francine: building on credit, property rebounds in china, driving first quarter growth of .7%. no intervention yet, the yen had its worst week since the bank of japan cut into negative territory falling to levels that analysts say could spark more easing. and goldman cuts its losses. they're set to join j.p. morgan and wells fargo in a cost-cutting push as a slump in trading take their toll. this is "bloomberg surveillance." tom, we've had quite a week. equities not doing much, but again, i look at currencies, and i look at what they're

saying. tom: the we'll focus on the i.m.f. has to be the great phrase of 18 months, madam lagarde, the new mediocre. i don't think anyone's changed, francine. they're still talking about the new mediocre. francine: right, except the immediate oaker is maybe getting a little bit worse than it was 18 months ago. let's get straight to plorg's first word. here's caroline hyde. caroline: another casualty of the panama papers, this time it's spanish industry minister. he resigned after giving conflicting explanations to a fund. he initially denied any involvement before backtracking and calls for his ouster intensified after the newspaper report yesterday. another blow for brazilian president. the country's supreme court has rejected a motion to stop an impeachment vote against her that's scheduled for sunday.

it's just the latest defeat for the battled leader, who lost support from key allies this week. the high court voted 8-2, rejecting her claim the voting plan procedures are "contaminated." russia's defense ministry is rejecting complaints by u.s. officials who say russian attack planes came dangerously close to a u.s. navy destroyer in the baltic sea this week. they call the moves unsafe anden professional, but a russian ministry spokesman said they used all measures of precaution. u.s. secretary of state john kerry tells cnn the ship could have opened fire under u.s. military rules of engagement. more news 24 hours a day, powered by more than news carriers around the world. tom: i want to make clear so there's no confusing, this is not b.f. goodrich. goodrich petroleum corp is a small company, 51 employees. they just filed for chapter 11.

but i don't want to get anybody to spill their cereal this morning or their morning tea in the united kingdom over sowing a headline that goodrich files for chapter 11. we saw that bigger company the day before with peabody. i think it's peabody. francine: peabody, unless you're chinese. tom: i learned it from the cartoon. francine: it doesn't matter. tom: they were a little bigger. they went under. a data check now, i can take six seconds on this, and nothing's going on. negative three, the euro 112. oil elevated. on to the next screen, if you would. the v.i.x. showing the market, under 13. nat gas under two. that will be an interesting discussion in a moment. francine? francine: this is my board, tom. i wanted to show you europian stocks, but actually it's the autos i want to focus on.

the first quarter market share reached a five-year low because auto buyers snubbed volkswagen because of the ignition cheating scandal. i want to show you a little bit of the yen. what a reversal from the previous week, and then pound. tom: right, over to the terminal, i want to introduce this as we go through the hours with the deputy managing trek for, mr. lipton. this is a dollar. we show in this chart even more, strong dollar, the dollar to 200 . up we go, the latest is strength. mihm, i 's logrith can compare and contrast the latest dollar move, which is getting out to the dollar move of the late 1990's, nowhere near the plaza move. there's relative dollar dynamics as we await speaking with ken rogoff. this time is different. we go to a brilliant, spotless

francine lacqua chart. francine: this is what i have. i have oil production. last time opec, this is in 2001, right? so we have russia in white. norway. mexico and angola. opec didn't trust nonmembers to join its production cuts at the meeting in doha, and this is what happens. they said, yeah, guys, this is back in 2001, and then look at that. a couple of months later, russia keeps on pumping oil. and angola keeps on pumping oil. this is an important one that was watching. tom: the dispersion of that is brilliant, everybody for themselves. francine: right, and that's exactly the challenge that you have. you wanted to be united, but with low oil prices. you do have defense for yourself. joining us for the hour is the

managing director of global advisors, former chief investment officer at pimco. great to have you on the program. when you look at these markets this week, they seem to have stabilized a bit, and yet yen had a crazy move last week. we see the price of oil still not really finding a bit. what will it take for markets overall to stabilize? >> ok, so i think clearly it's a long road to november. you've heard me say that. we have election. we have politics. we have a lot of things. i think, however, that we will find some sort of adjustment, and it's possible that those chinese members are actually attempted stabilization. clearly i don't like the quality of the numbers. we know they came with a lot of credit, so $351 billion if you take new loans and other

financing. clearly it's also going into property and construction, but we're clearing up inventories, so i think it's possible that actually the chinese factor, which so far in the last 12 to 18 months has been very negative, becomes more of a neutral. clearly depending on potential default in the corporate bond market, that's what we have to watch, intensification or not. francine: we'll talk about china in just a minute, but what do you make of the bank of japan throwing everything they have at it. were negative rates a clear mistake? virginie: it's very difficult to know, but the reality again is we are in an unconventional mode of functioning by central banks that we veels this stress. and a lack of power i would say. the problem with japan are not only linked to now, the

problems of japan are long term, a lack of demand because of aging and other factors. it's an important question, the question you're asking is important. however, what i would like to focus on is an investor. when can we come out of conventional measures and what do we need to do? i still go back to, it's about structural reform. tom: it's tax day in the united states over the weekend and monday, and, of course, that means without question, we've all got to look at our retirement program. we showed this chart yesterday. folks, it's a single best chart . we showed this chart yesterday. this is the dow back to 1900-ish, the depression there with the blue box, and the long, long trend from what i call the rally coming out of 194 . this is buy and hold forever. what's wrong with just buying them and holding them? virginie: i think if you focus

on quality companies and you have a long-term time horizon, it's actually the right thing to do. if you're looking at the short term, what we're seeing in the earnings season for this quarter in the u.s., you might be able to buy stocks that you like at a lower level. my point is, long-term holding clearly makes sense depending on your time horizon. tom: francine, that goes back to what virginie said earlier about japan. it's been 25 years of malaise. you have to have a strategy on these long-term structural changes. francine: i know, and we know that, of course, japan is complicated, tom, because also the tax increase, which probably backfired and the structural reforms, and yet you really -- you feel for the governor, who's really giving it his best shot. we'll speak plenty more on yen next. coming up in the next hour, we'll be joined by harvard university's kenneth rogoff,

david lipton, and president of the peterson institute, adam posen. what an a-list star guest lineup. all of that coming up. ♪

francine: tom keene is in new york. let's get straight to the bloomberg business flash. here's caroline hyde. caroline: thank you. goldman sachs chief executive lloyd blankfein is trying to ride out a years-long slump in bond trading and deal making. he's embarking on the bank's biggest cost-cutting push in years, according to people familiar with the effort. they say that recently began dismissing more support staff and is increasingly rejecting bankers' spending on air faye, hotel and entertainment unless it directly serves the client.

prices in the initial public offering at the top end of the marketed range. the deal raised $253 million after 13.3 million shares were sold at $19 apiece. investors are looking to the deal to en liven the i.p.o. market, which has been hampered by stock market volatility. and china's economy gathered strength last month, thanks to a surge in new credit that helped the property sector rebound. g.d.p. rose in the first quarter from a year earlier, meeting the median projection of economists surveyed by bloomberg. retail sales picked up in march and beat analyst forecasts. that's the bloomberg business flash. francine: thank you so much. for more on china, we're jound by our chief asia economics correspondent. he joins us from hong kong. what do you make of the numbers? a little bit of stabilization, but there are still concerns. >> good morning, francine.

definitely adds to the emerging view that the economy is stabilizing, if you remember where we were in january with the stock market rising, a lot of uncertainty, and the view that their economy could go for a hard landing, while three months in, it appears to stabilize. real estate sector holding up. all together, that's where we got to, a decent headline number. the issue is the growth has been driven by big surge in credit. nothing worrying a lot of analysts. real play reaching for death to drive growth in the near term. when i push through the reform needed to keep the economy going on a more sustainable, long-term basis, that's the big worry out of today's numbers. francine: yeah, and we have a great, great bloomberg view piece also out today, saying funny numbers show that money is leaving china. we were concerned about out

flows, should we still be concerned about money leaving between a? enda: yeah, i think the pace of money leaving china has probably slowed from where we were at the end and start of this year, and partly because the yawn has stabilized, of course, but the yuan stabilization story has much to do with what's happening to the dollar and u.s. fed as it is to anything else f. we see a turnaround, that will put pressure on the yuan, for example, and that could trigger money. we don't really know that the trick, even though the amount of money has slowed, it's still happening. look at the trades this week. we see the hot import numbers from hong kong showing people to get money out. tom: it set us up for an important conversation in the next hour. the trade-weighted chinese yen shows a country that has been responsible and strengthened e recommend him bee over the

years, even pushing out a decade. does china perceive their currency as managed, or does beijing perceive their currency as a float? enda: i think there's still a degree of management in it. they want the market to have a bigger say in setting the yuan's value. that's all part of fleeing up the currency. as we know, last year they finally won at the i.m.f. a gradual process, but in washington, they said yesterday right now it's not in china's interest to have a very volatile yuan. they're quite happy to have it stable, but long term they're freeing it up. tom: thank you so much. have a great weekend. he is in hong kong. right now virginie with us in london. virginie, when we hear him talk about chinese adaptation, one of the new themes is by winner, which means get brave about emerging markets. is virginie brave about emerging markets?

virginie: it's selective. i think it's not, tom, because geopolitics and politics in each country has had so much impact that i think clearly, if you think the dollar is getting weaker, that is very positive for emerging markets, but within that, company by company and country by country, you have to be extremely selective, because there's still a lot of danger out there. francine: where do you see the biggest value? i guess some industries are overvalued. you have this kind of overvalue concern of the new normal. virginie: exactly. i still like the long-term trend of more power to the consumer when you have that, and i'm still quite worried about financials in general, and clearly within the commodity space you have to be really, really selective. so if you see innovation in technology, in consumer, if you see companies becoming more global, so if you take china, you have some companies taking

over companies globally, and what, if you want growing in their purpose into this sort of global role, i think that's very interesting. but to me, it's more finding pockets of growth and where they are expressed anywhere in the world as opposed to, say, it's e.m. versus e.m. tom: virginie to continue with us through the hour. we'll look at the politics in the u.s. as well. coming up on "bloomberg go," scott writes up a storm, a smart storm about the linkage of investment and finance to our economics. we'll do that later today. ♪

francine: welcome back. tom keene is in new york. tom, i picked out a morning must read for you. this, of course, ahead of president obama's arrival here in london. it's about brexit. i pked out something, why the brexit crowd wants to silence president obama. now, phillip stevens argues that it explodes the flawed notion that if they leave the e.u. they'll get closer to the u.s. he says this is not true. this is a flawed notion that there is a choice to be made between the english channel and the atlantic. instead, mr. obama makes a case that a leadership role on its own continent serves to amplify rather than diminish britain's voice in washington and in other world capitals. tom, if you look at the top,

and i guess the special relationship with tony blair with the u.s., i imagine as a u.s. partner you would want, of course, the u.k. to also be the stepping stone to the rest of the e.u. tom: it's been a nuanced week of debate. i believe the president visits for the queen's 90th birthday. i looked at it as overlaid by a president who's really beginning to get into lame-dumb status. the calendars moving on, as we saw with the democratic party debate last night, and it's a president that was in a very delicate position. what changed in the debate this week, francine? to me it really felt like not -- almost like a pause and a nuance in the great brexit debate. what did we observe this week? francine: what we observed was the fallout from the panama papers, for david cameron. but at the end of the day, and it's interesting you bring up that we think president obama

may be in a lame-duck status, but the fact of the matter is the white house, and i imagine people say the next president, think that e.u. membership is for britain, but that was good for europe, and that means it's good for the u.s. virginie is still with us. the problem when we look at the brexit taint, we often focus on the economic side of things, but how much of a step back would it mean for britain's world wilede politically? virginie: there's several angles here. clearly brexit would help the u.k. negotiate a closer deal to china, which is one thing. but if you take the american's perspective, i really think we have stepped into a new realm of geopolitics. we had the cold war, the post-cold war, and actually i look at the u.s. perspective, the u.s. is probably quite puzzled with this crisis, this fragmentation, this radicalization in europe. and if you think that possibly some of the russian actions were meant to divide europe

with a crisis, which in turn has an impact on the u.s., which has had europe as a trusted partner for all those years, the u.s. perspective really needs to get close to europe, because it's probably the country we're the closest to. tom: i get that, virginie, but i understand to -- but i want to understand here for the people in some way leaving the continent, what did you learn from denmark, sweden and others who, in whatever level, has said no, we don't want to do this with brussels? what can the u.k. learn from their experiment, pro or con? virginie: i think there are plus and minus signs on both sides. clearly, for the u.k., it's about mohr freedom. it's also about answering the freedom for trade, freedom for profit, but it's also answering and tapping into fears in the

electorate and the population to capture some political bonus points, if you want, at that particular point in time. moon a harn way to say it. i think it's very different than what we've seen for this country given the timing. so ultimately, you know, if you think about memberships and clubs having a fear of influence, it's more about thinking where is the u.k. going to be the most impactful, and clearly i believe it's being in europe. francine: thank you so much. come up next, we talk about oil . ♪

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froipt's "surveillance." i'm francine lacqua in london. tom keene is in new york. let's get straight to bloomberg first word news.

here is caroline hyde. caroline: south korea's news agency carried a report that a missile which could be capable of reaching u.s. bases in the pacific exploded seconds after liftoff. the launch was reportedly the first test of a new mid-range missile. nigerians took to the streetses to protest the kidnapping of early 300 schoolgirls by boko haram two years ago. on wednesday cnn added video of some of the girls' so-called proof of life reportedly filmed late last year. in india, the new delhi government is beginning driving restrictions. cars will be allowed on the streets on alternate dates based on license plate numbers. the indian capital is the

world's most polluted city. bernie sanders and hillary clinton went on the attack last night as they faced off in a debate in brooklyn. they questioned each other's judgment and rorsd. the former secretary of state pushing back hard on questions about her judgment. >> he had to question if i judgment. the people of new york voted on me twice to be their senator from new york and president obama trusted my judgment enough to ask me to be secretary of state for the united states. caroline: it was the first face-to-face meeting since the campaign moved to the empire state. i'm caroline hyde. tom: careline, i'm glad you mentioned the empire state. it is amazing to see the candidates, the dichotomy that s always been there, the

polarity almost, anyone who believes upstate begins, some ink it begins at albany and utica. it is fascinating to see where this will be next tuesday and how upstate affects all the media flow that you see out of down state. we'll do more on this in the hour. we have to look at oil. i believe when we looked at -- look at oil on monday, the tone will be different. here is the oil chart. the oil chart has come down, down, down. up we go to it. all of this, a precursor in doha. what do the saudis not want to happen in doha? what is their worst outcome?

>> i think the worst outcome for them would be the meeting happened and some really negative sentiment came out of it. say a producer came out and -- that the deal is not on the table. we couldn't agree on something. they are just scared that price also back down again into the 20's. so they just want to prevent that. tom: they want to prevent it. do they have the power or the economics, the price theory to prevent it? i don't understand what their weapon is. >> no, i think it is a combination of factors. you are starting to see supplies drop, not just in the united states but in many other parts of the world including latin america, china, kazakhstan. they have that momentum behind them. they are trying to capitalize on that and ensure the status quo is preserved. keep prices around $45. they don't want a lot of upside

either. that would bring the shale producers back but they don't want the prices to go down. francine: we may have some sort agreement can the peck governor not really make the decisions needed? are we expecting positive sentiment? >> i think there is a clear ploy over here. they probably don't want the reigning oil minister to come there. if he came to the meeting he would probably come out and say we are not going freeze and that would put a damper on sentiments. i think this is very much a ploy to make sure the market doesn't sell off too much, too oo quickly. francine: i was looking at a chart that showed the last time they agreed to freeze production. a couple of months later they start pumping again. what impact would a freeze even have on oil prices? >> here is the interesting

thing. it has no impact on balances. we have been talking about the freeze since february. i would be very happy to see the back of it because balances don't change because we are going to freeze at january levels which are anyway the high first the year. everybody was pumping at maximum. that is one thing much more about the sentiment. we are talking. we are no longer at fight with each other and we meet again maybe in six months and evaluate how the policy is going. that is exactly what's happening. but in terms of balances, no impact whatsoever. but like i said, supplies are starting to fall already because of low prices. in a way the strategy has worked. tom: do they have control of the debate into this weekend, into doha? i can't get a handle on this. do not all opec actors actually control the debate? >> i do think they are in control without iran. iran is definitely the sticking point. don't get me wrong, saudi arabia

still has a condition that they will only freeze out if iran does. that is not going to happen. this is the second best outcome for them. they are saying we may not be able to get iran onboard now. it doesn't mean they have given up. it is more like kicking the can down the road. now.rve the status quo for francine: have you ever seen that the u.s. has shown up at these things? >> how do you get them to show up? you have 40-45 fragmented oil producers. it can't ever be a partor these talks. francine: are we going to see -- back in the cards? >> if you look at -- it is already back. that is the positive thing in the oil market. for all the talk over the freeze, we are seeing fundamentals improve. supplies are falling in many parts of the world.

we are starting to see stock drops on our balances. crude stocks start drawing from june every single month. francine: thank you very much for that great briefing. the oil i guess saga is complex. more complex than it has ever been. they don't have power to influence the price. >> less power and i think there is three major factors. even if there was an agreement, clearly the countries that i call labelors desperation, i.e., russia, weakness, iran, despite former agreementings, russia continues to produce. how do you judge that level of desperation and their impact on global flie supply. the second thing is volatile any

the middle east. the third thing is if you have in fact a short period of demand e igse in china, might actually supply on the upside there. we have -- inventories around the world that are quite high and they see the clearing point in 2017. all of this adds to the complexity, you know, basically the way to summarize it is you want to go back to global growth. if you think it is going to be weak, if the supply/demand equation is not balanced and it is very hard to have much stronger oil prices. tom: we'll continue our discussions through the hour. lots coming up on international economics. on monday, international relations after doha as we reset for april and into the summer, may, june and july. richard will join us particularly with oil economics. the in our next section,

weekend. ♪

francine: i'm francine lacqua here in london. tom keene is in new york. we're looking at global banks and watching banks this morning on the back of jpmorgan earnings and also had yesterday bank of america. goldman set to embark on its greatest cost-cutting push this year. mike m moore covers banks for bloomberg news. michael, great to have you on the program. we are hearing this is a nice bloomberg scoop that goldman sachs embarking on its greatest cost-cutting push in years. >> they are forced into it by the world we're in right now.

first quarter was not good. they were specifically exposed to the trading environment given that it is such a big part of their business. so they kind of have no choice there, really cutting wherever they can but they are doing it -- they are not getting out of major business lines. it is more on the edges. francine: this is what? job cuts? i guess expenses being cut? michael: right. travel. anything that is not nailed down i'm guessing. but you're seeing it in travel and head count and the shape of their workforce, cutting from the top more than the bottom. francine: have they been laggards compared to some of the rivals? michael: they have not taken some of the steps their rivals have because they have not had to. they have had better returns than a lot of their peers.

tom: michael, not that mr. blankfein would do it but if he was to parachute in, they would spend money to tell us about geography and lines of business. goldman sachs is known for banking, etc. what lines do they get out of? do they off not their trouble bid their asset management business that has just so forth been there for years? michael: asset management is one of the areas they are trying to grow in. lloyd blankfein has always had the philosophy and i want to get out ahead of this and do smaller changes. smaller tweaks to keep the returns highway so i'm not forced into a decision about getting out of a business and to this point he hasn't been. a lot of european banks are under a lot of pressure from shareholders to get out of -- so

the business and they -- goldman has not been under that pressure because their returns have been higher and that has given them some flexibility. tom: michael moore is adamant his single best buy is citigroup. he is foaming at the mouth for the enthusiasm for big banks. we appreciate his appearance on "surveillance" radio yesterday. what did you learn this week and from citigroup today and is it really about where lloyd is, which is the continued slow? michael: i think what we're going to see from citigroup is whether or not they also had trading results that were not quite as bad as people feared. it is still down yearover year but it wasn't the doomsday that some people predicted. does that give them a little more hope for the rest of the year? testimony other thing we're seeing among all the -- the other thing we're seeing among all the banks is higher provisions for oil loans and

that could be a major headache as we go through the year. tom: francine, what michael moore did when he passed c.f.a. level 4, he said the word hope. would when you say the word hope in business, you circle it. that means you're in trouble. hope is trouble. francine: yeah, hope is trouble. your take on banks has been actually they are in a much worse place than we thought they would be. >> yeah, that is one of my questions to you. you look at the five-year start and the global economy and the level of banking it seems to me that you know, in this environment of low growth, slow rate that we're going to have have in the foreseeable future, we need to transform the banking system and partially, utility nd of passing on capital and

higher business but i think we have probably too many banks. michael: i think that is part of the strategy for jpmorgan or goldman is to wait out the others. if we are overbanked and they are waiting on competitors to exit so that they can actually get some decent spreads but shareholders are getting a little impatient on that because a lot of the stronger banks have been waiting for five years for their competitors to exit and we are just now getting to that points. in the meantime, the environment keeps getting worse. tom: michael, one of the articles of the year, that little article that you guys were out front on, the economy between europe and american banks. this week where is that dichotomy? is it ever wider? michael: it seems to be getting there. we'll see the european results in a coumple weeks. -- couple of weeks. but certainly a lot of the m&a

ctivity and so far the capital retirements, you know, the u.s. banks have got on the the capital retirements quicker so they are facing fewer questions on that front. but i think, you know, we're going to continue to see that trend until the european banks figure out what their end state is. tom: what is that about? michael moore, have a great weekend. francine, i don't understand why the banks in europe report in a couple of weeks. i think it has to do with the loverpbing lunch. -- length of lunch. francine: you already mentioned the five-hour lunch. i have a prubtivity chart. i'll show it to you later. tom: this battle between lacqua and keene.

coming up, the deputy managing director to have i.m.f. the background into that crucial friday meeting. i'm gasping. stay with us if i can keep breathing. ♪

francine: welcome back. i'm francine lacqua in london. tom keene, he's in new york. let's get straight to the bloomberg business flash. here is caroline hyde. caroline: first quarter market share reached a five-year low. v.w. brand's made up 23.4% of new registrations down from 2424.4% a year ago. that was v.w.'s worse showing for the period since 2011. mangroup, the largest traded says sales of $155.1

billion offset $4.6 billion in redemptions. mangroup shares have fallen almost 14% this year compared to a drop of 18% on the stoxx 600 index. that is the bloomberg business flash. tom: very good. caroline hyde, thank you so much. last night the secretary and the senator, well, they landed in brooklyn for a heated debate ahead over the new york primary. both candidates atact each other's qualifications. >> the kinds of problems he had about answering questions about his core issue, about raking up the banks, he asked he could not explain how that would be done. when asked about a number of foreign policy issues, he could not answer about afghanistan, israel, counter terrorism except if he had some paper in front of him, maybe he could. i think you need to have the judgment on day one to be both

president and commander in chief. tom: michael bender has a little bit of experience of actually winning states. he is from the ohio state university and knows a little bit about ohio. you have got to be kidding me. the secretary and the senator to get traction in ohio? michael clop if her opponent is going to be ted cruz or donald trump, i think so so. this is what has republicans frustrated. tom: when you look at what we see now, how does the new york state primary subways and all the silliness that we perceive, how does it translate to the rest of the country? michael: this is just a local political culture in new york. i think that is -- it is sort of built in and accepted as part of local culture here. what is going to matter is how

big hillary wins on tuesday. if she can get -- if this is a double digit win for her, it is going to be seen as real momentum moving forward. trump needs to get 50%. francine: why is it so difficult for hillary clinton. yesterday she attacked bernie sanders. it is difficult. we understand it is an anti-establishment but will it ever get easier for her? michael: nothing is going to be easy for any of the establishment candidates in 2016. what her campaign is really frustrated with is some of these narrative. they see themselves as having distance with bernie sanders and they see themselves as as being the clear frontrunner. a big win here in new york. sewed ink this will be

up. francine: she attacked bernie sanders on gun control. is that a winning strategy? michael: it has been and will continue to be. these are core issues particularly in new york and these have been her answers on those issues for months now. tom: senator kennedy had negatives. everyone has negatives. senator kennedy had whopping negatives. compare and contrast secretary clinton's negatives now with previous candidates. michael: the interesting thing with clinton's negatives, we saw in a poll yesterday, she is up 17 points in norbling. -- in new york. some 80% of people believe she is influenced by corporate donors compared to 1/3 for bernie sanders. where they are holding on to hope here is the experience question and people see her as a better uniter for party, a

better uniter for the country and someone who is able to actually get things done. tom: don't be a stranger. thank you so much. next time we'll talk ohio state football. we will continue on international economics. joining furs the entire hour, kenneth of harvard university. a conversation with adam posen. and david lipton will join us as the i.m.f. considers a global new mediocre. from new york and from london with futures at negative two, this is bloomberg "surveillance." ♪

tom: is this the era of the new mediocre, of the great

distortion of new negative interest rates? in this hour, kenneth rogoff and adam posen. different, aing is conversation with david lipton of the international monetary fund. and while hillary feels the burn, democrats and republicans non-debate as washington burns. this is "bloomberg surveillance ," friday, april 15. i am tom. with me, francine lacqua. francine, i give you immense credit. one of the backdrops to all of this is brexit. it is not just about the united kingdom. francine: it is not. the imf upgraded to one of the main risks. earnings, banks, that is another risk to the world economy. then currencies. tom: what a busy hour of international economics. now to your friday "first word news," here is caroline hyde. caroline: another t -- another

casualty of the panama papers. .e resigns today he initially denied any involvement before backtracking. calls for the spanish industry beganer to resign yesterday. another blow to dilma rousseff. the country plus supreme court has rejected a motion to stop an impeachment vote against her scheduled for sunday. it is the latest defeat for the embattled leader. the country rejected her claim that the procedures are "contaminated." bernie sanders and hillary clinton went on the attack last night, facing off in a debate in brooklyn ahead of new york's crucial primary. the democratic candidates challenge to judge her -- challenged each other.

president obama is set to enter the brexit debate when he visits the u.k. next week and could call for britain to remain part of the european union. he says it is a decision for the british people but it is also in the interest of the u.s., the u.k., and the rest of the e.u. to keep it together. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. tom: thanks so much. it is a small transaction, but we will go with it. mitel networks taking out polycom of san jose. let me look off the bloomberg here -- it is 22% of premium. to another transaction in the land of free money, one of our themes. i want to get to professor rogoff. 1.1265., francine? francine: auto stocks in europe

are a little bit down. volkswagen lost a lot of market share because of the emissions scandal. announced newa policies. here is the bloomberg terminal. this is a briefing on trade-weighted dollar. this is brought and price adjusted. the plaza accord here, this is a long chart. percentage changes evident. here is a later dollar in the 1990's and two 2002. we compare and contrast where we are now. it is sort of a rubin-like dollar here. adamf our themes with pozen, and david lipton through the hour. francine, what do you have? francine: i was meant to have an oil chart, i got a chart made.

you mentioned it a third time, and this is productivity. we cannot even cook the numbers. this is labor productivity. look at the white line. that is the uk's look at the u.s.. it was better back in 2011, but we have taken over. no four-hour lunches for us. tom: it is not europe, it is not france, it is not canada, which has less productivity. greg this cousy on from paris, but he has already started his four our lunch. kenneth rogoff redefined a part of our international economics that is foundational. more than anyone breathing today, he is the one rationalizing moving from managed currencies to the trust and the confidence of floating rate regimes. a lot of people are out in front of him, including robert mundell

and jacob frenkel as well. we are thrilled to have professor rogoff with us to get an update on our global system. how out of tune is china with a managed currency, given that it is not 1998, and there are many floating currencies? thatit is hard to see how will end well if they do not free of currency in the next couple of years. they have gone back to tighter currency this year by saying they are going to squeeze capital. it is hard to do when you are such a big global economy, when you trade so much. money leaks out. your job and olivier plan jobt -- olivier blanchard's third with that said, what is the new trilemma that you teach within that book? ken: certainly, you see it in china. it is very hard to do one thing with your monetary policy that

completely is counter to what the world is doing, and at the same time have a fixed exchange rate. that is still true, but the world is so integrated, the markets are very connected even if you are able to protect your economy. tom: are the markets telling madame lagarde and other global leaders what to do? ken: i think they are hardly telling them what to do. they have prepared their latest reports thinking the market was tanking. of course, the market has been going up here in -- the market has been going up. francine: you were talking about renminbi. the problem is, we're seeing the in china. will that turn ugly? ken: that is the number one risk in the world still. if you are asking if a bad systemic accident can happen -- yeah, there is greece, but china is much more important.

what they have been trying to do this year is manage things so they would not have a crisis by tightening everything. but can they still grow in that environment? it is a contradiction. francine: is greece a cynic? ken: depends on what happens. the leaders are so tired about having endless meetings over it, they will make a concession. i do not think it is systemic. what happens in greece may move on to other countries. tom: there we are. as we go into the imf meetings, "imf urges fg -- shakeup of greece's deal." for mario draghi and other central bankers, they have huge pressure to just do something to assist greece. for that matter, this is brazil. what is your prescription now for europe to jumpstart growth? ken: i think certainly writing

down debt -- tom: just get it done? done, make a it transfer, and they do not like doing it. there is all the talk about needing a fiscal boost, but if you do not do structural reforms, it is not going to work. japan did not, and they are still growing slowly. just get it done. francine: i know, but this is what everyone says. it is easier said than done. when you look at structural reforms, that is not something that the u.k. needs. it is countries like france and italy. i guess my counter argument is that we have already done more than we have in the last 30 years. it is just that we are starting from such a far point, europe needs time. ken: it is different in different countries. spain has done quite a bit. italy is -- italy has probably

done more than it is given credit for. france, not so much. the uk's doing better in part because it's markets are more flexible. if you want to know the answer in the long run, your output is determined by these fundamental factors. talking about big fiscal stimulus -- it is a good idea when demand is low, but if you think that is going to fix things in the long run, you are mistaken. francine: the problem with just getting it done, there is a complicated political antiestablishment movement in europe. if you do structural reforms, it may push voters to the extreme right or the extreme left, a little bit like you are seeing in the states. it is more nuanced and complicated than we give it credit for. -- let's set the template for you and adam posen and david lipton later. reflation the idea of x number of years ago, you had a great panel at the imf. where are we -- and this goes to

your wonderful book, "this time is different" -- getting out of the crisis through the solution of reflation, are we re-fleeting and are we doing it -- are we reflating and doing it correctly? ken: we are not. tom: how do we get there? having --er flavors favors having a high inflation target. i favor negative rates working more effectively. they can still do a lot by being less evangelistic about their inflation targets. they will not let it go higher, so any time it creeps close to it, they think they are going to tighten. they need to change their whole dialogue about that and say overshooting is not bad. they are worried they will lose

credibility because we cannot even make it 2%, so why are we going to talk about 3%? they are connected. you just heard the most important single sentences on international economics i have heard this week and this month. we are going to come back and address that theme. a little bit of discussion not so much about negative rates, but the dynamics of negative rates. coming up, adam posen of the pearson institute. we will look at some of these distortions, including negative rates. from new york and london, "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." let's get right to our morning

must-read. town onpart of the negative interest rates. tom: rogoff squirming here. adam posen, we welcome from the pearson institute. our negative rates and particularly further, deeper rates, a positive prescription for europe and for japan? adam: i don't think so, but for different reasons than mr. stiglitz. negative rates work well if you're small open economy where capital flows are dominant.

singapore, negative rates work well. if you are japan or italy, you have a bunch of savers who are very stick in the mud, and negative rates are not going to do very much because the capital flows aspect is a small aspect. you are just going to get the negative political backlash. like japan is facing with negative rates, they either try to protect savers, in which case the effects are hugely diminished. or they do not protect them and they say what is going on here. they were for small economies, but not for large. tom: the idea of negative rates, have we tested it, or do we need to go further to get the beneficial effects from negative rates? ken: we have to have a framework in which negative rates can effectively work, where they can

be open-ended, where you clear the way various institutional ops. they have not done that. i do not think you can say anything meaningful about it. i would disagree with you, adam. i think the real interest rates sat in the world market, and that is not -- people complaining about low interest rates, it has to do with global imbalances. the central banks are not ultimately setting the real interest rates. they are being driven down by other things. adam: ken, of course that is right. but there are fears factors, cultural factors that matter. so when youth -- so when you say the broad thing, everybody agrees. they are still -- there is still a huge difference across countries about how effective , and thatlicy rate is

is what they are seeing in japan. when i was at the bank of england, i predicted the negative rates were going to be a gimmick for large economies, and that is what we saw in japan. francine: is it the distortions being too big overall? areortions that are created -- adam: i agree totally with ken that the idea that if you want monetary policy to work, you cannot just be in expectations game. you have to have channels in which monetary policy can work. it is about blocked channels but also the reaction of people. when you yard in a small open economy, the reason for that distinction, the size of the capital flows relative to the economy is very large, so that channel is effective. if you are japan or italy, a country that is very heavily banked -- very heavily bank

dependent on savings, by definition those capital flows are not as important as to how the economy works, so the negatives it's just rates -- so the negative interest rates are just not as effective. tom: what does mario draghi due to keep the cats in the page -- in the cage? ken: he can do a lot on his balance sheet. basically they are holding up the greek angst now by magic. they are zombie banks, but the ecb says they are ok, and that is what he is doing. it is very significant. i completely disagree with adam about there not being ultimately -- about them not being ultimately effective, but they are not effective in this environment. tom: within the real economy effect, do we still underestimate all of this international economic mumbo-jumbo and its affect on the real economy -- the dampened

gdp that madame lagarde talks about? ken: are you talking about the united states? tom: the united states and for that matter, the global economy. ken: certainly growth has continued to be very slow. we do not know how much of it is real. but it has many factors, one of which is certainly a very low versus staying until after the crisis. continuing debt overhang in other countries, and demographics. there are many factors. is wonderful. kenneth rogoff with us and adam posen. we will continue the collegial debate and disagreement. david lipton, first deputy managing director of the imf, will join us with an important interview later in the hour as well. from london and new york this morning on international economics, "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance," with kenneth rogoff and adam posen. francine likewise in london as well. adam posen is writing up a storm on central banks. i love this, adam -- tom: adam posen, are the inflationistas going to have the

upper hand into this year and 2017? so.: i don't think both are good reason and bad, the fomc majority is shifting away from canonical inflation targeting. there is a sense that inflation is inner shell -- is inertial. in theoretical terms, they want to be lower for longer, so they are willing to let it overshoot. i just think they are going to be slow to act. using the same calculus now within our central-bank policy? they are not going by the textbooks, are they? ken: there are so many different meetings -- there are so many different meetings -- there are so many different meanings of inflation targeting. i think it was carried too far. there is an evangelism to it,

and we are suffering now because it is hard for them to say we will let inflation overshoot, which is what i think they need to say now. francine: do you think there's a real danger that inflation overshoot will drive because of the place of oil -- because of the price of oil in the next 18 months? ken: if oil prices go up, inflation will go up. what is matters is the core of sustainable inflation. has not fallen very much, obviously. but they are struggling with that, particularly in europe and japan. francine: do you agree with that? adam: in terms of the broad forecast, i agree. because inflation expectations are so sticky, central banks are so incredibly anchored that they do not need to worry about oil shocks passing through. there is one piece of inflation targeting that i sort of renown

from when i was writing about it. book that with our the inflation target could be changed over time and that it could be symmetrical. in practice, that has proven not to be the way it has worked, related to the stuff can is talking about -- related to the stuff ken is talking about. you are scared to move them, you were scared to admit you changed them. we were naive on inflation targeting. tom: we are going to come back on this with ken rogoff and adam posen. we are going to look at who is out in front, and austerity and fiscal policy are what these guys do. international, "bloomberg surveillance." ♪

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i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. thank you. ordering chinese food is a very predictable experience. i order b14. i get b14. no surprises. buying business internet, on the other hand, can be a roller coaster white knuckle thrill ride. you're promised one speed. but do you consistently get it? you do with comcast business. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business. francine: this is "bloomberg surveillance." we have a great conversation coming up on negative rates. first, let's get to the bloomberg "first word news" with

caroline hyde. caroline: a north korea missile launch from the regime of kim jong-un has apparently failed. a missile exploded in the air a few seconds after liftoff. south korean and u.s. officials say the launches reportedly the first test of a new midrange missile. president obama's national security adviser says the u.s. now talks almost daily with russia. rice, speaking at the u.s. military academy, says the governments are working together to build common ground among syrians. bernie sanders and hillary clinton went on the attack last night, facing off in a debate in brooklyn. a recurring theme in the give-and-take between the two democratic candidates --

clinton's ties to wall street. bernie sanders: does secretary clinton have the experience and intelligence to be president? of course she does. electing tens of millions of dollars from special interests, including $15 million from wall believe thato not is the kind of justice we need for the kind of president we need. caroline: it was the first face-to-face meeting since the camp moved to the empire state -- since the campaign moved to the empire state. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. tom: thank you so much. .ith us, ken rogoff from the peterson institute, sen. rogoff -- adam po do we need inflation to lift up, to generate fiscal stimulus. ken rogoff, do we need to see

government liftoff austerity and reflate to get back to a higher inflation? be: fiscal policy should fundamentally directed about one you want to do with your money. the debate is so political, it has gotten away with that. there's lots of room for interest -- there is of room for infrastructure. interest rates are low, wages are low. we should do a lot more. tom: the key figure, dr. pose we get abovea that 2% and on we go. will that spare fiscal policy? adam: i totally agree with ken on infrastructure. inflatione cart is following behind the horse. we have been playing this game for several years, believing too

seriously in our models for expectations. if you commit to three instead of two or four instead of two, or commit loly enough, it will make a difference. the bank of japan, governor kuroda did everything we could have asked from an expectations point of view, from an inflation targeting point of view. managenot manage to inflation expectations and has not managed to reflate the economy. it is a very drastic measure. it is about trying to reflate the economy because you have to get the real side of the economy going. expectations management is not going to do it. francine: the more simple way to do it -- they are sitting on all this cash, and it seems all the

money that central banks are throwing out there is not doing much for inflation, that fiscal policy is not anywhere to be seen. when will ceo's start spending? adam: it is the u.s., even though the u.s. is doing that are than other countries, and it is throughout western europe. if you start believing in the strong version of secular stagnation, or the slightly weaker version, that brings you back to fiscal policy because what you are saying is, there is fundamental or at least lasting 's.ng on that spooks ceo therefore, you need to do something else to create an environment where they will eventually start investing. francine: this is a problem, right? andou look at monetary fiscal action, as long as monetary action is there and pumping money, no one else will do anything to counter that. , it has nott sure

been working that well. there are certainly plenty of incentives. if you look at japan, i would think allowing immigration is sort of the number one thing they could do to raise growth. they have a shrinking labor force. they need to do that. japan has experience -- japan has experimented with reflation and done a lot of fiscal deficits, but what they have not done a structural reform. tom: adam posen, i want you to follow up after professor rogoff. what have we learned? i'm frightened to tell you how many years it has been since your book came out. what have we learned since the publication of "this time is different"? crisesstemic financial events.y long, painful

advancedhat happens in economies, and they could sort of not recapitalize their banks, as europe has all the zombie banks and they cannot necessarily move quickly. it lasts even longer. you could say that is a better way to do things that is less painful in the long run. posen, what has the imf learned, and what is the view forward as we continue not through the crisis but a different set of crises now, including brazil? adam: i think we have learned a few things, the on the fact that these are persistent long effects with the financial crises. we have learned the structure of the financial system matters a lot. it is partly comparatively being good in the u.s. that we did have some banks clean up with recapitalization, but it is partly because we had a less diverse, less concentrated financial system.

there was an alternative inilable in the bond markets the community banks, so that kind diversity for a large economy matters. another thing we have learned, returning to the fiscal policy point -- which my colleague blanchard did with his time at the fund -- there has been a shift. fiscal policy works a lot like the keynesian expert -- like the keynesian textbook said. you do not get these huge confidence effects. there is no cliff for a country that issues its own currency in terms of fiscal policy, no magic number. all of these things are textbook. if you talk about brazil or nigeria, we should not lose sight of the fact that for all the terrible things the rich country financial systems due to themselves and others, some of a is just, you mismanage commodity boom or a fiscal policy, it is just classic

stuff. you do not want to do that. francine: we heard from the managing director, talking about -- bottom line, putting it simply, each country should commit to a set of reforms. if we are not seeing growth like we thought we would, is this the breaking point where we will start seeing concrete actions from countries, or will it take the next shock or prices? .dam: that is the dilemma i have colleagues at my institute and throughout the community that say you only get reform when you have a crisis. but then you put stuff off, too. the answer is, there has to be something else going on. the risk of crisis is not a good way to get reform. traditionally, when the imf or , you get bank goes in reform as then. but even then you get backlash. 15, 20 years ago, the imf went

on a reform kick when it bailed out indonesia. there was a huge backlash that they overstepped. there is no easy way to reform. n, are we asking too much of the imf? ken: what are we asking of them? tom: to go into countries and fix things. role, and ashat always been a problem in europe. i want to address one thing adam said. of course there should have been more fiscal stimulus. i think there are a couple of problems. the forecasts were very optimistic, and some of the people who wagged their finger and said there should have been more fiscal stimulus, want to read the imf forecast all along the way. even this latest one, they have a few percent since last october. when you tell things -- when you tell people things will get

better but you should dismiss keynes had a closed economy, but we live in an open economy world. if germany does a stimulus, a lot of it goes to china and the united states. havepaul krugman says we to hearken back to hicks in 1939. that was a different show. ken: i do not agree with that analogy. tom: i am just trying to make headlines. ken: i am not sure italy could do something, or who would lend italy the money. tom: adam posen? adam: it cuts both ways. when we had coordinated austerity in 2010, not only in europe but the reversal of fiscal policy in the u.s. and japan, it cut both ways. and it was also, as with

inflation targeting, there was nonsense about expansionary consolidation, like in the u.k. that somehow you were going to get a boost to the economy and the budget by tightening. that did not work. the open economy thing is extended rated -- the open economy thing is exaggerated. rogoff,ing up next, ken francine, and i will listen and question david lipton. it is easy to talk, and then you are in the seat where you have to do. "bloomberg surveillance." ♪

francine: i am francine lacqua in london. tom keene is in new york or the

imf's meeting in d.c.. joining us from the imf, david lipton, the first deputy managing director. great to have you on the program. we heard from your managing director, saying that a three-pronged approach with monetary, fiscal, and structural actions is needed. given what we have heard from central banks since the has theg of the year, policy been all wrong? david: the problem has been that monetary policy has been bearing too much of the weight. enough to getot the economy going again. the problem is not just cyclicals, it is structural. the need for support of policy -- the need for supportive policy. threee asked for a -pronged approach with structural, fiscal, and monetary policy to strengthen the pace of global recovery and to ward off the downside risk. francine: has all of this

central-bank action -- does it risk sowing the seed for the next global shock, or global crisis? david: i do not think so. it is hard to be worried about the economy growing too strongly. moreover, if it were to happen, policy would adjust. the greater risk is that the slow growth continues, disinflation continues, and we have a hard time getting vibrant economic growth in the world. tom: professor lipton, with your workout of wesley and -- out of wesley and and harvard, there is a green book on stability and instability that you publish every spring meeting. what is the level of financial instability now? we look at brazil right now as well. what is your measurement of global instability at this

moment? david: well, this is not a so we aree 2008, and not ringing alarm bells. but we think there should be some alert to growing financial pressures and the vulnerabilities especially in the corporate sector and companies, in countries that have seen oil prices and commodity prices decline, where credit booms have become advanced. certainly with the monetary policies that we see, it makes sense to be watching how risks are moving around the financial system in particular from banks to nonbanks. so there is plenty to be looking out for, but we are not ringing alarm bells. tom: director lipton, we have a treat for you. we cannot do david linton if we do not -- david lipton if we do not drag ken rogoff into the conversation. ken: i think the imf has done a good job showing that you need a

, fiscal monetary structure around this debate. on the structural side, do you feel very frustrated? the fiscal, they kind of here you. on the structural, i am not sure they do. david: we have devoted a lot of new work to that subject. we know that many in europe properly complain that when monetary policy holds up the economy, it simply creates room for policymakers to not take on the important structural reforms that they need to. but it is no answer to ask monetary policymakers not to act because others are not acting. we want to see a cooperative approach, not a noncooperative approach. one where everybody does their part. that will create a more balanced expansion and one that relies less on exchange rate change and

diverting demand. on structural reform, we are trying to point out that it really matters which reforms you do, whether they have short-run effects that are helpful or unhelpful, to try to make sure that fiscal and monetary policies, that fit together with structural policies, that that packages put together properly. i think it is important for there to be domestic coordination of policy, even more so than international coordination of policy. ken: you make very good points in the world economic outlook about policies have a short run effects but will take time in the long run. tom: francine? francine: david, you were talking about every country doing their bit. is china doing their bit,

transitioning to a consumption economy? i know it will take time, but this is probably the most critical thing for the world economy in the next five years. david: i agree. china's transition, there rebalancing, the move away from heavy industrial export sectors to household, growing household income, growing household consumption and the good that consumers want, that is the key transition that the world is going to observe in the coming years. it is likely to be a rocky one. i think they are going in that direction, but i think it is also possible that they are not going fast enough, and it is dangerous if they continue to provide credit to the old sectors and allowed that to build. we are encouraging them to move on with rebalancing. have avid lipton, we quote from your early march speech. bring it up.

tom: what is your action-concerted action to get us out of the new mediocre? david: the three-pronged approach for each and every country, but it is also the global community working together to make sure that if emerging markets have to adjust -- and i think they have to -- that advanced economies or emerging economies pick up the slack and provide support to the global economy. it is a time for everyone to do their part. tom: david lipton, thank you so much. the deputy managing director of the imf. we will continue the discussion, final discussion -- final thoughts from ken rogoff coming up. stay with us. ♪

tom: churning and range brown, the forex report. -- and range bound, the forex report. yenng in that strong

against the euro. francine: coming up shortly, it is "bloomberg ." david, what do you have on the show today? david: we have citi earnings coming out on the program. scott minor of guggenheim, and christian omani of oppenheimer. rousseff's possible impeachment in brazil. that is coming up on "bloomberg ." tom: let's talk with ken rogoff about our single best chart. this time is different. this is not in ken rogoff's book. maybe it should be. , to bring upmple the chart here of two decades of work. g7.sed to have real gdp, larry summers talks about secular stagnation. is that what we're looking at in this chart? ken: i think the primary things

going on our demographics and the aftermath of the financial crisis. if you use the word secular, i our growth isces fast is as good as -- tom: you have the same optimism as professor gordon? ken: i am much more worried that productivity will be faster than they can handle. francine: as long as we are not in a recession, even if we have slow growth, it is not too bad as long as people have jobs. is that fair, or is it too simplistic? ken: it is important, but it is not enough. we have gotten to the point where rich countries create inequalities and counterproductive policies. tom: ken rogoff, thank you so much. very generous this hour, before the imf meetings. professor rogoff from harvard.

francine, thank you so much. what a wonderful week and a wonderful show. our special thanks to adam posen for appearing from the peterson institute. "bloomberg ," coming up on bloomberg television. we will continue with "bloomberg surveillance" on radio. monday, a conversation after doha, on international relations with ambassador haass. we need to thank you to -- we need to say thank you to all of the "surveillance" team. have a great week. ♪

david: cheap credit helps to china's economy stabilized in the first quarter. not participating in this

wii's opec meeting people -- in this week's opec meeting. and void blankfein pushes the in years.st-cutting -- and lloyd blankfein pushes the deepest cost-cutting in years. david: welcome to "bloomberg ," i'm david westin, here with jonathan ferro and vonnie quinn. jon: what a morning already. a weekend packed full of action. doha meetinge as well. let's bring you an update on the markets. we are 30 minutes away from the open in new york. futures negative, dow futures up 29 points. in europe