francine: stocks up, dollar strengthened oil rebounds. we will look at inflation in the u.s. as governor kuroda says he can go for negative territory. a trading tighten for europe. lsc and deutsche boerse say they will merge. and trump and clinton tighten their grip on the nomination. marco rubio drops out of the race. this is "surveillance." tom, we have a very busy day. the fed, kuroda -- i would argue that it is about divergence. tom: central-bank divergence

with a fed sandwich. we'll do that with great focus tomorrow, but what a great conversation we will have with certain howard davies, stephen roche. alan blinder will join us as well as we do the fed coverage. francine: yeah, and we also talk politics with yanis varoufakis. i'm looking forward to all those interviews. let's get to the bloomberg first word news with vonnie quinn. vonnie: thank you. donald trump didn't get this week he wanted, but the front runner did win at least three of the five states holding primaries. trump's victory in florida was enough to knock marco rubio out of the race. afterwards, trump talk to a party unity. >> the fact is we have to bring our party together. we have a great opportunity, and the people that are voting are democrats are coming in, into

candids are coming in -- independence are coming in, and people that never voted before. it's an incredible thing. vonnie: ohio governor john kasich won his home state and says he will stay in the race until the convention. the delegatesof he needs for the nomination. ted cruz has 396. kasich has 138. hillary clinton tightened her hold on the nomination. states.itur of five was too close to call in missouri , with a narrow lead over bernie sanders. 2382as 1561 of the delegates needed. sanders has 800. in north korea, an american college student has been sentenced 15 years of hard labor for what the government calls crimes against the country. last month, north korea said he took down a propaganda sign in dopyongyang.

nations says the start of the russian military pullout has breathed new life into peace talks. russian forces begin their withdrawal as negotiators met in geneva. the envoy for syria says there is now new momentum in negotiations. russia has urged its allies to be constructive. global news, 24 hours a day. tom: let's get the data check. a quiet screen, almost like jobs day in the u.s. -- not what's going on until the afternoon. -- not much going on until the afternoon. euro weaker, 110. nymex at $37. showing -- i put in a german two-year yield, a -0.56,

pre-draghi. he lifted up yields a little bit. francine? francine: i care about the yen, tom! you can't do this to me on a wednesday. governor kuroda said he could go into further negative territory. yen at 113. he almost said he could go to -0.5. banks are pretty much flat, but some pressure on credit suisse. european stocks overall are flat. we are waiting for the fed. we had governor kuroda and the budget report in the u.k.. tom: this really sets up a set in economic finance investment and banking, with sir howard as chairman of rbs. this is a broader view. this is the actual terminal chart, vonnie, this is g7 gdp. this is 20 years before, and this is the wretch down.

2%. is 3% g7 gdp under politically that is unacceptable. vonnie: you can see why they want to get inflation up. this is frightening. unusual thes how slowdown was in the gdp during the crisis versus the mid-80's, late 80's. this is reunification in here. here's 1973-74. francine: i love that you say it is politically acceptable. economically, it is not acceptable for all. cw.sed this chart -- it's b the bloomberg correlation weighted indices. i picked the yen in yellow in the dollar in white. it measures major currencies against developed markets. we talk about it every day, but

this chart says it. marking functions have changed. we saw kuroda doing more and more and the japanese yen going higher. janet yellen continuing saying she wants to normalize, and the dollar pretty much flat but also lower. was talkingandler about ratcheting down the dollar exuberance. alan hear that from ale ruskin. we have a guest. francine: we do. we have plenty to talk about. everything is interconnected. it looks like janet yellen should be starting to normalize even further, if you look at inflation and employment. then you have all these concerns -- brexit, the eurozone, china. this must be weighing on her thinking. >> a lot must he weighing on her thinking. that she should be fairly happy. if you look at the u.s. data, if

you take core pce, if you look at u.s. unemployment, you could make the case that the fed has, by and large, achieved its mandate. inflation is edging closer to where it should be, close to 2%, unemployment is at a level that could cause full employment. the first thing is, judging from the fed's point of view, things are actually not bad. francine: the markets aren't believing that. >> i know the markets are believing that. they are always a little nervous as they tended to look at the not so bright side whenever they have a chance. after going forward, the market turbulence was a warning. in response, the fed will probably have a very go slow approach. the data are good enough that you could say you could think about a rate hike in april, that the fed will probably signal they'll look at april, but it could be june. have a real respect for

the ramifications of all this blather on the real economy. is the effect of kuroda, draghi, and yellen on the i.s. curve in macroeconomics? what is the effect in driving or at least the neck yo nuclear the economic growth? >> the fact is that we limit the downside. the effect is not a major upside; the downside that markets talked about so much for weeks ago -- that downside has now disappeared from the screen. central banks cannot push growth beyond that rate. but they can prevent reoccurrence of financial crises. tom: i want you to memorize -- keep in your brain what you just heard. a killer day for year with "surveillance," and what he just said is the arch issue. as neil ferguson would say, it

is a massive counterfactual. it's not what they are doing, its what they are avoiding happening. it's almost a negative action. francine: you are right, but at a driventime, it's view. others say central banks are here to promote growth. >> as lily wr -- absolutely wrong. central banks cannot promote growth in the long run. you need structural reforms for that. central banks can limit the deviation in demand from that trend, but in an age of caution, the upside beyond trend growth is limited. they can protect the downside and that is not bad. francine: thank you so much. coming up on "surveillance," we speak with yanis varoufakis. he's usually very colorful. we will be speaking to him, asking him about the new manifesto and also about more

extremism in politics, coming up next. ♪

francine: this is "surveillance." we have a huge day ahead of us, tom. not only the fed, but governor kuroda, and brexit as george osborne is presenting his budget today. it's austerity, the name of the game. we're joined by the former greek minus minister, yanis varoufakis from athens. ld the position of the minister of finance for seven months and is one of the most outspoken and colorful politicians that europe has had. it will get onto your manifesto

in just a couple seconds, but do you miss being in office? >> not the slightest. towards the end of my tenure in the ministry, it became abundantly clear that it was impossible to conduct a national, sensible policy of fiscal consolidation for greece. they were adamant that we should continue expanding unsustainable loans and pretending we had resolved our bankruptcy. government you realize that you are not empowered to do good things, you are better off outside. francine: and you don't miss fighting? you fought a lot. to you think you gained anything from it? >> i'm sorry, i didn't hear you. francine: you don't miss fighting? we were watching almost every day when you are fighting with the troika and the imf -- do you miss that? >> well, no one would miss that, i don't believe.

what i do miss is the sense of hope when we entered government, that we can have a sensible agreement with the troika. were forced into a situation -- this is what happened -- the greek government was not going to partake of the charade and has accepted the task of implementing an unenforceable program, a program ist everyone knows that it absolutely impossible to implement a program that makes no financial sense. francine: i know you think it doesn't make financial sense; a lot of analysts believe you but a lot disagree with you. do you relate to the frustration that brought you and your boss, mr. tssipras, in power? >> not in the slightest. allow me to say something extremely straightforward. when i moved into the finance

ministry, it was abundantly clear, as it was to everyone in europe and the imf, that the program ahead for greece was financially implausible. fiscal targets that we inherited when we moved in to office were so grossly unrealistic that they were deterring investment in the country that was starved of investment. the simple question was this -- with the other side, the lenders, be interested in sitting down and, together, develop a program for greece's recovery so we no longer have to talk about on those programs? they were not interested. or interested in another fight its minister who signed on the dotted line of an unsustainable loan. their frustration was due to the fact that i was not one of those ministers. tom: mr. varoufakis, good morning. you taught at the lyndon b. johnson school of economics,

among others. lbj always said, when the facts change, i change. i think you stole that from an economist in england. how have the facts change for greece? you should be lauded for recovery, getting back near 0% gdp. what do you do now to move the facts forward, to develop economic growth in your greece? >> you're completely right. factsoblem was that the haven't changed in greece since the early 2010's. greece went bankrupt, and europe, in its infinite wisdom, decided to cover this up by means of pretending. new bailout loans that came with strings attached guaranteeing to dry up investment, to destroyed bank credit, and to drive growth into negative numbers. this has been happening for six years and europeans are in

denial. what we needed to do, in this is what i tried to negotiate, was a sensible program. , weut it together presented what i thought was a very sensible program, and had it have a very siblings -- lowering the target surplus to something manageable, 1%. restructure through debt swaps that gave investors an opportunity to imagine that the greek debt are sustainable. third, reforms of the great economy. the lenders were not interested. these factors need to change before greece can become sustainable. tom: when we are into 2017, if we assume that we are beyond crisis, can greek politics find a common ground, a more centrist approach? isn't even feasible that you could -- is it even feasible that you could join the new

minister for a couple coffee? -- a cup of coffee? >> this is not a question of personal relations, or indeed political will. it is a question of bankruptcy of the state of greece. i say this with great sadness, but nevertheless, it is bankruptcy. europe is trying to pretend and extend. as you know, whether it is a corporation, a household, or a government, if you are trying to pretend that you are not bankrupt through getting more credit cards on conditions that guarantee income, it's not question ofa personal relations. francine: do you think the u.k. should leave the eu, on your premise of what is wrong with brussels at the moment? that this country in london should say bye? >> no, absolutely not. as i like to say here in the european union, whatever our

creditors might do to the european union, we are under the spell of the hotel california dictum. you can check out anytime you like, but you can never leave. on the 23rd ofte june to leave the european union, they won't have very much left. whether a single market is good for free trade, you need to have common industry standards, labor protection rules and laws,, and environmental standards. to do that, you need to have common sovereignty of the executive, judiciary, and lawmaking. the brits can't really leave, and a better stay with us and fight with us in order to change brussels. tom: professor, i'm glad to see thequote "th economist clinton friday. -- clinton fry. when i look at the past five

years, it comes back to finding agreement between developed and less-developed europe. let's state that . is the coalescence of europe, or is europe still under threat? >> i think europe is very much under threat. therethe very notion that are soldiers and policemen being sent to a non-european member state in order to block the borders of another european the bordery going to sir, toia, allow me, challenge the notion that the problem in the european union is that there are no agreement between the developed and the less developed. the issue in europe at the moment is that paris and berlin are engaged in an old market capital amongst themselves. rathere battling, the

than the mice are being squashed. this is a major issue between paris and berlin. tom: professor, don't move. we want to talk to you about statistics and your years in birmingham. newsday forcked all of bloomberg and for "surveillance." to forget about scarlet fu and michael mckee. i'll bring you the former vice chairman of the fed, ran across zero chicago, in a conversation with bill gross after the yellen press conference. ♪

francine: i'm francine lacqua in london; tom keene is in new york. time now for my morning must-read. margaret carlson writes about marco rubio. "he was met by general discussed with politicians. he won as a to party darling but by 2016 he might have been dining napoli with nancy pelosi. to the angry base, he had become a washington elite." this plays well into yanis varoufakis's world. you are a former finance minister with new ideas, liked by the public, then they decided you were too extreme. how what a trump presidency play out on the international stage? would it weaken the u.s. internationally? it would certainly not do

much in order to bring about harmony in already tumultuous international relations. but then again, there is a very large question mark as to what the presidency would look like. donald trump seems to me like a gentleman absolutely incapable of of creating any kind of certainty about what policies he will go with. if he goes for a major protectionist drive internationally, and if he tries to confront china and insults every other nation in the vicinity, that is what we are going to have on harmonious the elements. ♪

tom: good morning, everyone. we are meeting with baron burbank in a moment; jeffrey sachs will join us in a moment on oil and gold.

right now, we will do our first word news with vonnie quinn. vonnie: donald trump knocked marco out of the republican presidential race, but john kasich says he is in for the long haul. trump won primaries in three states. his latest victim lost badly in his home state and suspended his campaign. for governor of ohio won his home state. he says he will stay in the race until the convention. to close to call in misery, where trump has a narrow lead over ted cruz. trump is about halfway to the delegates he needs to get nomination. on the democratic side, hillary clinton won four of five states. she has a close race in missouri. the second largest subway system in the united states is closed all day today.

the washington metro will conduct the safety inspection after an electrical fire in a train tunnel. a report that president obama will announce his pick for the supreme court. the network says the president has thinned his candidates. republican leaders have promised that no matter who you select they will not hold confirmation hearings. in brussels, police searched houses throughout the night, part of the investigation to the terrorist attacks of paris. suspect armed with an automatic rifle in three police officers were wounded. in brazil, a big turn of the corruption investigation. according to a person close to it, the former president has agreed in principle to join the cabinet. she faces criminal charges and joining would make it harder to prosecute him. tom: thanks so much.

it was a select few who had the courage and rationalization of they're eager to fight on the dissent. jeffrey currie is out of the university of chicago and works with goldman sachs. wonderful to have you with us. you absolutely nailed the 39 call. we said we wouldn't have you wanted total oil is 39 it is 39 today -- congratulations. where do we go from here? we will talk commodities later in the half hour, that the distinction for me is the clearing of the market. have we seen it? >> no. we would argue that only have seen so far are the shoes to create it. if you think about the outlook going forward, we expect a price that will have lots of

volatility to continue the rebalancing process. we think the rebalancing process really gives momentum sometime in the third quarter, when we get a drop in inventory, at what which point we get a green light. the market can't trade hired to lead finish rebalancing. tom: the clearing in the market is sophisticated. it takes incredibly important math. curry at goldman sachs, you get the decline-o-meter. you can barely see this. this is what you get with jeff curry. explain the decline-o-m meter. >> when you look at the usc apiece sector, -- the u.s. enp sector, that has announced a guidance number. typically these numbers, they like to underpromise and over

deliver so they beat their promises, but ultimately we handicap for that and, with what is the production decline that is embedded in these guided stompers? -- these numbers? in the 25 years i have been doing this, i have never seen the consensus so bunched up. saying put out a piece, goldman is within a month of everybody else. i think the reason for that is that we are all looking at these same data. thinkingne-o-meter, about production changes beating to take place. however, we have never seen this before. we are replacing these production guidance numbers with what we used to look at out of opec in terms of rebalancing the market. i would like to emphasize that there is an enormous amount of uncertainty with these numbers. francine: do you think opec will atar together in guitqtq

antifreeze output? -- and freeze output? >> it is no sweat off their back. if you look at saudi arabia, you already had a flattening of investment. in terms of looking at the outlook going forward, it is not surprising they would be willing to agree. the outlook for further production increases is quite limited. more importantly, when we think about a production cut in oil, you can't operate a cartel the same way you used to. the reason is the fast cycle nature of shale, and that doesn't change. francine: he's absolutely right. it's a whole new world out there. are you confident that it would cause a bottom for oil prices, and what does it mean for your inflation forecast? >> the bottom is in my major concern. my concern as an economist is easing.

the fast cycle nature means if oil prices were to go 60+, we would likely see a supply response. oil prices are unlikely to be such a hit to the global economy then they sometimes were in the past. testimony inflation forecast, i think oil will go towards 50 eventually by next year, $50 per barrel, and that is in line with a gradual pickup in inflation, which i think a most everyone would welcome. francine: have you adjusted your range for the price of oil? >> yeah. we took it up to eight $25-40 five dollars range. -- to a $25-40 five dollars range. will we see the behavioral shift

-- we need prices to stay down. we went i that prices can go up a little bit higher than before, because of the friction of unwinding the decision already made. you have to go out and find rates and rehire people. we would put a slightly higher price. widen we taken up to $25? the time has passed. the probability of having a containment issue, of blowing out storage, is starting to decline. tom: we haven't talked about demand elasticity. identify for us the global view of what demand will look like against all the supply. >> when we look at supply -- or demand, when we look at the demand forecast we have invented, i like to use the term the nine. benign.rm th

the place that is a real standout is india. to put it together, modest demand growth is around 1.3 million barrels per day, year-over-year. just shy of 1.5%. that is a type of growth i'm talking about. tom: as an amateur, my oil humility -- russia's so damn hard to figure out, what the actual performance is going to be. is russia a mystery for you right now? >> well, if you look on our equity analyst that covers the russian oils, one of his favorite trees right now is long. you look at the economics, they are extremely compelling. most of their costs are in rubles, so we see a sharp devaluation of the ruble that could give them a strong competitive advantage. letter altogether, the cost basis is around $20 per barrel. if you look at the pure lifting

cost, you are moving down and that seven dollars range. they are extremely competitive. tom: jeff curry. later on, our fed a meeting with bill gross, among others. alan blinder, the former vice chairman of the fed. sir howard davies, rbs chairman. stephen roche. ♪

francine: i'm francine lacqua in london; tom keene is in new york. governor kuroda is speaking. we will get janet yellen later. it is fed day, tom. we had a great interview with a former finance minister of greece, yanis varoufakis. he was pretty explosive, as

expected.we had just curry of goldman sachs . hoelger, you have a public spat with yanis varoufakis. that is the understatement of the year. you don't agree with anything he says about public finances. >> well, i agree with a lot of what he said about brexit. it was what he said about protectionist risks coming out of populist policy in the u.s. -- i would add that if you want to exhibit a as the damage populism can do, look no further than the greek economy, where the less than right-wing populist government came to d until that ago an it had been a good economic upswing. francine: it's dangerous, but it is ripe. we see it with u.s. politics in donald trump, here with the possible brexit vote, with jeremy corbyn in marine le pen. >> yes, and that is let we need

a reasonable debate about actual facts. the risks are significant out there, pre-at the brexit risk over here, which is met with fears about europe that are largely irrational, which is not informed enough by they gains that britain has, that london has, that surface the center of europe. we need economic debates more about facts, less about this populist claims. it still i look at it, comes down to me to dampen gdp in the search for economic growth, whether on a nominal basis or a real basis. of these nations and societies are in search of growth. ? where is it where does the -- where is it? >> it comes from people who are free to work as well as they can, who are free to innovate and put their innovations into practice. that basically means deregulation is the opposite of protectionism, free-trade,

rectify the trade agreement with asia in the u.s., concluded the trade agreement with europe. that is the way to growth, and within europe, do a french labor market reform. tom: we have a number of people it is madegram, and clear that the transpacific pact is debt. whatever happens in the united states, this huge pacific trade pact is dead. that doesn't move the debate forward. >> well, a, it may not be dead in the sense of let's see what the result of the u.s. election is. for me as an economist, my role is to warn that if it is dead it will cost us growth, and that l be damage to the central

bank cannot offset. freer trade would be good for the u.s., for asia, for europe, and if we wonder where the additional growth could come is where it could come from. the arrangement with your being negotiated, labor market reform, that is the way forward, rather than just looking at central banks who can do a little excited anytime they choose but who cannot provoke lasting growth. francine: it is getting difficult to do real market excitement, but let's bring it back to your world. has surprised are you that all this political risk all this fear has been correlated more than ever before? >> well, look at what has been dreading the commodity markets. i would argue that when we think about the political risk, the geopolitical risk has never been higher, but oil risk has never been lower. i don't view it as a primary

factor. when we look at the rally that occurred across the commodities stage, particularly in gold, i think the biggest driver was the realignment, or expectations of a realignment, and central-bank policy. that fueled a weaker dollar. at the same time, you had creation of reflation. you put that together, that is what created that. none of that is sustainable. francine: so maybe we are mispricing a couple things. we will get more. thank you for joining us. ,"n "bloomberg plenty of guests, including the former minneapolis federal reserve bank president. that's at 8:00 a.m. in new york, 12:00 p.m. in london. we'll talk inflation and dot plots. ♪

tom: good morning. this afternoon, our fed coverage with scarlet fu and michael mckee -- the right now, francine lacqua and myself drive the conversation forward with jeff currie. right now, news and political news.

here is our louvered business flash. vonnie: emissions testing scandal keeps hurting the company. the last market share dropped. overall, the car industry reported that sales rose 14% of february. vw losing sales. the british serious fall off dropped a two year-long investigation into currency rating. prosecutors say there is insufficient evidence, leading lawyers to question whether they were hampering prosecutors for high-profile cases. it was the worst day in valeant history. shares fell 51% after they cut forecasts and said they would be able to file earnings reports on times. concern about their process practices have turned them into one of the markets worst-performing stocks. valeant is down 87% since august. you.e: thanfrancine: thank

lsc is merging with a german rival. we are joined -- you has been following the rumors of the talks and now the confirmation. when you look at lsc and deutsche boerse, lily have regulatory approval? >> that is one of the huge questions, and you wouldn't think they would be so far along as they weren't. they had a call this morning with reporters and said we still have to wait and see. deals of this magnitude in the past -- it could happen again. francine: it was important to get it done before the referendum, because it plays into the brexit debate. >> this deal makes sense for them either way. they say brexit or no brexit, they think this makes sense, that they can create a european champion, a really big piece of european financial infrastructure, a counterweight to other titans like intercontinentalexchange or hong kong exchange.

francine: there were rumors that an american counterpart would come in and try to sweep up lsc for team up with deutsche boerse . is that definitely not going to happen? >> it looks very possible that there will be a higher bid. they were required to disclose that; we reported that they were mulling but haven't done it, but now they look like they are considering it. francine: thank you so much. we'll be speaking to the deutsche boerse ceo later this morning. in london. tom: it is one of the great debates right now -- james steel and hsbc has made a fundamental bullish call. goldman sachs began our commodity coverage, and jeff currie joins us now.

you maintain a tilt toward depressed or lower gold prices. justify that -- why is that? >> i like to call gold the currency of last resort. if you want to be bullish on gold, you really have to be bearish on the dollar and the u.s. you think about the recent rally we have seen in gold -- a lot of it was driven by a realignment and central-bank policy globally. we think about that realignment u.s.at took place was the economy was going to weaken to the rest of the world and the federal reserve is not going to pursue the hike in rates. we stand by our view of higher rates in the u.s., which will likely lead to a stronger dollar in lower gold. tom: this is important. we are not talking to him as a monetary economist. there is another firm on wall street, morgan stanley. 23tohave gone from four three to two to one.

where are you in the hike-o-meter? key is that he focuses on the labor market. in terms of looking at the strength of the labor market, you would need to see job growth drop down to $85,000 per month before you would create the weakness in wages in the resiliency in the labor market that would make him back away from his view. that it is our view based upon the core of the u.s. economy and the strength of the labor market. francine: we were talking about political risks, and i understand strong dollar, but if you see political risk handing it, a brexit, anything, seems that the gut reaction from buy gold.is no matter what happens, buy it.

>> we talk about these other issues in the u.s. -- about gold it's nominated in u.s. dollars. if in going to buy something of security in a bad environment, i will buy the u.s. dollar. why will i buy something with a negative that still has a positive? that is why i think the trade-off is against the dollar; it is that last resort asset. us theme up for thelihood -- sum up for us commodity summary. are we still in this massive deflation? >> we're definitely at the end of it. how far are we in terms of thinking how long it will take to create a bottom and start to go higher -- i think that is still a question mark. our base case is that it happened sometime this year; other sectors, it could take years before you get that bottom. i do want to emphasize, even

within the energies sector, i am a little concerned about how it will play out. we have never seen this before. we are going into the world of and are only example of how shale shuts down and turns back on his u.s. natural gas. illustrating $1.60 a year ago, which -- tom: thank you so much. greatly appreciated. please help francine with our combined ncaa brackets for march madness. francine: we are winning. tom: we are winning, we are winning. francine doesn't understand that everybody loses. howard davies of rbs, stay with us. ♪

is said it day, and all will converge on the yellen

press conference. chair yellen will do verge from linking fed policy with global recession. trump wins, clinton wins, sanders fights on, rubio exits. it is only 20 days until wisconsin. and we search for clarity. sir howard davies of rbs and percent -- and professor stephen roach. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. i am tom keene. francine lacqua is in london. let's get to the bloomberg first word political news. here is vonnie quinn. francine: the republican presidential front runner won at least three of the five states holding primaries. missouri is too close to call. trump talked about party unity. donald trump: the fact is we have bring out party together. we have a great opportunity, and

the people who are voting -- democrats are coming in, independents are coming in. people who have never voted before. it is an incredible thing. at 621 ofump is now the delegates he needs. ted cruz has 396. kasich has 138. hillary clinton has a narrow lead over bernie sanders she spoke to supporters in florida. hillary clinton: because of all of you and our supporters across hascountry, our campaign earned more votes than any other candidate, democrat or republican. we need you to keep working. keep volunteering. keep contributing. the 2382he has 1561 of

candidates she needs. we go to megan murphy. so kasich wins ohio. what more does he need to do to become more than just a thorn in the side of the truck campaign? megan: he has no mathematical chance. what he needs to do is get the funding and the establishment support to make a credible campaign. that has always been the strategy, to take this to the convention. but it is difficult to see what other states he can pluck off, and it is difficult to see in a three-man race how he does. vonnie: i will ask you about cruz in a second, but the marco rubio campaign has been put out of its misery. what happens with the money and the supporters? megan: john kasich will be going

after those people hard. ted cruz has always said he is an open tent, join me. that is not a really good fit. marco rubio is an establishment candidate. ted cruz has run all his life as the nonestablishment candidate. donald trump has claimed all along he will get a share of that, too. vonnie: hillary has 400-plus more delegates than bernie sanders, which does not sound like a lot, but she has moved on to campaigning against trump. what happens with her to win over the independents? megan: she is struggling with independents. she had a great night last night. ohiore watching to see if -- we repeated in the same states a similar demographic. that did not really turn out for him. for her, it was a big night about momentum, delegates, but

she really has the game firmly on her side. on the republican side, are the chances of a contested republican convention rising? megan: donald trump had a good night last night. he lost ohio, which would have made him unstoppable if he had won it. six in everyk up 10 delegates moving forward. that is not impossible for him. possibility of it going to the convention remain high if ted cruz and john kasich continue on. -- i do not even know if he has been to wisconsin ever. i think he will be there in the coming days. the green bay packers and the leftists in madison -- that is a stereotype. stephen roach is with us from yale university, who darkened the door at the university of wisconsin. would you like to ask a question of ms. davies?

stephen: i want to ask about it did not seem to apply in ohio and missouri. why? megan: we thought it would work well in states that had seen a perceived decline in manufacturing. came out andly hammered it last night in ohio, in illinois. it looks like she will win missouri, and one wonders if that was just a one-time thing. if michigan was just a bit of an outlier. that is what it looks like today. we will have to see in other places where he has big turnout. tom: thank you. --m "the new york times" "most americans still do not like him or her."

excuse me, i am going to davies. ,ith all due respect, tonight after their great coverage here out of florida and ohio. with sir howard davies, rbs chairman in london, and of course stephen roach, up from wisconsin. howard, i have to rip up the script today on the rationalizations, the layoffs at your rbs. this is a measured plan. every bank is going through this, but there is something unique about rbs. explain to me your executive strategy to make it a smaller bank. we have decided significantly to downsize the investment bank. we announced that 18 months ago. so today upon us job losses, which are always regrettable, were part of the strategy that

was signaled a while ago. we decided that we plan to be primarily a british and irish ,ocused bank with u.k. retail commercial, corporate, and the investment bank will exist in so far as it provides products and services to our corporate clients that we need because of our other relationships with them. we are not aiming to be a full-service investment bank. that is not a realistic strategy for a bank like rbs. over the last 18 months or so since we announced that strategy, one or two other people are coming to that realization. of aif you are more domestic vision, why do you need the european union to do business at rbs? bank quitehave one significant assets in the form of our bank in ireland, which is in the eurozone. so we would be concerned if we

were detached from that bank. we have quite a bit of corporate lending in western europe. we have a lot of links in europe. i was in brussels for the last seedays, and we certainly ourselves as part of the single financial market in europe. that is significant to us. francine: is a possible so-called brexit a problem for banks as you are in limbo for a couple of years, or is it competitors outside the e.u. that would regrettably try to get your revenue? howard: the point is probably different from bank to bank. for rbs, we are less seriously affected than others because we do not have a loss of operations on the mainland of continental europe, and we are not trying to be a very large trading house trading across europe. from our point of view, there is an issue with the irish bank that we have to be care about.

there are some practical issues us. that, that would affect i think it is probably more of an issue for the banks who have a very large investment banking presence here, who are doing business across europe from a london base. that is true of -- tom: we are going to rip up the script for you today. we are thrilled to have stephen roach with us now. i am doing all sorts of charts showing then and now, and the answer is it is a dampened global economy. do you have any vision that that shifts, or would you advise sir howard that the terminal value or the terminal rate or the new potential gdp of the developed world is forever changed? stephen: far be it from me to shed great insight into a brilliant mind like howard

davies, but i would argue that for ais the template world that is in the grips of a much, much weaker -- larry summers has called it a secular stagnation growth environment. we have seen it for some time, whether it is japan, the united states, europe -- recoveries are a fraction of their former precrisis. tom: have we set ourselves up moment, andrew's mellon-like? demand: in a weak environment, there is excess supply. how that shakes out in the financial system, in the nonfinancial system, remains to be seen. tom: i want to go to sir howard on this ideal combination. are you managing your new shop

for a combination of banking, for mergers of banking? howard: i think that in the u.k., mergers are pretty unlikely. concentratedr a banking system which became more concentrated somewhat by accident during the recession, as a few banks were not together. i am not looking for new consolidations in the u.k. we have some new challenger banks arriving. elsewhere in europe, that is an issue. there are a lot of small banks in europe that look pretty weak from a capital point of view, and there are a number of countries that i suspect some consolidation rationalization were going to happen. but i think not in the u.k. tom: breaking news it is not valeant, right? vonnie: it is peabody. the company down 95% since this time last year. it is saying it may not have .nough liquidity to continue

they are in discussions with debtholders, and they are engaged with all sorts of stocks , considering a debt exchange or a buyback. tom: a more somber tone about the final value on commodities. stephen roach with us, yale university. howard davies of the royal bank of scotland. this afternoon, we continue our coverage in global economics, focused on chair yellen. the former vice chairman of the fed will join us. gross will join us after the yellen press conference. with howard davies and stephen roach, this is "bloomberg surveillance." ♪

i am francine lacqua in london. tom keene is in new york. it is time for your data check. -- it may bes eco- something that is hurting banks. credit suisse is down some 2.6%, one of the biggest losers today. we understand the cfo is not coming to the morgan stanley conference. that may be one of the reasons. markets are nervous and they latch on to anything they can. maybe there is something bigger, but we do not report on rumors. let's get to the bloomberg business flash with vonnie quinn. vonnie: it is a merger that will create unity in trading -- a unity in trading titans. it may not be a done deal, international -- enter not -- regulars also still have to give their blessing. ceo willche boerse

join "bloomberg ." -- oracle recorded has reported a quarterly profit that beat estimates. oracle is making progress in shifting away. shares of sony climbs the most in a week as it priced headsets lower than rivals. will costlaystation $399. virtual reality -- tom, you live in virtual reality every day. that is the bloomberg business flash. we are starting trading for btu, peabody, down 19 points. it may not have enough liquidity to continue. that is a growing concern. francine: virtual reality is a huge concern for transport. can are looking at how they

-- davies, rbs chairman. stephen roach -- they are both with us. howard, when you look at banking stocks, they were extremely hard-hit at the beginning of the year. saying it is because there is too much fear on the market, and there is risk on the price. how do you explain the downfall, what took rbs down with it? howard: the main reason is that there was a changed view about global economy. people thought china was slowing them more, and therefore the nominal gdp was going to be smaller and the banks were heavily geared toward the real economy. in europe there is the negative interest rate factor. we have the ecb pushing interest

rates into negative territory. the bank of england is not there at this point but not impossible. thanks face a great difficulty, -- banks face a great difficulty. you would not get thrilled to get a letter from a saying it would cost you 1% to keep your money at rbs. you might take it away. at the moment, that is very awkward for banks. people have not been able to a business model that accommodates a long period of negative interest rates. was a great summary of the toolbox that the fed has. what is the state of chair yellen's toolbox right now, given negative rates and qe? stephen: howard raises an important question about the profitability implications of the negative rates. what worries me, tom and howard, is that by penalizing banks for not lending, that is pushing

marketplace in april 2 of very weak aggregate demand. , this smacks of the central banks forcing lending on the system, so to like the japanese did with zombie banks in the 1990's. tom: does it lead to a zombie public that would dampen gdp? stephen: we have already had xobni corporate's in japan -- we have already had zombie corporates in japan, zombie consumers in the united states. prancing, one of our themes -- francine, one of the themes of the day, the 20-year level. we used to be at a 3% real gdp, and it has dampened down. a bankerhe chance that

like howard that he is giving out toasters for deposits, he is that desperate. this is a chance for everybody, isn't it, francine? francine: it is. europe is still playing catch-up on the back of the financial crisis, and you have this environment that is completely out of your control as a banker that you need to deal with. when you look at the environment , the chancellor will present the budget today. it is almost impossible to say that he will sell. when he -- when will he be able to say that it is healthy enough for us to start selling? howard: he has set out a plan to realize the stakes at deutsche , and so the intention is clear, but the timing of course depends on market appetite, and it is clear the chancellor has deferred his sales of lloyd's and rbs during the course of this year because it has not been a great time to sell bank stocks.

the strategies clear, but the tactics will clearly be influenced by the state of the market. at the moment there is a lot of uncertainty. the uncertainties we talked about on the macro side, and then of course we have brexit uncertainty. we are waiting for donald trump's view on brexit. that would clearly be decisive when it happens. it will be huge. howard, we have to take a break, but we will come back to that. donald trump has also talked about yen. he probably will come out with a brexit comment very soon. we will have that here on "bloomberg surveillance." ♪

francine: francine lacqua in london, tom keene in new york. time for our "morning must-read." howard davies writes in "project syndicate -- francine: sir howard, how do you prepare for a brexit? howard: difficult because we have not done it before. the bank of england has done sensible planning, and we take our cue from them. they have also announced particular liquidity arrangements in case there is significant market nervousness in the run-up.

we have to look at the exchange rates, and if we have significant liability, we have to consider more hedging than you would otherwise do. we also have to think what it would mean if we were out whilst owning a bank within the eurozone, which we do. we have to do some contingency i am sure every financial institution across town is doing that work. francine: sounds like a headache. howard, thank you so much, chairman of rbs with some unique insights and some very strong words against brexit. coming up, we will talk dot -plots and inflation. bill gross of janus capital on radio. ♪

francine: it is fed day. we are watching currency. francine lacqua in london, tom keene is in new york. let's get straight to "bloomberg

first word news" with vonnie quinn. vonnie: donald trump won primaries in three states. marco rubio lost badly in flown and suspended his campaign. john kasich, the governor of ohio, won in his home state. he says he will stay in the race until the convention. call ino close to missouri, where donald trump has a narrow lead over ted cruz. 396 delegates, kasich has 138. on the democratic side, hillary won four of five states. bernie sanders has 800 delegates. the second largest subway system in the u.s. is closed all day today. 's closinggton metro after an electrical fire in a

train tunnel. president obama will probably his bid for the supreme court today. senatesident -- republican leaders have promised that no matter who the president selects, they will not hold confirmation hearings. in brussels, police search houses throughout the night. earlier they killed the suspect on with an automatic rifle. three police officers were wounded. in brazil, there is about to be a new turn in the big corruption investigation. according to a person close to talks, former president lula has agreed in principle to join dilma rousseff's cabinet. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am vonnie quinn. tom: thanks so much. he will head to china tomorrow.

the chinaach owns watch at morgan stanley in the invention of modern economics markets as well. it may be on our dampened gdp. this is an early chart of the year. here in march. the basic idea is that the yield comes down. the bottom line is looking at america and the lack of growth -- that is the wrong chart. let me go right to this. it has dampened gdp. it is that simple. stephen: by dampening gdp, you mean slower gdp? tom: slower gdp growth than the models we used to use. stephen: we went through a horrific balance sheet recession. we did it first in japan, we have done it in the u.s., and u.s. consumers felt the brunt of it. in realt years, growth

consumer demand, the average has been 1.5% in real terms for eight years. tom: i come close with 1.6%, down from 3.7% eight years ago. stephen: exactly. consumers facing underwater collateral after the property and credit bubbles burst, have been desperate to repair their balance sheets and not putting their new income to work as discretionary spenders. tom: in the last four or five days, three people have said why doesn't janet yellen just go to capitol hill and say we have exhausted our toolbox, we will be here as a lender of last resort, but you people have to get the men going? what precludes her from doing -- but you people have to get demand going gekko what precludes her from doing that? stephen: the longer janet yellen defers the normalization of

monetary policy, the less incentive there is for fiscal authorities to work on the demand side of the equation. if the fed's focus is just to boost asset markets and providing a lot of euphoria for investors but that is not translating into growth in real aggregate demand, then the fed is basically pushing on a string, and policymakers are just fiddling while the economy burns. roach -- professor tom, bring up the gdp chart again. as we haveas strong had in the past and this could be worldwide. look at japan. gdp has gone nowhere, and yet people live well. should we just get used to this new normal, where we do not grow as much but it is a sign of immaturity economy? -- but it is aot

sign of a mature economy? mistake, sinceo 2008, the developed world is in a funk from, again, japan 24 years, europe, and the u.s. we have not addressed the demand side of the equation, and monetary policy is failing to do that. we have done qe1, qe2, qe3. now we are thinking about negative interest rates. onedo we keep going from program to another? it is because the earlier programs are not working, and we have run out of brilliant options, and this negative interest rate ploy is a total disaster waiting to happen. but what needs to happen for the economy to stop being in a funk? stephen: we have to a dress the demand side. for consumers, the need is to

repair balance sheets, debt to income ratios have come down but they are still too high. there is no incentive to save in a zero interest rate world, so the savings rate has come up a little bit, but it is still well below its current norm. we have address the factors inhibiting consumer demand. consumer spending takes its key from end-market consumer demand. tom: i go to michael mckee on this. mike,ot know -- where is vonnie, do you know? vonnie: on radio. tom: michael mckee centers on 80% of people exiting various primary votes saying their life is not better. there are two americas. can we do stephen roach based on allich is

one bell curve america, in a kind of massive polarity of and even polarity of aspiration as well as expiration? stephen: this gets to the big issue in michigan that did not map into ohio, and that is pressures on middle income american workers in terms of jobs and wages. i think the politicians -- and i have a little something coming out on this today, on a yell university press blog -- on a yale university press blog -- are misleading the american public by been aiming -- by blaming trade. what they fail to tell you is that they are responsible for these problems by running big budget deficits. tom: that was a massive plug for the yell blog -- for the yale blog by professor stephen roach.

what is the level of gdp donald trump needs or secretary clinton needs? three? it seems so removed. stephen: we historically have been able to grow between 3% and 3.5%. ,ow we are growing at 1.5% which is sort of ironic because the unemployment rate is comparable to what it was in the old regime, which is another way of the geek economists saying we are falling short on the productivity front. if we continue to fall short on the productivity front, the pressures american workers are feeling today will only intensify in the years and decades ahead. so we have to rebuild saving. that is the point of my shameless plug of the yale university press blog. invest theings, savings in people, infrastructure, incapacity. free ourselves from foreign

saving, and that will reduce the trade deficit that squeeze american workers. we have the wrong approach to economics in the united states. hockey -- yale hockey -- is that a shameless plug? stephen: it is not yeah hockey, it is yell basketball. -- it is not yale hockey, it is yale basketball. yale wins.ins -- we have to do that to keep stephen roach around. francine: i cannot talk about march madness. i can talk about negative rates, about rebuilding savings. that is not what negative rates do. we speak when we come back with denmark's central bank. that interview coming up live next from copenhagen. ♪

francine: i am francine lacqua in london. tom keene is in new york. it is fed day. we knew that. we need to check currencies. dollar strengthening a little bit, and we had a little bit of movement on yen. credit suisse is by far the -- concerns about the strategic plan. let's get to the bloomberg business flash. vw lost market share in europe for the sixth month in a row. the car industry sales rose 40% in february. the w is losing sales to mercedes, ford, and fiat.

prosecutors say there is insufficient evidence, leading to wonder if setbacks in the libor probe are hampering -- shares of the drugmaker valeant fell after it cut its forecast. concern about the company's business practices has turned the drugmaker into one of the worst-performing stocks, falling 18% since august. it may not have enough liquidity as a going concern, down 20% premarket. tom: valeant is still down in the premarket. a 31going to call it handle. i do not have that in front of me. "theve the same chart at wall street journal" this morning, taking it back to 2011. to be the headline is just further down on valeant.

. will get this out on social matt levine less night just killed it in his analysis. bondholders are getting antsy. and it will miss it bond payment today. great cardinal rules is that bond people are always in front of the equity people, and you really see that relation yesterday. , where thed that out valeant mons were just as damaged as the equity. francine: on the valeant chart, when you look at the amount of capital that it has lost in terms of capitalization, valeant is now worth less than all of the deals it made it 2015. that seems a little bit crazy. the market cap dropped $11.4 billion. last august it was worth $90 billion.

tom: there is the long-term chart, with the plunge yesterday, the shock and awe of that very difficult. i am going to call a conference call as well. but, a central bank day, francine, there are other central banks, aren't there? francine: there are. we can link negative rates to the interest on banks. the denmark central bank the bank cut its forecast be really go to copenhagen, where governor lars rohde joins us. thank you for speaking with us. your bank has had negative rates longer than any other central bank. we try to figure out the side effects. you haveorried because kept negative rates for so long that you come to a point where unintended consequences will take over? well, so far we have not

seen it yet. our experience is that there is not much difference between very low positive interest rates and low negative interest rates as such. it works simply the same way. we have not seen any more cash going into the economy, so in that way it has not been that different from our earlier experience. you have also said that the -0.75 policy rate does not lower bound. are you concerned that the ecb will go into negative territory? i am not. we have a very simple mandate at the danish central bank. we have to keep the currency, these of these the euro -- via

, and that is what we have done for the last 30 years. differenty it is not from our earlier experience. i think it is fair to say that we have not seen that many side effects. what we are following closely is, for example, the housing market, and all of the signs of asset-inflated prices. but we have not seen that much from that perspective. francine: are you worried that it will hurt financial stability , governor? you say going below -0.75% will still work in terms of policy? the boj is now negative. the ecb is looking at going more negative. lars: sorry, could you please

repeat the last question? francine: are you worried about financial stability and the fact that the ecb is going into negative territory, impacting your pegged to euro? lars: i would like to say that we have absolutely the feeling that we have all the necessary tools in our toolbox. the financial stability issue dull. be by the monetary policy itself because it is dedicated to the euro pick, but by macro maybe loantools that to value or loan to income ratios and so on. so it will be more that kind of , with the danish

use for thewill instability issue. tom: denmark owns the economics of geography. you are a victim of the geography of europe, particularly with frankfurt, germany, being so close. what will be your strategy over the next two years to benefit the people of denmark, given the sizable monetary authorities around them? well, i think over a long period of time, danish currency policy has benefited the danish population and danish companies quite a lot. changeo not expect any in these circumstances. we are among the countries that are quite strong with economic fundamentals.

surplusa huge payment and sound public-sector prine enhances. -- and sound public-sector finances. mr. director, thank you so much. we thank lars rohde this morning. coming up, stephen roach with comments on negative rates and on our fed policy. we moved to this afternoon, scarlet fu, michael mckee, and blinder,th alan randall kroszner, and william gross. stay with us. ♪

tom: very good. tom keene in new york, francine in london. they are backing and filling as we see valeant down 6% this morning. the forex report -- stasis before the fed meeting. 1.4114.,

our central-bank derby. francine? francine: we talk inflation, we talk dot plots. coming up, "bloomberg " with david reston and stephanie ruhle and jon ferro. at ishat we are looking the difference between federal reserve expectations for hikes currently and market expectations and how that difficult -- how that different -- how that differs with the fed. most expect the dot plot to come down a little bit. fed decision to one side, that is the top story. the other top story is the big ,orporate deal, deutsche boerse and we will put that question to the deutsche boerse ceo right here on "bloomberg ." tom: moving on, stephen roach

was squirming. i say squirming as we listened to the good director of the denmark central bank. this over negative rates. denmark is not the united states or anything else. tell me what upset you so much about denmark's toolbox. stephen: how can you get a central banker with a straight to tell people around the world that it makes no difference whether or not they or theyrest to banks charge banks with the purpose of holding -- it is a total difference in terms of the transition mechanism, the impact on the lending cycle, the impact on financial markets, the impact on financial --

to bill gross this afternoon, does it just extend financial repression? when you cross the zero threshold, it turns the process of credit intermediation inside out with implications that central bankers, with all due respect -- which i am not sure they deserve anymore -- have no idea what they are doing. the governor from the danish central bank is saying so far it is working fine. well, so far is not good enough. you have to be forward-looking. tom: i promise we will change our bracket to yale beating baylor. ," ong up, "bloomberg television. ♪

to "bloomberg ." there is breaking news, david? david: president obama has a

supreme court nominee. if you thought the big news was the primary last night, that is not the case. president obama is winnowing down to his top three. david: i do not remember a time where there has been this much anticipation, with republican saying we do not care who it is, we do not want to know the name, we are against it. jon: talk about what is next. he announces his nomination later on this money. what happens beyond that? the judiciary committee says they will not hear it. the interesting dynamic is he is trying to put pressure on the republicans by putting out a nominee that is so acceptable to everybody. talk about the most likely three. number 1, 3 srinivasan. canadian american.