afghanistan, america considers a third front. ourral james stravidis on ouron, our economy and fractured international relations. it's not gat. contain chinese efforts. christine lagarde. francine lacqua considers the new mediocre. good morning, everyone. this is "surveillance" it is thursday, october 8. i'm tom keene. from london, jon ferro. you have an important bank of england meeting in one hour. what we look for? jonathan: i want to know whether the issues are brought have altered the central view of the mpc. look to the vote, look to the minutes. tom: we will come back and a

moment on that bombshell, hsbc. right now we need the bombshell of first word headlines. here is vonnie quinn. vonnie: hillary clinton is distancing herself from her former boss and a potential rival. mrs. clinton says she is against the asia trade deal. n: what i know about it as a today, i am not in favor about what i have learned about it. there is one other comment i want to make because i think it is important. trade agreements to not happen in a vacuum. have ar for us to competitive economy, there are things we need to do that home that help raise wages. vonnie: clinton backs the deal when she was secretary of state. supported by a possible competitor, vice president joe biden. clinton will propose a tax to penalize high-frequency trading.

michael horn will testify before house committee investigating the emissions test scandal. he is expected to say vw. delivery of 2016 diesel models. thousands in the u.s. will remain quarantined in court. a late night agreement averts a strike at fiat-chrysler. they reached a deal for 20,000 workers. the union says it made significant gains. workers will vote on the agreement tomorrow. many said it did not do enough to close the gap for lower paid employees. floodingis threatening the water supply in south carolina's capital. meanwhile, the state warns that the threat of flooding in coastal areas could last to the weekend. and the chicago cubs are moving up in playoffs. i know. they beat pittsburgh in the

national league wild-card game. complete game shutout. next up, the st. louis cardinals. tom: just one example -- megan murphy of our washington office, she had to be sedated because her cubs moved forward. vonnie: bookies. they have 25% of the outstanding book. tom: $8 billion in all cash transaction. this is real estate. this is gorgeous city properties fancyton, san francisco, office buildings for fancy phd's and biotech. vonnie: we have a 24% premium. million deal to end the sec probe as well. tom: i want to get to the data check.

looking at equities, bonds, currencies, commodities. within features. futures. looking at with the vix at 18.40. we are below the average for the vix. oil near. $50 a barrel gets my attention. very simply, this is claims compared to the number of employed in america. lis goes back to the time of bj. ugly recessions. down we go. we are in new territory. this is the most optimistic chart on bloomberg right now. vonnie: what is interesting as people were asking whether we reached full employment. tom: we times this on central banks today. markets, that's rip

up the script and talk about steve majors call at hsbc. you have had time to look at their international research note. this is a note that will be read at the bank of england. jonathan: a 2016 projection for the u.s. tragedy, the 10-year e ield, cut. 150 basis points below the bloomberg median. an international started -- an international story. these central banks that want to hike. that cycle is going to be nothing you have seen before. tom: isn't the reality for the real economy that you spoke of in the last hour what this does to yields in germany, what it does for yields in copenhagen? in denmark, how do they deal with the stamping by major economies? nonathan: it is going to be a issue. if you look at that treasury curve, with the 10-year and all

the way to the back end, they longer -- factor in yields and the such a bank is going nowhere for a long time. if the fed is thinking about hiking any time soon, we should go back to that question -- the payrolls report. is it a one-off for the beginning of much softer data? that is what everybody is discussing. tom: thank you so much. folks, bloomberg "surveillance" is about economics, finance and investment and about the international relations that goes over all of this business economy. this morning, we learned american warplanes change their flight paths and did not complete in assigned mission to avoid russian fighter aircraft. this is in recent days. this over the combustible mix which is known as syria. this is not the baltics. it is not wayward planes. this is the here and now.

you get -- we have james the fletcheran at school at tough university and the former supreme allied commander from the north american trading -- treaty organization. news.s such distressing i want you to take us away from the headlines and the obligatory tv video of airplanes flying around. what our military people thinking about the idea our planes are diverted because they are within 20 nautical miles of a russian jet? admiral stavridis: in addition, we had our drones -- these are big aircraft, these predator drone's -- they are 50 foot ,ingspan, intercepted by russian aircraft. so we have got a mixup between russian fighters military, u.s. drones. planes on planes. at the same time russian missiles are flying from the caspian sea. vonnie: who decisive gets to fly and in what direction? admiral stavridis: absolutely

nobody controls the air space. tom: your question is dead on. betweentary does ads football games to get kids to join the military. the show the razzle-dazzle guy on the boat. he has got the headphones on and controlling big, important things. do we have a kid in the mediterranean controlling the airspace that we're in and the russians have somebody in the caspian sea doing the same thing and are they talking to each other? admiral stavridis: yes, to all. except are they talking to each other. they are not. the russians also have controllers in lebanon and on ships in the mediterranean, on a ship next to that u.s. ship where the control is going from. it is a huge -- there is no control. vonnie: is vladimir putin playing to size? admiral stavridis: we see vladimir putin taking off his shirt. this is the equivalent of that. he is launching missiles.

he has got aircraft going, tanks moving in. vonnie: but he says he was to coordinate plans with the u.s. and then he is attacking rebels and propping up assad. how can that all be true? admiral stavridis: it is disingenuous. what he is doing is supporting assad the same way he is supporting the rebels in ukraine. when he says he is going after the slower state, i do not think anybody syriza believes him. -- thanybody seriously believes him. tom: how do we respond? secretary, our defense, tragically flawed was his phrase yesterday. admiral stavridis: i think we need to go after islamic state high, hard. tom: boots on the ground? admiral stavridis: i think so. we probably need 10,000 to 15,000 to do the special forces, the forward air control and push this -- tom: can we put some of those troops in damascus? east of israel is damascus. we know it from lawrence of arabia. north of there is hwere -- is

where assad's from. on the coast is where the russian troops are. where do you put our boots on the ground? admiral stavridis: this will sound somewhat odd but not in syria. they should be in iraq. this from a u.s. perspective is going to be a bombing campaign. our special forces will need to go into syria but not certainly into damascus. tom: the most important article today. patrick lyons buried in "the new york times." weapon intonew play. they sent a cruise missile 900 miles -- this is not the falkland wars -- this is not an intercept missile. admiral stavridis: not at all. this is a missa we have used many times, the tomahawk missile. missile we have used many times. it is a capable weapon. it goes 900 miles. our missile goes 1500 miles. hours has better accuracy, but this is a very capable weapon

and launched from the caspian sea. 900 miles. tom: i had to get the map out. vonnie: what is nato's primary? priority? admiral stavridis: nato has to support its nato ally, which is turkey. you're seeing a meeting followed defense ministers. one thing on the table will be, how do we support turkey? tom: we will have so much on this in the hour. how is this link to ukraine? admiral stavridis: in a strange way is what putin is playing is that he's trying to convince the west he will want to be part of taking on the islamic state. he will go to the europeans and say i am playing nicely. can we lift sanctions and ukraine? -- in ukraine? it is a strategy that will not work because it is transparent falls. -- false. his james stravidis and

expertise front and center. ben bernanke, the former chairman of the federal reserve, he will be on bloomberg this morning.0 on bloomberg radio, mike mckee has some questions set up at 8:00 a.m. for chairman ben bernanke. we'll see that later today. stay with us with james stravi dis. this is bloomberg "surveillance" ♪

tom: good morning, everyone. next week, i will be in london with the jon ferro and francine lacqua. really looking for to our coverage of so much in europe. and in economics next week from london. right now we need to go to our business news. on deutsche bank, here is vonnie

quinn. vonnie: georgia brink is -- deutsche bank is bracing for his biggest loss and a decade. the dividend that has stood since germany's postwar reconstruction. and bonuses are likely to be slashed. to combine with all are part of the data storage company emc. emc has been seeking strategic options to boost its share price. the deal -- a slumping market for personal computers. ahead of volkswagen's u.s. unit reportedly knew about emissions problem far earlier than the carmaker previously knowledged. "the new york times" says engineers told michael horn about the issue in the spring of 2014. vw did not admit to cheating on pollutions tese until last montht -- pollution test until last month. questioning and

congress today. hans nichols joins us with more from berlin. if you were michael horan's lawyer, what would you be telling him this morning? hans: i would be very aware of fred upton. if you are an auto executive appeared before the house committee, you need to be worried about the democrats. in this case, the congressman from michigan could be playing protective defense on his industry in michigan. it is michael moran, the head of the u.s. operations. they were aware back and early 2014 of some potential emissions noncompliance. butrely get to say this this is one morning i wish i were in washington, not berlin. that committee hearing is the crackling tension. you have to look at not only what mr. upton says. and then on the democratic side you have a big environmentalist. you will have a lot of members of congress trying to take volkswagen down. tom: i remember the silliness of detroit executives taking their vw diesels from detroit to washington to show how sensitive

they were to the american people. let me cut to the chase. do german executives or do american vw executive show up on the hill this morning? hans: right now it is a german u.s.nal who is head of operations, michael horn. two weeks it was reported -- two weeks ago, it was reported he was out. he's not out. michael horn will make most of the appearances. on the german side, a lot of this was run out of germany. could not haves been aware of how devious the software actually was. that could be the line today. jonathan: a rather cynical line. this is a rather convenient distraction. all of the focus is on u.s. and not germany. anyone who wants to get the knife out for germany, they have got a lot of fuel to do it. hans: a lot of fuel, very sharp isfe and a target that has,

bleeding from a lot of different places. we talked about for six month how germany's engine of growth in europe, the last three bits days ofmic data, four negative data, tell us the german economy may not whether these headwinds. not only did you have greece and china now but we have this tolkswagen at the core of wha germany is about, and export driven economy that relies on its brands for competency. tom: hans nichols. thank you so much. we continue with jon ferro in london. later this morning, on bloomberg television, an important timely conversation with former morgan stanley chief executive officer john mack. look for that. this is bloomberg "surveillance" stay with us worldwide. ♪

good morning, everyone. london looking up to st. paul's, across the river thames. next week, jon ferro and francine lacqua have to put up with me. looking forward to being in london all next week as we give you an international perspective on bloomberg "surveillance" right now, our morning must repeat vonnie: there are so many to choose from. i wanted to choose this one. an interview with pbs, hillary clinton said "i'm worried about currency manipulation not being part of the agreement." talking about the china pacific partnership. " we have lost american jobs to manipulation that the companies in asia have engaged in. i'm worried that the pharmaceutical companies may have gotten more benefits and patience and consumers fewer." these are just some of the

problems hillary clinton has with the the deal. tom: and the political how kilis of it -- the political calculus of all. james stavidis at the fletcher school, tufts university. one major economist -- it is the only thing that everyone agrees on. free trade is good for everyone involved. give us the new way it is taught on fletcher. we have moved on from gat to bilateral agreements. is that a good thing? admiral stavridis: it is a good thing. that rising tried of free trade float alltide does boats. i want to draw a line under the geopolitics of this tpp. it helps us with our allies and friends in the region. issue: is she corrected, taking good advice when she says she is against it because of things like not -- no current

simulation? admiral stavridis: she has to look at the 360 aspect which is the trade balance, the geopolitics of it. i'm a supporter. i think that is the right direction for us to go. tom: phil mattingly is in washington. and brief the now admiral on where we are with our atlantic agreement. if we are getting finish with the pacific agreement, is there going to be a corresponding agreement? phil: the u.s. trade ambassador never gets a holiday. right after he announced this agreement, the u.s. trade representative's office noted they were coming out again and they would be meeting on the ttip. lot more work to do. part of the recent was the focus from the united states almost entirely was on the pacific rim trade pact over the last couple years. this was kind of in the backseat. it i do think the focus will shift to this in a big way. i do not think when you talk to the administration officials,

there is a lot of confidence this will get done in 15 month. there is going to be a lot of effort expended on capitol hill in the u.s. to mystically to pass trade, the pacific -- domestically to pass the pacific trade agreement. they want to lay the groundwork so the next administration can get this done and a quick fashion. tom: you see it with secretary cleanse comments. clearly political -- with secretary clinton's comments. vonnie: today we learn more details on how hillary clinton is going to come out chastising wall street, and her advisor is barney frank. phil: gary gensler, the former chairman of cftc is one of the senior people involved in this plan. according to the hillary clinton aide i spoke to, the plan's multiple elements but there are two that will be interesting for wall street. what is she is looking to transaction tax on high-frequency trading. evoke cancellation orders purchased trying to tighten up the vocal world -- the volcker

rule. tom: go cubs. it will be fun to watch. phil mattingly helping out from washington. speaking over to -- speaking of baseball. we move on to something odder, soccer. mr. blatter suspended but fifa. i think it is a major-minor. mr. blatter suspended this morning. we will continue with james stavidis. this is bloomberg "surveillance" ♪

tom: good morning, everyone. bloomberg "surveillance" from new york city. right now we need to get to our news. here is vonnie quinn. vonnie: a warning from turkey's

president erdogan. he called russia's military buildup unacceptable. moscow should consider its trade ties with turkey when it chooses to fire missiles at syria. turkey is unhappy about russian warplanes violating its airspace. u.s. warships will challenge china's territorial claims over part of the south china sea. the u.s. ships will sail inside a 12 mile zone that china claims. the move is likely to increase tensions between the u.s. and china. fiat-chrysler avoids what would have been a costly strike. earlier today, the automaker and the united auto workers agreement. no details yet that the union says it has secured to the cannes gains. workers will vote tomorrow. they rejected an earlier agreement. -- the union says it will secure significant gains. republicans will vote on that first be the next speaker of the house. kevin mccarthy is expected to

win. those lawmakers could try to deny mccarthy a majority when they fill the house speaker vote in three weeks. and those are the top headlines. tom: very good. this is fun. the end of meeting of the imf in april in washington. and then the true and all meeting happens in october in lima, peru. francine lacqua is in lima with an important conversation with madame lagarde. christine lagarde comes to lima with a huge, unfortunate success, which is the new mediocre. is that the theme of these meetings? cine: i think your are right. it is exactly the theme. people are trying to figure out how we get out of this slulmp. the growing economy is there -- people i tried to figure out how we get out of this slump. if you look at strike around the world, europe is, the u.s. is

one of the struggle school in economies and then you have china -- worries about whether they can grow at 6% this year or next. so, this is the new mediocre. you're absolutely right. have on top of that commodity rout, emerging-market questions. and the fed, right? that is what people here are really talking about. the london school of economics with others including former bundesbank members with a imfer in the ft sayin g the must be broader, more international p if lagarde does not continue her service next year, is there finally an effort to make this european institution more international? she's tryinghink her best, tom. i think what lagarde's message toe in lima is skewed emerging markets. they are talking about stability risks. i spoke to jose vinal, and he

was keeping emerging markets in mind. they are looking at the risk that a fed interest rate hike will give for emerging markets, but you know, when you think about it, are we to negative on world growth? we know, we have covered these crises in the past, that if we talk about negative headlines too much, this will self-perpetuating. and on the emerging markets, when you speak to participants -- i spoke to the central bank. he says, yes, if the fed delays hiking, it makes my job easier by the uncertainty is still there. at least i know where i stand. jonathan: good morning. are you believe the imf has been guilty of doing that -- coming out with negative headlines, telling the fed what to do. that stunning headline at the beginning of the summing where the imf and christine lagarde told the fed do not do anything. -- at the beginning of the summer. how is that debate moved on? well, of course, in

the last four months, the world feels slightly different. is it really that different when you look at china? what does it tell us about world growth. jon, what we are trying to isure out at the imf whether the turmoil we saw in the realks back to economy. it is unclear when you speak to participants here if it really does have a linkage, if there is a credit crunch in the making, or the fact that people are putting money into china without understanding what was going on. this linkage is what participants want to try and find out. when the chinese delegation arrives here today, it will be, i hope much more clear if they answer the right questions. that has changed in the last three to four months. the fed rate hike is against the -- a backdrop. and we do not know what is going on in china. tom: look for an important interview with madame lagarde

later this money. hathave james stavridis t speaks to the changing institutions and particularly nato. vonnie: that is where i want to go. nato has to stand by turkey. it is an ally. how do we feel about turkey? months ago, turkey was a problem. amiral stavridis: turkey is friend and an ally of the united states. we will defend turkey through the nato alliance. we do not always agree, but in terms of our relationship, fundamentally it is strong. when easter happen here in terms of nato and institutions are that nato -- what needs to happen in terms of nato is that nato needs to look at the new world. it is not only syria, it is cyber defense, stepping up to the russian pressure. so institutions have to change. we are seeing the same thing with the imf. vonnie: with oil prices dropping, so many other countries are potential hotspots, including yemen. saudi arabia is trying to take care of yemen but it is still under rebel control. what does the u.s. think about

other hostiles now? admiral stavridis: we have got to take a global view. the idea we will pivot to the pacific and focus there is dead. we have to look at emerging areas -- africa, latin america. we are global nation. we are going to have to act like one. tom: when we speak of saudi arabia with the illness of the royalty. they move on to a new generation. everybody asking the same question. syria is outside the petroleum today. do the youths you teach at fletcher, does syria fold over into geopolitical shot down the road? admiral stavridis: i think there is a reasonable chance that the is going toplit continue to create real chaos in the middle east. it is like the war of the reformation in europe. it went on for 100 years. tom: does this foil into -- fold into oil pricing?

admiral stavridis: it will. vonnie: how do we pick and choose our leaders? admiral stavridis: we ought to be picking and choosing leaders and choosing leaders in the united states, in my view, who are centrists, who have a global outlook. in terms of who we a lie with overseas, we should pragmatically decide who we want to work with. that means with working with our like saudies arabia, egypt, jordan. tom: i speak of robert -- i think of robert hormats. do you have optimism that our political process will move to the centrist format in 2016? admiral stavridis: kevini do. if we look at the candidates, we see some working on both sides of the spectrum. but the american electric has a way of coming back towards the center. ratehe american electo

has a way of coming back towards the center. these are huge numbers. we are probably going to see one million migrants cross into europe this year. we are 600,000 now. i think where it ends up is that the international community has to go into syria and solve the problem there. fixing the problem in europe is palliative. we need to go after the actual root cause. probably no fly zones in syria building refugee camps on the borders. vonnie: this could end up in problems for decades to come. admiral stavridis: indeed, it could. let's hope we go after this situation in syria in a multinational way. tom: we will come back with james stavridis on china. we have been talking volkswagen this morning. happens trading -- that to own a little bit of mining and agriculture. one of their major shareholders, qatar's sovereign wealth fund, suggest an exit of the agricultural business would make sense. i want to make clear that 1.21 is 1.22 pounds.

that is about $1/80 per -- $1.80 per share. coming up later, francine lacqua will speak with christine lagarde. also, with jim yong kim of the world bank as well. two important interviews, particularly lagarde on the new mediocre. good morning. number "surveillance" -- bloomberg "surveillance" ♪

the next time i complain about the weather, remind me of october, 2015. the weather in new york has been nothing short of spectacular the last few days. absolutely perfect. we welcome all of the worldwide. ben bernanke with bloomberg later. then bloomberg "surveillance" on radio. francine lacqua with christine lagarde later this morning from lima, peru. our single best chart. with james stavridis of the fletcher school. it is a simple chart. the collapse of ukraine. ok, i guess? financial crisis? ok, i guess. then collapse. syria has already collapsed. but there's further to go in economic decline in syria.

admiral stavridis: there is. and syria is like humpty dumpty. i am not sure we are going to put the pieces together again. when we look at what vladimir putin wants to do at a minimum, he wants to carve out the western part of syria. where we have to take on islamic state and the kurds in the north and west. that is an economic disaster of epic proportions. tom: within the newspapers this morning, -- carter's comments, i go back to again -- our secretary of defense, what is your to do list, not boots on t he ground, which will take weeks. what do you do now? you do not dial 1-800-putin and say, you are a bad boy. what is the adult process? admiral stavridis: we start to separate the forces. let's start with jets intercepting each other. military to military adult conversations about operations.

in terms of the islamic state, you prioritize that. you arm the kurds. you use u.s. troops to train the farmingmp up campaign. go after the islamic state first. you work politically to try to solve the assad problem. tom: jon ferro, jump in, please. jonathan: i got back to that chart of ukraine gdp.i look at russia and the economic situation, and it is dreadful. it has not forced russia to challenge their foreign-policy. do we have to look at other ways to address the situation with russia? if you look at the situation, it has not changed despite the economic pain in russia. admiral stavridis: two answers. one is given time. the history of sanctions is such that they do not have immediate impact, but over time, they produce real results. iran situation. the second issue have to go

after some of the other geopolitical aspects -- that is making friends and working well in central asia which is vladimir putin's wheelhouse. it is making sure china does not come too close to russia. their geopolitical pieces that go alongside his economic pieces. vonnie: do we have to have a grown-up conversation military to military, what about the mistakes our own military is making? the unfortunate hospital incident. yes, this, ofdis: course is in afghanistan. we had a very terrible accident, but it was an accident. this is not a war crime. the united states does not and has never deliberately bombed hospitals anywhere. it is not what we do. we are going to have a very transparent set of investigations to put the blame where it goes, to have accountability. our forces, nato forces, are not out there conducting -- tom: doctors without borders would like an international review rather than a u.s. review. give them confidence that the military of united states has a

process that comes to full disclosure. admiral stavridis: it is not just the u.s. military. there will be a nato investigation because that bombing have an under a nato rubric. that is international power that will not satisfy doctors without borders, but we do this routinely. we givemake mistakes, restitution. we hold individuals accountable. we have done that repeatedly throughout our history. tom: what percentage of military is killed by friendly fire? do you have it off the top of your head? admiral stavridis: i will type it is a tiny percentage. when it does happen, it is horrific and extremely well known. tom: very interesting. china. vonnie: exactly. loss to talk about. we take a look at a few photos making the news first. continue with russia. putin mania was felt all over russia yesterday. president putin played hockey in honor of his 60 thirds birthday. -- his 63rd birthday. putin scored seven goals and his

team won 15-10. un surprisingly. it comes hours after russia five days 26 -- tom: you can make jokes but he is out there. very cool. russian hockey player was just taken by the -- cut by the penguins at 41. vonnie: what you make of his technique? tom: he looks like he is 60. it goes. for me, it went clearly about 36 -- your feet say go, and your lungs say no. vonnie: those are also the rangers colors. our second photo. jonathan: tom keene loses me whatever he starts talking about ice hockey. lottery recipients. national lottery recipients having in london to try to set the new world record for the

largest gathering of lottery millionaires. reservationd 117 -- if i won the lottery, i would not be out there screaming about it. vonnie: i hope it wasn't advertised in advance. what a haul for a robber. number one top photo. last night the chicago cubs beat pittsburgh in the wild-card game. it was a bench clearing fight after jake area was hit by a fastball. the cubs are one of baseball's most betted on teams in las vegas. sporsts books give 40-1 odds for the worldo win series. i bet that has gone down a little bit. tom: to our international audience, this is part of the ballet. you can hit somebody accidentally throwing the ball. or sometimes you never go after

the pitcher. and there is a ballet to what you just observed. waves of people coming out of the dugout. vonnie: feelings are getting heated as we approach friday -- the first game of the playoffs? tom: i don't know, but it is great to see some new teams, including kansas city royals. today we focus on international relations. tomorrow we turn back to the markets. russell -- will join us from blackrock. we are thrilled to bring you david harrell. harrell of chicago. we will talk to him about international investment, particularly with the challenges in emerging markets. vonnie quinn, jon ferro in london. i'm tom keene. this is bloomberg "surveillance" good morning. ♪

good evening to all of you in asia watching in your asia evening. our guest james stavridis will be in asia later this week. it is a different asia with an

tradetd upon -- agreement. let's move on to the forex report. yen under 1.20 a surprise. stronger yen. churning nowhere near that parity certitude of 90 days ago of 1.13. renminbi very importantly we see continued appreciation of the renminbi after devaluation, after depreciation turned the other way with a stronger renminbi. the ruble part of the hydrocarbon complex, doing better. our corporate news. pullingvolkswagen is its 2016 diesel powered cars from the american market. vw won't ask u.s. regulators to certify the cars meet federal emission standards. that could mean the new cars have the software that cheats on pollution test. the change surfaced as testimony

for the head of a u.s. unit will face a house panel today. shares of gopro are at their lowest since it's ipo. morgan stanley cut its target price saying gopro is not improving editing and sharing software fast enough. down 54% this year. sony is close to selling its half of the music publishing venture it owns with michael jackson's estate. sony atv music publishing has the rights to -- the company is worth $2 billion hit it was one of the smartest things michael jackson ever did. tom: it is a great story of copyright, and you wonder where that transaction will be years from now. with mr. jackson from the 20th century. right now, and this is important. whalers stuck in the south seas.

it sounds like in the movies. it is the spratly islands. you don't know where it is on the map. james stavridis has every single part of that archipelago memorize, which is what you do when you are navy admiral. this is a joke but it is not. we are going to show the flag around this contentious area. are there chinese warships there or is that a potential threat? admiral stavridis: they're absolutely chinese warship, military aircraft. china claims the entire south china sea pay the call it the 9 dash line. this into hinges on the waters of the philippines, vietnam and other nations. the watersinges on of the philippines and vietnam. the chinese have built 3000 acres of artificial islands to bolster their claim. we are going to go within 12 miles and fly over them because they are not real islands. they are part of international airspace. tom: how will they respond to one of our boats going, how many

knots to be go underweight? 12 -- go underway? by,ral stavridis: we cruise show the flag. it is not anything military. we are not launching missiles but these are international waters and we need to demonstrate freedom of navigation. vonnie: how fast could this escalate? admiral stavridis: it is highly unlikely that china is going to come with direct confrontation. they will conduct close surveillance and overfly our ships. we will warn them on the radio. i doubt we will see missiles flying. but it is of a piece with a growing pressure between the united states and china. vonnie: is it an exercise in keeping military morale high? admiral stavridis: i would not say morale so much as it is emphasizing we have to be free to operate on the high seas and in international airspace. tom: next time you're here, we will speak of the philippines. fletchervridis, the

school of tufts university. we say thank you to jon ferro in london for that coverage on hsbc and their lower rate call. major know from steve major. bloomberg go is next on television. bloomberg "surveillance" next on bloomberg radio. good morning. ♪

>> hillary clinton wants tough new rules on banks investing in hedge funds and to hold financial executives personally responsible. then bernanke it tells all. he opens up about life and the

center of a financial crisis. and volkswagen under even more fight. chief is on capitol hill, and it looks like he is going to have a rough day. >> welcome to bloomberg go. we are in new york city at bloomberg headquarters. i am stephanie ruhle. >> i am david weston. let's kick it off with steve case. welcome to bloomberg. also with us, bloomberg executive at her christine harper. we love to have christine with us. stephanie: guess who's joining us in 30 minutes? bloomberg "surveillance" is still here. it is on the radio now, but tom will be joining us on set. david: he is a very tall man. stephanie: