>> this morning, after a landmark speech by prime minister may, britain considers a hard brexit. britain listens for an e.u. response. , 20% of revenue. it may take the euro started paris. swiss banking is not too big to fail. we are joined by someone from ubs. and mr. trump considers if nato is ancient history. in this hour, the prime minister

of sweden. sweden is not a member of nato. neither is russia. good morning, everyone. from a meeting of the world economic forum, i am tom keene. francine lacqua will join me in a moment. it is called today. -- it is adapting to the new world order. we will catch you up on the news in london, with sebastian salek. europe's biggest bank, hsbc, says trading operations that generate about 20% of revenue for the investment bank in london may move to paris. speaking exclusively to bloomberg, stuart gulliver and -- was confident about london's future as a financial capital. stuart: this is a decision british people made, so we need to execute it. but london will return -- london will remain a global mental center. ofelieve the revenue impact brexit on financial services

will be made good in two or three years time. i do not see the foreign exchange market moving, the equity market moving, the high-yield bond market moving. specific we will happen is those activities covered specific by european legislation need to move. looking at our own numbers, that is about 20% of the revenue. seb: meanwhile, the president of ubs's investment bank said his organization will also move out of london. >> brexit, we will have to. the question is, how many? it will very much depend on the agreement that the u.k. will but yes, wehe e.u., will have to move bankers. an option ine have frankfurt. we have property set up in spain. we have, still, flexibility to decide where to go. and we will definitely have to go. saudi arabia has promised it will reduce the overall tax rate paid by national oil

companies to make the ipo potentially one of the largest in history. the aramco ceo spoke exclusively to bloomberg at davos. the company, with what is remaining, is able to, for example, in 2016, execute one of our biggest capital programs. and we paid a dividend in 2016. so going to the market, definitely, it will change. >> a lower tax rate in some ways. >> exactly. seb: a special prosecutor in south korea is making his case for arresting the same son heir apparent for paying for political failure -- political figures -- political favors. samsung has denied any isngdoing and said the court expected to rule within 24 hours.

if you have ever thought how is is to buy a house in london or new york, expensive cities are all in asia. mumbai and shanghai take years for a household with a normal income to buy an apartment. london came in fifth place. powered by journalists and analysts in more than 120 countries, this is bloomberg. tom: thank you so much. it is too cold in davos to do a day to check, so we will go back to london. mark barton? mark: it is not frigid here. this is my chart of the day, sterling-dollar intraday percentage moves, going back to 1992. look what happened yesterday. a 3% move out, versus dollar. the biggest daily game since 1993. this chart shows every single one of them, going back to 1993,

after prime minister may's brexit speech. bank of america merrill lynch says the worst for sterling is most likely over for now. what may go when she triggers article 50? hard brexit concerns may have peaked in the near term, leaving sterling undervalued. deutsche bank disagrees. it sees sterling falling below 1.10. hsbc forecasts further depreciation, given political and certain key. a 3% rally yesterday. we are falling a little bit today. it is not every day a company loses a quarter of its market value. this is pearson. shares climbing 25%. the world's largest education company withdrawing its profit goal for 2018, amid challenges in the u.s. courseware market. and also, it says it plans to sell its stake in publisher bank when random house. it has lost a quarter of its value. mark barton, thank you so

much so much. this is arguably the most important interview for donald trump in doubles. this is the current minister of sweden. he is a trade unionist, and he did not overlook beginning on third base like the president-elect of the united states. he took welding courses at a young age. rosa through swedish politics. and joins us now from our studio. esther prime minister, wonderful to have you here. populism seems to be a substitute for a new kind of conservatism. ,ow do liberals respond including liberals in sweden and the united states? these are worrying times, and we have seen it over the years, that people are getting more and more concerned about the global's -- about globalization. we have winners, of course, in globalization. we have very clear signals we want to reduce poverty, increase education for boys and girls.

those are good signs. but also we can see people are losing. and they are feeling threatened by globalization. that means that we have to show that globalization and our societies are developing in such a way that you are on board on this future project. it means jobs. it means decent jobs. it means equality, social youlity, welfare that gives some trust for the future. so we need to change these worrying times, uncertain times, into more certain times, and a positive attitude to the future. tom: to yourself, within the turmoil of european politics, we have the netherlands, the french, and others with elections, germans with elections. what should be the e.u. response in the early days of a trump administration? >> to stay united, of course. tom: to have one voice? >> it is very important for

europe and america. i would say it is very important to keep developing the transatlantic link, because that is beneficial for both parties. we need to stay on that track and develop that. for the european union, given the happy brexit negotiations coming up soon, we need to focus on those, of course. we also need to focus on the larger scale, on the larger pic sure. -- larger picture. one of those is cooperation with the united states. tom: americans -- and i am the ugly american -- we look at scandinavia, norlin -- norway, sweden, denmark, we learn for two weeks in school and we move on. i know that is a naive view. explain to me sweden's distance from the toe when you see the heritage of finland with russia and the threats from russia. can sweden stand aside, as it has for years? p.m. lofven: both sweden and

finland are outside nato. we are nonaligned countries. for us, it is a way of keeping the stability in our region is -- in our region. changing that would mean more instability. but we are taking responsibility for ourselves and our region. so we are increasing our own military capacity. we are increasing cooperation with the nordic, baltic countries, with nato, with the united states, with the u.k., and so on. sensitivities that the present administration, the administration of mr. obama -- did they err in their expansion of rhetoric of nato to the east? p.m. lofven: i am sorry, did they? tom: president and secretary kerry, did they err in expanding nato to the east or the talk of moving eastward? was that a mistake? p.m. lofven: no, that is something that they have to decide during the decisions they

were about to take. but we also stated to president obama and vice president biden and secretary kerry that we will stay nonaligned, and they respect that. so in this environment, we all need to make our decisions. defend thehing can action from the russian side now. ukraine, the annexation of crimea -- nothing can -- tom: there is conversation of the elimination of sanctions that mr. trump would support the elimination of sanctions. are those sanctions constructive against mr. putin and russia? p.m. lofven: we need to adhere to international laws. for small countries, this is very important. you cannot just change borders. that, we will have disorder around the world, because if one can do that, another country can do the same. we need to stick to

international law. as long as countries do not adhere to international law, we also need to be prepared to use sanctions. tom: mr. prime minister, thank you so much. is thelogan -- lofven prime minister of sweden. the ubs chief executive officer will join us in this hour. all of that with francine lacqua. from davos, this is bloomberg. good morning.

francine: a special "surveillance" here in davos.

we just finished a panel on populism. it was great. if you look at the three point plan to combat populism and the anti-globalization wave, panelists including christine -- let'slarry summers get back to globalization, but talk a little bit about banking. let's talk about what it means for some of the revenue growth. for joining much us, as always. when you look at your bank, where do you see the most growth, and terms of where it is coming from, in 2017? >> obviously, u.s. momentum. we see good growth in asia, although it is slowing down compared to the last few years. what i would say u.s. and europe, clearly, things are pointing at developments. francine: more cost cuts to come for ubs? sergio: it is about executing

the current plans on cost optimization. we're always talking about net cost. we also make a lot of investments. we do need to change our levels as an industry, and also as a bank, freeing up resources to invest in new technology, and also to respond to regulatory requirements for new setups. talking about regulatory requirements and going back to what you were saying about the u.s., are you expecting donald trump to deregulate a lot of companies, which means you will attract more business from companies that are willing to take advantage? sergio: it could well be, outside of the financial sectors and banking. but i think a lot of deregulation coming through -- the right thing to do -- there are, at the margins, some intended or unintended consequences of the regulation that has been implement it over the last few years that needs to be rethought. but in general, i do not think

there is going to be deregulation. probably, it is going to be a slowdown and a more pragmatic approach to it. francine: what worries you the most? you are looking into 2017, with brexit, possibly moving some jobs. you look at what is happening in the u.s. and volatile markets. what we focus on? sergio: our focus is really on executing our plans, to be honest. ,e see, in the last few years 2016 was a year of a lot of changes. to try to focus too much on the macro and the outside environments. we stay focused on executing our plans. the u.s. are promising a market for us. business is starting to deliver solid results. francine: do you worry about being able to retain balance? is that part of your thinking when you come to bonus and compensation? sergio: not really. i think compensation is part of the equation. i think it is not the only motivation for people to work in

an organization. so we have a clear strategy. we are strong with our capital position. we are an attractive employer. we try to be attractive to newcomers. most importantly, to our existing employees. francine: talk to me a little bit about your asset management. how much are you expecting to manage by the end of the year? , still,asset management we see growth. if you look at our client business, we expect to grow around 50 billion of assets. that is in line with what we did in the last few years. and if you take into consideration that in those numbers, there is a lot of clients changing theirrisk profile, booking centers, and so on and so forth, i think it is a solid result. francine: is it also new money coming in, and where is it coming from? do you break it down by region,

or in terms of types of people that want to come in? sergio: it is a good mix. clearly, we are skewed toward high net worth individuals. asia is a big engine of growth. in general, we saw good flows coming in from all segments. and the very important item for us is that, a, we have not seen a lot of leverage. money is also a function of how much leverage clients want to take. our plans were risk-averse. is that we arec also very selective in the way we onboard new money in terms of profitability. i think we could get billions and billions of new money, but structurally, it would be a loss leader, because low rates or negative rates and capital consumption is also factoring into on boarding. francine: steve factor in possible -- do you factor in possible trade wars in emerging markets? sergio: not really. i do not think those things are

going to play out in 2017. it is time for the world to adapt to the new market. francine: if i am a high network individual human asian market, i am a high net worth individual in an asian market, why would i choose you instead of a competitor? crowded, but well defined in terms of the offering and what people are looking for. i think we are very well equipped to serve not only altra clients, but also high net worth individuals in high affluence segments. we have a lot to offer. we have a long-standing presence in the wealth management. it takes hundreds of years to build up such a franchise. so the -- so that is a major advantage. francine: when you look back at 2016, did we -- a lot of markets -- most markets actually missed the global populism and a lot of market signals. have you learned anything as a

ceo on how to do things differently because of the last 12 months? sergio: it is a process. it is nothing new, populism. it is something we feel more and more, because probably people see the latest developments in the u.s. as a big step towards that. but in europe, we have been used to populism for a while now. so i'm not very surprised about those developments. but, you know, we need to do something that conserves it, but also need to be pragmatic in realizing that populism is not going to be addressed by coming with slogans and short-term solutions. we need to address the fundamental issues that is -- inequality is driven by two factors. first of all, a need to retrain people to stay competitive as an employee, as a workforce. and number two, low rates. a low rate environment is putting pressure on the savings of people who have been counting

on their savings for quality of life. and they seem more wealthy people getting wealthier because they are invested in financial markets. but we all know that financial markets is not the only way to measure the true net wealth. to therefore, we need address these issues, but not to panic and not to be populist it -- populistic as companies, and tom a political standpoint, address unease. may's speech,esa getting out of the single market, a surprise? sergio: considering the last several weeks concerning the pressure on her and the government to come out with clear signals, i was not surprised at all. the situationider now clear. having said that, the position position in a

negotiation, and the clock is m2 --ing to start to take countdown.ck and to but it is too early for us to take a decision about brexit issues. francine: you have said that in the past. 1500ould move up to people. a clearer view of how negotiations are headed? sergio: i have no view at all, and it is unlikely to be clear months.ext six to nine we are preparing for a couple of options. we have existing businesses in the continent of europe. and we will decide how to best leverage those capabilities in -- depending on how things play out. but i do expect things to be clearer maybe in the last few months. the very good outcome of yesterday's speech by theresa

may was that she is also looking for a pragmatic phaseout. francine: a transition. sergio: i think that is the most important issue. no matter what they decide -- i hope they do not go down the route of creating more instability across the continent and in the u.k., and potentially globally. francine: do you think you are a step ahead of your rivals or peers because of the bank's record? sergio: not necessarily. it takes at least a year or 15 presence,build up a and entity. we have the advantage of already technicalnd some capabilities to execute transactions. so it is an advantage. but many others have it, so not really. francine: at a negotiation stage, it is difficult to predict how it will go. are you expecting by the start of summer to have a better idea

of how people you need to move, and how quickly? sergio: summer is too early, only five months to go. i would say probably towards the end of the year. you think about article 50 being called maybe march, april. it takes -- for us, it is going to be important to know at this time next year, the direction of travel. francine: do you think that swiss banks have in actual advantage, compared to u.k. banks, because of this? sergio: it is more a mental advantage, because we are used to have a passport, and therefore it is nothing new for us. we are used to running a complex coming -- complex, multi-jurisdiction environment. francine: two banks in europe need to be simple fight? in europe need to be simplified? sergio: we could talk about making ubs less complex. cases, the complexity is

coming from the people who want that complexity. francine: bullish or bearish on russian clients? sergio: we have always been bullish on russian clients. we are staying out of these political debates. russian clients are very important for us. it is just a country. we stay out of this kind of political issues. francine: what about the middle east? i imagine clients have changed their allocation strategy because of what is happening with the price of oil. does that impact your thinking? sergio: always a factor with oil prices. you could see, not only in the middle east, in general, oil countries, looking at their reserves and how they manage their reserves in a different way. i would say right now, with a more stable environment, things have been stabilizing. in general, people are reviewing wealthiews on generation, and trying to look at a combination of data and

asset mix. but that is nothing new. francine: sergio, thank you so much for joining us. the ubs group ceo. we are also keeping an ion boris johnson, the u.k. foreign secretary. he is speaking in india, saying the u.k. will be out of the you -- the e.u., but will be supportive of the e.u.. that is on the back of the foreign secretary, having heard from theresa may. we speak first to the japan post ceo. that conversation, next.

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going to the market -- >> lower tax rates in some way? >> exactly. francine: he was speaking exquisitely to bloomberg in davos. day two of the world economic forum and joining me is the ceo of japan post holdings, much more than a post -- a normal european pos you on a lot of japanese debt, it is a huge company. .hank you for joining us the finance ministry has indicated they want to sell further stake of japanese post, since the ipo the shares have barely written, what is your message to investors if further stake were to be sold to them? >> japan post holdings has three subsidiaries.

japan post insurance, and japan post corporation, we are taking care of letters and packages. two years ago three companies time.sted at the same our service holding company and subsidiary japan postbank and japan post insurance, last monday, the 16th of this month, the minister of finance government of japan announced they will sell additional shares of the holding company, our service only and the japanese 100%,ys government owns but they are supposed to self down to one third, they will continue to keep shares permanently but they have to sell two thirds of our shares. francine: 10 what timeline -- in

what timeline? >> they say by 2022 they want to sell that much, two thirds of our shares and by the last ipo -- by 11% and we bought back shares. they are now owning just more than 80% of the shares. this time, it is not clear yet, they say the packet amount of the ¥1.4 trillion which means about additional 20% or 25%, they want to do it twice. francine: that would be this year -- by the end of the year or summer? >> they only said last monday they will choose the underwriter , by the end of march they will choose six underwriters to sell the shares. most likely, because of political and so forth, we are

accepting they may do that sometime in summertime in japan of this year. francine: how will you create value for shareholders this year? >> we have three subsidiaries, we have to show how our growth to customers. 80% of the holding company's revenue comes from japan japannk and 20% once from post insurance and japan post company, their contribution is very negligible now. we have to make this japan post subsidiary to be more performance oriented. francine: is that on negative rates which have hurt -- >> japan postbank is the largest 94% of thean, performance comes from only

investment so 80% of holding companies revenue comes from this back and 94% of price-performance come from investment. we are the largest bank in japan but specialized, we do not hurt the private sector banks, we are not allowed to make loans even though we are a check. this 94% revenue comes from investment only. we have to find out how to make money by investment but negative interest rates last year and domestic interest rates saw how to make money and this is our homework -- francine: talk to me about asset allocation, if you need to make money by investment, are you changing your asset allocation on the back of donald trump victories? >> even before donald trump becomes president, since domestic japanese interest rates went down and down and down and

the january 29 of last year, negative interest rate we are speaking to the only japanese domestic -- domestic market of performance might go down -- we used to be investing only in japanese government bond, 100% went to japanese government bond but that is now declining. several years ago we decided to go to someone else. francine: riskier assets. >> more than 91% of japan post backs assets is more than rated single a, so we are investing defensively. we have to expand our horizons to go to the riskier assets and 200, ¥300,among -- yet 5% goes to night investment and this will be expanded. francine: you have an

inquisitive in 2016, anymore acquisitions on the table this year? >> that is by japan post subsidiary. they are doing this business and the logistics business, we know japanese domestic market will be matured, saturated, if and when we want to grow more we have to grow abroad so we expanded our business horizons are broad and we acquired one australian company. we paid $6 billion. this is only the first step because they are very active, asia-pacific region, station in australia and we may have to continue to do that. the good target corporations. francine: thank you very much for joining us. brexit global trade, china, donald trump dominating the

agenda in the world economic forum. the hsbc the -- ceo spoke to us about how the policies may affect the banking sectors, free trade, and mexico relations. last weekendexico and business leaders and government officials concerned about president trump but the team he selected, the people appointed into government and the advisory council, he asks steve schwarzman to put together and get it level of engagement in the business level giving reason for encouragement, changes to the way nafta is constructed or maybe -- at the end of the day, the mexico i still think will represent an important manufacturing hub for u.s. business, but the balance is clearly got to be reconstructed in a way that the

president has said during this electoral campaign because often what he is talked about is not against free trade but the agreements that were put in place were not great deals for the usa. sees only- he only exports as good. clearly, wey, and would probably disagree with that in the sense that -- put aside the work globalization's which have jordan tax, free hase and the markets is -- resulted in people prospering over the last 20-30 years, a lot of people being lifted out of poverty and there are studies that prove that. open trade, global trade, free trade, is guarded as a force for good generally. what happened is five narrowing the differences at sovereign levels between countries, often what happens is within the country there has been a widening of wealth and so on. wealth globalization has

benefited certain countries and lifted it -- it has probably created more splits within countries and that is the problem government is dealing with and manifested itself in discourse we have seen around brexit, etc.. >> hong kong shanghai, you are one of the great big global things, do you not feel is -- you're talking earlier about the world seems to be divided into different -- you since divided into different units, that is against everything in a strange way be bank tried to set out to do. try to set out to do but requires us to fine tune our approach because within the trading blocs there is massive amounts of supply chain trade finance etc. to be done. the worldly, as digitizes, trade will move from trading commodities, trading services, there is also a change taking place structural he would then trade finance before we get to that geopolitical point.

america, you have mortgage settlements discussed with american authorities, do you have a more optimistic view of that under donald trump? -- aetect -- your peers much more bullish about the trouble administration when it comes to these issues. have inthe sense we talking to our peers at the american banks is there is a more constructive attitude towards wall street, certainly we have seen strong values and american bank stocks which probably reflects a pro-business attitude of the president-elect and reflects an impact that will have on interest rates and interest rates let -- levels of interest rates and the dollar. benefitr interest rates the banking system because the maturity transformation that banks do does not work at all well with -- with interest rates are at zero at the short and long in and that shift in yield curve will benefit a number of

banks. the way the judicial process works remains to be seen. -- whocan talk to backs have worked for hsbc and other foreign banks, one of the aims of american regulars is close to extorting from foreign banks. you could end up with a trump administration both fairly tolerant of american banks and much harsher on foreign banks, is that something that worries you? >> it worries me but remains to be seen how that unfolds because banks like hsbc we employ nearly 10,000 people in the united states a we create jobs in the u.s. and length to u.s. companies and finance u.s. companies in their overseas operations outside the united states, creating wealth in the united states and jobs in the united states. companies american and the other 69 caps and the wealth in which we operate, not domestically within the u.s. so we actually have a function or a role that is a benefit to the united states.

i think it remains to be seen how that plays out. francine: that was the hsbc ceos flicking exclusively to john nicholson. breaking news from the german cabinet, there will be elections in germany where angela merkel says she will try and gain another term, the german cabinet recommending september 24 as a date for the election. here with the ideas ceo. ceo,ng about -- adidas brexit, there had to be a time where there is no big sporting matches. we will talk politics but more about globalization. if you have this anti-globalization sentiment, popular sentiment which is very clear in davos because western leaders, you remind me they have not shown up, what does it mean for a company like yours and your supply chain, do you worry about trade wars?

>> we look upon risk in the business environment but i am concerned, you are seeing a reflection of a multicore problems that have not been sorted out particularly in europe. where are the future growth, global context, where will we get our products, still from asia. i am not worried in the bigger context, the current sentiment but we also francine: --francine: do you worry about tariffs? you have no control over policy set by the u.s. government and focus on day-to-day running of your business. >> we do not know if they are coming, maybe you should not worry about it too much from our sport industry or industry will be impacted the same way because it is the same business model. on a macro level, it will not impact us cover the only thing he will be impacted if our products become more expensive.

i do not think it is any the interest of politics to make sporting goods products more expensive. francine: how much do you worry about being singled out by donald trump? is there a way of protecting yourself against that? >> the new digital world you will get a storm in certain areas and you have to live with it, i am not worried about it, i'm worried about other things -- that europe cannot get its act the other end is still struggling since 2008 which you are seeing in the brexit. slow economic growth and unemployment. that is my court worry that we are very much not getting problems solved and you can see isdavos, the western world being notified by its absence of the senior political leaders and the chinese are taking leadership. francine: what does that mean how you translate those concerns to business, do you need to sell more to economies in jeopardy of these possible trade wars but

that look to or there is a trajectory of growth in europe? >> we have a very global footprint, in every major market, it impacts -- it does not affect our business, our two biggest markets is the u.s. and china. we have a very balanced footprint in that context. francine: talking digital, you panels where digital artificial intelligence is at the forefront of a lot of the sessions, isn't part of the globalization problem that is it part of the globalization problem? >> digital has made globalization and differences transparent and that is what you are seeing, the consumer can see the differences between he and she and some reveals, so the transparency is making the difference is an globalization more transparent but i do want to say because i have a globalization pro, globalization has brought goodness and an

immense amount of improvement in people's lives, particularly in the third world. francine: are you on track to sell your taylor made golf unit? >> in the process of selling it. francine: happy with the number of buyers? is tiger woods still in the running? >> i did not know he is in the running. francine: a group that includes them. >> i do not comment on this that we are in the process of selling the tailor-made business because we want to concentrate on adida s. francine: are you worried about currency swings or something you have no control over? , there the longer time is many upsides and doubt -- asked outside so we get more revenue out of the u.s. because of a stronger dollar and make it less out of china, over time it works out but you have to have a balanced portfolio to have that view. francine: thank you for a great

conversation, the adidas ceo. let's get to mark barton for your check on the market. : the stoxx 600 down for a third consecutive day. there is the stoxx 600, the ftse up, a big fall in the ftse yesterday after a jump in sterling which i will come to, the dax is up and the cac 40 is lower, a mixed market, a big day, u.s. inflation data, and fed chair janet yellen speaks today later ahead of the inauguration of president elect donald trump on running. let's look at the currency board -- donald trump on friday here in the pound is falling today against the dollar, down by three quarters, -- setswas the biggest joke january 5 1993, it rose against

all 31 of its major peers. been scouring the commentary pages listening to what the banks are saying about sterling's trajectory from here, bank of america merrill lynch says the worst for sterling's most likely. deutsche bank sees sterling falling and hsbc forecast further appreciation given political uncertainty and a wide external and ballots as well. -- balance as well. the u.k. 10 year yield up by one basis point today. francine. francine: for my next interview i welcome the first vice president of the european commissioner, thank you for joining us. actually vice president. how you look at brexit and the eu and commission will deal with theresa may and how you will deal with donald trump, what will be the most problematic? >> both are challenges but also

opportunity. i believe we will have to wait for the letter telling us that britain will leave the eu, article 50 letter. we will see what britain wants and we will start negotiating. it is our duty on both arms of the channel to do as little harm as possible to the economy because that is what we need to do from citizens as for our citizens. francine: what did you learn from the prime minister yesterday? >> she confirmed what you could have already seen coming in terms of leaving the internal market. i was pleasantly surprised by her positive tone about the u, the 27th remaining countries of the eu, she wants the eu to be a success and so do we so that brings us also together. europee: a ceo settled needs to get its act together, how does it do that? >> we have sometimes been

slightly too gloomy, unemployment is down and economic growth is stable, not massive but stable. looking well. we are slowly coming out of this crisis in a stronger way. as a consequence of the brexit now of the european nations closer together, they are determined to set a course jointly. there are reasons to be more cheerful than we were last year. for ane: do we need to go new campaign, a new marketing campaign to reconnect citizens with europe and what europe stands for? >> if you look at all of our societies, as a consequence of the crisis which is the worst economic crisis since the 1930's , too many people have been left behind, especially the middle classes in europe deal they have been left behind and we need to fix that. if you do not expect from any campaign to promote the eu will fail miserably, people need to feel it is about them and we are looking after them and making sure that profit from the economic growth.

backine: which brings us to brexit said theresa may saying she is confident she can get a better deal with the eu, what kind of deal with the eu be ready to give her? >> let's wait and see what they come up with, we had a speech, it is clear, at the same time, we can only make up our minds how we will negotiate once you have notified article 50 and given as their indication of what they really want. then we will look after our interest in let me stress once again, it is our intention to make sure this does as little harm as possible to economic growth and development of our member states. francine: are the red light still there or do you negotiate from scratch? >> it is not a political life, it is a legal line. the aftermarket is linked with freedom of movement and if this link is not accepted, there is no internal market. that has been the position the

commission has taken from the start which has not changed. francine: are we clear this bank has not excepted from a u.k. standpoint? >> the u.k. has been cleared -- theresa may has been clear about this in her speech but what the consequences of this are, we can only look into that want we have enough vision and we know exactly what they are looking for and then we can react and start negotiating. francine: how will you deal with donald trump, can he do damage to the european union? >> we will need time to see what the administration wants. we heard what donald trump has said in the interviews but we have also seen what was set in congress by the new top people of the administration. they all said they want nato to be a success. they said nato is arguably one of the best projects the americans have been involved in. i am sure that if we get into the style of -- a dialogue with the new administration they will

see that a successful eu is in the strategic interests of the united states, that has the force of years and i do not did changing under donald trump. francine: is there any good that can come out of the policies of donald trump when it comes to relating u.s. economy, does it help europe or automatically mean that if the u.s. gave europe and the rest of the world loses out? >> it a successful dust a successful american economy is in the interest in -- to all of us if it is not combined with protectionism because protectionism will hurt all of us. create positive economic dynamic without falling into the trap of protectionism, we all win but it protectionism becomes the norm then we all lose. francine: isn't protectionism what people are bracing for this year and that could mean elections going to a populist presidential candidate in france , something happening in germany, the netherlands, and italy?

>> i am not that worried, there are reasons to be more upbeat about all of this. let me be very clear, from the european commission, we believe protectionism will hurt all of us worldwide. do not fall into that trap, we need to protect people but protectionism is not the way to protect people, it will harm their interests. francine: how do you convince people of that, a panel of populism with larry summers, a consensus that populism will hurt the middle classes which are the very classes that have asked for it because they want to be protected. how do you get the message across to the voters? >> the mistakes we have all made over the last decade is to think you can convince people with statistics. the populist arc where people's feelings are and that is why they get the support. it is about because they get the right feeling across. as long as we do not get the right feeling across, diversity is a good thing and working together with others is

necessary, if we do not get that feeling across statistics will not help us and economic growth will not help us, we need to get people in the right state of mind which is a huge task all of us. francine: why did we not see this wave of populism coming? it was completely missed 12 months ago. >> i was here last year and two years ago. i am excited to the fact that this community is waking up to ,he realities in our countries which is the first that the fixing the reality and to giving it a positive impetus. in our societies, we need to channel it and there is a huge silent majority of people with goodwill who are sometimes intimidated by all of the shopping by the nationalists. man,ine: does the davos the globalization, free treatment need to shout louder? >> they need to wake up to the rally that if they do not take responsibility for how society develops, they lose, our economy

really needs more engagement. this community is waking up to the fact we need government. the premise that has been around for 30 years that the market will take care of itself, the trickle-down economic works, it is off law thinking, we need to -- a lot of thinking, we need to rethink the role of government in modern society. francine: the first vice president of the european commission. next, joined by tom keene and talking to a load of other top guests, a lot of newsmakers including eurasia group ian bremmer at stephen schwarzman, and -- this is bloomberg life from davos. ♪

♪ aspc ceo says operations generated about 20%

of investment bank revenues could move from london to paris. ubs investment big president says his employees will also relocate. the problem in europe is europe, the italian finance minister says political reforms are badly needed and the imf christine lagarde says advanced economies are seeing a middle-class prices. theresa may's primus for parliamentary vote on taking the u.k. out of the eu saw the pound jock but what is the future for europe's financial centers? -- pound drop but what is the future for europeans financial centers? tom keene only shows up if it is 10 degrees celsius higher than when i showed up. you do is remarkable how it in the morning it was so cold. francine: flattery will not get you an easier time but what a remarkable day, a lot of the talk is on china and what the

president said yesterday but a lot of the talk and i'm surprised about this is brexit and the consequences of that. tom: a profound speech by theresa may and the idea we are distracted by two major speeches yesterday at today is the beginning of the discourse of this davos. let's getfirst straight to the bloomberg first word news, here is taylor riggs. taylor: a report of an earthquake in central italy, a 5.6 magnitude and felt in rome, no word on damage. a series of earthquakes in italy last august killed almost 300 people. theresa may has been selling her brexit plan to key european union leaders, counterparts in germany and france after her pledge that the u.k. would leave e.u. single market, as she spoke with the heads of the european commission and the european council and they told her they would negotiate in the spirit of goodwill. korea willsouth

decide whether the samsung group heir apparent should be arrested and that influence tunneling scandal. they appeared at a hearing today, being invested for bribery, embezzlement, and perjury as part of a scandal that led to the impeachment of the south korean president. george h.w. bush has been hospitalized in houston, according to two local media outlets. no word what he is suffering from although his office expects him to go home in a couple of days, the former president is 92. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. bonds,uities, currencies, commodities, 14, not the going on in the market, two didn't spread called the trunk litmus paper of the market system and is market -- and that is boring.

-- you want tod talk about that, otherwise a churn in the market. markets: i disagree, are never boring, maybe they are the only check and balance that will be a place in the coming couple of months. my data board, a move out of safe havens we saw yesterday, look again and gold. donald trump is not in attendance at davos by the next commander in chief is a huge presence, hsbc ceo spoke to our editor at chief on the next u.s. administration. last week inexico that business and government leaders are concerned about president trump but the team he selected both the people appointed into government and into the advisory council, tss steve schwarzman to put together, indicate a level of engagement at the business level which is encouraging. francine: that is the hsbc ceo. when you look at the truck

administration, one adviser at the sturm mucci -- trump administration, one adviser, almost a rock star. tom: he joins us yesterday on bloomberg radio and he was very respectful of the uncertainty that all and any have about this administration. as we speak, vice president biden makes arguably his final speech. knowine: people want to what this administration is about and what donald trump is about. areing us to help us and we seeing live pictures, i am not sure if it is live, previous pictures of joe biden but to talk about this anti-globalization sentiment, eurasia group president ian bremmer. we have the lack of the administration that everybody wants to figure out what they are thinking or what their next step is.

we had the chinese president showing up and we have theresa may arriving later. what are you most worried about? ian: president xi was going to come here sooner or later, if we elected hillary clinton it would have been later because the evolution of the will order would have taken longer before the chinese felt they were really ready to step it up. they have to do an earlier, there is an opportunity for them , definitely with donald trump saying we do not care about the strong europe, more european countries should leave, we can win a trade war with donald trump saint we do not want multilateral deals, we will not be supported the human, that is an opportunity or the chinese to step up and xi jinping brought it, the most important speech of davos is this speech. the potential for direct conflict between china and the united states is a likelihood. that is not just true on the economic side but also to over things like taiwan, north korea,

south china sea and the chinese do not like that. francine: what does that look like, some kind of antagonistic move by the president trump and retaliation in forced by the chinese? ian: the retaliation will be on both sides, both economic retaliation and security retaliation. thehe americans are pushing chinese and putting the sanctions because they are not squeezing the north koreans, the chinese will respond in kind, saying we will not be doing government procurement from american companies, we will it these guys with fines in the united states. some journalists may be summarily packed off and not working in china anymore but the tension -- a relationship -- obama foreign-policy largely failed of u.s.-china relationship has been reasonably well-managed but back to follow for quickly. that roberts is will join you at eurasia, good news, his most coming anarchy

touches upon the backstory no one is talking about, is there a coming anarchy in our international relations when we look at all of this uncertainty this year? , as absolutely there is much as there is reason to be excited, the imf for the first time in nine years was -- didn't upgrade of developed countries, the economics -- the developed world -- people excited about donald trump and a unified congress doing good things short-term and maybe even medium-term for the u.s. economy but globally? the thing i worry about most about the coming anarchy is that donald trump really believes negotiating's position globally is better than it used to be which is not true. tom: secretary of state tillerson will be the adult in the room? do you have confidence his team of rivals and subsets of groups, that those people can measure and change and adapt the truck

message -- trump message? confidence,t have but if you look at the way he interviewed these people were he had lots of questions on foreign policy compiled by his team and he sits down with them and hits off the question and they start to answer and he cuts them off because he will not listen to policy. will he delegate and how much will he continue to be -- francine: weed -- tom: we do not know. ian: everything we have seen from he will maintain complex of interest, he is a guy who is not lazy, he will enjoy the presidency and the joy the manifestations of power it brings. on a series of issues, donald trump will be hands-on. francine: where will we be in 12 months? what does it mean for foreign relations? ian: if the united states wants to do and emma from his

responsibilities globally, that is what america first really means, we are not like britain where we have to take what other countries have us, we are the rules superpower, japan and the u.k., israel, mexico, canada, if we tell them to jump, they jump. donald trump has the ability to score points with countries that need america but there are a lot of countries that do not and able hedge and move towards china and move towards other countries, the middle east falling apart, we will be in the teeth of a geopolitical recession next year in davos and donald trump is a big piece of that. tom: too short of a visit but everyone is busy and davos. coming up, conversation with the blackstone chief executive officer, stephen schwarzman, erik schatzker will speak to him about business and investment at these meetings of the world economic forum. this is bloomberg. ♪

>> it is much more difficult to build up a solution to design and implement it that it is to areno, the fact that no's dominating the political landscape and this is a side of a crisis because it is called for a rethinking about what leadership means and what it means to have a credible long-term project that can bring back the middle class, not only the middle class, back into achieving consensus and supporting reforms which are badly needed to ♪

francine: bloomberg "surveillance" live from day to of davos. all of the discussion on digital is being taken over by populism

and we do not have populism. what this think about means for the men defined as free trade and globalization. let said it to erik schatzker it was joined by the blackstone group chairman, stephen schwarzman. erik: this gorgeous day in davos , we get to do it again. tell me about the discussions you have had so far with president-elect donald trump. stephen: you know i cannot do things like that, these are confidential discussions. erik: you have had some time with the president-elect, what have you come away with? stephen: the fact that they are putting up a government, a really busy time, he wants to do at the end of the day the right thing for america. he wants to improve the economy. he is pretty flexible person.

when he is presented with thermation, he will go to right place. sometimes it is colorful getting there but he is an interesting, quick study. erik: some of the things he has said has concerned people, the things he said about trade for example, have you been reassured in your conversations with him privately that may be some of the things he has said are -- either he is more flexible on that people may think but he has a different point of view than what he articulated publicly? stephen: some of it is a different style of communicating. his basic themes are really quite set. whether it is not bottlenecking the economy and minimizing regulations, whether tax reform, whether it is bringing dollars

back to the united states to be productively used from abroad, there are a variety of basic themes. there are other things that are sort of descriptions of things you may do to accomplish that objective which gained a lot of attention but may not be where things ultimately settle out. erik: beyond accelerating growth which is good for everybody, what could he do, what good his administration do to help your businesses at blackstone? on a tax policy for example, financial regulation? erik: i do not worry about what --stephen: i do not worry about what is good for blackstone, i worry about what is good for the country because when the country does well, magic that if we could take growth -- imagine

that we could if we could take growth, run 1.8% over the last eight years, and move it up into to greatlyt leads companies,alues for it leads us to hire more people, it leaves our companies to get better, a real estate to be worth more. erik: growth is good for everybody. stephen: our linkage is what is good for the country. erik: your shareholders work -- worry about blackstone. stephen: they are not supposed to worry, they are supposed to be happy and our job is to make them happy. we are pretty buttoned up. erik: are there things he has talked about doing that will be good for business, your business? stephen: there is a very complex tax proposal which everyone is still trying to figure out as to whether it is good for your

overall company or for our case, in some of our business is or the real estate we have. it is early days because the program has not come out yet. aik: the subtext in davos is world turning inwards and away from globalization, can you feel the anxiety? stephen: i can feel the general anxiety because there is change in the air, whenever you get a new administration in the united states, people realized that policy ultimately has major consequences. and we have a new administration. erik: it is fair to say that no one in corporate america has made a big commitment personal and professional as you have to china, blackstone invests in china, invest for china and you have created a personally endow the most ambitious scholarship program since the roads in schwarzman scholars.

many people have told me they are very concerned about what donald trump may be do regarding china, what do you make of the saber rattling? stephen: part of it is that the u.s. generally has a pretty unbalanced relationship with many countries in terms of taxes that get paid to enter another country and we let people come into the united states for free basically. aspect -- not particularly regarding china, is being looked at by the new government. erik: he has singled out china. that if he were to pursue an aggressive policy on that with the chinese american companies would lose some of what they had in china, the market access for examples that companies like yours have had? i was at aphen: lunch yesterday and talked to the president of china which was

a good conversation. erik: what did he say? stephen: he was very positive on the long-term relationship between the countries. erik: president xi told you this? stephen: that is what i just said. erik: just making sure everybody understands. stephen: everybody understands. he was ready to engage when the time was right in the u.s. had figured out what it's positions were. that they have gone through many u.s. administrations with many chinese administrations. he was anticipating being able to work things out. as our the u.s., despite the language that from time to time is employed. it is early days, so multiplying things that get said to create enormous anxiety is a little

overdone. erik: a little patience and a little optimism, thank you, great to see you at the world economic forum. you know who he is, chairman and ceo of the blackstone group. francine: we do and that is a great interview. we enjoyed it, going through a number of topics. rector wasaging speaking earlier on our panel, prices of the middle class. >> the middle class is growing and shrinking. the middle class is growing on a global races, if you look at numbers, the middle class over the last 40 years has gone up to 13% todayy 7% on the global basis, the middle class is defined as an income between $10 and $20 per day. the middle class is shrieking if you look at the u.s. numbers. the middle class in the united

states has shrunk from the 60% -- 60-ish to the 50-ish as a result of more will at the top and more people moving below as the result the middle class has been treating. -- has been shrinking. in this panel we are focusing on the advanced economy where the middle class has shrunk and a lack of trust and a lack of hope, and disenchantment with many of the principles. -- christinearde topic, wes a side will get to that later on bloomberg "surveillance." robert smith is the founder and chief executive officer at vista equity partners which barely describes his contribution to american finance. , built of a cornell

practice in technology at goldman sachs and set up his own shop but his heritage is so important to america and we will get to that year in a bit. marc video -- benioff, not many technologists here? >> i get to meet with those who are here, i had a panel on and theal intelligence, good news is we are talking about the solutions that technology brings society, the big challenge you keep hearing ,bout as a disenfranchised technology can help that and that is what we are trying to solve, real problems. tom: we will talk about the creative destruction and disruption in technology, what is the disruption of the cloud right now, can it be profitable and a sustainable business for the players? >> the short answer is yes and

it will continue to proliferate, it enables a computing platform, multiple computing platforms, ai is what we will spend time on, and what that does is bring what i call the best of our thinking and the best solutions that you can solve problems you otherwise could not processing massive amounts of data. one of the problems we are focused on -- how do we take that and reinvent our education system to greet more on ramps to move and reach rain and three skill -- the summary we came up , skills will be the challenge of this next generation of what we have to do is leverage technology to enhance the skills of our working-class so they can purchase something in this fourth industrial revolution. francine: the problem is that skill and education takes years. if you think about what the u.s. is going through, creating jobs now, i do not call -- know if you call it anti-globalization

or protectionism, innovation will to get back step because you are trying to create jobs through the old way, infrastructure. >> that is not the right way. francine: is it the path the u.s. is trying to take? >> i do not know, what we are saying is that their organizations that say come in nine months, two years, you can gain a new set of skills and participate in this for the industrial revolution and those are the things we need to bring our power and best aching to is creating those opportunities. there will be infrastructure jobs by the new infrastructure is an infrastructure of the cloud and it and technology. francine: can you square the new fourth and after revolution with the anti-globalization movement? globalization has happened for 1500 years and will continue to happen and has improved of -- the lives of so many people on this planet and while you may have blitz sometimes, we have to strive for the greater good for all of humanity. francine: you are one of -- tom:

you are one of the most important voices in america right now, you were less than one-year-old in 1963, you were at the martin luther king's reach. -- speech. please comment on this uproar between the president-elect and congressman from georgia, mr. lewis, you are interpretation of how this interpretation moves on from what we observed last week? >> we as an american people are the best of us is the collection of all of us. while there may be some risk, i think it is -- riffs, i get is wrong to insult john lewis about what he is done for african-americans, the civil rights movement was not just for a african americans, it was about the right thing to do being a just and human society that can be the beacon of the rest of the world, we have to get back to be the moral beacon for the rest of the world, that is what we need to do as a

society and as americans and that should be our charge. tom: thank you very much. we will continue, very different , not the big speeches of yesterday but the conversation of esteemed economist, dennis rogoff would join us of harvard university and nouriel roubini of new york university's stern school of business. that is on the new davos and the new populism. stay with us. this is bloomberg at the beatings of the world economic forum. ♪

>> we are expanding and the , irastructure and the credit think we have to take more risk in order to maintain relevance.

francine: that was the kuwaiti investment authority managing director talking about his investment landscape, saying, as returns are getting more difficult to have, he needs to go to risky assets and giving us a breakdown of how much risk appetite he has, saying, away from public companies they went to invest in private companies that does that mean they take on a management role? tom: good to see that video, a backstory that is unspoken, this valley is still getting used to oil moving from 100 to $29 and maybe stabilizing at the $50 level. francine: an interesting interview, the problem with the range at the moment is that he believes shale producers in the u.s. will come back in force and it is more in the second half. if you are what the saudi's said , they will probably stop

cutting production in six months , where does that leave us by the end of the year, we are not saying it, they are saying and they are in charge. tom: if the league with a hydrocarbon of economics, -- she is warmer than we are, the first word news, here is taylor riggs. : taylor special prosecutors in he is being invested for bribery, embezzlement, and perjury, part of the skin will delve led to the impeachment of the south korean president. hong kong's chief executive hit out at independent advocates in his final policy address. -- is ahong kong is an part of china and no room for independence or any form of separation, he surprised hong kong last month by deciding not to run for a second term. a republican senator is making an offer to democrats to vote says ifl not refuse, he

they like the affordable care act, he can keep it, will introduce legislation that will allow states to keep obamacare, congress a transition, is preparing to repeal obama care but has not announced a replacement. a new congress bull says dollar trump is the least popular president in a generation. audio percent of americans see him an unfavorable light at 38% -- 48% of americans see him in an unfavorable light with 38% with a favorable one. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. we were talking about oil and i was telling you about my interview, many economies depending on the price of oil rebounding after last year's landmark opec deal, the possibility of a lump opec members cheating but earlier on

i spoke to the executive director and here is what he had to say about the impact of shale producers. the u.s. oil production, shale oil production will react strongly and we see oil is the first indication, the number of rig activity is increasing. int year we saw a decline the shale oil production in the united states and i believe this will be reversing this trend and an increase in u.s. shale oil putting oil into the markets. it is veryhis is -- clear when you look at growth, especially in europe, you did not see more consumption coming from lower oil prices. if oil prices go too high, that has a huge impact on inflation. tom: bring up the view right now of this davos valley, i want to

frame this debate with the beauty, in my 13 years, one of the most spectacular mornings in davos. this is an extraordinary and beautiful valley this morning. within that is the prosperity of davos, the prosperity of the people. francine: we are trying to get a ,uest on set and there you go we are going back to the landscape because we just saw them. ceo sending -- vcv ceo sitting down. ,om: an economist from russia usurped the russian diplomatic corps in australia one million years ago. how far does help our global audience, is the pressure up-to-date any semblance of the pressure when you -- of the day any somewhat of the russia when you served? >> certain features of the

people and the country but russia changed probably a lot and very much a different , thaty, a market economy is part of international community i think. francine: thank you for your time. we speak to you in the year as well but we love hearing from you what you see as growth potential for russia. what does a donald trump administration me for the relationship between the u.s. and russia that mean for the relationship between the u.s. and russia? >> hope and opportunity. russia was not -- the russian people not sure about who should be an american president but definitely in my opinion, for example if ms.

clinton becomes president, let's less hope fore -- change but mr. trump is opportunity. up until now, what we have heard from him, he is ready for constructive dialogue with the russians and that is encouraging. francine: do you believe this dialogue goes as far as saying he will roll back on sanctions and will be e.u. follow suit if he does that? >> i think sanctions should be an agenda if we would like to return to a good level of relationship, they should be eased. maybe not all of them, they be not on crimea but on other issues and issues relating to financial institutions. francine: if there is in distress -- tom: if there is a distressed in the west for mr. pruden -- distrust in the west for mr. puting, what would you

like to see him -- from him? need to do?. putin >> the mistrust was created from the western side. vladimir putin delivered a famous speech, he was very sincere, he is like mr. turmp -- ,rump and speaks what he means the person who defends the russian policy, russian rights for investment interest in this world come he will defend this but mr. trump promised to recognize the interest of russia. tom: i understand the finance and your work in economics, that is fine, in this chair yesterday, the president of ukraine was a respectfully different view on this dialogue

of russia and the west. donald trump suggests nato is an artifact of history, an ancient part of history. >> that is impossible view because nato and the warsaw pact were created from adverse organizations. the warsaw pact disappeared. we believe that the increase of our arms in europe is a dangerous thing, we do not see the reason. thatwhat is the calculus divides the financial desires of your nation and vladimir putin with the political realities of russia right now? where can the sick -- where can we be six months or six years from now? >> we can build up the relationship with the west and resolve the ukraine if we have a positive approach from both sides. we do not see any reason why we financialwe want good -- relationship and finance,

syria, iraq, many other issues. what has happened over the last few years was very negative development. we reached the level of near cold war and we should return to normal negotiations, the relationships between russia and america, will be much easier to resolve, the ukrainian issue as well. francine: what is your biggest concern about the russian economy, inflation? growth, 1.3omic 1.5% growth, something in line with western europe but too low for russia. there is much more we should do inside. help butvement will the main problem is ourselves. many things come everybody

talking about structural changes around the world, russia is among those who really needs it. tom: too short a conversation, thank you so much, the chief executive at vtb. --er today, the president there are many here, president obama is set to deliver his final press conference, look for that, the 44th president of the united states looks towards a friday inauguration. from the meetings of the world economic forum, this is bloomberg. ♪

>> i think irrespective of

a decision thes british people made, london will return -- london will remain a global financial center and i believe the revenue impact of brexit on financial services will be made good in two or three years. before -- i do not see the foreign -- the equity market moving, the high yield bond market -- moving, specifically what will happen is those activities covered by european legislation will need to move. that is about 20% of revenue. ♪ francine: that was the hsbc ceo stuart gulliver speaking exclusively with us on the talking about the impact on brexit. he said that a lot of the banks are still way too complex. welcome to the world economic forum, day two in davos with tom keene. thank you for joining us.

we talk about consolidation among forces, financial services, anti-globalization, what has been the most surprising conversation you have had in davos so far? >> i think we are in a situation where it becomes evident that the future is not only unknown but unknowable. as is demonstrated by be completely misplaced confidence projections last year and this year we have another couple of elections, german elections and french elections and there is this unknown factor. tom: we could talk to you for an hour, let's continue on this theme right now. you have a real derivatives history with your work for goldman sachs, you are at middlesex in england and the idea of uncertainty, my phrases all agility -- volatility,

uncertainty of the uncertainty, i never said that before, that is where i am going as you beautifully mentioned, on a derivatives basis, i have never seen this uncertainty on the uncertainty, it is for markable. -- it is remarkable. carsten: it is an for institutions in this situation, you need to have sensible humility when you express yourself and when you move forward in terms of your decisions. tom: quickly -- how do you hedge donald trump? yetten: we do not know just how the president-elect will move forward. there has been cultivating market reaction at the very inception -- conflicting market now it has tailed off though they were

-- the way to behave as an institution is to behave with a robust flexibility. that means you have to be flexible in your plans and recognize they might be changing. but robustness in terms of corporate. francine: i will focus on your bread and butter, regulation, and article 50, what does it mean for clearinghouses when article 50 it triggered -- get triggered? carsten: what manifestation of brexit will take, we do not know, there has been rhetoric over the past 24 hours, i believe that capital markets by definition, global in nature in terms of the need for them to of liquidityflow and capital across the weld with some speed and accuracy. changing, otherwise

you would have to enforce capital controls and i do not think that is something -- if anyone envisages anywhere, we are talking about changing regulations in a legal framework. and this is something to be waited for to pan out, clearinghouses are basically providing a very important system stability service to the world. this is done differently and all parts of the world to this day. play itsurope will role in terms of moving forward. by having more clearinghouses that understand their role better. thecine: you met with german regulator if i am not mistaken, either this week or of days, whate was discussed, was it on brexit? carsten: we are engaged in a transaction -- francine: which we talk about every day. carsten: discussions are agreed

to be confidential at all times because we are in the middle of this deal. however, we of course touch upon the topics of how the political system is changing. this merger, you are committed to operations in london and frankfurt? anything that will make that change? carsten: it is very plain to see for everyone that the political changes that you are referring to make the case and the necessity for building bridges by virtue of institutional design all the more important for everyone. tom: thank you. please join us again. coming up, we look at the international economics of the world economic forum, a lawyer from yale university, robert shiller on donald trump and the

good society, later this morning. from davos, stay with us, this is bloomberg. ♪

tom: good morning everyone, from davos, switzerland. a surplus of beautytude. many people, particularly in the united states -- francine lacqua and tom keene. joining us is one of the most interesting and twisted economist in america with this time of the congressional budget office and now holding court at the harvard kennedy school, what is the number one school you learn as dean of the kennedy school? hard thinkingpact and evidence can have on public policy around the world. tom: the evidence we saw a few days ago with your congressional budget office, bipartisan, remove, weighing in on the affordable care act, can doldrums dream of all bending

obamacare -- abandoning obamacare happen and what is the price to the nation? >> no way to maintain the currently high level of insurance without using federal subsidies about the same size as those under the affordable care act and the changes in the federal rules that i cared under the -- that occurred under the affordable care act, we can either stop spending the money or go back to old rules but insurance will fall by 30 million people. tom: everybody in the united states needs to look at that important memo, whatever your politics is. what will you look for in the next six weeks to six months about how congress will adapt and adjust to donald trump's certitude on obamacare? havepublicans in congress had seven years to put forth an alternative which they have not done. it is hard to square the circle, you cannot maintain

therance company without federal subsidies and you do not have money for the subsidies without tax increases that were part of the affordable care act. i do not think they will find any way out of that box now. francine: what our policies that donald trump and his administration will put in place to help the middle class? a i do not think there are lot of things high on the agenda of the donald trump administration or the congressional leadership that will do a lot for the middle class. taking away health subsidies and other benefits will hurt working class americans. and the tax cuts they are talking about will mostly benefit higher income americans. francine: the working class america put him in charge because they were unhappy and felt left out, how does he unified the nation and square the two? >> i do not know, there was a survey of economists about a month ago, from across the country, how they thought the trunk platform -- donald trump platform would help most

american and the answer was almost unanimously no. tom: from the work of you and your good faculty about how the democrats regroup in the coming years, there is always a death of a party and the world is coming to an end, you and i know, they do not labor in the united kingdom but everybody else regroups, how will the democrats regroup in the coming months? >> they need to focus on jobs. good jobs at good wages as the saying went. is so important to so many americans who are struggling in their work and struggling to find jobs that use the skills they have been struggling to get paid enough to maintain the lifestyle they want. wants good economist dynamic scoring, you are the expert on this, can dynamic scoring work with budget, the idea of expecting out into the future and pulling it back to a present value? >> i support dynamic scoring for

important pieces of legislation that can move the economy enough that it is worth taking the time and energy to do the estimates of those economic facts. when i was director of cbl we built up the tools for doing that analysis and present it and included that, immigration macroeconomic effects should be included in estimates of tax reform or health care reform. one should not overstate how much they will matter, macroeconomic effects are worth keeping track of but do not fundamentally change. tom: thank you so much, of the harvard kennedy school. joseph of columbia university, this is bloomberg. ♪

tom: this morning, after a

landmark speech by prime minister may, britain considers a hard brexit. britain listens for any you response -- britain listens for an e.u. response. at the meetings of the world economic forum, there is uncertainty within the many uncertainties. all eyes turned to washington friday. trump world. good morning, everyone. this is "bloomberg surveillance ," live from davos. with me, francine lacqua. just an extraordinary davos. it takes me back to the lehman davos of january, 2009. francine: when we look at the sentiment, let's not forget what is sweeping our developed world. we could look at the financial

crisis and say that we have not fixed this. after a day of big speeches yesterday, people now -- tom: it has been a more normal davos. thecine: it is always in details that gives us better foreign policy and economics. tom: right now to new york city and "first word news" with taylor riggs. taylor: as you are mentioning in your open, british prime minister theresa may has been selling a brexit plan to key european leaders. she called counterparts in germany and france after her pledge that the u.k. would leave the e.u. single market. told they would negotiate in the spirit of goodwill. a court in south korea will decide whether the samsung group 's era parent be arrested in and influence peddling scandal. ay y. lee was part of a

scandal that led to the impeachment of the south korean president. and george w -- george h w bush has been hospitalized. no word on what mr. bush is suffering from, although his office expects him to go home in a couple of days. the former is 92. is 92.former president global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i'm taylor riggs. this is bloomberg. francine? tom? tom: francine, thank you so much. equities, bonds, currencies, commodities. i look at curves steepening. maybe a little bit of evidence flow for two days -- maybe a little bit of ebb and flow. francine: today a little bit of a pullback from safe havens. watch gold and watch again. -- watch cold -- watch gold and watch the yen.

tom: bloomberg on the economy, including the work we have done at bloomberg news over the year. these two have battled with many battles over the years, and today they look collegiately -- collegiately forward. joseph stiglitz, it is a changed world from when you went at it decades ago. limit go to you, professor rogoff. fromdo you mean to observe the trunk cabinet and those within this new administration to soften the rhetoric of our new president? ken: we want to see that he listens to them. he has appointed some adults in the cabinet -- the secretary of state, the secretary of defense. but is he someone who will listen to them? is his behavior going to be erratic? i am not so much looking at the policies as the whole temperament. do they look like they are going

to be a rational administration? tom: you have been a harsh critic of conservative economics and the politics and rhetoric of the president elect. how should democrats, progressives, in a liberal world, respond to the trump presidency? oe: i think we have to stand together and say this is not normal in the united states where we have been combating racism, bigotry, misogyny for decades. to have a president who so openly expresses those kinds of , and in many ways that is the number one issue. it is also a very big issue, to me, because of the rule of law, including the international rule of law. if you want, more companies to

invest in the united states, you change the tax law, you change the regulatory system. i might disagree about how you do that. but you do not go after individual companies. that smashes of authoritarianism, fascism. stiglitz,professor this is not normal, but he was elected on a democratic platform. joe: he does not have the legitimacy of -- and there was interference from russia. francine: what will the look -- what will the world look like in four years? joe: let's be clear -- we do not know, because there is a very big -- we know what he said. i think we have to take seriously what he said, and if anything like what he has said and anything like some

of his economic advisers, who are very strong protectionists, we will see a very different world. tom: i know what you are going to say, and you see the dreaded f word, "fascism." , are there tools toward that? is there a zero-sum attitude here whether has to be a global response to trump economics? ken: we need to give him a chance. the whole world wants him to do well. i do not think we want to have a reaction before he has had a policy. but if we talk about the threats to institutions, i would start with the fed. there are a couple of vacancies, probably a couple of other governors who might step down, and certainly fisher and yellen are likely to leave.

more importantly, will he respect their independence? there are lots of ways congress lots ofg -- there are ways congress can bring pressure to bear. look at what nixon did with arthur burns in the 70's. inertia, partial deregulation, partial stimulus, but after that there could be high inflation. francine: does donald trump really want higher rates? which is what he has been asking for in tweets this year. how canre in charge, you -- ken: there is no way. he is in the construction industry. joe: this is a good example of the mystery of trump there it said something during the election that is totally the opposite of what anybody in the construction industry normally believes. economy,a boost to the and high interest rates will be even worse for the dollar in terms of a high exchange rate

that he is worried about. time we have left with you, in this historic moment with the two of you together. professor stiglitz, we need an international advocacy now. can the imf be that institution? with madame lagarde, after madame lagarde -- who knows? what would you like to see out of our international institutions? hope and i assume they will be a strong advocate of the international rule of law. there are certain rules that we have agreed upon the way the international system works. the wto is important because the area where he has been most explicit in threatening the international rule of law is a unilateral kind of protectionism , and so we need a voice to say this is not the direction to go, and there will be cases brought

if he goes and does those things. to be support for what they adjudicate. francine: the problem is, a lot of these organizations, professor rogoff, are considered elitist. they are considered to have enjoyed all the benefits of globalization. is it not the markets that will really be the president's checks and balance? but speaking to the imf, i think christine lagarde has been very sensitive to any quality and these issues that are not so obviously within the imf's remit. tom: professor rogoff, your great phrase "flying on one engine," we are now without question flying on one engine, at least with political economics. how do these international organizations assist a new world

order given the turmoil in america? ken: they could be challenged very quickly with problems in emerging markets. if u.s. interest rates rise, we live in a world where the dollar is more influential than ever. we could see problems even in u.s.ontext of a growing and europe. francine: a lot of people on the panel were saying that this is , as it issm inequality, people feeling left out and that they are not being taken care of. --s leads to people being this leads to people taking control back. 90% has hadtom stagnant incomes for a quarter century. incomes were a growing thing , their attitudes towards these

changes would be totally different. yes, things were out of their control, it not only are they out of their control, they have been going in the wrong direction. i would respectfully suggest the big difference between your economics is that, joe, you are taking a broader view. have more of a rigor to your analysis. coalesce those two. what flavor of advice does it need to be? are let me just say, we both so much closer to reality that it would not matter. would you accept the job as governor of the fed, professor stiglitz? joe: i think the answer is yes. it is very important for anybody who is willing to say i am not going to -- the debt has a kind of independence. if i got appointed, i would exercise that.

if he tries to fire me, that is what i -- redefine how would you globalization to include -- professor stiglitz? joe: what we have to understand is that globalization has represented a fundamental change of bending the rules of the game in ways that have disadvantaged large groups of our population. thing about it that way. we have to rewrite those rules undo some of that. for instance, one example is, workers in the united states are threatened by -- their bargaining power is weaker. ist we can do simultaneously weaken unions and weakened bargaining power in the workplace. instead of weakening it further, if we said let's try to

unionize, it will not fully undo the force of globalization, but at least it gives them a little bit more of a sense of control. ken: let me point to the work of another nobel prize winner other you stiglitz, who is here, have to be careful when you are talking about inequality. when you think of the whole world, this has arguably been the best 30 years in history. this is a question of how do you treat people within borders versus across borders. the tax cut is hard for me to understand if we are trying to attract inequality. tom: great great moment as well. look for this on the itunes podcast. coming up, nor roubini -- nor roubini -- from davos, this time is different. it is a globalization of discontent.

this is bloomberg. ♪

>> the president-elect has made four or five phone calls to four or five companies, largely suspending the rule of law and extorting them into relocating dozens, or perhaps even a few , into plants in the united states. at the same time, the consequence of his rhetoric and announced policies has been a

15% decline in the value of the mexican peso relative to the dollar. francine: former u.s. treasury myretary larry summers, on panel earlier on, speaking on the crisis of the middle class. he had a moment with another panelist pushing back against that. saying it is not that simplistic. he could reflate the animal spirits. larry summers sticking to his guns. tom: it was like the moments we had with professors rogoff and stiglitz. they have a real bite to them this year. francine: people disagree because we are still trying to figure out what the next administration will bring, the executive policies they will pursue. let's bring in our next guest. tom: nouriel roubini is with us from new york university. conversation in 2005,

2006 where we laid out the financial crisis for the next 36 months. it was not that easy back then. but what we got wrong and what you have mentioned in your book throughout this crisis, we get the amplitude wrong. we get the scope, the size of these moves wrong, all of us. what are we getting wrong about the amplitude we will see under president trump? nouriel: when the markets are happy since the election, capital gains, income taxes, corporate taxes, also some regulation. alreadyal stimulus has led the signal of surviving long of theand the hard price u.s. dollar. donald trump says he has saved 1000 jobs in indiana, carrier, but based on the fed model,

there will be 400,000 jobs lost in manufacturing. forcing the fed to tighten faster and sooner, stronger dollar. it is going to damage economic growth. paradoxically, supply-side will go down instead of helping the working class. even more so against trade globalization and migration. this is basically a working assumption of what we have seen in policy. how did we miss this? and i been here 72 hours, keep thinking, are we missing something? 12 months ago, we completely missed brexit and we completely missed donald trump. are we looking at things wrong? nouriel: the conventional wisdom in davos is an indicator.

-- lastere thinking year there was a panic about china, january and february. we said it would be a temporary phenomenon, not back to 2007, 2008. massive backlash, populist against globalization because we have the top 1% elites that are not in touch with what is going on in the rest of the world. francine: how big d you think the wave of populism will be? will it reach francine lacqua? will it possibly touch germany? nouriel: i think it will increase throughout the world. in europe, there is a meaningful chance -- i think the polls are wrong. marine le pen in france, there -- there'sance that , forgma voting for trump

brexit, i think the polls are wrong. is appealinge pen to the left, to socialists and communists. in the second round, many on the left may vote for the 10. -- four marine le pen. in italy, she was still committed to coming to power. they are important risks. tom: you mentioned neofascism with ms. le pen. mr. trump have neofascism elements to his discourse? nouriel: a professor of economics at columbia, nobel winner, free markets, says he is bashing businesses. he is telling businesses where they should be producing. it reminds him of the situation nazit to germany and -- in

germany and fascist italy. theident xi jinping is leader of the communist country. the biggest commonest country in the world. donald trump is saying things against capitalism. that is a paradox. tom: each front rate economist has a different style and you have been one of the greats at analysis with new world america. ,n the last 12 months after what you have seen, is america becoming part of an old world mentality? nouriel: we have forgotten that blue buts are many, also increasingly white-collar workers. the policies of the last 10, 20 has come to rally

for these people. even with economic policies, frankly on taxation, regulation, and on labor. the white working class has voted for him. therefore, there is some red meat. bashing migration, building a wall, and becoming very protectionist. but that is not going to help the working class. francine: on the paradox -- bashing and building walls and the u.s. becoming more inward looking, while china is trying to save globalization. leadautomatically paradox to conflicts between the two nations? tom: it certainly can -- nouriel: it certainly can lead to trade sanctions. tensions or wars? nouriel: tensions can lead to wars eventually. then there is the political dimension.

trump speaks of the surrogates about taiwan, about the south china sea. mainly that is a buildup of military tensions as well. trump's lead advisor on this, peter navarro, has a tone about china that it is about them. what tone would you advise for the trump administration, given trump's domestic politics? and yet they have to project to china. how should they project? nouriel: whenever there is an outsider running for the presidency, before the election they bash china on human rights , currencyrade manipulation. once they come to china, they realize that china -- once they come to power, they realize that china is the second largest economy in the world. they are going to bully china? i do not think it is consistent. either they understand that and

they become constructive with china. you cane many things sell about china. or you are going to challenge china on economics or trading? then there will be conflict. francine: we have spent 10 minutes talking about risks and possible conflicts. why are the markets up? nouriel: the markets went up after the election because the fiscal stimulus will boost growth in the short run. taxes,te taxes, state and then there will be slashing regulations on regulation -- slashing regulations, and then the market will go up. i think the market is underpricing. they will lead to trade wars and professional damage growth and the economy. francine: so a huge correction, you are expecting.

timeel: i expect over there will be a huge correction, yes. roubini, aouriel particular forum. will focus a lot on globalization and protectionism. that special coverage of the inauguration tonight starts at 9:00 p.m. in new york. bring you we will special coverage of the inauguration of the 45th president of the united states. watch out for that on bloomberg. this is bloomberg, live from davos, from the world economic forum. ♪ with the xfinity tv app,

anything with a screen is a tv. stream 130 live channels, plus 40,000 on demand tv shows and movies, all on the go. you can even download from your x1 dvr and watch it offline.

only xfinity gives you more to stream to any screen. download the xfinity tv app today. >> we see growth. on a combined basis, we expect billion, innd 50

line with what we did last few years. ermotti: sergio speaking there earlier about his plans for the ubs bank. ultrahighfocus on the net worth individual in asia. we are here in davos. panel to panel, people are saying we have to get simpler. everywhere. francine: we have to get simpler. when we look at the troubles of the world facing this globalization, the answers are not that simple. there are big thinkers here, and they cannot seem to agree. tom: the other idea on this wednesday, the inauguration is here. two days away. francine: let's get straight to "bloomberg first word news." taylor: in south korea, a

special prosecutor argued why the samsung group's era parent should be arrested. lee is being investigated for bribery, embezzlement, and perjury, from the scandal that led to the impeachment of south korea past president. hong kong's chief executive give his final policy address. he said that hong kong is an inalienable part of china, and there is no room for any part of separation. he surprised hong kong last month by deciding not to run for a second term. a republican is making an offer to democrats he hopes they will not refuse. bill cassidy says the state likes the affordable care act, and they can keep it. states that like the affordable care act can keep it. congress is prepared to repeal obama care but has not agreed on a replacement. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries,

riggs. this is bloomberg. tom? francine? tomfrancine: thank you so much. let's speak with russia's richest man. i thought the owner of the washington capitals was russia's richest man. to gete: we get to speak his worldview and the biggest risks. what does the inauguration of donald trump mean for u.s. sanctions on russia? what does that mean for the mining industry? >> we do not know, but i hope it means a chance to come back to fundamentals because we believe the fundamentals of russia and the u.s. have much more in common than contradiction. i hope it gives us a chance to come back to fundamentals and

stop the cutting rates. francine: as soon as sanctions get unwound, and i know you are a careful man. but how much impact does that it immediately have on some of the industries? alexey: it is difficult to estimate the straightforward impact on the overall economy of russia. immediately be helpful for the banking sector, and increase competition. but i do not think the immediate consequence will be very big. but strategically it will be very important because it would bring more confidence and certainty to the economic players in russia and the united states -- probably more in russia. and it was fuel economic growth. time, youis polarized

have lived investment in america. when was the first time you walked into the dearborn factories? was a 12 years ago? was it like -- what was it like walking into that acclaimed steel factory in dearborn, michigan? alexey: seeing the company after it went bankrupt -- bailing out ford but providing for the rejuvenation of the steel factory -- how do we get back to that? with the polarization of trump n frederickd puti -- how do we get back to that? rhetoric, how do we get back to that? we sought opportunities

to does best -- to divest. the political turmoil. francine: let's talk about the economics of steelmaking. do you believe that the world needs much more steel in 2017? are we on a steady growth path? alexey: you would be right, but, extent growth -- it will be a couple of percentage points. course, we need more and more -- l, francine: if there is a trade war between the u.s. and china and the u.s. and other countries, will that dent growth to hurt demand for steel

products? alexey: it is very difficult to estimate specifically, especially if you are asking me to quantify it. but in general, in the free economic trade and free economic playoff givingll growth strategically. generally, of course we need more free trade and less interference. tom: within domestic russia politics and economics, are we going to see trickle-down capitalism? will the middle class of russia be changed in 10 years, in 20 years? alexey: 100%. it has been tipping for many years. look at the statistics of what has happened in the last 20 years, we see a growing number -- we need more.

the initial striking point, we need more growth. tom: the interview that we have ," "bloomberg surveillance there is a question about what is the right ruble for you, the right ruble for mr. putin, and for the russian people. do you need a cheaper ruble, a signal of the ruble strength being a signal of a better russia? believe thaterally same, sameis the rate for the ruble. we are all part of the same nation. there will literally be one exchange rate, not three. very difficult to say. it should be balanced enough to enable russian producers to be

competitive. but on the other hand, it should facilitate growth of consumption in the country. we are accustomed to what now we hopefully -- another one important point in the paradigm -- not only balanced, but also stable exchange rates. francine: we want to ask about m&a in the mining industry in a second. on a specific investment point, you increase your stake in -- will you do it further? alexey: it depends upon many circumstances -- my financial strategy and capabilities. we probably will like to increase slightly. we will see. francine: in the next couple of weeks or months -- why do you believe in the country so much? alexey: i believe in the sector so much.

two reasons -- it has a huge growth potential. the growth in technology is not evident in travel. international terrorism is focused on content. intermediate and not about -- francine: does it mean the industry is ripe for more m&a? alexey: definitely we will be active and we will look at opportunities. we nonetheless -- on am a we do not like to repeat any --

much.hank you so this has been wonderful. look forward to seeing you again. maybe in london. mordashov joining us. coming up, we will speak with robert shiller of yale university, the laureate for mail. i am going to try to talk him into a new edition, trump and a good society. from the meetings of the world economic forum, this is bloomberg. ♪

>> there are 3.6 billion people around the world aspiring to better income, food on the table twice a day, and sometimes once a day. to turn to globalization, to turn -- to turn our backs to globalization, to turn our backs to helping development is the wrong approach. francine: it was very enjoyable, a spirited conversation, a session with christine lagarde. , andso had larry summers the italian finance minister. we talk in theory about populism and what it could mean, but we have three crucial elections coming in europe. tom: one of the themes here is that populism continues and will not go away at any time right now. it is always a good moment at ofos with robert shiller yale university. in well over 10 years that we have worked with robert shiller,

it cannot be a better time than now. trump talk about exuberance or rational or irrational exuberance. we have a new president. robert shiller of course is the author of "finance and the good society." what would be the opening thought for trump and the good society right now? robert: i do not have his ear yet. here is the good thing about trump -- his business orientation and getting things done. management,r risk better private risk management, which is a tool against hedgingty. insurance prevents inequality. they do not disrupt incentives. tom: it is a good way to start. our single best chart, the second day of the doubles meetings of the world economic

forum -- it was my chart of the year a few years ago. it is simply how is america doing? the median household income adjusted for inflation, with a little bit of a list up in the ast few years, but still horrific -- in the middle of that chart is 1989, and that is where we are right now. thatis the day-one thing mr. trump needs to do to jumpstart that horrific chart? robert: you are talking about the leveling off of middle-class incomes. that is his theme, the top rising 1%. i think it is actually a difficult problem. it is could completely -- an economic force underneath us. the first thing i would do is to set in motion a plan -- he will not do this -- but a tax system that responds to rising inequality.

we are not trying to stop inequality, we are trying to make sure it does not get worse. taylor: francine:\ -- francine: does that hurt animal spirits? robert: i do not think animal spirits will be harmed by what i am proposing. he is an inspiration to entrepreneurs. the idea is that entrepreneurs can still get rich. we just have to put some balance to this. do see -- do you see any policy that this is the president -- this is the way the president wants to go, or a at least robert: is thinking about it? he understands -- robert: he understands risk management. he has succeeded. a lot of people do not understand that, that you do take risk. that is part of diversification. most people are not very good at it. tom: we interpret the exuberance

out there right now. we have this idea of a great distortion. we have a financial crisis, things are better at we are not best yet. how vulnerable are we to exuberance within the stock market? robert: it is very difficult to project the stock market. you know that, right? tom: people predict that bob shiller is right. there is a bubble out there. is there? states,in the united yes. i would call it that. although, it is not as dramatic as it was in 2000. we are not of there yet. in europe, less so of a bubble. my price-to-earnings ratio is not particularly high in europe. francine: what are the fundamentals? let's just look at hope. the real fundamental reasons why valuation and stock prices should go up. it should not be based on cost

cutting. earnings have gone up since 2009 dramatically, but it is a reaction. it is an aftermath of a crisis. it encourages certain narratives. i have been in -- i want to know what people are talking about. the voters who voted for him find trump very refreshing. it is very striking. i have not heard much mention of the financial crisis of 2009. we have pushed it all aside, and now it is something uncertain but exciting. tom: let's come back and talk about that. my theme of davos is uncertainty amid the uncertainty. churnof mathematics, a day within the world of economics. atet yellen will speak today the commonwealth club of

california. that is an historic club. fdr spoke there in san francisco. look for that on bloomberg life. this is bloomberg. ♪

, theen you say inequality first thing you think about -- and it is a very important issue -- is the poor and what to do to support the poor. and a lot of people voted against brexit and four donald trump, and they think too much is being done to help the poor, not too little. francine: harvard university president emeritus larry summers. that does not begin to describe what he has done in his past lives. he was speaking on my panel earlier on about the crisis with the middle class. there was no real consensus about why brexit happened, and therefore it is very difficult if you do not understand the

underlying factors of how to readdress the imbalances. to help us readdress the balances, robert shiller is still with us. what sewed thet fears that led to donald trump and brexit, what would be your three-point plan to make things better? i have to have a three point? what about one point? francine: away from income redistribution. robert: i would like to see livelihood insurance, what i call livelihood insurance, which is an extension of disability insurance. to cover economic disabilities. suddenly the market changes for and it cane good at, be contingent on an occupation. so you can ensure that you can ensure the risk --'

can be as legitimate plan, but within the reality we face in 2017, the keyword of this davos is "uncertainty." yet you know we cannot really measure uncertainty. we can do it with risk, but uncertainty is out there at a distance. how do we see the whole of it? what do you want to see from this administration to get a handle on people's unknown unknowns? robert: i do not know that this administration is going to do that. they seem to be creating uncertainty. maybe it is strategic. the real problem that has been talked about repeatedly is that our news media are no longer trusted. i like to talk about narratives. the narrative is that you people are a conspiracy. politicians, and

actually anyone -- conspiracies can run prominent in the human narrative, but they are not always there. francine: how do you change that? how do you address that. -- how do you address that? robert: it is a sociological thing. things like davos, the meetings are efforts to encourage a civil society that is more trusted. but once you have stories out -- there are so many stories out about fake news, that now everybody is alleging that everything is fake. people have to observe honest reporting -- of course, you do. but you have to observe it again and realize that this is a mistake about the established news media. tom: robert shiller, thank you for being with us. we will continue with professor shiller on davos radio in a moment.

it is a quiet day, after gyrations and the huge strengthening of sterling. dollar-renminbi after the speech, 6.85. on friday, another nobel laureate will be with us. francine lacqua and tom keene. stay with us through the day across all of bloomberg for these meetings at the world economic forum for it from davos, this is bloomberg. ♪

♪ jonathan: good morning. welcome to "bloomberg daybreak."

i am jonathan ferro alongside alix steel. david westin is in washington d c as they prepare for the inauguration of donald trump should here is how -- donald trump should here is how the market -- donald trump. here's how the markets are looking this morning. about 0.1%. we're seeing a real squeeze on shorts on treasuries. right now, the yields are up three basis points. your yield on the u.s. 10 year. a stronger dollar story today with a cable rate of 12234. brexit aftershocks just one day after theresa may lays out her strategy for leaving the european union.