>> diminishing risks. the fed takes a step towards a second rate hike but stopped short of committing to september. credit suisse, and unexpected return to profit. and double trouble for shell.

a 72% drop in profit as it faces challenges in the up and down stream businesses. good morning, i am here in zurich. we have a lot of earnings to go through. and markets are on the move. euro area economic confidence rises a little bit. it is the backdrop of central banks struggling with their monetary economics. there are some pretty good numbers going on. we have a great show today. zurich,ith francine in with what the fed is@m doing in washington and what people see from the bank of japan this evening. now, to the first word news. president obama made his most forceful case yet for hillary clinton. he offered a stirring

endorsement last night. president obama: and that is why i can say with confidence, there has never been a man or woman -- not me, not bill -- nobody. nobody more qualified than hillary clinton to serve as president of the united states of america. clinton joined the president on stage after the endorsement and they left to loud applause. bloomberg is the parent of bloomberg tv. turkey's president has stepped up the crackdown against the military in the wake of the .ailed coup turkey shutdown 131 media organizations. theresa may is back on the road today seeking allies for the

organization. hundreds of thousands of citizens are dependent on jobs in the u.k.. and critics of venezuela's president marched through the streets, demanding that the recall process go forward. the board missed its own deadline to certify signatures on the recall petition. the government is trying to hold onto power in the midst of an economic collapse. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. tom: thank you. let me go through two data ports. futures rising, brisk on. lower yields. 1.50 on the 10 year. will be with us in the

next hour. 12.55 and markets, the yen is stronger. 104.to oil is mixed. european oil is flattening. ushard clarida will be with as well. francine is in zurich. after a lengthy lunch, we ought to look and see what is going on right now. this chart is the largest ranks of the swiss franc. up we go. there is the brexit vote. down we go, a massively strong swiss franc. management shows the the swiss national bank are doing in assisting their people.

it borders off euro responsibility and that is one of your themes in going to zurich, to see how european banks are dealing with the political economics of the continent. yes.ine: you are right. i was looking on the plane over interesting to research. it reminded me that if you looked at the yield on swiss government bonds, anything from 40 years below is in negative territory. so again, it is a bit of the crazy world that we are living with in the moment. let's get more on the fed and central banks. magnus, senior economic adviser. you are in london and i am in zurich, great to have you on the program. what did we learn from the fed yesterday?

what specific factors they are looking at? george: what i took from it is had the things that they previously been looking at and listing as reasons for not raising interest rates didn't seem to be as significant now. so in a way, it is a clearer vista or they think it is a clearer be stuck where the there have been ones from china. but they have failed to materialize so the focus is on the economy and the employee might -- the employment numbers. may now looks like it was an operation. so the way i looked at it is "as you were." and maybe in september or later this year. at bond: when you look

yields across the world, what does that tell us? focus on inflation? well, this is a story that we have become familiar with for a long time. in marketu know -- talk, this is really about the absence of inflation and the inability of central banks to drive higher inflation in macro .conomic so, this is kind of where we are and i don't think anything is changing about that at the moment. although i do think that things are stirring.

and may surprise us over the next year or two. i'm not saying this is imminent in the next month or two. but if you look in canada and japan to portion to europe and most likely, to the united elected,hoever is things are beginning to stir in response to extraordinary political developments. populism, ifeak of you want to put it that way. and i think we should take notice of that, and what that might mean. tom: pc the political developments and to dovetail on the theory. now, or a theory right is it so ad hoc? i don't understand the foundational theory that leads to reflation. is it out there? werge: in textbook terms, if

diagnose the world's ailments correctly, as secular stagnation, which is otherwise, the excess of savings over investment, then, the policy rule book says we have to do something to spur investment or minimizeing down the reasons why companies save money. that the extent governments may look rich -- governments may leverage their balance sheets more than they have done and start to sanction higher deficits or rigor infrastructure investments, yes. that is the foundation. tom: what would be the outcome of moderately higher interest rates to signal to credit suisse -- what would be

the outcome of a modest rate increase? george: i think they would welcome it to the extent that maybe a steeper yield curve evolving as a consequence of higher expert patients. modestly higher interest rates. to the extent that we have begun to digest that the negative interest rates and qe regime is something that is on -- that is undermining the models of banks and industry models, the industry would probably welcome it. nobody would want to welcome an exceptional or strong hike in interest rates in a crisis. but actually, some modest pickup in interest rates is not something that we should be frightened of, particularly in the context of how it happened. tom: george magnus is here with

us in london. later this morning across all bloomberg media, alan greenspan. tois an important moment speak to him, between the fed meeting and the important bank of japan meeting. this is bloomberg. ♪

after 10 minutes, the

bells have finally stopped tolling. they say they have not been compensated enough for the .ecent plunge still, sab miller board have not walked away from the deal. we have a earnings from two of europe's biggest companies. the second quarter profit fell, and missed estimates. shell has been hurt by weaker oil prices. and -- beating estimates. them offset the oil price slump. that is your bloomberg business flash. thank you. anm here in zurich with interview with the credit suisse ceo. he told me that this is a first step in what he thinks will be a good direction. remember that he announced the strategy in november, three

months into the job and he has now been on the job 13 months and this is the first time that he surprised markets on the upside. i talked to him about how the execution was going and about cost cuts. >> cost control. it is the first time that we see our actual absolute costs going down. $4.3 million and that his deep. in the way that the bank is operating, we have a currency meeting over this transformation. and we see the beginning. francine: credit suisse shares are up. let's get to one of our banking experts in london. our team leader for finance in the u k, michael moore. great to have you here on the program.

when i spoke earlier, he was optimistic. he was quite pleased with the results but he said it is the first step is it will be tough for this bank and all swiss banks. michael: yes, i think you're seeing a similar story at credit suisse than what you saw at deutsche bank yesterday. on the cost side and the capital picture. credit suisse seemed to make progress on both. about the progress on absolute costs cutting down. and they brought the capital ratio up to 11.8%. higher than many of them had expected. ÷w&3p+ are starting to see progress from the turnaround. and maybe a bit quicker than deutsche bank. tom: i will put the credit suisse chart up here on the bloomberg. excuse me and it is the basic idea of another troubled bank.

the scope and scale is not talked about enough. credits chris will do $2.5 and something healthy like a healthy deutsche bank or jpmorgan will do more. is he managing this beast forward for merger? not sure.'m he's talked about not wanting to sell the bank and not operating under that assumption but -- wenly, we are greeted are grading on a curve. they are trading at a quarter or value.imes book so the profitability picture continues to not look good. revenue, even though they had a surprise profit for the revenue, it was down 16%.

i think they are just looking for nuggets of positivity. tom: nuggets of positivity. michael moore, within the nuggets ofñi positivity, who wod they merge with? is there cross-border mergers in mind what does the team say? michael: not someone who jumps out in an obvious point because of a regulatory question. i don't think swiss regulators would like a bigger bank. increaseen trying to capital requirements and make them less the stomach. there is not a ton of appetite there. the regulatory question is the biggest one on any kind of major bank deal.

one of the questions that shareholders or analysts had is -- are we sure this is enough? do we think credit suisse will need more capital? given that they are better than expected, does the market think that they can keep to their targets and they will need to go back to investors for more money? michael: well, they certainly showed progress on that front. thatt makes it more likely they can stick to the targets. investors will be looking at the leverage ratio, which was not as positive of a story. it was relatively flat and the in talked about at improving the second half of the year. thewe are still waiting for regulators on what the minimum will be for the european banks.

the u.s. regulators have set a there is still talk of europe increasing the minimum. so if that happens it may put more pressure on them to put -- to move faster. michael moore, in london with european banking. let me do a data check. between janet yellen and kuroda, risk on. next hour. in the ♪

tom: tonight, thursday evening in new york, it is friday morning in japan -- a more important meeting than what we witnessed yesterday with chair yellen -- michael mckee is all boj. michael: they have ruled out you willr money but get something that looks like it. the prime minister slipped into his speech that they will propose a ¥28 trillion stimulus package which would be impressive, if it were real money. know, the japanese tend to roll all of the previous spending into the package. so what is the real money? the yellow is the real money. is, will be get a lot of new money? tom: what are the dots on the

right? michael: oh, that is what they ae talking about as possibility. and as you can see, you get more paying for the buck -- the nikkei. -- that is when you have fiscal spending. a may get a monetary package. there are three choices. lower interest rates, to buy different stuff like real estate japanese additional bonds. tom: let's back up. is he independent? he is.: he doesn't want to do the helicopter money you think about where they coordinate but this is what is likely to happen. the negative interest rates went over badly with the market so he might not want to do that. butan buy additional stuff it is getting harder for him to do the qe and buying. tom: another chart? michael: how much do they own?

and throw in what insurance companies and pension funds own, more than 50% of the government bond market is owned -- tom: what is the white line? michael: the bank of japan. so they have a liquidity problem if they keep buying. tom: what will yen do after the meeting? michael: it depends on how much stimulus you get. if you had a lot of monetary stimulus, it may weaken. valuableael mckee, a briefing. we will talk about this in a bit. on the next hour on monetary policy, richard clarida. ♪

. .

tom: francine in zurich. i am tom keene in new york.

taylor: president obama says no one has been more qualified to sit in the oval office than hillary clinton. president made his case for clinton. he took a number of shots at donald trump. pres. obama: we are not fragile. we are not frightful. from aer does not come self-declared savior promising he can restore order as long as we do things his way. we do not look to be ruled. taylor: the two walked off stage together. called donalderg trump risky, reckless, and a radical choice. angela merkel is ending her vacation earlier after a rash of violent attacks.

in japan, plenty of questions about the prime minister's plan.ic about one fourth includes actual spending according to a person familiar with the matter. another quarter of the package would be financing for projects in state-run companies. all they has yet to offer a breakdown of the plan. global news 24 hours a day powered by more than 2600 journalists and analysts in more -- countries. i am taylor riggs. tom: we would love to give you -- that can get it done. ed morris and richard claret and our next hour. right now, a special treat. george magness with decades of watching monetary theorists theorize and apply the wisdom. -- isthe bank of japan the bank of japan flying blind?

george: i think they have a plan. i think it is a plan which was greeted with shock and all when it was announced. the efficiency of what the bank of japan is doing is diminishing overtime. economist mckee, your basically said in the last options to cut negative interest rates even more negative. it has an option to increase the size of its government bond purchases, but there is a diminishing supply of new government bonds coming out, unless there is a big fiscal package. buy other assets like exchange traded funds and real estate funds and so on. it does not really add up to much, to be honest. unless it is done in conjunction government is expected to announce.

that may or may not be a disappointment. .om: bring up this chart this is one of my earliest charts. the bernanke speech chart. bernanke gave a speech election in the japanese on reflation. the goal is to get back to the glide path of the red line, which was inflation. you can see the failure of japan, the deflator of their gdp has rolled over. what is sad is the faintest tweet of reflation with abenomics. they do not need an arrow. they need a cultural transformation. it is. we live in hope the abe government will announce something credible. as mike mckee said, what people are hearing, a small proportion

of at ¥28 trillion or $267 billion is going to be new money or new stimulus. listed companies are sitting on cash pile on their balance sheets equivalent to about 2/5 of their gdp. if the government could really throughhat cash corporate governance changes, imagine what that might do for spending and possibly for wages. the arrow that the government, that everyone is willing the japanese government to fire or shoot is not in the realms of the bank of japan or even a loan program to basically deliver. this, ifnment could do only it had the bottle to act. francine the clock is in zurich. francine?

francine: i spoke earlier today ceo afterredit suisse they reported earnings that beat estimates. this is an important day for the ceo, because since he has been in charge of the bank, he has had trouble after trouble. as strategy wasn't executed quickly as shareholders wanted. today is the first day he seemed pleased with what he has achieved so far, but only said it was a first step. we talked about what janet yellen cannot cannot do to make his life easier and the ipo of part of his swiss bank. we have been very consistent in saying that we do not need to raise capital. we have been very clear. we raised 6 billion. we have the highest ratio we have ever had at 11.8%. we can pull many levers to drive it forward. -- so, we could do about

you never want to -- we have been in a reasonable range of outcomes. we are in a perfectly adequate capital position. francine: for the swiss unit ipo, this will be in the second half of 2017? >> markets permitting. it is a deep, strategic move. we love our bank. we think it is a crown jewel, a phenomenal asset. what we want to do with this ipo is to get the markets to fully recognize the value of our assets, which is a very good bank and the wealthiest economy in the world. it is a powerful ipo which will drive -- for our shareholders. we want to keep 80% of ownership and keep control of what is one

of our best assets. janet yellen raises rates sooner than they markets expect, is that good for banks? >> overall, yes. francine: overall, he was positive. he says this is a good first step, but talks about unsupportive markets and the fact that the macro environment will remain tough for the years to come. let's get more on the swiss banks. the european banking landscape in general. let's get to david. great to have you on the program. when you look at european banking, it is a mess. if you are in america, you say they should have started restructuring quickly. >> i have seen the strategy is paying off. -- banks are a bit different than other european banks.

-- i have seen the growth and asset management. i was opposed to -- last quarter. capital ratio value is important. there is a small improvement. it is a good sign. it means they might not -- ipo be positivet would overall. i am happy about the result of credit suisse, but we are not out of the woods yet. francine: when you speak to analysts, they say they worry about the capital raising. maybe there is an extra day we don't worry about. a littlee to worry about these write-downs? the unwinding of these risky positions? we hope that may be we will see a bit more, even though the limitation of the stress giving going to -- in the full picture.

from what i have seen, they have been having more than 50% of these activities. many other banks are doing the same. i think it is under way. only time can tell whether they will be on the right strategy. now.have a strategy they are executing it now. let's wait. francine: there are rumors they are waiting for the bank to be taken over by someone bigger. does that make sense? he has told me that is not the plan. no.d: i would say it is unlikely that there will be a possible merger of the two biggest banks in switzerland. much depends on how it is restructured. having -- of the universal bank, -- that is one of the competitive advantages of assetnk, playing on the management card. down the road, anything could happen.

francine: is that outflows, capital, something more fundamental? >> i am looking at three things. execution of the strategy, the capital is extremely important, but also inflows. it is the relation of whether will pay off or not. francine: thank you for joining us. that was the robert kennedy college dean. looking at banks, janet yellen, looking at what yen is doing. round up ofll european earnings and what they are saying and telling us about impact on the u.k. economy. this is bloomberg. ♪

tom: good morning. thrilled you are with us. george magnus. i want to read one of the charts we just did. i did this over a decade ago. may 31, 2003, ben bernanke, some thoughts on monetary policy. there is a chart. it is the demand by governor japan grow up and briefly. he wanted them to move along the green arrow to briefly back thatds the glide path their deflator showed over the years. it did not happen. oft is the scope and scale combined fiscal and monetary stimulus japan needs to get back

along that green arrow? this is a political question. the scope to blend easy money with fiscal policy. helicopter money, the colloquial term for this, it is fiscal policy by another name. what happens is the central bank directly finances public expenditure or tax cuts, or both. scope for fiscal and monetary policy, to create a much more aggressively reflation airy environment. it is pretty big. whenheld the japanese back bernanke made that exultation and still, we continuously are

bombed by that. political decision to allow that to happen. workcan helicopter money in an age of oversupply? we talk about oversupply , but the two-handed economist will always tell you oversupply is inadequate demand. in and of itself, it is a good thing. theously, it does not solve structural problems.

these things cannot be changed by helicopter money. you need to have a good demand platform in order to have these supply-side policies to gain traction. francine: when you look at markets such as treasuries, are we nearing the end of the bull market bubble? define near. you are not going to make money in the bond market. you probably are. particularly giving the policies that banks want to pursue. me -- have we reached deflation, to the extent it has been influential, bond has helped drive yields down this far, i think we

have reached that point. politically, things are staring -- are stirring and i think public policy will look different over the coming year or three. i think, at the risk of being hostage to fortune, this is as good as it gets. tom: if we trace our foreign --hange, let's start with there has to be currency adjustment with real or pseudo- helicopter money. what do you assume the yen will do? if we see concerted action by the authorities in japan.

george: the monetary picture will be more decisive than the fiscal picture. let's say there is an upside surprise in terms of what the bank of japan announces. the yen will go down further. it is equally the case, if there is a home low response, the bank of japan hasn't done that much .ifference sadly for japan, i think it will go the other way. tom: i greatly appreciate this. discussionte smart on the option bank of japan will have in the new york evening today. i am watching oil carefully. i am not going to call it yet. ed morrison in the next hour.

curvext screen, brent, flattening off of yesterday. it is a beautiful view, an ancient city, a river into a lake. francine in zurich. good morning. ♪

francine: tom keene is in new york. we have to look at macroeconomic finance and what the markets are telling us. front, there is a political election. we are trying to figure out with the prime minister of the u.k. can do to trigger article 50 or retaining stability for the country. briefing inbrexit as the first time way ca deal which was meant to be a deal.htforward

shareholders demand more money because of the fall him pound and that is a brexit issue. there is concern that they are not going to get as much as they thought. .rancine: brexit is mentioned it blurs the forecast for the future. who has been had the most? the homebuilder yesterday saying we are saying that many effects. mcdonald's gave a vote of confidence by saying they would be higher here in the

future. they are all talking about brexit. they have a wait and see attitude. how will they take a hit, if at all? slightly overblown in the run-up to the referendum. seen everything we have seen since the vote. lloyd's is cutting jobs. >> the company is doing things that are highly unpopular with their staff and shareholders.

just how many of them are going to continue cost cuts. tom: i can see it now -- brexcuses, with a movie to follow next year. change ifour nation we get a 120 sterling? thought the u.k. problems were about competitiveness, this would be nirvana. -- that no question at british export companies,

several them will do well in global markets. we should not be under any illusion about that. unfortunately, the problem the united kingdom has on leaving , or the threat of problems we face, is not about competitiveness, but it is about the long-term capacity the economy has for growth when the principal ingredients of growth are all compromised. tom's as we are going to have to cut you off. i am sorry. thrilled to be with you. simon kennedy, thank you as well. in our next hour, edward morris of citigroup. ♪

a tom: any excuse will do.

credit suisse increases cost-cutting. is in --the clock francine is in europe. will the bank of japan send in the helicopters? for virginia does his best donald trump imitation. good morning, this is surveillance live. i am tom keene. it is a europe buffeted by challenges, isn't it? francine: i spoke to the credit suisse ceo. he says it is a good first step. there are so many challenges tom: we willead

continue our interview with the executives at credit suisse. >> president obama made his most forceful case for hillary clinton. he offered endorsement in philadelphia. president obama: there has never , not mean,or woman not bill, nobody, more qualified than hillary clinton to serve as president of the united states of america. >> clinton joined the president on stage and they left to loud applause. michael bloomberg said clinton is not a flawless candidate, but voters need to select her over donald trump, who he called a dangerous demagogue.

-- dismissed almost 1700 members of the armed forces, including 149 generals and our -- and admirals. british prime minister theresa may is on the road, seeking allies for her brexit negotiation. are skeptical. there was a surprised increase in your area. it is a sign the -- may have an impact on growth. i am taylor riggs. this is bloomberg. tom: oil, we are watching.

what a thrill to have ed morris with us. onto the next screen. good equity markets. 2/10 spread flattening with a little bit of strength today. 77.81 basis points. great chart ona inflation's the fed has to deal with. 60% economy. this is richard clarinet inflation. big fat 3.2% and rising on the right side. us in thenus with last hour. alan greenspan, we dovetail that with edward morris of citigroup.

i don't even know where to begin with the two of you. does oil matter to you within global economics? >> it is crucial for the global outlook, inflation, global markets. tom: do we bound -- rebound? >> u.s. data yesterday was terrible in terms of imports. the inflation issue has led to the tanking of oil, but i think it is temporary. japan, maybe we -- and do somee

form of helicopter. >> rates and currencies that are a lot, particularly in a short read. we have seen the bouncing around of commodities, whatever the expectations are, fed rate increases fluctuate. tom: comment on the importance of the bank of japan. >> it is very important. to move the needle, they have to beat expectations. the expectations are that they will do something tomorrow. average, you cannot beat expectations. we will see if kuroda can pull it off. tom: francine in zurich, please. francine: when you look at what governor kuroda has done in the past, he has surprised markets twice or it what happens if he does not deliver tomorrow?

is there down in your mind he would not do it or would not do as much as the markets are asked acting him to? >> on the chance they disappoint markets, that is at least 50-50. this issue about coordinating monetary and fiscal. that is complicated to do. roadmay be a wild down the -- that may be a while down the road. francine: what would you be telling clients to buy at the moment? >> we will know in 24 hours. tradeically, the way to japan is to try to get ahead of

all day and corroded. i don't think there is an obvious trade to do right now. france is one of the factors the fed should or should not be concerned about? in the past, it was brexit. when you look at oil demand in in somen countries, cases, it has increased. thans been more positive we were expecting it to be. world oils half of demand growth. there is nothing indicating anything on the gdp side has had impact on the demand side. what is the distinction and supply dynamics? 100 to 29 back up here and there

this huge feeling of now what. >> it is the inventory of what we call the access. tom: i get it. you have a lot of drilling. drilled the well and they did not complete it. that led to the buildup of an inventory. 50, they move towards move towards a completion of these wells.

actual increase in production. we estimate a could bring on a good four or 500 barrels a day. question wemain have about where it is going in response to prices. tom: alan greenspan across our platforms, an important conversation between janet yellen and mr. corroded. i don't think mr. greenspan will talk about frack logs. are talking about it in europe. topic number one. ♪

bloombergthis is surveillance. we have plenty to talk about. first, let's get to the bloomberg business flash. >> -- has been thrown into disarray. sab miller shareholders are rebelling against the deal. they are saying they haven't been compensated enough. is joining glaxosmithkline.

glaxo well invest 360 million dollars in the u.k. to increase capacity. the company is the biggest british drugmaker. shares of facebook rose after the network reported second-quarter revenues that the estimates. facebook gets 84% of its ad revenue from mobile. tom: what struck me was not the moment for president, etc.. , he really had some force in his comments.

she is still believing in an agenda that is far left. i thing that was one of the more interesting moments. people are saying we want a different future for the party. democratica normal position -- convention. drill. the after the big speeches, i want you to comment on them. of those speeches, will mrs. clinton have the with her? will they turn out, even as they protest in philadelphia. wrote about what her

husband got after the convention, which seems like an unimaginable for her. will she get a bounce? expectations have been set low. last night did not knock it out of the park. obama had a speech. the moment comes down to her. people are looking at her to have that kind of moment where she accepts the nomination, where she makes her self human to these voters. kind of moment she can manufacture to get that kind of bounce she needs. tom: he was speaking of independent voters that separate clary -- that secretary clinton has to get.

run thee chance to largest city for one dozen years, governing in the wake of its greatest tragedy. today, telling everybody of surveillance what to do, i believe we need a president who is a problems solver, not a bomb thrower. megan murphy and i work for mr. bloomberg. how did mike do? >> people in the hall thought he did well. that was probably one of the best received speeches of the knights. if you look above the content, it was more that what he is saying is the message she needs to hit. if you are an independent voter and you are not sure where you're going or what you are doing, i am someone in your shoes and someone who has been as afflicted and troubled by this race.

i look at this other candidate and say i have no option other than to vote for you. there is no question he seems affective -- he seems effective. i am always unbiased. what we will watch for tonight is whether she can put aside her her pastakes, everything everybody knows about her and come across as authentic, the person people want to connect with. biggestgoing to be the hurdle for her, can she change her message and can she change the mind of voters that she will need to change. megan murphy in charge of our washington efforts. we are going to come back with richard clarinet and edward morris. evening, mark

halperin. i believe we do that at 5:00 p.m. worldwide. this is bloomberg. ♪

an importanthad interview. we spoke to the credit suisse ceo. russ. have been pretty

also because of the macro environment. resalesuisse has a huge property and the u.k.. i asked him what the worst-case scenario would be. he was cautious. after a good while, he gave me a couple of answers. it would be damaging for london if they were to lose this right. if it is not resolved given the weight of the financial services, that would be a bad outcome. francine: let's get back to our guest's in new york. when you look at past sporting and the fact that the markets have taken brexit in stride, is it because it is better than we expected or is it because article 50 has not been triggered yet? combination of both.

the political situation in the u.k. got resolved much more quickly. realize this will take at least two years. had a policyly response, or the indication that central banks are going to step in. think your previous comment is correct. the passport issue is crucial for the u.k.. that is going to be the linchpin of the negotiations and that will be central to the outcome here. tom: what is the incentive for europe institutions to do past ting for thepasspor british? >> the easiest way to get the passport would to be go to norway, do the norway model. the trouble is, you pay in the same amount to the eu and you

have the same labor market mobility, which is what brexit was about. u.k. negotiators have their work cut out for them, no doubt. it is about currency adjustment. it changes the debate. can i change the debate further in the coming quarters? >> it can. problem the eu members do not have. they cannot adjust currency. it. is part of the bank of england probably will be commenting on that, the way it is impacting pols the decisions next week. francine: does boe and mark carney have it tougher than anyone else? we are not sure which way the wind will blow. we haven't even started the process. we do not know what we are looking at.

>> among the four major banks, they have a tougher challenge than the bank of england. you areense of the ecb, running monetary policy. in the case of japan, a huge stock of debt and a history of deflation. to: they go from $30 billion $17 billion. they would do that wherever they are located. all of this brexit talk has to be a huge challenge emotionally for hydrocarbon executives. >> it is a big challenge. any have the luck of being environment, which is a deflationary environment. the numbers are palpable. we had 30% cost deflation last year alone.

had 20% cost deflation in deepwater. hasefficiency of capital changed so dramatically that you cannot use this as you might think. tom: we are going to come back. i want to quiz him on demand dynamics right now. it has been the source of a lot of conversation. toer this morning, i speak -- of columbia university. somehow, i think we will talk to joe stiglitz about what is happening in philadelphia. tom keene in new york. francine, zurich. ♪

francine: tom, we are talking about banks. we are also talking about the currency. you have the fed. we are doing a global show

tonight. let's get more from the bloomberg first word news. >> president obama no one has ever been more qualified to sit in the oval office than hillary clinton. the president made his strongest case yet for clinton and took a number of shots at republican donald trump. >> we are not a fragile people, we are not a frightful people. our power does not come from some self-declared figure promising that he alone can restore order as long as we do things his way. we don't look to be ruled. >> clinton made a surprise walkednce and the two off stage together. former new york mayor called donald trump a risky, reckless, and radical choice. bloomberg is the founder of bloomberg lp, the owner of bloomberg. electionovernment

deadline to certify signatures i recall petition. socialistaduro's government is trying to hold onto power in venezuela. in japan, there are still plenty of questions about shinzo abe's stimulus plan. one fourth includes actual spending. another quarter of the package would be for financing for state-run companies. abe has yet to offer a breakdown of the plan. spain's king philippe will try to end the country's seven-month political limbo. the prime minister is trying to win the support he needs to stay in power. if there is no agreement, spain could be forced to hold a third round of elections. global news 24 hours per day powered by 2600 journalists. this is bloomberg. with ushard clarida

from pimco. edward more is with us from citigroup -- morse is with us from citigroup. he is also with the council on foreign relations area on oil. you are a great support of american ballet theater. let's talk about the ballet of oil demand. do people have reason to question oil demand? edward: they have an underlying reason. the world economy is sputtering, so oil demand should be sputtering. oil has been robust, considering the oil -- world economy. even if china sputters more, we don't see that changing. china is making 2.6 million cars per month. gasoline demand has to go up 8% no matter what.

big changes fuel oil demand. , which wasnd supposed to be the lion's of demand growth in emerging markets, has flattened out for reasons that surprised a lot of people. the major demand is for gasoline jet fuel. no substitute there. ,urprisingly, propane butane, these are things that come about with natural gas production, we have a surge in lpg demand. that is not refinery driven. tom: we don't talk about the local key town until 7:00 a.m. this is an approximation of real oil, then adjusted for rising incomes over the many decades. pre-opec over to the left. the first surge in opec, the second surge.

the spike in the middle is persian gulf one. oil is cheap. the under lowing microeconomics state the gloom kicks. the people worried about $35 or a revisit below 20 nine dollars, what is their case? edward: it is a supply case. this is a supply driven market. we were misled by what happened in china in the last decade. this was a demand response to high prices that triggered, for the first time ever, the exploitation of deepwater and shale. the cost structure has gone down dramatically. it is a supply driven story we have to look out for and the case for much lower oil is saudi arabia confronting itself holding a standard asset long on something. what do you do with that? you pump. you are the lowest cost producer

in the world. that adds to the woes of the world. and richard, dovetail oecd -- edobal gloom on ad morse's world of oil. is he wrong? richard: i think we are consistent with the story that ed has told. we are in a muddle through world. i think now that we have had the three pricing of oil down into this range -- re-pricing of oil down into this range, it does become a net positive for the economy. our view is that oil in this range becomes a modest positive for the global outlook. francine: tom: overall -- overall, are we really

stuck in that oil price range of $40 or $50? could we see it going up? edward: the price range is unsustainable at the moment. you can't produce enough oil at $40 to meet global demand. we think we will see a drop of 1,300,000 barrels per day. at is going to lead to an inventory drop. it is going to lead to a massive -- it is going to require a massive change. we think the price is bound to go back to a $70 range. we are also living in a disruption brown world -- prone world for the oil driven

countries. the question for these opec countries under duress, libya, venezuela, nigeria, is how low is their production level going to go? how unexpected will a disruption be? we saw disruptions with the canadian fires -- disrupt supply, you get a pop of $10 for oil producers. tom: can saudi arabia -- francine: can saudi arabia still be the swing oil producer in 20 years? edward: they can if they go back to the short-term policy of being the market swing producer. they have said loud and clear that if they cut production, they are in danger of losing market share and not getting it back. that is the danger of this new world. unlikely in the next

five or eight years. tom: does the next president need a new energy policy? do we have an energy policy? edward: if you look at what the two candidates are saying, they are very different. donald trump says he is going to get rid of regulation and will curb the epa, he will open the keystone xl pipeline. it is a very different world from the environmentally driven platform that the democratic party has. tom: do you want to comment on this? where is our policy on hydrocarbons or energy? is it good that we don't have one? richard: essentially, the policy we have in place is at least 10 years old. there was a major energy bill in the mid to thousands. -- mid-2000's. that was before a lot of the technological innovation. it is probably a little bit stale right now. edward: last year, there was a

major policy change, the u.s. is no longer constrained as an exporter. the u.s. is going to remain the hub for pricing and that is not going to change. tom: francine. francine: we will get back to a lot more on what demand of oil is doing to global growth. we will be speaking to the former prime minister of finland. you know what i want to ask him? how he would deal with theresa may if he were still in charge. we will go through brexit, growth, negative rates. that is coming up on "bloomberg surveillance." ♪

francine: this is "bloomberg surveillance."

tom keene is in new york. i'm francine lacqua. now, let's get straight to the bloomberg business flash. taylor: canadian fertilize producer protest corporation has cut its quarterly bid. it reported second-quarter profits that missed estimates. hit byhas been agricultural commodity prices. lloyds is trying to stave off earnings slumped by cutting 3000 jobs. credit suisse returned to profits unexpectedly in the second quarter. over -- bossck took over a year ago. that is your bloomberg business

flash. francine? francine: taylor, thank you so much. when you look at credit squeeze , this is aarnings first step, the ceos at the right town. however, it will -- the ceo set the right tone. however, it is still a new market. let's go straight to mr. alexander stubbs, the former prime minister of finland. thank you for joining us. i really enjoy our interviews. you are probably one of the most colorful politicians because you just say it as it is. what was the move like in brussels -- mood like in brussels when they found out brexit was going to leave? mr. stubb: i think it is much easier to say what you think when you are a step down from office.

mood was a first mood of shock. i think a lot of people were frustrated and in awe. it is a little bit like washington dc. it is a little bit like donald trump being elected. like, what happened? i think the eu always goes through three phases. the first phase is crisis. the second phase is chaos. that is what we saw a little bit with the markets, with the currency, with the union of the united kingdom and the parties. the third phase is a suboptimal solution. i think we are looking right now at a suboptimal solution. francine: you still have insiders, i know you are talking to people. what will the final model actually look like in negotiations between the u.k. and the eu? mr. stubb: it is very difficult to say. you have to take things

step-by-step. this is the first time a big country is about to exit the european union. it is very much a 1952 moment or a 1989 moment. huge fort -- this is europe, there is no denying it. we are seeing people trying to figure out the process. theresa may has nominated three key people to deal with the brexit. kind of the mentality, you caused it, so you deal with it. on the other side, the european ammission has nominated former foreign minister and commissioner of france to deal with the negotiations. now people start looking at the nitty-gritty. , i can tell you that the nitty-gritty is going to be complicated. we are talking about 100,000 pages of secondary litigation.

we are talking about a long, long process. what we get at the end of the day, i don't know. tom: the great unspoken this summer of 2016, except maybe for trump politics, is vladimir putin. in finland, there is a unique relationship to the east. give us an update on mr. putin and political europe. mr. stubb: he is a little bit the ghost in the background in many ways. ended, it waswar predicted that everywhere would become a liberal democracy. with yeltsin, that one quite far. russia has taken a quite different town, to put it diplomatically. a rather centralized regime. if i was putin, i would look at this with a little bit with a smirk in the eye and think

about, what is going on? we have trump in the u.s.. we have brexit. we have marine le pen in france. a lot of forces coming along. at this andking basically thinking, you europeans, you deal with your mass. someone sayavia owns hockey. you are the former ceo of the finnish hockey association. on a sweltering day on the east coast, let's talk hockey. does hockey needed bigger goal? [laughter] mr. stubb: it is actually my dad who is the chief scout for the nhl in europe. at the tender age of 81, he is just signing a new two-year deal. we are seeing at hockey can be reinstated where it started.

we are going to toronto to root for the maple leaves. francine: all right. i don't know how to follow up on hockey. let's go to banks. are you worried about european banks? mr. stubb: basically, i think the european union has taken enormous steps in creating a banking union. you remember the lehman brothers crisis in 2008. than 2009 in the euro crisis. i was intimately involved last summer when we were talking about grexit. itselflook at the system , the crisis mechanisms, and the banking union, we are going in the right direction. obviously, there are still talks about whether some of the key banks in europe are stable and in good lace. that debate will continue this summer. we are in the clear or in a

better direction with greece. there are still worries about italy. tom: minister, thank you. you did not answer a question on the goal. next time you are on, we will crush you on where hockey needs to get exciting again. alexander stubb, the former finance minister of finland. larida knows about weak organic revenue growth. really not all that good. you need to stay with us. richard clarida on my favorite ben bernanke chart. we will do that in a bit with ed morse. there is the ed morse tower just to the left. ♪

francine: this is "bloomberg surveillance." we are live incirlik and london. actually, london and new york. weston, jonathan ferro, and alix steel are up next. david: good to see you over in zürich.

we will have earnings out with mark fields. yourll have more of fascinating interview with the credit suisse ceo. it is a big bank week. we will we joined by alan greenspan. ." all on "bloomberg tom: the foreign exchange report. ,all street, new york time thursday evening, friday morning for most of the world, including tokyo. it will be amazing to see where maybetatistic is in 12, 15 hours. the dollar is a little weaker after the yellen fomc event. with us righta now. along with edward morse. we whipped up the bernanke

chart. this is a nice set up. this is the idea of the 2003 bernanke speech. bernanke speaking with the japan deflator rolling over. he wants to get back to the reflation, back to the glide path of inflation in japan. total failure. cap perpetual bonds held? richard: this is one of those things that, in theory, works like a charm. in practice, there are a lot of doubts, a lot of concerns. getting the details right will be a concern. we have the government pooh-poohing the notion of helicopter money. has surprised before, but it does look like there is tension within the japanese officials area --officials. tom: how long is perpetual?

50 years? visit charles dickens? regency england? it means forever. there were perpetual bonds that britain issued hundreds of years ago that are still trading today. it does mean forever unless they are retired or called back. tom: a perpetual bond. could the japanese economy with stand that drew coney and thinking? richard: they are running out of options. doing itenge was traditionally with monetary policy is that at some point you get rates to zero or negative and then you've got to go to plan c. ofn c is some version monetary-fiscal coordination. on: in theory, we focus american and european oil dynamics.

what is the salient discussion point about japan and greater asia oil dynamics? japan virtually plays no role in oil dynamics. it's demand is going down. it is an unstoppable path. that is not where the action is on the oil side. tom: that is why we like ed morse. when there is no answer, he tells you there is no answer. gentlemen, this has been a pleasure. they will continue with us. michael mckee and myself on radio. "bloomberg " that important interview with greenspan. we will talk about secretary clinton somehow. ♪

jon: diminishing risk. the fed inches toward a second rate hike but stops short. david: credits week beats with an unexpected return to profit. -- credit suisse. vonnie: president obama makes yet forngest case hillary clinton's presidential bid. jon: live from bloomberg hq in new york city -- the federal reserve is done. we are looking forward to a speech in wyoming from janet yellen. cracking the door open to the possibility of a hike. the real question is what yellen says in august. x: laying the groundwork for prepping the markets. we got a bit more clarity on what prime minister