francine: havoc slams florida. benin on the defensive. the former white house strategist calls up gary cohn. what is gary cohn's future in washington. a cautionary tale. the construction company defaults on $209 million. we speak to the outgoing ceobeck and future tevo

on the news of his departure. this is "bloomberg surveillance" and i'm francine lacqua in london. first, let's quickly check on your data. prices across the board quickly tell us the story and the mood. we also had possible sanctions on north korea being discussed. the dollar is gaining and treasuries are falling. of course, the north korean missile test failed to materialize and hurricane irma struck the u.s. with less force than feared, which is why the gold yen and swiss franc are falling. reporter: was korea has warned of retaliation if harsher sanctions are approved against the country. is jong un's regime says it closely following the moves. pyongyangconducted -- mostcted at siits sixth and

powerful nuclear test. the surprises strength get support from metals to fuel and shows the effect of resilient demand. the u.k.'s frexit secretary has warned lawmakers if they block a key piece of domestic legislation today it could lead to a care at departure from the european union. david davis rejected accusations that the government launched a power grab. this contains so-called henry viii powers. and in the u.s., former white house strategist steve bannon said he would go to war on the republican establishment because of his lack of support for donald trump. on cbs' show "60 minutes," bannon said the president should resign. >> if you are going to break somebody's arm, the stuff that

was leaked during that weaek was unacceptable. if you find unacceptable, you should resign. >> three talking about? >> i'm talking about gary cohn and some other people. >> gary cohn should have resigned? >> absolutely. reporter: you can catch more of the interview with charlie rose on bloomberg tv. if you are watching in europe you can find that at 6:00 p.m. tomorrow. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. turnine: hurricane irma as to streets into rivers, hammered the caribbean islands in the florida keys and left 4.5 million people without power and millions more temporarily displays. the storms came in weaker than predictions. damage fell water

to $49 billion from the initial estimate of $200 billion. let's talk to how this impacts the oil market. oil gained as the storm weakened and u.s. refineries came back online after the damage from hurricane harvey. always great to have you on air with us. thank you for coming on. you have written quite a lot of note on looking at the impact from this. how is this inversely impacting the price of oil? alreadyd weakened before making landfall, but more importantly, it was going to miss the key area in louisiana. the impact was less on the supply side. there will be some demand lost. but beacuse the damage does not seem as great as initially expected, it should be small. we do have the news of some damage in the caribbean and i think that needs to be watched

because their hundreds of millions of barrels stored in a lot of those areas in the bahamas. informationll scant on how that has been affected. francine: how quickly can we assess the impact on demand? >> it is going to take a little bit of time, but it is safe to assume that gasoline demand will weaken. you had gasoline demand falling month on month after katrina. quite easily anywhere between 100000 and 400,000 barrels a day. for harvey, we are anticipating 150,000 barrels per day. we have a lot of weak activity, and then it bounces backk. it depends on how many days the rain does not subside for. hurricane harveyan is still dampening on the west

coast. >> the issue with harvey is the biggest problem is going to be the international market. some of the refineries are still off-line. they seem likely to be off line through the end of the month. which then effectively means you have less exports, which obviously then means you are pulling products out of europe at a time when europe should be building diesel. that's why you have seen product s crash so strongly around the world. in the winter, even if you have a normal winter, we are going to be very tight on diesel stocks in europe. francine: give us a sense of stockpiles in the u.s., what will happen to them because of these hurricanes? willock barrels build. the refineries are down. europe is now sending barrels to latin america, which is what the u.s. gulf coast would do. the east coast is now being

deprived of products. it is very bullish, less so for wti markets and crude in the u.s. you will get more exports out of the u.s., but generally, much more weaker crude markets. francine: top to be a little bit about opec. >> we have the french at multi-year highs. i think it is still a little bit disconnected with the fundamentals. but again, it has to do with sentiment. in terms of opec, i think they've done very well, finally. they were initially lagging inind on the cuts, but

august and september we have pulled back exports substantially. the one thing i will say, this market is demand drive.n. that's why even the smallest of opec cuts is having an impact. francine: amrita sen, thank you so much. we will continue the hurricane coverage throughout the day, bringing you the interviews we have. coming up, we will talk about the fed, the impact these hurricanes are having on consumption. this is bloomberg. ♪ francine: this is "bloomberg

markets: european open" and i'm francine lacqua in london. reporter: uber and lyft have been offering free rides int amp n tampa as hurricane irma hits the gulf coast. lyft is also giving free rides to hospitals. there is a deadline for carmakers to end sales. that is the biggest market to do so in a move that will accelerate the push into the electric car market by company is coming putting byd. the vice minister of energy and technology said they are working on a timetable to end production and sales. shares have tumbled in hong kong trading after the company warned the plan could take longer than expected. 7.5% as theped strong euro cut into tourist spending. shares in lundbeck have slumped

as the ceo heads to teva. he joins the world's largest maker of drugs. teva shares are trading higher this morning and we will speak to schultz this morning. that is the bloomberg business flash. let's get back to our top story, hurricane irma. last week william dudley said the back-to-back hurricane xina third quarter could temporarily influence the timing of the next rate hike. how big of an impact have these storms had? joining us is kit juckes. thank you both for joining us. how will this impact the fed's thinking? off 0.3%ane jerry is shave of gdp in 2017. however, this comes back through

investment and rebuilding. the fed is looking at the world with outdated models. they are looking with the phillips curve, which is completely flat because of structural reasons. there are stars left by the recession. demographics and technology have changed. i think -- we know they should hike, because there are asset bubbles in the market everywhere. but they are reluctant. and now with the stanley fischer resigning, deadly is effectively number two. he is trying to talk hawkish, but he is a dove. you hvae ave two problems, lackf inflation and leadership at the fed. i think this would lead to a lower hiking. the real issue is lack of inflation and lack of delivery and corporate tax reform and a stimulus. francine: what is your take,

kit? plots might come down because they are so far away from markets, but i agree with alberto in the sense that this is a fed that is quite timid. it takes very little to dissuade them. they should look through hurricanes, but frankly, what we have seen in the past, they like to four more in us of a rate hike, they like it to be priced in and if we do not presidenprii t in, they won't do it the bias is, it's always safer to wait. affectsuctural bias the market. if you think 10 year notes peak, that'she longer-term dot, note yield.r

we don't believe those dots at this point in time as a market anymore. francine: does that mean the fed is being tethered to the market? since january, the market is not believe what they have said. >> the fed wants to lead the market, but it takes a lot of leading and the markets have established that the fed is easily dissuaded from its path because they get spooked easily by any piece of bad news, and irm and harvey are bad news temporarily. we might well get a rate hike this year. francine: i am looking at the wirp function, but i also wanted to get to comments made by steve bannon, made on "charlie rose." >> if you are going to break and

resign, the stuff leaked that wheek was unacceptable. if you find it on acceptable, you should resign. >> who are you talking about? >> i am talking about gary and some other people. if you don't like it, you should resign. resign?ary cohn should >> yes. francine: will markets be paying attention to who the next president is more than anything else at this point? >> this is more dependent on whether gary cohn styaysays in s is place, and with him, the advisors to the administration. qecome from a period of infinity. to get out, you need central banks to coordinate and you need fiscal stimulus.

in europe you are starting to see something with macron and merkel. if the u.s. does not deliver, the fed is tempted to wait and effectively free-rdide to create some economic boosts. int urn, this takes away inflation from europe and canada, other central banks that are trying to hike and it keeps them dovish. it defies this attempt of global central bankers to hike rates. then, we go into currency wars and then back into qe infinity. that is the greatest danger we face. francine: thank you so much, alberto gallo and kit juckes. up next, a construction firm's default angers bond holders in china. rose more of the charlie interview on bloomberg tv. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua in london. investors in china have been anchored by the latest corporate bond default. the construction group defaulted on $209 million. bondholders claimed the company did not disclose the transgressions in sale documents more the bonds, which were sold back in 2015.

this is the most recent problem for china as it tries to develop its $9 trillion bond market. bloomberg's chief asian market correspondent is in hong kong. how much of a warning sign is th is default? reporter: good morning. i think if you look at the development of china's capital market, developing and opening up the bond market is at the center of that. investors might have considered this to be a complicit guarantee from the central government. that is what we are seeing now, as risk is introduced now. on the one hand, the good thing is you need to have risk and defaults are comprised with his. on the other hand, this is based to be of transparency and the lack of corporate governance you might associate with more developed markets. does this raise doubts

about the internalization of the bond market in china? >> again, the theme in china over the last year or two has been the opening of the bond market. they are trying to give companies an alternative source of buying, and give global investors a new asset class. when we see bumps in the road like this, it will give investors pause for concern. they will want to apply rigorous scrutiny to chinese company. it will want transparency and corporate governance on par with the western world. it's standard that they expect this of china. an increase in defaults, while there are some positives come overall, a gives investors pause for thought. there is some distance to go, yes. francine: thank you so much. we'll get to this in the later hours. still with us, alberto gallo and kit juckes.

should we worry more about china than we are at the moment? >> no, i think there's two common fallacies people have about china. one is they have infinite dry powder. that is not true. they have a simulated -- they have accumulated losses in the banking system, which are roughly over $1 trillion in loans. knows what -- nobody the true number is, but if you are one of the 10 people in china that knows the real num ber, you know dry powder has to lust for the next five years. the second fallacy though, is that they have other resources they can use. it's not a free democracy. you can funnel people's savings

into investment, and that is a much larger amount of money. they are trying to control the slowdown, create bond market, so the debt can be externalized and they can use people's savings to invest in stocks and corporate bonds. anyou have too much debt at aggregate level, you can either grow out of it, which they have already done. you can count of future population growth, which just changed. the people are not going to make children very quickly, even though the one child policy has changed. or you can restructure. the u.s. restructured a very large portion of debt. francine: kit? >> it is going to be a huge problem in the long run. s trying tona is trying t juggle this desire to maintain

control. we can see a population that is not growing too fast. we can see a slowdown in nominal gdp growth, and we cannot quite reconcile it all. we know that ultimately, they are planning to plug this big hole with domestic money after the heaviest official money and we're all looking back and saying, we don't really have the courage to bet against them. we have the courage every now and then to bark at the men, that this is not sustainable. but it is hard to be brave enough. francine: kit juckes and alberto gallo of stay with us. up next, we talk brexit. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua in london. asorter: hurricane irma

knocked out power to 4.5 million customers. the storm heads up florida's west coast. irma, now a category two storm, is cutting use from power plants and has blocked shipments. north korea has warned that if areproposed sanctions approved, there will be retaliation. sixthkorea conducted its and most powerful nuclear test. 6.3% has accelerated to from one year earlier and that beat estimates from all but one of the 38 economists at bloomberg. this shows the effects of resilient domestic demand.

global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine: thank you. traders who have placed bullish bets on the pound might find their nerves tested this week with everything from brexit to the bank of england. the biggest weekly gain since last week. there is a vote today on the brexit bill, and then the policy decision on thursday. still with us, kit juckes and alberto gallo. kit, what is moving the pound at the moment? >> the first thing that will move it is, if you overlaid a picture of euro-sterling with rise willr, the show a bigger story going on.

the market is rebuilding is negative view on sterling. the not confident about state of the economy at the moment and it is rebuilding its position. the most important thing this week, the two most important things i suspect are one, is some of that going to get taken off if we get inflation data that reflects the weakness in the pound, unemployment data that remains strong, because that has been a trend, and a little bit of nervousness ahead of the bank of england that we thea edeal that reflects hawkishness. if we don't get a short recovery rally for sterling within the next three days, i will become quite depressed. if we get the euro-dollar moving down, that will help.

euro-sterling should be below 90 cents. francine: agreed? >> short-term there has been a move down in sterling. a little bit of shotrtcoming makes sense, but let's think about the long-term picture. the bank of england will never hike in the foreseeable future. expectations in the market are that they still might hike. francine: the governor was at pains to tell us two months ago that they were thinking of hiking. >> but the forecasters are still based on an orderly brexit. and household leverage continues to rise. people in the uk have been spending more, possibly in the hopes that the u.k. would be better off. you'reu're seeing now is

starting to see companies missing on their eanrinrnings. are starting to see a large amount of companies missing on their earnings, lowering their forecasts. that is even more important now than the fx market, which is sometimes driven by central bank talk. teh real economy is starting to get hurt. francine: are we going to get parity. alberto, this is my euro-pound chart. >> i have been on record about this since about one year ago. getting a bitk. weaker overtime, we see a stronger europe. we will see how the german elections go, but there is the potential for fiscal stimulus in the eurozone. the u.k. is actually still surviving because of exports to europe, just at the time when it wants to become severed.

it's a paradox. francine: do you think it will be messy, the divorce? >> i don't think we could get something sensible a great fast enough to make this tidy. more particularly, i think it is drawn out enough that however it ends up, we are treading water and not making any progress. i agree with alberto, we will hit parity, but not this year and he will hit parity because higher.-dollar is francine: what worries you most about the u.k. economy? >> the lack of the long-term plan for the economy. the brexit is a distraction. one out of three children lives in poverty. 1/3 of land in the u.k. is owned by nobles. it is very difficult to revive an economy if you do not invest in infrastructure or productivity, education.

7% of people that are privately jobs,ed have the top finance journalists in the judiciary and so on, mp's. what worries me is lack of social mobility and lack of long-term planning in this country. been a there has benefit from social an efficient thesies. -- social inefficiencies. francine: do you agree with that, kit? >> i think it is the same. the u.k. faces the same fundamental problem of weak productivity as other countries. i agree with the point that we are going into a slowdown in may. we are at the point in the cycle where the economy is slowing. what it needs now is a long-term plan to boost productivity through fixed investment, for education, and we are politically, utterly distracted

by the brexit nonsense at the moment in terms of what we are trying to do. i think the u.k. isn't such a bad position overall. it has been doing very well for a long time now. but if we want to get ourselves back into a strong position, we need to get away from this distraction as fast as possible because all of the major economies have this productivity crisis that is goign to take our ,ome growth rates towards 1% which is -- we need to get on with solving that really big dilemma. francine: thanks, kit juckes and alberto gallo speak with us. we speak with the outgoing ceo schultz.ck, kare this is bloomberg. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua in london. shares in lundbeck have fallen as the ceo leaves for teva. the outgoing ceo joins me on the phone. what, first of all, is the future of teva? it might be too soon to have a clear picture of what you want to do, but what is your first instinct? >> it is a little bit early for specifics on what we will do, of course i will, along with the directors and management, develop a strategy to take the company forward. but what excites me is teva as a

very strong heritage and today the world's leading manufacturer of generic medicines, basically supplying high-quality medicine to more people in the world than anyone else. we are helping in areas such as multiple sclerosis, and so on. it is a very interesting combination. francine: mr. schultz, you are known as an aggressive cost cutter. where does teva have room to cut? >> that is too early to say, but i think all companies need a strategy that supports their long-term future. in the case of teva, i think it looks very exciting and promising based on the core foundation of the company, but it is also important to ensure o you are efficient and competitive. francine: why did you take the job, given all the challenges?

>> i am the kind of person that likes challenges and i have always been inspired by challenges. if it is very challenging and very complex, i normally thrive on that. francine: i don't know if you have thought about dividends, whether they can be restored or how much that will be compared to the rest of the company. >> i think that is again, too early to comment on specifically, but the key element is to to secure you have a strong business performance and all the financial aspects come second. francine: when you start, what will your priorities be? i know it is a difficult question because you have just been announced, but how long will it take to put teva back on the offensive? >> it is something i cannot comment on specifically right now. i have to repeat myself. but it will work with the board and management to very fast formulate a clear strategy and the moment we have done that, we

will communicate that and secure we are putting the company on a steady and strategic course. francine: i completely respect and understand that. do you think they will be any changes on the board of directors? have you spoken to anyone about the potential for this new cfo? >> i have not spoken to the board about any changes on the board. i think that is up to the chairman. you will have to address that question to him, but from my contact with the board, i very positive about the decision and i think it will be a great board to work with, given the great composition. francine: so, what is your biggest concern about the industry. we see a lot of generic drugs. of course, the political system could make it more difficult for certain companies. what is the biggest priority for the industry? >> in general, i am an optimist. i think the industry is in

better shape than people think because there is always the need for new, innovative therapies and it is part of a system where you do get patted protection. -- you get patent protection. that is why when you go over generic, you have high-quality generics. i'm a firm believer in the current system. i believe it is much more sustainable than people believe. i'm a long-term optimist on the pharmaceutical sector. francine: i noticed probably too soon for you to tell me if you want to reduce teva's presents israel, but where do you see the biggest potential coming from? >> i think of all the pharmasset igo companies in the world, the biggest market is the united states. am, ites for the way i

goes for my previous companies before that, it goes for teva, and nearly all pharmaceutical companies worldwide. you need to make sure you have a good strategy for the u.s., but also that you have a good overall worldwide strategy. ou i will relocate with my wife and the company will remain headquartered in tel aviv. francine: thank you, kare schultz. i hope to have you back very soon on "surveillance." junckerlk europe, where will deliver his annual state of the union speech. the president is likely to strike a more upbeat tone than one year ago. istill with us, kit juckes from socgen and alberto gallo. alberto, you have been talking

about the macron=-merkel axis, but macron is also having a tough time. are you concerned we're putting too much hope on this strong axis? >> i think we need some time, there is always a honeymoon period. what we see, at least the reform plan is going in the right direction, in terms of liberal market and in terms of long-term strategies, like climate change, which is increasingly important as we are seeing. so, on the other hand, you have german elections. the question will be, who is potentiale the coalition partner and who will be the finance minister. there could be a positive surprise there, in terms of a bit less austerity and a bit more integration and a spending. in any case, the outlook will change after the german elections because you will see

chancellor merkel at her last mandate, focusing on not the next election, but long-term legacy plans for europe and that means more integration. so, we have definitely eliminated the tail risk of le penne. and that is what markets have priced in. what is not yet priced and i hear a lot of skepticism about europe is the further integration, the potential for a finance minister in europe, the potential for a bigger budget for defense spending, for more integration in banks and capital markets. people are always skeptical, but we have seen europe delivering slowly, but delivering over the last few years. francine: kit? >> i think the first bit is european economies are growing at 2.5% already. we are in an economic upturn. credit growth is pretty plentiful. there are problems in some places, but banking systems have been in better shape.

fiscal policy has not been a drag. got athink we have following wind on the economy, and that makes some of the political problems go away until the next recession, when they will probably come back in spades, frankly. but that is not really relevant for now. for now, europe as a chance to do some good things on political front. we will see what they make of it. the currency has gone too far too fast, but has a lot further to go. so, i think there's everything to be optimistic about, and then we can say, the structural problems, the growth of populism, lowering unemployment is 8% -- i would be miserable, because that would be way too fast, but let's see what they

can get done. francine: once the german elections are out of the way and there are negotiations about who replaces draghi in the ecb. >> we heard a lot of different -- that is a little bit further, at the end of 2018. wouuld negotiations start earlier. faces isem the ecb they want to taper, they want to exit qe. they need to because there are not enough bonds to buy, unless you change the portion of italian and french debt they are buying. at the same time, they are facing a too slow federal reserve, which means the euro could appreciate too quickly. we would use that tailwind that europe is i enjoy now with growth above 2%. it is a very careful game here, where the fed needs to do their part for the ecb to also taper and hike.

what we have seen is an ecb that is very tolerant to fx appreciation. they are worried about it, but it does not matter strongly for growth. they're happy to see it go up. the question is, if the trump administration does not deliver, europe could go a lot higher, maybe even 1.30 next year against the dollar, and then you would see a return for the dovish ecb. francine: thank you for joining us, kit juckes and alberto gallo. up next, the latest on hurricane irma. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua in london. her think irma -- hurricane irma has hammered the florida keys and left 7.3 million people without power. the storm came in weaker than expected, something to a category two before reaching the tampa bay area. for more on this, eric is in orlando.

first of all, keep safe, but what do we see on the ground? reporter: at the moment, i am not outside. it is still too dangerous. there is a lot of debris on the streets here in orlando, florida, the center of lord a more or less -- the home of disney world. 70ds are still gusting to miles per hour here, more than 110 kilometers per hour. that will continue for at least the next couple of hours. the storm itself is now a fair ways away from orlando and from tampa. it's heading up the coast and has weakened to a category one storm, which means the winds are 85 miles per hour, but it continues to weaken. over the next few hours, they could possibly drop as low as a tropical storm with winds at 74 miles per hour. francine: how difficult is it to assess the impact?

how can we assess the damage from this? >> it is still there difficult to assess the impact. all we can do is look at the can see. what we yesterday we saw those images of downtown miami turned into a flood zone, streets as if they were rivers, so we know there is a significant damage in miami. we know there is perhaps devastating damage in the florida keys. that is a small part of the state. while the damage is terrible, it might not add up to those billions of dollars we had seen in some of those pre-storm estimates. the same goes for western florida. until there is daylight and they can assess what happened overnight when the storm surge alongin, all the weighayh al when you the storm surge had the potential to be the most damaging part of the hurricane. this is the water that comes in above the normal tide levels at

any time of day. western florida, the cities of naples and ft. myers for example, were expecting is storm surge of 15 feet. if that happens, much of the property ended up underwater and there will be terrible damage. that is mostly residential. tampa, much more commercial. we don't know yet, fran. francine: thank you so much, erik schatzker. he will bring us latest updates throughout the day. we will continue hurricane irma coverage that the day. we also have the interview with the mayor of miami. "bloomberg surveillance" continues for the next hour. i will be joined by tom keene in new york. this is bloomberg. ♪

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walls of water and violent winds cause havoc from miami to tampa. bannon on the offensive, the former white house strategist close-out gary cohn and lack of support for trump. said the united states is the greatest pain if the u.s. pushes for sanctions. there is a lot of news once again for a monday. we are looking at politics and the impact from the storms and what they mean for oil and demand in general. tom: sigh of relief for the markets, but definitely a sign relief last night from hurricane irma. we will get to that. erik schatzker is in florida. a huge sigh of relief over a lesser storm up the west coast of florida. francine: let's get to first word news.

taylor: we are starting with hurricane irma. it weakened overnight after battering florida. 85 miles per hour now. it is expected to weaken to a tropical storm later today. the extent of the damage is not known. almost 5 million people are without power. there was severe damage and flooding in the florida keys where hurricane irma came ashore with 135 miles per hour winds. korea is warning that it will retaliate if united nations security council votes today to impose more economic sanctions. the regime says it's responsible cause the u.s. the greatest pain and suffering. the u.s. is calling for a vote on sanctions following the north's nuclear weapons test. david davis says there could be

a chaotic departure from the european union if lawmakers blocked the key piece of legislation today. davis rejected accusations that the government launched a power grab with the bill that seeks to turn eu law into legislation. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. risk on this morning. let's get right through it. steepeningve this morning. oil not part of the dialogue. two michael mckee later on the distinctions of irma versus party. -- harvey. that should be green. three basis points higher yield. sterling interests me. gold was -10 when i walked in.

sterling really gets my attention. francine: i am gone for a week and we are on the same page. i am similar across assets. ofrall, i would say because the north korea missiles test failed to materialize and hurricane irma failed to struck with as much force. tom: focus last night was on naples and tampa. it was an extraordinary storm with a massive sigh of relief that it was well lesser that the grim fears of category 5 and category 4. ith better for tampa after hammered down south. anding us in his early exhausted morning, bob, what was it like to note that this was a lesser storm? as don approaches, it

approaches for us with a great sigh of relief. we had a lot of wins and rain. it could have been so much worse. we are thankful and prayerful that tampa -- a bullet. -- dodged a bullet. picture of the teamwork that was done by tampa, state, and federal authorities in your area. what was it like behind the scenes? >> well, it was as seamless as i have ever seen it. i have been around government for 30 years. one of the first times everybody was on the same page. no one was siloed. there was no parochialism. federal government although he down to the locals, we knew what our jobs were. there was no drama. everybody executed.

everybody stayed in their lane. in parts ofof that, this day, there were lives that were saved as we were witness about telling people the magnitude and potential devastation of this storm. francine: how extensive is the damage downtown? >> all of our fire and rescue crews are out. they have been out since 2:00 sweeping the streets. they had given us a damage assessment. there is a lot of standing water and tree limbs down. there are some trees down, power lines down. it does not appear at this point, though it is still dark, that there was a lot of property damage. we're still not at high tide yet. the tide is coming in. that is when we will know for sure if there was any effects from the surge. i imagine there will be standing water in parts of the city for a portion of the day. i would tell both of you that we were very lucky last night. francine: how much do we know

about the surge? i know it is difficult and will take daylight to know for sure, but when did it take and how high? >> it is still ongoing. high tide has not completed yet. based on surveillance from police officers, it does not look like it will be that bad. they drove the streets that normally hold water during floods, and they were relatively dry. i am optimistic about that, but we will not know for sure for another two hours. tom: thank you so much, bob buckhorn, mayor of tampa. harvey-irma compare and contrast. >> two different types of storms. the mayor put it well, it could have been a lot worse. disaster models are bringing down the numbers.

one thought was a could have been $200 billion, now down to $49 billion in total losses. analysis things we might get $13 billion in losses. in comparison, rms estimates that hard because the going $25 billion and $85 billion in losses. core logic thinks it could be as low as $10 billion. the difference between the big storms is the wind. there is no wind to speak up in houston. it was flooding. most business policies caused wind debt -- cover wind damage and not flooding. tom: are we getting a little smarter? >> we are getting a little smarter, but it is not fast enough. two articles published by news organizations earlier this year predicting there would be

catastrophic damage to houston and tampa if there were direct hits. we saw that play out in houston, and tampa dodged. we are not set up to face these things, and we build in the wrong places. francine: will this have an effect on rate hiking? didrobably not since irma not have to be as bad as it could have been. we will probably see it show up in jobless claims. that will go higher in houston and florida. oil, home prices obviously, but it will not affect the economy as bad as was locked. where we will see it is in car sales. tom: quickly the hurricane go function. this will be great over the next couple of years. here is tampa to tallahassee.

this becomes a tropical storm and just a depression. this is the tennessee and alabama border and into kentucky. right here is where the cincinnati reds play, which is important. you toe: tom, thank michael mckee. joining us now is howard davies, rbs chairman. if you're from the fed, how would you look at these hurricanes? is it the wrong time to change sentiment? think i would look through them. that sounds a bit callous to the people affected, which is dreadful, but it is unlikely they will cause the fed to rethink. i think they will probably keep their heads down and let this storm passed. i doubt if it will fundamentally alter the picture. francine: is monetary concerns the biggest threat to

geopolitics? bigrd: i think it is a thing to say away from geopolitics. geopolitics is a big risk in asia and in the middle east still. we are still very uncertain there. for us, there is the future relationship with the european union, which looks like a pretty big risk. monetary policy and potential changes their are in there, but for the moment the fed and the ecb are pretty well able to signal their intentions. i think we have a fairly clear view of where they are going to go absent a major disruption. i don't sense a great deal of nervousness in the markets. tom: a lot of different themes to do this hour. i am fascinated from where you sit and with your experiences if the fat is going to become more like the bank of england. is that really where the fed is

heading, to be more like the bank of england? i am not sure which elements of the bank of england. are you meaning the fed is going to improve its wine cellar, the bank ofbe up to england's, which are very high? i think you are talking about the kind of decision-making and forward messages about policy intentions. fed theiculty is in the structure is rather different. in the u k, you cannot have vacancies on the monetary policy committee. there was a vacancy recently because of an unfortunate resignation. have to have your nine because that is the way the balance is -- you have to have your nine because that is the way the balance is played out.

for the fed, you are not sure who they are at any given moment. -- i wish the fed has a more why liable way of had way ofd a more reliable making appointments. tom: macroeconomics, the information we can see and less transparent. this is bloomberg. ♪

♪ is "bloomberg surveillance." francine lacqua in london with tom keene in new york. let's talk about brexit. david davis has warned you can

lawmakers blocking the brexit bill could lead to a disruptive departure from the eu. let's get back to howard davies, rbs chairman. he has decades of experience in the industry and used to run the uk's finance regulator. when you look at the conundrum for the u.k., is it more likely the u.k. crashes out? we triggered article 50, and we don't have anything on paper at the moment. do you think things will fall in place? howard: the latter is a very optimistic reading. the difficulty is that eu 27 have said we need to make significant progress on the budget and free movement of people and the rights of eu citizens in the u.k. before they are ready to talk about the stuff that interests me, which are what kind of access

financial firms will have after brexit. i think the government have been drawn into that mess of negotiating, and at the moment we are at the worst possible time, which is we are not apparently making headway on those difficult issues. i think the government is going to have to change fear and really get to grips with the budget question. i think that means warming up people for the fact they are going to have to make some payment. i have no idea what the numbers went to become a but it is not going to be nothing. i think they need to want to go to that and try hard within the next month or two to get an agreement so they can unblock the other dossiers. some sensibleet negotiations because there is a lot at stake for both sides. at the moment we are in the worst possible time. it is very uncomfortable. francine: what does this mean

for financial companies? we see a lot of financial firms already taking decisions because you cannot wait for something on paper. howard: some of those decisions could be wound back if we get a full passport deal. i don't expect this, but if miraculously we were decided to be in the single market again, i don't think that some of the big moves people have talked about will happen. they are making contingency plans, including rbs. the longer it goes in the closer we get to march 2019, you will just have to implement that. if you send people to amsterdam, they will not be thrilled to come back, so you will probably not do that. they are making contingency plans. at the moment they can only make them on the basis of an expectation of hard brexit. that is the only fruit in thing as a board of directors to tell your staff to do. the longer it goes, the more

likelihood there is that those hard brexit plans will be implemented. tom: i like that. what have you learned about the staff? response from the sap about moving to point a to point to be your point see from the trenches? you are the biggest issue is schools and where they can put their children. the capacity of international secondary schools in frankfurt is probably the biggest question on the minds of a lot of human resources directors in london. if i wanted to give you an investment recommendation, it would be to invest into a company that is planning international schools in frankfurt. tom: this is a huge deal. what are you going to do about it? what is goldman sachs, what is schroeder's going to do about schools in frankfurt, schools in dublin with a great education

system i might point out, but what are you going to do about that third rail of these moves? howard: i think people will be providing faced solutions. for will be having to pay people to come back and have their children educated in the u.k. where we do have a school system that does cope with a lot of foreign students. they will probably get a boost by this as well. i think they will simply have to throw money at it and provide people a safety net if you like while they make that adjustment. francine: howard davies, rbs chairman, stays with us. tomorrow on bloomberg television, apple is set to unveil the latest iphone. stay with bloomberg for live coverage of that event. that is 1:00 p.m. in new york. this is bloomberg. ♪

♪ is "bloomberg surveillance," with tom and francine. from theays risks remaining options will continue to weigh on credit profiles. rbs comes as the times says 60 theidering -- two ceo. succession plan in place? howard: we have succession planning procedures in place. we regularly look at the bench

strength we have and identify those people that are upwardly mobile. for every job you have three potential successors, the dropdead successors, and the medium-term and long-term. we have all that's in place. we don't currently have a vacancy, so this is at the normal level of good order and discipline planning. francine: do you think you will have a vacancy by the end of the year? howard: the story on which these stories are based is sourced to and unnamed headhunter who is trying to get the job of trying to search for the new chief executive. i think the standards may be slipping on the other side of the bridge where this newspaper is based. that is just spinning wheels and suggesting someone that used to

be working for c.p.a. might go back to work for cba. i don't think we should get dragged into people being overexcited about this. tom: you mentioned the pink paper, they feature today lloyd blankfein's efforts to join howard davies in banking. it is called markets in the united states. be added aing to threat to the royal bank of scotland? howard: the article goes on to say that they are looking to replicate here to peers -- pee r-to-peers who are taking a smaller market share. i don't think i have seen any pign that they are setting u a massive network system. we have 18 million people with current accounts. i don't get any sense that that is what they're trying to replicate. they are looking for deposits, and some of those are available

for a decent enough package with good technology. it does not look like they are going to be the big force in u.k. banking. lord -- if lloyd blankfein gives me of four slice toaster, i am all for it. i want for slices. francine: good to know about that. howard davies is so delighted to know that. coming up on bloomberg television, we will be talking about the emissions scandal. that is taking center stage in the german elections. those elections on september 24. this is bloomberg. ♪

tom: it is something to see. it is out of ancient rome. except it is in downtown new york. it is one of the two foundations

of the world trade center. one of the beautiful pools of the world trade center memorial. it is an extraordinary and emotional visit in the foundation of the two buildings. they are truly extraordinary. we welcome you on this september 11. we will have coverage of this on bloomberg radio later today. jonathan miller scheduled to be with us to talk about the vibrancy 16 years on in downtown manhattan. here is taylor riggs. weakened hurricane irma is making its way up florida's western coast. it has been downgraded to category 1. it is now northeast of tampa. and battered south florida left an unknown amount of destruction. almost 5 million people are without power. there was severe damage in the florida keys, which were pounded by 130 mile-per-hour winds.

damageses for total from $200 billion to less than a quarter of that. authorities say earthquakes killed at least 90 people and damaged thousands of houses and hundreds of schools in the southern part of the country. nuclear inspections and iran have almost doubled under the agreement that president trump has questions. the president threatened to tear up the agreement during the campaign. president trump's decision to give honduras six months to come up with immigration legislation dealing with so-called dreamers did not just make liberals unhappy. the presence former chief strategist steve bannon talking to charlie rose about the policy known as daca. >> i understand how he struggled with it and how he is getting

the possibility of legislation and said last night in a tweet he would rethink it. trust me, the guys in the far right on the conservative side are not happy with this. taylor: you can see all of the interview with charlie rose at 10:00 p.m. eastern on bloomberg tv. hillary clinton says she is finished with being a candidate. still she says she is not done with politics because, quote our country's future is at stake. she said that giving a speech is to wall street was a mistake. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thanks so much. investment firms may cut spending on research by about $1.5 billion by new rules intended to make markets more transparent.

in the u.s., the dodd-frank rollback remains limber after the house of representatives pushed through a bill cutting back many banking reforms in june. what are the exact effects on this, do you have any idea who the winners and losers are? howard: i think it is difficult to say at the moment. i think there will be change in the marketplace. when people are invited to pay for research separately, they will ask themselves if they really wanted. this is in a restaurant where if 12.5% service is on your bill, you just sign. choice, maybe you don't pay. people will look harder at the value of research they get and maybe less prepared to pay for the volume they get at the current time. i suspect there will be some concentration in the markets and that people may not be ready to

pay for lots of different equity research. the whole purpose of method to is to enhance competition in that area. francine: on the equity side, how difficult is it or where do you see the price settling? i do not know. rbs is not in the equity market. we are fixed income foreign-exchange. i have not focused on that. you have to ask someone from an equity house. tom: that is fair. you gracefully got around that question. you did a good job getting around that. people go to fancy schools and get fancy educations and have to get a fancy salary. is it going to be lower wage and as many people or even higher wage, fewer bodies in the intellectual game in of wall street? howard: i think there may turn out to be some concentration in that probably the marginal

analyst is going to struggle to get people to buy her research in the future. you may will get some concentration. it to be more concentration rather than at the same or more volume and people pay less. that is the unlikely outcome. tom: you look at all this, and would you say somebody ought to or get an mba to learn securities analysis, or is it a dinosaur species? howard: i don't think it is good to be a dinosaur species. i think people are going to have to do rather more than they have done in the past. i think they are going to have to generate and demonstrate real insights rather than just which is news stories, what some of what research looks like on occasions.

i think the prizes will be to those people who really analyze the company in detail and have good insights into their actual business, not just their financials. i think the financial stuff is relatively easy to do, but analyzing competitive dynamics is harder. the prize will be to those people that show they can do that. it will not just be the cfa people, but the people who really understand the dynamics of petition in the pharmaceuticals industry. francine: will it make a difference if you are small or big? howard: i think you'll have to concentrate and demonstrate you have a competitive advantage in a particular industry sector. people will be focusing in the areas where they really have a competitive advantage and cut out those areas where they just go through the annual reports and churn out a few equations. francine: could it be in the next few months or as late as

december? be close expect it to to when the new arrangements start in january. tom: we are nine years on in this financial crisis. escape reached velocity, or are we still in the grind of it, particularly looking at negative interest rates? howard: i think we are still in the postcrisis phase. i don't think we can say we have normalized markets unless you would say negative interest rates are the new normal forever. i don't think i do believe that. we are in and the position where the central banks believe there is slack in the markets, inflationary pressure is weak, and the risk of a relapse into a recession in the postcrisis era is worse than the risk of inflationary boom. francine: there is a lot of talk

about this report of the business spending practices of rbs. will you give the fda permission to publish it? howard: this report that people are talking about is not what is called a 166 report. regulators commission other people, mainly accounting firms but other consultancies as well, to provide input to them for their decision-making. this has happened hundreds of times a year across london and all kinds of firms. i don't think any of those reports has ever been published because they are an input to regulatory decision-making. usually the regulator does their own inquiries. 166 or more on things they want in-depth work on and then conclude what their view is on whether this is an enforcement case or what should be done. that is what we are working --

waiting for from dsca, their conclusions. it is certainly not done anywhere else as far as i know that's a 166 report has been published without the regulator saying this is our conclusion. francine: given brexit and the challenges we have talked about, legacies from the financial crisis, what is your biggest challenge in the next 12 months? howard: four rbs the biggest challenge remains settling the subprime mortgage action would be u.s. department of justice. many banks have settled, but a number of whom we are one have not. in the subprime mortgage market. that is material for us in our overall capital decision. that is still the number one priority for us. tom: greatly appreciate your time this morning. america, of you in

watching us is a joy. that is a very good thing. while you are at it, go over to radio. bloomberg daybreak. this is coast-to-coast on siriusxm. stay with us. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance" with tom and francine from london and new york. we have to talk about the u.k., inflation measures tomorrow and the bank of england expected to leave policy unchanged on thursday. that is what we are expecting from the bank of england. let's get more on this. -- we needtalk about

to talk about what is happening with the bank of england inflation forecast and brexit. talk to me about what will move the pound from now on. will it be something to do with the bank of england? >> i think in the short-term it will be the noise surrounding brexit. there is not a lot of legislation to go through parliament, and it looks like this will be difficult for the prime minister. i expect any noise we see there could have impact on the markets. i don't expect it to have a decisive move. the thing that could get the pound moving is what actually happens with the interest rate debate going forward. as you suggested, the bank of england are likely to remain on hold when they meet this week. as we move into next year and what market expectations are for bank of england policy will be decisive for the currency. francine: talking about the euro pound. this seems to be the most crowded trade. euro hasew is that the

already gone a long way against the pound. we expect the pound to pick up from here. i would not expect it to go much beyond the 88 level. clearly the economic momentum is very strong in europe now, the stronger than in the u k. that will be the factor that supports the currency. stirling is already achieved currency. that is on the eurosterling as well. let me grab dean quickly. justin, i think you have this chart already. sterlinghave cable, dollar. i was thunderstruck by this. simply missed it. brexit with the red circle. on radio, we will get this out on social. ere to a stronger sterling. you have been brilliant on

stronger sterling. >> we think the trend we are seeing at the moment is likely to remain in place. part of the story is going to be weaker dollar from here. we must step back and remember that performance of the u.k. economy, although to quote the bank of england is sluggish, it is certainly not as bad as many initially feared. brexit negotiations, there are clearly difficulties taking place. ultimately, acceptance of the need for transition deal is positive for the pound and another factor for the currency. we expect over the next 12 months we could see cable tray as high as the mid-1.30's. tom: what is the mood that you see? >> that is a great question. i think it is fairly evenly split now. there are some clients who are

clearly concerned about the outlook, but equally as many clients who are interestingly intrigued by the opportunities brexit present. francine: volatility? >> volatility within the markets is one area, and clearly as you pointed out with eurosterling at the moment, sterling is a cheap currency. there is opportunity there. also on the business side, in theory, assuming the transition deal comes through, the u.k. economy should weather the st orm. as the u.k. finally leaves the european union, beyond that, there are potentially more opportunities. francine: what happens if we crash out? will we know whether we crash out and this divorce bill doesn't pay, what will it mean for your investments? >> there is a base case, but

there is an appreciable risk. if that were to happen, we think that would be very disruptive for the economy and certainly a negative for the pound. what we have seen so far through the process is the pound is the conduit for all investors to express their concerns or hopes. if in a situation where we were to get a bad outcome from i would see the pound a lot lower. tom: what is your confidence on exit negative rates? at some point you have to move on the zero bound and the negative rate bound, what timeline does ubs see on that? one year, two years, five years? >> i think it is a story for beyond the 2018. we have to get through the process of balance sheet adjustment in the u.s. and in the eurozone as well where we expect that we will see some tapering come through in january

next year. processitself will be a that will take some time. in terms of actually looking at a position of coming out of negative rates, i think that is some ways off just yet. tom: let me throw this chart you, francine. i think this is a remarkable story that we have not talked enough about. this is the 10 year yield of germany rolling over here. maybe a little higher in the last couple days. this is remarkable how this two-year yield against to revisit early 2017, big negative yield. francine: when you look at that chart, actually a fantastic chart one of my favorites so far. where does that end up? equal,r things being assuming the global economy unfolds in the way we expect, which is -- francine: which is ok. >> yes, clearly higher, that we

are seeing some dislocation in bond markets as i would describe it. there are a lot of factors, it could be global risk, north korea in the background. does not seem to be a growth story. francine: you don't think it is growth because if it is we could be looking at potential recession in the next 18 months. >> if i'm looking at what the bond markets are signaling now it is signaling a sharp slowdown in productivity. that is not what we're seeing. francine: thank you. if you are a bloomberg user, this is what you do, like me just now you load up tv and look at tom and steal some of the really cool charts that look germant and -- gilt and bonds. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." i am taylor riggs. its latest mobile phone tomorrow. they will be called the iphone

eight, iphone eight plus, and iphone x. it has an on the design and facial recognition scanner for unlocking it. the u.s. is set to expand its first annual declines in solar panel installations. that is according to a report from gtn research and an industry trade group. solar panels comes after a decade of double-digit expansion. francine: thank you. let's talk about the middle east and president trump's efforts to disarm a political standoff between saudi arabia and qatar. discussions between qatari ruler and the saudi crown prince were aimed at the escalating the boycott of qatar, however the negotiation ended in failure after a disagreement over who

initiated the talks. joining us to talk about this is our bloomberg markets editor in abu dhabi. what does this mean for the crisis going forward? >> i think it really underscores some of the complexities of the dispute we are dealing with. watching the headlines on friday about this phone call was amazing because you had the first one that seemed to suggest a progressive and possibly promising conversation had taken place between the two sides, qatar and saudi arabia. less than an hour later, you had other headlines coming out full of recriminations from saudi arabia. the particular emphasis of the fresh light of the dispute seems to be who called who first or whether the call was initiated by donald trump. asdi arabia suggesting qatar

the train the call as something saudi gave in to. this speaks to some of the difficulties with resolving this dispute, which is neither side wants to lose face. neither wants to be seen as making the first move when it comes to giving in in terms of its demands. francine: this basically underscores the depth of the crisis. does it also made resolution is pushed back significantly in terms of timeline? >> i'm not sure it means the resolution is pushed back in terms of timeline. you have to realize at the beginning of the dispute, and we are now in the 100th day or so, it seemed like this would be something that would go on for some time. webcasts in two. potentially is the role of the u.s. in this -- potential he recasts --we had this phone call. the u.s. has said more than once

it wants to be a mediator in this dispute. at first glance it seems it in a place of good leverage because it has ties to both sides. here is a phone call that was potentially initiated by donald trump, and it ended in a fresh round of insults. tom: thank you. abu dhabi this morning. we have much more to talk about, including coverage on hurricane irma. we will turn to the american economy next. this is bloomberg. ♪

♪ this morning, yields higher and markets recovered.

points and are up 12 a weakened dollar finally catches a bit. the president's ballet with on, immigration, and trust needed among consenting adults, tax reform. slams key west, damages enables and tampa, and depressionropical somewhere in the vicinity of tennessee. this is bloomberg surveillance, i'm tom keene. francine, it is a busy monday but always in new york on this september 11, it will be a day of remembrance. francine: it certainly well, tom. we need to keep an eye on the hurricane, whether this has an impact on fed policy. thise short term, saying, may have an impact on hikes, others saying it will not. tom: goldman at changing their

gdp numbers over the weekend. monday update, here is taylor riggs. weekendhurricane irma after battering south florida overnight. it has been downgraded to a category 1 with wind at 85 miles per hour. it is at naples and is expected to weaken later today. the extent of the damage is not known. rivers instreets into miami, almost 5 million people are without power. there was severe damage and flooding in the florida keys with 130 mile-per-hour winds. billion, to less than a fourth of that, maybe the extent of the damage. the un security council votes today to impose more economic sanctions on north korea. the u.s. is calling for a vote on sanctions in the wake of the

most powerful nuclear weapons test yet. in the u.k., a warning from brexit secretary davis, he says there could be a chaotic departure from the european union if lawmakers lock a key piece of legislation today. rejecting accusations that the government launched a power grab with the bill that seeks to copy a you and turn it into legislation. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg.. tom: let me get to this right steepening this morning, the euro doing better. we get to that, with oil, a lift as well. dow futures up. better, showing resilient equity markets, gold is down nine dollars.

day, ie: a very similar am looking at yen and dollar. tom: let's begin our coverage in florida and a good place to be is in the center toward the east. orlando, florida and eric is there. what did disney world do? our viewers and listeners worldwide know of disney world. what did disney in orlando do for hurricane irma? >> the short answer is that disney shut down and hoped that the storm would not be as bad as windwere predicted, the peaked at 80 miles per hour overnight. that is not enough to do serious and thet disney world theme parks surrounding orlando. the universal parks for example. with the good weather around the corner as early as wednesday, they are looking to reopen as

fast as possible. tom: we spoke to the mayor of tampa in the last hour who emphasize what we are learning, hurricane after hurricane, what did you observe are the coordination of state, federal, and local authorities? was as goodination as it has ever been. there was plenty of warning for the storm, it was a category 5 in the eastern caribbean, it caused devastating damage. florida got ahead of the curve in the governor rick scott aggressive and ordering mandatory evacuations in the miami and fort lauderdale areas. campo was a little later to the game but they were able to get areas out of zone a, the of the city most prone to flooding. the people who were most at risk were taken away out of the path of the storm and as a result,

the loss of life was minimized. muchwe do not know is how damage there was because it is not daylight yet in florida. francine: when do we find out about the economic damage? are already tallying it up. emergency crews have been in fort myers, naples, tampa, they are trying to get a measure of what the damages and trying to get that back in working order as fast as possible. insurance companies and others are trying to figure out what the damage was to residential and commercial property. the place that has taken the worst hit is the florida keys. not know how bad the damage was there but we can expect to find serious devastation once gone brakes. eric, thank you so much. it was a category four when it

hit key west and now it is down to a category 1. theyel mckee has looking at the economic damage. there has been chat about richard branson and the heartbreaking total of st. maarten, blown up. the caribbean is the damage focus. >> it it as a category 5, the islands it damaged, in many cases wiped out, barbuda. there is nothing left and it will be a hard reconstruction project because they will have to appeal to the rest of the world. insured losses in the caribbean of $62 billion. tom: $62 billion? >> that is more than we see here in the united states. here,onderful to have you you have written about harvey, and we will get to that.

62 billion dollars, that is an extraordinary per capita number. >> it is obliteration of the infrastructure. and has all be asked moral obligation, france is very parts of the caribbean that are their territory. $62 billion is not a feasible amount of money to be raised by the states, they do not have the resources. it will be a long painful and expensive job. it will take many years. there is nothing left in some of these places. u.s.,ne: focusing on the does this impact thinking -- said thinking -- fed thinking? not changing my forecast now, but if irma had been talked into the $200 billion plus range, then

december was looking less likely. there is a reasonable chance now that they will go in december if we get clarity in the data by then. what will happen over the next few months is there will be chaos in the numbers. working out what is going on will be difficult. inwill see wild swings retail sales, industrial production, you name it will be distorted. tothe time we get through december, we might have clarity and if that clarity looks like things have reverted back, that leaves the door open for the fed. it is very much a question and i am curious to see what the fed it says at the next meeting and if they give us an idea of how they think it will impact the economy. francine: mike, how does this impact the federal budget? in the floodly insurance program which the budget office already estimates has a $1.4 billion shortfall. congress will come in as they have already with aid, houston

getting $7 billion in early aid and there will be more coming. the federal budget deficit they have agreed will go up. this is not going to be offset, so taxpayers will pick up the tab. weekend,ory over the there was a circle chart of sandy, harvey, irma. the circles are getting bigger on an inflation-adjusted basis. this linkage of property and , at some pointmp it ends. how many billions is the end of the silliness? >> you raise a good point. the federal flood insurance program, just because it exists creates the moral hazard of enabling people to believe they can build in flood prone areas and get relief. there have been anecdotal stories about how many times a property has been hit. the cost keep going up, they get

more expensive. there was talk that they would address this in the reauthorization of the federal flood insurance program which was supposed to come at the end of the month but then harvey hit. they extended it for another three months without talking about it because they want to get aid to people. whether we see any changes or not, open question. tom: the darkness of florida, the first responders are still at risk and we make note of their efforts over the last number of days. michael mckee, thank you so much. we will continue this discussion. ian, will continue. in the 9:00 hour, david gura and i have a conversation about columbia. like to talk about gary, indiana and immigration. this is bloomberg. ♪

tom: it is sunrise in new york, still very emotional, downtown new york, the freedom tower which stands thousands of feet tall. it is extraordinary still 16 years on. francine: it is amazing that everyone can remember where they wear when that happened and it has been 16 years. let's turn to china and the latest bond default in china. increased concerns over the stability of the world's third-largest debt market. --ault thing on it notes defaulting on notes, posted on the shanghai stock exchange website but the company did not disclose, joining us

-- is this something we could see more of? how symptomatic is it of new china? >> china has wanted to open up to the bond market and wants to attract capital. want to allow greater scrutiny of the homegrown companies by foreign investors in the way typical western bond markets operate. some people say this is a good thing because you can price risk. defaults are coming out of left theseand investors say companies should have been more transparent about their books. interestedstors are in the bond market but they want to make sure they know what they are buying. francine: how much does it raise doubts about the internalization -- internationalization of the bond market? push by china.

they want to open for bond markets. it will help to attract capital for companies away from state buying. it will help to internationalize their currency. it reminds you that they have a long way to go in terms of transparency and corporate governance that we are familiar with. step this year to allow u.s. grading terms to enter the chinese market. that has been welcomed but there is more to go in terms of the level of scrutiny and transparency that is required. up do want to bring llar-yuan, i am sorry, it is a managed currency, you can see this chart we have, this is a the on elegant chart with a rebound. link in fixed incomes or debt markets of china with the reality of a managed currency.

the things they have done recently is open a bond connect making it easy for foreigners to buy mainland of to hong come along -- kong. that is attracting capital. there are much bigger forces at work behind the yuan. chinaadual opening up of will attract capital. capitalg $3 trillion in by 2025 and that is considered a source of support for the yuan going forward. tom: thank you so much, greatly appreciate the briefing. let's bring up the chart, ian, of you on. f yuan. not -- o this is not a modern debt market or equity market, how can they get to where they want to be a

they are working with such an artificial structure? ian: they can't and a hurry. this will take years. bubbling up in the background, we have a gigantic pile of debt across the chinese economy and everything else. the reform process is one step forward, causing problems, you have to come back because the last thing they want to do is engender true market reforms and blow up the economy at the same time. tom: it is almost anti-greece. china can do a workout over starbucks coffee and in shanghai, the number one variable on that workout is extend duration. ian: absolutely. you look at china's balance sheet, the debt burden and compare it the u.s. before 2007, before the crash, the china and the u.s. numbers are barely visible on the same chartered

that is terrifying on a global perspective but also to policy makers in china. they have to manage the economy so as not to kill it but try to ref firms the burden can be managed. it is a difficult and dangerous balance. there is no guarantee they will be able to get away with it indefinitely because the size is so overwhelming. francine: what happens if they can't manage it anymore? are we looking at a financial crisis of epic proportions? ian: possibly or possibly it is because the wreck situation is managed given fiscal resources, they can manage things for a long time. i'm not going to bed thinking in the morning it will be exploded. at the margin, it means the ability to use debt to generate more growth diminishes and so growth projector he becomes -- both projection becomes weaker

and that impacts the rest of the global economy. this isn't happening now. if you look at the latest on the service side, the hard data, it still look strong. it is dangerous to extrapolate that into the future because there are so many structural impediments to maintain growth at that pace. especially when debt fueled for so long. francine: thank you so much. , we hear from the ceo of volkswagen, and things about the cheating -- cheating and emissions scandal. this is bloomberg. ♪

♪ this is bloomberg surveillance. taylor: i'm taylor riggs riggs, let's get the bloomberg business flash. china is dealing a blow to the cryptocurrency market. the government planning to banning on domestic exchanges. prada tumbled in hong kong today. their first time revenue fell almost 6%. that is the bloomberg business flash. francine: thank you so much, taylor. , bannon says that gary cohn should step down. leake stuff that would that we, that was unacceptable. >> who are you talking about?

>> gary cohn and other people. if you don't like what he is doing and don't agree with that you have an obligation to resign. >> gary cohn should have resigned? >> absolutely. francine: you can see that tomorrow on charlie rose. ian, we were just hearing from steve bannon there, if you look at who will run the fed next what does it mean for gary cohn? how much focus will they have on the next president? ian: it probably won't be gerry:. -- it won't begin read cohen. gary cohn.be there are other names floating around but there is no clarity on this at all. market attention is focused on

what the fed will say on the impact of the storm and pushing off this question of janet yellen into the future. small distraction in december with what we will see from congress. invigorated a new chuck schumer from new york. better than good with the president. why can't that happen with the fed debate? over to aent migrates perceived moderate or democrat political candidate within the fed chairmanship -- because he wants longer -- lower for longer? during the campaign trump talked about how the fed had blown up asset bubbles -- at other times he talked about rates staying lower. it is not clear what he wants. markets are assuming rates stay lower for longer but the fed

forecasts do not show that. one will be right. either we will see low rates with one hike and that is it for the next two years or the forecast will be right and there will be dislocation. monday shout out to gary shilling, on the edge of brilliant as well. we will continue with ian, always a joy, and how about a $1000 per cell phone joy? three out of five children's apple phones will break wednesday. 1:00 p.m. tomorrow, apple special.

♪ tom: it was to be a september derby in washington. tiltingt with support toward a democrats, shifting it out to a discussion to december.

something, thee sun rises on washington. on this september 11, i'm tom keene. francine in london. here is taylor riggs. taylor: a weakened hurricane irma is making its way up the western coast of florida. downgraded to a category 1 with wind up to 85 miles per row or it is now northeast of tampa. anbattered florida and left unknown amount of destruction but 5 million people are without power. streets were turned into rivers and there was severe damage in the florida keys which were pounded by 130 mile per hour winds. less than a fourth of $200 billion is expected in damage. an earthquake killed at least 90 people and damaged thousands of houses in the southern part of the country.

aftershocks continued to rattle the region. nuclear inspections in iran have doubled under the agreement president trump has question. that is according to the national -- the international atomic agency. trump -- hillary clinton says she is finished with being a candidate. she says she is not done with politics because our country's future is at stake. she spoke to cbs in advance of the release of her book about the campaign and she says paidng paid -- giving it speeches to wall street was a mistake. six months to come up with immigration legislation. it didn't just make liberals unhappy. steve bannon talked to charlie rose about the policy known as daca. >> i don't agree with the decision but i understand how he

struggled with it. he said last night, he would rethink it. -- the is on the current guys on the conservative side are not happy with this. can see that interview on charlie rose at 10 p.m. eastern on bloomberg tv. global news 24 hours a day, powered by more than 2700 journalists and analysts in more i'm tayloruntries. riggs, this is bloomberg. tom: taylor, thank you so much. two different views on this on trump throwing responsibility back to congress. the attorney, the law professor, noah feldman, brilliant, let's look at the morning. feldman,rom professor "the framers of the constitution thought about immigration and wanted congress to charge. solution." permanent

-- ianpherd's shepherdson is with us and martin joins us, the senior executive editor for government. what a strong weekend for thinking about this issue. the romance of getting congress back to the 1950's congress back to the 30's, back to tommy lee emancipation proclamation with abraham lincoln. is it going to happen? iti think it will because was the intention of the founders to have congress settle on issues of immigration. donald trump's punted this issue back to congress. wherehere was that point tommy lee jones and daniel day abraham lincoln, the

president is not that powerful. that was the way it used to be? the generations moved through the presidency, gained much more power. this is a throwback to the fundamentalist view of the constitution. marty, what is the common misconception when it comes to these things? >> some of it is borne by president trump himself when he imposed the ban on immigration early and his presidency, he inserted that it was the purview of the president to decide who can come to the country. to an extent that is true. but the legal status of who can be a naturalized citizen is the purview of congress. barack obama, when he implemented the dreamers stipulation, he himself conceded it was probably not constitutional and are needed to be a legal solution. francine: will he be challenged

legally much more? >> it is possible but really , john mccainappen yesterday on the talk shows made it clear, congress did pass comprehensive immigration reform at least in the senate in 2013. there will be an attempt to revive a comprehensive immigration plan. you had so much of our coverage 16 years ago. it was remarkable. the tragedy of 9/11. you personally led our coverage in real-time. your thoughts? >> it was an extraordinary moment coming into the building on park avenue and feeling the tangible shock that was going on on the streets. then we realized the world had changed forever for us and for generations to come after us. tom: marty, thank you so much.

now, we continue coverage on governance in washington. you, wonderful to speak to your clinton administration work, your work out of berkeley and kennedy school, do you trust them? where is the trust in washington, where is it? >> i don't think many people trust president trump. i have been thinking of writing something called, president chaos. that is what he is turning into. i said a while ago there was three possibilities for this presidency. one is it could normalize. every time we think he is behaving as a normal president, he will give a speech, i nice speech about a tragedy. then he went to phoenix and blew it up. i don't think we can hope he normalizes.

tom: you sound like you are in the beltway. he has support outside of the beltway of washington, of the sanctuary cities. are those people going to follow him to a conversation with the senate -- with senator schumer? will butk they remember his support is not that strong. he is in the 30's in approval ratings. he has a base but may i remind you that richard nixon was at wasapproval rating when he about to be impeached and he resigned from office. all presidents have a hard-core base. if i were trump or his people i would be worried about how close he is to a hard-core days. he has seen mammoth erosion from independents and republicans who ickught that his whole scht

was just that. it into theed presidency creating chaos and confusion wherever he goes. they are not getting much done. francine: and yet, last week was one of the first times we had a party agreement on the debt ceiling. can the president change? >> that is what everyone is kind of hoping for because this is no way to run a government. everyone is hoping he can change but every time we think he is changing he blows himself up. the thing about this president , which has ideology been a consistent republican ideology. the fact that he seems to change it on a dime and he does not have any friends. come towhen you washington, no matter if you are president, you need friends. while the president is somewhat powerful, as her previous guest said, he is not that powerful.

so far he has been in washington doing nothing but alienating the people he needs. tom: let's migrate to marty. to both of you, as an economist, do you assume new deficit to gdp? , is the rockefeller presidency upon us? that is unlikely to happen. a big deficit for harvey and irma at this point. i don't see any meaningful trajectory or willingness and congress to change that. tom: where are the fiscal hawks right now? they are done. are surrounded by people who want to spend money on things like tax reform and defense. think that they realize that and they are holding the budget negotiations hostage to get

clarity on tax reform about what that will be. without specificity on tax reform, this budget deal is going nowhere. francine: elaine, you say the president does not have friends, what about his advisors, who should he be listening to? >> gary cohn. he seems to have been pretty unhappy with the president so i do not know how long he will last. he seems to have a good sense of tax reform. in response to the previous guest, the president and the republican congress really need tax reform. if they don't get tax reform this year they will go into midterm elections with no achievements. i think that they will get some form of tax reform. it much -- it might be pared back and that is where i think gary cohn is so important to the efforts. tom: thank you so much.

book, marty, thank you so much. we will continue with ian shepherdson. itre thrilled euro watching us on television worldwide -- we are thrilled that you are watching us on television worldwide. boston,xm, new york, bay area, and the washington nationals home. this is bloomberg. ♪

taylor: this is bloomberg surveillance. it let's get the bloomberg business flash. drugmaker the largest

has named a new ceo. they are trying to revive a sales and reduce debt. has been ceo at a danish drugmaker. >> i am the kind of person who likes challenges. i have always been inspired by challenges. if it is challenging and complex, i normally thrive on that. taylor: he may get pressure on -- from investors. that is your bloomberg business flash. the 16th anniversary as we remember september 11. this year, looking at the beautiful memorial, these are two units for our worldwide audiences. this is an extraordinary monument. , i will bent out over later this morning with a wonderful charity effort where

people give up a day's pay toward the continuing remembrance of september 11. we want to be positive. you do that with john miller who is in the rough and tough battle of real estate in new york. extremely authoritative on this. not september 11 but september 12, october 12, november 12, no one is going to go down there. i know that the mayor of new york, mr. bloomberg, mr. giuliani, pushed against it. what was the catalyst for this incredible rebuild of downtown new york? or sixthe first five weeks after 9/11, there was no market. it had essentially stopped. ,urprisingly, five weeks later i came across a four way that he wore on a apartment in midtown. war on anway bidding apartment in midtown.

the fed pressing rates to the floor, we saw a bottom-up return of the market. tom: the boom of the lower tip of manhattan, commercial properties there and stores, are there schools? is it a place where families can go or do they have to migrate uptown or the hinterlands? >> there has been a big push since the tragedy to reinvent downtown as more of a 24-hour neighborhood as opposed to a 9-to-5 neighborhood. that is been interest in regard. over the last 16 years, lower manhattan has -- property prices risen, a big jump. this and the story about is that it essentially

enabled or accelerated and inevitable gentrification that had already started. francine: how much foreign money is there in downtown? how much of that money comes from china? >> surprisingly little foreign money downtown. most of the foreign money especially in this super luxury, super tall new development phenomenon, has been focused on the midtown is this district versus downtown. far lesshas participation, probably in the neighborhood of 15% to 20% of transactions versus billionaires row which is more like 75% foreign. francine: as the dollar gets weaker is there increased demand for it? >> absolutely. one of the reasons why the market cooled off so suddenly was in 2014, we had the dollar

strengthened. currency, but it wasn't just a currency play, it was capital preservation globally. tom: also a resilient new york. john, what will mortgage rates do? ian: not yet. we have had this extraordinary time where government rates are just about 2%. they will not move in a meaningful way unless and until markets start to take the fed seriously in terms of projected rate increases over the next two years. at the moment that seems somewhere else. that might change quickly. we have been talking about it for years. until it happens, those tenure rates will stay -- those 10 year rates will stay near two and three. >> there is no concern about

rising mortgage rates. john miller, find me a three-bedroom unit somewhere. thatefing on the optimism it took 16 years ago to rebuild downtown new york. tv is a good place to go, francine mentioned it in the last hour, the freedom tower in the background. i like it. the freedom tower on this september 11. you can grab a chart, bring it that cablecan steal chart and bring it over to your bloomberg. this is bloomberg. ♪

francine: this is bloomberg surveillance. coming up shortly, bloomberg daybreak: americas. focusing on commodities. >> welcome back. we will be taking lots of different angles when it comes impacticane irma and the there. drilling down into the energy sector as well. we will get a perspective on the

effect of the market after these destructive storms. tom: alix steel, greatly appreciate that. i want to go inside the formula for gdp growth. , the dynamics of exports and look at the elasticity and the variable of all that mumbo-jumbo. this is an extraordinary chart. line, 87 207ight '07.7 to where did that gap go? is businesses being reluctant to catch up on capital spending they didn't do in the aftermath of the crash. the outcome, is the capital stock, that businesses have to generate income, has shrunk.

tom: what is the first order differential? technologies changing? new globalization? or do they not know where rates are so they cannot make intelligent decisions? ian: much more the latter. this a merged immediately after the crash. it was an event rather than a program -- rather than a process. rates being low for a long time, makes companies wary. things must be bad so i will not borrow money. tom: exactly. whether it is janet yellen or mario draghi, no one knows where the keel is on the sailboat. whether: nobody knows it is alive or taking time off. the data points, ahead of the fed, have they changed significantly from what we were looking at or should be looking at five years ago.

ian: i don't think they have changed very much but the dynamics have not become visible. in developeds economies, the u.s. and u.k. and eurozone, is where is the wage growth? where is the pressure on wages? the u.s. is just above 4% now. that is historically low. it is unclear as to why this has happened and there are lots of theories. looking at evidence in the u.s. specifically, it has heightened -- tightened over the last six months. that tightening will change the way the markets and the fed think about the future path of rates. this is a mystery that has been common to economists. we should have a wage growth of 4% and we actually have 2.5%. very much focused on labor costs and if you don't have that inflation you don't need to keep raising rates even though you promised you would

be. markets have worked this out. we have a standoff. in the meantime, the economy is growing but with the shortfall in the capital stock and weakness in investment, it is not growing fast. tom: thank you for the note on sterling, i'm nice leg up, 1.31 handle, bring up the chart if you would. very quickly, you have a nice leg up in sterling. we like to give you market coverage as it happens in real time. ian shepherdson, thank you so much. sterling, above the day after brexit. this is bloomberg. ♪

♪ jonathan: hurricane irma batters florida but the most dire

predictions evaporate as it weakens overnight. north korea threatens retaliation if the u.s. backs harsher sanctions. the reflation story, substantive life in china. as consumer price inflation comes in faster than predicted. from new york city for our viewers worldwide, good morning. i'm jonathan ferro alongside david westin and alix steel. to get you set up, the action as follows. after a week of losses on the s&p, futures are firmer by 13 points on the s&p 500. the dollar bounces from a 2015 low. down by 2/10 of 1%. treasuries on offer, by four basis points. up, stillar-yen trading around that