tom: this morning, markets adjust. central bankers gaze into an uncertain future. does a decline in volatility signal a 2007 to come in this hour -- single-a 2007 question -- signal a 2007? i am live from new york, tom keene. live from london, guy johnson. two days in a row. what onomic data have we

gotten out of euro? there is a plethora. guy: i think the releasing stuff came out of the u.k., the inflation data pretty much as expected. in that is the up number terms of what the u.k. is having to pay for cheaper sterling. the survey expectations number coming through at 5.4, better than expected but prior 4.6. the investor gauge picking up a little bit. tom: there it is, and we will have john normand with us of jpmorgan. >> good morning. violence flared along the border of israel and syria. part of the struck happen just hours

after a cease-fire began in the syrian civil war. the democratic presidential candidate told cnn she did not think her illness was going to be that big a deal. a video shows were almost stumbling as she is helped into a van. she said she was overheated but once she had some water she felt better. she has promised to release medical information in the coming days. industrial production rose 6.3% from a year ago. fixed asset investment was up and chinese retail sales are up almost 11%. south korea halted the operations at four nuclear reactors after the country was rocked by back-to-back havequakes most factories resumed their operations. in venezuela, opponents of the president are calling for a

nationwide round of demonstrations. they have pushed back the process until friday where there will be a key ruling on the recall process. 120 nations will be meeting in venezuela. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. let's go through the data. equities, bonds, currencies, commodities. futures are -15. oil,s churn, euro churns, up, down, up, down. the vix 20, down to a better market with a recovery. ofures back to a close 18,300. yields pretty much know where. speaker to speaker, governor brainerd yesterday. in yen, 101.83.

kenneth rogoff in the next hour. guy: the yen is the big story. this is what is happening with the cable rate, down a touch. the stoxx 600 flat. the u.s., wall street heading for a negative open. we started positive and then we fated, we are back a little bit but the negative priced in the iea report and that is certainly having an effect. that is the aussie versus u.s. dollar. commodity currencies under pressure. tom: iron ore after stability just cannot get a bid. we will talk a little bit later with mr. normand about copper. john normand and kenneth rogoff. this is dollar-peso back 30 years, the weakness of mexican peso.

1994 is the red hawks. we go up to the success of mexico. in recent weakness is a lot more than people think. mexico peso weakness has my attention although it is a little bit about secretary clinton and donald trump and that the adjacency to the american election. guy: i think the story of the last 72 hours has not been about the fed. tom: i agree. guy: it has been about the boj. from reporting that we are doing bojof japan, suggesting the may widen the range to stiffen the curve. that has been the story. this is been the rebirth effectively of the japanese yield curve. just before the end of june, since then we have been steepening and this has huge implications.

it is a story for the ecb has well, but it is really interesting to see what will happen. the 21st turning out to be a massive day for market. let's talk about that a little bit more. john normand, jp morgan's head of fx and international rate strategy is sitting next to me. how significant is that? john: it is not only the steepness of the curve, it is the low level of rates in japan. not only does it matter if the curve deepens but if the level of -- small changes in the boj's remark, this is very positive for the yen and negative for non-japanese fixed income markets. guy: is the long duration trade done now? john: i think it is done for the year. there seems to be a subtle change in the policy focus at the boj and i think there will

be a fed hike before year-end. i'm not sure the duration trade is over for the cycle because you still have low-inflation relative to history. i think for the year it is over. tom: john normand, let me ask you the question we are going to rogoff,essor kenneth can policymakers move currency market? can they reflate economies? do you see a successful history that they can do what they would like to do? john: it is pretty easy to reflate an economy with a cheaper currency if you are the only central bank engaged in that policy and if there is another bank encouraging as much turn in growth at that time. with cheaper currencies the u.s. was going from strength to isength but in this era it quite difficult because every economy stagnating or growing pretty close to trend, and many

countries are trying to reflate simultaneously with the qe policies. kuroda wantedr. to go to that green rectangle or points in that vicinity to re-firm abenomics -- reaffirm abenomics. i cannot think of a policy failure like that chart in my career. in a stunning how the markets basically told the policymakers, no. why did the yen strength and? john: i think it does go most important things are well abenomics was unfolding japan retained its current account surplus. a couple of years into the experiment the fed became extremely dovish so it is not just about what the boj is following from a unilateral's and point, -- standpoint. guy: where does the money go? john: it goes back into japan

because of -- it is a much slower risk process to buy 10 year jgb's than it is to buy treasuries or emerging markets. it is a repatriation story back to japan. guy: implications for pension funds if the ecb follow suit? the magnitude is enormous. john: the central banks arguably have really overdone it in europe and japan in terms of the size of the qe program. it has flattened the curve and discouraged savings to some extent. if they did nothing more on kiwi you would see yields -- more on qe you would see yields rise. 50% -- if rates moved up 50 points it would not have much of a macro economic impact either so they should go much lower so they can get more steepness and a bit less of an adverse impact to savers. tom: it is a most odd september. john normand is with us.

in our next hour, in support of his group -- his new book, kenneth rogoff, it is controversial to say the least. this is bloomberg. ♪

london and a lovely day. i am guy johnson in the british capital, tom keene in new york. let's get a bloomberg business flash. tom: it looks like to buy. there are -- it looks like dubai. there are so many cranes in london, it is remarkable. i count nine cranes there alone. effect, irexit

suspect many of those were even erected for the referendum. -- there isase francine lacqua going down the river thames. guy: i am not sure how she's going to be feeling about the fact -- we will leave that one alone. here is a business flash. nejra: a bit more on u.k. -- sebastian: the u.k. home crisis has barely reduced. the average price rose just 1/10 of 1% to $390,000. prices grew at the same rate since july. it is the weakest increase in three years and the tax increase in investment properties get some of the blame. country --ccuses two companies of agreeing not to recruit each other's employees. the suit says tens of thousands

of u.s. workers are involved and the companies are not commenting. apple, google, and other companies reached a settlement other -- over anti-poaching claims. oil production in china has dropped to its lowest in six years. the state-run energy companies are pumping less. guy: let's stick with that china theme. the economy coming through in august perking up a little bit. all exceeding economist estimates. i think the private sector is a little weak. investors have warned that surging chinese prices may not sustain. enda curran is in hong kong. sustainability, that is the question i need to ask. enda: that is exactly the conundrum. on a headline basis things are

taking over and we have, a long way from the worry of a hard landing at the beginning of the year. the private sector is not spending -- the government wants to keep the money flowing through the economy and poor money in infrastructure projects. on the other side of things, the long reform agenda in china is not necessarily being pushed forward at a fast pace and the fears are they are stabilizing things by using cheap credit at the cost of building bigger problems for down the road, and that is the balancing act. for for all it takes private sector investment to we going to see the kind of status that we are seeing now for the political period? enda: we have this big us so we block on private investment and foreign investment. the government talks a lot about shaking up that sector but we

have a big political reshuffle toward late next year. that is one hurdle on private investment. ppi is inching toward positive territory and if it goes into positive territory it will be a big boost for company investments and we could see a big turnaround. tom: john normand with us now. he knows the world has changed because of floating currencies. from where you sit in hong kong, is the chinese renminbi a true floating currency? enda: not yet. we are some distance off that. we are coming into the one coming off the imf -- into the yuan coming off the imf. we know at the same time they intervene on a regular basis anytime it is weakening beyond our comfort zone.

it still has a firm grip on the people's currency. tom: enda curran in china this morning with bloomberg news. we are honored to bring you john of jpmorgan. you see a break from the fixed regime of the renminbi. where did the time go? over a decade ago, with massive renminbi strength. has china does it -- don its fair share of yen strengthening? it has depreciated about 10% from the peak. that is a more helpful level of the currency but probably not a helpful enough level of the currency. you can say the economy is experiencing problems with profits and growth in the industrial sector so our view is

this currency will continue to depreciate. it will change the way they operate the regime in the past nine months to make it stable even though it continues to weaken. tom: you do not mean the political regime, you mean the currency regime, their method of floating and fixed currencies? john: exactly. you can imagine what it was 15 years ago. they are somewhere in the middle now with i want to see it respond to market forces but not fully and not every day. guy: just trying to get an understanding of what is happening because this always intrigues me. this is u.s. three-month libor, the white line. the correlation to the off-shore yuan rate looks pretty close to me. libor is being affected by changes in money markets and there are all kinds of factors, but the elevated cost of that story ripple into china and when

it goes away, does this story go away as well? you theat is telling yuan is responding to the relative cost of money in the u.s. versus china and some of that is related to money market reform and how that has boosted libor, but a big part of that is .he fed normalization story if you think fed rates are going to go up at some point and you think chinese rates are lower because of the slowdown in the economy which will be coming in the next several quarters, then dollar-china should be going up further. tom: john normand with us of jpmorgan. i look forward to talking about the copper morgue it that jpmorgan -- copper market. in our next hour along with toneth rogoff, we only speak roger altman when the boston red sox are in first place. altman on roger clinton and trump. ♪

london, 5:23 in new york, i am guy johnson. tom keene is up early. president clinton spoke to charlie rose about hillary clinton's health. thever the last many years same sort of thing has happened to her when she just got severely dehydrated. demon. worked like a

as secretary of state, as a senator, and in the years since. guy: giving us an idea of the health story, you have got to take that seriously from her spouse. she called in the u.s. tv yesterday and talked about the fact that she did not want to miss it. are we underplaying it? enoughcannot emphasize for our global audience when a big deal this is in the united states and as megan murphy said yesterday, the has been a shift in the dialogue on what we need to know, how much we need to know, transparency of it all. donald mcneil in the new york times today with an article on the medicine of pneumonia. mostly what it is, people like you and me do not know about it. mcneil went out and talked to doctors about what possibly the secretary has.

it sounds like we will get more information in the next day. i would suggest that in the last number of weeks there has been a cascading set of questions or wonderment, if you will, about the secretary's health and less so mr. trump although he is part of the mix as well. guy: it will be interesting to see those numbers come out. tom: the way she looks in that video taken days ago, i would suggest, not the way she looked this weekend. guy: absolutely not. john normand still with us. why is the market not pricing in the u.s. election? john: because there is three elections and what policy outcomes you have are a function of how those turnout on november 8. it is difficult to call one of these correctly, much less three. status it is clinton any -- and a status quo set of

policies or trump and a revolutionary set of policies, it is difficult to get this right. guy: you can watch that full interview with president bill clinton tonight. that is coming up on charlie york,t 7:00 p.m. in new 1:00 a.m. in london. markets,ck on the european market softening after an initial surge higher. we are looking at a negative start in the united states if my wpi function is to be believed, and it should be because it calculates the fair value for you. s&p 100 is down by 1% at the get-go of trade. ♪

tom: new york, bloomberg "surveillance." what a wonderful day yesterday, scarlet fu and myself at cantor fitzgerald's

wonderful charity day for 9/11. we were going in, the manning brothers were going out. joe girardi walked in, the manager of the new york yankees. girardi had to face the los angeles dodgers at yankee stadium. symbolism. they are in the other league so the dodgers rarely come back to new york. it is lost in translation. in transatlantic translation, but a big deal last night, the l.a. dodgers playing in new york. i am tom keene in new york, guy johnson in london. our first word news, here sebastian. sebastian: the cease-fire in syria civil war appears to be holding. groups say there have been only minor violation. the truce was broken by the u.s.

and russia. at the end of seven days they will coordinate to attack islamic state and al qaeda forces in syria. hillary clinton says she did not disclose her pneumonia diagnosis because she did not think it was a big deal. video on sunday appears to show her almost stumbling as she was help into a van. she told cnn after she had some water she felt better and they promised to release more medical information in the coming days. demandingchairman is the fbi turnover all their files on the clinton investigation. jason chaffetz has issued a subpoena. the fbi has defended its decision to withhold its investigation. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you very much.

sector, david davis is optimistic about the exit from the european union and sent not only can the u.k. leave the eu in two years, but they can cement new relationships in the bloc during that time. simon kennedy had the pleasure of meeting our brexit coverage and joins us now. do i need to listen to people like david davis, when every time a politician that is not theresa may opens the mouth on the subject she tends to smack them down quickly? what can i listen to and say, theresa may may disagree with that? simon: david davis is the brexit negotiator but at the end of the day, over the years we have moved from a cabinet government to a more presidential government and certainly theresa may is the first so what she

says is what guides us. a couple of statements last week from fellow cabinet officials liam fox, the trade secretary, calling british exporters lazy for not doing more to get their goods on the international market. that was slapped down. previously david davis suggesting it was improbable that we could remain in the single trade market and deal with immigration. they are trying to keep some of their negotiation plans back, creating room for the parlor game of he said, she said. guy: the u.k. economy is performing and all of the things we talked about before the referendum have not materialized. if you look at today's data on but if you look at the import cost numbers, they are going through the roof. there is an inflationary surge.

it is not a question of if but when. simon: in fairness, they both seem to be on the same sheet. of the gove was one brexit leaders in the house of commons last week with david davis and he gave davis an opportunity to share his joy at the state of the economy and the weeks since the brexit referendum. davis took that free pass and set it aside, saying he welcomed those signs but it was early days. theresa may also predicting difficult times so i do not think the government is under any sense of security that this is a sign the economy is doing ok. it is open to the risk it could turn self. tom: help me with one basic question -- who is the prime minister speaking to? i cannot figure out who in europe she is supposed to speak to. simon: that is the interesting

thing in the negotiations as we start to firm them up. theresa may will want to talk to angela merkel in france while holland. she will want to talk to fellow leaders. if she think she can do politics with those kinds of people she can find areas of common interest. if you are a german car manufacturer, do you want to lose access to the british consumer? probably not. another plan is the likes of the european commission. parliament naming a brexit negotiator. they are more of the federal europe model. they do not want brexit and they are more likely to seek a punishment for britain. if theresa may can give lip service to them, she will try to talk to angela merkel and hope that fellow politicians can do an ugly deal. tom: i look at euro-sterling.

we have had that grexit announce -- brexit bounce which a lot of people did not expect, weaker sterling over the last few months and a little bit of a consolidation. what is the nature of the consolidation? to thet is related perception that may be the bank of england overdid it by easing so much. the activity data has been much more mixed than university negative -- universally negative. i think it is way premature for the bank of england to reconsider what it did but that is leading sterling to be unstable. tom: what is the jpmorgan analysis of the united kingdom current account deficit, a deficit of stability or could it worsen affecting directly sterling? john: i think it will worsen. it might improve slightly

because of the weakness of the currency and what it will do to is goingt also what it to do to income receipts from overseas asset holdings. maybe it falls by a couple of percentage points but even if it were 4% gdp it is still large for a country with 0% interest rates. guy: what is your expectation of where gilts go from here? you can borrow enchanted -- incredibly cheap if you are philip hammond. does that change between now and november? john: i think gilt yields will be pulled up by what is happening in the euro area and u.s. because at the same time as people think we are at the end of easy money, some of that extends to the u.k. i would be surprised to see at the levels17 they are at now because over time the bank of england policy is going to be the bigger driver. tom: simon kennedy, what is the most important date on your

calendar within our brexit coverage? simon: we see david davis speaking today. later in the week we see the bankers coming forth and publicly talking about brexit and parliament. there is no data, to some extent. we do not know what it is so it is hard to pick a specific date. we are going to roll along for a little while and hope some things start to firm up. certainly one thing worth looking for, the conservative party conference starting in october. tom: simon kennedy, thank you so much. move, down we go yesterday and then up through the day and down we come again. futures -114.ow it has been crazy the last couple of days. guy johnson in london, i am tom

keene in new york. this is bloomberg. ♪

guy: i am guy johnson to london. tom keene is in new york. the international energy agency thechanged his view on crude glut and sees oversupply persisting into late 2017 as demand grows slumps. oil sharply lower, wti down 2.6%. a senior oil analyst at the iea on the phone. where is this data shift coming from? >> the majority is coming from the demand numbers. we have been forecasting for quite some time that the

previous very strong growth of 2013 what goes back, but we have seen much sharper pull downs in china, europe, and india so we had to shave our third quarter demand numbers somewhat. we are still predicting a mild uptick in the fourth quarter but we are trimming our 2016 growth number. in a market when you have got record opec supply, this is quite significant. guy: in terms of what the supply side story is going to be, are you plugging in current numbers and anticipating we are going to see a pickup in supply? there does to seem to be a bias on the upside, the battle for supremacy we are raging in as we get toward the next meeting is pressing -- is pushing supply up and up. record: we are seeing supplies in saudi arabia, iran and the rock coming back rapidly

-- iraq coming back rapidly. in 2017 we think we will see some modest growth once again in a non-opec country. it is a case that the supplies are continuing to grow which is outpacing demand. arguably the number one expert in the world on calculating the demand of oil. what is the single distinction in your demand analysis, the complexity of opec, non-opec, the united states, what is the marginal thing that gets matthew perry going about demand? matthew: china, it is really china, how the economy is panning out. the structural change slows industrial demand and we are seeing a job offer in diesel. china up for, the strong gasoline growth has been falling

back recently. we are weighing a little bit on the china issue. there has been some odd things that have happened recently. heavy flooding has trimmed gasoline in china and that will not persist. ahead of the g 20 meeting a lot of the factories were forced to close so you have an additional third quarter disruption. those things will not be maintained going forward but the economy is slowing. structural changes having a big impact on china so were you -- you are seeing one of the biggest growth stories disappear. understand with iea you do not really have a call on the market. bring up the brent crude chart that shows the red line off the $29 bottom. how do you respond to the consensus call the demand will hold up versus someone as

esteemed as phil for liquor -- for liquor, apoplectic that it will fall away? matthew: it is for me the fact that non-cb countries have a lot of people who have never driven a car. increases in large the global fleet, yes, some people will buy cars but it is not efficient to trim away the growth that will come from gasoline globally. we will steve -- still see global oil growth for the next five years, which is a slowdown from the recent years. in 2015 we had 1.7 million barrels -- 1.6 alien barrels. it is down quite significantly. we still have lots of very poor countries in the world where they are buying a lot of

vehicles and they will drive those. tom: wonderful to have yuan from paris with iea. truly outstanding on demand analysis. right now we demand john normand to give us perspective. in your research on copper, i am fascinated by your caution and weakness on copper. here's the adjusted inflation on copper back 30 to 40 years. 2005, 2006, boom of 2008, and we roll it over. i'm shocked at your caution on industrial metals. state the case. john: you could take that same chart and line it up against chinese industrial production and see that they would track reasonably well. you can have a view that the chinese economy might be somewhat stable but if you think the industrial sector has a multiyear stagnation it is tough

to be bullish on the copper price. we see it going down to about 4200 making it one of the worst performing economies -- commodities. 4200 buts right to say within the copper world, there is two quotes. there is the london quote and the chicago hd quote which is a whole other quote. guy: it is baseball and cricket. tom: agreed. guy: it confuses everybody. aussie dollar trading soft this morning. what are the commodity currencies doing? john: they are weaker which is a little bit surprising when you consider the chinese data were stable but the commodity currencies probably trade a little off the global rate story and that has a wider range of outcomes over the next several. you can consider the flows into those markets when everyone was

so downbeat on the fed and everyone believed easy money would persist forever. guy: can i back up to the china stuff? i remember glencore saying they did not understand china because copper is used as part of the funding story to getting money offshore and how the whole process works. it is used for a different story in part of the economy. how much visibility do you have when you are looking at your currency calls and what is happening in terms of the copper story? john: you do not have much visibility on these things and people are naturally very suspicious of the chinese data but a lot of these asset prices that are related to china, whether it is copper or the commodity currency prices, they are closely correlated to chinese data.

they correlate so well that if you think the reported data go son, asset prices go down people are forming their expectations on what they see. tom: really interesting on industrial metals, john normand of jpmorgan. with guy johnson's limited number of days with us, he does not understand the etiquette that we do not take baseball hate from london. we do not take baseball hate. we are respectful of football and soccer. the baseball hate has got to end. mindy masucci is being sedated right now because her baltimore orioles once again are the worst pitching on the planet. it is september and we do baseball on "surveillance" in september. guy: i went to a grace -- a baseball game once, enjoyed it thoroughly but not a clue of what was going on. tom: that is how we do it in new

york. save us from baseball hate in london. guy: argentina knows a bit about football and they have quite a good rugby team but we do not talk about that too much. we have something of an argentinian theme coming up. erik schatzker sat down for an exclusive conversation with the president of argentina at 8:30 in new york. ♪

investment, iics, am tom keene in new york, guy johnson in london. to our business flash. twostian: a lawsuit accuses companies of agreeing to recruit each other's employees in silicon valley. the suit says tens of thousands of u.s. workers are involved. the companies are not commenting. companiesother reached a settlement over similar anti-poaching claims. ford plans to start selling

driverless cars by 2025 and their goal is to lower the costs enough to make autonomous vehicles affordable. that is your bloomberg business/. tom: thank you so much. let's set up september of 2016. jpmorgan's john morgan is with us -- john normand is with us and i want to talk with this week volatility and how fragile we are to any given exogenous shock, or many different levels of outside shock. how fragile our we? john: quite fragile mainly because of the low levels of volatility. it is not just where it is in an outright sense, it is how low volatility is in markets relative to the volatility of the business cycle. if you think it is too low relative to the business cycle and you think it will get less predictable because of the

inflation outlook in the u.s., maybe the election outlook, the qa policy in europe and japan, that is the fuel. tom: what is your prediction for a given exogenous shock? i know it is tough to that. shifts and central-bank policy, this is nothing new. people have been on the lookout for some change in fed policy. i'm not convinced that september is the month when everything comes. i think there is enough circumstantial evidence that the central banks are up to something, and given how tamely markets are priced, this gets you hire an volatility and bond yields. guy: everything is correlated to central banks. that explains the situation we are in at the moment.

give me a sense of the standard deviations we are talking about in terms of the shockwaves. john: if you think easy money were ending in europe and japan, meaning the next announcement is that qe is a goner, you will see moves that are probably several standard deviations. i do not think you are going to get that but could you get a move that is one sigma? absolutely. john normand, thank you so much. withg up in our next hour the controversial book of the season, kenneth rogoff. from london, from new york, this is bloomberg. ♪

tom: this morning, markets adjust.

the speaker to his bigger agony of central bankers gazing into their uncertain future. take the cash away from drug dealers and crooks. in this hour, ken rogoff on the curse of cash. and secretary clinton rests as mr. trump delicately tweets forward. this is "bloomberg surveillance ," live from our world headquarters in new york or tuesday, september 13. i am tom keene in new york. the economic data out of england, guy, shows a prosperous united kingdom. may be aation data little bit more benign than i anticipated. but take a look at the story. there's a shock coming. the cost of a low sterling is beginning to manifest itself. lastwe saw dormant in our -- we saw john norman in our last hour, from jpmorgan. "bloomberg first word

news" with sebastian salek. sebastian: israel says its .arplanes hit syrian positions is the fifth such incidences last week, taking place hours after a cease-fire began in syria's civil war. every clinton is trying to end speculation about her health. she is suffering from pneumonia. video on sunday appeared to show her almost something as she was helped into a van by staff and secret service agents. she told cnn last night that she was overheated, but once she had some water she felt better. her husband spoke lessening on pbs's "charlie rose." mr. clinton: the same sort of over has happened to her the last couple of years she has worked i can demon, as you know, as secretary of state, senator,

in the years since. sebastian: you can watch that tonight on "charlie rose," 7:00 p.m. eastern on bloomberg tv per china's economy picked up steam and industrial production rose 6% from a year ago, beating estimates. chinese retail sales did better than expected, up almost 11%. ofvenezuela, opponents president nicolas madero are calling for another nationwide round of demonstrations. they have pushed back protests until friday, when there will be a key ruling against maduro. meeting in will be venezuela. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am sebastian salek, and this is bloomberg. tom: let's get to the data so we can get to professor rogoff. and to his book "the curse of

cash." dow futures -1.10. euro churns. 45.19 on american oil. was at 20. we did better in the market yesterday. the dow 18 on futures. let's talk about the brexit effect. we are starting to feel it coming through. 132 -- 1.3263. the data this morning, while benign in terms of the headline inflation number, point to an inflationary push coming through in cheaper sterling. waiting for the start of u.s. trading, which looks softer. and the commodity currencies are under pressure. tom: guy johnson, thanks so much. this is the controversial book of the season. me tell you, they hate for can

rogoff it -- for ken rogoff is off the charts. is really a controversy. we will touch upon the idea of doing away with cash for the crooks in society. right now, kenneth rogoff of harvard university, on our markets, and the strange markets we are in right now. if i look at yen and abenomics as one example -- i remember being on an airplane, reading monograph, on imf 14 times rate currencies. the market is saying to kuroda and abe you are not going to get a week yen, you are going to get a strong yen. what does that signal to you? confidenceave lost about their programs going forward. they have the markets going with them at one point, and now they do not. i think they must be worried about it. the arch goes to

question. bring up the chart here. we have shown this so many times. the green rectangle is where they want to the yen to go. it did not happen. kent policymakers -- can policymakers tell the markets what to do? ken: certainly not? they can tell themselves what to do, what their policy is going to be. if you ease, it depreciate your exchange rate. but it is not something that lasts forever. they started a few years ago, and it has not continued. so some of it is coming back. but exchange rates are very hard to explain. they are almost impossible to predict. there are limits as to how much to read into this. tom: this is the idea of the mexican peso. bring it up again. we use some along charts when ken rogoff is on the set. some real success by the mexican government, the leadership of

professor carson and others. what does this signal to ken rogoff to see the peso near 20? ken: there was concern about risk in emerging markets, with china slowing, with the global economy going slower. emerging markets always respond with more volatility. tom: does it indicate the tensions of 1994 or particularly 1998? ken: i do not think it is a 1994, 1998 situation necessarily. that said, i wonder if there would be an echo price after the advanced countries had money flowing in. but so far we have not seen that, maybe because exchange rates are more flexible. that provides a cushion. guy: let me talk to you about japan and your take on what is happening now.

it seems we are reaching the limits of what qe is able to deliver. the japanese seem to be admitting that. the suggestion this morning that the may widen the ban on front end. the curve has been steepening. can we start talking about a steeper curve in japan? is that desirable or doable? ken: i think there are limits as to what quantitative easing can do. the government owns the central bank. if you have the central bank buying government debt, it is a lot like having the government issue shorter debt. so certainly there are limits as to what you can do. we always should have known that. they have been very tentative with her negative interest rate policy because they have not laid the foundations to do something more -- with their negative interest rate policy because they have not laid the foundations to do something more. you do not want to get into directed credit as if you are in india or china. guy: say both the ecb and the

yieldgineer a steeper curve. how does that change the story for the fed? ken: i don't have a quick answer to that. i think the fact that they have been lowering rates makes it easier for the fed to wait. there is no question about that. the overall situation in global markets has been pushing down rates. the long end -- i do not think central banks control much except expected inflation, and neither the ecb norther boj has been able to push of inflation expectations. for that matter, inflation expectations are coming down in the united states. i think there is a loss of confidence in the ability of central banks in the long run to regenerate inflation. guy: to the back end is inflation dependent. if you could shifted up, shift the curve slightly steeper and get it positive, the effect on the banks is going to be quite profound. we see bank stocks rallying.

is that what we now need to see? in europe the bank transmission is so important. has qe failed to take into account? ken: i would not say it has failed to take it into account. the interest rates you must care about are what investors pay, what consumers pay. that is the idea of qe. in europe they have failed to really deal with their banking crisis fully. they have not written down debts. they have evergreened everything, and that is what their problem is. tom: this time is different when you wrote the iconic book. i do not believe our modern theory was in there. bring up the dots, if you would. the market is down there in red. good, smart people like ken rogoff are up there in green. are the dots in your textbook?

is is in your classic textbook? ken: certainly the nuances of central bank policy, which have almost become a religion among central banks of exactly how to do things. no, that is something pretty new. but the basics of monetary policy have not changed that much. religion going to change? are we going to move away from dsge and differential space of, and x, y, z modern economics, back to something we knew a long time ago? ken: what i really meant is central banks convinced themselves that they had found the perfect way to do things. it is not just inflation targeting, but they have all these principles around inflation targeting. it is not flexible enough. they did not leave themselves an escape clause during the financial crisis. tom: ken rogoff is with us from harvard university. the curse of cash -- "the curse of cash," widely anticipated. drugs outout the

there, folks. this is about the bad uses of cash. rogoff wrote a short, perfect primer on this. the red sox are in first place. roger altman with us from evercore, as well. that is pretty good. stay with us. this is bloomberg. ♪

guy: i am guy johnson in london. tom keene is in new york. let's talk about the markets. this is the picture. firmer from the get-go this morning, starting to rally now, but still soft, only up .1%. the pound is down on inflation data.

oil is softer as well. my fair value can't commission says the s&p will be down around 1%. tom: very good. guy johnson, thank you so much. this is usually anticipated, 232 pages of must, must, must read. it is loaded with history, as ben bernanke said, and many others. ken rogoff, what do you right after the acclaim of this time is different? i cannot convey enough the brevity and pointed this of it, and the basic idea of the controversy. idea is the simplest way would be for government to cease putting new large denomination notes to get rid of the crooks. and then paving the way for unfettered and fully effective negative interest rate policy, a different angle. that would be a major collateral benefit. let's start with the crooks. the crooks use cash more than anyone. less cash, not no

cash. i do not think we will ever see a situation in the next decade where we do not want any cash. but large denomination notes, which dominate global money -- central banks pumped about. 80% of the u.s. money supply, over $4000 for every man, woman, and child's. it is not a normal circulation. people might use them a bit, but they do not have 35 or 36 of them in their pockets. tom: what is holding us back from the common sense of getting away with big money for the crooks? ken: first of all, there is an emotional attachment, so i can nail that this is the worst idea -- semiautomatic weapons, people who do not want to pay taxes, that the government will just waste the money. the government also gets profits off of this, and they do not want to give them up. if you talk to treasury, central banks, they say they make money

printing money. that is penny wise and pound foolish. i will say cryptically that i did give a talk on this at the treasury in april, but i do not want to specifically -- tom:, on, make some news here -- come on, xm news here on "bloomberg surveillance." what is causing the biggest problems? is it the europeans or americans? ken: sorry -- tom: is if the europeans or the americans causing problems? ken: it is both. .here is more tax evasion we have a lot. maybe the problem -- maybe the crime problem might be bigger in the united states. but in europe they are getting rid of their 500 euro note, finally, which i started writing about 20 years ago. they recognize it plays a much bigger role in crime. they are worried about

terrorism. we will see in time if they do more. they get a lot of pushback from germans who say they use them, but surveys and polls do not show that. guy: what is the biggest note that we should have? think as dollars, i fast as we can -- though it we take five or 10 years -- we should get rid of the $50, $100. i would go a little further than that and get rid of $20, and go down to $10. but the hundred euro, swiss franc note, really do a lot of more harm than good. ken: in the u.k. -- guy: in the u.k. we have a five-pound note, made of plastic and with winston churchill on it. i cannot wait to see one. they are pretty indestructible. when you think of technology and how money is changing, we have a

plastic note. is that another way of technology helping us deal with this problem? ken: it is. i try to talk about a lot of the issues of the pluses and minuses. but with plastic currency, it is easier to have automatic scanners read serial numbers. they do it in law-enforcement agencies. they do it with the bank of canada already. they can instantly read the serial numbers, and some of the anonymity is actually disappearing. you can decide you do not like that, but that is probably coming with the plastic notes. tom: there is history in here. you have james meet on page 151 on targeting -- you have james 151.on page you say there is collateral benefit to less cash. this shows a chronic sense on the x axis. tell me about negative rates in a less-cash society. ken: i do talk about negative

rates as a collateral benefit. it is not something you can do tomorrow. you have to pave the way. there are all kinds of changes you have to make to have negative rates. but of course we will have another financial crisis. the fed has cut rates by an average of over 5% in the last nine recessions. other foreign central banks do the same. there is no room to do that. nobody takes qe seriously as a substitute, although janet yellen does that in her speech. withdo you believe professor blanche art that name thatofessor blanchard these ideas that are not in the orthodox books -- ken: negative rates are just a natural thing. keynes liked the idea but did not how -- but did not know how to do it. the copter money is just an illusion of fiscal policy. does that itl bank

will lose its independence. tom: ken rogoff with us from harvard university. martin feldstein will join us on bloomberg radio and bloomberg television. really looking forward to professor feldstein. somehow fiscal policy will come up here and we are with kenneth rogoff. roger altman, next. this is bloomberg. ♪

tom: "bloomberg surveillance." guy johnson in london.

i am tom keene in new york. "the curse of cash." 230 two gorgeous pages on the history and controversy over what the crooks are doing with our money. how about a "morning must-read," on page 122 of "the curse of cash." thosehis is like one of word problems in eighth grade that ken rogoff got right and i flunked. tom: larry summers does the math for us. we need fiscal caution and prudence. but we also need infrastructure, don't wait? ken ken: everyone has been saying we

need to spend on infrastructure from back in 2009. the only qualification is you do need to pick projects that have a good return. sorts of political problems and restraints. our infrastructure spending has been so low, there are such projects. i would like to see some government agency curate infrastructure problems, at least give some opinions. tom: guy johnson, jump in here, speaking of the british. guy: the thing that strikes me about this conversation is how high we should shoot. i guess the rates of return argument, professor -- digitization changed the economy forever. ken: i do not think we should try to go to the moon again. it is not as easy as building infrastructure in an economy where you have to go through all sorts of legal stuff, right of way. we are not china.

it is much more complicated to build infrastructure, but, yes, the u.k. needs another runway, etc. tom: very good. ken rogoff with us. the curse of cash. the message here, folks, is really simple. it is about cash and it is about the crooks, but reviewer after reviewer says this is your primer on negative interest rates and the societal costs and benefits of negative interest rates. we will continue with professor rogoff, roger altman joining us as well. we are really, really looking forward to a conversation with norrish worsham, kevin -- we look forward to that in the 8:00 hour. this is bloomberg. ♪

guy: it may be september, but the sunshine is still shining on london. the currency has been down. -- aroundn around 5%

.5%. london. johnson in tom keene is in new york. are we warbling, tom? tom: i do not know if we are warbling or not. it has been a warm couple of days in september to start. debate the presidential coming up, if healthy -- if hillary clinton is healthy and up and running. guy: here is bloomberg first word news with sebastian salek. sebastian: the syrian civil war cease-fire seems to be holding. there have been only minor violations. the truce was broken by the u.s. -- was brokered by the u.s. and russia, and the goal was to hold it for seven days. hillary clinton says she did not publicly disclose her pneumonia diagnosis immediately because she did not think it was a big deal. video sunday appears to show her almost stumbling as she was helped into a van by staff and

secret service agents. she told cnn once she sat down and had water, she felt better. she promised to release more medical information in the coming days. a house committee chairman is demanding the fbi turnover -- turn over complete files in the investigation into hillary clinton's e-mail system. has defended its decision to withhold some information, saying some people who were interviewed are public figures. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am120 countries, sebastian salek and this is bloomberg. , in ken rogoff is with us celebration of "the curse of cash." roger altman of evercore says he will read it cover to cover. why are you going to read it cover to cover? have been ase i tremendous admirer of his work.

focus with aread lot of history in it as well. you can see that a little more in there as well. roger altman only agrees to come to us when the red sox are in first place. last year and two years ago, he had pneumonia. he joins us today. the medical condition of our candidates. i have never seen anything like this, have you? roger: i do not think there is anything seriously wrong with hillary clinton. i think she is going to be fine. i have personally had pneumonia four times. three out of those four times, i more or less kept working. i do not see it as a serious problem, and i think there has been plenty of disclosure now in terms of what her condition is. we know that a lot more parenthetically than we do about trump. tom: our disclosure is that you are a supporter of secretary clinton, not really advising her

directly. but within your support, what does mr. trump need to do right to gain marginal supporters here? how does he need to change his message? roger: i have not thought a lot about it. tom: i want you to think about it now. roger: he should change his economic plan. ago came out weeks with a pretty thick report on his economic plan and concluded that it was it -- that if it was implemented, the economy would shrink gdp would shrink. investment would fall. imports with fall, and employment would fall. so you have one candidate who has proposed a plan -- no plan is perfect, but it is a pretty someone -- which moody's analytics and others have said will grow the economy substantially, 3 million more jobs over the first cointreau years than would occur over the status quo. and another candidate's proposal would shrink the economy. , botho the two of you

candidates run from trade right now. is that typical to you, and then we add mend -- and then we amend within the administration? ken: it is pretty scary, but there is a huge wave of the populace that is anti-trade at the moment. if you are worried about slow growth in the future, that is something that might create it. that is a huge mistake for u.s. leadership and the world. guy: the fed seems to be over here that we are going to be in a situation where the different parts of government are casting in the nextut administration. is that your sense as well, that we will end up with almost no government in the states? roger: that is not my sense, actually. finished election is and the new administration is in office -- and i think that will be a new clinton administration

-- i think a lot of her economic plans centered around infrastructure but including college affordability, capping ,hildcare costs, and so forth will be able to be passed. guy: there does seem to be a sense that maybe the infrastructure story will be something that republicans get on board with, but it probably ends there. changes to taxation, etc., are more difficult. where do you see the more difficult battleground lying? roger: i think you are right, there is an opportunity for approaches to infrastructure. both parties support a big new initiative at the federal level on infrastructure. they disagree historically -- or in recent years, at least -- in terms of how to pay for it. is other one i think immigration.

i know immigration is a politically charged issue. we all know that, watching this campaign. enoughhink there may be members of the republican house caucus who realize that that party has to reposition itself at the national level in order to compete seriously for the togethery, to bring under paul ryan's leadership in the house and agreement on immigration. infrastructure and immigration are two areas where there could be bipartisan agreement in the early phase of a new clinton administration. iy: professor rogoff, can talk to you a little bit about why we do not seem to be able to get parties to reach beyond their base? that seems to be part and parcel of this narrative at the moment. when you look at society and think about how it dysfunctional at the moment, you have these kind of areas that do not interact. i wonder how the economic effect of that will continue to be felt.

ken: it certainly creates paralysis, volatility. there have been economists who studied what happens after financial crises and polarization, and it is something that is pretty common. -- financial crises, and polarization is something that is pretty common. tom: we are going to talk about mergers and acquisitions and the tone in the street in our next session. but right now it is about economic growth. you have to put intellectual content where the bodies are. are you going to continue to invest in london, even with all the turmoil after brexit? roger: yes. tom: that is where you will be located? roger: evercore today is located at 15 stanhope in london. you are staying investing in london? roger: the answer is yes,

because we have been growing our personnel and business in london for many years, steadily, and we will continue to do that. tom: ken rogoff, you have of thison the history for decades, and your research work over the years -- the media doom with a certitude of is going to happen, everybody is going to leave london. i see no indication of that in history, do you? ken: i do not know what brexit is your there was sort of a palace coup and a certain party that brexit created. are they going to have a soft landing? a lot of people think so. if they do a hard brexit, i do not know what it will be doing in the long run. guy, explain to me brexit. mr. cameron is going to leave parliament, right? that is the news in the last 48 hours. guy: i think his sense is that the former party leaders, prime

ministers, do not operate well from the back benches. they cannot operate from the back benches. so he is saying his usefulness is limited, but nevertheless, he clearly is in a situation where he had to walk away. it was not the result that he wanted. tom: let's talk about the ultimate backbench and bring it back to the white house with president clinton. explain to me the dynamic we are going to see if hillary clinton wins the first week of november. ken: i do not know, tom, -- roger: i do not know, tom, what former president clinton's role will be. i am sure it is a meaningful one, though, because he is such a talent, arguably one of the greatest political talents in 50 years or more in this country. i have not heard any word as to what that will be. tom: roger altman is with us, and ken rogoff as well. 's book is "thef

curse of cash." we will talk about global wall street and mergers and acquisitions. the vix at 20. we're watching yen, 101 earlier. weaker yen in the last hour. worldwide, this is bloomberg. ♪

guy: i am guy johnson in london. tom keene, of course, in new york. this get you "bloomberg business flash." home pricesritish barely increased since the brexit vote in late june. the average price of a house in .he u.k. rose .1% prices grew at the same pace in july, and for the last 12 months british home prices are up 4.3%,

the weakest increase in three years. a tax increase on investment properties gets some of the blame. oil production in china has dropped to the lowest point in more than six years. last month output fell almost 10%. state-run energy companies are pumping less. that is the "bloomberg business flash." tom: ken rogoff is with us from harvard. roger altman is with us, from the boston red sox. evercore, and the transitions and acquisitions that are out there. money is still cheap, and that is still driving everything. roger: market conditions are pretty favorable. of have robust availability credit, relatively high stock prices, and you have a decent level of confidence. i would not say confidence is

extraordinarily high, but it is at a decent level. historically, those elements have meant for active levels of m&a volume, and that is what we are seeing. tom: is an acquisition of revenues what we are seeing here? because we cannot find growth anyplace else. roger: i think what is driving much of this -- and every situation is different, every deal is different. but what is driving most of this is the role of synergies and the degree to which so many large multinationals are going to rely on a mix of organic growth and synergies to get bottom-line growth, not just organic growth. it is pretty tepid. 2016 and 2015e of has been strategic combinations, rather than financially driven deals and sponsors. and primarily for reasons of synergies. the consolidation that we saw in the 1930's -- are you

worried about oligopoly, monopoly, with all these mergers? roger: no, because of the role of technology. obsolescence is accelerating. the lifecycle of corporations, at least in terms of their success periods, is shortening because of technology. think there is too much of a worry about oligopoly. tom: professor? ken: back in the 1930's, policy encouragement oblique. they said there is deflation -- policy encouraged monopolies. barry eichengreen wrote a piece recently saying that it is not bad because it drives up prices. tom: guy johnson, catherine mann at oecd paris is adamant about this tendency toward oligopoly.

guy: i am curious what the guests think about all the money we have got sitting over there that belongs to -- over here that belongs to u.s. companies over there. roger, how would that money be spent if it was repatriated? roger: the first thing we need, of course, is an agreement on business tax reform, which would allow a repatriation element and the related medium level tax on that repatriated cash, to get that capital returned here. that is a third area, together with infrastructure and immigration, that i think might for bipartisan agreement in the new administration and the new congress. but you need at first, or you do not have to worry about what you do when it gets back here. guy: how much would be useful money? roger: it is hard to say because

we have seen weak investment and weak productivity over the last couple of years, in particular, in the united states. most models suggest that the reason investment is weak is because anticipated growth -- or as ken would say, anticipated output growth -- is modest, and investment tends to follow. is the keyword. the most important thing we need to get investment up is a better growth outlook for the united states. tom: roger altman, 10 seconds. one more question -- red sox -cubs -- what happened? roger: no team in baseball has a better offense than the red sox. it is mind-boggling, their offense. i think they scored 40 runs in the last cointreau games, -- in the last cointreau games.

four the last games. tom: is that enough baseball, guy johnson, for you? guy: probably. tom: we are going to do 100% baseball with roger altman later today. as well on radio, the laureate robert shiller. but for that with michael mckee in the meetings of the national association for business economics. robert shiller of yale. we continue with ken rogoff. this is bloomberg. ♪

tom: "bloomberg surveillance." we look at equities, bonds, currencies, commodities. 101, stronger earlier, gives back a little bit. if there is one thing i am watching within the tea leaves of emerging markets, it is the peso. there it is, 1.3084. guy: back to baseball. let's pick up with what is coming up on "bloomberg surveillance," on the radio, and

on "bloomberg " on tv. erik schatzker speaking with the president of argentina. he joins us now. talk to me about what we are going to hear from him, as the feds seems to think this time is different. i have heard that somewhere else on this program, and i wonder if this time it is going to be true for argentina. erik: guy, we might just borrowing that we might just be borrowing a line from ken rogoff there. certain this is the question that every ceo participating in this forum is asking as well -- why should they believe that this time is different? yes, mauricio macri has marketced the laws of oriented reforms since he has been in office. but argentina has a long history of populism. this guy is trying to drag the country out of the dark ages. argentina, under christina fernandez, was effectively

headed down the road to a place like venezuela. everybody wants to know it is not going down that road again. done, what hase he delivered, and what is still to do? lot, he has a cobbler's a what some people might say he has picked the low hanging fruit -- he has accomplished a lot, but some people might say he has picked the low hanging fruit. he has lifted some trade restrictions, but that is not enough. there is institutionalized corruption in the argentine bureaucracy that may not take a single presidential term to eradicate. it may take a genetic rewiring of two generations. tom: erik schatzker with that important interview later today, from point of cyrus. -- from buenos aires.

ken rogoff, in your book "the curse of cash," i would think jamie dimon is a banker -- as a banker has a little bit to say about this. can economists like you look at the negative rates story and debate without thinking of the ramifications? ken: i look at it in my book as a long-term proposition, and effective negative richest rate. paper wrote in an early about an idea to get negative interest rates with cash, and my book has a lot about that. but there are a lot of other things you have to do with tax laws, legal issues, and i think given time they are not that difficult, but if you do not do them, you find a situation where it is not that effective. tom: jamie dimon, brian moynihan, mr. cryan at deutsche bank -- they do not have the end of time that you have. how do you dovetail their world

into the theoretical world of rogoff? is ai am very clear, this long-term proposition. central banks cannot just jump in deeper right now without clearing the way. so that is the answer. i think in the long run, angst make money off of this. as long as they charge a higher rate for their loans, and they are paying for the money, they make money. my plan excludes small depositors, and gives banks the credit for giving them zero. far down canr, how you push negative rates? is there a limit? ken: if you do the ideas in my book, and this takes a long time to blame, -- and this takes a long time to explain, but basically no. right now, yes. there are just lots of reasons decides cash that you cannot push at that low. exactly how low can they go? i don't know. how low can they go effectively? i also do not know that.

there are a lot of obstacles at the moment. that is what the financial firms are pushing back. some people who have not read my book say negative rates are a disaster. i agree right now you cannot do that much. it is a long-term proposition. tom: ken rogoff will continue with this -- with us on bloomberg radio. this isse of cash" -- the controversial book of the autumn season. different.tle it is 232 pages of history and perspective, and it dovetails nicely into the debate on our black-market in cash and on negative interest rates as well. joining us as well from harvard, professor feldstein. ♪ one before next week's

policy decision. hopes fade away. reinforce china. largest 's second economy rebounds. ahead. >> and crew change of heart. tkpwhrut will last longer than initially estimated. ferro alongside david westin and alix steel. >> i feel like we've walked up back down d walked the hill. nothing fundamentally has changed alix. a rotation been within the aspect class market. america out with their fund level. level at september 5.5. >> you wonder whether that comes given what we've seen.

the one thing that was holding