francine: the rba holds fire, the australian central bank withheld its ammunition leaving a clean slate for the governor's successor. bayer sweetens its bid for monsanto, is $56 billion enough? while the central bank extend qe this week? this is bloomberg "surveillance ," francine lacqua in london, tom keene in new york. this is the picture overall for the very important gdp figure coming out of the eu. it is important because it has an impact on what we see but

also gives us an impact on what germany is doing. germany with worse than expected data out this morning. taylor: philippines president -- the whitete house canceled a meeting after an expletive filled tirade at the u.s. president. theonday duterte warned u.s. against interfering in his war on drugs. he regrets that it came across as a personal attack. david davis told lawmakers there is no turning back and at the end of the process britain will be out of the european union. >> there will be no attempt to stay in the you desk in the eu by the back door. no attempt to engineer a second referendum. because some people did not like the first answer. taylor: several parliamentary

committees will investigate .arious aspects of brexit in afghanistan the taliban staged a deadly attack that killed at least 24 people. 90 were wounded. the taliban and had been gaining ground and increasing ground in territory across afghanistan. results from the election in -- china isow warning that any's there's any support for independence is against the law. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. in taylor riggs, this is bloomberg. tom: equities, bonds, currencies, commodities. let's get right after -- right to it. a churn after the jobs report. 1.61% on the 10 year yield, oil

gyrating but that is a reset going halfway through august, 44.82. better 12.46 showing than expected on equity markets. 0.80%, andr yield there is brent crude, 47.09. a picture ofs is the european stocks fluctuating a bit and i think we have some news in terms of asian stocks. ,hey were at a one-year high the dollar weakening a touch as prospects for u.s. interest hikes seem to be subdued. i am looking at brent, $47 and the pound, 1.33. bloomberg,go to the a major shout out to deutsche bank who said, this is what matters. moving the three-month

average of hours worked, up it goes and it evaporates back to where was in about 2011. this is a very subtle tea leaf kind of index and nonetheless it is disappointing to see hours worked roll over in america. francine: sorry to say that that payroll report failed to sway traders either way. i have something from japan, a simple chart. the white is the japanese ours 30 year -- japanese 30 year yield and the yellow is the 10 year bond. they are inching up a touch. a lot of traders are trying to plot the return of the yield curve that has been driving the bond rout. we will have more on japan and the labor force in the u.s.. all of that coupled with brexit and send gdp figures out of the ,u pretty much as expected

germany factory orders undershot forecast as the momentum seems to be cooling. watt.g us is ewen cameron he is with us for the first half hour. given what we have learned in the past couple of months, u.s. data on friday did not really give an indication of the market. the expectation of monetary policy still matters. we have dealt with a number of crises against the backdrop of expectations of the ecb extending, the bank of japan extending, the boe coming to the party, and the volatility has been exceptionally low but i think that comes back to monetary policy. francine: are we expecting volatility to be low a bit? the 21st of september is probably the trickiest day because we have the boj in the morning and the fed is 12 hours later.

moment. have a big we have the u.s. presidential debates starting at the end of the month. you get through september with no voc tech and volatility, thus with no uptick in volatility, that will be quite an interesting outcome -- with no uptick in volatility, that will be quite an interesting outcome. the the booming economy of u.k., i want to give you congratulations for not -- ewen: the economy looked dicey in july and better in august and part of that is due to the preemptive action that governor carney took. i think it is too soon to tell but the predictions of an immediate crash in the wake of brexit proved wrong.

it is a long drawn out process that i think we will see overtime. services are good, housing is looking a little bit supported. sterling is beginning to strengthen. i think ahead it is not necessarily smooth seas. indicate oncet again that currency trumps all with an open global economy? currency adjustment is front and center? you bet, and currency adjustment is a sign of monetary policy. if you supply more and more money relative to demand, the decline in sterling is a panic. i think it has partly been because the supply has picked up but at a time obviously when the ecb is going to continue to increase its game. francine: should the ecb also wait for what the fed is doing?

we saw that from the central bank of australia. ewen: they have had to rate cuts in fairly quick order and i think we will wait until they have their over inflation report. i think the ecb has got the problem that it cannot pull back , it cannot give up at this stage. it has to widen the menu of what it does and that can be tricky in some cases. i would guess that it is going to be the normal mario draghi performance of war people up and drop it in after that. in after that?it it is not a done deal? ewen: it is not, and it is a question of what do they do. keys,y change capital widen the range of assets? i think what you will see is a lot of technical adjustments but

what they are not going to do is give up on the program and neither is governor kuroda. tom: i did euro-sterling because i missed you yesterday, cable, and up we go with sterling weakness. the brexit announcement and up we go, a weaker euro-sterling. within that is the overlay of what mario draghi does. let me ask a blunt question -- is there a shortage of paper in europe? .wen: there is going to be as of today there is not because of seasonal reasons that the ecb was below the running race in august but there is going to be, particularly german paper unless they change the rules. "unlessike the phrase they change the rules." what do you expect from mr. draghi? is it thursday? ewen: yes, thursday.

they try to donk it once on a wednesday and the market freak out. ewen: it is a two-day meeting. francine: the problem is everything is on a timeline so if you are the ecb and the fed does something, what is the central bank that has the most to lose if they misread the fed? what are they going to lose at this stage? it is credibility. it is completely about -- not completely about inflation, credibility is something. the market not because of what they are saying but because of what they are doing. , describe it as confiscation qe is buying products and you have this insane competition. that is one of the reasons why

emerging-market debt is running as strongly over the past several months. francine: black rocks yuan rocks ewenblack cameron watt stays with us. this is bloomberg. ♪

francine: this is bloomberg "surveillance tom: francine lacqua in london, tom keene in new york. airbus has one about six and a half billion dollars in orders from airlines in vietnam. expected to be one of the 10 fastest-growing aviation markets in the next two decades.

british airways says it systems are back on my after computer problems caused widespread delays. passengers said it took two hours to check into flights and in some cases, employees were writing out boarding passes. the latest in a series of data signaling momentum and europe's largest economy. that is your bloomberg business flash. francine: thank you so much. has sweetened its takeover bid for monsanto. they are in advanced talks to what would be the largest deal ever. ewen cameron watt is still here. this is a huge deal because monsanto is so valuable and one of the only assets left in this kind of consolidation that may

be bayer is willing to overpay. sure andy, i'm not so when we had first written about this deal in may people were talking about $135 animals $150, and this seems to be an they are willing to go but people are asking could this go hostile? francine: where this go through if they were hostile? ruth: analysts are speculating there is only a 50% chance of the deal going through with the approval then he to get from lawmakers and antitrust officers. beng hostile is not going to easy but that seems to be an option on the table right now, that is the understanding we get. tom: is there somebody else out there? would like us to

believe there is somebody else out there and they have been saying they have strategic alternatives and other approaches. a little while back we had monsanto wast looking at buying one of the bsf units but if you look at syngenta and cam china and dow they are already there. tom: monsanto is not a true multinational, is it? it is a smaller company then we perceive, right? yes, and because of falling crop prices are the following share christ -- share price, and it is not at the level that iris are saying they are willing to pay so what has been vulnerable for a take aim are -- a takeover. this is more than just the chemical industry, right? this is cheap cash and big

companies coming together. ewen: the aggregate chemical industry is a great industry because you get very long product life. think of it like the ethical drug companies. the drug is therefore long period of time, the approval periods are shorter. life so at ale time when people need long cycle cash flows, monsanto is not a big gush as big a company as many people think but it is the only prize left in that space. francine: coming up, we have a willd show, robert hormats join us at 6:00 a.m. in new york. we will be talking about vladimir putin's game plan. this is bloomberg. ♪

tom: new york city, it is september which means baseball is heating up. in the new york mets playing the nationals of washington and a good time was had by all. it was a three ice cream baseball game. francine: now you are talking my language. up until ice cream you were talking chinese. it is time for our morning must-read on baseball -- no, i'm

kidding. formally the u.s. will -- formally ratified the climate agreement. this is what they say in the report. to combat climate change is rising. the risks are underappreciated yet could soon start to unfold. significant spending on sustainable infrastructure and government incentives are needed to meet emissions reduction target. it is largely, it is delivered somewhat but the talk about recession and the concerns in the economy meant that in certain cases climate change has taken a back door. ewen: let me put it this way. we have got this very powerful triangle forming of regulators

being able to regulate more fsb taskhings like force is reporting at the end of the year. the board headed by mary schapiro and the sec has done its work and fiduciaries should -- regulation is going to increase in the cost of the technology to do this is coming down rapidly. battery storage technology. francine: but so is oil. alternative power generation is cheaper on a transmission basis at an auction scenario then other power. this is a risk that does not go away, it accumulates over time. there is an adaptation of being pressed by a regulator. tohink this is the potential

be as big a disruption over the next five years essentially as shale was for the oil industry over the last five. francine: why our markets not seeing it? ewen: when did markets start to see the point of shale? francine: when it was too late. ewen: after six or seven years of explication. -- six or seven years of exploitation. growthsons to do with and with taxation an opportunity. be small cities rather than big national governments and the other thrust seems to be private enterprise ponying up the money and creating their own incentives. if we are going to get anywhere on this issue, can we go it alone versus big government, big institutional mandates? ewen: big institutional mandates

are changing because people like the public in the united states are very much acknowledging, and the same as is true for europe. i think it is a question of how the profits develop over time that will ultimately change people's minds. if this disruption comes from technology or physical risk or regulation, that concentrates. tom: where does the u.n. fit in? ewen: it is the cheerleader, it is appearing in the bleachers if you want to keep with the baseball analogy. i see it very much as one of the enabling bodies and there are many of them. francine: what is the most critical? the problem is you are basically saying the markets are misunderstanding so if i were a market participant listening to you, what am i researching first

of all? ewen: because i think profits will change people's minds, i guess it is the speed of disruption. generation energy and the lowering price of battery storage, it is a big story. it is happening so rapidly and we are seeing people paying up for access to this. i think this is something that is gradually going to grow. francine: thank you so much for joining us, ewen cameron watt of the blackrock investment unit. coming up we speak with francesco garzarelli at 5:30 in new york, 10:30 in london. this is bloomberg. ♪

tom: good morning, everyone, bloomberg "surveillance." francine lacqua in london, tom

keene in new york. let's get to our first word news. taylor: president obama is in laos where he is pledging $90 million to clean up unexploded bonds and other munitions from the vietnam war as well as those injured when the devices explode . he is the first sitting u.s. president to visit laos. he is therefore a summit. presidential candidate donald trump is committed to taking place in all three debates with hillary clinton. previously he had hedged whether he would participate because of the moderators. the first debate is september 26. hillary clinton says it appear that vladimir putin and his aides will get some benefits and made it clear that tolerant -- interference will not be tolerated.

anrobe found a pilot of emirates plane tried to take off again after crashing. a head wind started to shift to tailwind and back again. all 300 people aboard the plane .anaged to escape in venezuela the opposition is looking to build on the momentum against the president. opponents are trying to force the government to agree to a recall election. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. .rancine: thank you so much we are just getting breaking news out of south africa. we have been talking a lot about south africa because the finance minister has been embroiled in scandals. we are getting some second-quarter gdp figures out of south africa, expanding an

annualized 3.3% in the second quarter, better than economists had estimated. they were predicting 2.6%. the rand gaining a touch on the back of that. a lot of high-yielding i.e. the rand, rose earlier this morning on confidence that the central banks will go out of their way to avoid jolting financial so that coupled with better-than-expected gdp makes her a higher rand. it is a busy bank -- busy month for central banks. francesco garzarelli of goldman joins us with the very latest. great to speak with you. it is nice to get started for a september morning, the first tuesday of the month, it is going to be a busy month. what have we learned about central bank in action over the summer months. francesco: we have learned to

have been discussing a lot where they are going to take rates eventually in the cycle. our debate has been a very central in jackson hole. we learned about the limit of implementing zero rate policies and collateral damage this particularly at the rallies at the long end of the curve, the damage to pension and insurance companies where low yields are created. francine: when does the yield start being normalized? the curve is basically nonexistent. ewen: we saw that turning a little bit -- francesco: we saw that turning a little bit in japan. i think that is a reflection mostly of how the central bank has spoken about its implementation of policy. the next big thing seems to be too stupid back the yield curve to make policy even more

toective -- seems to be steepen back the yield curve to make the policy even more effective. the rates will be highly determined by what the central banks do. francine: what can the fed do to help or at least not hurt the rest of the world? francesco: i would say hike gradually. the ways this is going to go is they will hike again. he have higher chances of them moving already in september, mainly because we find it hard to see what they are going to come up with to say why they are not going. the unemployment rate was ok and we did not have a catastrophe two factors that refrained them from hiking in june. the narrative is straightforward for delivering a hike in september. the probability is not there but it would take a couple of speeches to lift it up. alongside with the hike, they

could come out and say the trajectory is going to be lower, and that will be interpreted as a dovish normalization of policy. tom: it is a time for readjustment and i know you have done that with goldman sachs. this is the three major banks' assets. the white line is the u.s., the red line is japan, and down below is the tentativeness of the ecb. what is the new orthodoxy of economics that links into finance? what are you thinking about moving to october and into next year? francesco: i think the policy winds arehanging -- changing in a important direction. there are limits to lowering rates. lower-called effective

bound is relatively shallow because of the institutional frictions that we live with. pushfore, there has been a towards expanding fiscal policy and allowing central banks to underwrite essentially bigger budget extensions through the qe plans. we are likely to see this in action in the u k the ecb will continue doing qe all throughout 2017 in our view and the boj has set the path. tom: is reflation possible? the idea that a bunch of policymakers can "reflate" and economy, is that even possible? francesco: i think so. i think we have been a bit unlucky as people would like to see inflation up because of what has happened to the energy markets, which was another normalization post crisis. the effect of that repricing of

commodities is waning. in 2017 we should see a bigger contribution from energy and food. alongside that we are seeing economies that have received plenty of stimulus like the united states reducing inflation and services, which make up a lot of the cpi basket. tom: that is a very important point. tell me about the immense spread between fed watched inflation and service sector inflation in the united states at 3.2%. the is a remarkable divergence in our different price changes, isn't there? francesco: there is and in our experience and analytical work we find that service inflation tends to lead. it is more persistent. you have things like education, recreation. the prices generally have an asymmetric behavior.

it is easy to see prices stay -- is ear to see prices stay stable or go up then to fall. inflation% service means that we are likely to stay there or go above. tom: francesco garzarelli with us. in the next hour we will drive forward the conversation, the dollar view, the ambiguity of the dollar view with stangl and -- with steven englander of citigroup. this is bloomberg. ♪

tom: good morning, everyone, bloomberg "surveillance." after labor day in america, september

truly get started. francine lacqua in london, tom keene in new york. with us is francesco garzarelli. when a look at trade weighted and blended dollar dynamic, do we get a repeat of the stronger dollar? francesco: if the fed hikes as we think, i suppose so. i think the key to getting the dollar even stronger is seeing signs of inflation in europe and japan. they seem a bit convoluted but i think the problem here is despite all the policymakers, expectations of inflation have not increased in europe and japan and that has only led to higher real rates in comparison to those prevailing in the united states. that has kept the exchange rates stronger than warranted. as we go through the coming

quarters and see more fiscal policies being delivered to these economies, europe and japan, and that starts working its way through prices, i think there is hope to see the dollar stronger again. also a stronger european and japanese domestic demand should relax the fed and get them more comfortable with the hiking cycle. tom: mervyn king calling it a level change, let's bring up the chart of the dxy. you can see the range bound action for two and half years and range bound recently as well . i believe within a currency war other nations want their currencies weaker so is brazil or the united kingdom, are they rooting for a stronger dollar? francesco: i think it is a cheap way of getting out of problems, which we have tried, countries

have tried time and again. if you are small maybe you can get away with it, small in terms of your share in global trade. if you are the size of japan or the euro area you would hardly think that is going to last for long. i think what is missing in those places as we need a revival of domestic demand and that needs to be encouraged by furthers policymaking -- further policymaking. as i said before, i think there is a change in the political greater recognition that fiscal policy can play a role here. francine: going back, is that the end of the currency wars? we see the yuan a little bit marketsd it seems the are testing the app the site for the pboc. everybody wants a weaker currency. is at the end of the euro where it is a race to the bottom? francesco: i think so.

it has been discussed at least twice this year in g-20 for a a.h for a -- for the experience of 2013 proves it, it is a one off but if that initial boost is not followed by other things happening mostly on the domestic side. you have the most to lose if they misunderstand what the fed is doing. the biggest experiment which is on the verge of possibly failing, is japan, is that fair? francesco: they have been where they are for 20 years so i think in the global equilibrium, particularly for markets, we talk a lot about japan because where the jgb's have yielded and they are at the forefront of these problems so we are all watching what they are going to next to learn something about what they can export.

would not say japan is central in the way the european area is. europe is the underperformer in the cycle. tom: francesco garzarelli with us. later today on bloomberg radio, really looking forward to speaking with dennis garden. -- gartman. dennis gartman on the collapse of wheat. this is bloomberg. ♪

francine: this is a picture of the city of london. this is i think millennial bridge. keene's all-time favorite landscape in london. tom keene is in new york, im francine lacqua in london. tom keene said we do not have a good landscape. the worstandscape is in london. what else do i need to say

besides the walkie-talkie? francine: i quite like it. oneead of talking economics day we are going to two or all of the london monuments. let's get up to speed with corporate news. taylor: bayer has increased its bid for monsanto a second time to about $56 billion. the have been in advanced talks for what would be the biggest agriculture related takeover ever. evaluatingys it is the offer along with proposals from other parties. struggling. the company filed for receivership last week. needs money tone pay fuel bills and for port operators to unload cargo. apple unveils its newest iphone tomorrow.

unlikely to have any breakthrough features that marked earlier models. iphones made up almost two thirds of apple's revenue and iphone sales have been falling. that is your bloomberg business flash. gene munster will join us to pick up the debris after the announcement on thursday. i will be buying one, francine. so idue for an upgrade will be buying one of the 12 that are sold. tell,ne: as far as i can a bigger screen and better camera but i'm not sure how it works. you can also listen to music without the line. i am looking forward to buying an iphone and discussing it on the air. that's turned to european politics. now that the u.k. has decided to leave the eu the next challenge is italy. we are with francesco garzarelli

really -- and just googlers a really. when you look at -- francesco garzarelli. when you look at europe as a whole you were calling it the underperformer. politically it makes everyone less fragile yet we are growing a touch. this year itthink is just above 1% and next year it will be a little above that with some fiscal contribution. remains stuck at 1% and if you look at the forwards, it is going to be there forever which is really the disappointing feature. francine: do you worry about italy? you are in italian and there is the referendum does not get through and renzi has to step down and something uglier will pop up. with that play on the market that the ecb is there? francesco: let's talk about the

referendum in a line, it is not a brexit winery event. event.e trying -- binary they are trying to make the constitution more stable and effective. they tried 10 years ago and ofled so it is a repeat something the italians have been trying to deliver since the 1980's. why does it matter now? there is this sense that italy needs to change in order to improve in its growth performance. that thed be a signal direction is still the same. italy has a, problem with its banks. the banks need to be, some of them recapitalized. there is plenty of nonperforming loans, so having a government failing on this referendum and

therefore would be weaker could create some problems for the ecb. tom: let's look at the italian struggle you just mentioned. a four yearian gdp, moving average, a stunning chart taking the four year moving average back to 2002 and 2003. just a stunning failure. from a distance, what is the level of screen? we saw a merkel defeat over the weekend. what is the primal scream of the people? how loud will it be? francesco: i think they are really screaming from what i read. if you add up the five-star which tends to be more on the anti-establishment side of the political spectrum, political projections give them 40% of the national vote which is high in the context of the

bigger european country. if the elections were to be run today in the lower house, you would most likely have one of these populist movements taking power. the problem is on the upper house there is a. a proportional electoral law in t pur --ity proportional electoral law in place. i think italy cannot afford it. tom: what does goldman sachs think about eastern europe? it has been quiet recently but i do not buy it. francesco: there is always stuff brewing. i think is to your is in general enjoying this growth in the core countries with very low rates. there is some vulnerability initiate -- originating from the low rate environment should policy change course.

it is not a focal area. i think the focal areas are politicalthere is brewing in spain as well. francine: you said it would take a couple of speeches from fed officials to reprice markets, right? the fed would never move if the markets were not fully priced in september? francesco: why do liver a shock whyt now, it is strange -- deliver a shock right now, it is strange. , thee emphasis were to be haslative data up until now been sufficient for us to deliver this other hike we are going to do it but then something about the path being lower, i think that will fit the bill. from alook at this

distance and the vote against merkel on immigration this weekend, i just think sets the tone for the autumn in europe. that is stunning. francine: it is a stunning statement. for the first time there is a real combination of the u.s. politics. you have an election with donald trump running and they are running on the same fears, be it brexit or the movement in italy. that is what is worrying it's global. tom: francesco garzarelli with goldman sachs. robert hormats will join us of kissinger associates, steven englander of citigroup as well. this is bloomberg. ♪

tom: the summer ends, the fall begins. in this hour, janet yellen

adjusts to america's great europe, japan,h china, and britain. in this hour, robert hormats on -- the philippines, in a pivot to a new level of indecency. prepare for aump september 26 debate. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. it is tuesday, september 6. any number of ways, francine, to reset? i would be set on the politics of europe, the defeat of chancellor merkel in germany. francine: especially when you look at factory orders in germany pointing to slower momentum, to brexit, and then we need to look further east to the emerging markets. they are gaining. tom: robert hormats will join us in a bit.

right now, "first word news" with taylor riggs. presidentilippines rodrigo duterte -- the white house canceled a meeting with him after an expletive-filled tirade at the u.s. president. on monday, duterte warned against the u.s. interfering in the war on drugs. today he says that he regrets his comments came across as a personal attack. the u.k. secretary of state pre-brexit has made his -- he says there is no turning back. at the end of the process, britain will be out of the european union. >> the prime minister has made clear there will be no attempt to stay in the eu by the back door, no attempt to delay, frustrate do will of the british people. no attempt to engineer a second referendum. because some people did not like the first answer. several parliamentary committees say they will investigate various aspects of brexit.

kabul, afghanistan, the taliban staged a deadly attack. two explosions outside the afghan defense ministry killed at least 24 people. 90 were wounded. the taliban has been gaining ground and increasing its hold in territories across afghanistan. results from the election in hong kong show a strong performance by younger, more radical lawmakers. china is warning that any support for independence is against the law. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. francine, tom? tom: let's get to the data right now. ambiguity over the next six minutes -- futures up three, the euro has done nothing. -- x crude post jobs, the vix, great equity markets.

francine? francine: what do you mean ambiguity? markets today are on fire, at least a little bit. they were flat in europe. high-yielding currencies rising on the back of the fed. the pound, 1.3338. tom: let me go over to the bloomberg right now. joe from deutsche bank, thank you so much for saying, hey, stupid, this matters. it is back to 2011. hours worked is a subtle kind of statistic, but it is disappointing. it is a rollover. this is all i have, this morning. i am still in labor day mode. francine: it is a good one. if you look at what governor kuroda is trying to do, it is what the fed has or

has not intimated, with the jobs report on friday. we see a little bit of movement. in blue is the japanese 10-year bond yields. you can see them at record lows, and then increasing back up a touch you can see the flattening of the yield curve continue. tom: it is an ambiguous chart. francine: it is an ambiguous day. steven englander is with citigroup. writeswith willem buiter, as well. -give me the willem buiter view about the global recession and how that folds into an ambiguity about the u.s. dollar. it is sort of a with her -- even: the only part of the world that is outperforming is the united states to some degree. and this is the first time this

year that investors are confident that there is little risk that the fed move is going to be in the east, which is a market change from where they were the first seven months of the year. the rest of the world is kind of mixed. there is no deterioration. europe may be slightly better than expected, but no excitement that the mediocre is outperformance relative to where market was a couple of months ago. tom: do we want to hide in a range-bound dollars? your research is fabulous on this, what we spoke of two years ago. jump condition to a new level of dollar strength. do we stay in range or break either way on dollar weakness? steven: the market is undecided because the central banks are undecided. ecb this week will probably take a real but there is

uncertainty about where the fed is heading, where the boj is heading, whether they will stay on in easing course, or in the case of the boj accelerating and the fed decelerating -- that is keeping things pretty tight. francine: why are they undecided? are they undecided because they are trying to think about continuing what they are doing, or just because they want to see what the fed does first? steven: in the case of the boj, there is a debate about how much further they can do, how successful they will be in terms of what they are doing here in obviously we have this -- how successful they will be in terms of what they are doing. i think in market terms, there is much more uncertainty over whether they can cut rates further without doing huge damage to the banks.

just -- there is no one direction, one direction for policy. there are multiple dimensions, and they do not know how each of those dimensions will play out. francine: so what is the end game? do you change the mandate, or do you do work like the fomc changing the inflation target? or do you continue with the tools that are available now, putting more pressure on fiscal policy? steven: it is tempting to say that things are going to end badly. , ands are going sideways the central banks have the luxury of going sideways until pressure comes on them. central banks love to do fiscal, but it is not clear that governments are going to play. "thei love how you say luxury." i do not buy for a minute that they have luxury. come on, this is the chart of

the decade. there are three banks -- yellen, me,hi, kuroda -- and to this is a tangent or first derivative chart. it is about the rate of changes of these balance sheets. europe is running out of paper to buy, right? steven: they are running out of government paper to buy. tom: so what are they going to buy, citigroup shares? i am trying to get you in trouble with --we are going to bring that chart back. thank you, michael mckee, for shoving that a front of my face this morning. steven englander is with us. resetting international relations with us the september. elections hormats on and on the dash to september 26 and the first debate. this is bloomberg. it is gorgeous. ♪

francine: this is "bloomberg surveillance." to theet straight "bloomberg business flash" with taylor riggs. is $.5 airbus has won -- ion in it systemsways says are back online after computer problems caused widespread delays. passengers in the u.s. said it took two hours to check in to flights. in some cases, employees were writing out boarding passes.

the latest in the series of data signaling that momentum in the european largest economy has cooled off. there was a 10% jump in and domestic orders -- in export orders. that is your "bloomberg business flash." tom: this is a great pleasure. within our september reset, to speak with ambassador robert hormats with kissinger associates. i want to get people started on their autumn reading. my book of the year two --soning -- two years ago and also a little more economics and international relations. but nevertheless, there it is. bob hormats, you have got to help me. diplomacyfar from the of your youth and before your time to where we are now. this video from the philippines, the distance hear from hyde park to manila is absolutely extraordinary.

the president canceled his trip to the philippines? it is extraordinary. , that hiseting you meeting, yes. he canceled the meeting because of what duterte said about him. tom: how did we get to this indecency? bob: you go to hyde park, you see inspiration, franklin roosevelt. the unitedknew that states was a great country. we had to have strong allies, a strong international policy. we had to mobilize americans behind an effective global policy. today we see a lot of leaders who are pulling back. we see very little support for proactive international policy or foreign policy, for that matter. yet we do not seem to realize, if we do not have a strong national security infrastructure that roosevelt understood, or a strong global economy, it will

be adverse to the united states, harmful to us economically and from a national security point of view. like tpp,eadership, strong nato, strong alliances, strong cooperation. not just for a strong global economy, but for a strong america here at home. tom: bob, part of what a lot of people think is if stupid stuff happens like what we saw in the philippines, or maybe someone to just, with mr. -- or maybe some would suggest, with mr. trump, the establishment will come to the rescue "if they are elected." bob: how do you make effective international, economic, or former -- or foreign policy in a period of xena phobic populism, which you are seeing -- in a. xenophobic

populism, which we are seeing? you need solutions to major problems to have a strong security infrastructure. if people do not believe that they need to work with other countries -- a lot of people in this country and in europe do not -- then it seems to me you have a reprise of the 1920's and the 1930's, where countries turn inward, away from their global responsibility. and who will write the rules? it will not be the united states and our allies, it will be the other countries that take a more proactive global role. francine: i want to go back to asia. how is the pivot to asia doing? president obama has said this was one of the priorities, and he is there in asia, basically defending trade deals that keep taking a back step. bob: the pivot is going very

badly. it was centered on tpp. basically, it is tpp. one, ofto be a signal, u.s. economic engagement in asia. two, the united states was going to take the lead in rewriting the rules on labor participation, environment, leveling the playing field between state enterprise and nonstate enterprise. there may be problems that some people have, but the broader objectives of tpp were very important to this country. second, tpp was to be an underpinning for the stronger national security relationships. if it fails at home for lack of the reading byt, the asians will be that the americans do not have a sustained interest, do not have strong sustained power, and that the rules will be written not by the united states, but by china and other countries. and these countries, in many cases, do not support a level

playing field between state enterprise and the free market. roles, andheir own their own ideas, and we did not so much to have a confrontation with them, but to have a better set of solutions. tpp is far better than the solutions these other countries -- francine: you have two main -- whattial candidates can the next president due to get more popular, better trade relationships with asia? do they need to get closer to china? how do you do that? bob: they have to work with china. there is no solution in asia without china. importantly, they have to work with japan, with the other countries we have been working with in the tpp context. i do not think the demise of tpp prevents us from playing a stronger role in the region, but it certainly reduces our ability

to be as effective as we would. at tppre a lot of parts that presumably can be salvaged, like a level playing field with state enterprises and intellectual property protection. we need another route to get to those same things. it is possible, and i think it can be done, but it will be more difficult without the agreed framework between both countries. tom: steven englander is with us from citigroup as well. bob's world ofn international relations, and your world of looking at the holistic system, it is about a more mercantile time, a more mercantile world and trade, maybe a more mercantile america. is that feasible? steven: as bob mentioned, there is a populist wave that is coming, and we have known from economic theory for the last 80 economy as ae whole gains from trade.

there are segments of the economy that we can compensate them, and compensation has not worked out that well. the other side that is happening is that on the margin we produce and consume intangibles -- services, electrical property items. this sort of trade we discussed when you talk about tariff barriers, that is shrinking in size. all countries are trying to figure out how to do with the fact that the traditional framework is dissipating right now. bob: steve is absolutely right. trade has declined and international finance is declining. the thing that is growing is international dataflow. debate, in the brexit m.nder about a zero-su francine: there is a great story by simon kennedy who puts it in very simple words. when it comes to trade and

brexit, they do not have a plan yet. so they have 180 people working on it here. they have 120 people from the u.k. government and brussels. we will have plenty more on that as well. our guests will stay with us. this is our pivot to the markets. this is our picture of the emerging markets. watch out for the hunt on these high-yielding currencies. you can see emerging markets. asia-pacific getting 0.8%. crude above 45. this is bloomberg. ♪

" on "bloomberg surveillance this tuesday. we begin the autumn season in new york after labor day. robert hormats is with us. with kissinger associates. steven englander, at citigroup. dollar.l be the this is a long chart. the move, stronger dollar a million years ago. the the rubin dollar in 1990's, and you bring those two arrows over, which you can do on a long chart. another plaza accord? are we close enough to the instabilities where we will have something like another plaza accord? steven: i do not think we are close enough right now.

to where were close were with the s&p move. asset markets are very calm. you get those kind of records when asset markets are moving in the wrong direction, but the wrong direction for everyone, not just one or two countries, but for everyone, and you can get a consensus. without it being in everyone's interest, typically there are platitudes, as there were in the g-20, but no particular concrete moves. bob: i was at the plaza accord, and the united states imposed a punitive tariff on our trading partners. the united states really used a lot of muscle. tom: at the heart of this is fixed versus floating -- is fixed versus floating. we are in a different world now. francine: bob, i did not know you were at the plaza accord. that is wonderful. new would it take to have a

accord? it could not happen without china. bob: you are exactly right. two things are different. one, the power structure is very different. the united states is the preeminent power. rates were fixed then. they were not floating. now you have bigger countries in there. you have china as part of the equation, a big part of the equation. and you have floating rates. tom: we have to back. steven englander with us, and robert hormats. coming up, bob hormats on eloise. she was at the plaza accord as well. stay with us. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom keene is in new york. i am francine lacqua, in london. here is taylor. islor: president obama

pledging $90 million to clean up unexploded bombs and other munitions from the vietnam war in laos. he is the first u.s. president to visit laos. republican presidential candidate donald trump is committed to taking part in a debate with hillary clinton. previously he had hedged on whether he would take part because of questions about the moderators. the first debate is september 26 clinton warned of potential russian meddling is a serious concern. says that interference will not be tolerated. investing it is have come out with a preliminary report on the crash of an airliner in dubai last month. the pilot attended to take off again after briefly touching down but then crash. the weather may have been a

factor. a headwind switch to a tailwind and then back again. everyone on board managed to escape. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine, tom? tom: we are going to get to laurence kotlikoff, and robert hormats of kissinger associates. essay from the beginning of september. my morning must-read this morning from the good albert hunt -- hormats with us, who

supports secretary clinton. what an ugly contest. that contest between individuals, and the personality clashes. and the rhetoric, the crudeness of the rhetoric is really troublesome. there are a lot of issues this country faces, at a time where we face major economic issues at home. that is what they ought to be debating, and that is what the american people deserve to hear. tom: what would be your advice to the secretary in a debate rehearsal? trump throws so many bad things at you, many of an of substantiated nature -- many of an unsubstantiated nature. you have to have a mandate to govern if you are elected, and you really need to drill down on three or four central issues. jobs creation -- that is central to many americans. that means infrastructure,

education, r&d. take a few central points that will boost this country's ability to compete in the world and boost jobs and hone in on those. that is what the american people want to hear. they do not want to hear all this bad stuff, but it plays well on tv, so people watch it. tom: there it goes, bob hormats once again blaming tv. bob: i am not blaming it on tv. people want to see it on tv. francine: thank you, bob. bob: unfortunately, if they spend as much time listening to the substance as enjoying the interpersonal contest, i think whoever wins needs to have a mandate to govern. we tend to forget that. francine: we do. what we are not forgetting is that the polls are sometimes considered reliable, sometimes unreliable. today we have nbc and cnn showing two different polls with the two leaders leading in one

and the other leading in the other. this means the race is tight. do people realize how tight this race is? bob: i do not think they do because the polls shift, as you correctly point out. now after labor day, there is a onle new focus by americans the election. i think there is an opportunity for the candidates to explain their views. it is a different environment, one would hope, and the substance needs to become more important. it is more important if you are .oing to govern this country the country is not doing all that badly. tom: let's switch to policy. laurence kotlikoff joins us, professor at boston university. larry, you were so upset, you are running a right-in candidacy

for president. what fiscal policy discussion would you like to see from mr. trump or secretary clinton? larry: i think we have to understand that we have 30 different fiscal policies that have been constructed on their own without any coordination of how they work. we have people in very high tax , and especially the poor, who really have no incentive to work. the tax system is 32% underfinanced, $32 trillion in the red. it needs to be fixed from the ground up. the health care system is a mess and needs to be restructured from the ground up. if you go to collect kotlikoff2016.org, we need a new deal. we need to fix banking, education. i am offering an intelligent solution to our problems, not

just soundbites. i am the only write in candidate who is running in this election because you have to be a registered write-in candidate to have your votes counted. i am the only one registered across the country. at: professor, when i look the debate and the non-debate that we are having, i harken back nostalgically to tip o'neill and the idea of tax reform in 1986 and various other acts before. we are miles from that. what can speaker ryan do, day one, with president clinton or president trump, to begin a return to an adult policy debate? neither of these two people, trump or clinton, is going to get anything then -- is going to get anything done because the two parties will be at war with each other from day one. i am the only candidate running who has a reform plan that both sides can accept to move the

economy forward dramatically. i think it is very important for people to go to kotli koff2016.com to look at an alternative option. francine: what is the end game? are you hoping that more candidates that have bigger traction will endorse some of your policies? end game is to win the election. i do not think that these candidates really are serious about fixing the country because they have not actually articulated policies that will work for both sides. i think they are into this for power, for maintaining power, for prestige, whatever it is, but they are not here for our children and for the future of the country. so i am here to win. i am not playing a game to try to get influence to change

people's mines in my direction. francine: with all due respect, it is extremely unlikely that you will win. taylor: i would not be on your news -- i would not be on your new show if it were extremely unlikely. now it is time for the public to look very carefully at who is actually available to run this country and who is actually someone they want to lead this country in the future, who has the experience, the technical expertise, the educational background, the knowledge to make a difference. tom: steven englander is with us from citigroup, as well as robert hormats. it is real simple -- all the benefits have gone to the elite. bring up the equity chart. this is a way -- this is away from steven englander's world.

this is the boom that pushes against all the political tensions we have now. does citigroup feel will be the shift off the election? is it more of the same with the elite taking most of the gains? toven: we are very likely end up as a divided government again. fom: as professor kotlikof mentions. steven: there will be continued pressure on the fed for monetary policy. there is unlikely to be a fiscal agreement that will use central forward, push things with more pressure on the fed. tom: larry, help me out. steve bodie of boston university was way out front on the collapse of real rates. so was bob hormats 15 years ago.

we have a world of 1%, 2% real rate. what can the central bank do about that, larry, if your prescription is not one that we can use? larry: i think the real rates and what the fed does is not really the primary problem that we are facing. the fed has been printing money out the wazoo for seven or eight years now in order to pay congress' bills. we have massive structural domestic problems here. we have an overall fiscal policy that is totally -- we have all of these off the book. we have the health care system that is out of control, and the obamacare part of it is about to implode. we have a banking system that could fail again because dodd-frank -- we need to fix the structure. fundamentally, from the ground up. that is what i am offering in my campaign. it is not really whether the fed raises the short-term interest

rate 25 basis point or 50 basis points. that may be important for some watching your show who are doing daily trades. but for the long run health of this country and the welfare of our children, it depends on primarily addressing a nation that is fiscally broke, a nation that has a social security system that has 2800 rules that nobody can understand. it is a bureaucratic nightmare. laurence kotlikoff of boston university are this is what "surveillance" is all about. mark halperin and john heilemann tonight, "with all due respect." look for that in the 5:00 p.m. hour. this is bloomberg. ♪

francine: i am francine lacqua in london. tom keene is in new york. this is "bloomberg surveillance." monsanto has been in advanced talks for what would be the biggest agriculture related takeover ever. monsanto says it is evaluating the offer along with proposals from other parties. apple unveils its newest iphone tomorrow. based on reports, the device is unlikely to have any breakthrough features that marked earlier models per last year iphones made up almost 2/3 of apple sales. for the first time, apple sales have been falling. francine: last week bloomberg tv -- our editor in chief spoke

with the russian president, vladimir putin. it was an exclusive interview that lasted two hours. let's get reaction from robert hormats. they talked about oil and the middle east and about ukraine. they talked about the u.s. presidential election. this seems like a man firmly in charge who probably does not want to go anywhere. will he stand for reelection in 2018? bob: i think it is a virtual certainty that he will. he is firmly in power in moscow. he feels he has been able to get a lot of what he has wanted. he is playing an active role in syria, is pushing further west using russian intelligence forces and others. in ukraine there is a lot of evidence of russian interference in the united states through cyber interventions, focusing on the american elections. he has a great relationship with the chinese. his economy is in terrible shape, but his nationalistic

policies have enabled him to retain support among the american people -- among the russian people. the russian people. this was exactly my question. how does he retain popularity, apart from intimidating the poppies at -- apart from intimidating the opposition? at the same time that the economy is on its knees? bob: the russians like strong leadership. many russians were disappointed at the fall of the soviet empire. they want to restore the old russian nationalistic policy influence around europe and other parts of the world. they like him. he is strong, he stands up to other countries. we saw his conversation with president obama, where he did not seem to give anything on syria, on ukraine. he did not seem to give anything on cyber interventions. he is now feeling strong. he is feeling also strong because he is supporting a lot of these xenophobic

nationalistic parties in central europe. can individual countries -- if you can weaken individual countries, he is able to gain more influence in european countries and their decisions and weaken the role of europe and the united states in europe. all study thatve beautiful book on pearl harbor. "the winds of war." are we at a point where we are so distracted by our juvenile ity, our silliness? bob: nato has generated a stronger presence in the baltics and other parts of europe. tom: scandinavia, certainly. bob: and we are supporting a lot

of these states in the baltics as well. we have had maneuvers there. we have had american planes, an american presence growing in the region. i do not think we are naive about peyton. -- about vladimir putin. the question is, he is playing a waiting game. he is clearly using russian intelligence and russian capabilities to infiltrate certain groups in eastern europe , to divide europe and the alliance and to divide europe from the united states. all of these things are designed to strengthen russia's position in europe. i do not think he wants a major confrontation with the united states that will poke -- that will provoke a big intervention by america. it is a gradual deterioration.

he does not want a big confrontation, but little by little, he is strengthening his -- tom: ambassador hormats is with us, steven englander as well. we will continue this discussion on bloomberg radio as well. jim stavridis will join us later this morning. from new york and london, this is bloomberg. ♪

tom: foreign-exchange on "bloomberg surveillance." -- dollar-index, 95.60. francine: coming up on "bloomberg ," david, what is going on? david: we are starting the nfl season this week, tom keene, and that means of course fantasy football. ceo of draft kings. a guest from pimco.

what we are going to hear from the fed president. five of them talking this week. that is coming up on "bloomberg ." tom: we continue our discussion on the economics of the moment. guess thekee on i middle class. do we have a definition of the middle class? wages areiddle income starting to grow again. a lot of people have written off a september fed rate move, but economists are not doing that yet. you have barclays, bnp, and goldman sachs saying they are still on track to raise rates. here is why -- 150,000 jobs, still well above the level you need to account for all the new entrance to the labor force. according to these economists, it means we are confirming the fed view that the economy is ok. august has a seasonal adjustment problem. for the fast -- for five of the last six years since the recession, we have seen the august number from its initial

release revised up from 100,000. they know this 150,000 is probably understating the number of jobs we got. then you get to the middle class number. over the last six years there has been a lot of talk about how all we have been creating jobs -- all we have been creating our jobs for hamburger flippers. in the beginning of the recovery, that was true. but over the last two years, is no longer the case. middle income jobs are rising, itch means the rig every -- means the recovery is broadening and deepening. francine: we spent a lot of time looking at how the markets should view the fed. what about other central banks. we have the ecb coming up on thursday. tom: the ecb will have to make its own decision -- michael: the ecb will have to make its own decision. they have to focus on inflation and say we are not going to move until we see inflation. which is why everybody is

forecasting they are going to end their qe program. look at inflation on a forecast basis. that means at this point they can probably go ahead. the dollar is not moving. the ecb moves are not likely to affect what the ecb does -- what the fed does. enthusedare not as about a symptom a rate increase, are you? steven: what the fed will be looking at from now on with the economic data coming out -- we have seen some weakish job numbers. the fear is that maybe it is more cyclical, not a structural. based on manufacturing pmi, retail sales, that will guide the sale -- that will guide the fed very much. is it a supply-side thing where we do not have bodies, or is it a demand thing? tom: we could continue for

another three hours with steven englander, robert hormats. michael mckee and i will do that on radio. they will continue in conversation with us on bloomberg radio. tomorrow, we continue our discussion on international relations, and folded into the financial system, richard haass will join us, from the council on foreign relations. in michael mayo of clsa on banking governments and banking nonprofits. from london and from the gorgeousity of new york, the beauty of new york -- the chrysler building there is extraordinary. this is bloomberg. ♪

jonathan: third time is it charm

for bayer. is $56 billion enough to seal the deal? david: will the central bank extend qe this week? why am mario jog need to reconsider what he can buy. jonathan: clinton and trump prepare for a september 26 debate. i am jonathan ferro, alongside david westin. alix steel is off. we continue the central bank discussion, the countdown to september 21. david: we have five different fed presidents talking, ecb coming up, boj. focus in i think the japan is the idea that they may allow the yield curve to steepen and that could be quite pivotal. david: they stopped buying the 30 year bonds which was controlling the yield curve. jonathan: that