francine: sterling flash crash, the pound plunges more than 6% versus the dollar. a crucial test, traders are putting the odds of a rate hike this year at 64% as they await september payrolls data. treasuries fall and the dollar jumps. deutsche bank is said to be exploring options including asset disposal and share sales. this is bloomberg "surveillance i am francine lacqua in washington with tom keene. news, ithe backdrop of

is the hurricane. taylor riggs will get to that in a moment but also we have got the basic idea of -- sorry, i lost my train of thought. francine: we are getting breaking news on the nobel peace prize. it is the first time i remember they have not awarded it to one person, but to the colombian peace accord. the peacet because accord was in jeopardy when i had a referendum and it was rejected. we did catch up with the finance minister of columbia, unclear exactly what will come from here. we are getting that live announcement from the nobel peas committee in oslo. the winner is the colombian peace accord. that is after the referendum on sunday. tom: it really changes things and the interesting thing is the

duration of a peace accord. it is supposed to be a year or two and this has been a generational struggle. francine: i correct myself, because the prize was awarded to colombia's president, mr. santos. it is not to the peace accord itself, it is to the president. the reason colombians rejected the peace support -- peace accord was because they felt some of the guerillas were not put under enough pressure, there was not enough retaliation. tom: there has been a debatable prize every year. francine: let's get to the bloomberg first word news. taylor: hurricane matthew is now battering the florida coast high winds and rain. several people in the southeastern u.s. were ordered to evacuate their homes. steam andane has lost

has been downgraded to a category three but still has wind of more than 120 miles an hour. there is concern this hurricane could be one of the 10 most destructive in u.s. history. in haiti, authorities say the hurricane killed at least 283 people. it struck a remote area and the southwestern area of the country and officials expect the death toll to rise. , a bomb placed on a motorcycle exploded outside a police station. at least 10 people were wounded. there have been a number of bomb attacks in turkey, blamed on kurdish rebels or islamic state ellerton. the united states -- united nations will crackdown on human trafficking. member nations will be allowed to inspect ships. are blaming

computer-generated sell orders in part for a two minute flash crash of the british pound where it fell more than 6% against the dollar before rebounding. that was its biggest drop since the u.k. voted to leave the european union. traders speculate that may have been caused by human error with algorithms adding to the pressure. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: let's look at equities, bonds, currencies, commodities. sterling front and center. yields up over the last three days. this is the likelihood of a december rate increase priced into the market with oil lifting as well, that is american oil at $50.61. the strength -- dollar strength and the euro weaker. the equity markets in one big churn.

two-year yields showing the move from about 2.78. stirling is more critical that 1.2430 then all the razzle-dazzle of the flash crash. euro-sterling not moving the same amount, euro weaker versus dollar. francine: today is u.s. jobs day and i wanted to start with pound because we saw that, because of the algorithm flash crash. we will ask erik nielsen how he wants to quantify it. pressure on the euro stoxx 600. 2% ande bank is gaining we understand it is holding informal talks with securities firms to explore options including raising capital, if legal bills require it. joining us to make sense of this extraordinary move in the pound is jane foley, senior fx

strategist in london and also with us is unicredit chief economist erik nielsen. jane, what happened in pound last night? jane: perhaps it was the fat fingers algorithm or illiquidity but one of the things is quite telling is people would agree there were a lot of sell orders triggered and that snowballed. one of the big pieces of news that we are left with is perhaps the unsurprising news that there were a lot of sell orders, and sterling is quite obviously a vulnerable currency. i think that was very clear during the course of the week and clear after what happened last night. francine: it is two months of chaos, does it point to nervousness on the market? erik: i do not think it is computers. it may have been for a minute or two, but starling has a huge

account deficit. the news that people have started to wake up to over the last day or day and a half is this is not just about soft versus hard brexit. theresa may is lining out and ambition from britain which is very different from anything the people in the market and business friendly people would think she would do. tom: in the meeting and birmingham boris johnson was in the audience. how far away is prime minister may from the body language we saw the evening before brexit? erik: i think she is very far away from it. she is on a different planet in a sense. board johnson is sidelined. -- boris johnson is sidelined. he is there because he has to put brexit into the ministry. tom: do you have in your head, and you live in london and have for years, do you have a trip point for sterling where the dialogue changes?

if you have bond prices go down, yields go up and there is a moment when people shift from yield analysis to price analysis. at one point -- at what point do we shift our thinking? erik: parity to europe i think. francine: jane, do you see parity? jane: i think it still is a long way away and if we look at the levels, they are at the lowest level since 1995. if you think of the u.k. economy in 1995 so different. parity is still a long way away but i do think that sterling is on the brink of further volatility for certain, and obviously the likelihood is that we could see further shock downside. tom: how critical is euro pricing to what sterling does? , 1.12, manya euro are looking for a weaker euro

and it is an interesting dynamic between sterling, the u.s. dollar, and the euro. jane: we have a stronger dollar this week, hawkish data from the fed. obviously it has connotations for the u.s. dollar. if we take that aside and look at the euro, it is a vulnerable currency not as much as sterling. if you look into next year we have presidential elections in france, elections in germany and the netherlands. what is really important, and what we have seen in opinion polls is quite anti-eu sentiment in europe. some of the reasons that people voted for brexit here was a general protest. we have seen protests in the u.s.. we have seen this in europe as well. i think the elections could tell us more about the degree of

protest votes in europe and the degree of anti-eu sentiment, and whether or not the eu is faced with a risk. francois hollande pointed out last night. francine: let's remind ourselves about the huge -- and this was tom's chart of the day yesterday -- current account deficit in the u.s.. that is coupled with a possible parity call, it spells disaster. the only thing important to appreciate as we were worried about a hard brexit for a while but it is difficult on how it stresses the market. the equity market is driven by foreign earnings in the currency was the most honorable. the other thing we saw was after this peculiar statement that theresa may is going to raise interest rate, may be the central bank is not independent anymore. the optimism relative to europe,

i hope we are wrong but this feels like an earthquake in britain. tom: let's go to the shock and all last night. -- shock and awe last night. those red circles or two reports by bloomberg news of pricing. i am not saying they are official pricing's but they are way down at the bottom. jane, what does this do to the confidence of the foreign exchange market? i know you have got skinny fingers, we know you did not do it, but what does this mean after a flash crash over 18 months or so? jane: it does not do much for confidence and raises questions about computer trades. i think this is very much a sterling story and it heightens the vulnerability of the pound. i think this week has been a real watershed week in terms of confidence in the pound.

we look at the economic data for the u.k., perhaps aside from the industrial production, if we look at the pmi's they have been better. has sterling cared? no, sterling is not looking at the here and now, is not looking at the fact that industrial orders -- it is looking to the future of what could possibly be, what would be of the uk's trading relationship with europe in two or three years time, and it does not like what it sees. tom: jane foley, thank you so much for the briefing this morning. we will continue with erik nielsen, adam posen will join us later this morning. williame jobs report, gross of janus capital at 8:30 this morning with his thoughts not only on the jobs report but on negative interest rates. from washington, this is bloomberg. ♪

francine: this is bloomberg "surveillance," live from the imf world bank meetings. we are in d.c. for another couple of days. i am francine lacqua with tom keene. france's total has been -- has agreed to sell to carlyle group. the company sells chemicals and equipment. the sale is part of totals plan to divest $15 billion in assets over a two-year period. deutsche bank is looking at options as mounting legal bills. they are talking with securities firms about possibly raising capital. several banks are offering to

underwrite a stock sale for deutsche bank that would raise about $5.6 billion. the justice department is demanding they pay $14 billion to resolve mortgage claims. that is your bloomberg business flash. tom: thank you so much. our view from 60,000 feet and what we face, christine lagarde faces in the g-20 world leaders meeting in washington. erik nielsen with unicredit with us. this chart really says it all. it is back 30 to 40 years. 20 years is the three-year growth. that rollover of g7 real gdp speaks volume. the partition in the green book, the financial book is cyclical fixes are not going to do it. go to structural

fixes and that is true of economic growth as well. what is the structural fix? erik: i do not know. investment has been too low. this is a matter of productivity . we have a demographics issue in the developed world but the biggest conundrum is the drop in productivity. we do not quite know why. there is a possibility we are miss measuring gdp because the world has changed so much. yearort from earlier this suggested that u.k. gdp growth could be somewhere between one third and two thirds stronger for a year because of mismanagement. there is this possibility. when you look at the investment numbers, particularly public investment in the u.s. and it naturally leads to lower productivity numbers. tom: that is the theme over arching everything. francine: it has been the same

for at least 12 months and i'm not sure how you fix it. you on talking about this is the problem and it is unclear to me, who is the institution or the person who can guide the rest of the world? , ik: you go back to the imf would say that you stop talking so much at g-20 because there are too many people around the table. go back to a g5 and communicate to the world what we are doing. could you imagine the u.s. after the election, germany, france, the u.k., italy say we are going to boost property investment by 5%. more energy efficient systems. not bridges this early, but for the new economy i think it will do fantastically well. thisine: stay with us

afternoon for a special episode of bloomberg "surveillance." we speak to philipp hildebrand and the finance minister from the imf meeting. york and 7:00ew p.m. in london. this is bloomberg. ♪

francine: this is bloomberg "surveillance." francine lacqua in london -- in washington, d.c. tom keene. people want to know about deutsche bank.

tom: more than a lot. more than a lot. francine: i and understated. deutsche bank is looking at options because of mounting legal bills. according to people familiar with the matter to the german bank is talking with securities firms about possibly raising capital. let's bring in lionel laurent, erik nielsen is still with us as -- with us ass well. this seems pretty obvious but you also have a plan b. lionel: it is the right noise to hear and the market likes it that we do not know how much the legal bill is. it is nice noise but does not help us get any more clarity on what any capital increase would look like. tom: let's look at a chart of the one-year cbs. -- cds. you can see a little pullback.

francine: the share price is gaining 2% today but to go to the heart of the matter it is all about the doj fine in the final number that they end up with. do we know if the german government is getting involved? lionel: we know there has been some kind of on the record reluctance to get involved but they have to. i think what is worrying is that we keep having these rumors that a settlement is there a number is not here. let's hope market worries get us closer to a number. tom: erik nielsen with us with unicredit. not appropriate to talk about another bank's affairs but a broad european statement was clear across the imf. is it about npl's? erik: for the italian banks, no doubt about it.

the german and french banks do not have npl's of significant magnitude but the real issue is that we have not adjusted to the new world. we are not really developed into the new i.t. world. tom: i would suggest you are one of the great spokesman on continental europe. you have got a global reach. can the european banks become more anglo-saxon or even, should they become more anglo-saxon? erik: i am not sure they should. i am not completely sure this is the model that you need. it is a long-term model to think we are going to a security-based financial system. europe is basically powered by smaller enterprises which is not obvious to easily to the financial markets, without a banking system. i think it is a misstatement that the european banks should become anglo-saxon. they need to modernize the

operations to the world, that is a general theme for the whole sector. nielsen, thank you for starting your day with us. lionel lawrence, get back to , get backonel laurent to work. the state of global finance, william rhodes for years with citibank now with his own firm, global advisors, bill rhodes on the state of the imf, on the state of madame lagarde's world. it is jobs day, this is bloomberg. ♪

tom: good morning, everyone. from washington, tom keene and francine lacqua. meetings andf imf

meetings into saturday. really focusing on florida and a nasty hurricane with our first word news. is likely to be the strongest storm to hit the u.s. in more than a decade. hurricane matthew battered the east coast overnight with high wind and heavy rain. it is supposed to track along the atlantic coast. it has been downloaded -- downgraded to a category three, but 2 million people were told to evacuate. damage could total as much as $50 billion. the nobel peace prize has been awarded to the colombian president who helped decade -- who helped broker a peace plan. he is now in negotiations trying to salvage the deal. russia is warning the u.s., do not attack president besides

forces in syria. any airstrikes controlled by the syrian government would be seen as a direct threat against russian troops deployed in the area. the u.s. ended one-on-one talks with russia over the civil war in syria. a report that a group of high-level defectors will establish a north korean government in exile, living in the u.s.. they would try to install a democratic clinical system in north korea with an economy based on china. formal mf global chief jon corzine is resolving applications -- according to a person familiar with the matter, he may pay $5 million to settle the ftc claim. ofis a former cochairman goldman sachs and was a u.s. senator. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120

countries. i'm taylor riggs. this is bloomberg. tom: thank you so much. there are lots of young turks walking around washington creating their international relations stripes. they pause and listen to william rhodes with more than 40 years , bill rhodes of brown university is someone who has spent years in international banking, the linkage of finance into econ. bill rhodes, i look at the green report, the financial stability report and i love what they do. they say the short-term is the short-term, and the medium-term is what matters, this linkage of finance and economics has never been more tenuous. bill: i think we are facing the biggest challenge we have faced since the great recession because central banks have been carrying the world on their back

. at this stage of the game, it is not clear where we are going from here because negative interest rates do not seem to be helping very much. he sort of have to find our way. if you listen to speeches of christine lagarde and others, everyone is concerned about low growth, how to get out of it, and what that brings. madame lagarde said yesterday in passing, i am a lawyer. the ballet is to explain to non-economists or financial experts what is the immediacy. how do you explain what is going on with deutsche bank or the financial system in general? bill: i think we have to go back to 2009, because in the united states where the subprime , theion -- situation began regulators worked hard to clean up balance sheet, take off the bad loans, cut costs, raise

capital, and unfortunately this was not done it particularly in the eurozone area. regulators in europe did not push it and unfortunately the banks did not do any of those things. what you see now is a situation where john cryan has a very difficult job at deutsche bank. immediately the problem is litigation, not only in the united states but also italy, russia, etc. medium-term, he has got to cut costs, he is got to raise capital, and he has got to write off some of those bad loans. francine: it is almost not as simple as that because he has a buzz -- a business model which could be considered flawed. if you look at unit credit -- unicredit, they cut cost and have a strong retail bank. deutsche does not have that. bill: one of the problems when

we talk about core businesses is the problem with the postal bank. they bought that to get themselves in the retail area and it has not worked out. at the same time they were expanding the investment bank internationally. they really have to change the business model, i agree with you. immediately, the have to move stronger on all the three points i made and settle this litigation situation. francine: why is it taking so long, the litigation? bill: i do not think it is a great idea for the justice department to float a number. the best way they should be done is to work it out, announce it, and move on with it, and i think that is causing all sorts of problems. you have people say the u.s. government is trying to get back at apple, i do not believe any of that. it has been mishandled. tom: we had a guest the other day who said there is going to be mergers, and he brought up

the idea of wells fargo mating with deutsche bank. it is a kind of merger where there is not a lot of overlap. do you see another era of international bank mergers or is that impossible? bill: i think where you will see the merger side is more in europe. tom: like what credit suisse ends up doing? bill: right. we have not seen calls for mergers in europe over the last few years. the last one i can think of was basically commerzbank and dresdner bank. tom: would you like to say some names so we can have news? bill: i do not have a specific one, but i think it is important that the banks having some of these problems in europe get on with it because too much time has been taken. on the regulatory side, it was

only when we had the banking union and got the european central bank involved that we started to get -- tom: what is the cultural shift required these mergers underway? bill: i think the cultural shift that is necessary is to understand that we are in a new world, and old methods i think are out. the cyber talk about situation, cyber attacks, all of these things, we are in a new model in the sense of what banks have to do. the old story was, you just automate and get on with it but it is not so simple. francine: i need to push back a little bit. tom: i knew you were. francine: i do not know if it is cultural. i do not know if these european banks think, i do not want to be like an anglo-saxon bank. they were hard during the financial crisis and the

europeans did not have an immediate impact to change, and there is regulation. if you are a week bank but stronger than the others why would you buy someone who makes a weaker? regulators are putting so much capital requirements making it difficult to merge. bill: one of the problems we have a whole idea of overregulation. needeed regulation but you good regulation that can be implemented. that goes along with what i was saying about getting to your core business model, writing off bad loans, raising capital, you have to do all of the above. this is the toughest period i can remember for banking in my whole career. think it was very clear what needed to be in 2007, all the things i mentioned. tom: it is an emergency. bill: this was basically not

only an emergency but a situation where if you did not move quickly you would fail. you had tarp in the united states and the equivalent in the u.k., and i think one of the problems for the eurozone banks as they did not take the lessons learned from what happened in the united states and the u.k. they are paying that price now. tom: who is your banker of the year? the obvious pick is james -- james dimon. it could be john cryan. who is the banker who impresses you. francine: european. tom: european or asian. bill: you have one of the most experienced bankers in the u.k., the chairman of barclays, john mcfarland. he has been through the ringer in europe and asia. tom: love that. bill: he is a first rate banker and gets right down to the

basics, which is, get down to your core business, right off loans, raise capital, and decide where you want to go. tom: two of our brokers are out, can you book john for us? francine: you were very strong on brexit. he is certainly one of our favorite bankers. bill rhodes, thank you so much. stay with us this afternoon for a special episode of bloomberg "surveillance." we will speak to philip held a grand and the italian finance minister -- philipp hildebrand and the italian finance minister at 2:00 p.m. in new york, five -- 7:00 p.m. in london. ♪

francine: these are live pictures from london, home sweet home. imagine the panic. i know it was late last night in the middle of the night so a lot of people were not in the city of london with the cheese grater that makes tom lost. some point,wn 6% at and investors are saying the slump was exacerbated by computer selloffs. tom: i would not look at the algorithm issue, i would look at we have gone 1.24. that is wealth destruction. francine: the current account deficit is one of the biggest in the world, certainly the biggest in g7. tom: i would move to italy. francine: they have problems of their own. philip hammond has dismissed

discussion that the u.k. government is turning antibusiness. speaking to john mickelthwait in new york he said the u.k. economy faces the same problems as the rest of the world. >> this government is a pro-business government, strongly supportive of open markets, free markets, open economies, free trade. , and it is a problem not just a british problem. it is a developed world problem of keeping our populations engaged and supportive of our market capitalism economic model. francine: meanwhile, before the chancellor the u.k. philip hammond spoke to john mickelthwait about the pound before the flash crash. >> we do not target and exchange rate level. we have a free exchange rate.

the market will make its judgment on the appropriate level of sterling at any given time, and history tells us that those judgments can move fairly significantly on fairly small provocations. francine: that was philip hammond, bill rhodes is still with us. my problem is that we were in the core doors with tom keene speaking to a lot of newsmakers, and people are confused about what brexit is becoming. what the chancellor is saying, trying to reassure the market they are open for business, is put into question by all the newsmakers and people around the world that matter in d.c. today. bill: one of the things you have got to look like -- look at is, clarity is everything. i think the present government, prime minister and chancellor of got to make it clear shortly how they are going to deal with the financial center in london. is going toity

cause i think a lot of problems, if this is not made very clear over the coming months. francine: what do you think brexit will bring? it seems like they are moving away and to protect the city of london and what the government rhetoric is, is they want to safeguard their right to control immigration at any cost. big issueink it is a in the mk the united states, and all throughout europe. not does not mean you do take the necessary measures to protect the financial center of london, because one of the great things the u.k. has built up since the days of maggie thatcher was the importance of london being the financial center. she believed very strongly, i know because i used to go on speaking tour is with her, and

she thought that was one of the great thing she accomplished as prime minister. tom: let's look at the math moving the markets. the white line is the current account deficit, down 7%. the blue is the goods and services and the rest is the flow of the money. .ou know big money moves london is going to have an investment boom. what about the rest of the nation? we have seen this many times before where currency depreciation gains a very small percentage of the public and the rest get hit in ahead. bill: on the positive side, you have exports and tourism, but you need some stability in the exchange rate because volatility does not help investment. this is one of the key challenges i think this new government has to face. it is a very difficult situation. some people compare this to the last crisis, which is world war

ii. when you were talking about not only changing the business model, the investment model, and and theh the political international model of what the u.k. is. tom: do you agree with mervyn king that a one-off sterling depreciation could be something you united kingdom could live with? the long-term chart of sterling speaks volumes and i have been showing it in a number of ways from 1934 and five dollars per pound, that is a stunning chart. we are well through one standard deviation of currency depreciation. is it a one off event or does it filter out over the next three to four years into the u.k. system as well destruction? i have a lot of time for his opinions but i'm not sure you are going to see a one-off devaluation. francine: because? bill: i think the actual

government, the conservative party has always believed in floating exchange rates. i think that it is a challenge, but that might be the answer as mervyn says, but i do not think you will see them do it anytime soon. tom: i am going to do a linear extrapolation which is difficult, but i am doing it to see when we break 1.20 sterling. francine: we had erik nielsen of unicredit saying he would not be surprised of parity. bill rhodes, thank you so much. bill rhodes stays with us. coming up we set down with the euro group president. we will talk a little bit about brexit and currency moves. a.m. inerview at 11:00

new york, 4:00 p.m. london. ♪

francine: this is bloomberg "surveillance." i am francine lacqua live with tom keene from

washington. the nobel peace prize has been awarded to colombia's president. he helped broker the agreement that ended the five decade war with marxist guerrillas. win.y be a bittersweet they -- people in colombia rejected the referendum. that will get the people thinking. we are back with bill rhodes. you have known president santos for a very long time. and i think have, all his intentions are well-meaning. columbia needs peace. have been having problems ever violencia which started some 40 years ago and what i think he is doing is the right thing. the problem is the method in which he went about it because the most popular politician in

colombia and the most popular president took the fight to fark , reducing them to five to 6000 -- 5000 to 6000 and put them in a corner so they had to negotiate. one thing sanchez has to do is sit down, because you have to , and that is front the only way you are going to get a peace agreement that will stick in columbia. he is doing that, i think he should have done it before. i do not think the present government and test in colombia thought -- in colombia thought arribe could get the number of votes that he did against it. there is the thought that fark should not be rewarded for all they have done over the last 30 to 40 years. interview,iew after

the reality is people move from germany and france to peripheral countries, to portugal, greece. italy is a proxy maybe for a peripheral country. give us an update on greece. bill: greece is getting into its seventh year of depression. tom: it is coming back, but barely. i thinkry little, and the problem is there is very little confidence in the present government. the present government got into this job because they said they were going to stand up within the eurozone to move out of austerity, to get back to growth. all the population as i went around greece, the average person in the street thinks this has not happened. i think you have to have a change of policy because if you do not, i think you are going to see an implosion increased again. tom: bill rhodes, thank you so

much for the briefing. bill rhodes with william rhodes global advisor. it is jobs day. it is a little different because november is a dead meeting. francine: also we are at imf and the conversation on negative rates, we are dealing with deutsche bank and pound. jobs data isu.s. extremely important but maybe a little bit of a back step. tom: sterling at 1.2431. later today after the jobs report, on imf and central banks, will you gross of janus capital. this is bloomberg. ♪

tom: a glitch, a flash crash

unnerves britain. pound sterling trades weaker, nearing a 122 handle. it is jobs date. if global leaders are adapting to the traffic. also, big debt and interest rates. hurricane matthew hits florida with a vengeance. good morning, everyone. we are live from washington dc. one of my drivers said this was the worst traffic ever. francine: i can go to london now ecause i can afford it did this is not that funny. the pound dollar is heading for the biggest drop since 2009. i have a funny tweet. that would be true. we are going to talk about those dynamics.

bring up the three-day sterling chart. there is francine's finger in those two run circles. even down way below 119. the rollover we are seeing right now is front and center. we will get through this in the hour. bill gross will join us at the 8:30 a.m. point. here is taylor riggs. hurricane matthew is battering florida. several million of people were ordered to evacuate their homes. the hurricane has lost little steam and has been downgraded to a category 3. it still has winds of 120 miles per hour. there is concern it could be one of 10 most descriptive in u.s. history. say theies in haiti storm killed 283 people.

some towns are still cut off by floodwaters. in istanbul, a bomb exploded outside a police station. there have been a number of common tax in turkey. they have been blamed on kurdish rebels or islamic state militants. he helped broker the agreement. it may be bittersweet. last sunday, voters in columbia rejected the plan. he is trying to salvage the deal. dayal news 24 hours a powered by 2600 journalists. i am taylor riggs. this is bloomberg. tom: let's get through the data check.

futures are challenged with the weight of the market. this is a big deal. quiet is well over jobs date coming up. the two year yield is elevated. sterling, that is a stunning number. we see euro sterling soundly over 90. francine: sterling really is the story of the day. however, we had eric nielsen saying he is worrying this is a seismic shift. that is the picture of the pound. we want to show that. it is now getting 1%. they are looking at all options as they try to get a number from

boj. on baseball.cused the red sox losing. the orioles are out. currencyno joke about depreciation. there is always a win? when does this become a story for the people of the united kingdom. long-term trend. we set a few months ago that given the shock to british competitiveness and the account deficit, it had to go below 120. it's an old trope. it was wily coyote still running after he was off the cliff. a lot of people were in denial. he has enabled bernanke.

adam: this is the best use of it. they kept running because they were in denial. they thought it could reverse. tom: bring up the banner please i did an extrapolation. if you get to a sub 120 sterling, that is just some rough mathematics. this is the real mathematics. does a bank of england respond to this? question ofs to the how much faith they have. bigger than what the bank of england can do. i think it's a fundamental change to british competitiveness. i do think there is going to be inflation. francine: can we take a step back. ofe politicians dream competitive devaluation.

how much is it good for the economy? adam: it's good in the short term. this is why we haven't seen the --bers collapses much as me we thought. it's bad for the medium and long-term. about written, all that time in the 70's and 80's when the pond kept going down. you can't replace the terrible numbers they have with exchange rate. if you do, you just erode living standards. it goes back to what you were saying. it goes back to the bank of england. unsound, they is inflation starts going up. are you worried about central bank independence?

said the rates are too low. it just feels not right. adam: i agree with you there. i don't have any doubt the bank of england will maintain its independence. it increases the odds they are going to raise rates to show they are independent or continue doing what they want to do. tom: sterling is rolling over. it is not in freefall. but a rollover captures the moment. we are in washington with adam pozen it. identify contagion it? is there a tangible contagion to what we see in britain and italy? adam: i don't think there is that much contagion. it's way overplayed. it's when something happens in russia and brazil lows up. we are talking about direct

limited trades. this is getting over dramatized. it's a tragedy for the u.k.. it's a loss for the eu. negativementioned interest rates are not the drama. there is a rate calibration of the chronic effect of negative interest rates. give us an update on your optimism, your call monday to rates. adam: thanks for remembering my writing on that. that goes too if you've got big macro problems, the flexible ranking system, you can survive it. i think that remains true. i don't think they are a good idea in japan. i don't care so much about individual banks. why do worry about is pension funds and insurers.

tom: this is the heart of this meeting in washington. they don't care about banks. francine: you couldn't care. i want to get back to brexit. trump -- adam: they did the capitation's. the standard deviations moved in the stock market when donald trump lost the debate. it was outrageous. the value of the u.s. economy goes down if donald trump wins. if you look at the variations we have seen, when ever it looks like he is leading, that's what you get. francine: you see the tension

here. tom: he is driving the sterling. also stay with us for bloomberg surveillance. we will talk to blackrock. he is a former s&p governor. we will talk to the italian finance minister. that set 2:00 in new york. ♪ this is bloomberg. ♪

tom: from washington, we are at

the meetings. the city is jammed. everyone is focused on london. let's look at three-day sterling. the idea of rolling over, what time was it? --as in my beautyrest rid beautyrest. there were two reports of those pricing. that was the flash crash. is thedline this morning recent rollover in sterling, down to 12281. i got a 11841 off the flash crash area that francine: this has huge repercussions. let's get to the bloomberg business flash. taylor: they will sell their chemical unit two carlyle group.

they will pay $3.2 billion for the business. the company sells chemicals and equipment. it part of their plan to divest assets over time. according to people familiar with the matter, the german bank is talking to security firms about raising capital. raise $5.6 billion. the justice department is demanding the bank pay $14 billion to resolve bond claims. snapchat is preparing for an initial public offering next year. that's according to people familiar with the matter. for disappearing photos. it could have a market value of $25 billion.

atck us out on twitter technology. that is your bloomberg business flash. tom: thank you so much. pictureok at the larger of the international monetary fund. what does that mean for the united states? there is very little discussion. adam: everybody is waiting for the election. nobody is expecting any action. tom: you called for a multi-pronged approach. part of that is fiscal policy. the statement yesterday from the brazilian minister was something. is there any hope for fiscal policy? adam: it's not a pipe dream it, but it's more of an aspiration. we are looking at a world where essentially everybody in the g7

except the u.s. is doing stimulus. cycles in election germany and france and italy push them to expansion. by french and japan are doing expansion. it would be wonderful if the u.s. got on board. there is less leakage. there are less currency distortions. it wouldn't be that big of an expenditure. francine: we had the imf report yesterday. i know it's public. you are borrowing more and more. the question is less about the amount you darling unless it's a ridiculous level and more what you spent in. we all say of course. we've got to get past that. when italy is issuing 30 year dods below 3%, the world can

with that money that's useful. g.: it's about the little you've got capital letter equations and the little ones are the growth rate. g?re is the little where is it to help us out? adam: it is a big part of it. the problem is it's shrinking. that is when sam fisher gave his speech and said below neutral rates represent a slowdown in growth. yellen acknowledge that a month and a half ago. this is the turning point. we can no longer deny or say it's just cyclical. there has been a slowdown. tom: how exposed are we to shocks? fragility that you see that william klein sees? adam: i think we have come out

and said we think the system is more resilient than it was in the sense of balance sheets. the unitedolds in states are better off than they were. the shift of public debt may not be good for the long term. is we may be less fragile, but we are less flexible. if something bad happened, there isn't much the fed or the ecb or the boj can do. don't worry about negative rates. what are the chances we should worry about? we worry about things we know. one can always spend ball a bunch of things. are thegs that worry me

long-term erosion for pension funds. that is a fundamental fragility that has political implications. latin america, tom mentioned brazil. the problem is they have this dynamic. venezuela is a disaster. brazil is not doing well. they voted down the peace deal in columbia and they've got refugees pouring in. there is an overflow in latin america. finally, this productivity number is so bad. that i think keeps a set low inflation. tom: we are going to come back. we are looking at international economics and we wandered to domestic economics. the jobs report will have a full last -- list. bill gross will join us on television and radio after 8:30

a.m. ♪ this is bloomberg.

tom: good morning. it's a beautiful washington, d.c. pumped up for the dusty baker national league a small playoffs. it's a fun day in america. to baseball games being played. baseball fans are riveted across america.

is adam pozen on jobs day. is it clear for the labor economy? adam: pretty close. we would like to see per dissipation go back up. the lack of response to a couple of years of expansion says it structural. tom: is it structural in the old weight where it's one america or do guys like you have to partition it into the haves and the many have-nots. have-nots arethe more unified than they used to be. it used to just be african-american males. if you were a white male, you still had a good shot. recession,ent in the we now have have-nots including a lot of white people. from a social justice standpoint isn't so bad.

that's why we have the politics we have. the haves are increasingly diverse in a distant from the have-nots in. francine: how does this get fixed? it's terrible. adam: i am not taking any joy that people don't have work. francine: does it need to get worse before you clear it out? adam: this goes back to the stuff we talked about before the break. it's the private sector not investing. the public sector needs to invest. people are setting sites in a strange way. secretary clinton cares about this stuff. college funding isn't the issue. and about training short-term community colleges and apprenticeships. tom: can we do that? everybody wants that. where is the will to jumpstart

blue-collar jobs? adam: not in congress. we are stuck. tom: thank you so much. this is been great. francine: adam, thank you so much. we speak with blackrock. thes the chief of staff to u.k. chancellor. he will have a thing to say about brexit. ourlooking forward to conversation. tom has a great chart. will sterling be under pressure going forward. this is the picture. this is bloomberg. ♪

francine: pictures of new york. i miss new york. the chrysler building. lower, sterling goes any

that is the gorgeous three-bedroom for bath waiting for you. francine: we digress. poundlly do look at the every two seconds. moving toually london. let's get to the bloomberg first word news. taylor riggs has the latest. a night ofre was pounding the florida east coast. the storm has been downgraded. it has maximum sustained winds of 120 miles per hour. the hurricanes expected to stay over florida for most of the day before moving into or near georgia and south carolina tomorrow. 2 million people were told to flee their homes. the nobel peace prize has awarded to columbia's president.

he helped broker the agreement that ended the world with -- four with guerrillas. it may be bittersweet. voters rejected the peace plan. he is now in negotiations trying to salvage the deal. rush is warning the u.s. to not attract -- attack aside. any airstrikes would be seen as a direct threat against russian troops deployed in the area. the u.s. has ended talks with russia over the civil war in syria. jon corzine is close to resolving allegations he failed to oversee the firm when his brokerage unit spiraled for failure. $5 million toy settle the claims. he is a former cochairman of goldman sachs. he was the governor of new

jersey. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. francine: thank you so much. we need to talk about the falling pound and brexit. philip hammond says he is committed to finding a solution. it will be one of the government's objectives to ensure that the parts of the financial services sector that are europe facing are able to continue doing business in europe. francine: that was chancellor hammond. we are with rupert harrison. it's great to have you on the program as always. what a week. what a week for brexit. theresa may says they should the less and dependent she was

criticizing policy. we heard about foreigners being put on lists so they are shamed into hiring more brits. rupert: i am here for the imf meeting. a lot of people are acting -- asking what's going on. it's a fair question. the speech and the bank of england, i am convinced that was an honest mistake. you might question how it happens. i do not think the government is trying to imply they are constraining the bank of england. she was trying to make a point about inequality. i think it was an honest mistake and people shouldn't expect the bank of england to behave differently because of this. it's not ideal. francine: people are nervous. rupert: as we saw this morning. people are very nervous about what brexit is going to look

like. philip hammond gave some very sensible messages. the question people have is there is conflicting objectives. they want to control immigration. they don't want european courts to have jurisdiction in the u.k.. have marketnt to access. francine: i want to show rupert your chart. all of those algorithms, you have traders questioning whether pound dollar is a possibility. tom: let's bring up the three-day sterling chart. we will try to bring that up. i look at -- there it is. this was reported by bloomberg news. all ofrecent rollover, this. into your day job. what do you do with equities and commodities? what does it mean for global stock markets.

the ftse currency adjusted or to the american stock market at this point? apert: i think the u.k. is brexit issue. sterling is a big focus. the u.k. stock market is very important. the flash crash has something with liquidity. sterling is on a downward path and that is because markets are waking up to the fact that we are heading for a hard landing. further currency depreciation? rupert: there is further to go. i think there is a naivete out there. people think it's going to go smoothly. i think it's going to be very difficult. for global markets, this is a contained issue. the momentum in the u.s. economy is not going to be knocked off

course. this is a u.k. issue. francine: what did you learn about brexit this week. i'm sure you are asked every 10 minutes. is the u.k. still open for business? does the government know what kind of brexit they want? rupert: they know what they don't want. a singlet heading for market european economic area. we are heading for full exit area there are some red lines around what a post-brexit scenario is going to look like. the u.k. government would like to have a sector by sector approach where they re-create aspects of a single market as closely as possible. we saw french while all on way in. are they going to take that approach? are they going to suffer? tom: who will the u.k. speak to?

i have asked this question 15 times. where do you plant blackrock resources in europe? who does the prime minister speak to in europe? rupert: ultimately, it's going to be a negotiation with all of the eu members. there are going to be a lot of different capitals. each of them is going to have a potential veto over the deal. you're putting together a very complex richer. the most important partners will be the french. if that is merkel or aland, we have had harder rhetoric from them in the last few days. francine: the markets forget.

i don't know how the government views it. the u.k. is focusing on inequality. it hasn't been the same growth for everyone. earlier, the person you were working for actually one significantly. what happened in 13 months that the u.k. now feels they need to push back against immigration and slapped down as this is? rupert: you have to aim for the tone of the government. she wants to set a new tone. she wants to make it clear that she is not just about brexit. she is different than it cameron. we need to aim for that that rhetorical different. there is going to be continuity. there is a lot of talk around fiscal loosening up. tom: let me reset. 12345. the festivities of overnight, it

is solid sterling depreciation. that is a bad story as we go to the jobs data. are --e: some traders rupert harrison stays with us. this afternoon, we have a special episode of bloomberg surveillance. we will talk to the former governor of the swish -- swiss national bank. this is bloomberg. ♪

francine: we are talking brexit after the huge ball in the pound

and we are talking about the race and world growth. let's get straight to the bloomberg is this flash. taylor: or problems for volkswagen in north america. they are recalling a quarter million vehicles for fuel pump inspection problems. aong those cars, the audi seven. they have then trying to resolve and omissions cheating scandal. british manufacturers have made a modest recovery. 2/10 of atput rose percent in august. that is after a drop in july. the pound is did overseas demand. of the richest dynasty on the billionaires index had a day to forget. the family that controls walmart lost $3.5 billion. it would be relatively flat.

shares fell 3%. they have a combined net worth of $120 billion. that is the bloomberg business flash. tom: thanks so much. there willn sunday, be a special episode ahead of the second presidential debate. look for that on sunday. this will be at washington university in saint louis. they did great in wall street rental college survey. now they host a debate in st. louis. megan murphy is our chief. she is in new york. sprawle in the twitter of the last few days, donald trump is doing a reagan redux. if we just get rid of regulations, it will be better. what is the attraction of that idea? megan: it's something they have

noticed, even more than what he talks about reducing corporate taxes. the thing that gets him the most traction with businesses is really stripping back this regulation across industries. is something they say whether this is a politics game, it's something they know has been instrumental in getting support behind it. a chart thats showed the republicans that migrate -- the democrats that migrate to donald trump in a given geography of ohio, there is nowhere near secretary clinton getting republicans. what will be that dynamic? megan: both of them have consolidated support among their traditional supporters. they are drawing about 90% isport area the wiggle room

narrow. at the people who are on the margins right now. those people are usually working class. they are going to be targeting. what she has to do this sunday is when those people over. it's going to be about jobs and national security. we will see what the jobs number looks like today. now, what donald trump thinks he has to do is make the case that he is going to be the better jump starter of a stronger economic recovery. she has been forward about making the case that we need more regulation in the wake of things like wells fargo and deutsche bank. we need to keep an eye on big business.

she is going to boost women's dissipation and the labor force. i can't believe how much i've talked about donald trump tweeting. i have asked the king of charts to give me a chart about his popularity. megan: it hinders when he gets these tweets that get dissected like he had with the miss universe contestant last week. for 24 hours.der the one thing he has proven a master of, twitter is a sickly a mechanism to troll people. that is what his supporters like. does he win voters over when he does that? probably not. i need to report to you that i darkened the door of the palm restaurant on 19th street.

to chuck todd who helps us out on bloomberg radio. i also listen to the people at the bar with all of their washington perspective talk about how mr. trump wins. that was the dominant talk. how does he do that? that path still runs through states like new hampshire. we saw a poll yesterday showed him within two points. he's got to rack up. if you look at the math, there are a few paths for him to take. he's got to win maine. he's got to win north carolina and florida. he can lose a few states like pennsylvania and virginia. there is a pathway where the polls are still tight.

tom: the guy from pennsylvania thought he would not win pennsylvania. i was at a bank reception. there was a lot of talk of how the markets are price it. this confounds most people. itert: markets are finding harder to process. with briggs it, there was a big a simple event. the implications were clear. what does it mean to markets? we don't understand what he is actually going to do. we don't know if he will be constrained by congress. aboutne is very nervous action on trade. if the main thing he means is a stimulus, that could be positive for some markets. we see that in market moves.

mexico, everyone agrees that's bad news. megan murphy, thank you so much. safe travels to the sunday debate. we will have a special programming beginning at 8:30 p.m. it is a very different debate than the first one. the imf meeting, this is bloomberg. ♪

tom: let's do that. it's a foreign exchange report. the euro is weaker, but not as much a sterling. that is stunning at the bottom. 12390 after the flash crash this morning. coming up shortly, it's blumberg go. david joins us. you have jobs and ecb tapering. david: we will talk with several prominent guests about the jobs

situation. by thegoing to be joined flash crash. since you are going to be interviewing the bank of italy governor. we are interested in what he has to say about deutsche bank. they might be going for some more capitalization. tom: david westin, thank you so much. let me give you a quick morning must-read. this is from the green book at the imf. we go to the banks. stunning language on the report. recovery will not resolve the problem of low profitability. 25% of banks remain weak and face significant structural challenges. stagnation of pressures are substantial. this is the real deal. deutsche bank is about getting to 2018.

rupert: that is a very significant issue. ofhink this is symptomatic an industry in europe the suffering. they are right that there are some fundamental business structure issues with all of these big investment banks in europe. learn froman they the united kingdom of five or six years ago? you enjoyed rbs. what is the lesson that deutsche bank and other banks can learn from the u.k. experience? rupert: recapitalize your bank early like the u.s. did. the problem is the new regime makes that difficult. they have locked themselves into the straitjacket with mo more bailouts at the wrong time.

i think from a market point of view, there are a lot of people thinking about risk. if you're worried about that, european financials are not a bad hedge to have. i think the imf is right. if people start to see steeper curves, i think banks will benefit. there are potential opportunities there. francine: we worry too much about what happened in the 2008. banksoblem with deutsche business model which may mean the share price goes down, there is nothing uglier. , you don'treholders want to be a shareholder. theseher side of this is idiosyncratic issues. this doesn't feel like a systemic crisis.

it's a profitability crisis. it doesn't feel like a systemic crisis. tom: thank you so much for coming in today with lack rock. we have a busy day. we have the jobs report. you're going to wander over to the imf. francine: we have the central bank governor. we want to talk about tapering it. laurent, we have our special with hilton brand. is one of the key interviews here. no question about that. we will look at the american labor economy. we will do that with bill gross just after the jobs report. this is bloomberg. ♪

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>> a warm welcome to bloomberg go. job state is here. -- jobs today is here. equities up bye, 46% -- 46 point. a flash crash in sterling and sterling stays weak. a pound heading towards its worst weekly loss since 2009. >> we are less than 90 minutes away from the september jobs report, estimate for the gain of 172,000 jobs and we will break it down live with bill gross and alan krueger and rick rieder. deutsche bank holding informal talks with security firms to explore options including raising capital should mounting legal bills require it according to people with knowledge of the matter. of chaoses