♪ nejra: these are our top stories. one of the most high profile brexitheir exit -- pro has resigned. nigel farage says he has done his bit and wants his life back. construction contracted since 2009 as the impending brexit though held back --. economists in a survey predicted a reading of 50.7. has set ahancellor goal of lowering britain's

corporate tax rate. it is an effort to keep businesses investing. osborne said he expects the results of the eu referendum and want to mitigate the economic impact of brexit. c and china investment securities are in talks of a possible merger. the firms have around $20 billion of assets. has declined to comment. there is no response from cis. global news 24 hours a day, let's take a check in on the markets, starting with european stocks. we can see how they are performing. of steam.st a bit i want to get the ftse 100 up. it is close to entering able market. it is up 19% from a february low.

commodity producers are the best performers on the stoxx 600. heading lower. italian banks in particular being driven down to record lows amid concerns they will be under pressure to raise capital. take a look at what is happening in commodity markets. forer topped $21 an ounce the first time in two years. gold is rising. seeing brent holding above $50 a barrel. anding an eye on sterling dollar yen. seeing a little bit of yen weakness today. back to best of bloomberg. ♪ shery: coming up on "bloomberg best," the stories that shape the week in business around the world. the political aftershock of the u.k. brexit vote, who is in charge?

>> a no-confidence vote against jeremy corbyn was a resounding defeat. david cameron: for heavens sake man, go. shery: global glom, reacting to britain's departure. >> i will make one prediction this morning, the united kingdom will not be the last member state to leave the european union. >> the european union is in mortal danger. shery: initial market turmoil worries investors. >> absolute uncertainty. >> there is a lot of uncertainty. >> uncertainty is the enemy. shery: does big pharma have prescription for brexit side effects? it is all straight ahead on "bloomberg best." ♪ shery: hello, and welcome. i am shery ahn. this is "bloomberg best," your weekly review of the most

important business reviews, analysis, and interviews from bloomberg television around the world. this week has been all about digesting last thursday's u.k. vote to leave the european union. on monday, the market moved in uncertainty, and nowhere else were things more uncertain than in britain, with the leadership was thrown into chaos. nejra: it is interesting what the next step will be, because logically the next step would be for the u.k. to trigger article 50 and actually start those negotiations on leaving the eu. actually, other governments in europe are not expecting david cameron to do that when he needs other eu leaders on a meeting -- on a tuesday in brussels. what they will want is some kind of plan for what happens next. john: believe vote is

understandable. the will of the voters is to be respected. i don't see this where it is essentially or necessarily the calamity that many are saying it will be. mark: disruption within the parliamentary labour party, widened the no-confidence vote for jeremy corbyn. it was a resounding defeat, 172 votes to 40. therefore, there is no confidence in the labor leader from within the parliamentary labour party. michael: i am running in his leadership contest for one reason and one reason alone. i want the country i love, which has given me so much, to have this opportunity for change, with optimism and conviction. theresa: i have invited you here today to announce my candidacy to become leader of the conservative party, and prime minister of the united kingdom. nigel: two of the circumstances in parliament i have concluded, that person cannot be me.

>> i don't care which man or woman wins the tory leadership and becomes the prime minister, provided they have first and foremost in their mind 17.5 million voters who voted to get back the ability to make our own laws, have our own court judgments, and control our own borders. guy: remember friday, post the announcement the u.k. was going to leave, we saw sterling slide very sharply. we are now below those levels once again. roy: you look at the yen, it has recently passed levels when the japan unilaterally intervened in the second half of 2011. if volatility continues to strengthen further, you will see intervention by the g7. in our view, japan right now, the conditions for the unilateral intervention have been satisfied even though the volatility in the yen is relatively extreme.

g7, i think they are likely to wait and see how financial markets react this week. vonnie: we will be speaking about the biggest story of the hour, and in fact of the day, the s&p cutting the uk's top credit rating by 2%. matt: it was not expected -- unexpected but the ramifications could be large. we could see fund managers who are only allowed to own aaa debt, forced to sell because of that. let me ask you why you decided to go two notches here. it is not a one notch move. is it in your view such a serious matter that it could go even further? mortiz: yes indeed, it is a major event that has just occurred. if you have followed what we have been saying over the last months and quarters, you will know that we and other people expected the vote to go the other way, to remain. we have been quite clear that if the british population were to vote for brexit, this would hurt the ratings. we also said the ratings would

go down by more than one notch depending on the circumstances. mark: the economic outlook has deteriorated, and some monetary policy easing will be required over the summer. james: there is the issue about whether there will be further contagion. i don't see that either. we will keep an eye on it. we will definitely wait and see that so far i do not see a big impact on the u.n. howard: we have a toolbox, we think we have put limits on the qe program. we can do more of that, more forward guidance. we can do a lot of work in the u.s. the u.s. is very close to it's mandated outcomes. national employment, the inflation is 1.84 with a target of two. you are very good in terms of meeting mandates in the u.s.

but if we had to or if some shock came along, we certainly could do more. >> i think that on the plus side, the bank of england was well prepared and there was liquidity in place. markets have functioned effectively. guy: how do you think about this market? patrick: this lack of certainty, this uncertainty right now. the investment decisions, return on equity, return on capital employment for companies are going to go down right now. to be chasing this rally will not pay off in the long term. david: you are setting record lows in government bonds around the world. it is the ultimate risk off trade? mike: when you have this much uncertainty, you are afraid of what comes next, you hide under the bed. u.s. treasuries and other government bonds are the bed right now. it is kind of insane because the yields are so low. if you hold to maturity, you will lose money if there is any inflation at all. what else are you going to do right now? mario: i tried to find a word

which describes our feelings. i was just chatting about this a moment ago. i think probably the best word would be sadness. david: the tone of the meeting was one of sadness and regret. our partners in the european union are genuinely sad that we are planning to leave this organization. francine: the german chancellor angela merkel said before, she sees no backing out to a brexit now. michael fuchs, always great to have your perspective on these things. first of all, you heard that chancellor merkel was very clear. there will be no renegotiation with probably no access to the single market. what do you expect? what are the negotiations going to look like? michael: first of all, the u.k. has to trigger article 50. that is number one.

as soon as this is out and as soon as this has been made, we have to form a team to negotiate. of course, there will be no free access to the single market anymore. this has to be renegotiated. to say it bluntly, there ain't no free lunch. it is not for free. you have to pay something. they have to accept a certain terms and conditions. mervyn: i think the most important thing at this stage is for everyone to understand central banks are prepared to supply liquidity if and when it is needed. it is not clear a large amount will be needed but nevertheless, central banks will provide it on-demand. and the economic position, one in which much countries feel if only the rest of the world would grow properly we will be fine but they are not so what do we do? we try to lower the exchange rate. i think central banks should not

compete in trying to push down their exchange rates, but there will be big changes needed if we can get back to a stable position, so we should not try to resist that. tom: michael mayo, the u.s. banks, are they going to lose jobs because of this crisis in london? michael: u.s. banks have the worst revenue growth in 80 years before brexit. there is no question banks need to control costs. you are going to be reducing jobs, your going to be reducing compensation, and the fallout for the large u.s. banks would be the cost of business goes up, there are capital market headwinds, increased complexity, currency risks, and central banks have lower for longer interest rates. jean-claude: scotland wants to be heard in brussels. so i will listen carefully to what the first minister will tell me.

nicola: i have stated our desire to protect our relationship with the european union. tom: what is the leverage miss sturgeon has to advocate for scotland in brussels? i don't see it. what is it? sony: the optics of her actually having meetings in brussels and starting preliminary negotiations, whether they have any legal authority or not, is more than enough to essentially send the signal to the whole of the u.k. that a brexit is equivalent to a breakup of the united kingdom. i think that is the best thing she can be doing both for scotland as well as for the rest of the u.k., and that is what she will continue to press. shery: still ahead, no shortage of opinions on brexit. we hear from the world's top portfolio managers, economists, politicians, and central bankers. more "bloomberg best" is next.

♪ ♪

shery: this is "bloomberg best." i am shery ahn. our global tour of the weeks top business headlines continues with financial and economic conditions tied to the brexit. uncertainty seems to be the word used most by money managers and economists, and there was good reason for what happens next to me remains anyone's guess. joe: you say you are not convinced that this brexit vote would be the spark for the political class to get smarter about more inclusive growth. what would be that catalyst? mohamed: i'm afraid to say it would be a bigger crisis, a bigger economic and financial crisis. and step back. as you know, i have this notion the role we have been on characterized by two things, low but stable growth on one hand and central banks able to repress financial volatility, that growth is coming to an end. we are seeing all these unthinkables and improbables. negative interest rates and many more. that world is coming to an end. if politicians do not preempt further problems, then you will

get a crisis, economic and financial, and the question becomes, how big a crisis do you need to wake up? my hope is we can avoid the crisis, i suspect we may end up needing a crisis in the wake of fall. >> you have seen what has happened to the pound. aren't you a little concerned about the economic chaos that brexit has created? nigel: let's get a few things straight. sterling is down a bit. >> a bit? nigel: it has been in a bear market. it is in the decline in currency for a long time. it is 12% up since february last year. >> still way down from friday. nigel: it is 12% up from february. let's get a sense of perspective on where these markets are, ok? draghi may have a point. if we don't come to a grown-up trade deal between the united

kingdom and the eurozone, it will hurt the eurozone. which is why today in parliament i was urging a grown-up approach. >> mark carney, you said you would like to see him resign. why? nigel: he is the governor of the bank of england. he is supposed to be independent. he has played a completely partisan role. yvonne: you think that the u.k. leaving is a good thing. why do you think that is a good -- why do you think that is? marc: we have a constitution. we swore we would not pay taxes to a foreign leader, and we would never accept foreign judgment. and that is basically what the european countries have done. they transferred their sovereignty to essentially unrelated bureaucrats in brussels. i believe that countries

function better if they are small. i believe the u.s. will be a better functioning economy if it would consist of 50 different states, not just one federal government running the place. yvonne: some say this was a result of backlash on globalization, every country for themselves right now. does this actually play an impact on global growth, which we were talking about before the brexit vote has been very, very slow? marc: well, global growth has contracted. in other words, growth rates have been reduced and many countries are in recession already that has nothing to do at all with brexit. the global economy has begun to slow down 18 months ago. the u.s. economy began to slow down at the end of 2014. that is why bonds have been so strong in 2015 because the bond

market knew the economy is weakening. alan: it is a terrible outcome in all respects. it did not have to happen. i always thought that the real problem in europe was the euro, which i thought what basically an unstable currency. cannot exist from the existing structure. it never entered my mind that sterling was an issue. it is a floating currency. and britain was in fairly good shape economically. tom: if your attention is on europe, what would you request from chancellor merkel and what would you request from brussels? alan: i am not in a position -- tom: we would like to know. alan: let me start off with what i think ought to happen with respect to the euro. first of all, the euro has been

pulled apart basically by this existence of greece in the euro structure. greece got in by mistake. or should i say, miscalculations of the data they submitted for the purposes of entering the euro. it became very clear when the next government, greek government showed up that the data which have been submitted is not accurate. they have been a thorn in the side of the whole euro structure ever since. they should never have been in the euro. they should get out as soon as possible if you want to sustain a fundamental euro structure. tom: we think about the new russia and how they respond to brexit, what should we listen for from mr. putin? how should we respond? >> from what i have seen, he is very pleased with what has

happened with brexit. this works to his advantage because one of his agenda items is to cause disruption in the european union to make sure it splits apart. i think the important part is how nato will continue to function together, and also what signals there are for the eu generally is supposed to be doing. michael: that as a key question about nato. there is a school of thought that says, we will have trouble with security arrangements in europe because the europeans may not getting along. another says, because they are not getting along and don't know what is going to happen, they will fall back and rely more on nato, and this could reinvigorate that organization. what do you think? madeleine: i do think nato continues to be the stabilizer in many ways and the alliance that has held together the longest. i think they will be looking to see how the security arrangements continue to be strengthened. a lot of the issues at the summit are going to do with what nato is going to do in central and eastern europe. jes: we have thought a lot about

this referendum, and it obviously went one way that will have economic consequences. barclays is going into this process, eyes wide open, balance sheet exceptionally strong, people very motivated and committed to the economy of the united kingdom. erik: so i take that the answer is yes, you can sustain the challenges ahead of you. jes: yes. erik: your leadership skills going to be tested like never before, perhaps. are you ready? jes: i will find out. we spent 13 months getting ready for this referendum. we created a situation room which we invoked last week. we had full committee meetings about four times a day in the week, thursday through the early part of this week. erik: four times a day?

jes: yes, to make sure people knew what was happening in the call centers. on friday alone, we made 1500 loans for small businesses across the united kingdom. to know what was going on in the foreign exchange markets, in the early morning hours of friday, we had foreign exchange trading through the system that we normally have in a full day. to know what the corporate clients are asking, institutional clients -- i think we were very, very prepared, and i feel good about how the bank handled itself. the other thing is, it is quite different than what we may have seen with previous crises, the corporation between large banks and regulators. ♪

♪ shery: you are watching "bloomberg best." i am shery ahn. even though the brexit vote aftermath dominated the news, bloomberg brought you the very latest in other news around the world from settlements to stress tests. michael: the first round of a

stress test show they have adequate capital. this was round two. the qualitative tests where the risk management systems that, as you can see, the unit of deutsche bank, deutsche bank trust did not pass. tom: stop there. that is misleading. that is hsbc, na and td group toronto dominion. that is not deutsche bank. that is a tiny part. michael: that is the clearing and wealth management. tom: they handle that -- michael: according to deutsche bank people, it was about 5% of their balance sheet. santander said they were going to fail, but they are still working on their risk controlled systems. both of these are going to be folded into separate holding companies in the united states starting july 1, it is a new fed requirement. they will be stress tested with all of the other portions of that instance in the u.s.

starting next year, in 2018. if they don't pass, they cannot send profits to their home country, because they have to retain some of them to meet their capital requirements. francine: so the stress test, in terms of the u.s. banks, they can pay out dividends. bob: the u.s. banks actually do really well. after years of taking up costs and cutting capital, they can withstand some pretty severe stress tests. from a credit quality perspective as a bond investor, they look pretty attractive to us. david: take us through this settlement. $14.7 billion. what are they paying for, and does this take care of all of it? matt: it definitely does not take care of all of this. it is a large chunk of uncertainty taken out of the picture. first off, volkswagen has agreed to either buy back cars at precrisis levels and customers that want to get rid of them, and give customers as much as $10,000 for their trouble.

or, recall the cars and fix them so the customers can drive them legally in the states. that is going to cost about $10 billion. that is an estimate, but that is how much they figure it is going to cost. and then about $4.7 billion is going to go to two things. $2.7 billion is going to go to the epa and the california air resources board, and $2 billion they are going to invest in clean energy technology, which is, something they would have done to begin with, but now that is mandated. alix: lions gate will be buying stars for $4.4 billion. $32.73 a share. it looks like starz's shares are halted while lions gate shares keep popping. malone owns about 4 million shares of lions gate. so starz swapped some of its

shares for lions gate. that led to speculation there could be a merger between the two. john malone talks a lot about getting scale in the media industry. starz has the platform, lions gate has the tv production side of the unit. this will be a creative story, funding the purchase with new bank and bond financing. shery: still ahead, a raise hike negative interest rates, and whether the u.k. brexit will actually happen. we will get insight from some of the world largest money managers. first, the side effects of britain's vote to leave the eu. pharmaceutical ceos weigh in on that and drug prices. you are watching bloomberg. >> the current system is better than most other symptoms. ♪ you guy's be good. i'll see you later

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never code this is bloomberg. these are our top stories. most of the most high-profile campaigners has resigned as the leader of his political party. nigel farage is stepping aside as the head of the u.k. political party. u.k. construction unexpectedly contracted at the fastest pace since 2009 in june as the impending brexit vote held back residential building. a purchasing managers index slid and month 51.2 earlier. a survey predicted a reading of 50.7. an increasing number of economists are pretty chinese banks will receive a government bailout within two years. standard chartered and commonwealth bank of australia are about nine of 15 responders in the latest newberg survey that say they expect a move. they believe the cost of

recapitalization will exceed the cost of $5 billion. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries, now let's check on the markets. u.s. equity and bond markets are closed for independence day. so happy independence day, if you happen to be watching from the u.s. europe, the rally on the stoxx 600 is losing steam. down .2%. keeping an eye on the ftse 100 -- because it is close to entering a bull market -- up some 90% since a february low. commodity producers are the best performers with the rally in commodities we are seeing today. banks are heading lower with italian banks particularly hard hit. let's switch of the board and take a look at what is happening elsewhere. silver has gone above $21 per ounce. it did that earlier for the first time in two years. gold also rally on the bid for

the safe haven, and brent crude is holding above $50 a barrel, as you can see. we are keeping an eye on sterling, up ever so slightly after a two-week drop. dollar-yen, we are seeing dollar strength, yen weakness today. we will have more news and markets in half an hour. for now, it is back to "best of bloomberg." ♪ shery: you are watching "bloomberg best." i am shery ahn. them in drug pricing, and r&d pipelines -- this week we got unique perspective from the chief executives of the world's most notable pharmaceutical companies. this is all part of bloomberg's new series, focus on pharma. yvonne: it is focus on pharma we

ek here at bloomberg, but we are looking at the lowing global business of test growing global business of pharmaceutical technology. allergan ceo and president brent saunders joins us live from shanghai. great to have you. i want to get your take on this brexit vote. i know allergan is based in dublin. does the u.k. leaving the eu change your business at all, or put the health care industry at all? brent: i think it is a bit too early to tell about the impact on the industry. with respect to allergan, we are headquartered in dublin, but we have 1% of total sales in the united kingdom. outside of currency, we see the immediate impact as minimal. i think longer-term we will have to see how things like regulatory approvals go, but that is a few years away. yvonne: you are known as a deal guy, but you talk about operations as well. i was hoping to ask you about brexit.

how does that influence or change the way how you move your facility to the u.k.? would you essentially move out of the region? brent: i don't think so. we have our international headquarters in marlowe, the u.k. we have a fantastic team there. we are very committed to both marlowe and the u.k. and to our people there. no plans to change anything in the way we operate, and hopefully we can remain committed to our operation in marlowe for the long term. yvonne: let's talk about m&a. what has recently dominated headlines is that allergan-pfizer deal that failed because of the treasury. you have been blindsided by what happened, that now you are ready once this, as and as this is complete. you have a lighter balance sheet right now, more cash. how are you going to spend it? brent: we were a little

disappointed by the u.s. treasury's involvement of the pfizer deal, but allergan is in a good position. we are in the final stages of closing our deal with teva to sell the golden generics business for $45 billion, and when that is closed, the proceeds will be spent 10% on a stock free purchase program, $10 billion on every payment. -- $10 billion on debt repayment. that will leave us with cash flow of about $20 billion to invest for growth. we will be looking at buying intellectual properties, r&d assets, and of course m&a. with respect to m&a, it will be a smaller scale tuck and deal to really support our therapeutic areas of leadership and innovation. david: i want to take a step back and talk about generics. because mylan is a major player worldwide in generics. what role does generics from a

cynical play in the overall business and, for that matter, with people? heather: they play a very significant part of the round .- part around the globe if we start in the united states, generics have become the backbone of the health-care system. we represent 80% of all the drugs in the united states. as you work your way around globally, different parts have different utilization rights. -- different utilization rates. we know every health care system is looking for cost containment and health care solutions. we work very hard to break down those barriers to provide access literally to the world 7 's 7 billion people who need health care. whether you are about developing countries, emerging market, or throughout europe, we continue to fight and increase generic utilization and have a more sustainable health-care system in these countries. david: as you say, heather, affordable health care is

terribly important, and that takes us to the price of of drugs. how concerned are you about regulation of drug prices going forward under a new administration? heather: again, what we have said repeatedly is that if we are going to look at the system, let's look at the whole system. if we are going to talk about trying to fix a piece of it, you end up not getting to the root of the problem. i would argue that here in the united states, we have got that pretty right. hatch waxman, which was put in place in 1984, that was a great balance. that is not to say there are not abusive practices i can that can certainly affect that. overall, we have been able to represent 88% and drug utilization. we have saved $1.6 trillion for the united states health-care system over the last decade. that balance of innovation and competition, we think, is

incredibly important, and letting the open market with supply and demand. we have done a competitive marketplace, and our markets have horse pretty quickly when something has gone awry, or there have been abuses to the system. we believe that the system works. we believe that we have got to be challenging ourselves and the governments and the regulatory regime to maintain and keep pace with the globalization of the industry on really every front. but like i said, i believe foundationally, our system is the right one, and it provides the most motivation in the -- the most innovation in the world. it has provided the best of care and we need to make sure we can continue to provide access so that everybody is afforded the luxury of actually getting the health care. it should be a right, not a privilege. leonard: we have this conundrum. we have to have drug pricing that makes people feel like they are getting value and they can afford to get the drugs.

it does not do us any good if all these new drugs and approaches are invented and people cannot afford to get them. on the other hand, we do have to have prices that encourage investment. no place is it purely known that are than at bloomberg that capital is agnostic. it flows the way people make money. if it doesn't make money in the biopharmaceutical industry, they will not be here. therefore, all the hundreds of companies, the young entrepreneurs that want to create the next cure for cancer , theyheimer's disease cannot fund it and we will not have it. we have to have this balance of short-term, people being able to afford it, and sufficient incentive to make this grow, make the industry grow. the patent system, which gives us pricing power, i love the quote that president lincoln said about that. he said the patent system provides the fuel of interest to the fire of genius.

it is a wonderful quote. it explains why, in the united states, most of the world -- most of the drugs in the world are not invented in britain. they are not invented in asia, not russia. plenty of smart people in russia. they are invented in the good old united states, and why is that? we have a system that encourages it. ken: the debate about health care today is polarized. allink it falsely pits pharmaceutical companies against society, and society needs these drugs. the reality of the world is, if we don't have a sufficient return on investment, we will not get the significant capital that we need, that we have to put up significant risks, for significant periods of time for the current research. david: is that message getting through to the populace overall? we look at the individual

candidates, and it doesn't appear ever candidate test either candidate loves the pharmaceutical industry. no one wants to go after pharmaceutical prices. why is it people and politicians do not have appreciation for this? ken: i have to say most people that i encounter really do think what we do is important. i think there is a legitimate conversation that needs to be had about, how do we make health care more affordable? i think unfortunately, in the heat of the political season, the discourse around pharmaceutical prices becomes overheated, and when we finally select a president, we will be able to focus on what works for our society. david: i will not ask you to pick a president today, but i will ask you -- from what you , will it make a difference which candidate will be president? ken: it is hard, because they have various portions of their platform that are not good for innovation, competition, and patient access. erik: many of the most advanced

remedies are often expensive to develop, and the companies are incentivized to generate the maximum profit possible. i am thinking of things like tourean.and t and prices have treatments and immunotherapies, blood disease, drugs. what in your mind is the best way to control costs so these medicines and treatments are not just available for the rich and the insured? bill: i think the current system, despite extreme cases that i think have properly been labeled as inappropriate, i think the current system is etter than most systems that one can imagine. this is a phenomenal thing. you have multiple drug companies

competing in terms of equality and the price they are offering. the drug companies are turning out miracles. budget.their rmt budge r&d we need to see the opportunity. for things like alzheimer's, they can reduce medical costs so dramatically and improve the human condition, and the pharmaceutical companies have been a great partner to our foundation. when we need help in doing science, they are unique in what they can do. also, they are good about tiered pricing. you take about hep c as an example, i think that, and all the responsible companies do this, for the poor countries, had an approach that was not oriented about making money, it is about driving access. tier pricing is often the way to come on the idea that

being able to fund new miracles, you really want both. ♪

shery: you are watching "bloomberg best." i am shery ahn. some of the largest money managers gathered in aspen, colorado, this week for the aspen ideas festival. among topics, central banks, interest rates, and brexit. erik schatzker was there. erik: given that pearson generates a vast majority of its revenue here in this country in the united states, how bad the could the brexit be for you? john: that is a very good point. we see that reflected in the view that shareholders have taken. erik: yours is one of the few stocks to rally on friday. john: we made 65% of sales here in america. with the disposals we made a year ago, we have a strong

balance sheet from a financial position. for me point of view, it is business as usual. erik: have you considered or perhaps contemplated in light of last thursday's vote the possibility of moving the company to another jurisdiction? john: pearson has been a british company ever since it was founded -- erik: 173 years ago, right? john: 173 years ago. so i think now is the time for everyone to be calm, not to overreact, get on for business as usual, and hope that common sense will prevail and we will see a solution work through that reflects that legitimate concerns of the british electorate, but also doesn't lose britain's influence in the wider world or the importance of the markets in which we operate. erik: can you see a rate hike this year or possibly even next year? larry: i would say with certainty we are not going to see a rate hike in july. we probably won't see one in september.

let's see how the world progresses. they've always been independent. -- they have always been data dependent. there is still a modest possibility they could do 25 basis point tightening in december. if not, it will have to see. i actually believe the brexit will lead to more uncertainty. it will lead to moderately -- it will lead to modestly slower growth. so i am of the opinion that it is highly probable they are not going to do anymore tightening this year. erik: janet yellen and her colleagues have faced a lot of criticism over that data point. people argue the data were there and the fed that have raised interest rate at some point over the course of the first two quarters. now that we have seen the brexit and furthermore the financial market volatility in december through to mid february, can we look back and say, they were right to keep their feet on the gas pedal and to keep monetary policy as loose as it is? larry: they being the fed?

erik: yes. larry: i don't think the data is entirely there. you have modest inflation. we have a weakening economy. they revived the first quarter to 1.1. we have weakening quarter profits. you add that up, i believe it was appropriate for them to pause. erik: what do you think happens, your operating assumption for the future of britain? we don't know what is going to happen, so you have to decide for yourself, do i think britain is going to stay? in other words, not respect the mandate of the referendum, maybe kind of muddle through with europe, or perhaps there will be something more disorderly? david: my view is britain will not exit, because when it becomes clear the terms of the exit are so expensive, not only because the eu's demand

expensive terms, but also the consequences of leaving is so significant, i think the prime minister of england will not invoke article 50. in my view, this will take a year or two to play itself out, but the consequence will be too severe. for example, if scotland has a vote to exit, scotland has north sea oil, the submarine bases, and scotland is a very important part of the u.k.. it would be not good for britain. absolutely. erik: not so great britain and a any longer. david: 52-48 vote, democracy does not say if you have a majority, that requires you to do something. in our constitution, to get a treaty approved in the senate, it takes two thirds. if you want to amend, it takes two thirds of the senate and three quarters of the house. this is not a binding vote. whether the prime minister regretted it or not, that is another issue. in the end, the next prime minister will take a hard look

at it, assess the terms. my own view, obviously not based on inside information, my view based on general knowledge is it is unlikely written will actually exitill in one or two years. they may negotiate for a while. the terms are going to be so expensive. erik: many people are hopeful that you are right. let's say you are wrong in britain -- david: i have been wrong before in my life, yes. erik: would that make carlyle inclined to do less business or reduce its presence in the u.k. or europe, for that matter? david: the devil is in the details. so what are the terms of the exit? we do not know. they are probably going to be expensive. i don't really know yet what the terms are, so i can't say what we will do, but i am reasonably optimistic that britain will come to its senses, leaders will come to their senses and realize brexit is not in anybody's interest. erik: how do you think financial

markets, prediction markets, for that matter, every established leader in europe and elsewhere for that matter kind of wrong on -- for that matter got it wrong on brexit? david: the polling firms, the betting operations, nobody got it right. that is because the was a shift -- that is because there was a shift in the last minute, the last hour or two, a couple of hours before the vote. maybe people are too distant from the people doing the voting. many who voted against it were in parts of england that a lot of the leaders to spend a lot of time in. there may be many factors. it makes one wonder about the polling system in england, because they got it wrong on cameron's election areas they did not think you would have an overwhelming victory. the most important thing is to not panic, not say the world is falling apart. the world survive this. it will not happen overnight and suddenly have a calamity. it will take a long time before we know the consequences are. -- before we know what the consequences are. we've already seen a rebound on

the markets. they are not back to where they were, but they are coming back as people realize this is a long-term operation before we notice going on. david: does it make david do anything do anything as the co-ceo is carlyle? do you think is way more prolonged, that can create challenges, as asset management? david: there is no doubt that there will probably be a slowdown in the u.k. economy. we have to assume the economy is going to grow at a lower rate, make some difference in financing. we don't know yet. we look around the world, are there any other brexits that could happen? i think a geopolitical assessment of whether possible brexits around the world is a good thing to do. ♪

>> this is a chart we are

looking at for a lot of different assets, hrh on the bloomberg. it looked at the outliers, what are the moves we are seeing. this on friday, 10 standard deviations out from the northern -- from the normal moves that we have seen in the past year. matt: i have chart 1813, and for the european viewers, they will understand why this is very important right now. this is the spread between italian 10-year yields and spanish 10-year yields. shery: there are about 30,000 functions on the bloomberg, and we always enjoy showing you are our favorites on bloomberg television. maybe they will become your favorite. he was another function you find useful, quic go. here is a quick take outlining the secular stagnation.

vonnie: secular stagnation, an ugly phrase among economists. it means busts cannot turn to booms, tie into growth policies -- tried and true growth policies will not work, top jobs will not be regained. here is the situation. since the u.s. recovery began, , a weakhas grown 15% come back when looking at this. europe is worse. growth in the euro area has stalled. this can be given to aging populations and the efforts of governments to build foreign exchange reserves. with inflation low and phenomenal interest rates at zero, real interest rates cannot fall enough. here is the background. the term secular stagnation, meaning long-term, slower growth, is not new. it was coined by a harvard columnist in 1998. larry summers gave the idea new

currency, and it appeared at the international monetary fund in 2013. suggesting the floor on interest rates might be a chronic and systemic inhibitor of growth. here is the argument. there is one school of thought who believes the euro of slow growth may have begun. but there is disagreement on the cause. the lack of policy tools to attack it. others, the diminishing powers on innovation. others, including former chairman ben bernanke, think it is overdone. there are concerns demographics are hard to dismiss. shery: that was just one of the many quick takes you can find on the bloomberg. you can also find them on bloomberg.com along with all the latest in business news and analysis 24 hours a day. that will be all for "bloomberg best" this week. i am shery ahn. thank you for watching bloomberg television. ♪

nejra: this is bloomberg. these are our top stories one of the high-profile brexit campaigners left as the head of his political party. nigel farage is stepping aside as they head of the independence party. u.k. construction contracted at the fastest pace since 2009 in june as the impending brexit vote held back residential building. a purchasing managers index slid to 46 from 51.2 a month earlier. economists in a bloomberg news at 51.7.d it