francine: deflation fears another slow down. the poc may act soon to ease monetary further. the trading train is not over yet. street.on takes on wall clinton goes on the offensive in the first of a connecticut debates of the 2016 white house race. this is bloomberg "surveillance." i am francine lacqua.

with tom keene. tom: you have an optimist to keep us going. francine: mark carney. employment figures and deflation. onus: christopher wheeler banking with those bankers coming out of the united states. let's get to the first word desk. here is vonnie in new york. the four challengers took on frontrunner hillary clinton. at one point clinton and bernie sanders does a great about wall street. >> it is the greed, recklessness, and the havey are a wall street where fraud is a business model -- helped to destroy this economy and the lives of millions of people.

>> when i think about capitalism, i think of the small businesses that were started because we have the opportunity and freedom in our country for people to do that, and make a good living for themselves and their families. i do not think we should confuse what we have to do every so often in america, save capitalism from itself. theie: bernie sanders said american people were tired about hearing about her e-mails. according to the new york times, the president is willing to keep enough troops in afghanistan to search for al qaeda and islamic state militants. originally obama only wanted enough troops to protect you when embassies. in iran and russia supporting and offensive in rebels opposed to boscher all assad. al-assad.

high drama in the national league playoffs in new york. made the metsre look foolish. three-one when that forces a decisive game five and los angeles. the winner will face the cubs. victory and made history. the first time they ever clinched the playoff series at home field. there are hoping for their first world series in 107 years. tom: this is a huge deal. i have to translate this. i am wearing cubs blew. -- cubs blue. everyone is rooting for them. were with the elites in chicago, the north side of chicago, and the evil chicago white sox are on the south side. francine: we really only want to

talk about rugby. , a diehardent obama white sox man, weighed in. , as well.id go cubs the president congratulated the cubs. even the white sox fan is rooting for them. a huge cultural design. francine: england has been kicked out of the rugby world cup. tom: i'm sure there is a british equivalent. i like sheffield in football because def leppard likes them. jim o'neill thinks i am an idiot. commodities futures, they are not very cubs-like. looking at the 10-year yield, this is important. this is inflationary impulse, we will talk to erik nielsen about it. 80 on the 10-year.

it gets your attention. i dollar weakness. so much for parity and nine that crude. elevated for 65, down from the 48 level that it was a few days ago. markets, i guess it is sort of quiet and we're waiting for economic data, but every series has to do with disinflation. central: looking at banks, 2-baggers talks about it today -- the central banks have limits on what they can do to reduce monetary policy. it goes down to what we have been talking about, at some point the tools will run out. this is the first central bank saying that. tom: the president and the white sox tweet, hoping for audacity,

hoping for inflation. here is erik nielsen. welcome to the show. it is great to have you. when you look at the specter of disinflation and central banks, new zealand, singapore, they are saying that we're worried that at some point our tools will run out. what is it mean for the global economy? and maye in trouble have to think about the policy mix. i am less worried about i-formation than most. i think it is stimulating demand from other places because it is driven by commodity prices primarily. if you take the health care out 170, 180., 170: -- five-year, all the thing start moving around --

tom: economist say forget about market expectation data. five years out, and five years out from that it is market derived. should mark carney, janet yellen, and mario draghi pay attention to five-year statistics or real economy data? real economy data. the reason inflation numbers are have a because we gap. in america it is 3% of gdp. in europe it is a little bigger because of the policy mix. you have no inflation, that is economy 101. if you want it inflation, how do you create inflation? creating demand in the economy. tom: this is not u.s., this is forwarde-year inflation. they are looking the same now, but it was off of the cliff.

this gets market participants -- francine: if you are a central bank, the ecb, you would need to be looking at that transition mechanism, the pipeline to see if qe works. if it doesn't what can you do to air it out for it to translate through the real economy? the only way it works in europe is the exchange rate, realistically. have enough liquidity, this is not the issue. there will be some sort of inflation of assets from people holding something that is more risky. most of those who hold the stock they will buy insurance, buying risk. in that situation, it is extremely difficult. the greatave been optimist through sick and thin. even in the darkest days of greece you said we will get through this. interview you do with

european ceos, business is not that. can you signal the all clear? mr. nielsen: people are a bit and some oft china the other emerging markets. all clear is a big statement. the story is that the recovery .s ok-ish 1% annualized growth, which is the trend, more or less. it should be higher because we had the outward cap. it is running, from a business point of view, at ok numbers. francine: one of the big things that erik nielsen was saying is that this recovery is fragile in europe, but run by consumption. in the past, if recoveries are led by consumption, there is a higher degree it will hold. it is not 3%, it is 1.5%, but it will stay. is consumption

driven by a real increase in income. , andwe have the five-year my question for you, when you look at the disinflation and inflation, is there a terminal , aue in the united states terminal value in euro, and how close does that get to zero? the terminal value of rates, the nominal gdp in europe is distressingly lower? come to an: we have closer place with the negative effects of the low yields -- it is time to bite more. under huge duress because you have no yields. pension funds are the solvent. for terminalice yields. the problem is when they go down, negative, those that can

benefit should borrow money to spend for the government -- they do not want to do it. a smart conversation on europe optimism. we will address china. we will get a global look at reticular really a transatlantic look with atlantic equities. we will bring christopher wheeler with his terrific perspective on european banks. we brought it to jpmorgan yesterday. and wells fargo reporting later in the united states. , tom keene, and vonnie quinn. good morning. ♪

tom: good morning.

bloomberg "surveillance" gorgeous thiss morning. this is an exclusive. they serve espresso cups on the london said, no wonder francine is so gracious in the morning. francine: get with the program, this is the only way to have espressos in europe. we will just feed you espressos in the morning. tom: for lousy coffee we go to vonnie quinn in new york. the third quarter was not great for jpmorgan, in the fourth quarter doesn't look great either. they missed estimates. trading this quarter appears high. chip maker largest is forecasting a slowdown in corporate server demands, a right spot for intel. they been hurt by the personal computer slump. ease in china signals more

weakness. retail inflation is below the target of 3%, opening the door to possibly more stimulus. francine: thank you. just got in from a listener, i was wrong. elliott of def leppard supports one of the chef phil teams, and the bass player does another sheffield team. a correction. francine: a correction on baseball, i am happy. more on china and what a slowdown means for europe. that spring in hans nichols. teamnot know what football a support, or if they look at football in china. when you look at european growth, it is slower than expected. do withs it have to inside, emerging markets, and china. and: i was negative

concerned with the data until yesterday. we got the luxury auto sector numbers from china. theaw mercedes up 53% in month of september, that is not a chinese consumer that is concerned about spending. even audi which is part of up.swagen, is it looks like there is a rebound. i've more concerned with that would mean for germany's export economy. france, we had flat growth. that seems to be a bigger problem for germany. china ity travels to is always about france. they have a franchise in china. what is the german attitude in china? germany's exposure is? tom: i understand why the chinese want to work with the nuclear engineers and that, all

i know that there are 14 audis around the block. it ismy guess would be heavily auto influenced. that is my first take. when you talk about stimulating domestic demand in china -- i asked this question. the ceo of volkswagen, on his china thoughts. this was a week before it was clear that he would not be able to hold on. he says they will continue to invest in china and are not concerned about the long-term. they think it will be the world's biggest auto market for a while. tom is very keen on -- they're been there for hundreds of centuries. when we look at numbers from

knowr demand, we don't real demand because so much of it is traded because they get a better interest rate. in the commodity sector for china. this is what i think drives the commodity universe. rise of what we see. i spoke to a guy who runs our asian business, and from all of the businesses we deal with that are trading into our producing in china, they see constant growth in the 6% to 7% range. orderare accurate, trading is getting a hell of a lot of market share. story is that the moment you get a blip in china you see big moves and people are worried. nielsen is here for

the hour. hans nichols will join us to learn the difference between the cubs and the white sox in our next hour. we will speak about the foreign policy of the u.s. and his united kingdom. charles powell will join us. stay with us, this is bloomberg "surveillance" ♪

tom: we say, good morning.

you a thrilled to bring perspective on economics, finance, investment, and international relations. first, a smart morning must-read from friends in the quad. francine: basically greece is the heart of two roots of british civilization. that is another morning must-read. mine is talking about china. the world has run out of large economies ready and willing to lead. that means global demand might , and policy must adapt to this reality. i love this morning must-read. it is warning policymakers to take this seriously and think outside the box. mario draghi, i am sure, will be thinking about it. should we be so pessimistic? think then: no, but i market is missing an important

point. we have a conundrum between commercial life and private life, it is increasingly global, but policy for policy is local. we have a monetary policy that is very clear in everything we do. there is not one central bank anymore, one government, that can actually control the key economies. francine: we talked about the fed yesterday. you are right. if we were to set policy for the world it would be easing. should the federal hold off hiking? mr. nielsen: they should probably get it off of the ground, because the labor market in america is almost standard. we should have some fiscal stimulus in the right areas, in america and europe. tom: you said earlier the government will is not there.

austerity -- it is a time of political dialogue towards austerity. which institution will break that so we can have like inucture copenhagen? we don't. how do we do that? is a major: it issue. we start on the g-7 level. that theern is international corporation councils have become so big with g-20 there's almost nothing to agree on. it is good to talk, i'm not saying we should not have them, but the policies among so many diverse economies is not right. francine: the whole idea behind the g-20 is to involve emerging economies to be stronger, fedor, and rule the world 10 years from now. do you have arrow well -- or do you have parallel g's? i would argue that

a letter the trouble and is a payback for a lack of institution they should have built during the good years. riven by-15 good years commodities, that is over. they have to build the proper institutions, that we do not see. it is by far the biggest part of the world economy, you could toanize a coordinated policy allow these things. we are teetering on the point of currency wars. need coordination. thank you, erik nielsen. coming up at 5:45 london time, we speak to norway's prime minister. ♪

francine: this is "bloomberg surveillance." let's get to first word news. theie: round one of

presidential democratic debates last night in las vegas. challenger spent the time going after hillary clinton. i respect what secretary clinton and her husband have done for our country, but our country new leadership to move forward. attackedernie sanders wall street, saying it has fraud is a business model. blessir putin says god russia's central bank after hearing the bank wants to cut inflation down to 4% for the next couple of years. ryan chilcote spoke to the top central banker in moscow. ryan: is 4% around what you think russia should have for rates? it is difficult to talk about

the difference between rates and inflation. it will depend on the economy. vonnie: prices in russia rising at an annual rate of almost 16%. the air traffic controllers union warning more flight delays. the shortage of air traffic controllers is the worst in 27 years. new york city's three airports are in especially bad shape. those are your top headlines. maybe you should fly back through boston, tom. tom: maybe minnesota. this is great. we have eric wilson onset. david stubbs, one of the most twisted resumes. he came out of the new school of social research in new york. us in the strategy of

disinflation. my chart of the year is the old index.ndex -- crb are we reinserting the idea of commodity deflation underneath the other economics we do? >> commodities lose their value versus other things we make because there is more value add in the other things. we have seen this enormous bear market. they have shortened the australian dollar. we are starting to see the beginnings of behaviors which suggest stabilization is coming. of: the behavior is clearing balance sheets. when you speak to jpmorgan research, how long does that take? david: probably a 12 month event. it will be volatile. on its way down is a

surprising lack of supply reaction. tom: have you been surprised by that, eric? : one should be surprised to an extent. have a fundamental change with shale gas and change policies of saudi arabia. francine: this has to do with china. how much do we know? howmuch is real demand and much is speculation? david: we see the tide going out with china's boom. i would not be surprised if there is a lot of corporate demand built up. francine: how much? we hear about 70%. this would be disastrous. david: i am not sure it is that

high. the usage ofserve cement, this was a historic building of epic proportions. you might get stabilization and commodities. they are not going back up. not pushnt you to against, but common and give us perspective of the call at citigroup of global perspective. -- of global recession. erik: it is a low probability. it is a small probability. francine: 5% over 18 months. erik: the definition of recession is not what you think it is. tom: caution and gloom out there tells me it is a time to think about markets clearing and getting more optimistic.

at it the wayook the probability is still low. 20 four quarters into the recovery in america, it is about average. the world's biggest economy is teetering off -- petering off. david: a lot of the big moves we see are now behind us. in the yene lower and euro is behind us rather than in front of us. you look at where the market effects -- market affects -- market fx are leading, they are low. tom: the market is clear.

orally --hael for michael feroli speaks to that. used to be?where it where is the new level of growth? work, you look at his absolutely. real growth base in the united states, below 2%. erik: we disagree. the trend in america will stay above 2%. in europe, looking at 1.5. the democrat -- the demographics is not difficult. francine: when you look at productivity -- would not go to regulations are it i would look to technological progress.

nielsen, the optimist. ofphen gary are at the edge the board saying we are all going to die. francine: that gives you a glimpse into the markets. keeps us employed. francine: my question to you and our guests, if we talk about this, it could go either way. we need shocks. the shocks can be positive mistakes, something in china or political shocks. how do you muddle that? shock is theggest tightening in credit conditions. managersok at credit find the junkiest k is access to credit. that makes credit conditions tighter.

all time low, the interest paid by small dummies. -- paid by small companies. we look at the ft cover on the paranoia in europe about competing with the american banks. wells fargo reporting later this morning. from london, it is "bloomberg surveillance." good morning. ♪

francine: this is "bloomberg surveillance." pick up on something. currency wars are here and real. who is going to be the big loser and winter? we are entering a cease-fire. we have had these different interestto learn the rate with the major currencies and now they seem to be standing still. there is hope it does not blow up. francine: why? they do not have monetary policy were they realize it is counterproductive? erik: i do not know the answer to that. it could be both. that they mayling be running out of ammunition in a sense.

the other side is -- what i hear , this is discussed every month, a bit of a fraternity among the bankers, how much can you feast on the other guy? china has seen in norma's appreciation. that is where the minor devaluation was overdone -- we are near the end of where we were a couple of years ago. a look at some of the more aggressive things, buying foreign equities -- tom: this goes back to the new school of social research.

abenomics has been a huge policy prescription which you say china has had two a drip -- had to adjust to. yen went down, it got richer. this helps out. tom: we talked about that. talked about his 2003 speech on reflation. can you reflate an economy without a currency war? erik: that is why we came close to the currency war. the policy mix is unfortunate. is all on monetary policy. when you open up the balance sheets, that is where it stops.

of mark: let's think carney. there is worried the pound will go higher. he had an inflation figure yesterday that was a concern and today, a strong labor market. it is not being pressured to do anything. will come six months from now as headline inflation bounces back. stirling is high and the ecb and bank of japan are giving us more stimulus. it is a tough environment. tom: let me talk about a currency war. here is sterling, cable as they say, in the foreign exchange. 1.eed sterling to go to 46. -- 1.46.

here, it has a lot to do with consumption worldwide. .ou want to go to zurich are you kidding me? it is $40 more than it is in new york. the growing -- you are looking for the winter ahead and you get these huge boatloads of chinese that come over and fill up their suitcases. francine: i love it. we are keeping it real. , would you rather be at bank of england or the swiss national bank? erik: they are both nightmares. you cannot render monetary policy in a small economy.

--, read it, learn it by heart. it is the best paper written on the issue. i would rather be at the bank of england. the swiss national bank is dealing with extraordinary flows. erik: i thought you said they did right by buying all of these equities. insight today.he the island mentality of smaller nations makes for different economics. francine: up next, norway's prime minister, ernest oberg -- erna solberg. ♪

francine: this is "bloomberg surveillance." ahead of the climate change summit, the norwegian british .hamber of commerce gathered

joining us, erna solberg. oilmuch do you worry about and how much can you see into your chris toed ball to know what oil will be like six months from now -- into your crystal ball to know what oil will be like six months from now? we know oil and gas will be important parts of the economic developments. we have a good business around this. we have good companies. transformative system that is more demanding than it has been in the last years. tom: i want to congratulate you. norway does not have negative interest rates. many would consider that to be a triumph in europe. how will you protect yourself from financial distortions

within continental europe? we are dependent on european economic development what happenscially in swedish and german economies norway.important for because of lower currency rates, the norwegian krone is worth a little less. we will continue, as long as there is growth in the german and swedish markets, we will -- two parts of our economy. we see that we have rising system.nt in our it is not a crisis, but there is a change. francine: we understand there your -- fund.s to

is norway and crisis situation because of the price of oil or are they changes that were going to come anyway? these are changes political debates have had for a long time. how heavily should we be invested in oil and fossil fuels ? it has been linked to should we continue to invest in coal? when it comes to investments in coal, it is based on the political discussion on environmental and climate change. a longtime discussion that has been concluded. we will be less invested in: the years to come. coal in thested in years to come. how would you describe the

people on migrants? how will norway adapt to this new inflow of people? erna: norway has had a lot of steadily, every year. we are seeing more than a doubling of that. that stresses our resource system. i think the positive view among norwegians are coming. we see voluntary work done, a lot of people who want to contribute and participate. the futured basis in for saying welcome to the refugees. it will be costly in the first years. we have to make sure the people get into work. if they can work, they will sustain themselves.

tom: thank you. rg, the prime minister of norway. for those of us uninformed, separate norway, sweden, finland, denmark. ericans, we take this two weeks in eighth grade. let's start. erik: hillary clinton loves denmark. and hates norway. we need to make headlines. what is the distinction between the norwegian cultural political economy and sweden? sweden has a bigger industrial base, long traditions

of great families and great companies. ikea, volvo.om within scandinavia, sweden has been the bigger brother. was predominated by the swedes. within that, what has tondinavia learned about the molt in europe? francine: they have made some right decisions. anti-immigration parties -- how it, davidyou look at to invest? what do you buy? at sweden,ou look they are traditionally seen as procyclical economies.

sweden has companies with a huge amount of revenue from outside of sweden. the big lesson about sweden is we saw what the -- did, raising interest rates, getting themselves into a bit of a model when they had to cut them. that is a cautionary tale. thank you, so much, gentlemen. turnr next hour, we will to american banking and european banking. christopher wheeler will join us for a discussion about bank of wells fargo, and fortress diamond. stay with us. ♪

tom: it is all quiet on a too big to fail front.

will authorize a balance sheet with bodies of the door. no booths on the ground, lessons learned from tony blair. london is ready to assist washington on syria. burningnton tears into over the "essentials of capitalism." good morning. this is "bloomberg surveillance tom: live from new york. it is wednesday, october 13. joining us from london, francine lacqua. it has been a wonderful week. francine: and it is not over yet. tom: the markets are moving, able to get out and see some of the things in london, a still resurgent london. the cranes are everywhere. francine: which is why cable is going up, why mark carney has a headache, and why we are seeing on one hand,m -- wage growth going up, employment

going up, but inflation going down. tom: the backdrop here of foreign policy, the papers. grexit -- we will talk about that in the coming hour. right now, the news, here is vonnie quinn. vonnie: the first democratic presidential debate proved to be a sparring match between hillary clinton and party rivals. gains traction last night in las vegas. the discussion about capitalism and wall street showed her differences with bernie sanders. bernie sanders: the greed and recklessness of wall street, ,here ford is a business model helped to destroy this economy and the lives of millions of people. thinky clinton: when i about capitalism, i think about the small businesses that were started because we have the opportunity and the freedom in our country to people do that -- for people to do that and to make a good living for themselves and their families. i do not think we should confuse

what we have to do every so often in america, which is save capitalism from itself. vonnie: mrs. clinton and sanders share the stage with -- shared the stage with martin o'malley and jim webb. president obama plans to withdraw virtually all american troops from afghanistan before leaving on this -- before leaving office. iran is reportedly helping the syrian army as they attacked rebel forces. reuters says thousands of iranian troops are joining an offensive in northern syria. russian airstrikes are supporting the operation. official calls the airstrikes "reckless and indiscriminate." high drama in the national league playoffs. in new york last night, the game's best picture -- best

tcher made the batters look sluggish. ever that first time they have clinched a playoff series at wrigley field at a couple of times, hoping for their first world series title in 107 years. it really is an underdog season, tom. tom: i cannot say enough about this. st. louis is such a dominant team this year. to see the cubs get the hope and the prayer over a century of disappointment is great. the president tweet last night was wonderful. for those of you worldwide, i cannot begin to convey the separation between chicago cubs and chicago white sox fans. the president is by hard white sox. can you imagine -- is diehard white sox. can you imagine the president throwing up the first ball at

wrigley field in the world series? i'm going to call this a further churn to the market. s&p futures do absolutely nothing this morning, waiting for news about equities, supportive what we see -- -- supportive compared to what we see with bonds. right now. quickly, on the oil -- down to 46 out of american west texas intermediate. -- bringerman two-year that up, if you would. the negative yield shows the financial distortions that are out there. -0.26. vonnie: they are worried about the markets and about china. tom: i go back to the headline from yesterday, which was no inflation in the united kingdom. francine: and when you put that against wage growth today.

if you are mark carney, you cannot do much at the moment. tom: american retail sales. mike mckee and i will have that on bloomberg radio later. the idea of retail sales -- they are supposed to be good, but they may disappoint, and then you get under 2% gdp. francine: and the fed is data dependent, so what does that mean for the fed? tom: i would say so. you're seeing it with jamie dimon, data dependent as well. we wanted to get someone to bring you a transatlantic view on big banking. christopher wheeler of atlantic equities has given us terrific perspective over the years. was it a big surprise to see jpmorgan off the mark yesterday afternoon yeah cap christopher: not really. the big banks have been talking us down on the numbers for the last six weeks. we had not quite gone far enough with jpmorgan.

investment banking was brought in line with consensus. it a new vista for christopher wheeler now? christopher: what a question. they were still using pebbles as -- this is a completely different world. ,hen i first went into banking we were in a different world as well. we had a much more significant moving to capital markets, disintermediation, and we are coming out now with regulation dealing with that change in the banking sector. what you are seeing is banks much that are capitalized, considerably higher levels of liquidity, much more cautious in many ways. we are waiting for the next blowup, but nevertheless, these banks feel really strong.

francine: you are talking about u.s. banks, right? you said that jpmorgan was trying to talk down what was happening, and that you did not quite get it, in terms of the numbers. what does it mean for goldman and citi? jpmorgan missed in mortgage fees. are worried about getting into more litigation about foreclosures and perhaps not underwriting the deals collectively. that was another issue. one of the most interesting things with to hear how well they are managing the bank. they have this global systematically surcharge on the capital. moving the by balance sheet to lose half a percentage point. that is worth a billion of capital that they can -- that is worth eight ill human capital -- that is worth 8 billion of

capital. the idea of the state of european and london banking versus the united states -- it is sort of the backstory that no one is talking about. christopher wheeler, what is the state of the city, the state of canary wharf, to move against the u.s. penny system? christopher: it is very difficult. calculate your -- clearest on your balance sheet with discussions with your regulator. the fed state -- the fed said no. we are going to have a look at it. what that meant was the european front --t figure -- shrunk their capital. banks on 5% or 6% ratios, --

francine: and what the european banks want to become are not investment banks. want tot do they become? do they want to become jamie dimon? christopher: where they have a footprint like credit suisse, global leaders in a fast-growing business. nothing else has to fall back on. they do not have a successful business like barclays. its asset management business, they are working on. that is where they are going to have to stay. jon klein has to work out how he can do that within the sort of confines of the capital leverage issues he is facing. francine: what is your favorite u.s. bank? christopher: i very much like citibank because -- given what it had -- what has happened to the market, i have

to say wells fargo and jpmorgan have come back. tom: is there a wells fargo in europe? if we like john stumpf and when one boring block attack, john stumpf dunking, what is the deal with wells fargo? in my interviewing both of them? francine: welcome to europe. so do lloyds, and the old boys bank wants to model itself on wells fargo. europe --fargos of handles bank and almost focuses predominately on domestic business, costs very well managed. advise samuel before the bank of england? were you there? even i know this area if that is how it is pronounced.

francine: it is the names that we cannot remember that are the most touring. next guest will talk about foreign policy. powell on the united states and the united kingdom. you need to stay with us. "bloomberg surveillance tom: worldwide. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua. tom keene in london. we are looking at live pictures. what time is it now? good morning, america. bloomberg business

news. here is vonnie quinn. vonnie: the fourth quarter does not look good for jpmorgan. quarterly earnings missed estimates, and the cfo says the trading forecast for this quarter looks high. the world's largest chipmaker's -- iscasting a forecasting a slowdown. intel has been hurt by the .ersonal computer slump producer prices fell for the 43rd straight month. retail inflation as well is below the government target of 3%. that opens the doors for more stimulus potentially. that is the latest bloomberg business class. back to london. -- bonnie, thank you so much. we like the chart when you put it up. single best chart on banking.

normalized. we do that in london. the white line is deutsche bank, just not getting it done. there are many other banks doing a deutsche bank comparison. christopher wheeler is with us. if you are a policy guy saying to ceo's this is what you need to catch up to jamie dimon, what is the distinction to get the stock price going? christopher: it is a mixture of things. i am going to say costs. jamie was looking at another half-billion cost-cutting yesterday. he had far too high a level of costs, too much bureaucracy. he said every day we look at costs that we do not want. cost is important, but it is also making sure you have the right businesses where you have critical advantage. is the gentleman from bowden's taking over at barclays. you go back to the heritage of bowden -- that is a lot of courage. mr. chamberlain had that on the

battlefield in tennessee. thing -- bring that forward with what mr. staley's courage needs to be with barclays? christopher: you saw the chairman of barclays looking at the need for -- maybe it does not come from a single bank. together,banks coming bringing together the investment banking businesses. re-a -- will there be a megamerger with someone? christopher: i am not saying a major merger. let's do an asset management in france and bring them together. francine: they are just awesome. when you look at the heads of these banks, deutsche bank, mark there- barclays -- is concern that they are going to ?ank fast, being too aggressive

christopher: they have to take people with them as they go. if you are leaving a bank, you lead a few people and you get them inspired. you kind of get the whole bank behind you. you moved to bank fast, too much -- it is going to be problematic. it is difficult to actually work out what the best approaches, but the key thing is you must work out the businesses that you are strong in and put your capital and leverage behind those. world, this is a little bit wanted but it is a jargon alert, a pre-jargon alert. what is the new terminal tangible book value for major banks? 1.4, 1.6, howbe much do you mark the new valuation down? christopher: it is pretty straightforward now. you have banks that will be

earning between 10% and 15% on catchable equity. back at the u.s., we still have some u.s. banks, like usb in minneapolis, playing on two times book. you are going to have businesses there. but the normal is slipping down to 1.5. tom: 10 seconds. we have beer mergers, computer mergers. will we have big bank mergers? absolutely not. that one is off the table. tom: christopher willis is with us from atlanta -- christopher wheeler is with us from atlantic equities. calomiris will join us. thisis at 7:00 a.m. morning. stay with us. francine lacqua and tom keene in london. "bloomberg surveillance." ♪

francine: this is "bloomberg surveillance." i am francine lacqua, with tom keene, in london. tom: the morning must-read is a wonderful thing, and this is very important after being in the cigar bar without cigars. from "the financial times."

we are honored to bring you charles lord powell of the house of lords. to put in perspective here, the church by the tower of london, there is that old london floor. it brings back the loan and floor -- the roman floor of ages ago. the temple. tell us about british exceptionalism within the london boom. more powell: after all, what country of our size could have conceived of the global empire? what country could have stood alone against hitler's germany,

waiting for the united states to join in, but a little bit late. what country could be the first at discovering many fields of science and so on? we really do feel we are exceptional. people regard that as being perhaps being a little bit pompous and self-important, but we are exceptional. francine: are you exceptional enough to be renegotiating with eu in a satisfactory enough way to keep this country within the european union? more powell: i am rather passed that sort of thing, but i do believe we can make a satisfactory deal. tom: daniel yergin was so up front in his commanding heights and on to where we are today. what do you demand from the new british politics, the cacophony that we see in america? what do you demand with cameron as they move forward? lord

powell: we have a clear election result a few months ago. we have a conservative government that has a majority in the house of commons. we have the benefit of some continuity. as you say, i have just arrived this morning from the united states, and the politics there is not a pretty picture. tom: he has taken some real shots at the united states. francine: i know, i like it. powell: it is part of the welcome. visits two important this week -- the chancellor of china and we have you. francine: if britain were to leave the european union, are they banks, the swiss, out of here? christopher: as they look at their headquarters in london, absolutely. they want the passport that takes them to europe and they will have to leave some people

in london. they will after that they will have to shift sources within the european union. tom: i want a single best buy from you before you leave. christopher: long-term, citibank. tom: christopher wheeler with atlantic equities. through the morning on bloomberg television and radio, we will give you perspective on bank of america and wells fargo as well. coming up in the 6:00 hour, john norman will join us with his terrific perspective on derivatives. john norman of -- john normand of jpmorgan. this is "bloomberg surveillance ." ♪

tom: good morning, everyone. "bloomberg surveillance." francine lacqua and tom keene in london. vonnie quinn has our news in new york. vonnie: i am holding down the

fort here at the "surveillance" desk. mrs. clinton was leading in the alls is a frequent -- and was frequent target of martin o'malley and the other three hopefuls last night in las vegas. o'malley: i respect what secretary clinton and her husband have done for our country, what our country needs new leadership to move forward. hillary clinton: i am not just running because i would be the first woman president. i am certainly not campaigning to become president because my last name is clinton. i am campaigning because i think i have the right combination of what the country needs at this point, and i can take the fight to the republicans. vonnie: mrs. clinton and o'malley share the stage with bernie sanders and former senators jim webb and lincoln chafee. the next democratic debate will be november 14 in iowa there it

vladimir putin says god bless russia's central bank. he wants to cut inflation to 4% in the next few years. >> when you get to the 4% inflation's target, is that a run what you think russia should have for rates? >> it is difficult to talk about the difference between rates and inflation. it would be somewhere close to that, but it will depend on the economy. vonnie: prices in russia at the end of september were rising at an annual rate of almost 16%. the israeli military is fanning out across the country to help stop violence. palestinians are blamed for a wave of deaths, including shootings and stabbings. sealed off troubled spots, including arab neighborhoods in jerusalem. air traffic controllers say flight delays could rise as more

workers are found for the towers. their union says the shortage of controllers is at a crisis stage. federal aviation administration, which promises to speed up hiring. tom, you may have to do multitasking on your way home. tom: thanks so much. blackrock -- make it a round number four mr. fink and the company. of course, this is coming off the challenges of jpmorgan, a little different business mix between j.p. morgan and blackrock. francine lacqua and tom keene in london. we are thrilled to have with us this morning more powell -- lord powell. interesting looking across the decades between the united states and great britain. you mentioned world war ii earlier -- this idea of the relationship of great britain

and the united states, and the new trade agreement pending as well. how important is the transatlantic trade agreement? lord powell: i think the whole transatlantic trade agreement relationship is important. it is a story. its high point under president reagan and margaret thatcher. since then, it has eroded a bit, and that worries me. i'd share atlantic partners, which is dedicated to keeping that atlantic relationship. they create -- the trade agreement would be an important bit of that. tom: the charter was not done it with media not done scrutiny. it was top-secret. can these negotiations go on given the modern media and the twitter culture? are you on twitter? lord powell: i am not.

francine: this goes back to trade. in the u.k. we talk about nothing else and we have months until the election. would margaret thatcher have made of politics right now? lord powell: she would be alarmed that the united states is withdrawing from the world, pulling back into bank many areas -- in too any areas. with a natural partner like ronald reagan and george h w bush -- she would be worried about that. she would be disappointed to see the deadlock in congress. it seems impossible to move forward any major agenda item. we just negotiated this asia-pacific trade agreement, which is potentially extremely important not just in his this, but in a strategic -- not just in business, but in a strategic move at a specific time when china is getting quite expensive. that might be hostage to the thatcongress, something

would certainly distress margaret thatcher. francine: how would a world leader deal with donald trump? powell: you mean if he was elected. you are asking me to -- i never met donald trump. what i would say is that he is not alone in the sense that a number of insurgencies are going on in politics at the moment. you see it here. you see it in the united kingdom independence party. withsense, you see it jeremy corbyn, the leader of the labour party. all sorts of parties are coming up outside the normal political framework, and that reflects the disillusionment with politics as usual. tom: we go back a few years ago to te lawrence and the drama that every kid saw with "lawrence of arabia." how should the united kingdom

react to what europe wants to do, what washington wants to do, and most particularly, what mr. putin would like to do with syria? lord powell: there was a proposal that we should join the united states once president assad used chemical weapons against his own people. we said he we were going to do it that we said we were going to do it, president obama said he was going to do it, and then mr. assad used chemical weapons and we did nothing. i would say first of all we cannot leave president assad there. there is talk that he will have to go on for a bit and we will have to negotiate with him. i do not think so. he has been destroying his own people. we have to find an alternative. francine: how much do you worry about world peace? these comments by vladimir putin

largely went unnoticed by western media he said that if they had not let me do that, i would have used nuclear weapons. lord powell: i take that with an enormous grain of salt. these is on the defensive days. i do not worry hugely about world peace. i worry more about the economic problems of the world than i do about world peace. tom: to that point, richard haass' core theme is that america needs a strong economy to project a strong policy. will britain need a strong economy? lord pol: we do have a strong economy. powell: we do have a strong economy. we are about the only economy that is growing in the developed world like the u.s. the unemployment figures continue to come down. of course that strengthens our

voice, a voice that should be exercised in close cooperation with the u.s. together, we are much stronger. francine: this is a same -- this is a country that is asking itself whether it wants to stay in the european union. how dangerous is that? lord powell: i do not think the u.k. is simply recognized as being part of the european union. know, it would not be a great disaster if we were outside the european union. we would not disappear off the map. . just think it would be better it gives us that bigger market and that greater assurance. tom: let's continue with this. more powell is with -- lord powell is with us. .e is going to continue with us tomorrow, john normand will be with us from jpmorgan.

exquisite on the linkage of derivatives into economics, finance, and investment. francine lacqua and tom keene, with vonnie quinn in new york. from london, it is "bloomberg surveillance." ♪

francine: welcome back. this is "bloomberg surveillance ." the german chancellor, angela merkel, addresses the cdu party conference later today. she thinks criticism within her own party -- our international correspondent hans nichols joins us. he is usually in berlin, but we are lucky enough to have him here. angela merkel is in a tricky situation. she sees this as almost am humanitarian cause, but she is

getting a lot of flak from her party. hans: not a day goes by that you do not hear from which is a talking about the strain on the states. the party are concerned about the strain on their finances. then you have the other side. some of them are saying she is not doing enough. she has made some tweaks. she has put in peter all my are, the former chief of staff. refugees.arge of we will see whether or not that changes things. we still do not have a cost estimate for this year. they have put $6 billion aside for next year. tom: this is about scale. it is not about refugees or economic migrants, it is the scale, right?ha angelaeople inside merkel's government says the scale of this is not nearly as

challenging as -- they had to absorb 400,000 in 1989. tom: i do not disagree, but this is not the hungarian revolution of 1956. lord powell: it is on a much larger scale. first of all, you have to solve the problem which is causing the flow of refugees, which means intervening in syria. secondly, you need to help the syrian refugees all around the country -- turkey, jordan, 4 billion of them. if their lives were to be more comfortable, they would not have to leave. i think europe needs to reflect more on that. francine: you have to do with them now. they are arriving now. first, 1, 2, and three. powell: they have got to be

weeded out. the germans are going to have to do that. a lot of the cases will be rejected and sent back. hans: this is a moment of controversy in germany. 's government has set up transition camps on the border. they can have speedier responses , send them back to the balkans quickly. tom: you can ask this when you have an atlantic ocean between you and the problem. lord powell, where do you send them back to? typically back to the country from which they have come. even that you have free movement in europe, it probably means back to turkey or one of the countries surrounding turkey -- sorry, surrounding syria. it is difficult. in the second world war we had to send back cossacks and other people to the soviet union for a very unhappy end. tom: as angela merkel speaks, what is the nuance on the refugees?

hans: she is trying to get a sense of how much internal opposition she is getting. francine: it is economic, but it is also the right thing to do. we need to remind viewers and ourselves that the u.s. is a country that grew thanks to refugees. trump does not agree that it is the right thing to do. there is a certain part of each society, and you are engaging that from germany, right? hans: they are going to hire 60 refugees as trainees. it is a pilot program. they have covered a lot of other companies. a lot of the big companies are doing it. tom: do we need boots on the ground within syria and adjacent to -- and adjacent to syria? lord powell: i do not think we are going to do it. we learned the lesson of afghanistan and iraq.

if you get stuck with boots on the ground you cannot get out. tom: vonnie quinn, what do we have in photos this morning? vonnie: photo number three is a galaxy far, far away. space telescope captured a galaxy 70 million light years away from earth, in the constellation of fovirgo. the left isr off to julia roberts in the peter pan movie. --nie: number two top photo a photo sold in fresno for two dollars, believed to be the second photo ever of billy the kid. the photo has been authenticated and it is valued at $5 million. the only other picture of billy the kid was sold for less than half that, $2.3 million.

this particular photo is believed to have been taken two years earlier. that is why it is double the price. a good return of investment there. top photo has to be baseball. the st. louis cardinals could not stop the chicago cubs' winning streak. the cardinals looked on in dismay. it is the first time the cubs have won a playoff series at wrigley field. it would be their first world series title in 107 years if they win. tom: there is no equivalent to this. the cubs to beat the cardinals, the franchise across all of america. u.k., it ishe wimbledon? tom: the rounders. , get withord powell it. it is baseball. let's move on.

i wore my blue suit today for the cubs. coming up on bloomberg radio, we will speak with robert finch. we will synthesize so much across economics, finance, and investment. in london, a wonderful week here in london with francine lacqua. this is "bloomberg surveillance ." ♪

tom: from london, good morning. "bloomberg surveillance," as we gaze out from hong kong -- at hong kong from our offices. -- good evening from asia as well. thettle bit stronger off 1.20 level. yen, euro-dollar at the 1.14 handle. are you going to harrods? not anytime soon. to new york.w back

let's look at a business flash with vonnie quinn. vonnie: general electric wants a change its status as financial institution. it will last the federal government to drop its resignation as a systemically -- its designation as a systemically important company. ge is leaving the finance business to focus on manufacturing. the bankers behind the beer take over -- the banks will split $235 million in fees from the ab inbev-sab miller deal. it looks like there will not be a fairytale ending for the latest version of "peter pan." warner bros. could face a $100 million loss. the film cost about a quarter billion dollars to make. is "panyou could say it

ned." tom: you are killing me. last night was the first democratic presidential debate, a las vegas. clinton: we have to stand up to vladimir putin's bullying, and specific in syria, it is important. i applaud the administration because they are engaged in talks with the russians. to make it clear that they have to be part of the solution to end that bloody conflict. , phil mattingly, who hung on every word last night. is foreign policy an advantage for the former secretary of state to speak to? does her democratic party care about foreign policy? phil: i think last night showed yes. one of the key ways you can see this is, she put bernie sanders on his heels on a number of

issues, but foreign policy was one of them. he had to defend his willingness to push for foreign intervention , something you would not expect from him. bernie sanders: i am not a pacifist. i supported the war in afghanistan. i supported president clinton's effort to do with ethnic cleansing in coast of oh -- in kosovo. i happen to believe from the bottom of my heart that war should be the last resort. phil: secretary clinton -- her foreign policy would be described as out of step where the democratic base is right now. but as you saw last night, her experience, her time both in the white house and as secretary of state, as senator from new york, gave her an upper hand when it came to the issue during the talk last night. tom: i count one person not on the stage -- mr. biden. the us an update on what vice president's plans are.

phil: last night he hosted a high school reunion and then watched the debate according to a white house official. it is anybody's guess. there is not a real big opening for him right here. hillary clinton by all accounts, had an impressive performance. her numbers remain steady and high, even with rougher places like new hampshire and iowa. mr. biden has to get in soon, tom. , usually inchols berlin, and for years at the white house. what an interesting calculus. is the calculus this time around different than when you were on the watch? hans: yes. the republican party, the establishment, gets behind a nominee. 2008, it was clear john mccain was -- tom: tell me what jeb bush needs to do. hans: he needs to excite his

-- andd in either ohio in either iowa or new hampshire. francine: are you concerned about the u.s. debates? powell: i am not concerned about them. i am worried about the uncertainty that hangs over. when i was in the u.s. yesterday, got back this morning, the best opinion pollsters were pretty thing senator rubio on the republican side. tom: we need to move forward on "bloomberg " this morning. richard anderson on the state of media, and les moonves. good morning. ♪

it is a morning for bank earnings. grading the debate, who won and who lost. and, still flying high?

we will shortly. ♪ david: welcome to "bloomberg ," i'm david. stephanie: and i'm stephanie. did you watch the debate last night? david: i did, did you? stephanie: i watched it, and you know who did not win, the network. when donald trump is in a debate, you get entertained. last night's debate -- i was looking at e-mails. david: i also read some of his tweets which are pretty entertaining. stephanie: leave it to donald trump to still the show. it is the