francine: britain votes. public spaces are open across the u.k. u.s. futures and european equities are higher. extra acid checks. stimulus stealth. china plug the gap. gap.ina plug the this is bloomberg surveillance. i'm francine lacqua with tom keene who has been here for the week. an interesting day. .om: a historic day

will state repeatedly across the five hours of surveillance this morning, what we can and cannot say. let's go through it. of -- in fact -- welcome to the u.k. next line here is an much andra. >> citizens are voting in a u.k. referendum. prime minister david cameron is among those casting ballots. u.k. prevents of reporting while the polls are open. on capitol hill, republicans adjourned the house after 16 hours after the start of a protest by democrats. the democrats staged a sit in on the house floor demanding that republican leaders schedule a vote on gun control measures could one of the democrats, john lewis, is a veteran of protests

going back to the civil rights movement. >> i crossed a bridge, not just one time, but it took us three times to make it all the way from selma to montgomery. we have other bridges to cross ,nd when we come back in july we will start all over again. >> now you're looking at live pictures of the house. paul ryan called the sit-in nothing more than a publicity stunt. the obama administration has been sitting on requests for fighter jets requested by allies in the persian gulf. sales to be valued as is much as $20 million. the administration must sales to the middle east countries will not threaten israel aerospace. own watch the launch

-- the country has been testing the missiles and launches that began in april. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. you can find more stories on the bloomberg at top . tom? tom: francine, the sit in capitol hill, i saw someone say yesterday it was like the united states is becoming more like the british and british parliament. i cannot convey how unusual this is. it is radically different than what i have observed in your house of congress. -- house of commons. francine: sometimes it house of commons they throw things at each other. it is not as bad as italy where they punch each other. tom: they punch each other? francine: it is something i am not proud of. does this -- is this a new time

for debate? tom: it shows the animosity and the real idea that within the presidential election, when we get past the first tuesday of november, it is really not going to go all the way. this is on capitol hill, this the house chamber with some senators from the other chamber joining. francine: animosity doesn't mean they will come together with some kind of agreement. tom: i don't give your hopes up. history made without question in washington last evening. let's go to a data check. 14.odities, futures are up dollar weakness, oil churns nearly $50 a barrel. 19.09 -- euro swissie, one awake .43 removed from politics.

euro swissie is worth watching. francine, what do you have? francine: u.s. futures, but overall, i have on their. i picked up the world indices, gained 0.5%. the pound is also strengthening. i chose to look at emerging markets. is that a little bit different? listed peso and russia as ruble regains. crude oil above $49. tom: keep that up. dollar mexico is a huge emerging market. that was 19. strengthreal mexican over the last number of days. --a: had a ugly week has had mexico had an ugly week. lincoln global markets into global economics. this is a negative rate scenario.

the horizontal line -- five days ago. right now, near zero. what is critical is the persistence we have seen with the negative yields. it is something we are getting used to and the effects will be seen across surveillance. what are we going to observe? francine: i have yields. pmi.ted to show you this goes back to gdp. if you look at nominal gdp, you see the eurozone. the eurozone is right in the middle. you have germany which is getting a little bit better. but this, this is france. france is going down. this goes back to the struggles that the european central bank has. or three -- it is two or three speeds.

conversationt about negative rates and whether they impact anything. whether governor kuroda lost control of yen. geoffrey yu joins us now to discuss all of this. if you look at the greatest financial experiments, is it negative rates in japan? geoffrey: it is too early to say but if you look at negative , not only in the context of abenomics, then when you have had that horizon, you can start to make a donation on whether it has been successful or not. six months on, people are going to question it. francine: we had mark gilbert on, it is clear he believes there is a market psychology. greattlook is not looking

and to cut into negative territory. is that why ceos are holding back from spending? geoffrey: that is really important. the context of the dock plots that came out. now we know it is him who drag every thing down. -- who dragged everything down. it is good to have a debate. central bankers are talking up expectations. the outlook is going to be fine because if you don't have confidence in your own policy, then why should the markets have it? tom: where is the orthodox right now? the orthodox of kuroda? the orthodox of rocky? -- orthodox of draghi? geoffrey: i don't think anyone knows right now it just right now. -- right now. tom: they are challenging something to do they know what

they are challenging? geoffrey: i think he is challenging the notion that growth is what we thought it would be. productivity is still strong. that.mponents leading to they should be challenged. we are in a new political environment. francine: this something we see in research, once in a while it if your data dependent, you cannot forecast. you cannot have any proper guidance. thatrey: it is interesting carney's successor at the bank of canada tour up everything. he says introduce more volatility. you are back loading volatility. tom: you're such a student of all of this. hour.s my mmr for next with the honor of geoffrey yu here, we're going to try to early.

about every six months he writes forward on one fish theory. -- i amjust an aging just an aging economists with blood -- with much lest -- the effective prohibition on simple models that sometimes yield most of all of the insight. in the case of contagious secular stagnation, equity ratio well above 90%. this is krugman's clarion call. do we need simple models now or should we drown in geoffrey yu complexity. geoffrey: if you have a serge ibaka coming in -- if you have a central bank are coming in and -- if you have the detailed to a the dog, that means you have a specific models for that purpose, i think it is

worth it to consider it. tom: we are honored to have jeff have geoffrey to yu with us. geoffrey: central banks will continue to challenge themselves. that has not happened enough. i applaud carney. tom: france income of the bloomberg is great at this. .t is totally different francine: we will talk about helicopters. when that helicopter lands, some people say it might not land. speak -- forming ecb chief economist. ♪

francine: this is bloomberg surveillance. i'm francine lacqua. let's get straight to the bloomberg business flash. >> u.s. prosecutors are investigating credit suisse in a potential tax evasion case. according to a person familiar with the matter, it is a question as to whether employees may have helped clients in israel. has put five employees on leave while it investigates. jack park keeps repeating his message. so far that has not ended criticism that the e-commerce giant is a haven for base products. -- and's ceo intellectual property must be protected. shares of mobile, begin trading today. the stamp cisco-based company .aised $150 million for its ipo

-- the san francisco-based company raised $150 million for its ipo. that is your bloomberg business flash. tom: let's bring up a quote from our guest from a few years ago. this is otmar issing. numerous academic studies, quality of work of the laureate support the notion that it is competition among states and regions that lays the groundwork for technological progress and economic growth. arguably in earlier centuries, it was competition within europe that generated unparalleled dynamism. otmar issing is one of the founders of the euro and european central bank. he joins us on this historic morning from germany. great to have you. what does europe need to do to

reinvigorate good competition? otmar: this is a key issue because europe likes a number of fields. here, competition between currencies, countries, should also been ticked -- also be taken to the institutional level. europe is searching for -- isriate arrangement visible in many countries. in germany, france. rethinking what should be organized at the european level and what should be brought back to the national level. tom: dr. kissinger talked about a new world order. what is otmar issing's world order for europe?

this institutional setting in europe should be appropriate in the globalist world. there is so much talk about giving europe more weight and global matters, but all of this on your being able to reduce unemployment and growth. too much is centralized regulation is taken by a centralized approach. this goes key to what people want to wish, they are not more patient anymore to be as people see it rightly or wrongly. francine: do you think they are diminishing returns of all of the central-bank action in the world? overall, it doesn't seem we have

reached that escape, despite the balance sheet of central banks. how do you fix that? first, what is mostly is still thee euro second most important international currency in the world. the introduction of the euro has changed the more persistent on a global level. skepticism, the banksof euros in central has declined somewhat, but is still substantial. now in the context of the -- aion to what extent major player in this global system, the euro will play a major role and the ecb so far has defended press ability for the euro.

the euro suffers more from political uncertainty than from concern about its stability. francine: do you think we'll see helicopter money in japan or elsewhere for the next 18 months? otmar: i will separate my comment on helicopter money. withld organize a seminar two parties, one in favor of students defending helicopter money and the other critical of that. i would separate this intellectually demanding exercise. to what extent monetary policy are in a position to consider helicopter money. i'm strongly against both ideas because the end would mean the surrender of multi-policy. issing, issing -- dr.

thank you so much. so much going on around the world. in politics, there is the united kingdom that there is also america. president obama set down with bloomberg business week to cover this week. his conversation with john 48.le weight -- john mikel this is bloomberg surveillance. ♪

francine: we have a great exclusive interview. that is the front cover of our bloomberg businessweek magazine. we picked up something of that interview. tom: this a quote from the magazine. i guarantee you that is not -- that is our peace from john micklethwait. joining us now, megan murphy of the bloomberg news. what was he like? you ask questions like he give an answer everyday it -- everyday. megan: it was an in depth interview, very focused interview. president being very pensive about his thoughts on

the economy. tackling issues on incoming -- it is a different interview. he is in a very reflective mood. of thelso very cognizant links that need to be taken to deal with things like the automation of the economy. it was a really chance to catch up with him about his thoughts about some of these significant disruptions we see in the american economy and the global economy. tom: i like you how you bought -- you brought his daughters into it. he did have comments about mr. diamond and other too big to fail bankers could what did the president say about new york banking? megan: it was fascinating to hear him talk about the impact of dodd-frank. he talked about sec go about jamie dimon -- he talked about jamie dimon. the president made the case that

as a side effect to some of this regulation, banking is less profitable. safeoint was the system is and what we wanted to do is clamp down on risk. bankers, do not gamble anymore did invest in the future of the economy. tom: megan murphy, congratulations on your interview with the president you can read that full interview with president obama. tune in to bloomberg businessweek. it will be out tomorrow on newsstands. bloomberg surveillance, good morning. ♪ you guy's be good. i'll see you later

[ bark ] [ bark ] bye. see ya pal. ever wonder what your pets do when you leave home? [ laughing ] aw you cutie pie. aw. aw. aw. aw. [ barking ] [ washing machine running ] party's on! know what your pets are up to with xfinity home. xfinity. the future of awesome. see the secret life of pets, in theaters july 8th. tom: good morning, everyone. bloomberg "surveillance" in london. a date of voting across the united kingdom strict rules of

what we can and cannot say. coming to you from the united kingdom. right now with her first word news. a: u.k. citizens are voting on the country's membership in the european union. u.k. law prevents us from reporting on voting or discussion and analysis of referendum issues while the polls are open. house republicans refused to give into an unprecedented protest by democrats. early,journed the house i must 16 hours after democrats began a sit in, demanding that republican leaders schedule votes on gun issues. the fbi has rated the office of a new york hens find dutch hedge fund. -- hedge fund.

platinum is considering shutting down its main hedge fund. in paris, union workers will march to protest labor reforms thing pushed by the president. police tried to ban the march concerned the protest would turn violent like a demonstration last week. they will march along a shorter route than originally planned. the frankfurt airport is set for a makeover, investing $130 million in upgrades. is to make passengers more comfortable and more willing to spend money in the airport shops. global news 24 hours a day powered by 2600 journalists and analysts. to look at the global economy. ther issing is truly one of

founders and geoffrey yu was a student of all this. let's put into the dust into perspective what otmar just said. everybody has got to get on the same page. which institutions will be able to direct? aiibrey: that is what the is doing and it is giving the u.s. had a. -- headaches. picking up on something else dr. said, a new world order and i question that. that is all dollars strength. or most of it. geoffrey: it is dollars strength

and i think the chinese realize it. than oney different even your own citizens are trying to get money out. francine: we have been trying to figure out if it is, if people are all trying to put their money out and they have controls in place does that mean they have no confidence in the chinese economy and does not mean that there is the canary in the coal mine and we should be worried? highrey: running such a account surplus which is one of the reasons the pboc is saying the money would not appreciate. tom: you brilliantly come up with the idea of the fear and one of those is the dollar loses its exorbitant privilege company using the french phrase. joseph and i and there he can buy suggest the dollar will not

lose strength. what should we fear from a greater transparency and liquidity of renminbi? geoffrey: number one, what are the institutions backing the renminbi? what engenders faith in the dollar, faith and sterling, the swiss franc? beijing establish that institutional reform. let's continue this discussion, geoffrey yu with us as we take a broader view and that means we must speak with michael burda. wyplosz has been way out of then analysis european crisis. it is professor of the graduate institute of development studies in geneva. it is wonderful to speak with

you. i took a quote you did a while back in your scathing criticism of the ecb. under the presidency of , the ecbde touche concentrated on headline rather than core inflation leading it to raise interest rate in 2008, in 2011 when deflation was a fundamental underlying danger. way, the ecb has now moved some distance in the direction of becoming a normal central-bank. , can you everz have a normal central-bank? charles: eventually but it is not yet the case. at thenge of leadership helm of the ecb has brought, has been a big step forward. has started to normalize the ecb but there is a

long way to go. francine: what does a normal central-bank look like? i cannot even remember. central-bank,mal about each cares inflation target and cares about financial stability, and does not worry about what is happening in the corner of its kingdom, if you want. the ecb has been paralyzed by continuous pressure from germany. otmar issing was the first chief economist and he undertook to make the ecb a close clone of ndesbank.ess bonk -- gu francine: forget the textbooks.

we have mark gilbert advocating higher interest rates across the world because it would shock and give the ceos investments or the power to invest. what about abandoning the inflation target? ,f you cannot get inflation up focus on something else as a central-bank. aarles: the ecb never had formal inflation target in the sense we usually talk about it. it has indicated that its aim is to have the inflation rate below but close to 2%. even if they stop talking about that they cannot just continue with the inflation rate which is on average about zero, which means in some countries it is negative and some it is positive. it has to deliver on some very publicly understood commitments, otherwise it is a loose cannon

and central banks cannot be a loose cannon. they have no choice. they have to do something. tom: tell me what the swiss have to do. talk about adjacencies and economics. the swiss has been hammered by the european responsibility. you are in geneva and living it every day. smbessor, what does the need to do to get europe off their back? charles: nothing they can do. they are totally crucified. a smalltalking about country that is doing a big chunk of its trade and financial transactions with europe, and chiefly the euro area. what happened in the neighborhood, it is not a neighborhood, it is all around switzerland, is totally dominant for switzerland.

bank tried toonal manage the relationship between the frank and the euro, and there is not much they can do. they are a victim of all of the policy mistakes of the ecb. francine: our guest host geoffrey yu has a question for you. geoffrey: just going back to the smb, they start to consider moving the thresholds and things like that because some people consider what they are doing as an experiment at the forefront of the monetary experiment as well. transmitting negative rates toward the retail side. it is extremely difficult in switzerland but there is talk about growing within the circle. their main problem when their only problem -- or their

only problem is to keep the franc from appreciating with the euro so every time they lower their interest rate they have to keep it even lower because the franc is a safe haven. there is no end in sight to their problems because they are condemned to prevent an appreciation of the franc which is already pretty strong and that is detrimental to their trade. they have at the same time to keep financial situation as quiet as possible because switzerland is a financial center so they are hopeless. tom: thank you for the briefing. i cannot say enough about the recent essay. wyplosz, the institute of international and development studies in switzerland.

what a good time to catch up with james grant, jim grant. rumor has it he will wear a bow tie. from london, bloomberg "surveillance." ♪

francine: welcome back. i am francine the quad in london with tom keene. we are -- i am francine lacqua in london with tom keene. we are talking about banks. later today, all of our viewers know we have done two or three stress tests and the first few were not credible. michael mckee is with us and geoffrey yu is still with us. michael, when you look at stress test in the u.s., they are

credible but how can you stress things that you know may not happen? they are looking at them in isolation. michael: the fed makes up different scenarios every year and they use a three scenario process where they look at stress on banks'capital. a sort of normal consensus growth, a moderate recession and a severe recession and then they change the parameters of a severe recession every year. it would feature 10% unemployment and negative interest rates in the treasury market. the results affect the amount of a have to hold but also with their return on equity is and how much they can lend. last year there was talk that michael corvallis would lose his job if city failed again because they failed twice, bank of america failed three times. mark --they say why is

do they say why? michael: they say it is deep in the details. tom: when jpmorgan was operating at precrisis and now it is 10 billion more, what is stressful about the money mr. diamond is minting? michael: it has to be in capital form so that you can absorb losses, not just money that you have coming in and out the door. it matters to shareholders particularly because it affects how much the banks are allowed to pay out, and you can see that in the amount that the banks have paid out. citigroup and bank of america paying almost nothing, five cents a share on in a while dividends. goldman sachs -- on annual dividends. goldman sachs paying $.63. tom: they say get beyond the

hurdle of 18 months or two years from now and these guys begin to mint money. i do not know if that is true but that is a very. andcine: i remember the one only interview mario draghi gave me was the day before the stress test. tom: mr. draghi, if you are watching, come on. francine: there was a crucial one where i asked him, you need to fail test if you want to regain credibility and he acknowledged that. tom: is that credibility there? michael: there is certainly credibility u.s. and it is considered one of the reasons the financial crisis turned around. tom: you and i remember that day. that wall of red headlines came out in the world stopped. will that happen again? michael: not less one of the banks fails miserably and they are allowed to resubmit their

capital plans if they do fail and come back and another six months. tom: so it is like an open book test. isncine: when i worry because it is in isolation you do not really understand the impact of systemic risk. have we gotten rid of those? michael: we assume in the test that you would have counterparty risk. we do not know how the tests are the fed is looking at a systemic situation when they are looking at counterparties but they are probably not naming them. tom: back up to negative rates. chair yellen says we will never see negative rate in the united states. i would agree that would be a huge shock. what would be the shock of our too big to fail banks of negative rates? michael: he do not know the scenario under which it happens but it limits their ability to make profit on their lending and eats away at their capital

because many of their is -- many of these banks are holding capital. tom: all the ceos go down and do a sitting. -- a sit in. francine: very normal in the u.k.. michael: that would be very french. francine: one of the things the european central bank may be thinking is that if you have a worst-case scenario, you can have leaks. how do we know they are stress testing to the limit without again acknowledging the there is something very ugly out there bank? geoffrey: it is a troubling situation and we go back to how central banks must manage expectations. we already had a pick earlier this year with the 81 situation earlier this year with the 81 situation so something has to be comprehensive and consistent.

going back to systemic risk, are we looking at it? me in the global financial system is resilient. ubs,geoffrey yu with michael mckee, thank you so much. bloomberg radio worldwide we will bring you mohamed el-erian, lots to talk about on our various and sundry unknown unknowns. from london, this is bloomberg "surveillance." ♪

tom: good morning, everyone, bloomberg "surveillance" from london, england. to our bloomberg business flash. twitter is closing in on deals to stream more live events from sports to political debate. twitter will show 10 nfl games for free. they say the deal for other live events will be announced in weeks. drivers in the u.s. are burning gasoline at a record pace. the summer they are taking advantage of the lowest rices at

the pomp in a decade. 4% and the is up retail price for gasoline has fallen 17%. the world's largest pension fund ,as sued toshiba over a scandal asking for almost $9 million in damages. the company is down more than 40% this last year because of possible problems with its accounting. that is your bloomberg business flash. francine: here is what we are watching for the rest of the week. of course later today we get the latest jobless claims data in the u.s.. the federal reserve dallas president speaks in new york city and on friday, the pboc governor delivers and adjusts at the monetary funds. citizens of the commonwealth are voting on the referendum and we will start getting results tomorrow, and we will have

special coverage on that. we are forgotten to talk about it so we must focus on the rest of the world. let's get back to geoffrey yu. we mentioned some of the currencies tied to oil, the mexican peso, the russian ruble. his oil stuck around 50? geoffrey: the upside could be somewhat limited and with these currencies, i think the less riskng in oil is the less -- risk appetite. the currencies took a big battering in june. dynamics andthe the microeconomics of oil. i do not hear anybody saying all clear. let's bring up brent crude, european oil, west texas intermediate with the same idea. this is not rocket science. can you bsa all clear for oil right now?

say all clear for oil right now? geoffrey: no, we cannot. the key thing here is the powerful to -- partial differential of unit dynamics versus price dynamics. emma chandra is talking about that our u.s. oil demand. geoffrey: demand is important and is demand does not a cup, -- pick up, who has been the marginal buyer? emerging markets. china being the largest marginal buyer of oil over the last several years or so, then oil it's secular level, where is that? francine: we have the u.s. oil and gasoline demand at a record. geoffrey: we are very confident

about the health of the u.s. consumer. perhaps where the savings race is in the u.s. they could spend more. that is the missing element to two. u.s. gdp closer clients believe in that that they are not putting their money where their views are. tom: geoffrey yu, thank you for joining us. boston,ts university in and the acclaimed fletcher school, james stavridis will join us. we will look at the global view of america defense and james stavridis on american security. ♪ okay, ready?

whoa! [ explosion ] nothing should get in the way of the things you love.

♪ get america's fastest internet. only from xfinity. by switching to xfinity x1. rio olympic games show me gymnastics. x1 lets you search by sport, watch nbc's highlights and catch every live event on your tv with nbc sports live extra. i'm getting ready. are you? x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. tom: britain decides. 46 millionkingdom's

registered voters go to the polls today to cast their ballots on european union membership. we consider the next american the relationship with the european union. are you sitting down? bedlam. history is made on the house floor. this is "bloomberg surveillance." live images from the house. it is almost like the house of commons. francine: almost. in the house of commons, they throw stuff at each other and they hit each other. i'm not kidding. tom: there is a ballet of in the united states. sit in.is leading this

francine: it shows more animosity, as you put it. the sequence of the multiple deaths from the shootings -- it is about orlando, it is about sandy, connecticut -- it is most difficult and it exploded last night. francine: it transfers to the u.s. election. tom: first word news. >> u.k. citizens are voting in a referendum on the country's membership in the european union. prime minister david cameron was among those casting ballots. we will be following all the action as the result come in -- results come in. republicans adjourned the house

almost 16 hours after the start of an unprecedented protest by the democrats, who staged a sit in on the house floor. one of the democrats, congressman joe lewis -- john lewis, is a veteran of protests. >> i crossed the bridge, not just one time, but it took us three times to make it all the way from selma to montgomery. we have other bridges to cross and when we come back in july, we will start all over again. ryanuse speaker paul called the sit in nothing more than a publicity stunt. diplomacy isis needed in fighting terror in russia.

police tried to ban and march in a march in paris. protesters will march along a shorter route. donald trump will interrupt his campaign to fly to scotland tomorrow. he is taking a planeload of journalists with him to mark the opening of his golf resort in scotland. he employs 150 people at the resort, a fraction of his initial pledge. global news 24 hours per day. this is bloomberg. tom: thank you so much. let's get right to the data check. equities are the lift this morning. dow futures doing well, as well.

onto the next screen right now. vix trades before the market opening. sterling, 1.4882. francine: stocks rising in europe. we are seeing a lift for equities. i want to go back to the emerging markets. leading gains among currencies of oil exporting nations, the ruble. tom: negative interest rates. let's get a quick look at that. what a thrill to talk about negative rates earlier. one of the founders of the european experiment. francine: this is my chart. it basically goes through the number of rigs in the u.s.

tom: woah, chart camp! very good. francine: this is the number of u.s. rig counts. show producers can come back online -- shale producers can come back online quickly. do you like that? tom: i'm speechless. i can't take it. looking at commodities -- it has been way too long since we talked to you about metals. let's start with the basic metals business. iron ore, copper, and the rest. do they suggest the global recovery? >> there are two sides to it. tom: you like her chart better than mine? nice. francine: 1-0.

[laughter] michael: we had a fair amount of high-growth coming through. you are looking across the complex and you are seeing how that growth is slowing down. if we have a thought for copper. copper is the weakest of the 22 raw materials we track. what is going on with copper? michael: there is a divergence. what you have on copper is a relatively bigger supply growth then you do have for some of the other commodities that are slowing down. it just took a little bit longer to get rid of the oversupply.

they are bringing big projects online. gold, which is the thrust of your note. one of the modern ideas is that gold is currency. this is one of my most popular charts. out-chart, to francine. nexen with the blue the blue nixon with circle. this is adjusted for inflation. is gold a currency right now or a currency proxy? gold can trade like a currency and it can be a currency proxy area it can be a lot of other things.

it was a great moderation. nowink what you have right is people asking where are you going to go with a gold economy? about thisked culturally with india and china and their demand. do they look at gold as a currency equivalent? michael: they do, particularly the indians. they like to hold gold in that sense and keep it for a rainy day. francine: not necessarily jewelry. but there is also a high jewelry demand. michael: it is a bit of a gray area in the traditional markets. jewelry forhold investment purposes and a rainy day. india and china are very special.

outside india and china, when you are looking at the develop nations, most of the gold -- the gold demand is held as bars. tom: i'm the dumbest guy in london on football/soccer. what i know is iceland is a big deal right now. they were handed a defeat with aluminum. aluminum gets nations in trouble, doesn't it. it does. it is relative to steel, in that regard. you only need a production facility. that is why you have gotten over capacities. tom: is china going to be an adult in the room this time? on aluminum? and on steel?

michael: i think they are. are lots of concerns about debt levels in china. continue. michael: you saw big production utbacks. we have seen some restarts in prices. insist we have ethan harris, francisco blotch, and michael onset with us. francine: at 6:00 a.m. get him to say yes now. tom: we've got to have that. michael: that would be interesting. tom: it would be fun. metals widmer, head of research at bank of america merrill lynch. , theg up, james stavridis admiral come on cyber security.

from london, a most interesting united kingdom this morning. this is "bloomberg surveillance." ♪

francine: good morning. it is "bloomberg surveillance." i'm francine lacqua with tom keene in london all week. let's get straight to the bloomberg dismissed/. flash.mberg business : jack ma has reiterated that alibaba has no tolerance for counterfeit products. there is an unusual split among

volkswagens and unusually close knit owners. the second largest shareholder is refusing to sign off on actions last year of two of the company's board members. bill gross has become the latest investor to bet big on argentina. thentina's bonds are one of top 10 holdings. argentine debt is posting it second-biggest returns in emerging markets. the new president has settled with disgruntled creditors and has settled --pulled argentine out of default. tom: thank you so much. the ground rules are simple. francine and i are very limited about what we can say about this

historic election in the united kingdom. nothing can be set until 10:00 p.m. london time. francine: that's right. kohl's will close at 10:00 p.m. u.k. time. we will have special coverage. he knows the ground rules. stavridisl read us -- set the ground rules. school of at tufts business. admiral, wonderful to catch up with you again. i believe there is a mini result at the state department over what we are doing about syria and what we are doing about the islamic state. give us your thoughts on how our state department should protect -- project their policy as regards syria.

adm. stavridis: tom, this is an interesting phenomenon. ambassadors come ,ogether, they write a letter objecting to current u.s. policy -- it is hard to imagine admirals and generals doing the same thing at the pentagon. anyway, what the letter says is that we should be taking a tougher stance against assad. i think it is a very dispensable -- defensible position. he is a war criminal, he drops barrel bombs, he uses gas against his own people. it is a cry of the heart against that behavior. admiral, it also goes a little bit further. it is criticizing the obama administration. is it personal? is this very unusual to have 51 diplomats sign this kind of letter? adm. stavridis: it is very

unusual. it is not unknown. i can't recall a letter with over 50 ambassadors, very senior officials. yes, you are exactly right. it is a very direct shot across the bow of the administration. the administration is pushing the events against islamic state. the ambassadors are saying, you've got to take into the -- into account the horrible behavior of a sod. -- assad. tom: what is your report card on the greater middle east? we see greater uncertainty in egypt. we see the generational challenges of the saudi royalty. give us your report card on mideast policy. adm. stavridis: let's remember that the uber-game is the conflict between shia iran and the sunni states led by saudi arabia. that is a global conflict in a

defined region, if you will, much like the wars of the reformation in the 15th and 16th century. it is going to go on for a long time. it is going to manifest in yemen, lebanon, syria. buckle up. you were not going to see a peaceful middle east for a decade. tom: i saw this firsthand over on st. james street here in london. i spoke with a gentleman who literally came off an airplane from iran 25 years ago. he said he literally had a suitcase full of rice because his friends wanted rice. it is the dynamics of iran. francine: i look at the foreign policy of the u.s., president obama has been criticized a lot over the in action in the middle east. it seems to me that there was a lot of conflicting analysis about what islamic state could become.

what do we know about islamic state right now? do we know that they cannot be dislodged easily? adm. stavridis: it is going to be challenging to take them out on the ground, but it is a doable function. what we need to do is to take back the property they own in iraq, which is the source of a lot of income. mosul and falluja. we need to amp up the bombing campaign. we are ultimately going to need boots on the ground. of u.s. troops, but probably 10,000. tom: stiffen the force. a lot of people just spilled their coffee, admiral. we will come back with you in our new york studios. later this morning on bloomberg radio, michael mckee and i will speak with mohamed el-erian about the game series of the globally -- theories of the economy.

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good morning from london. this is "bloomberg surveillance." i'm francine lacqua. tom keene for the week from london. we spoke to the u.s. secretary of state john kerry. he spoke to emily chang. he talked about the divided opinion over edward snowden. secretary kerry: i'm

uncomfortable saying it was a public service because he exposed secrets about intelligence gathering and intelligence work that puts americans and people in the world at risk. so, you can look and say i'm glad we know about these things more, but it should not have happened that way and he did it with a recklessness that has put lives at risk and i'm not comfortable with that and never will be. tom: the secretary of state with emily chang and brad stone. with us.vridis admiral, you have been way out front in this discussion. way out front of me. how is our budgeting of cyber security? are you guys broke in terms of getting smarter on this to defend america? adm. stavridis: i always say that cyber is the biggest challenge we face. if you think about what i worried about as the supreme allied commander in nato, it was

iraq, syria, libya, the balkans, piracy, etc. was kept me awake at night cyber. our level of preparation is completely mismatched to the level of threat. we have to put much more emphasis on cyber defense, everything from protecting our secrets to guarding our infrastructure to ensuring our financial networks, the heart of your show, are well protected against daily, massive attacks. francine: who hacks the most or who hacks the best? how much knowledge and intelligence do we know about these groups? adm. stavridis: we have a pretty good idea about a wide variety of capability. i would put russian cyber activity at the top of the list. i worry a lot about north korea in smaller segments. they were probably behind the swift bank robbery that took money from the bank in bangladesh and moved it to the

philippines. china is very good, but they don't do that kind of criminal hacking so much. iran has demonstrated capability. every nation is developing offensive cyber tools, including our own. tom: thanks so much. ,ean of the fletcher school tufts university. coming up, president obama in an interview with "bloomberg businessweek." the president on the cover of "bloomberg businessweek." we will talk to megan murphy about the president's legacy. ♪

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this is "bloomberg surveillance." i'm francine lacqua. tom keene in london. there is a referendum, an

important referendum. he polls started at 11:00 a.m. we cannot talk about it until the polls close. tom: in america, there is a joke am a vote early, vote often. i guess we can't say that here. francine: can i give you a little bit of a timeline? tom: please. francine: the first results come in at midnight. at about 2:00 a.m. london time, we have results. 4:00 a.m. london time is the busiest. we should have a clear idea of the vote at 7:00 a.m. tomorrow. you are not capturing the majesty of this united kingdom. is it correct that the first results come in from gibraltar? francine: yes. we will make you a britt. let's get over to the bloomberg first word news. emma: the u.s. is defending its use of economic sanctions

against venezuela. president obama says it is a way of responding to repression. the u.s. is trying to break an impasse between president nicolas maduro and opposition leaders. frankfurt is set for a makeover. it is investing $130 million in upgrades that include yoga rooms and a forest-like recreation area. the fbi has rated the office of a new york hedge fund. agents are looking into operations after a manager at the firm was charged with bribing a union boss. platinum is considering shutting down its main hedge fund. casino billionaire sheldon adelson wants las vegas to gamble on the nfl. he has called on the city to come up with the biggest subsidy in pro football history to get

the oakland raiders to move. he said the new hotels could raise $750 million for a stadium. the plan will be reviewed today. global news 24 hours per day powered by 2600 journalists and analysts. tom: thank you so much. it is a different interview. that is my headline for the wonderful interview of megan murphy of "bloomberg businessweek" with the president of the united states. he talks about his daughters. he talks with respect about business. he talks about his final months in august. megan murphy joins us. you walked in the oval office. how were you greeted? megan: we were greeted with coffee, with tea.

the president himself made us coffee, which is always a strange experience. i accidentally left my debit card in there on the way out. [laughter] very quickly on your interview with the president, he is in the final days. what was the key theme that he wanted to get across to global finance and economics? megan: the message the president wants to get across is how far we have to go to restructure the economy when we are looking at automation and technology. getting the workforce to embrace and thrive a totally different economy going forward. talking about education to improve wages, different kinds of jobs, higher wages to get people to go into sectors. he is thinking big thoughts about the truly disruptive forces affecting the global economy. francine: in the interview, you asked what company you would like to run or what industry you would like to be in.

megan: he shied away from that one. [laughter] megan: he noted that he does not think his daughters will end up on wall street. he was very flattering of jamie dimon, saying that he thought that america's deep, broad financial system and flows of capital are crucial to what has made a successful as a nation. it was a very nuanced interview and a very wonky interview. he is a very wonky guy. francine: has he been beneficial to business at the end of the day? megan: his numbers speak for themselves. what he is also focused on is how far we have come, but how much further we have to go. we are facing immense disruption weeconomic inequality, how entice our best and brightest into industries. solving the big global problems. tom: i heard the joan baez music last night with the sit in on

the house floor. it was remarkable to see that moment. what will be the republican response? megan: the republicans have packed up and got out of town. democratic sit in over gun control in the house failure to even put up a bill to vote on -- i think this could be a real inflection point, particularly for paul ryan. his leadership is at stake. refusedfour bills that -- failed to pass the senate. these are bills that the american people support. this could be the moment where paul ryan really does not step up to the plate. tom: i will respectfully suggest that all americans have a public respect for john lewis of georgia. what a want to know this morning is are the democrats unified? former speaker pelosi, when the

old guard walk out on that floor and join that sit in, where the comrades in arms? megan: absolutely. what you saw inside the chamber, you should have seen the scenes outside. they were holding impromptu rally moments with hundreds of people who gathered on capitol hill. the democrats smelled such political blood on this, they know the public is behind passing some of these bills and they are going to press home that advantage every way they can. tom: francine, what is so unique about this and being in london, is seeing the united kingdom reaction to the murder of the member of parliament, joe coxe, compared to what the united states is dealing with with orlando, sandy, and the other shootings. francine: it is a very good point. you also don't realize the fact about this sit in. it was such a rare thing. was this the first time we have

seen something like this? tom: megan, help me out here. we have seen this before. in the john quincy adams 19th century. in recent memory? megan: we did see a similar things with republicans staging a sit in and the democrats turned out the lights. this is an extraordinary moment. you draw the contrast between the u.k. and the u.s. appropriately. we had 50 people killed in , 49 people killed in a nightclub, these are the kind of massacres that have become commonplace here and the american people are starting to say when is enough enough? when can we pass minor bills to tweak our gun laws? francine: how will the gun control debate play out in the u.s. presidential election? will it dominate or be quietly simmering? megan: it has been forced to the forefront. donald trump has made a big play for the nra, but he has been a

little bit all over the shop. hillary clinton called again to renew the federal ban on assault weapons. it is something where the democrats sense that the tide is shifting. they do feel there is a rare to have some limits. they think there should be some limits. it seems like common sense to many people that someone on the terror watch list should not be able to buy a gun. tom: we are watching live images from the house. this is the house, where the city and occurred. megan murphy, thank you so much and congratulations on your interview with a most different tone from the president. really most interesting. this will be out on "bloomberg businessweek."

really interesting, as he addresses what to do with his daughters. that is always a key topic. "bloomberg surveillance." ♪

francine: welcome back. good morning. let's get straight to the bloomberg business flash. : tesco reported a second straight quarter of domestic sales growth, the first time it has happened in five years. tesco's ceo has been trying to win back unhappy shoppers by offering lower prices and better service. drivers in the u.s. are burning

gasoline at a record pace. they are taking advantage of the lowest prices at the pump in more than a decade. consumption is up 4% from a year ago. the average retail price has fallen 17%. twitter is closing in on deals to stream more live events. gamesles on pro football in twitter have been better than expected. that is your bloomberg business flash. tom: thank you so much. greatly appreciate it. paul sweeney with us. he has built bloomberg intelligence. it is a smart set of industry coverage. mr. sweeney has looked at the media business for a few years here. we talked disney, which is about espn, which is about twitter. emma just mentioned twitter. they are going to live stream

football. how big a threat is that to the cash cow that is pro football? paul: it is interesting. the nfl manages their rights better than any sports organization. they like to parcel their rights to as many partners as possible to get as many people bidding against each other. the recent foray for espn is to go digital. for the nfl, it is to bring the rights digitally. last year, the nfl stream the game over yahoo!. it is another piece of competition out there. espn owns the big games on the big nights for a long period of time. francine: i don't know anything about the nfl, but i'm trying to look through the numbers. how does twitter get their money back? paul: advertising. twitter is trying to grow their user base. they want to grow the user base and grow engagement.

they want people to stay on longer. tom: they are looking for young kids. paul: one of the ways to get young kids is with live content. sports and other live video. to try to drive subscriber growth. tom: francine, it is not a match. it is not a damn match, it is a game. [laughter] tom: let's go to the game known as walt disney. this is paul sweeney on disney versus the train wreck known as viacom. viacom has not got it done over the last 10 years. how threatened is the disney franchise? paul: the disney franchise is in great shape. tom: you visited shanghai? paul: i did. tom: did he take the gulfstream? i don't think he did. paul: they built a $5.5 billion park in shanghai. that is their foothold into the

chinese market to introduce their brands into china. walt disney is doing well on cable network's nest -- network business and their film studio is going lights out with all the franchises, with marvel and star wars. francine: is it different? is disney shanghai different to what you get in florida or paris? the chinese consumer travels, so they could see it elsewhere. paul: they did try to bring disneyland to china. what disney tried to do is create something that is authentically disney, but distinctively chinese. that is how bob iger phrased it. they really do not incorporate the french culture into the experience in paris and it kind of put off a lot of the consumers. herethink they made amends in china and created a park that is welcoming and inclusive of the chinese and their cultures. tom: i've got to rip up the

script. that watchesdience us every day are very aware that mr. bob iger had an incredibly difficult week. you personally observed disney senior management dealing with the horrific events in orlando, the horrific events with a child at disney world. discern you observe or in shanghai with management? paul: shanghai was arguably the pinnacle for the last feather in the cap of bob iger. he has been working on this for the last 17 years. this is a crowning achievement for him, for the company, for the management team. it was a major achievement for the government as well. it was a big moment for him. at the same time, very difficult news from their home market in major., which was really

they handle themselves very well, i thought. tom: how did they message that? in the idea of governance and leadership, you've got to message that. what did you observe in shanghai? paul: they recognized that orlando is the home of walt disney world, there home park. they feel like they are the -- one of the major players within the community. the employees live within the community. they give back to the community in-time -- all of the time many different ways. they did make a donation to the orlando victims. when they went to orlando in the early 1970's, walt disney said this is a transformational moment. it has been their home for the largest part for over 30 years. tom: i thought they really got out in front of these tragic events. ,aul sweeney, thank you so much in london with us, recently in shanghai to see the opening of the disney park. coming up on bloomberg radio, we

will speak with mohamed el-erian. we will talk to him about the global economy and our unknown unknowns. stay with us. ♪

tom: let us consider foreign exchange. sterling, 1.4 919. coming up shortly, it is "bloomberg ." what do you have coming up? david: we have quite a show. an exclusive interview with president obama. we have an exclusive interview that emily chang is doing with john kerry, the secretary of state, talking about particular risks in cyber security. ,e have the outspoken jim grant who will be here talking about the dangers of central bank ,ntervention, bank regulation and china. the risk of china. that is all coming up. tom: thank you so much.

one topic over the last two years has been court economic theory. a string of the quote. i showed this earlier. i'm just an aging economist like michael mckee with much less tolerance. thank you, larry summers. headlinen with the because the spell check got isln theory all wrong. paul krugman on fire over simpler is better. mathematicalr ban models from bloomberg surveillance on radio. francine: we do. he is not necessarily

saying simpler is can we leave you are looking for why we are not seeing growth again, you can go back to the you can drawl and out in a simple way what is going on. we hit the zero lower bound. traditional economic thinking is not working. tom: part of it is a simpler model, which in banking and the stress test is the idea, just put more capital on the books -- that is the simple solution. mike: the fed is conducting its annual stress test. there are 33 banks. the nation's biggest. they call it the comprehensive capital analysis and review. that is the technical name. the want to see if they have enough capital under three different scenarios. , a recession,nomy

and then a deep recession. they are saying 10% unemployment , negative interest rates -- how would you do? tom: 28 variables? that is anti-krugman. francine: we should do more algebra on tv. i don't know how you do it on the radio when you cannot actually see the equation. let's go back to stress tests. mike: bank of america has a lot at stake because they failed three times. citi failed. they came in clean last time. we will see how brian moynihan does. shareholders also care because it affects the amount they are allowed to pay out in dividends and stock buybacks. you can see the two worst performers, citibank and bank of america, have not been able to raise the amount of money they give back to shareholders. they are still way low. tom: unfair question. could deutsche bank past the

stress test? mike: i guess we will find out. they operate a subsidiary in the united states. tom: i did not know this. mike: their u.s. subsidiary. not the whole bank. tom: interesting. francine: i quite enjoy talking about u.s. stress tests. in europe, they did not have the credibility. i don't know if it is because they were being too free. here, each government had to give the results. people are saying in europe, it is less equal. tom: the stress test here is not all the streets have look right, look left on them. that is the stress test. mike: the cars come from the other direction. [laughter] mike: in europe, the stress tests were not severe enough the first time around. tom: now, has europe caught up? mike: there is still some criticism of it, but the u.s. ones are considered quite tough. tom: what is brian moynihan's

best outcome? mike: that they pass with no demerits and next week we will learn what they are allowed to pay out in terms of their dividends and capital money. lambda.ilon another algebraic function on the radio. it is better on the radio. [laughter] francine: in your brain. tom: michael mckee. should we do this every other week? mike: every time they have a referendum. [laughter] tom: michael mckee and i will continue on bloomberg radio. "bloomberg " has important interviews. from london, mohamed el-erian coming up on the radio. "bloomberg surveillance" -- good morning. ♪

jonathan: voters are heading to the polls to see if britain should leave or remaining in the european union. david: bank of america is under the national spotlight and given us come later today. climbed to akets two-week high. they had for a fifth straight day of gains. jonathan: is very warm welcome to bloomberg. my colleaguee david westin who is in new york. that: we are coming to the dachshund of a big week. we will dissect