u'e e dry. oding uc pwiwiro fi hthatpsyori francine: a divided fed minutes show officials on the time aummd rallies as data shows resale sales unexpectedly jumping after the vote. we speak to nobel prize-winning economist joseph it's -- joseph stiglitz. tom keene is in new york. for the third time since the brexit, the yen is below 100, it briefly flirted below 100, and

we have strong figures out of the u.k. is deceptive to say that it is a sleepy august day, it is not. what i would suggest is that the various shops are staking out their autumn calls. there calls into 2017. francine: i think you are right. a lot of people are on holiday, but august is not sleepy. i agree 100%, we are never on holiday. taylor: japan's exports have not fallen this much since 2009. 14% from july from a year ago. one reason is slowing global demand and the stronger japanese yen, it's gained 20% making japanese products more expensive . turkey has revealed how broad the crackdown was after last month's attempted coup. the prime minister says 40,000 people were detained and 5000 are in custody.

80,000 turkish government employees were removed from duty . germany says that the u.k.'s future relationship with the european union requires a custom-made solution. deputy foreign minister says that they will not be able to cherry pick the economic advantages. what is clear is the u.k. can expect access to the common market that allows the free movement of workers. more details coming out about the north korean diplomat that has defected to south korea. the number two official at the north korean embassy in london arrived in seoul with his family. he defected because of his solution met with kim jong-un's regime. north korea has not said anything so far. a historic night for american hurdler's. 3 in thewere 1, 2, 100-meter hurdles, the first time any country swept the event.

with 54, rated bridge and has 50 medals. -- great britain has 50 medals. tom: equities, bonds, currencies, commodities, the yield, 155, a little bit of a grind. interview, we are grinding oil higher out of an extreme, the vix showing a pretty good equity market. 12.22.on brent crude sterling, 99 when i walked in. .01.7 abenomics, sterling crisis over. 131.60. francine: you stole my board. i forgot to bring you the inflation figure from the eurozone. this is important, because it

indicates if we will become like japan are not. i know we don't have the same unemployment rate. -0.6% year on year, as expected, 0.29. i went to show you the yen movement to the pound. i don't know if we are in a false sense of security because datae only getting that is good, but it is related to the weather. make an outtime to of consensus call. hsbc with us yesterday, hsbc has been on fire with getting things right. there is their call, sterling has dropped down as the brexit, a weaker sterling, then we eb b along. they would suggest that the end of 2017 we have a stunning, weaker sterling, 1.10. the bloomberg call is 134, the blue circle. that might come down.

the zeitgeist is a 120 sterling one year outcome of the yellow circle. hsbc goes further on current account deficits issues. this has massive ramifications if we approximate a 110 sterling. economistwe had an that was outstanding on pound, with the figures mean. how she is the economy. i picked out oil. i thought it would be nice to talk a little bit about some of the trends. i know we don't always see all her to i bull and bear markets, eye-- we don't always see to eye on bull and bear markets, but i wanted to show you the trends. it is thely, definition of a bull market if it rises against 20%. on brent, it would be seen as a bull market. i was interested in this chart

because it is on talk. we went through yesterday, we are expecting an opec gathering. saudi arabia says we would like to stabilize and then the market gains for five days and adds $13. a crazy time in oil charts. bank of america merrill lynch , gillest is with us moec. is it eurozone inflation, is it how the fed sees world instability? no game changer in both cases. if i look at european inflation and quarter, which is with the ecb is looking at, it has been evolving between 1.7 and 1% since just before the ecb started qe. it doesn't change anything with actual inflation.

we are in a very slow inflation situation. moving and it seems to be repressed. there is no change. you can expect after everything the ecb has done we would start to see change. it is not happening. that makes us come both our call. we were not expecting move in september. we expect a move in december. the problem in the u.s. right now is that hawks and doves. you could make anything you want on the data set you have. it is the dovish members that have the voting rights. don't forget. years: f had for about one is the sense any time the balance of risk as to the onnside the fed will focus

this glass half-empty situation, which makes sense in this situation where you don't have that much ammo if things turn sour, which makes sense if you don't know where fiscal policy will go in the next year. from that point of view, they are following the textbook. at the same time look at the data. we have seen wobbles, but inflation is back. it has been normalizing for a while. they'll have to react. they have time. it was the clear. if anything was clear in the minutes, it was not feeling pressure or any emergency. compared to where we were a year ago, every time i was in the u.s. they kept talking that debt inflation. inflation is still not within the feds preferred region, but it has started to normalize. tom: i want to congratulate you on your latest paper.

i hate it. i hate it because i'm forced to read it because it is so smart and interesting. you talk about flows, current account deficits, and you state in europe it is about the businesses and big money like the u.k. account deficit. there is the u.k. current account deficit. one call is it stays lower and wider for longer. janet yellen doesn't have this problem? the united states is not too much worried about flows? gilles: no. exactly. last 10 yearsthe is that we moved to a situation where everyone in my profession was talking about global imbalances. about the u.s. gigantic current account deficit at the time. with the u.s. is demonstrating, and it is important, is that it can grow at close to full employment, if you accept the

idea this is where we are now in the u.s., without generating much of a currency account deficit. it is still a deficit, but a very manageable one. the source of an balance has shifted. the big source of imbalance right now is in a new area. the u.k. presents too big of a current deficit. the u.s., in itself, is in a fairly normal situation right now. tom: with u.s. being in a normal situation, that implies currency movement by other nations. strongat end up being a u.s. dollar, or is the dollar removed from the discussion over the next year? gilles: it is hard to say. , what we have normally is consistent with a stronger dollar. we may discuss forever the timing of the next moves by the

fed, but we cannot know the direction of the moves. whether or not they strike this year or next year, but they will continue to normalize. it is normally consistent with a stronger dollar. in europe, we are doing the opposite. the ecb does more. all this is normally consistent with the dollar that is stronger. tom: fascinating. gilles moec with us through the hour. ofthe next hour, 326 pages joseph stiglitz. .oseph stiglitz on the euro he goes after olivier blanchard. what else would you expect from joseph stiglitz? this is bloomberg. ♪

francine: it is "bloomberg surveillance." on francine lacqua in london. tom keene in new york. let's talk about corporate's, let's get to the bloomberg business flash. taylor: nestle, sales grew in the first half in the slowest pace since 2009. the world's largest food company reported a 3.5% increase in revenue, slightly less than estimates. it is tough for nestle to raise prices because of little inflation in europe. home prices in china are rising, cities as as many before. 55 in july versus 55 -- 51 in july versus 55 in june. slowing down real estate price hikes, some cities have raised down payment requirements for buyers of second homes.

brexit having an uneven impact on the housing market. remain areas like london have seen a drop in the number of properties put up for sale and an increase in canceled transactions. areas that voted to leave saw property listings increase, and little change in cancellation. businessour bloomberg flash. keeping the focus on the u.k. and the economy? francine: we certainly are. we have the brexit, we spoke to one of the german ministers. the town jumped after retail sales were unexpectedly much stronger than we thought they would be. they surged after britain voted to quit the european union. sterling also encouraged taurus to spend. the head on brexit coverage. on the job for 25 years as we try to figure out what brexit is trigger they will

article 50. on the serious note, how much would it have to do with the u.k. finally being stronger than we think, and how much does it have to do with it being a difficult point of data to predict? >> if retail sales have collapsed, we would say that is the brexit affect. it went up in july, but it is a very volatile theory. the pointmaking earlier that you have to be careful with retail sales data. also in july in britain, we saw the sun. that pushed up barbecues. closing did well. you have to break that out a little. you talk to economists, and they say it is better than expected, but the pain is still to come. ro brexit will say that everything was blown up after the referendum, and things are much better. francine: when does the pain

come? do not know when article 50 will be triggered, but are we going to see a drop in the u.k. economy, or will be on trend -- will we be on trend until blue -- until people move out? do not see recessions, they see stagnancy, other seat recessions, a very shallow one. it is just one month since the referendum. the question for employers, do you let workers go, that would be a bigger drive for a name ointment and would -- for unemployment and would affect retail sales. some time for them to make their retain his they will employees, if they will take on more staff. they will want to see the data xit, or aexit schme bigger effect on the economy. chmexit.ike brexit s

that really defines the moment. the outlier call of 110, talking about net implied and inflation. the three or even 4% inflation from a weak sterling, how does that affect the british people? obviously, some people are suggesting the inflation forecasted, the bank of england is already stale a couple of weeks after they have a the chart, showing that any are forecasting a 3% inflation next year. the bank of england does not see 2018.lation until that dilemma for the central bank come they want inflation at 2%, but how do they get it? import rice is going up will affect consumers and workers. and movement,ncy

the weaker sterling goes, they require in points for money facture goods. tom: within bloomberg reporting seven ramification of brexit, do you assume a higher inflation for the length of the brexit? if brexit is two years, four years, six years, you get an aggregate 3% each year? is that how this works? simon: it depends of the pound the kleins also. under terms. one year is stripped out to the next year. you see that with declining oil prices. inflation took on a different meaning when you strip out the effect. stackeding is a inflationary environment that could last through the brexit. to those whoe fair

think the brexit will have a short-term effect, and long-term when we strike trade deals we will have a much better -- the bank of england thinks that is reason to worry about the outlook. tom: i like the idea of a new definition of stagflation. simon kennedy with brexit schmexit coverage. important research groups. ryan meijer has been dead on with the linkage of advertising media -- brian wieser has been dead on with the linkage of advertising media. hitting the message out. ♪

francine: i am francine lacqua in london, tom keene in new york. time for the morning must-read. i picked up something different because i know that you like algebra. gilbert, he wrote, the world is braced for the discovery of a fifth central force of nature. the 4 are electromagnetism, gravity, and strong and weak forces for the so-called standard model of particle physics. e -- leading the revolution purity which had a -- he will try to shock the system i raising rates

without giving the market a heads up. tom: mark has touched upon a huge issue. i think it speaks about the exhaustion of the present-day theory. i love how british this is. when you talk about electromagnetism it has to be michael faraday with the statue on the river thames on the causeway. you go back to the idea, will we go back to 19th century economics, or at least pre-world war ii. that means we go back to more newtonian physics in a sim bhullar, almost tree shea type analysis. the article by mark gilbert is exceptionally smart. i agree. i like that you get the feeling by reading the article that may be we are looking at the wrong things. a little bit like research, instead of looking at how you

debate the best way forward, what if we were only measuring wrong? joseph stiglitz talks about this in his own book. inventing modern physics of dynamics equilibrium theory. to go back toing a more simpler analysis, which mark gilbert alludes to. a great essay on the need to respect the old physics. francine: physics class with professor keene. we were are so -- where also a professor discussing the book rethinking capitalism. this is bloomberg. ♪ [ clock ticking ]

time. you only have so much. that's why we want to make sure you won't have to wait on hold. and you won't have to guess when we'll turn up. because after all

we should fit into your life. not the other way around. ♪ everything is cool when you're watching a screen ♪ ♪ everything is awesome, ♪ when you're sharing a meme ♪ ♪ a voice remote, "show me angry kings" ♪ ♪ you know what's awesome? everything! ♪ ♪ apps that please, more selfies, ♪ ♪ endless hours of the best tvs ♪ ♪ brand new apps, shows to go, ♪ ♪ awesome internet that's super whoa... ♪ ♪ everything is awesome xfinity. the future of awesome. tom: it is a beautiful hong kong extraordinary view. years,mazing over 200

250 years, how the land as reclaimed the harbor. the land pushing out from hong kong. i believe that is the mandarin hotel in the left corner. i believe i said where the horizontal windows are and had a few beverages of my choice. francine: i believe you flew to hong kong just to make sure that places you are talking about are in the right places. tom: it is a spiritual bar on top of the mandarin. spiritual. i am tom keene. francine lacqua in london as we reminisce. with first word news, here is taylor raikes. taylor: donald trump overhauled roundtablend held a in new york. they were discussing ways to defeat radical islamic terrorism. donald trump named steve bannon tend run his campaign.

hillary clinton said this by shakeup there is no new donald trump. in louisiana the death toll from the flooding is 13. floodwaters damaged 30,000 homes and thousands of people are living in shelters. the british government wants to use a sugar tax on soft drinks to fight childhood obesity to pay for school sports and healthy breakfast clubs. call for food and beverages to redo sugar in products most eaten by children. arriving in beijing for her first overseas trip. the nobel peace prize winner is signaling her foreign policy will be more friendly to china. the obama administration considers the changes and myanmar its biggest victory and might not be happy with the move to the chinese. for american swimmers who say point, 2 robbed at gun

athletes were pulled off of their flight to the u.s. by brazilian authorities. they were released after promising to speak with investigators today. resilient police are skeptical about their change. another swimmer, ryan lochte, is in the u.s. he changed some of the details of his original story. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. riggs.ylor this is bloomberg. francine: thank you. western capitalism in crisis. economic policy has neither reformed the financial system or restored stable growth. we have mariana mazzucato. gilles moec is also still with us. your book is getting a lot of traction. a lot of the thinking which was overlooked two to three years ago is getting traction because it folds into the political

arena with the brexit, with donald trump. what is wrong with what we are doing and how we are distributing? mariana: a key problem is what we are focusing on, around inflation. that we should focus on the long run. one of the problems worldwide is around business investment. we have not understood the role of policy in terms of creating and dodge and nestle animal spirits -- of creating animal spirits. periphery wern have low business investment and a low level of vision in terms of where the public and private should be: investing. one of -- should be co-investing. one of the points in the book, and we co-authored chapters with wonderful people -- is we should get out of the framework or policy is fixing problems and about failures, and

shaping and creating markets. economic growth doesn't only have a rate, it has a direction. francine: the problem is you need someone who is a radical thinker and has been in a position of power as a politician or central banker that is brave enough to do it. could it backfire? mariana: you can look at the data. wide record. close to 2 trillion euros in europe. we have record level financial of asian. did notder steve jobs engage in a buyback program, but tim cook,. companies focus on short-term stock options rather than reinvesting back into areas like human capital formation. if you think about one of the big debates around secular stagnation and the relationship between technology and unemployment, none should be inn as inevitable problems

advanced capitalism. when we do not have companies reinvesting profits in skills, we have a crisis. organization has been -- mechanization has been with us for 200 years. today we have a crisis, that is a new way of thinking about the problem. tom: i want to congratulate you for not only taking about capitalism, but the timing could not be better. the charts that you have in your chapter with michael jacobs are standing on the decline of real wages. in particular, the fallback of real wages within the united kingdom. what is it about the united kingdom they are getting wrong? mariana: i'm glad you pointed to that figure. .t is also about private debt it is amazing that after the financial crisis we focused so much on public debt that it was private debt that actually caused it.

real wages have stagnated in the u k and u.s. since 1980. you have to take on a huge amount of debt to maintain living standards. if we do not have a change in corporate governance, which we haven't had in the u.k. or u.s., if we have no new relationship between capital and labor, old words but useful concepts, we need a symbiotic relationship between workers, managers, financial markets where we have stakeholder capitalism as opposed to shareholder capitalism. that is where the u.k. and anglo-saxon type economies have gone wrong. the shareholder value, if you want to hurt the ability to think about where the value actually comes from. i think that we do have learned a lot from germany on this. tom: productivity, it is not 1956 or 1957, the land of robert l though, it is about new distributed tech knowledge he -- robert solow, it is about new

distributed technology. is that our friend or enemy to getting to better capitalism? mariana: where does capitalism come from? my previous book was all about, where did silicon valley come from. technologies that make the iphone a smart phone and not a stupid phone come from? the answer is the public sector. musk is the new here really silicon valley, the guarantee loans that tesla received is about patient long-term finance, that also sometimes produces failure. issue of where will patient long-term finance come from, if it is not coming from the public sector because of the of session with austerity that we have, and how to allow public institutions to engage with the

uncertainty, risk, inevitable failures that any venture capitalist will tell you is normal. read what the state has not had is a way to socialize risks and rewards. to get the upside to fund the downside. a new way to think about distribution issues. economics, and i would argue politicians, because we have been doing traditional things for so long, monetary policy is anything but traditional, but are we thinking along those lines? gilles: it is becoming central across the profession for the reason that you mentioned. a very inventive monetary policy, things did not take off. fiscal is really going back as the answer. in the eurozone we need to rethink the way that fiscal policy is here the problem we have institutionally in europe is that we don't have exactly the right environment in the

eurozone to produce the kind of clear path towards a rethinking of the state of the economy. another problem we have is the legacy of not so great experiences. if you think of spain, they had a big problem with private sector debt. there was also a quite clear case in central projects. that they did not have that much. we have a legacy of bad experiences, institutional problems. i read this every day. alone ago i was probably saying that we need to start thinking about a more expensive central policy. tom: let me take you out of the ivory tower for 32nd. 30 seconds.r -- for how do we spur infrastructure? if we need a new runway at

heathrow, how do we do it? isn'ta: the problem infrastructure. it is austerity versus infrastructure. what kind of structure? at germany with the energy band program, it is about greening the economy, which will include green infrastructure, -- distribution infrastructure. in the past, it required a particular type of infrastructure and direction of the economy. one problem in the u.k. is that we continue to have not only a stop and start policy around green, that will be taken away all of a sudden without justification, but we do not have the debate about what it means to radically transform the economy, what is the role of infrastructure in the transformation? and the in spain southern periphery, countries like italy have low deficits historically.

the deficit has never been the problem. the problem is debt to gdp. canuld argue innovation transform the entire economy, increasing productivity, enhancing the gdp, which is the denominator. italy has had a relatively low deficits and very high debt to gdp. the denominator isn't growing for 20 years, before the euro started. the ratio, the numerator him even if it isn't growing high, 3% to 4%, the ratio can go to infinity if the denominator is an growing at all. tom: she is talking numerator and denominator. we love that. francine: it is so "surveillance ." she stays. with greatzucato insights. coming up, we speak with joseph stiglitz who wrote a chapter in "rethinking capitalism."

he joins us with his new book "the euro: how a common currency threatens the future of europe." that is 6:30 in new york. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." francine lacqua in london, i am tom keene in new york. we have a problem. sometimes when michael mckee walks up to you, he says, we have a problem. gilles moec with us, also with us with a new book from suck sussex,new book from

mariana mazzucato. turning attention to what is going on in portuguese banks. looking at the 10 year note yield, it has moved higher. here is the issue. investment grade rating can be eligible for the quantitative easing program and the ecb portuguese bonds as collateral. only canada db rs gives them an rating.nt grade company officials have expressed concern over what is going on in portugal. you see the reaction. lose the rating, does mario draghi have to sell the paper back to the market? >> they would not have to sell the paper back to the market. they could not take more. portugal is very close to what analysts call the doom loop. in europe, banks tend to load up

on sovereign debt. you can see how close portugal is to italy at the top of the doom loop. their country that is soaring. bad bank loans hurt the country's fiscal position. as that deteriorates, that hurts the position of the banks. it is a doom loop. add in the possibility banks may not be able to sell the collateral, and you have problems in a country with a .29% debt to gdp ratio it is estimated that if you saw a 15% fall in portuguese bond prices it would wipe out one quarter of portuguese bank capital. tom: i thought do loop was great when they opened for death cross. who came up with that phrase "doom loop?" francine: i like it. many times you do see vicious circles.

portugal,ews is that i know it is significant, but is it a bigger problem because it is more systemic if something goes wrong? gilles: definitely. in the portuguese case, negotiating a longer form of atport, which wasn't enough the time, if portugal gets into trouble again we know how it will be dealt with. we have emergency mechanisms to deal with it. it doesn't bring positivity for the long run, but we know how to emergency.n italy, we do not have the current supportive institutional setup in europe to deal with a massive issue, which explains why at the moment there is lots of good will from the rest of europe. think, for instance, of mr. anythingting on

fiscal. that is probably a reflection on the idea if you push italy too much, ask them for more austerity, you have the risk of backlash. .rancine: also the referendum it is unsure how that will go. interview with mario into said it was right not to take a bailout. should italy have taken the bailout? i don't think that is the question. it is about italy since renzi has come on board. zero growth and productivity. if you look at the reforms that he has done, structural reforms which were a euphemism for going dragon, one of the laws that says if you have more you cannot fire or higher. the problem is that they have very small companies. the average italian company is

four to five workers. the whole notion that there was article 18 the meant you could not hire or fire if you had over 15 workers is not the italian problem. the problem is they have not had public or private investment in education, research and development, training, human capital formation has lagged for 15 years. we can talk about vale ins and bailouts, but if they do not kickstart growth, we can get a bandage today, but they will have to be bailed out six months. francine: bandages are better than nothing at all. mariana: not if it makes everyone talk about the wrong thing. gilles: on the italians, i agree there has been lack of investment for years. have their eyes on the right priorities when they chose between more disco and structural reforms, that almost

always went into more austerity. structuralcal and reforms, they almost always went into more austerity. it is precisely because property rights are not where they are in other countries in europe. francine: go to the portuguese they say it is time for morning movers. we are looking at oil. we were talking about rent possibly going into a bull run, in the last couple of months. that has not happened. 49.75. it would have been the first time since july 5. this is bloomberg. ♪

francine: bloomberg surveillance. francine here. let's go back to the conversation about that are capitalism. gilles moec and mariana here.ato are she is the author of "rethinking

capitalism" and the advisor to the first minister of scotland. it is full circle. we are speaking with joe stiglitz later. when you speak to nicola sturgeon, she seems to be the most grown-up in the brexit. gilles: she clearly has some sort of a plan. when the news came out of the brexit vote. the problem is that it is unclear what room to maneuver she has. i guess the favorite approach what was publicly stated initially that they would euegotiate membership of the even if the rest of the uk. that seems complicated to organize. then it is trying to get the -- best possible deal with the u.k. with scotland and it. if all else fails they are exiting from the u.k.

altogether. there is a logic and the clear ranking of what they want. the problem is, they are not in charge. they're not completely independent. tom: a book a few years ago revenge."rxist if we need to think about capitalism, what do we need to do to shift the dialogue away from short-term-ism? rx iana: when i read ma appreciated capitalism, free capital volume 1, 2, and three is all about change. you were talking about physics. one of the problems with neoclassical economics is they took newtonian physics, focusing on the center of gravity, reviewntative agents, read about changing capital

labor ratios, capital output ratios, what is it do about the profit ratio, it is impossible to have a static audio mathematics helping you to model. that isan dynamics, where the revolutionary brand of economics is going. are we talking about nicola sturgeon or marx? tom: you're done. we hope to get you on again to talk about rethinking capitalism. much. moec thank you so he will wander into the next hour with us. in the building, joseph stiglitz of columbia university, the professor has a scathing book on the currency, the euro. ♪ ♪ everything is awesome

♪ everything is cool when you're watching a screen ♪ ♪ everything is awesome, ♪ when you're sharing a meme ♪ ♪ a voice remote, "show me angry kings" ♪ ♪ you know what's awesome? everything! ♪ ♪ apps that please, more selfies, ♪ ♪ endless hours of the best tvs ♪ ♪ brand new apps, shows to go, ♪

♪ awesome internet that's super whoa... ♪ ♪ everything is awesome xfinity. the future of awesome. [ clock titime. ] you only have so much. that's why we want to make sure you won't have to wait on hold. and you won't have to guess when we'll turn up. because after all we should fit into your life. not the other way around. tom: the dollar weaker this morning. in this hour, britain considers

a plunging pound sterling. after half a century it's not about europe it's about the euro. it is a failed experiment. joe stiglitz on a failed euro. -- good morning, this is bluebird surveillance. lot from our world headquarters in new york. thursday, august 18. with me, francine lacqua wine london. the idea of just a glitz saying it's a failed european currency, you wonder what that does to the movement of the currency over the next five years. francine: many people saying it is a failed currency. i would argue and probably push back the it is too late. you have the currency, let's make the most of it. tom: he does a lot of pushing against consensus within his new book. we will get to that and a bit area first word news coming years taylor riggs. taylor: japan's exports have enough on this much since 2009.

oversee shipments plunged from a year ago. one reason is slowing global demand. the other is the stronger japanese yen. it is gained about 20% making japanese products more expensive. turkey has revealed how broad the crackdown was after last coup.s attempted more than 40,000 people or detained in more than 5000 are still in custody. 80,000 turkish government employees were removed from duty. germany says that the u.k.'s future relationship with the european union requires a custom-made solution with deputy foreign minister's -- the british will not be able to cherry pick economic advantages. ross says what is clear is the u.k. can expect access to the common market unless it allows the free movement of workers. .ore details are coming out that north korean diplomat who is defected to south korea. officials say the number two official and north korea's embassy in london has arrived in eoul with his family.

he told -- north korea has not said anything so far. at the summer olympics, a historic night for american hurlers. hurdle,n's 100 meter the first time any country swept the event. the rollins from the gold. the u.s. leads with 93, 30 of them gold. great britain has 50 metals. global news 24 hours a day, powered by our 2400 journalists and analysts in more than 120 countries. i'm taylor riggs. tom: thanks so much. equities bonds, currencies, commodities. not much going on. futures flat. you are over 113 is a big deal. i want to get the michael mckee in a minute. .29, jan was 99, a little bit weaker over the last hour. sterling explodes higher even

though the consensus call is weak sterling overtime. francine: brexit, what brexit? retail sales are not bad. employment is great. winning medals in rio. it's great. probably my story of the day. almost at 15, not quite. it briefly touched below 100. tom: i did this in the last hour. this is an important chart. the zeitgeist is the yellow circle, maybe a 120 sterling. brexit coming down and the blue the consensus of call. that blue circle will come down. hsbc is way out front with a 110. the ramifications of a year-end 17 110 sterling are jaw-dropping. francine: i really like the chart. i'm not sure what comes after this but if we are not feeling the breads of pain -- the brexit pain -- i think consensus is for

weaker pound. a bullish talk on oil. this is brent in white, wti in blue. we were almost touching a 50 so we kind of peter goff. if we had touched 50 it would have -- we would have gained what he percent. on talks of some kind of stabilization. i had a nightmare last night. had to get up at 1:00 a.m. have my handheld. i try to imagine joe stiglitz on the fed board. can you imagine the minutes? can you tell who is saying what in the fed minutes? >> you can't. which is one of the issues. a couple of clues. you can separate out those who are voting from those were not because participants is the .ntire group and when they say it was noted, that usually refers to the chair.

it's hard to know. we do not let a whole lot. the fed is trying to figure things out. not much has changed in the economy. inflation remains low and unemployment is falling. neil irwin of the new york times writing about this this morning. what it shows is the fed is trying to figure out what its models are doing now and we have seen this with john williams and his paper this past week. 4.7% unemployment you should be seeing an inflation and you should be seeing the phillips curve come to pass and it's not happening. they're trying to figure out why that is and the implications for monetary policy. the move fast, slow, will you be behind are not? nothing to really hang their hats on in terms of when the fed is going to move. francine: what exactly did we learn last night? the doves and the hawks, doves have more voting rights. is really expecting

inflation to overshoot anytime soon in the probably understatement of the year. michael: central banks, they can move their rates to affect the inflation rate. they cannot really do much about unemployment but in unemployment still continues to go down. are you at risk of falling behind if you don't move now? that's the debate they're having. so far with inflation solo and with low growth around the world bringing more disinflation to the united states they've decided they can afford to wait for right now. we don't have any kind of got post. charlie evans of chicago suggested you wait until you see the whites of inflation size. at this point all we know is they don't seem to be ready to raise rates. think they're too low but they don't have a reason to this point. francine: they think they're ready but they're actually not ready because they're not raising rates. michael: i'll be down in a moment.

gilles: i don't know what the definition of proper inflation is. because of inflation in the u.s. right now, the ecb would love to see that. definitely love to see that with core cpi above 2%. normalizing. sorry to be so repetitive about --s but in the end it is , becoming very hard to argue that we are not close to that. inflation, it is normalizing. they will hike. i agree that the minutes were very noncommittal. tom: bring up the chart if you would. the idea of inflation all over the map. service sector inflation curling up the white line. goods inflation going nowhere. you and i looked at a chart on facebook live yesterday of medical inflation in owners

equivalent looking like service sector. how could janet yellen ignore medicine in red being very much inflationary? michael: those are the things that affect people on a daily basis. the things they pay money on most often and that should lead to inflation expectations rising but they're not. tom: exactly. michael: americans are telling the surveys and financial market suggesting people do not think inflation is rising even though they are experiencing it in the things they are buying every day. they may have to do with the fact that gasoline prices are so low. tom: i strongly agree with that. the fed seems to be moving because of those expectations in a different direction. michael mckee, we will do surveillance throughout the morning. moec, thank you.

it is a tour de force. stiglitz writes these short books and every once a while he writes a killer sick book on joe stiglitz economics. the euro is about the failure of the currency. this is bloomberg. ♪

francine: let's get straight to the bloomberg business flash with taylor riggs. taylor: brexit is having an uneven impact on the u.k. housing market. says thatstate agent programming areas such as london have seen a drop in the number of properties put up for sale at an increase in cancel transactions.

areas some property listings increase and little change in cancellation. and -- airlines and china are desperate for pilots. and he to hire almost 100 per week over the next 20 years to meet demand. -- winners are expatriate regional chinese airlines often offer to pay pilots tax bills too. sticky global demand for smartphones is not slowing down son -- not slowing down samsung. samsung reported better-than-expected second-quarter profit. u.s. carriers are promoting the latest galaxy smartphones to consumers were passing of apple's iphone. tom: it is death of tv. i think tv has died 47 times the started surveillance years ago. brian wheeze or, the most articulate advocate for the value of tv for all involved.

maybe that includes mr. trump and secretary clinton as well. if you were advising mr. trump and his new team on spending millions on television, is that a good message for him? brian: i would argue that i observed tv's value to those who use it. taking a step back to any political candidate, it is well documented that tv works. that i havee way been looking at this is whether or not the republican candidate will pivot to normalcy, which also includes things like using tv. tom: barry goldwater was a totally different rose before marshall mcluhan for that matter. of laborater dynamics day august of 64 are totally

different than mr. trump. he's doing tweeting, fired his staff, got the new crew in. i get that. to the go back to block and tackle political ads? brian: the trump campaign capitalized on social media in ways unlike anything since howard dean. their failure to use mass media probably heard. seemingly, it's still early in the sense. tom: what's so important here is secretary clinton is actually stopping spending money in selected states where she is doing so well. the polarity is something the united states has never ever seen. francine: when we go back to looking at donald trump's campaign, it is just him.

i am who i am and he's in charge. is it almost impossible to look at a campaign? he does what he wants on a day by day basis. brian: it's sort of an expression of and id. organization looking to maximize the value of the campaign and the party supporting it. a party is able to raise money, spend money helping get out to support the party including the presidential candidate and that is not what is happening here. francine: how difficult is it for him to actually attract campaign money? you have the old republican guard telling him you need to be more stable and he is even more reactive than he was two weeks ago. brian: i think that is going to be a limiting factor. certainly the rhetoric has been

so divisive i think to almost anybody who wants supported the republican candidate. to the companies you follow, they enjoy politics? academic profits of the cycle? -- do they make profits off the cycle? brian: i cover the more nationally oriented media who see relatively little political advertising from the national properties. the owners of local properties, cbs and fox in particular. foxnews do see a lot of spending from political because sometimes it is just cheaper to buy a national avail from fox news. even if you only care about a couple of states. tom: i got eight battleground states. you would suggest to go to fox national.

>> it was during the primaries in many instances. tom: the secretary clinton have a lot of money as you said? brian: they cannot have too much money because you don't know where you are going to need to heavy up. i don't think there is such a thing as too much money. francine: do you need money when you tweak yourself and actually get a lot of traction? brian: here's the funny thing about social media. the howard dean campaign laid a lot of groundwork for the stuff. the idea that social media is powerful and appealing to a narrowly defined base which is great for fundraising. that's not what gets the vote and that is not what causes awareness of your brand attributes. francine: why? because you look at social media? how does that work? it gets me thinking. i look at social media and think , let me look at that on tv. has more of an impact?

brian: generally speaking, social media is less useful, less impactful for things like get out the vote. less impactful to the people who aren't paying attention to the social media feeds. tom: and the time and we got left with you, feeling fix has been volumes written. i've seen pro nbc, anti-nbc. what is the lesson you take away from tv versus all of these good competitors earnestly trying? brian: advertisers are looking at professional video relatively monolithically. it's the same thing whether it's delivered over a tablet, a phone or traditional tv set. tom: sir martin sorrell needs to sell the bacon. brian: he needs to sell the services, the pfizer element of it. the marketer does not really know.

if you are g.m., all you know is that if you spend more money on a medium relative to your competitor you probably do better than if you spend less versus your competitor. the advertiser is willing to take the professionally produced content in whatever format is delivered. tom: in the summer nothing's changed since madmen -- in summary nothing is changed since madmen? actually, i wore this bowtie backbend. , on how we consume and profit from advertising as well. coming up, we will profit from a conversation with joseph stiglitz of columbia university on a currency that is grievously flawed, the euro. this is bloomberg. ♪

francine: welcome back. let's get straight to some of the data we had on brexit. the pound jumped. u.k. retail sales surged in the month after britain voted to quit the european union. hot weather bolstered sales of clothing and footwear. on all of this with dan hansen. a lot of people are saying the hot weather, we are buying more. we have had inflation, retail sales, employment and they are

all better than expected for the month of july. dan: they are. we had a relatively good data docket this week. the thing you've got to remember is retail sales, a lot of temporary factors. the fact that the pound has fallen so much. inflation is on the rise. it's going to rise further and it's going to put a squeeze on household incomes over the coming year. i think that's going to -- retail sales, headwinds. we do not see much in the labor markets. unemployment for the double line -- further down the line. lineink further down the -- francine: how much worse is it going to be in the coming months? is this a trend until we trigger article 50 or are we going to see bad news coming in? dan: we've seen the fall in the pound so were going to get that squeeze on household incomes. --hink investment intentions

hiring could push up unemployment. with inflation up nominal wage growth down, that squeezes incomes and real purchasing power. tom: francine said the most important thing of the morning. encourage tourists to buy more. there completely ignoring second and third order of facts of sterling depreciation. the answer is, within your reporting, what is the potential for a boom economy off of a 120 or even 110 sterling were hsbc think it's going? dan: with sterling, you are alluding to the net trait affect from a much weaker sterling. i think we are a little bit less sanguine that we will get a real boost.

.he normal argument runs here depreciation boosts exports, imports weaker. that boosts gdp. the point i made earlier about the household real incomes in the u.k.. we import a lots of that affects household completion. the ability to affect domestic demand. will supply chains, ask you export you also import a lot more. those things go hand-in-hand and you tend -- tom: coming up, on his discontent over the currency known as the euro, joe stiglitz. ♪

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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. francine: the day after the fed minutes, this is bloomberg surveillance. let's get trait to the bloomberg first word news with taylor raikes. taylor: donald trump and his

overhaul campaign staff held a roundtable in new york. the campaign says they were discussing ways to defeat radical islamic terrorism. trump named stephen bannon to run his campaign. hillary clinton says despite the shakeup there is no new donald trump. in southern louisiana the death toll from that massive flooding has risen to 13. floodwaters have damaged more than 40,000 homes. thousands of people are still living in shelters. .he new twist in that story four american swimmers who say they were robbed at gunpoint, two of them were pulled off their flight to the u.s. by brazilian authorities. they were released after promising to speak with investigators today. brazilian police are throwing -- are growing skeptical about the claims. ryan lochte is back in the u.s. lochte changed some of the details of his original story in interview. uber plans to start putting robotic cars on the road by the

end of the summer. the right hailing app's robotically into -- in pittsburgh will be overseen by a human up -- 100 times cars due by the end of the year. global news 24 hours a day, powered by our 2400 journalists and analysts in more than 120 countries. raikes.or this is bloomberg. francine: thank you so much. i don't know what regulation and how you ensure this. you could be reading the joe stiglitz book while someone else drives for you. a big win for volvo although the volvo deal is not exclusive with uber. tom: pittsburgh is the single place to try this song and dance because of carnegie mellon where they have a thing called buggy. what you do, they do this in the spring. the engineers make these self driving things and they put engineer girls in them and push

them down the mountain towards one of the eight rivers in pittsburgh. i'm not kidding, they do this. francine: here in the u.k., a m.ggy is a pra tom: a thing like a self driving car that the engineers build and then they pushed innocent women down a mountain toward one of the eight rivers. none of them die, they all have yingling beers and they are done. pittsburgh is the perfect city for uber detritus and. -- for uber to try this and. francine: introducing self driving cars in pittsburgh. we were expecting them further along the way. they will be this pittsburgh fleet supervised by humans in the driver seat for the time being and they're using volvo cars. , i don't believe it. a widely anticipated book.

this is joseph stiglitz. scott stiglitz books. a thin book where he writes about something he's written brill fish brilliantly on the injured and killed in our wars in iraq and afghanistan will book that even conservatives have to read. there is the stiglitz thick or book. the euro is one of those and we congratulate joe stiglitz for dropping by today. even germany as a failure, why is germany a failure? joseph: we are talking about its growth rate. if you judged its growth in the period since 2008 since the global financial crisis it has been dismal. if you look even more detailed, what's happened to the ordinary citizen? the bottom 30%. it's even worse. even less of a model for others to follow is the fact that it's model cannot be followed. unit limited growth, its growth

was based on surpluses not all countries in the world can have surpluses. the basic law of economics is some of the surpluses have to the sum of the deficits. if some country has have surpluses, some of the countries have to have deficits. tom: you're very outspoken and respectful of economists you disagree with. it take a shot at can rogoff. you don't take a shot at your colleague olivier borchard out of m.i.t.. your critical of what went on within the crisis. the outcome of that, rogoff, can agreean stiglitz on, interest rate are bizarre. bring up the chart are you mr. rogoff right now. negative interest rates is the ultimate stiglitz distortion joseph:. what it means is that the economy is not doing well. the fed, central banks all over

the world are doing everything they can and even at zero interest rates there is a weak economy. tom: we are observing mervyn king's pound sterling adjusting to realities. your arch criticism is the euro, the currency is a failed model because it can't adjust to these interest rate distortions. joseph: you have shocks to the economy. the global financial crisis of 2008 was a big shock. that effectively countries differently. different countries have different mixes of products. one of the things germany had that others did not come it was exporting machine products that were demanded by china. one of the problems of the countries like italy and spain is that they were producing shoes and things that were also produced by china. while the demand for germany

kept up, the demand for the others went down. that require some adjustment. tom: joe stiglitz on the edge of david ricardo, i love it. francine: i love it too. congratulations on a book which has had so much traction in europe. something that quite rare. even if you have time for reading they often don't pick up books like this. when you say that the euro is a failure, what is the alternative at this point? we don't have an alternative until we break it up. when that be a systemic and dangerous thing to do? joseph: it's better than continuing in the current path. in other words if you look at what's happened as a result of the euro, the rigidity it is put in. it took away the interest rate and exchange rate. mechanism for adjusting, did not put anything in its place. europeput, the gdp of

below even the united states. we were the country from where the crisis began. we have done a better job in recovering. basically stagnant. .4%. that is not a good performance. would you have to contrast is continuing that dismal outcome. greece.ons in spain and an alternative. of course a divorce is not going to be easy. it could be done in a way that is better than the current system. it would still be better if they put in place institutions that would make it work. the question is, will they do that? francine: if the euro bricks apart, but say the ecb is fed up

with austerity with a vote in a party that wants out of the euro, france does the same, how many years of pain delisi? six years of recession before we get into this utopia world you are talking about? 2008h: the crisis began in , 2010, 2016. the market, with the euro is not adjusting well. i think an example of countries that have exchange rate like iceland, responding to crisis, while of the countries with the deepest crisis responded very quickly. a small country. i think we're not talking about six years. i think were talking about a couple of years. argentina, once it broke with -- dollar, began an enormous beginning in 2002 it had a growth rate of 8% and put it right next to china as the fastest-growing country in the

world. the continued until the global financial crisis. francine: you would argue for a breakup of the euro while at the same time for stronger banking union. joseph: what i would argue for is a stronger banking union and doing the other things that would keep europe together. that is the first best. the question is, is there enough lyrical solidarity, a loaf -- enough will within europe to do those limited number of things ,hat would make the euro work make the eurozone return to the kind of growth it had before the euro. tom: you have a lot of critics. -- this is not adjusting its debate, a political debate. how do you respond to the germanic tone of, we came out of world war ii, conrad at number

have the courage to get together with everybody else and make this system. how do you respond to axel weber and others that say we have to persevere forward with this program? i agree that the european project is very important and i think they have made in norman us progress in so many areas. the question is, the timing and pacing of the creation of a single currency. they put it to early. phelps --ot mondale, the three of you get together with differing politics and ideas and say i'm sorry, we have to move in from one european currency. what is your prescription for the new euro? joseph: the prescription is, if they can't get it together, probably dividing into the two

or three different currency areas, i giveaway in which it can be done fairly smooth. one of the things they are to take advantage of his modern technology. with modern technology we don't need to use old pieces of money to the currency area and we can go to an electronic payments mechanism. that would be enormously helpful in helping regulate the economy and facilitating that transition. once you add electronic money it would mean you would be able to monitor much more closely what was going on and that itself would be able to regulate the sort of destabilizing blows that have been such a problem. tom: that is the heart of the matter what you do with a new europe when it is in three or four senses of regional blocs. joseph: sweden is a member of the eu but not a member of the eurozone. it has been doing extraordinarily well.

a lot of people say was the problem. euro o."book is "the francine: we have major elections next year, france and germany. assets across the world. european stocks little on the higher side. this is on policy optimism that the fed will wait. this is surveillance.

tom: good morning everyone. in london in new york and around the world is the shock of a lack of productivity this summer of 2016.

joseph stiglitz is in support of the euro. we migrate to other issues right now. just a glitz, i spoke to you about this when you were in philadelphia at the democratic convention. technology has surprised us. what is the surprise for you of technology that has driven us to low productivity that all agree is unacceptable? joseph: part of this issue is changes are very fast. . sectoral move part of that sectoral move more to the service sector, really hard to measure productivity. i think there is more going on. i think whenever you have these structural transformations which we are going through there are difficulties of adjustment. some of those difficulties get reflected in lower productivity. tom: everybody is begging for more investment and the idea of

capital deepening within any nation. many other nations besides america. you presume that president clinton, if she could affect a policy to force or jumpstart investment to lead to productive capital deepening? joseph: yes i do. tom: what would that be? joseph: one part of it is investment infrastructure. you often forget how important infrastructure is. back in the great depression -- tom: the interstate went through gary, indiana. joseph: that had a very big of fact. the great depression, very nice book by gary fields, he looks at the effect on private sector productivity. the infrastructure investment that went on in the great depression. he has a lot of credit to the recovery that occurred later to that productivity improvement associated with infrastructure investment. that's one thing that's very important.

there will be an increase in .nvestment, technology one of the things that is very strict about the united states. our investment in basic research is lower as a percentage of gdp -- tom: jonathan cole at columbia has written about this. --ncine: you're suggesting you're saying that austerity is what killed productivity. joseph: couple of things. austerity really hurt. with austerity there were no resources to invest in technology and infrastructure. that illustrates one of the real problems i pointed out. it was supposed to bring the countries together but the way it was designed when you look the details it actually pushes them apart. germany has lots of resources to invest in infrastructure. crisis countries don't have

those resources. the air being told you have to cut back so you get declining productivity in those countries relative to the country is like northern europe and germany. francine: if you have the right infrastructure, fiscal spending, is it enough to put productivity up or do we need to look at the sharing economy and things like that? googles and uber's of this world that put huge pressure on productivity? joseph: they are part of it. equally important are industrial policies. policies that stimulate the new technologies. which could include the sharing economy. the problem is, in europe, --ernments are prescribed stimulating their economy with these industrial policies. on your program recently, you had mariana mazza coco.

her earlier book was called -- she details the role that government investments have had in promoting productivity. they can't do that in europe. the countries individually are limited. small veryet is so little of this is going on at the european level. tom: just a glitz with us. the book is the euro. we will go the dollar here next talking about present-day politics. professor stiglitz in support of secretary clinton. up next, mr. trump decidedly sh.ets for the labor day da stiglitz on trump. that's an interesting idea. we will do that next. ♪

tom: sterling advances over 131.

we are watching with i-99 handle. earlier this morning. --id westin, john farrell fed,we've gone to the hawkish fed. we are going to spin forward and look ahead to william dove at the new york fed. to try to get some kind of clarity. we are trying to get some kind of clarity over what the messages from the federal reserve currently. u.k. retail sales, big upside surprise. the weaker pound, tourists buying watches and jewelry. people went out and spent. tom: thank you so much. we are here with just a glitz of columbia university. the book is the euro. professor stiglitz is advising secretary clinton on economic policy. the back of the euro, way back here, you take a slam at neoliberal ideology.

those neoliberals. they are not just stiglitz. you suggest secretary clinton, how could she be a liberal and govern for america? joseph: the question -- the fact is the ideas that prevailed in the 1990's bubble size of the atlantic have proven not to work. the idea that you could deregulate the banking system and you would have -- 2008 crisis showed that is not true. you just liberalize trade, close your eyes and everybody, rising tide lift all boats. that has been proven also wrong. what we're seeing in this election is a recognition that americans, large fraction of americans, have not benefited from all those changes they were promised would benefit them. if you look at the numbers, the

-- basically stagnant income. most of it, the top 1%. the group has done really well, the top 10 francine: -- top 1/10 of 1%. if you were an advisor to donald trump what would you tell them? joseph: give up. the second thing i would say, get your math to work. if -- even liberals that say in a recession you need to stimulate the economy, you have to have a kind of basic fiscal responsibility. cutting taxes for the risk -- for the rich increases in the quality, does not stimulate the economy very much because those of the top don't spend as much money as those at the bottom.

leaves a huge fiscal deficit which constrained government spending. the point is the kind of tax program that hillary has been talking about focusing for instance on providing incentives for american firms to bring jobs back abroad rather than the current system which almost encourages them to keep their money abroad and invest abroad. tom: let's continue the discussion on radio. joe stiglitz, the euro. we continue this discussion on "bloomberg surveillance" on radio as well. what an interesting discussion particularly the idea of a weaker euro? this is bloomberg. ♪

jon: wall street eyes walmart

hear. will it focus on e-commerce lead to 28 straight quarter of profit. an eight straight quarter of profit? a warm welcome to "bloomberg ." with federal confusion reigning consensus, the zero -- david: they are communicating perfectly, they are confused. they cannot agree amongst themselves on what to do. alix: perhaps charlie evans' idea, you have to see the whites of inflation's eyes. in addition to th,