>> coming up on "bloomberg best," the stories that shaped the week in business around the world. european banks work through some jitters. john trump takes -- donald trump takes a shot at janet yellen. disney may have designs on twitter. opec jolts the oil market with an unexpected deal. >> opec bringing barrels out. scarlet: plenty of food for thought in the week's top interviews. >> i tend to be in the camp of normalizing sooner rather than later. >> there is always something to worry about. at the moment, there are a lot of uncertainties.

scarlet: the world's most influential financial actors -- down thus taken rates far. >> i have not seen bubble prices in most assets. >> the pressure is great on everybody. ultimately, you've got to produce. it's all straight ahead on "bloomberg best." it's all straighthello and wel. i'm scarlet fu. this is "bloomberg best," your weekly review of the most important business news, analysis, and interviews from bloomberg television around the world. the week began with reports from germany that created considerable worry for investors in one of the world's largest investment banks. bank shares dropping

to a record low in germany today amid further concerns about its financial stability, whether the government will save the bank if needed. how long can the government distance itself from deutsche bank? >> well, so, it's a very complicated position because we have an election next year and we have ongoing talks with the u.s. over this fine. $14 billion. everyone thinks deutsche bank would be pushed into a very painful capital hike. the german government is playing it in a complicated and potentially dangerous way by year, thell, election potential game of chicken going on with the u.s., we don't want to put the taxpayer at risk. that would lose votes and maybe encourage a steep fine from the u.s. deutsche bank is a huge bank. it has a huge balance sheet. 2 trillion in assets. there's no simple or logical backstop other than germany if

ever it does find itself in trouble. >> we are just over 40 days until the u.s. election. last night marked the first of three presidential debates scheduled before the big day. one of the topics donald trump was not shy to touch on was yellen's fed. is doing: the fed political by keeping interest rates at this level. to goy that obama leaves play golf for the rest of his life, when they raise interest rates, you are going to see some very bad things happen. the fed is being more political than secretary clinton. >> i think what donald is saying about the fed is that we don't understand the fed by design was a nontransparent committee. it was designed to be that way. the real issue is not is a great person like janet yellen political, because she is doing the best she can. it's that the process is not transparent. that makes it difficult for the

world to understand where we are going. >> is it political federal reserve where you are considered? >> that's a resounding no. --ping interest rates as low rates low is better for the incumbent party, meaning a democrat. that is absolutely not the case. the federal reserve is keeping interest rates low because that's what's needed to support economic growth, create jobs, keep us moving forward. politics simply do not play into it. >> josh earnest, the white house spokesperson, has said the assertion that janet yellen is political is prosperous. you think there has been a politicization of the fed. >> i don't think there's any doubt. it's a byproduct of the extraordinary policy stance of the u.s. central bank and central banks around the world. we are going into almost our ninth year of what banks continue to call extraordinary policy. at some point, it's no longer extraordinary.

there has been a push from the republican hard right to rein in the fed, if you will. i don't believe that legislation will be passed, but i believe if trump is elected, there will be members of the board would ask whether or not they would choose to serve, just as he would likely ask whether or not they would like to go. >> opec has agreed to cut production for the first time in eight years. this, according to delegate familiar with the agreement, that drops production to 32.5 million barrels per day, down by 750,000 barrels per day. this certainly is history making. >> it is. and the real country that is making history is saudi arabia. two years ago, saudi arabia instigated an opec policy that said we have to grab market share, we have to defeat shale, we should produce as much as we can. it is opec back managing the global oil market, bringing barrels out to raise prices. it's a surprise and it's a very

big change. >> does it tell you that the saudis are desperate? does it tell you they want opec to have a bigger influence? does it tell you that they really think prices can rise? >> i think it tells us to things. the saudis may not be desperate. but they need higher revenues. the economy is in trouble in the kingdom. the saudis really think that by cutting a relatively small amount of oil, they can drive the price is much higher. >> now, the challenges are far from over, because they need to figure out how they are going to do these cuts. they are targeting a range of 32.5 million barrels per day to 33 million barrels per day. they are currently pumping just short of 33.7 million barrels per day. that's unlikely to make a major difference is what analysts are telling us. mind that we also need

to see what they say about the timeline when they need in vienna. how long is this frees going to last, and is this going -- this and isgoing to last, this going to extend to non-opec? scarlet: the dow losing points in all industry groups. health care and financials were the big laggards. we have to talk about deutsche bank, a record low for its u.s. shares. a number of funds that clear derivative trades from the bank withdrew cash. this is all according to an internal bank document seen by bloomberg. >> how concerned are you by deutsche bank question mark, which potential is there for spillover -- how concerned are you by deutsche bank? how much potential is therefore spillover to the broader market -- is there for spillover to the broader market? it seems shareholders since we don't want to own deutsche bank and bondholders don't want to own deutsche bank's credit.

you see the kind of stresses you would normally associate with a major financial failing. when a financial firm is going to the wall, first of all, there is an asset that is causing it -- mortgages with lehman, sovereign credit the case of mf global. you start to see a host of other prices move as bank concerns try -- banksate assets concerned try to liquidate assets and raise cash. if you started to have a run, if everybody started to pull their deposits from deutsche bank, then it becomes serious quite quickly. in a sense, it's an artificial crisis at this point in time, but has the potential to become a real one. >> let's get back to deutsche bank now. the stock is spiking at the moment. the adr's in the u.s. up at 12.4%. -- up almoststup 6%, trading above 11 euros. the bank is near a $5.4 billion

settlement with u.s. if this happens to be true that it is something like $5.4 billion, deutsche bank can afford to pay that out of its legal reserves, as we heard earlier, correct? >> yes. if that's true, then that is a big relief. let's not forget that, for all of the noise, this began with worries of a very big fine, bigger than expected, $14 billion, so he could end with -- so it could and with a settlement. it's obvious that a fine of $5 billion is still a fine, but it's a lot better than $14 billion. technically, the litigation reserves to cover that fine alone, even if there are more potentially down the pike. >> would this deplete all of its discretionary funds? like, it can't get into any more trouble for a while? >> exactly. there is disagreement over what the bank can spend before it gets the capital increase. you have everything from $4

billion in the view of chase morgan analysts to the view of $8 to $9 billion in view of others. i think you won't know until we get a settlement. scarlet: still ahead on "bloomberg best," we have the biggest names taking on the most pressing issues. up next, more of the weeks top headlines -- week's top headlines. they should be held accountable, whatever that means. this is bloomberg. ♪

scarlet: this is "bloomberg best." i'm scarlet fu. let's continue our tour of the week's top business stories in silicon valley.

on monday, markets were a twitter with news of a potential buyer. >> the is said to be working with the financial advisor to evaluate -- the walt disney company is said to be working with the financial -- a financial advisor to evaluate a possible purchase of twitter. yethey have not made a big -- bid yet, but they are very interested in twitter as a media property. we can speculate as to why. disney is getting a little bit more into streaming. they have noticed the cord cutters. they are trying to figure out how to distribute their video content. for twitter, they are repackaging tweets in video form first with their apple tv app, xbox tv app. they want to make sure people can get into twitter through live streaming. >> we are seeing an increasingly

incestuous relationship between the two companies. you have dorsey on disney's board. you have the two of them doing deals together on the content side, through disney's investments in video streaming. previously, we had said media companies are probably not the best to buy twitter because twitter has to stay agnostic, but i think disney could be the unique exception to that rule. >> it has been a tough year for hedge funds globally. has$11 billion hedge fund closed its singapore trading desks. what background do we have here? >> it's a big story on downsizing and restructuring. it is one of the oldest and most respected entities on the street with about $11 billion u.s. it has been in existence since 1980.

it had phenomenal returns in the first years after it started. the returns have been lackluster over the last year, and that resulted in pretty sizable investor withdrawals this year. as a consequence, the founder jones, --naire, paul paul tudor jones, said he would cut the workforce. they are hiring quant traders. it's a bit of a change in strategy for the fund. they are cutting on the training activities and expanding on the quantitative activities. singapore is always affected by those developments. >> they will close its main hedge fund after announcing -- after almost three decades. in a letter, the founder road, -- wrote, "this market environment has not worked well for us." we've seen a lot of these for a long time, hedge funds not being able to cut it. is this -- does this fit the

general pattern we've been seeing? >> one of the founding titans of the hedge fund industry is going to throw in the proverbial towel. we've seen a lot of restructuring. cutting certain teams, shuffling things around. in terms of actually calling it quits like this, this is quite a big one. and it does -- this was not a run on the fund, so to speak. it's not like there were no other options here but to close, but it's clear that he made a decision that this was the best thing for him and his employees at this time and for his investors to kind of unwind some of -- unwind that mean -- main fund. >> the big currency story today is the turkish lira. all these currencies are rising against the lira today after moody's cut its sovereign credit rating to junk on friday

evening. it cited risks related to turkey's external financing needs and a weakening in its credit fundamentals as economic growth -- turkish assets are following the most since the attempted coup -- the most today since the attempted coup in july. what's the reader across as a result -- the read as a result of this? >> it will be interesting to see how the central bank reacts. it has been lowering rates since march. will they be able to continue to do so if the lyric appreciate too much -- lira depreciates too much? what does this mean for turkey's growth? borrowing costs are going to rise. banks will have to reprice. a lot of funds won't be able to hold their assets after the downgrade. they require at least two of the major agencies to have the investment-grade ratings to

invest. there will be some forced selling. weak is china's growth in the third quarter, mainly driven by so-called "old economy." the government's attempt to win the country off of manufacturing resources -- to wean the country off of manufacturing resources may have stalled. they are going back to their old playbook. >> that seems to be the case. this beige book survey seems to reinforce that. overall, the rating isn't too bad. it's the competition that maybe is a bit of a worry. the old economy drivers are back in action to property led recovery is boosting manufacturing. also commodities. it's the new drivers that are stalling. --ail, services, transport all over the bit weaker according to this beige book survey. economists are -- economists are rebalancing.

they are dialing back their forecasts for additional monitory stemless -- stimulus. >> deutsche bank isn't the only lender wrestling with the united states. credit suisse group and barclays -- what do you know? what kind of settlements are we talking about? >> this is the last set of banks going through the long-running investigations into how banks treated mortgage-backed securities leading up to the financial crisis and whether that armed investors -- harmed investors or other banks in terms of how they were packaged or sold these. are civil-- these investigations. jp morgan was close to $13 billion. goldman sachs settled for about $5 billion. you do see very big numbers. credit suisse and barclays, along with deutsche bank, are

now negotiating to close this out and figure out how much they are going to have to pay for this. >> what happens next? >> they have a long, painful negotiation to go through at the department of justice, where the department of justice typically holds all the cards. >> they said they would cut 9600 jobs and suspend evidence as part of an effort to cut costs. >> is this what we expected, or is it more or less? >> people were at first looking for something like 2000 to 3000 job cuts. sooner or later, it became clear that this was not going to be a job cuts or revamp program that we've seen in the past, which was addressing small steps. new ceo at the commerzbank trying to bring an end to restructuring and make one great move to finish it up. >> i'm going to ask you one question. does this organization reflect

you? >> i am deeply sorry -- scarlet: turning now to wells fargo. we have been hearing from john stumpf, really getting hammered. he's giving up $41 million they had clawed back. is that going to be enough to satisfy congress? >> i think the biggest problem for mr. stumpf is that this makes really good theater. they are calling for more hearings. there were calls to have the fired employees come in for hearings and some calls to have hearings of other bank executives to explain if they do cymer -- similar cross-selling types of approaches. even putting some pressure on the board saying, if the board hasn't fired you yet, maybe the whole board has to go. that will raise some eyebrows among the board and board members across the country will take notice of the anger being represented here. >> we know they have said something about this clawback of

$41 million. the on that, he has not given beyond that, he has not given any ground in giving up his role as ceo or his position on the board. clawback -- he agreed to that. it was not exactly a clawback. it was voluntary. that stock compensation. that was something they wanted to offer to the house today to say, look, we are taking this seriously. i'm being held accountable. it's definitely not going to be enough to stop the rhetoric. ♪

scarlet: welcome back to "bloomberg best." i'm scarlet fu. a dozen years ago, working in "the at the "th -- at

economist," she spent hours launching a business, which now brings in millions in annual revenue. if the subject of this week's -- it's the subject of this week's "small to big." >> i started a company in 2004, a year after my eldest daughter was born. i went looking for a blanket. it was very cold at that time in australia. i was truly shocked to find out that nobody in america had ever found out -- had ever heard of that blanket. that was my "aha" moment. in 2006, i went to market the old-fashioned way, working door-to-door to specialty stores saying, i have this product. would you like to buy it? i definitely got a lot more nos in the beginning than i did yeses. the people who did say yes sold

through within a week. then i started to attend trade shows. the first tradeshow we attended, we got 86 offers. i got very lucky in the private equity firm. me to find equity partners. we hit it off. they invested in my business. they were my first private equity partners. i am now with a different company whose focus is very much consumer products. seidler were instrumental in teaching me how to be successful as a ceo. swander has enabled me to truly scale. i want to create a true lifestyle -- global lifestyle brand within the children's space.

we are in 65 countries. i have offices in tokyo, sydney, london, montréal, brooklyn. we have just incorporated in china. for the first five years, we doubled in size every year. we still have wonderful growth. down't see it slowing anytime soon. i'm looking at acquiring companies now. i can do that now because we have such a strong brand. there is never at the moment. scarlet: we've got plenty left on this edition of "bloomberg best," including exclusive interviews with jack lew, george osborne, and patrick harper. he provides his insight perspective on the dissent at the last fomc meeting.

stay with us. this is bloomberg. ♪ . .

we know there are a lot of people in america that do not feel they benefit from growth. you can win the argument on trade that the economy will grow. the people will say, what does it mean for me? the answer is we invest in the things people see affecting their lives. we have infrastructure that needs to be modernized. that creates good jobs and tell people that we care you sit in traffic for two hours on the way to work. nobody enjoys being stuck in traffic. we know people worry about whether their kids will have the opportunity they had. education, primary education, technical education, we can help people get the skills they need.

childcare is a burden most working families struggle with. we have had proposals to deal with that. we have had some success. we need to do more. a message as send government that we are determined to have overall growth touch your life, we could get back to a place where there was a broad understanding there is a benefit from the interconnectedness. scarlet: dallas u.s. treasury secretary jack lew in an exclusive conversation with david gura in mexico city. this week, we had an exclusive opportunity to speak with the former head of riddance treasury. george osborne served as chancellor until he was fired by the new prime minister following the brexit vote. in his first interview since leaving office, he discussed next steps for the u.k. in its negotiations with the european union. >> we did put it to the british people. what we now need to determine is the trading relationship with

europe. how do we make sure london will remain a major financial center in the world? itons can make sure br live and study in europe like european citizens can come to britain but have answers to concerns the british public have about that? these are all crucial decisions. no one at the moment has perfect answers to all those things. it is not surprising. it is just a few months since the vote. that we have got to work harder to get the right answers over the next few years. my broad view is we should be brexit.p with a softer the economic consequences of a harder brexit will be more severe. waiting until next year, is that the answer? do you think that uncertainty would damage the uk economy if we wait that long? >> these are some of the most

important decisions britain will make since the second world war. it is vital we get them right. a point i made in a speech a couple of days ago is that europe is not going to be in a position to have this conversation with the u.k. until the french and german elections are out of the way next to spring and summer. 50,ever you trigger article the hard bit of the negotiation will have to wait for a new government. until the german government has come to a position, it is impossible to get a decision in europe. that is just politics. scarlet: let's move on to more of the week's most compelling conversations, starting with another bloomberg exclusive. the philadelphia fed president had never given a television interview before this week in dublin with michael mckee. they discussed a fed decision and division.

mike: three dissents at the last meeting, highly unusual for the fed. how divided is this policymaking group? >> i think people do have different perspectives on the pace of normalization. i tend to be in the camp of normalizing sooner rather than later. i would not say there is great dissent other than the speed at which we move accommodation. but nobody thinks we should do that quickly. it will be a shallow path. mike: how fast, how far? what's not clear. that is a function of how the economy responds as we start to remove accommodations. one of the dissenters said he is worried about bubbles developing in financial markets. other members have suggested the same. do you see monetary policy distorting financial markets? >> i think there is the potential for bubbles,

particularly something we watch in the third district, commercial real estate. and we are watching across the country. the other thing i worry about is the distortive effect we are having a corporate decision-making. stockmuch easier to do a buyback to increase your share price than long-term investing in equipment. i think that we have to reverse overtime. mike: how do you reverse that? >> as the cost of debt goes up slowly, that will naturally start to reverse. mike: is there a point where that happens? i'm asking because interest rates are so low that when does it start to have an impact on corporate decision-making? >> don't know until we start making that transition. i think a shallow path toward normalization and watching and be careful about not reacting to quickly. that plays out as we make those changes. i think that is the appropriate policy. generally, the european

banking sector is perceived as being weak. lots of concerns about it. from an e.c.b. perspective, what more i can be done to restore confidence? >> we would make several points. one is capital rates have gone up in europe. core capital has increased by several percentage points. number two is e.c.b. market policies a big lever helping the european economy recover. there are some side effects and low interest rates, if we were not doing the kind of accommodative policy, the european situation would be worse. as we repeatedly say and mario isghi said on friday, europe in an over-backed situation. there are structural problems. european banks have to consider what kind of reforms they need,

what kind of business model adaptation is necessary. of as the is a mix european economy recovers. our core is to make sure the european economy recovers. on top of that, there is a reform challenge which is primarily for the bank management and investors to lead in solving. comes towhen it monetary policy, we are curious what you think about what the bank of japan is doing with the yield curve control. it is intriguing if not new. it would be difficult to implement something like that in europe. would you say there's something europe can learn from japan? >> i think it is fair to say all of the major central banks look at each other all the time to pick up lessons. of course, we would look with great interest at that. the common element is the targets. to return and

it is committed to coming up with different waste to show that commitment. there has been overlap since quantitative easing tim holden 2014. the less took hold in 2014. it is not the case with inflation targets. we need to continue with that strategy. uncertainty, you have the fed and brexit. when you talk to clients, what are they most worried about? >> the funny thing is there is always something to worry about. at the moment, there are a lot of uncertainties. at the top of them is the fed, the u.s. election, the chinese economy. there is never a decade when there are not things going on. as business leaders, your job is to sort through that which matters from that which does not.

not look for perfection in making decisions but move your organizations forward. banks --rexit, the big do the big banks move employees? >> it is in the top 10. brexit happened so we are dealing with certainty. we know that happened. as the rules unfold, we will see what we do in terms of where we keep people, headquarters, resources generally. it is not a crisis thing. brexit will unfold over a couple of years. election is going to happen. the fed will move or not move. the chinese economy is the big enchilada. you said before you might have to move 1000 workers. do you have a better estimate for a hard brexit? >> not really. we keep studying. there is no question some control functions will have to do out of the european-style headquarters.

where the risk, finance, compliance, some of the sales you will have to do in country. we are sorting that out. london remains the key financial center across your. scarlet: straight ahead, more insight from some of the biggest names in business at the most influential summit. >> when i buy a bond, i do not think what will he do tomorrow? scarlet: this is bloomberg. ♪

scarlet: you are watching "bloomberg best." fu. go to -- i am scarlet ats week, bloomberg convened the most influential summit. we interviewed many of the featured guests on bloomberg television.

here are some of our more interesting conversations. julian robertson shares his thoughts on investing in an era of historically low interest rates. >> i think it is tragic we have taken rates down this far. i know the federal reserves all over the world are trying to ensure prosperity. but in so doing, they are ensuring a huge bubble which will be pricked and we will all be hurt badly by it i think. ratesk the negative completely stop savings because you are not only rewarded for saving, but not only not rewarded for saving but penalized for saving. i don't think that is good.

caused aink it has huge bubble in the bond market because people have nowhere else to put their money unless they .uy a beautiful piece of art mike: where would you put your money now? if negative rates have distorted the markets, if central bank have distorted the markets, how would you be exposed today to the end of the year? townthink the only game in are equities and we have to play in the theater. >> talk about china. what opportunities do you see there? >> they are embarking on the stock buyback program. now they are doing the shenzhen willam which will mean we

be more easily able to invest in the chinese market. that is very exciting because the shenzhen market in particular has a lot of tech names, a lot of small companies nobody knows about. this will be a very exciting opportunity. >> do you think this will make it easier for china to be included in the benchmarks? >> it will help. becauseot do the job they are very strict in ensuring liquidity and free flows. with the restrictions in the program, although it is better than the other, it is still a problem. >> how long will it take? >> i hope it will not take more than a few years for them to open up more. to be realistic, we are talking five years. >> do we need consolidation in

the european banking industry and will we get it? i was interested in mario draghi's comment. he went on the record saying there were too many banks in europe. i think if you look at wells fargo, bank of america, j.p. personallyas involved in one of the largest mergers in america. those banks have been created largely through mergers. with mergers is you cost-cutting and create a more diversified, stable organization. the differential impact on j.p. morgan's number in equities, activities is proportionate. they can solve it much more easily. clearly in europe, that has not

happened. >> do you believe your -- europe is open for banking? fromthink it could benefit consolidation. there would be a lot of upside. right now, every institution is trying to be on a restrictive diet and shrink on its own. i am arguing that is much easier to do with two institutions together, that kind of slimming down and taking out cost and inefficiencies. i don't think it is a realistic option at this point in the industry. >> because of regulators? >> yes. from the moment you say too big to fail, the notion will create bigger banks is never going to be viable. people think banks are already too large. that is an issue. objectively atk

the banking landscape, i think there is important consolidation. theou and i have compared continuum of a cycle to a baseball game. situations, you were the last out of the ninth-inning. where are we now? times upcycle, the good are in the seventh inning. the seventh inning. in other words, the game is more than half over, the easy runs have been scored. when you are in the seventh, you could be the eighth and don't know it. one of these days, we will be in the ninth. i don't think we are there yet. i am not seeing bubble prices and most assets.

s&p for one indicator sold at 32 times earnings in 2000 and it is 19 today. there's a big difference between 19 and 32. erik: what about treasuries? ell, you see, i am funny that way. when i buy a bond, i don't think, what is it going to do tomorrow? i say, is it going to pay off? if you buy a treasure today to get 1.5%, if rates go up, you will have an interim price decline but you will not lose money if you don't sell it. if you buy it today at a yield of 1.5 and hold it to maturity, you will get paid as you expect and make 1.5%. the question is, do you want 1.5%? the strongest thing i argue is we should not by 1.5 to get 3%. 1.5, todayhappy with high-yield bonds yield .5.

-- 5.5. if 5.5 plays a role in your portfolio, you can buy it. they may go down in the interim. there may be a better time to buy them later. if you buy them today and they turn out to be credit worthy, you will get your 5.5%. today, 5.5% is pretty good. >> people say we are in a bond bubble. what do you say? reason people say that is because everybody thinks everything is priced to perfection. if there is a problem, you're going to have real issues and everybody is reaching for yields . i get that. if at the end of the day, your choice is cash, which is zero, or invest, people have to invest. >> in some cases, not have

investing would have produced a better outcome. >> yeah. harvard was down. harvard is down 3%. they should have stayed in cash. yale is up 2%. pressure is great on everybody. ultimately, you have got to produce. there are always opportunities out there. people give you money. you've got to make the money. the vast majority of what we do is investing. >> how much pressure do you feel to invest? how much pressure do you feel to invest? clearly, the pension funds are under pressure to allocate capital. they have to generate a positive return. >> we don't feel that much pressure to invest because we are trying to invest in areas we know there's quite a bit to do. i think in energy, we think there is a lot to do.

if you give us capitol, we will put that money to work fast. i would feel under a lot of pressure somebody gave me money to invest in areas where i did not think there was a lot to do and then you got all of his capital and what are you going to do with that capital? ♪

i'm bringing the terminal up to show the longer-term rate. the medium-term is the green line. that came down to 2.78% in the last 10 meetings. there are about 30,000 functions and we enjoy showing you our favorite on bloomberg television. maybe they will become your favorite. here's another function that will take you where you can get important insight into timely topics. here is a quick peek from this week.

these islands do not look like much, but they are at the simmer -- center of a dispute about who owns them. seven countries have overlapping claims. there is one common player -- china, which has been jostling with its neighbors over maritime territories for more than a century. recent tensions have threatened to boil over, potentially dragging in the united states and even talk about possible war. here is that situation. china claims more than 80% of the south china sea within a border whose legitimacy it says is proven by 1940's map. about a decade ago, countries started making formal claims under the new you in rule -- u.n. rule.

that led to move from several countries to show ownership. china started to build islands. that led to the philippines challenging china's claims in an international tribunal at the hague. philippines won the case in july of 2016. china's reaction is that the order is no and void. the reaction of the u.s.? >> president obama: the u.s. will stand with allies. >> washington endorsed the ruling and called for peaceful resolve. beijing says it has no intention of preventing commercial traffic that is simply protecting its territory. 1000 miles north in the east china sea, china is also locked in a dispute with japan over another rocky outcrop. islands -- the u.s. does not take a formal position on the sovereignty, but in 2014 president obama vowed to defend them. so far, the dispute has been

confined to jostling for position by ships and aircraft. here is the argument. there's one big incentive for countries like china and japan to stay friendly. it is called trade. hosts $5 china sea trillion of trade every year. on the other hand, given how quickly china has been building itsmilitary position -- military position and how nervous that is making everyone, some analysts say there is a significant risk of armed conflict. perhaps as a wrist --risk of ms. kuck elation or mistake. the u.s. has responded by upping patrols. greater resolve may mean greater risk for the u.s. and the region. ♪ scarlet: that was just one of find on updates you can bloomberg and bloomberg.com

along with all latest business analysis 24 hours a day. that does it for "bloomberg best" this week. thanks for watching. i am scarlet fu. this is bloomberg. ♪ .

♪ >> we asked some of the best minds in the world from business , government, the arts, and academia. what are the most urgent problems facing humanity and how do we solve them? the result is "big problems/big thinkers." >> what is the number one major problem facing mankind? >> a lack of education. >> you are dealing with a balance. >> if we do not find a more sustainable way.