crude curve losses with a loo as they compromise with iran on a future priest. deutsche bank cells have a life and have ruled out government support. from the bloomberg markets most influential summit. this is "bloomberg surveillance." an interesting day. banks are front and

center. a quieter market day. list two data checks like we did yesterday. the german report with the seminary, finally we are getting to where the government maybe is talking about contingency plans. yes, very well respected. we haven't had confirmation but what we're hearing from politicians on the ground, this is something the government doesn't want to get into. but we do here that plans for deutsche bank national here more on them through the show. let's get to the first word news. taylor: mario draghi goes head to head with some of his toughest critics today. he is in berlin where he will lawmakers whoan want to and record low interest rates in the area.

they same it makes it difficult for eu countries for economic reform. -- heposition labor party wraps up the five-day labor conference today. he says that after having been elected party leader, he has a right to campaign on the issues he chooses. he expects theresa may to call an election next year. a typhoon has landed in southern china after battering taiwan. 100 mile-per-hour wind and 43 waves.- 43 foot the former israeli leader has died. he was knocked at with the country's defense establishment before turning into an advocate for middle east peace. he won the nobel peace prize in

1993 for historic peace accords with the palestinians. he was 93 years old. tom: resilience. no other way to put it. tom:he was really the one to meo brought israel forward. deeply experienced on defense and was a real balance to the dialogue in the middle east. let's give you the balance of our data. a quieter day today. .ields persist let's go to the next screen. joyerl doesn't -- what a pleasant joy today. i would note the persistency of negative german rates. 10.18. and with the department of

justice going up yesterday, it puts it on a further bid. i like that you are looking at deutsche bank and we are seeing as it's for the banking industry. they are paring a touch to the monthly decline. speaks toll, it monthly participants. we are nowhere near over with the troubles were these banks. it is still ugly out there. just a little bit less ugly than it was yesterday. tom: i strongly agree with that. i think that is exactly the way it is. the oil churning -- let me go to the bloomberg. this is the end of the month chart. the euro-yen. the 30 year trend. the three decade trend. the reason i have read circles at the bottom is to show you the

room to move that the euro-yen has. to bring stronger yen the line down. and there is lots of room on ono-yen, and by definition, dollar-yen for the strength. it would not be unimaginable to see a break 100. francine: you're right. and there is a debate going on downstairs as we speak with issmakers and one of them the former deutsche bank ceo. talking about negative rates and he thinks this is a disaster. my chart of the hour. put has risen steadily. you can see the decision not to in november 2014.

the second circle is the target ratified. you can see the loss. it iss is how much costing and the price of oil is going down, nonetheless. we are joined now by stephen gallo and ian bremmer. great to have you on the program. i'm not her how to read the european banks. every day we touch a record low and then they are little bit better. view the european bank conundrum? stephen: i think the overwhelming view of fx investors view deutsche bank as not a wholesale systemic risk from the 2010-2012 time. francine: angela merkel is up for reelection.

the last thing she needs is the need to step in. stephen: the last thing she needs is the million refugees that she invited to step in. but deutsche bank has clearly identified as the biggest brand after volkswagen and they didn't have a good year. timenvolved in the magazine foreign affairs correspondence and last year i campaigned very heavily for angela merkel to be the person of the year, and my argument was, this is the last year you will be able to give it to her. she's now caught up in american politics. francine: if she is weak, does she need to change her polities? ian: while she definitely has changed her policy on refugees. that is the nature of the deal, --s not like angela merkel

she needs to give them cash so she can keep the people there. she has also definitely talked a internals, softly of will you see tax breaks for the middle class and spending -- i think you will. but the strongest person in her coalition is the minister of finance. and he's only going to make it harder because she is constrained in what she can do. stephen gallo, help us out with what the market show. this is a bad sign for deutsche bank. earlier, we are getting to that panic of 2010-2012 weekly. ast would you advise remedial surgery? ecb is actively

involved. -- factor of why they because as a whole is of the ecb sovereign bond purchases. so it's very difficult today to put on eurozone breakup trades vicious feedback between the sovereign and the respected banking systems is effectively broken. it is dead. as you say, i think some combination of government and the main issue -- lack of capital -- these will all have to be addressed specifically. i do believe this will be an other proverbial nail in the coffin for the government in germany. tom: that's where i wanted to go. ian bremmer, help us here with the clinic on the state of federalism in europe. i would suggest that after

strasburg, it is under threat, am i right? ian: sure. renzi last week and he told me clearly that when he walked out of the meeting, it was because he wasn't seeing leadership from europe and on july merkel in particular. that is what happens when your leaders get weaker and they are facing challenges. he has his own referendum. the u.k. is leaving. who are we excited about right now? the netherlands? no, they are having an election. you can find a place in europe right now, it does not exist. so we are seeing a crisis of legitimacy with the government and the only thing that would give you any cause for pause is the fact that the americans may decide to elect their own challenge to the global order in the few weeks. love the fact that

you say there is not much you are excited about politically and then we come into the u.s. -- a little bit of european bashing. ian bremmer and stephen gallo. we are getting breaking news. downstairs there is an extremely interesting panel. -- a former deutsche bank ceo -- forcreating seriousssues pensions. they say this will be painful. it will correct and they are expecting the purchase to be ugly. many marketshat are distorted. we will talk more about the distortions and the game that central banks are playing. this is bloomberg. ♪

francine: there is a great panel going on downstairs in the london headquarters. it is about negative rates and the impact that it has on markets and the correction they go through. the former deutsche bank ceo is saying that a correction of corporate debt markets will be painful. and this is because he believes that corporate billing of debt at negative rates will correct. they are also talking about europe and structural reform. now, the chairman of ubs faces a negative demographic and we need to rethink monetary and fiscal policies.

very much what he was thinking when he was the head of deutsche bank. the rest of europe is now aligning. the it goes back to federalism debate and it will certainly be the debate in october of this year. with us is stephen gallo and in and ian bremmer. he studied at stamford. duke university is number seven on this list. surprises were two nights ago, with the debate, ian bremmer you were in europe -- did you watch the debate? ian: i watched it were two nights ago, with the live at 2:0 a.m., i guess i am not counted in the nielsen debates. it was pretty painful. tom: please discuss. what do these two candidates due

to the second debate to speak of your international relation and what everyone wants, it a discussion on the topic -- immigration. the wall wasn't even mentioned. it is the first time i've ever seen donald trump in a significant format where he didn't talk about the wall but he was off his game. when donald trump has is speaking points when he is on his cadence -- he does timing well, he drives the point home. when he starts playing defense, he gets into the weeds. he goes over details and he meanders and is all over the place and he is boring. and boring is the death note for donald trump. francine: does he not need to play nice? hillary clinton turned around and said being prepared is not that.

not if you want to be the next president. does the next few months, he need to watch the personal attacks? ian: i think he's actually going to go back to the personal attacks. he played nice it he allowed himself to be rated by hillary clinton. so on the gentle -- on the gender issue and on the taxes issue, he was playing defense. he can't do that. i mean, i am delighted that he does because he is a problem for the markets. but in an analytic sense, it was clearly a problematic thing. now i think it is very cap that when he left the debate, he actually said that lester holt was great. because if you want to show that she one you want to not blame things. he did start saying that his lesterone was broken and holt is in hillary clinton's pocket and coordinated with her

on questions. i happen to believe that lester holt was biased. he definitely was fact checking hard on donald trump. but that was good. i don't know when that ever is a bad thing. ian: i say this as no fan of trump. you think the media is going to undermined under a donald trump presidency, you have a bias. i want to spin forward to the next debate. how does secretary clinton address immigration. it is something that donald trump continues to win on. there is a large part of germany who are dead set against a broader immigration. what does hillary clinton do in the next debate where donald trump will be very comfortable on the immigration section. the one thing she lost on

in the first debate that was significant was trade, nafta and tpp. on theeed some rhetoric importance of immigration and the fact that they are hard-working and not criminals but she should not spend a lot of time on that. she should stick to her message. she gets painted on immigration, it is clearly a loser for her. tom: looking forward to that. we have stephen gallo with us. for your political fix tonight, i urge you to listen to the "with all duef -- respect." withcular the conversation donald trump tonight at 5:00 p.m. ♪

francine: this is "bloomberg surveillance." we were talking about it but about the impact of negative rates, the u.s. election and deutsche bank and european banks. this is the picture we are looking at now. nothing good about it. let's get the thoughts of ian bremmer and stephen gallo. andou go around the world you look at various regions and

countries, it is very clear that europe is moving to new politicians. that is one leader untainted? or who is doing the job of sticking to globalization but also keeping their people happy? ian: renzi is showing leadership. on the lineis job and basically said, if i don't done.is, i of course, he's now trying to walk that back. we could easily see the back of him very soon. you have to focus on asia. the three big economies in asia. so in the world's largest regional economy, -- if that weren't true, imagine what the world will be like now if after the 2008 crisis, you didn't have

the ability of the chinese to plow forward and do real stimulus and continue to have real stability? that is a very good story. to 2008, going back are we entering a new crisis? we have fiscal policy that is hardly there. i think you will see an unwind of a lot of central government systems. it will become harder for governments to govern. basically, globalization has been about emerging-market labor taking jobs away from the developed markets as well as populism and anti-globalization that we see in the u.s. and europe. not in japan. in the next five years you will probably see a shift from emerging-market labor to automation. that means the locus of

anti-globalization will lap up onto the shores of the countries i just mentioned. start addressing these issues. and if you don't, you get crisis or you get decentralization. and decentralization is ok in a place like the united states. europe, brexit might not be the worst possible thing. but to get from here to there you have to negotiate the most complex policy with a completely dysfunctional policy. francine: next to me come back, one hour on europe. bloomberg because we have coverage of the bloomberg markets most influential summit. ♪

tom: good morning. this is "bloomberg surveillance." we have a most eventful day here at bloomberg. we have our most influential series right now in london.

let me do a data check right now. not as exciting as yesterday but we will take it. there is new wants here. robertsontom, julian fired up about negative rates. -0.7%, thatwo-year, is ugly. deutsche bank is doing a little as well.r this morning with us is stephen gallo. filter in julia robertson's comments last night to us. was exceptionally negative about the outcome of negative rates. when it's time to get out of negative rates, how do you perceive that will occur? ok, well there are two issues here. there are two+++

debate. one is that central banks have brought us here to try to stimulate growth. the other one is dealing with surplus and conditions and so on and so forth. so i don't think there is a clear-cut answer. but there is more and more becoming available. the private sector, corporate, they have built up significant debt burdens as a result of the low rates. so they prefer debt financing over equity financing. when in fact, they probably should prefer more equity financing. so this situation is not good. it's not a good place for the global economy. now andhin where we are what we have learned, there is a massive divide between olivia blonde chart and julian robertson and on the other side, people like adam pozen and ken rogoff.

is it a question, stephen gallo, of not negative rates but not having the courage and will to do negative rates the correct way? i don't know what the answer is to that question in terms of what is the correct way to do negative rates. i think there are different levers of monetary policy. on the regulatory, monetary and fiscal side that all may to work in conjunction. but one of the issues that we are faced with is that a lot of the decisions are not taken in coordination. they are not taken in coordination domestically from a domestic policy perspective and on a global basis. globalot taken in a fashion. particularly when global trade is weak, there is a tendency of national authorities to revert to turning inwards rather than outwards. and so this is the situation we are in.

banks, idea that central despite the fact that there may be more central stimulus in the pipeline down the road, the idea that central banks will then step away from the accelerator in my opinion is not correct. every single amount of fiscal stimulus is ending up boosting cloaks credential in the developed world then potentially central banks can step aside but if it is not. and if the money is potentially wasted, central banks will have to continue printing. tom: so there is the conundrum right now. stephen gallo. we need to catch up on this morning's news with taylor riggs. taylor: hillary clinton is moving quickly to exploit donald's stumbles in the debate. the democratic candidate campaigned in north carolina seeking support from suburban women, middle-class men and young voters.

meanwhile, donald trump says he did very well in the debate. when the civil war in syria appears to be getting worse, the u.s. will provide money in aid. the money will help united nations and independent charities offer independent care. millions of syrians do need that help. they are living as refugees in neighboring countries. americans tax collector will cut thousands of jobs because fewer people are filing paper returns. the irs is illuminating seven is eliminating 7 million positions. eliminating 7000 positions. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. $45 a barrel after saudi arabia signals it could

compromise with iran on the future output agreement. we have stephen gallo still here. talk to me a little bit about the oil markets. in $10ket was pricing that they were fined to figure out a solution here. so it was always very unlikely. absolutely. there has been a lot of talk and very little result. there is a big divide in the position between saudi arabia and iran and we see that during this particular meeting and in anythingi think positive that could come out will be a setup for the next official meeting that will be happening in vienna in november. francine: i've covered opec for many years. saudi arabia, the last time we spoke to them they signaled they

may compromise over iran. is a round country that now decides? harry: what has become a lot clearer in this lead up to the iran is nothat targeting an absolute level of output, it is targeting a market share before sanctions. so what iran wants is a market share, the equivalent of 12% or higher. and that implies it must increase its production up to 4.1 million barrels or 4.2 million barrels a day. now, people were under the impression that current levels were submission -- were sufficient. hairy, help me here with the range bound. bring up the chart. this is a superb chart. down we go. range bound, range bound, range bound. you mentioned vienna in

november. tell me about how demand folds in to the desperation of these opec nations. harry: and is there beyond resolving this. the international energy agency, they're looking only for modest growth this year and next. the global economy is only growing 3% or maybe a little bit more than that next year and that is way below the trend in the global economy that we witnessed in the 10 years leading up to 2007. so an end, as far as what happens with prices, we will be in a range and the range will be swinged by the current supplier. and the supplier is no longer opec. u.s. shale oil. that'll give us the ceiling and floor of the market. notice the breaking news there. a mating in the year business.

stephen gallo has never had a miller lite. the champagne of beers. my mother drank it. the champagne of bottled beers. but anyway, sab approving a deal bev. anheuser-busch in how does this fold into your market analysis? being a canadian, bank dollar cat is one of the primary interests. i would say that based on some of the rhetoric coming out of opec members, i would say that a breakthrough this week is unlikely. but the possibility is not zero. so given that and given the fact that we start to see fx investors play dollar cat from the top side, and they are

looking for a dollar strength versus the canadian dollar, there is a risk of a squeeze of going lower. so i wouldn't buy dollar cat above 132. tom: here is the money question. if it is a proxy for clinton-trump, do we need to fold the canadian dollar into the proxy for clinton-trump with the export side to canada? stephen: let me be clear. to 130. that was my main point. we do see dollar strength ahead. regarding your question, yes. there is definitely a nafta trade resistance. that is as a result of trump and his movement in the polls. i think mexico is going to remain the main proxy. canada will follow mexico. we will follow mexico. but don't forget, canada is hurt

by a weaker peso. so canada's trade position is hurt by a weaker peso. so the weaker the peso is, there is probably a more of a likelihood that the bank of canada is forced to act. the weaker the peso, the more likely canada acts. tom: we have to do this longer next time. looking to vienna, looking to november. we move now to an important conversation. charles plosser on inflation. some of the vectors on inflation moving in a posterior direction. this is bloomberg. ♪

francine: i'm here in london and tom keene is "bloomberg surveillance." and we have an important summit here in london. and she says she believes the boe will have to either cut interest rates or do something a little bit more to stimulate the economy. let's get back to stephen gallo. when you look at what the boe can do and will do and the impact on sterling, is it clear that they will have to do more? the guys despite what we've heard so far, brexit will make this country worse off? stephen: it is a clear and they know that.

relative to the economy that they gave out in the first half of the year. policy on of their sterling, yes. additional rate cuts will weigh on the pound. but you have to remember that these policy options, especially for the u.k. in a structure like the u.k., a lot of asset prices and accumulation, these help the economy. and in our view, that prevents aggressive -- from happening. are hearing from -- speaking in the bloomberg auditorium that it seems like to her, it will be required at some point to help ensure that a slowdown doesn't start to turn into something pernicious. why do you think it is not a done deal? stephen: because look at how the economy has performed since brexit. we don't know the form that brexit will take.

once we know, what is the form of the economy? is there anything they can do to stimulate investment, anyway? there may not be. but the thing that i want to hit home is that most of sterling will be driven by the level of fear and anxiety in the market, some of that related to brexit. i do have other factors. weak growth. week banks in europe. eu foreign politics outside the u.k. francine: if these guys have to , we hear trade deals that is the red line from the eu so it is unlikely they will get the same access to the market. stephen: ok, fine. in the interim. is there a complete break that will occur? no. it is in everyone's interest that it is maintained. so it still shows a rebound at the nine months and 12 month

profile. we think ultimately they think brexit will result in and in that out relationship. like greece. eventually, it managed to remain inside. and we think the u.k. and brexit will work. betayou talk about high britain and high beta cable. this is just simple math. the current account deficit. and we see this in two days. september 30 i believe we get a new reading on this incredibly important series for all of the united kingdom. you add on the money flow. andyou have the massive persistent deficit in the current account. help me here with the horse and cart. does that force sterling lower? or does sterling get out in front and predict a worse account? stephen: i think a bit of both

can happen. tom: agreed. stephen: here to date, through the end of q2, the performance of the trade weighted count was -11%, year to date. that is significant. i know that a lot of the weakness came after the referendum and there was a lot of talk about that after q2. it is the data on friday is much weaker than the consensus, it would spell further trouble for the pound. it is if you think about what is driving the current account deficit, it is not specifically a trade imbalance. deficit in thee current account. now that should be able to be corrected pretty quickly. that if absolutely key the data is weaker than expected -- there is no question in my mind that the bank of england would prefer a weaker sterling. francine: stephen gallo, thank

you so much. coming up, our global coverage from the most influential summit continues. we talk to the biggest names in financial markets including my conversation with the credit suisse ceo. this is bloomberg. ♪

tom: good morning. this is "bloomberg surveillance." talk about the interview of the day. francine look walk will absolutely crushed the ceo of credit suites. what is your toughest question to him? it is an important deal. i can't give it away. but the premise is that thanks are facing no gross and actually, how do you manage shareholder expectations? they are clearly in a different situation. they are replicating it. tom: what is the timeline to repair? toas stunned that going out 2020.

investors gave a lukewarm greeting to the biggest public offering in two years. shares of china's savings bank were little changed. coastal savings raised -- in the ipo. the bank has a market cap of three times that of deutsche bank. one of the investors is george soros. and there is a report that germany's government is preparing a contingency plan to help deutsche bank if needed. one of the possibilities, the government would take a stake with more capital to cover litigation costs. deutsche bank faces a possible $14 billion fine in a mortgage bond case. and that is your bloomberg business flash. thank you. let's discuss with michael moore from the finance team.

a couple of german newspapers speculating about what the regulators might do and pop -- and what politicians might do -- this brings us way euro zone crisis. it is speculation and people saying no. bank, theor deutsche only way it gets fixed is when they reach an agreement with the justice department. that is the big question. once investors get a number on that and they can react. but at this point there hasn't been a lot of news. you have -- saying certain thegs but since we've had initial offer, there hasn't been much change. francine: and markets don't insolvency., about are they even worrying about the capital region?

i think those two are related. the profitability and the lack is --ernal generation there is a question about capital ratios and the ability to stay above regulatory minimums when they have big fines down the road. part of what deutsche bank needs to do, and what they're trying to do, is fundamentally reshape their business so they can be profitable enough to generate that capital internally rather than have to sell off units. tom: help me with the news. yesterday, it had a little bit of 2008 in the price action yesterday. at 9:30, the department of justice talking to all european , what was the importance of the justice department headlines yesterday? the big question is

whether the european banks will be treated in a similar way to the u.s. banks by the department of justice. you know, the $14 million number is far out of line with what the u.s. banks ultimately paid. and i think investors are whether the european banks can get a similar deal relative to their size in the mortgage industry before the crisis. that is the big question. stephen gallo, i know you can't talk about individual banks but help me out with what negative rates due to all of michael moore's european banks. stephen: well, we are confronted with data that shows that buffett ability is going down. so there's a dilemma. in terms of the impact that it has on foreign exchange markets, we think the eurodollar is up to 113.5 and we think that is where

it's going to be for the foreseeable future. tom: stephen gallo, thank you so much. and michael moore, as always. the story continues and we will go well into october talking about these banks. in the next hour, michael spence will join us. time to talk to him about the banks. and don't forget, francine look walk and her interview with the chief executive officer of credit suites. the data today is quieter. eat theded yankees boston red sox. criminal. ♪ a

tom: quiet markets this morning. shares, angela

merkel and michael spence. anotherand trump are in universe and credit suisse is not a german bank. good morning. this is a "bloomberg surveillance." alive in new york on wednesday, september 28. francine will speak to the ceo of credit suisse in the hour. she is in the basement of the --dquarters waking headquarters waiting to speak to the ceo. mario draghi goes head to head with some of his toughest critics today. he is in berlin where he will meet with german lawmakers who want an end to record low interest rates. decreasedhe low rates the incentive for eu countries to make economic reform.

of britain's opposition labor party will order lawmakers to fall in line behind him. jeremy corbyn wraps up a labor conference today. he says after having been elected party leader twice in 12 months, he has the right to campaign on the issues he chooses. he expects theresa may to call an election next year. a typhoon has slammed into china after battering taiwan. it killed at least four people and injured more than 500. 100 mile per hour wind left over 4 million households without electricity and 14,000 people had to flee their homes. hasformer is really leader died. fromrked at the defensive it before turning into an advocate for middle east peace. he held his posts over a six decade time. foron the nobel peace prize

peace accords with the palestinians. he was 93 years old. tom: thank you. did so much for middle east peace. truly decades of resilience on a safer israel. quieter markets today. stilleld now is remarkable. yesterday -- onto to the next screen, quickly. , we get to that in a minute. negative fields in germany and deutsche bank is doing better than good from 24 hours ago. you will get to that in a moment. let's do a chart to get you into october and imf meetings. out the-yen, take dollar, a long trend with stronger yen and weaker euro. did a chart because michael

spence is with us and you can see that there is room to move. do still have room to move. so it wouldn't be a shock to see and go over 100. michael spence on a number of topics. script.o rip up the wall street journal today has a beauty list of colleges and i thought it was an uncommonly smart and nuanced list. washington university doing well. the land of laurence meyer. the list, top of let's be honest. no surprise -- your stanford. help us with how you invented gasb at stanford? michael: i inherited a very healthy institution. stat.

you took it further. what did you do? michael: he moved away from the social science focus. a powerfuld entrepreneurship program. we leveraged our position in silicon valley and that sort of thing. so we made some progress and it's been carried on. the two saidthat that if you are going to do this, you did it right. you reapproved rigor. how do we continue to bring rigor back into american academics? michael: it isn't just academics. we are losing it in lots of areas and it is hard to analyze something in 140 characters. so i think we are in an era fore there is headwind analysis of important things. -- i went to bank

essay wherec 2010 ns you talked about false signals and true signals. there are fancy mathematics. broken out into new ugliness -- not record ugliness -- but i'm sorry, this is a michael spence moment. how does angela merkel deal with a false risk in rejecting the true realities of deutsche bank? well, there is a consistency problem. any country behaving properly should behave the way we did. if deutsche bank has a problem that is unseen, it should be bailed out. it is a systemically important institution. the problem is, the germans has led the charge are doing it banksn't bail out other in other countries, including italy so they may have a problem here. but i suspect that the charts

thatct or signal something is worse than the actuality of deutsche bank. tom: you then have to act. told you suggest germany can that develop anglo-saxon action versus the reticence to do something that we see in continental europe? yes.el: but it is harder in continental europe and they have the same fundamental problem that we have. we have not built the other side of the bridge. we are experiencing week and declining growth. is the really hard question is that if you assume that for political and other reasons that it will be difficult to act, the question is, is it right for

central banks to pull back? tom: help us here -- we have so much to talk about. roach with aphen scathing project in the last 48 hours. michael spence, when i look at germany and i look at this as , wherearing of markets does the courage come from? the political will come from to clear markets? kid comes from leadership. has to be someone with a clear eye of what needs to be done. tom: do you see that now with angela merkel? michael: no. on economic things she has bowed to the pressures of fellow germans. honored to have you here today. michael spence.

speaking of distortions, european banks. francine -- this is bloomberg. ♪

tom: still here with us on economics -- good morning. coming up, the conversation with the ceo of credit suisse. now to the business flash. taylor: walmart is talking about spliting in india's cart e-commerce market.

amazon is spending $5 billion to expand their. giveeo of wells fargo will up $41 million in stock and salary. john stumpf is fighting to keep his job in the midst of a national uproar. has givennk executive that much since at least the financial crisis. he returns to capitol hill tomorrow for another round of questioning. the ceo of deutsche bank has ruled out asking the german government for help. raising capital is currently not an issue and accepting government support is out of the question. shares of deutsche bank fell to a record low this week. the u.s. justice department once the bank to pay to settle a mortgage bond investigation. that is your bloomberg business flash. the -- on theout presidential election, how about

the actual policy discussion? with us is michael spence. and joining us now from london is libby cantrill from pimco. want to finally get around to a fiscal discussion of what we see it. dreams of clinton and trump are starkly different. what is the distinction between those two views? libby: good morning. the big difference is that one hillaryfor, so clinton's fiscal package, which would include a big infrastructure bill -- it would be paid for, effectively, by an , a taxe on the wealthy increase on the wealthy. whereas donald trump has a more aggressive individual tax reform plan. much of which would not be paid for. so they are different because one will be paid for by an

of upper income tax rates whereas donald trump would not be paid for. tom: the analysis of this is something. not the chart -- and want the graphic. the budget graphic there it is. differentlittle bit then the clinton guy pass. i think secretary clinton alluded to this in the debate. is this a differential of tax and mx? or is it about spending dreams? libby: i think it is both. on donald trump it is much more about tax reform and lowering tax rates across the individual rates. whereas hillary clinton provides tax relief for the middle-class class and pears that with increased spending on infrastructure. so it is a balance.

but you know that so much of this is rhetoric. have actually get implemented in terms of policy will be predicated on congress and whether congress approves these things. so while these things might sound appealing to the average voter, or a little this is --ely to mers to realize likely to materialize. of whate us an update will happen in washington in the coming weeks. know, the, as you all government has to pass a government funding bill by september 30 in order to avoid a government shutdown. the government has not shut down since 2013. i think that given the election year dynamic, very unlikely that members of congress oversee a shutdown a month before the election. this is about different provisions where both parties want to have things attached to

the funding bills. so very likely they will come to an agreement before the deadline. it might be at the 11th hour but it is likely they will come to an agreement given the election cycle. tom: libby cantrill, we will continue. is here with us. a favorite word is "resilience." can you do that with a subdued nominal gdp? the elements of resilience are still there. a dynamic economy. there is still a lot of resilience. but a low nominal gross and environment is not an easy one. tom: it is harder to work without the inflation illusion. yes.el: it is by far the easier way to reduce the debt burden so it is not a good configuration.

tom: let's assume we don't have this, it you trust the plug-in of the congressional budget office? libby: you said, sorry -- you trust the gdp numbers they are plugging in? abby: yes, we take them with grain of salt. they have been aggressive, historically. we view them as a data point but certainly not the gospel at pimco. tom: here are more headlines coming out right now. this is responding -- let me bring you up to date on this with deutsche bank. let me look at the deutsche bank pricing. saw here than last week. but the government has come out and say they are not working on it bank rescue plan. , what is the mood you

observe in continental europe and in brexit london. libby: i've only been here for 24 hours. arei think a lot of people talking about the similarities between brexit and the u.s. election. could be ane unexpected outcome in the u.s. like there was with her exit. the adverse market reaction in the u.k. was short-lived. but there is concern over here that perhaps it would be a prolonged option. tom: let's look at deutsche bank . i don't want to get hysterical about this but yesterday was the first time in 7-8 years that i saw the sweat of late 2008, for a little bit in the early morning. , 13 and then 12 on

the chart. down we go. yesterday was ugly. moving towards 10 euros per share. a lovely bounce this morning and we go over -- really, this goes to obe overcome. it is amazing. respect to the existing theory, we are in uncharted territory in multiple dimensions. tom: we will talk about that in a minute. cantrill, final thoughts for you this morning. when i look at your work on public policy, let's go to the gridlock. do you assume clear and present gridlock in washington? libby: certainly, the markets prices in as well for a status quo election. democrats in the white house with a split congress or republican congress -- and think we are maybe a little bit more hopeful that you could see washington be a little more constructed in 2017.

i think you will have a new administration, you might have the hill outreach on that hasn't necessarily been is prevalent over the last few years. so maybe, there is probably a little bit more hope that we can see a constructive outcome in 2017. but i think the market races in gridlock in the status quo. libby cantrill, thank you so much. tonight, driving forward the discussion, how britain heilemann look for it on "with all due respect." this is must watch, michael spence. ♪

tom: you will love this. let's get to the morning must read. stephen roach scathing review -- onerites "failing to heed of the most powerful lessons of the 1930's that fiscal policy is the only way out of a liquidity track could be the greatest tragedy of all. central bankers desperately want the public to believe that they know they are doing but nothing could be further from the truth." spence, who inl

the summer of 1968, had the privilege of learning and listening to sir john hicks of oxford university. to drag him into the modern age. stephen roach begs for the , are we delusional that we can bring formulas from the 1930's to bear in 2016? michael: well, i think it's not a good idea to take whatever solutions people proposed in another era and simply transplant them. but on the other hand, i am quite sympathetic with the view that he was taking, that germany is taking. the benefitshink costs and risks of having a policy agenda dominated by monetary policy is a dangerous path. you are an expert at the

time continuum -- i was flabbergasted at the press conference, sitting there with michael mckee. the conflation of trying to get out front of policy and waiting for evidence and acting ex post. his janet yellen trying to have it both ways? to look forward and waiting to react to data? yes, i think in a way she is and it is confusing markets and other folks. important thing, i think, that needs to emerge from this discussion is for central banks to say flat-out and clearly -- we do not have the instruments to engineer a full recovery. and the other instruments that are needed are in the hands of governments, businesses and so on. tom: what is the result of a one and done interest rate increase versus the modern idea of establishing a vector with a

measure or not? that once you are on a path, you have to keep the past going? i have a lot of sympathy for that. i think the one jump is a dangerous move. that a path to which you are reasonably committed which will cause people to behave differently with debt restructuring and capitalization with banks and other important things would be quite healthy. but nevertheless, you have the problem that other it is a jump or a path that is moving on a slope, it really depends on complementary policy. tom: we continue this discussion with michael spence on janet yellen and the central banks. ♪

tom: "bloomberg surveillance." you are watching deutsche bank. we will have more on that.

your first word news. hillary clinton is moving quickly to exploit donald trump's stumbles in the first presidential debate. she campaigned in north carolina. inmp said he did very well the debate and said he would appear in the remaining two debates scheduled. turkey has arrested 32,000 people since the failed coup in july. that is according to the turkish justice minister. turkey is demanding that the u.s. extradite a muslim cleric who is blamed for the attempted takeover. at a time when the civil war in syria appears to be getting worse, the u.s. will provide another $364 million in aid. it will help offer food, shelter, and medical care. millions of syrians need the help. 5 million are living as refugees

in neighboring countries. paperpeople are firing returns to the irs. global news 24 hours per day powered by more than 2600 journalists and analysts. tom: taylor, thanks. what a joy last night, michael mckee and myself speaking with julian robertson, arguably the founder of hedge funds. mr. robertson, always vocal, always interesting. onian robertson, scathing negative rates and chair yellen. >> janet yellen is unwilling to see the american public take any pain at all. because of that, i think she is

creating a serious bubble. tom: there we are. michael spence is with us from new york university. taking the pain. you spoke about clearing markets. when did we start thinking this , thatbe pain free capitalism could be pain-free? prof. spence: i think about two years after the crisis. wefirst, we were making sure did not collapse. the banks overestimated the speed of the recovery. they thought the monetary policy would have a bigger impact. tom: there is a reach of literature back on this dark side to capitalism. i think of benjamin franklin's work at harvard. another one, when did we decide to become pain-free?

do we blame this on the american economic association? it is almost a political issue. this idea of getting out of crisis pain-free. i thought robertson was dead on on this. prof. spence: i fundamentally agree with you, but the problem is more serious for the fed. if they exit now without the complementary policy responses that makes the whole thing more robust, they will be responsible for a downturn. second, they have to worry about their credibility. it looks more like a trap to me, that they and others have collectively created. tom: i see mr. trump speak at length, at the economic club of new york. we also the debate last night -- all saw the debate last night. how do you respond to the joint pile on of criticism for the federal reserve?

prof. spence: i think it is overdone. a serious discussion of what the central bank ought to be doing and conditional on what is a think pilingut i on in a way that threatens its independence or so on is not helpful. tom: michael spence of new york university. we now go to london. francine lacqua in conversation with the chief executive officer of credit suisse. [laughter] make very to significant adjustments. ,f course, at times like this there is overreaction. overreaction by shareholders? market.by the

you get extreme movement based on relatively minor news. there is relative uncertainty. not great -- you get uncertainty generated, like this week. all of that creates a very fragile situation. what we can do in that environment is focused on what we can control and that is what we have been doing. we take the cost base down. you have to create leverage. you have to lower your breakeven point, so that you are a bit more in control of your destiny and that depends on market movement, which means a lot of cost cutting, a lot of deleveraging. we have been cutting risk, cutting leverage, cutting cost. but, at the same time,

investing, investing in the future. billion.sted $17 we are shifting capital. timeis overtime -- over going to improve the economy. francine: i know you hate talking about worst-case scenario, but what do investors really fear? capital raising, like you alluded to? or do they only fear profitability of erosion? i think it is all of the above. i think there is a lot of fundamental doubt. the cost of equity, the return on capital. that is a big question.

capital.s of banksme of the leading generated 8% return on equity. that is not enough. makes banks not really investable. really, the kind of low interest rate environment. in our case, we have been able to manage it if you look at our numbers. but that is not the case for all the banks. again, it makes banks very vulnerable. is there a eu investment banks?

or to shareholders have to understand your strategy, which is a little bit different? mr. thiam: we are very clear on what we want to be and what we don't want to be. we were talking to a client before coming to this meeting. clarity makes it a lot easier. francine: you think your strategy has been understood? mr. thiam: you can't ask me that. you have to ask the people who listen to us. [laughter] mr. thiam: of course, there is always a lot of skepticism and that is fair. i think what we are trying to achieve is increasingly understood. certainly, our top three andeholders have booked have driven the share price this quarter.

q4, q1, iry turbulent think q3 will be reasonable. i think we will have a good performance of the bank. over time, it gets understood. francine: how can you reassure investors you don't need to raise capital? i ask you every time. [laughter] say, underi always the most foreseeable scenarios and circumstances, we don't need to raise capital, but i cannot completely exclude that possibility because that would not be wise. there are always extreme scenarios. there was a debate last year on whether we should raise capital or wait for events before raising capital. i feel that we made the right decision.

when i want to provoke, i like to say i'm not able to run a bank at 10.2%. to do that, you have to have a perfect view of the future. with a buffer, you can manage for uncertainty. do you think we will get consolidation? do we need consolidation in the european banking industry and will we get it? mr. thiam: i was interested by mario draghi's comments. he went on record saying there were too many banks in europe. wellsk if you look at fargo, you look at bank of , i was, jp morgan involved in one of the largest american mergers at the time -- those banks have been created

largely through mergers. you can extract a lot of cost synergies and cost cutting can be significant and you create a more diversified, more stable organization. the differential impact on jpmorgan's numbers, the same drop in equity, it is disproportionate. they can solve it much more easily. clearly, in europe, that has not happened. francine: can you believe europe is over-banked? mr. thiam: i think it could benefit from consolidation. benefit from consolidation. every institution right now is trying to build a very restrictive diet and shrink on its own. i'm just arguing that is much easier to do when you put two together, taking out cost and inefficiencies.

i don't think it is a realistic option at this point in the industry. francine: because of regulators? mr. thiam: yes. the notion that you are going to trade bigger banks is not going to be viable in the short term. if people think banks are already too large, you cannot increase them. that is an issue. , if youbeing partisan look at the banking landscape, i think there is room. francine: what is your view on deutsche bank? i know you don't like talking about competitors. mr. thiam: i can comment on the sector. i always believed that it is better to find a solution that allows everybody to move forward and do well. at others'oice

difficulties because we effect everybody. dragged down by the market reaction to the news on deutsche. you saw the news going out. it is not helpful. deutsche bank is an old institution, a great institution, i really wish them well, i hope that they come out of their current predicament. francine: do you think these market disruptions will last well into 2017? or are we nearing the end? it is difficult to see the end, but six months from now, 12 months from now, will we largely be fixed? mr. thiam: i think the next nine months will be difficult. in my lifetimeer theng the u.s. election in

same year as the french and german elections. the alignment. francine: and brexit negotiations. mr. thiam: and brexit negotiations. politics are going to play a big role. we have had low volatility. for a while. i think you will have spikes in volatility as the polls go in this direction and people think this candidate may or may not win. you will also have the drift toward populism in the political discourse, which i think will scare markets because you will see the likelihood that some people have disruptive strategies or policies and they get close to power and that is going to be unsettling for markets. i think the next 6-9 months will be choppy. francine: we have a chart looking at negative rates. have central banks so the seed for the next recession?

seed for the next recession? mr. thiam: i think it is a very complicated issue. background of insurance, everybody knows. clearly, i think it is becoming clearer now. mark carney was the first to talk about it. there is actually clear link between democracy and central-bank rates. there has been a glut of savings . on one handography and that is not going to go away and that is a difficult problem. unfortunately, there are a lot of negative loops there.

if you have low interest rates, your pension deficit increases. that makes the whole situation worse. you can see that in switzerland. -- cannot make any assets money on assets and liability explodes. you accumulate most of your pension between 40 and 55, you have your maximum earning power. 1968 and the next 50 years, they made nothing on their assets. that is a problem. when you get the distortions in , which was an explicit objective of qe, to drive asset prices up and push liquidity into the equity market

-- the distributional and political effects of that are huge. francine: what is the answer? mr. thiam: you will have to ask them. [laughter] mr. thiam: it becomes a political problem. in democracies, distribution is handled by parliament. normally, that is how it works. if you organize a huge transfer of wealth, it is going to lead to political issues. that is exactly what happened. , you cane a debtor borrow, you can issue debt at negative rates, it is fantastic. if you are a saver, you hate it. there is an argument that income inequality has also fed into the low interest rates because the ability to consume his lower in

higher income brackets, but it has compounded the glut in savings. francine: how do you fix this? to central banks need to step away from what they are doing? two they need to admit they did not look into it enough before going into negative rates? mr. thiam: the argument i have been making is that it is not just central banks. behavior,, savings distribution of wealth in society, those things are not controlled by central banks. the solution is going to have to be broader and involved political debate, particularly on the distribution. this is why everyone comes back to this fiscal debate. it is about policy, it is about stimulating demand. central banks can play a role. i don't know. i think in the public debate, people like to go to simple answers. to blame everything on the central bank and say that you

have to raise rates is overly simplistic and is not going to resolve the issues. francine: what would help your job as a banking ceo? mr. thiam: if interest rates go up, no question. every time there is it with of interest rates -- a whiff of interest rates going up, clearly. i think they will go up eventually. i'm absolutely convinced of that. the system cannot survive without a normalization of interest rates. what i'm not able to predict is when it is going to happen or by what mechanism. francine: why has the fed been so shy so far? mr. thiam: they have a very sophisticated process of decision-making. we would welcome an increase in interest rates. the market is pricing 100% probability by the next quarter. the market is telling you that

interest rates will rise. francine: you were talking about choppy markets the next nine months. what is your main concern? where is the main headwind coming from? i know we talked about political risk. mr. thiam: i think politics are a big, big cloud right now, the elections and the uncertainty they create. france and germany play such a big role in europe. if you have those two countries going through a major election at the same time, that creates huge uncertainty. brexit clearly has an impact. camp's who say you should wait to find out the outcome of those elections and those who say you should not. francine: does it affect your share price? mr. thiam: not directly, but indirectly, yes. through transactions that don't happen, through transactions

that are made. uncertainty is never very good. to have to go through that and see what happens. conversely, you can also hope that once that is removed, things will get better. francine: what does brexit mean for banks here or banks with a lot of exposure to london or the u.k. in general? mr. thiam: you saw before the referendum that most banks supported remain. now, we have had a democratic vote and it is brexit. i can talk about us. a planast year, we had to reduce our footprint in london. we have about 2000 jobs in london. we wanted to deemphasize london. we are not very much impacted by

the passporting issue. only 15%-20% of what we do here would be impacted by that. we are in a relatively reasonable position for that. and we just have to wait. we just don't know what shape britain is going to take. there is speculation on when article 50 may be cleared. between a hard brexit, a soft brexit, there are many variations. there can be an impact on passporting and the free movement of people. i think we have to wait. francine: could dublin be the new london post-brexit? mr. thiam: we have a big operation in dublin. we have transferred a lot of our prime services to dublin. we are well-positioned.

we also have a big platform and luxembourg -- in luxembourg. we have also transferred a lot of jobs. we have been followed by ubs, goldman sachs. look, we are in a reasonable through themanage next time period. francine: how do you view risk overall? tom: delicately answering questions is the ceo of credit suisse. i will be taking part in that later. looking forward to speaking to of columbiaida university and abby joseph cohen. we are honored to bring you michael spence from new york university. richard clarida joining us later today. helping with this thing called

dsge. and the idea of something that you did at stanford, having a choice at an options-forward. is it a dead theory or can we advance forward to good work of the last 20 years? prof. spence: it is a very useful way of thinking. i'm kind of a fan of that and i hope it is not dying off. tom: how should janet yellen use it at the zero bound? is ceo of credit suisse living at the zero bound, like all bankers. you people think about it and look forward. how do those two worlds meet? prof. spence: in my experience, with developing countries and lots of other places, somebody makes a fairly courageous decision and you change direction. i think it is going to have to be to bite the bullet and normalize the asset prices and the interest rates.

tom: is jpmorgan leading the way on that? is james dimon the most out front on what the new international and american bank will be? prof. spence: i can't answer that, tom. i don't know enough about hell --how he has configured the banks. the struggle let credit suisse isat credit radically different than what is happening in the united states. prof. spence: we did something .ery impossible -- unpopular we cleared the market in terms of transparency and dealt with the market. it is that kind of thing that has not happened in europe. they are just living on the low interest rate environment in many ways. tom: this has been exceptionally valuable time. , thank you soce

much for coming on. michael spence from new york university. let me do a quick forex report for you. weaker yen. i'm looking at sterling at 1.30. mexican peso out of the picture. an important conversation. you wonder about mergers. later today, alix steel in conversation with a mathematician, james gorman. so much more coming up across bloomberg television and bloomberg radio today on economics, finance, and these most-interesting markets. it is the new york yankees' new york. ♪

ceo roles out.

>> forfeits. the wells fargo ceo will forfeit stock and salary as a result of that scandal involving bogus accounts. >> saudi arabia may compromise on iran >>. i'm jonathan ferro alongside david westin and alix steel. working in overdrive. we have had headline after headline this morning about deutsche bank. >> we keep talking about the fact that it is deutsche bank specific and that it is deutsche bank debt. it is a deutsche bank story.