francine: takes a stand. stimulus has been -- finance ministers gather in shanghai. china's not done yet as they say china still has room for more easing. and apple versus the federal bureau of investigation. the tech giant lays down the argument that -- as microsoft and -- begin to back their rival. i'm francine lackaway.

if you look at the -- we talk a lot about presidents and then look at the g 24. tom: the one oddity is the german two-year continues with the low yield. that will be one of our themes is you really wonder what the we'll explore that throughout the show. caroline? caroline: well, frontrunner donald trump was -- marco rubio and ted cruz went after trump with everything from his health care and at one point rubio brought up the now defunct trump university. >> and they are suing him now. $36,000. that's a fake school. and you know what they got?

they got to take home a cardboard cutout of donald trump. that's what they got for $36,000. francine: more than a dozen states will hold primaries and -- this time in kansas. this time police say a man opened fire in multiple locations killing three people. they say most of the shootings took place at the factory where he worked. the united nations security council is preparing to -- they are aimed at forcing the country to curtail its news program. they obtained a draft and contained ships going in and out of ports. plus the country can no longer import aviation fields. voters in iran are costing

president hassan -- rivals attempts to block the economy and british lawmakers want greater power and dismissal of power over governments. members say that would help keep the regulators independent from government. more than 150 news bureaus around the world. i'm caroline. tom: let's get to equities, bonds, currencies and commodities. higher futures up a good 18. dow futures up 145 taking dow out to 16,818. oil very nice, but that's american oil at the bottom of the screen. 29 up to 3386 in the next week

or so. well under the average. there's the dow. closed yesterday. i wouldn't know if the one oddity is -- a negative 0.542 right now, that does get my attention. francine? francine: yes. it does get my attention. as well. it's declined to the lowest since june and we have seen a little bit of trickling data suggesting this has an impact on data. you can stop gaining oil and still gaining euro u.s. dollar 110. look, we've seen quite a lot of -- of course we get ever closer o that june 23rd referendum. tom: the euro quote is that one of our illustrious london staff

hat just didn't go home last night? went and had beverages of their choice? our creative euro quote this morning. let's go over to a creative bloomberg right now. we've shown this before. this is a big deal. francine, up we go with a very nice u.s. recovery. here's the hope and prayer. for rate increases as we roll over. meanwhile, the german two-year ith a leg down very near the 0.551 low we've seen. i mean two different worlds as they go to g-20, isn't it? already we are getting the pboc from china saying they are happy to act more. we are seeing strong signals from the german chancellor. now for more, let's get to

shanghai where we are joined by -- you spoke to gary kohn and some of the finance ministers. are they concerned that market turmoils are meant to mask something bigger? >> the sense i'm getting here and based on the people i've spoken is that markets tend to overshoot. we know that. now, that being said, you know, going into this meeting, expectations were quite high that finance ministers get together and put something, coordinate some sort of response and hopefully avert what the bears are saying. that being said, though, how do you do that, there are also expectations that we want to avoid -- mess up already fluid monetary policy.

so we heard from -- in fact he was speaking right when the governor was speaking. he basically said that's going to create more trouble. you know, fiscal and monetary stimulus has run its course, and the stimulus we are getting now, just looking at the omment is cheap oil. francine: what will come out of these talks? sometimes they say look, you shouldn't devalue. are we expecting them to be that little bit harsher on competitive devaluations? >> you mentioned it. i was talking to deparey coleman from goldman. we will probably get a vague statement. we already got some sort of

decide from the chinese of what we should expect from them. i was looking through local media even before this started. he described these expectations of a applause of style and accord. with that point guard said, though, i was listening to the governor speak earlier, and what he said was that yes, there's a problem, put it's not dire enough to merit us bringing tout big bazookas. they have the tools to deal with it should it come necessary. francine: nice to know they have bazookas. now, when you look at g-20 this is jack lew, shoaib lynn and others saying we need to focus on structural reforms. actually, what we need is

coordinated actions to start this on the market. >> it's about the tools that you have and we've used a lot of money in this central bank action, unconventional and it looks like we are running out of time with those. the problem is we have the con very janice of geeo politics as put in a gap in time to meaningful structural reforms. it's do we need things to get much worse before the g20 actually decides to take this or not. just central bank release. >> i remember gordon brown and at 1 g 7, the charge says it all which is g20 real gdt.

bloomberg put it together and it's a fascinating statement of what has returned. t's that one persistent long g 20 growth. virginia, am i right that we are still not back and the basic statement is g20 growth even when -- isn't there? >> i depreefment and i think with a we are seeing in thal markets now is the adaptation to this slower growth world as the emerging market slows and the -- and it's adjusting for that next step, if you want. we need structural reform. but i think what is missed possibly in terms of talk with the g20 is geopolitics. en you think about this, the

timing of june is not, you know, a question out of the blue or point out of the blue, it coincides with the peak of the selling season in terms of refugees, because this is the time when it's easier to -- so you are going to have a convergence of -- of data that at best has been mixed. not only at the g20 level but globally. and in a quite negative way, ind you. francine: yes. and it coincides with not wanting to panic people because of the refugee crisis but also the uk, they want people to go to the polls. tom: yes. i saw an article where they wanted to get that -- i can't

imagine many people wanting to get involved in the contentious debate in the united kingdom. joined by robert hor math of sisen jer associates. robert hor mats, bob hor mats and richard burner will join us in the next hour on economics. ♪

tom: futures down. let's get to a friday bloomberg business flash from caroline. care ryan? >> thank you, and the world's ggest -- the german company, -- says it slump

was going down in its oil and gas unit. meanwhile, the profits are flying high at iag. they are in talks to add more wi-fi with the surging demand. meanwhile the chief executive says -- will not affect its business. they are all taking a hit from the concern they are all leading the union. >> meanwhile, the measure of confidence has fallen to its lowest level in 362 years. that's business. francine? francine: caroline, thank you so much. now the bank of england governor warned about getting

broiled -- call he calls ate zero sum game. >> when zero rates are implemented in ways that insulate retail customers shutting off channels that mainly -- allowing wholesale adjustments, it can affect the exchange rate. >> this may be a way to boost activity. but the transfer of demand weakness elsewhere is also a zero sum game. >> let's bring in the founder of needle knows advisors. you are concerned about their rates at the bottom. but policymakers didn't have a choice to do more because root forms -- >> well, there has to be an end to the potent cri of the

central bank's reform. >> yes. well, i mean, you can, but it's and the a pass efficacy. and i think it's increasingly theavet if you get to the tremes of prices or that, it actually is productive. so the question is that do things have to get much worse when we have a fragile balance. we've got a lot of geopolitical and political pressure. we have elections coming in europe. we have clearly in march and germany in 2017 and we have u.s. and russia. i mean, there's a lot of things happening. fran: but will they get worse? we have had some worse than expected ideas that the shock is coming. >> i think it's a slow grind.

i think >> i think the consequences that are structural have not really been priced in, and the market has adjusted to alure price, but -- and i would say still looking at familiar indicators. i think we need to look at new indicators. if you look at what's happening with russia and russia and syria, you could say that this is a tool in a way to divide europe. tom: virginia, i'm glad you're bringing that up. we have headlines coming across bloomberg right now. we have seen from it says syria with no progress. then you see oil. day-to-day, virginia, do you belief there's a geopolitical part in the price of oil? or did that evaporate in the move? >> i think it's definitely a

geopolitical part, which is showing that the tables have turned. trying to get together all the old factions, if you want, that have power over the old prize, every time they try to get together and do something, it shows failure, and it shows how that structure really changes. and i think it's important and explains why partial -- in the middle east have changed. so are you seeing russia? russia action in syria to have boom also, if you want, in turk yip, so that when those arrive in the spring or summer in europe, to create much more divide in europe. now, that might be a little farfetched. but if you look at it on a global basis, can that -- i think that is a very valued doubt ahead of those elections

that we are having. tom: right. virginia joins us. coming up, while we will look at the political news and shout fest known razz the republican debate all migrating into supertuesday. all that and more tonight.

francine: i'm francine lacqua here in london. tom keene in new york. and we are focusing on apple.

it's the judicial order to help the federal bureau of investigation unlock the iphone of the terrorists. tom, this boils down to technology, and security versus privacy. who is going to win? >> ha ha, well, in some ways apple has already won, because it's put itself out there and gone on the record saying we re going to stand up for our customers. they may lose in the courts but in terms of their staking a stand up against government, they have already gained a victory there. tom: tom, i have been reading 1889. ritz act of would you sprain why the

government is going back to george washington to help us with this modern iphones? >> they are saying that it gives them the authority they need to say no, you have the opportunity to ask to ask congress to expand that authority, and you failed to do it. so in there if you read their order last night, their response last night, tom, they are saying shame on you, government. you have the opportunity to ask or more authority to decrypt and you didn't, so therefore, you do not have the authority to force my hand now. tom: do you assume this goes to in a general phrase, congress? >> that's what apple wants, which is a very risky in an election year when you can see that all the candidates want to turn this into a political hot potato and that apple wants to -- when you get

politics involved, rational sometimes goes out the window. tom: tom with bloomberg news leading our technology coverage. thank you. in our next section here thank you louisiana will join us from the bank. this is a nice idea of emerging markets and where we are in a single digit world. i think it used to be double , atul coming up. this is "bloomberg surveillance." ♪

francine: i'm francine lacqua here in london. talking to you in new york. let's get straight to the news with caroline. >> francine, thank you. a united nations security

county critical want to approve the cease-fire today. it takesal effect at midnight. he 's according to syria's, worked out the deal with the secretary of state. >> as the islamic states were excluded, attacks on them will continue. marco rubio went after frontrunner donald trump in the last time the candidates would be together. before the primary. >> you're the only person on this stage that's ever been work r hiring people to on your projects illegally. >> time only one on this stage who has hired people.

>> the u.s. plans to put special operations forces on e front lines with nigeria's boko haram.st d china is -- prime minister leads the coalition government and is trying to become the first leader of his party to win a second consecutive term. and india is about to join an exclusive club. it's had a submarine for decades but now india is close o becoming the sixth country to own a submarine capable of firing a nuclear weapon.

i'm caroline hyde. om: thank you. the shift. joins us. s and atul this is a log chart, a little bit of math on a friday, folks. stay with me. it's a log chart. slope matters. that's all you got to know. slope matters. the perception is the green arrow up to the peak and the pretty good steep necessary of the yellow arrow. atul, we don't buy at the bottom of the market. we buy randomly from a double-digit bull market reality to a single digit return. >> yes. we are seeing that the markets

are stag nating and now we are moving towards a period of -- number two. when we start to say -- it's difficult to get that expansion. so we're saying where it's at a -- t -- and the tom: fold in the top line. bring the chart up again, and what we need to know is nominal g.d.p., the expectation of top line growth at companies was probably a little better at the green and yellow arrows and home depot and lowe's were top , but -- atul: the reason behind that is we have got the low interest rates but now it's up to companies re-investing.

you can do stock buybacks and really it's a re-invest but really it's what we think will eep the bull market expanding. francine: but what needs to happen for those to start re-investing. atul: well, i think we need to see less shocks and see a confidence recover from where we are right now and we need to see more stable consumption. scoufpks, improving then we will start to see that compaq. francine: when you look at that, it's quite different to know because it's different to environment.

we are having nothing that different come out. and -- >> yes. so clearly sentiment is in that process and it goes through phases of disappointment and adapts to that level. you're right. it's in a fragile state. markets move because of sentiment macrogeopolitics and company data. company data locally, we have had a lot of -- particularly on the back of the fourth quarter. geopolitics -- macrois mixed and sentiment is a notch down. so i think it's possible that we have bear market rallies. and until we have a structural shift that takes place, those are going to be -- tom: let me go to you fist.

we'll touch on this with richard berner, formerly with morgan stanley, he has been -- dab's, atul talked about interest illusion. this deflation allows for odd business thinking. we are there right now, aren't we? atul: yes, quite simply you've got the cost of -- which is so low, and that really distorts the normal business cycle. when you talk about the -- what we really need to see is moving more towards a normalized stance. tom: right. virginia, what is the consequence of business rate increases and in economies that are doing good? let's say in the u.s. and the u.k.? what would happen? >> i think it depends on the growth.

if it's based on clear signals of recovery in america and the rest of the world is in -- shape. that would be positive. if you have it in an environment where we try to normalize where the rest of the world is fragile, we are creating an environment where it is binary and particularly it's overlay shocks, so a lot about fine-tuning which is what the markets are fearful of. >> inflation is not to be seen and the amount of normalizing inflation and it's taking much longer than we are expecting it to. so normalizing interest rates seems unlikely. >> and what your original expectations are, what we have to ask ourselves with regards to expectations which are still

coming down to lower parts of the world is when does that anniversary of weak inflation in all those countries where on a year on year basis we are seeing a level of normization, and i think we are not there yet. tom: mm-hmm. virginia with us and atul lele with us as well. if you want to get this off the bloomberg terminal, we have talked to the gremlins on the 33rd floor here. g with a hashtag. that's brilliant. b tv 46, and now we will get you the actual chart. i used to that's on the 346.berg terminal g #btv i get like a tenth of a penny when you do that.

w robert hormats and richard bernier, it's like a flash fwook 2005. hormats and bernier in our next hour. stay with us. ♪

tom: with the meetings in shanghai. we will touch on that with hormats and richard berner. but here's our caroline hyde. audi will take another shot at knocking off b.m.w. ast year audi fell behind.

one reason is it had the oldest line of the three competitors. nintendo blames weak sales of ts hand held console on 3 m. and next month nintendo comes out with its first smartphone. and shares of the world bank of scotland dropped for the first time. it reported its eighth consecutive annual loss. they paid out billions in misconduct. rbf had hoped to resume paying dividends early next year. that's the bloomberg business splash. francine? francine: when you look at the charts, caroline, of course it feels quite dramatic when the share price first opened. this is i think a little bit early. i'm not sure what we are looking at. let's stick with rbs.

it's definitely our morning shares falling and right now shares are trading below 9%. let's bring in bloomberg's michael moore. so michael rbs basically plummeting because it's been pushing out the dividends and they are going to be much tougher on compensation. >> yes. one reason is they have this overhang from the u.s. mortgage settlement that may be coming at some point. they warned analysts that they don't control the timeline of that. they are not having substance -- substantive conversations. rbs is on the later, and it sounds like it's not coming immediately. so the uncertainty there is also weighing. francine: and they have loads with, gs to deal

restructuring the banks. we need to forget about 2016 and look into 2017? >> well they hoped it would be the first-quarter and 2016 i think they are expecting more restructuring costs and expecting more issues from this p.t.i. issue. so i think you're going to see more struggles in 2016 as they try to turn this around. tom: it's on the edge of a citi group chart but michael moore, there's no equivalent in the united states. why is this bank not put out of its misery? >> well, that might be a political question. i don't know. but they are certainly, they have taken a long time, this is their eighth straight annual loss.

tom: eighth year of annual losses. >> they have tried to do what ladies has done to get a little more u.k. focused. but now ladies is profitable in raising the dividend and rbf is still a year or two away from that. tom: what's the strategic business plan for this dog? >> i think it's to be u.k. focused and to be simpler and they have not gotten -- they have gotten out of a lot of banking businesses. so it's steady profitability and they have outstanding issues, businesses they need to sell and charges they need to get to that point. >> there's no one would really look at - when you

financial substitutions in london, we are looking at the other debate. so how much pressure will that put not so much on domestic focus, but -- >> well, it will have an impact. the other banks will have to turn or just their model in some way so indirectly it will have an impact. so i think it'simportant thing to remember. because the numbers we are looking at in terms of the enefits of not having to pay -- with the consequences that you would have in the financial sector direct economy or growth or indirect through occurrence cris and probably what it does to another bank sector in theu. k. is very important mple

tom: virginia, you have time at pimco. what would happen if these banks went away? what are they waiting for? >> well, i think there's an element of politics which we just talked about. there's an element of resilience in terms of banking also. if you look at asset managers, there's an opportunity if they can add value and provide in this low-rate environment sustainable performance and absolute. but the financial landscape is clearly changing not only in the u.k., but i think all over the world. francine: all right, guys. thank you so much. we will have plenty minor talk about. today iranians go to the poll. coming up in the next hour you will hear live from teheran.

this has huge implications also for the price of oil and saudi and russia, friendship or not. ♪

tom: good morning, everyone. looking at the german two-year. it my grates, we do three digits on friday here. it's got a little bit of weight to it. dow futures. atul lele with us. we try to recover over the weekend with our failed retirement plans. one of them, atul is to go into emerging markets. as you write, it's also about this dollar shortage. explain, first of all, to people like myself, what a dollar i will liquidity is. atul: so 60% of global g.d.p. is in u.s. dollars. a lot of those economies simply need u.s. dollar liquidity and u.s. money supply to function just to keep their economy --

tom: where is the dollars? atul: what they are relying on is the flowing of u.s. dollars. we are up to our eyeballs in u.s. dollars but not to our hairline. so most emerging markets rely those capital quotes to carry on. the commodities or debt. when u.s. liquidity slows you basically pull the rug out from under those. francine: and i won't explain it better. >> the other way you can look at sit say a strong dollar is deflation narrow and deflation narrow trends into a world of low inflation, makes it difficult for the global economy but in particular,

emerging marks. so i agree with that. i think the question is maybe we are looking at it from the and oint of dm versus gm maybe we should look at it in terms of global lines of businesses, because some areas and businesses are doing well with chinese consumers. however, this idea of top down, and we have to remain with that because we have governments and countries remaining on a topdown basis. >> what is not deflation narrow? so the dollar strength, exporting from china, deflation narrow. >> so where do we find pricing power? i think they are pricing power in some areas. think of what i call the new

luxury, health care, school. some areas we want to go back to an area where there's demand. if there are demand for a specific product, we will have pricing power. security, online security which is talked about at all, probably cranking up the level of security to the maximum or show it to the maximum but even more investment in that area. if you think of financial companies, their investment in security to protect their clients is basically with no limit. so you do have areas, but it's quite tricky to find them. tom: who fixes i will liquidity? is janet yellen the chair of liquidity of the world? is it something the pangse can fix? atul: not really. because --

tom: so this links back to economic growth and the real economy as far as what institutions can do. atul: the u.s. tries expanding and we're not saying -- we're not saying the financial systems where we can't say the issue -- we're not saying as much about the u.s. dollar. tom: where is your e.m. buy this morning? at love you: they are all sells. tom: virginia quickly what's your e.m. buy this morning? >> well, i'm not talking about e.m., what i'm saying are the trends are very negative, however, within that trend, that trend, there's pockets of growth you can find. there's clearly the level probably in global companies as opposed to specific emerging market companies, but i think

the trend set is difficult for emerging markets, and you will see a bear market rally. tom: thank you virginia and atul. coming up, an important conversation we are thrilled to bring you in the next hour. robert hormats with the g 20 meeting and his most recent important paper on iran and with him will be richard berner. legendary in his analysis of corporate america into the american economy. hormats and berner coming up on "bloomberg surveillance." ♪

it is a g-20 friday.

they discuss stimulus. markets for the most part advance. we consider a path from precrisis to post crisis to a new america. in this hour, robert hormats and richard burner. in marco rubio recovers. it was a shout fest. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. friday, february 20 six. francine, i need your opinion on the debate fest last night. francine: we do things very differently here. that is the understatement of the year. cameronlike david standing up and saying we will stay in the e.u. i have never seen so much interest from european ceo's on what the presidential race is in the u.s. tom: it is going to be wild as we get to tuesday.

5:00 p.m., helper and heilemann how part and heilemann will sort this out for you. here is caroline hyde. the united nations security council will approve the cease-fire today that takes effect at midnight, according to russian plus foreign minister who work out an agreement with the u.s. secretary of state, john kerry. islamic statesays and such groups are excluded. marco rubio went on the attack last night for the republican presidential debate. , thent after donald trump last time the candidates would be together before the super tuesday primaries and caucuses. marco rubio: you are the only person on this stage who has been fined for hiring people to work for your project illegally. donald trump: i am the only one on this issue has hired people. seven southern states

are up for grabs tuesday. trump is backed by 37% of likely voters. the u.n. security council is prepared to consider sanctions against north korea. they are aimed at forcing the country to curtail its new click program after a recent atomic test and missile launch. they include mandatory inspections of ships going out of -- going in and out of north korea passport. the country can no long -- of north korea upon port. has been another mass shooting, this time in kansas. at multiple fire locations, killing three people and wounding 14. the gunman was shot and killed by police. most of the shootings took place at a factory where he worked. apple has asked the court to quash a judicial order from the

fbi to unlock a terrorist's phone. apple says the government wants a dangerous power that could undermine the security and privacy of hundreds of millions of people. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. tom: i bought a timeshare once in gnome a, alaska. timeshare does not work out. hilton is going to jettison their timeshare business, which i did not know anything about the story. to me that is no surprise. odgies always been a nod business. it is a curiosity for friday morning. let's do a data check, equities, bonds, securities, commodities. euro stable through the week. oil gets a nice bit. lavrov's comments on

syria may have to do with the lift on oil. , 19.11. two-yield, that is some weight in the markets. zero point 55. francine, what do you have? getting: i have stocks 1.6%, on track for their second weekly gain. this is all on china. the g-20 saying they have more room to ease monetary policy. that is giving them a list. we has news from sergei lavrov, oil gaining 2.3%. we need to do a pound check on a daily basis. tom: thank you so much. yield, uphe two-year we go. all of this rise in the yield is due to bob hormats at the state department. we come down your the german

two-year, and the important nuance is this is four fed meetings. we roll over -- fine. none of that in europe, where you have the lead in this, almost -- you have the leade nness, almost a weight. richard burner will join us later. he has been working with secretary lew of treasury. .nd robert hormats joins us we are thrilled to have him here , with his public service to secretary clinton and for years at goldman sachs international. have you ever been to a g-20 photo op? bob: i have been to many of them. some of them are substance, some of them are ups. whereho figures out everybody stands? bob: there is a lot of time and effort that goes into that.

in china -- tom: the ceremony of this event is serious. do you expect any serious consequences out of shanghai? bob: it will give the chinese a sense of how the rest of the world views what is going on there. , theature policymakers finance minister, the governor of the central bank, will have the opportunity to explain in greater depth to their fellow ministers what is going on in china, what the long-term views in china are. that will help. it will clarify things, even if it will not produce dramatic results. tom: bring up the chart. this is a bloomberg summary of real-time gdp. there is no question the gain of the decade. the g-20 here, the g-20 in pittsburgh -- i remember the meeting with gordon brown that was enthusiastic. then it falls apart.

are we in g-20 recovery, or is there a fragility? bob: there is still a fragility, and we are unlikely to see effort by the g-20 companies. the fact that the chinese have announced that they have more room on both monetary and fiscal policy is encouraging. on the other hand, people are going to be looking for whether the fundamental market reforms are going to continue to move in the right direction. tom: francine, this is so important. mr. schauble yesterday said there was no room for fiscal adjustment within germany. francine: he is saying we have to stop doing so much and focus on structural reforms. but he is almost like a broken record. he said that for four or five years. but when you look at the g-20, and we are looking at live pictures of the finance ministers and central bank governors coming together. bottom line, do we need an agreement on currencies, and

will we get it? bob: a detailed agreement like the plaza accord, which will be very difficult, with monetary policy being less useful for most countries, and in many cases there is very little room for official monetary policy. fiscal policy for many countries is the same way. unfortunately, the currency is in a default position since they cannot use monetary policy as well as in the past. the worry is that there could be competitive evaluations. there is major effort among them to talk through this and get some agreement that countries will not use exchange rate devaluation as a means of stimulating their economies or figuring thy neighbor, or risk getting into a currency war. i think that is the risk. is relatively stable as they say they want to be -- and

they have every interest in doing it because a declining r&b can also encourage capital exports. if they are doing what they are planning on doing, it can help stabilize things. francine: will they actually be able to find an agreement or something that is fixed? mark carney warned against the um game. at this time, everyone is evaluating. it is the ecb, possibly even the u.k., it is china, it is japan. , peoplethe asian region look at china because it is the biggest economy. if they allow the market to push the currency down, other countries go down to avoid losing competitiveness. it is not china's fault that this is happening. many countries are using currency devaluation for a variety of reasons, to stimulate growth and exports. avoid usingy has to

the exchange rate as the default position for stimulate americana me. to be the biggest, but it is not the only one for sure. nostalgia forall, the plaza accord. you can see the plaza -- the massive dollar strength. down we go. here is the rubin dollar through 2002. we are nowhere near the energy here, but the backdrop of that is mark carney talking about a mercantile world, and the idea that the new mercantilism is the backdrop that gets us to this dollar extension. do you perceive a stronger dollar in the coming years to get us toward a high-end accord? bob: i think there probably will be a stronger dollar in the coming years, not so much

because the fed will keep raising interest rates, which i do not think for the moment it will do. but a lot of countries in the world have debt and are in a much weaker financial position, and they are likely to have their currencies go down. some cases, it is because the market pushes them down because they lose confidence in their own economies. in some cases they want to improve competitiveness. the chinese have been doing a number of things to intervene to keep the rmb up, to keep it from going down. to keep it stronger. they really do not want the perception of the market dramatically declining rmb. when that happens, people anticipate that, and they move capital out of china. the chinese have a policy of not allowing the rmb to deteriorate are medically. people say is it too high or too low? there is a difference of opinion , but they are not allowing the rmb to deteriorate.

tom: coming up later with bob hormats, we are thrilled to richard berner. stay with us worldwide. "bloomberg surveillance." ♪

francine: i am francine lacqua all in london. tom keene is in new york. this is the german five-year, at a record low. is the racer this to the bottom. we are seeing pressure on the yields, and when you are sitting in europe, you kind of think how do you calculate risk. let's get straight to the bloomberg business flash with caroline hyde.

shares of herbalife fall in extended trading. they are in talks to regulate an investigation over whether it is a pyramid scheme. the probe began after allegations from billionaire bill ackman, who said he was shorting herbalife. grew -- spending by free -- spending by french businesses picked up in the last three months of the year. housing, consumer confidence, and the pound are all taking a hit from concerned the u.k. will leave the european union. say the home track on referendum will curb housing sales. a measure of british consumer confidence says it has fallen to the lowest level in three years. the pound had its worst week since 2009. tom: caroline hyde, thank you so much. now we digress. megan murphy is in washington,

damage from last night possible republican debate. were you surprised by the level of shout fest last night? was surprised they let it extend to that, because the strategy going in for rubio and trump.s to hit there were points you could not hear what anyone was saying. i think in some respects, even though they scored big points, i am not sure who it helps that much in the end. tom: i look at the world coverage -- francine lacqua mentioning the shock and awe of what people observe of america in europe. what is the tone of americans over both discourses that we are seeing? megan: i think the tone here is a little bit of disbelief about what we are seeing.

francine says she always hears about theropean co's election, and the interest. -- thise of populism level of anger and the rhetoric we are seeing in the lack of attention to policy is very interesting. this is four days before super tuesday. francine: what everyone wants to know is, is donald trump stoppable? megan: i think right now it looks very difficult for anyone to forge a credible path. he has double-digit leads. he may win texas. he is going to sweep a large portion of the south. a poll was out last night showing that he had a near 20 states goingn the down to the southern states. theynyone to stop him, will have to keep hammering him on policy and focus on their core voters, whether that is evangelical is -- evangelicals, ted cruz, or marco rubio.

francine: donald trump is very good on tv. he had 20 years to practice being on tv. when you look at policy, he is somewhat lacking. our voters in the u.s. going to realize that? megan: last night was the first night you saw them really hit on that, particularly health care and the middle east. they exposed his weakness to not have that flesh to put on bones. time and time again, we have seen that people do not care. they are not looking to donald trump for policy. they are looking to him for this vision of america that they think he delivers, and to feel safe and secure. tom: megan murphy, we agree she appreciate it. secretaryats and clinton on economic policy at the obama state department. i do not want to get into it, but -- a republican/democrat

analysis with you. where do we go? who do you blame? bob: the problem is that it is so much more theaters than substance. people say one thing one day, one thing the next. it is much more theatrical. tom: is in our media? is it the technological progress of the media? bob: i hate to blame the media because i think the candidates do this because somehow it benefits them to get into these shouting matches. for some reason, there is a general deterioration and crudity. tom: i will suggest william jennings bryan did a lot of shouting. it was just not distribute it like modern tv. bob: roosevelt was worried that huey long, who did the same kind of populist rhetoric with a lot

of shouting and anger, and could defeat him in the democratic primary. we have had periods in the past -- looking at it broadly, foreigners that are accustomed to dealing with liberal and conservative government in the u.s., they accommodate. the higherferent is level of uncertainty. one candidate will take one position one day and then another position the other day. is what is most troublesome. the allies have to rely on the united states. on it when oney guy says he will tear up what the administration did? francine: we have our share of crazies here in europe. the u.s. is that much more important because of your huge economy, and whoever you choose as president has a huge impact on world trade and the world economy, and at the end of the day, our growth in europe.

i always grew up thinking that the u.s. was, because it was so much more streamlined, you could not have people who were too extreme coming into power. this shows us that if you have a political party behind the candidate, it is much more likely they can win. bob: what has happened is the political parties themselves are polarized because the goal is to win the primary initially. that is what this is all about. the primary process polarizes you. if you are looking at this as an american or a foreigner, you are saying that the middle, which we have always relied on for the united states to come into, now you do not know that it is going to happen. in thereme positions primary could trap leaders into taking those positions when they come -- when they become president. our political news, as we go to super tuesday, you can begin and end with a conversation of our and heilemann -- of output and

heilemann. ♪

from animportant quote important essay on keynes. skidelsky. i thought it was a wonderful

else -- i thought it was a wonderful essay. francine: what he said on the theory of underemployment was right, but maybe the global financial crisis challenged that and we are feeling the repercussions. today iranians go to the polls to elect a new parliament. coming up, we had straight to speak to speak to go marmont the valley . ♪

francine: i am french a lock while london. tom keene is in new york. let's get to it -- i am francine lacqua in london.

tom keene is a new york. let's get to caroline hyde. caroline: marco rubio ted cruz went after donald trump with everything from his health care plan to his business. at one point, rubio brought up the now defunct trump university. for trumpo: $36,000 university, and they are suing him now. for is what they got $36,000. caroline: that is the last debate before next week's super tuesday. the governor of nevada has taken his name out of consideration for the seat on the supreme court. president obama had considered naming brian sandoval, a republican, but senate republicans opposed jim filling the vacancy said they would not make an exception for a member of their own party. approved a measure to

end corruption. defies trying to overcome corruption allocations that brought down president sepp blatter. the organization is expected to elect a new president later today. ireland is choosing who will run the country in the first election since the international bailout. the prime ministers trying to become the member of his party to win a second consecutive term. he leads in the polls. 'sesident rouhani of iran i political arrivals have blocked and attempts -- global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. francine? to golnarwe go

motevalli from tara on -- from tehran. golnar: i have been out this morning and i have to say i have seen a lot of their elong qs, especially in the north of tehran. in some areas, broadly speaking, they are pro-reformist, pro-moderate. it seems at least from what i have seen that the turnout is quite high so far. we have not had any additional announcements. francine: i know it is difficult to say, but given the amount of turnout that you see or suggest, does it seem that we may see an assembly that could limit the reform blocking tactics of the previous parliament? golnar: it is still early, and there are some reports i have south of colleagues here, from where i am going to go next later on today, that there are shorter queues, that

there is not a massive turnout there. what rouhani will be looking for in the next chamber is a parliament that is more sympathetic to the kind of policies he wants to get through . from his point of view, that is the most important thing with these elections. you are also choosing for the assembly of experts, which could choose the next supreme leader. golnar: that is right. there is also a very important election, the assembly of experts. a chamber of senior clerics and theologians, normally seen as a very apolitical procedural kind of election that people are not very moved by. but this time, because of the age, many people speculate the next assembly might choose the next supreme leader tom:. -- the next supreme leader. tom: thank you so much.

robert hormats is writing for -- is known for writing must-read essays. on whatthe money quote we do not know about iran, this from robert hormats. tom: you nail what i have heard from every scholar. can they have a different and productive election? bob: this is the big question. the guardian council, which vents all candidates, has unfortunately for the reformers removed a lot of reformers from es, from the roll council of experts, which will

probably select the next supreme leader. including the grandson of khomeini, who wanted to run for the council of experts, who was removed because he was not sufficiently versed in islam. what they have done is eliminated a lot of reformers. they are not even able to run, and therefore people will not have the chance to vote for them. some are still on the rolls, some of them are still on the ballot, but many have in removed. the kind of election were 10 or 15 years ago we expected former president carter to parachute into monitor the election, or is it a real election, where we do not need jimmy carter's prestige? bob: it is a hybrid. so many reformers and moderates cannot even get on the ballot because of the council of guardians having removed them. meaning that the choices the voters have are very limited, and therefore even if rouhani

gets people out to vote -- and he has been arguing you should do that, and former president khomeini has been -- the former -- almosthas been none for the assembly of experts. khomeini's son could not even get on the ballot. they want to elect as many reformers as they can who have been running, but there are certainly a lot of them who they will not even have a chance to vote for. that is the odd thing about iran it looks like the democratic election, and you look at what is going on and how people vote, the kinds of people that they have the choice among our strange very dramatically -- are strained very dramatically. francine: you are absolutely

right, and i am trying to figure out what we call reformists in iran. today,reformists win what kind of changes can we see? you can suggest they are extremely limited, if none at all. bob: it is very hard to imagine that they will form the majority in parliament. the goal is to get as many of them as you can, and to get as many people pro-reform to get -- to vote against the more extreme members, or candidates, who are running. goal of the reformers. what can you do? they want more foreign investments, market reforms. they want to remove the revolutionary guard from a ginormous role in the economy -- from its enormous role in the economy, improve the banking system, reduce the distorted subsidies. there are a range of things that president rouhani wants to do, and his hope was that he would get more reformers on the ballot

and that they would help him to pass legislation. tom: i will put this out on social media as well. , post actions, economic opportunities and risks in iran. it is truly must-read. talk about must-view -- bob hormats, joined by richard berner. richard berner next. ♪

francine: i am francine lacqua in london. tom keene is in new york. we have all the conversations on the markets covered, but let's first get to the bloomberg business flash with caroline hyde. caroline: oprah winfrey was not

enough to help weight watchers. the company plunged as much as 25% after its height partnership -- -- after its high-profile partition with winfrey failed. the number of active subscribers fell. helton says it will pursue multiple spinoffs of its hotel properties and timeshare business to boost shareholder value. the company released a statement saying the move would create three companies. this comes as hilton places intensive competition -- faces intensive competition from companies like airbnb. tom: this is a real treat. richard berner, with stephen roche -- heephen has joined the obama administration, working within the office of financial research. you may not know the institution. they make government officials smarter about the linkage of our economics into corporate america. richard berner joins us this

morning, with robert hormats. it is wonderful to have the two of you here. i know you are here together for only one block, but i was trying to convince you to stay here for two or three hours. what i learned at davos this year is that there is an interest rate in illusion. nominal rates and interest rates have come down, down, and they have affected all things. how is our interest rate affecting business sales and profits in america? richard: let's step back for a moment. the office of financial research was created under dodd-frank, and the purpose was to focus on threats to financial stability. so we learned in the crisis that we did not understand how the financial system function adequately, and we also learned that we did not have adequate measurements of financial activity. our job is to fill those gaps. tom: are low rates a threat to

our system? rates induce what yourll reaching for behavior. that means people are taking on more risk. -- what we call reaching for yield a hader. that means we are taking on more risk. investors are looking for higher returns and will reach for aelds, and the risk creates vonn for the financial system. financialu see engineering? are we engineering our corporate finances because of the great distortion we are in? richard: as we pointed out in our recent annual report, we think that this reaching for yield extends to corporate america as well. they have taken advantage of the ample credit availability. they have taken advantage of low interest rates, and they have

bolted on more leverage. debt to gdperica has risen, and that creates a vulnerability if interest rates go up or if credit quality begins to recede. we believe the reason we are starting to see some deterioration in credit quality -- and that is not yet fully reflected in the price. francine: you are talking about the fact that this fixed income, basically suppression, means that when we reprice it may be disorderly. but that is true about the world, isn't it? theard: it is true across world. it is not a phenomenon limited to the united states. officials around the world are paying attention to the vulnerabilities that might create. tom: go ahead, francine. francine: no, go ahead. i looked at where we are through the crisis and onward.

i think of jack lew's interview the other day with david westin and the optimism he conveyed about not adapting to global crisis. the not mean to speak for secretary, but what is the contagion and linkage of the united states over other financial systems right now? richard: we live in a world where markets and institutions are global, and that means that we are all interconnected. so the possibility that a shock and one part of the world can spread to another part of the financial system in another part of the world is very much something we pay attention to. francine: do we need to reprice almost everything? we are repricing risk, politics, markets. do we need to look at it differently? i think policymakers and investors need to pay attention to risk. the risk that we are seeing means that we are vulnerable to

shocks that my come along. if there is a slowing growth that we have seen, some of that is reflected in what we are seeing in financial markets. if there is a bigger shock, then we are here to point out that there are vulnerabilities in the financial system. francine: bob hormats, do you agree? do we need to relook at the world? we had the keynesian view that tom pulled out a project syndicate. do we need to radically rethink what we are going through? bob: i think we do because we are heavily dependent, more than we have been in the past, on what happens elsewhere, both from an economic point of view and very much from a psychological point of view. it used to be that many of the problems of the world and many of the opportunities sprung from the united states. now you are seeing china, other emerging economies, weak growth in europe, all have an adverse

effect in the united states, and particularly the lower interest rate environment around the world, and the weakness has an effect on what the federal reserve does. increasingly, we have to bear in mind what is going on and factor that in through the american decision-making process. berner, how does effect -- within your report, is there an analysis of ramifications of the stronger dollar? richard: what we see is that a stronger dollar obviously has had an impact on economic activities, and impact on corporate profitability. against the backdrop of rising debt and vulnerability from that source, it means that the ability of corporate america in particular areas -- particularly those exposed to global activity and affected by the dollar -- is

diminished to pay and service their debt. when we combine that with the global backdrop, it makes us more vulnerable to shocks that my come along. tom: would you suggest a coordinated response with a new plaza accord? richard: i do not make it my practice to speak about the dollar. tom: i look at nominal gdp -- sluggish. do we need by analysis a recovery in nominal gdp and animal spirit to pick up corporate profits? richard: that would be one factor, there is no question about it. corporate profits reflect factors going on not just in the united states, but around the world. something like a third of our corporate profits are earned overseas, so they are affected by global economic conditions, including the dollar. tom: when you leave public service, i want to get the two of you back. it is amazing to go back and look at 2005 and see where we have come. richard berner is at the office

of financial research, and robert hormats with kissinger. as francine mentioned, the five-year german to a record low. richard berner fell off his chair when he saw that. i am kidding. leaders a lift as g-20 meet in shanghai. with futures up 12, stay with us. "bloomberg surveillance." ♪

tom: foreign-exchange quiet this morning. maybe that is through the g-20 leaders in shanghai. sterling has taken a hit. we had a 1.40% an hour ago. 1.3947. some people would think of gold as a currency as well. francine: coming up shortly, it " with davidg westin and stephanie ruhle. what have we got on the show today? there ares best, always tensions. and then apple as well. jon: the g-20 is at the forefront of everyone's mind. listening to the governor of the

chinese central bank -- are we going to get more stimulus? the market hopes so. for the rest of the market, we do not know where to start. the pound is having its worst week against the dollar since 2009. five data yields in germany, just grinding down to new lows. we talk about the markets and the politics of the g-20, and apple versus the fbi. we will talk about this morning -- we will talk about that this morning on "bloomberg ." tom: richard berner, on financial stability, in your important annual report, the idea coming out of dodd-frank, is where we are in the corporate credit cycle. we all know of the do virgins now, but in the corporate world the divergences there as well, not just central banks. that is right. we think we are in the advanced stage of the credit cycle. given the backdrop of low interest rates and people seeking returns, reaching for

yield, when we start to see a credit quality, it creates vulnerability for the financial system. it means that if shocks occur and there is unexpected news about credit quality, we are going to see adverse movements in price, and that could spill over into the rest of the financial world. tom: we have had meetings for years over whether -- over how america is different, how we clear markets in the american system. does that lead to a create -- a greater or lesser financial stability? richard: in our economy, in our financial system, a lot of activity takes place outside the banking system. what is important is that we have made bank stronger through financial regulation. the financial system overall is stronger than it was prior to the crisis because of that. but what we see is activity migrates to other parts of the financial system. we have to make sure that those parts are resilient as well as the banks.

there are pockets of vulnerability, in our view, in those parts of the financial system. francine: richard, how do you view china, and the interplay between the u.s. and china? what is the single thing that the markets are getting wrong about china? richard: i am not sure what the markets are getting wrong about china, francine, but it is certainly true china has been an engine of global growth. a slowdown in chinese growth and in global growth has obviously had a huge impact on commodity and thaty prices, comes against the backdrop of a lot of debt that was taken on by commodity producers in emerging markets, and by commodity producers around the world. so we have seen deterioration in the prices of those assets, and further shocks could create more vulnerabilities in that area. tom: bob hormats, 45 seconds

before we roll over to radio. in your book, you said "expect the unexpected." what is the unexpected for china? bob: the unexpected is that people thought that china would go at 8%, 9%, 10%. that is gone now. they will grow at the new normal of 6%, and that has an effect on commodities and on a lot of emerging commodities who borrow very heavily, expecting commodity prices to be high because they are selling to china. it has a reverberation effect around the world and in certain companies in that market. tom: we have to go and we will continue this discussion on radio. robert hormats and richard berner, the friday final hour on television. "bloomberg surveillance -- "bloomberg ," coming up next. ♪

jon: the world bank of scotland gets hammered. the royal bank of scotland has been losing money for eight

straight years. apple fights back to crush the the fbi to unlock a dead terrorist's iphone. jon: a warm welcome to "bloomberg ." colleague,ith my david westin. the chief national economist is joining us for the next 60 minutes. front and center, the politics of the g-20, shanghai. talkingpple has been about its fight with the fbi, and of course the markets. matt: i'm looking at the number 1950. s&p has hit this number. this could be a trigger number where we see serious