francine: the u.s. senate tax bill is headed for a debate. bitcoins wild ride. cryptocurrency plunges the former covering losses. could the selloff spiral into something deeper? and how secure is the fabric of u.k. society? we will ask minouche shafik at the bank of england. ♪ francine: good morning and welcome to "bloomberg surveillance." i'm francine lacqua in london. we are seeing a lift to the

stoxx 600 after a selloff in technology stocks. meeting, we understand that russia and opec will extend their production cuts. euro-dollar, i'm looking at that, also pound. maybe finding an agreement. with some of her possible coalition partners. later on, we talk italian banks and risk with claudio costamagna. interview yousive don't want to miss as well. minouche shafik joins us in her first tv appearance since leaving the boe. i, we will talk with the socgen chairman. let's get to the bloomberg first word news. nejra: u.s. president donald trump has nominated marvin goodfriend to be a governor of the federal reserve.

a professor at carnegie mellon university and a former director of research at the richmond said goodfriend has served on an independent panel of economists known as the shadow open market committee. opec and russia are ready to extend their oil production cuts until the end of next year to ensure global stockpiles keep falling. viennang to delegates in , all opec members and russia agreed the cuts should last until the end of next year. two delegates said that a committee charged with overseeing the agreement also recommended extending until the end of 2018. credit suisse plans to boost returns to shareholders. investor day in london, the bank also increased its target for wealth management and business in asia-pacific. the lender confirmed its target for the swiss bank and

investment banking and capital markets. the u.s. has demanded china cut off all oil exports to north korea after the country's latest intercontinental ballistic missile test, warning that washington will force action. speaking during an emergency session of the united nations general assembly, u.s. ambassador nikki haley said donald trump had called xi jinping to discuss the matter. >> president trump called i and toldesident x him china must cut off oil for north korea. in recent past, the overall situation on the peninsula was stable, which provided opportunity for diplomatic efforts. regrettably, this window failed to lead to a resumption of dialogue and negotiations. nejra: donald trump has lashed

out at u.k. prime minister theresa may after her office rebuked him for retreating anti-muslim videos posted by a right-wing british activist. he tweeted, don't focus on me. focus on the destructive radical islamic terrorism. we are doing just fine. but trump initially tagged the wrong person, linking to a woman on twitter. moments later, he fixed the error. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine: thank you so much. u.s. senate republicans have taken an important step forward in passing their sweeping tax overhaul bill. they voted to begin debate on the legislation which could lead to a vote by the end of the week. if they can approve a bill, they will have to hammer out compromise legislation with the house. bitcoin has continued its roller coaster ride after yesterday's

sudden selloff. overurrency climbed to $10,000, after a 20% slide yesterday. the fall came just hours after hitting a record high. the price swings are increasing. lots to talk about. ed robinsonker and both join us on set. things the kind of wider the markets are hoping for. stephanie, what are we getting today? off 20ie: they kicked hours of debate. later today we will have what is ama, which vote-a-r could go into the night. influx it reflects how this tax bill is still, right before they hope to get a vote on it. have said, itors don't know what i'm voting on. this bill is changing so

quickly. i think it will continue to change. francine: we are trying to count the senators, but when do we find out? stephanie: part of the problem is it is very hard to gauge. they are trying to offer changes to satisfy the concerns of some senators. that can create problems for other senators. the trigger for a tax increase if the projections don't and out, that is the most controversial change that i think is being considered. francine: how loyal to the party are the senators? or how loyal to the president are they? stephanie: they can only lose two votes on this. certain senators we really haven't heard from in detail, notably john mccain, who remains a bit of a wild horse. because it is being rushed through, we just don't know how they are going to vote. francine: bitcoin, this is the

other. what happened yesterday? some of the accounts were frozen? ed: the demand is outstripping the infrastructure. that is what is happening now. the exchanges can't handle the traffic. francine: how many exchanges are there? ed: there's dozens. g dax was one yesterday that really had trouble handling the flow. even this morning, still reporting on its website that service is degraded. you're just not going to get through. you're going to get error messages. the market freaked out. that is how it kind of finally calibrated. francine: could they actually sell it? ed: not on that exchange. that exchange was down. if they had their bitcoin in a particular wallet, that creates

a roadblock. that gets people very shaky. it is around 11,000. that is why it dropped $1000 in about an hour. francine: two or three weeks ago, the value dropped 10% to 15% because there was a technology update that didn't happen. is that still expected? ed: that seems like ancient history, just a few weeks ago. you have the cryptographic community working very hard on solving the scalability issues. i think that process is ongoing. francine: thank you so much. you will see a lot more of stephanie and ed throughout the day and the week. stephanie baker and ed robinson. stay with "surveillance." francine:while we talk to claudo costamagna, chairman of cassa depositi e prestiti, a big bank, and we will talk about the italian economy.

later on, we will talk the welfare state in the u.k. society with minouche shafik, former deputy governor at the bank of england. later on, we willwe are really o today's show. this is bloomberg. ♪

francine: good morning. this is "bloomberg surveillance ." i'm francine lacqua. let's get straight to the bloomberg business flash. nejra: bitcoin's roller coaster ride is showing no signs of easing. the cryptocurrency soared above $11,000, a gain of more than

twofold since september. it then plunged 20% in nearly 90 minutes. expanding by acquiring the nation's stock exchange, a hub for etf's. the amsterdam-based exchange operator is buying irish stock exchange for 137 million euros. is also set to add jobs from london-based banks such as barclays, which will probably have to move staff. theresa may has said london is extremely well-placed to win aramco's planned listing. the comments come as she competes against donald trump for the coveted initial share sale. an company is mulling international sale in addition to a listing on the saudi exchange. trump tweeted his hope that the saudi's would use a u.s. exchange.

that is the bloomberg business flash. francine: now let's talk italy. business confidence has improved. the economy has recorded 13 straight quarters of expansion. while the economy is heading for its best year since 2010, unemployment remains above 11%. how confident should investors be? we are joined by claudia custom on you, chairman of cassa depositi e prestiti, and former goldman sachs executive. it is the third-largest bank in italy by total assets and manages the italian postal savings. welcome to "surveillance" in our new office. how does it feel? you must feel a little bit of a turnaround. claudio: definite turnaround. the economy is doing well.

not only the north and the center of italy, but also the south, because we had a very good tourist season this summer. maybe not for good reasons, because italy is one of the few beenries where there have no terrorist acts. the perception is safer than other places. south, it is the most important industry. francine: if you have the economics, it seems to be trailing other european economies. claudio: there are historic reasons for that. time, we are recovering pretty quickly. two days ago, there was a number of the export, which is really the most impressive number. we are the fifth-largest exporter in the world after china, germany, korea, and

japan. francine: quite something. claudio: quite something for a country that is clearly coming out of the recession. francine: when you look at some of the concerns that foreign investors have, we could have a hung parliament. how should investors view this? claudio: i don't think there's an answer. we don't know when the next election is going to be. we will see. nowhung parliament is as of the most likely result. we will see. we might have positive surprises. francine: if it is a hung parliament, does it hurt structural reforms or consumer spending? claudio: the most stringent reforms have been done by the renzi government.

one of the reasons why the economy is doing well is also the fact that we start to see the result of those reforms. there are still a lot of other reforms to be done. that is the problem. we have to wait and see. francine: that is the understatement. what do investors ask you? need to you differentiate. infrastructure investors are all over italy. that is not a problem at all. francine: will that change, infrastructure? claudio: i don't think so. if we have a strong government, we have a lot of things we can do. real estate depends on the cities. milan, you can do whatever you want.

things.you can do francine: milan was pitching for a lot of the business because of brexit. claudio: there's been an announcement also from some of the banks. benefit likeng to frankfurt or paris. small and medium-sized companies , those are the backbone of the italian economy. they are finally deciding to open up capital. the results of the stock exchange are there. we don't have a lot of supply, unfortunately. that is one of the things we are working with, trying to promote

as much as we can those companies that go to the market, and sometimes being a bridge in order to prepare them. francine: is it too risky to be on the italian stock exchange because of political risk? same as exactly the other european exchanges. francine: so there's -- claudio: if you are one of the maybe, but if you call --dsized, what we they exporttalian] -- 90% of the turnover. the small and medium-sized enterprises, why are they finally opening up their capital? claudio: they understand scale

is important. haveically all of them succession issues because of the change in generation. the new generation is much more international and careful about the financial performance. i think there is much more fertile territory to say, listen , the bank debt is not there as it used to be. francine: are the italian banks lending enough? claudio: they are lending enough to the big companies. they are going back to small and medium-size enterprises. the cost of risk is very high in the new regulatory environment. it is more difficult for them to do what they used to do. there are other ways. money providing plenty of

to finance more enterprises and we are working well with european investment bank on that regard. francine: i had bob diamond on yesterday saying that he's looking at an opportunity to become a challenger bank. the space in italy is pretty active. a lot of initiatives. in general, there is a lot of space. francine: what do you think of italian banks? it feels like we may have turned a corner. claudio: we definitely turned a corner. we still have a couple of situations which need to be solved. but nothing compared to where we were a year ago. think those have been dealt with. day, they arethe

very solid banks. what are the chances of the five-star movement getting into power? is there a risk that italy leaves the euro? claudio: the five-star movement has never said they are against the euro. positions based on polls that they do in the net. every single day. knowsality is that nobody what they are standing for. think the chances of them getting to power are quite slim. as a goldman sachs executive, i'm surprised you haven't been offered a job at the fed yet or the treasury.

[laughter] about somealk to me of your personal interests. you are invested in things to do with biotech. claudio: there are some things that i did before, when i was a free man. i had my own advisory boutique. i invested in several startups. one of them was very interesting. that company was set up in 2003, 2004, in a niche in the industry. francine: to treat cancers, for example. claudio: that is a great story. italian capital. it was in france, but it was backed by italian family in

france. then i joined the board and became chairman of the company to take it public. now, we announced the entry into an agreement to sell the company to novartis for $3.9 billion. it is quite a story. francine: why did it have to go to france? there's not a brain drain? claudio: not at all. it was a european company. the entrepreneur is italian. most of the money was italian. that is an interesting thing. marketond most important is italy after france. things can be done in italy very successfully. spacene: also in the

which italy is not necessarily known for. italy is known for a lot of the goods making, the fashion, the food, but biotech -- claudio: and pharma sector is doing extremely well in italy. we have seven or eight midsize companies which are doing extremely well. all of them are family-owned. it would be great. that is something we are trying make somether we can integration to create -- cassa projects, what are you working at the moment? claudio: it is not one project, ever.

we have a big balance sheet. we can do a lot of things. , we alwayssue is have to deal with somebody. we have to be true to that. secondly, -- francine: when you say sometimes you are the only one, it is because the person in front of you doesn't understand the endgame? claudio: what i was talking about before, convincing , it takesurs to scale time. but sometimes we can do it. we are doing it. another thing we've done, we launched the first italian-based restructuring fund.

they've done the first deal. done in the we've last two years, mainly. francine: thank you for joining us, claudio costamagna. we are getting breaking news out of opec. iraqi minister, saying opec agrees to an extension in production cuts. we understood from the saudi arabians that the iranian minister also said longer duration extensions would help with the stability of oil markets. up next, we speak to minouche shafik. this is bloomberg. ♪ is this a phone?

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choose by the gig or unlimited. and ask how to get a $200 prepaid card when you buy any new samsung device with xfinity mobile. a new kind of network designed to save you money. click, call or visit today. francine: good morning. this is "bloomberg surveillance ." a big meeting of oil ministers. opec and russia meeting in

vienna. our team of reporters are on the ground. arabia,ster of saudi the linchpin of opec, saying they see a healthy demand. discussion ise whether they extend production cuts. ,e heard from iran and iraq saying this will probably happen. the saudi minister saying the outlook is overly bearish. this is what we broke on a are a couple weeks ago. saying opec isr looking for a wider group of countries to join the cuts. yousef gamal el-din on the ground trying to see whether they have a decision. we will get back to that. here's nejra cehic. nejra: donald trump has nominated marvin goodfriend to be a governor of the federal reserve. he's a respected monetary economist.

a professor at carnegie mellon university send goodfriend has served on an independent panel of economists known as the shadow open market committee. credit suisse plans to boost returns to shareholders and pay half its net income in share buybacks or special dividends. the bank also increased its target for wealth management in asia-pacific. the lender confirmed its target for the swiss universal bank, wealth management, and capital markets, and global markets businesses. the u.s. has demanded that china cut off oil exports to north korea after the latest missile test, warning that washington will force action if beijing fails to do so. speaking during an emergency session of the u.n., ambassador nikki haley said donald trump had called xi jinping to discuss the matter. u.s. senate republicans voted to

begin debate on their tax bill. it touches off a process that could produce an up or down vote before the end of this week. if they can approve a bill, they will have to hammer out compromise legislation in the house. u.s. president donald trump has lashed out at u.k. prime minister theresa may after her office rebuked him for retreating anti-muslim videos. he tweeted, don't focus on me, focus on the destructive radical islamic terrorism in the united kingdom. tagged the wrong person, linking to a woman identified as theresa scrivener. moments later, he fixed the error. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. tagged the g francine: thank you so much. now onto britain's economy and the fabric of you see u.k. soci.

minouche shafik joins us. minouche was former lee the deputy governor. she was also the youngest vice president in the history of the world bank and was later responsible for the department of international development in the u.k. minouche just gave a speech which discusses why the welfare contract is under pressure and how inequality and technology are putting pressure. thank you. first of all, what is your premise? societyty is bad for and we need to bring it back closer if we're going to have better cohesion? minouche: absolutely. many of the divisions we see in society i think are driven by the fact that the welfare state isn't fit for the modern

economy. pressureer huge because of aging, technology, automation, and what that is doing to the ability of people to contribute to the welfare state. francine: what does automation bring? how do we look at the drunk drivers? what will our society look like in the next 10 years? minouche: estimates they re-, but most people think automation will affect about 60% of jobs in the next decade or so. this new wave of automation is it is not just manufacturing and truck drivers. it is also going to affect professions, things like lawyers, doctors, accountants. we have to think about the future of work in a different way. that which is automatable will be. the jobs that remain will

require complementary human skills. everything repetitive and mechanical is likely to be automated. take,ne: how long does it how do you retrain people that will either lose their jobs or not be able to go into those jobs? minouche: i think there are many solutions and countries haven't begun to think about how the welfare state will help people adjust. arguably we've done a very poor job dealing with the circumstances of globalization. we know this change is coming. we have a chance to act now. countries like denmark and the netherlands have a way of organizing their labor markets. it is easy for firms to hire and fire workers, but if they lose their job, they get very generous social insurance, and the states invest in helping workers retrain. that is an interesting model. francine: you think that our

current government is looking at -- we saw a couple things in the budget that tried to focus on technology and infrastructure. minouche: those things are very good. they need to look at new infrastructure, ways to build capacity. is one piece that is missing active labor market policies which help workers develop these new skills. there are pieces of it. they are not quite what you would see. gdpark spends about 1.7% of on active labor market policies to help workers. that is close to what the u.k. spends on defense. given that we know these changes are coming, it is best we do it now. because this will have an impact on the economy and everything else.

how difficult actually is it to say how you need to be trained to do jobs of tomorrow which we may not even realize we need them right now? minouche: it is impossible to predict specific jobs. who would have thought that smartphones would replace -- francine: our brains sometimes. minouche: a whole industry now of people replacing the screens on smartphones. or search optimizers. what we know is that things that are repetitive and mechanical will probably be needed less. the skills that are needed will be more creative, emotional, teamwork, those kind of skills. be other thing we can do is much more serious about lifelong learning. very few governments have got to grips with it. it is a good thing that in the u.k. there is no age limit on getting a student loan.

i think people will be going back to university or back to training programs. we need to make that really easy for people. some countries like singapore have given every citizen over 25 a voucher for $500 and citizens can accumulate those vouchers and use them to train throughout their lives. the story is of about part-time work. we need to make part-time work much easier, so benefits and entitlements are just prorated for how many hours they work. in the future, i think more people will work part-time as parts of their job are automated. francine: is it a hindrance or an opportunity? you don't know what kind of society it will create because you don't know what will happen. or do you say, we can start to reinvent henry conceive of society from scratch? brexite: at the moment,

adds a lot of uncertainty. many of the policies that would equip us to prepare for these changes don't have much to do with the european union. there are things we can do of whatly regardless the policies of the european union are. i think the main issue is the uncertainty. if you look at the lse, how do you train future students to be better equipped in this society, but also, do you worry about visa students? minouche: it is an issue. we are one of the most international universities in the world. students and faculty come from all over the world. it is a concern. that international students bring huge assets to the u.k.

they spend a lot of money in terms of tuition. they subsidize u.k. students. we know from recent research that they don't overstay their visas. there really are no issues around immigration associated with foreign students. homef course when they go they have an affiliation that stays with them for the rest of their lives. that is clearly the policy direction we should be going. francine: have you seen more students worried about their status because of brexit? minouche: for most universities in the u.k., the numbers are down. london school of economics is a bit of an exception. we haven't seen a fall. but we can't defy gravity forever. the other thing we are trying to do in the current environment is

contribute intellectually to where the future of the economy should go. and thinking about, given that we know these shifts are coming, how can we put institutions and mechanisms in place to make sure our society can cope with them? there's a big agenda for the lse to help countries figure out how to develop a welfare state for the 21st century. francine: what do you make of universal credits? minouche: i think the idea of consolidating benefits into one place is a good one. i think the idea of trying to simplify that is also a good one. there have been serious implementation difficulties. maybe the pace of rollout has been faster than the ability to implement it. the reality of poor people's lives often in car many shocks

at different times. having one system to try and adjust to people's lives is complicated. i want to get your take on productivity. this goes back to what we were talking. everything is linked in these economies. how would you fix productivity? some say there's a problem. but it is also measured maybe in a way that isn't 100%. we have to go to vienna very quickly. i think we are getting one of the ministers to talk to us. hold that thought. yousef gamal el-din is speaking to ministers. 100% agreement of the market on its way to recovery. the fundamentals speak to themselves. inentory has been going down

2017. we are entering a soft period of demand december through first quarter. therefore, those inventory draws will slow down and we may see a slight build in the first quarter we will have to wait until 2018. [indiscernible] us want to be of on our toes. the best case in terms of supply demand is going to require all of 2018. however, we will need to consider other events. we know that there are too many variables in terms of supply and demand. countries have4

been responsive and responsible. meetse a committee that bimonthly and we have a committee that meets monthly. they will continue to monitor the market. anything toct change. decisionng to adopt a that allows it to continue the process that has worked so well in 2017. [indiscernible] >> i think it is premature. we all know that when it is time

to adjust to normal production levels, we will need to do it gently and in a very thoughtful and considered way. we will do it in consultation amongst the participating countries, and those countries with spare capacity will gradually bring back their production and ensure that we don't unnecessarily drawn down inventories to a tight level. [indiscernible] >> we are extremely satisfied with the levels we have seen. unprecedented that we have compliance well above 100% for many months in a row.

are countries here or there that hasn't been meeting our expectations. we are having serious discussions with them. they are promising to pick up their compliance. , they've beeniers more than offset by countries that have over delivered. , as the biggest exporter, we've taken some of that load on our shoulders. some countries have experienced involuntary reductions beyond their commitment. that has offset those outliers. i think what matters is the fact

that inventories have come down considerably. i think what is important to focus on is that we still have about 50% of our work to be done. we are not complacent. 2018, knowing that we are only half done, we probably need all of 2018 to finish the job. [indiscernible] is it more difficult to have the collective good in mind? are people getting tired of the agreement? target in had a price mind. it has always been about fundamentals. francine: we will keep an eye on vienna. those are live pictures coming in thanks to yousef gamal

el-din. this is one of the most exhilarating, but also tough jobs for any reporter. you have 50 or 60 reporters in a pretty small room. meetings, we look at the price of oil, but it is just a warm-up act for the non-opec meeting which will happen later this afternoon. will comeen russia and we will see whether they sign up or not. we did hear from the minister of saudi arabia that he won't sign anything until russia says it will cut production. a sense of to get whether they will extend production cuts. i think it has had an impact on the price of oil. let's get back to minouche shafik. we've been speaking about the welfare state. we were talking about productivity. one of the things -- i don't know if fixing is the right word, but stabilizing it.

minouche: productivity is the most important thing. it is not just a u.k. problem. this is a problem in all advanced economies. the u.k. is perhaps more intractable. tospend a lot of time understand what is behind it. there are many different hypotheses. thought it, people was the financial system couldn't do its job of allocating capital. i think that problem has now diminished. some people thought it was low interest rates. they could borrow very cheaply. some thought it was because funds were reluctant to let go of workers and held onto workers even though it wasn't the most productive thing to do. now people seem to be

focused on the huge dispersion of productivity across firms in the u.k. there are some incredibly at one end of the tail of, and a long firms who haven't invested in the future. there's an issue around how to get those more inefficient firms to the efficiency frontier. that is part of the way forward. you asked about data. that is a good question. we don't think it is all about data. it could partly be about data. there was another episode -- francine: is this because of this? this is part of it, right? digital, it is often hard to measure the productivity gains and the quality of the service you are getting is different. that is hard to measure.

there was a similar episode of low productivity in the late victorian period. economic historians are still debating whether that was a data issue or a genuine decline in productivity. these things are hard to measure. at the current moment, there is an issue. the solution is around competition, skills, and that. francine: is this the one key question the bank of england would like to know? it is difficult to find the toolset to set monetary policy. the bank of england's objective is to keep inflation at 2%. one of the puzzles is why wages haven't gone up. the main reason is because productivity is low.

getting clarity and improved performance of productivity would mean wages could go up and we would have a slightly more normal inflation environment. francine: does regulation impact productivity? i've heard a million theories. something to do with regulation, some to do with people not being productive or efficient because they are concerned about the next crisis. is this nonsense? could it be something that is impacting? thosehe: i think explanations are less important than the core driver. competition also plays a huge role, forcing firms to innovate and do things better. francine: let me bring you to my chart. we got talking and i forgot to show them to you. u.k., the bottom line, then we have the european

union, the region in yellow, then germany. it is basically the percentage of manufacturing as a part of gdp. the u.k. is so low. is it easier to retrain in this society or not? minouche: u.k.'s share of manufacturing has been on the decline for the long time. the u.k. is a service economy. retraining, i say it doesn't make a huge difference. there will be retraining in manufacturing as well as in the service sectors. we will see automation transforming both areas. bad.'t think it is good or people tend to glorify the manufacturing sector. service sectors can produce very high income, high levels of

productivity, and high levels of well-being. i think the issue around skills and retraining is not sector specific. francine: is there one common misconception or something that companies get wrong? i don't know, whether it is how they look at the longer term, is there something our viewers and listeners should think about? minouche: what is striking is how firms' investments in training workers have declined sharply. in the u.k., research and development investment by the private sector is very low. francine: why is that? minouche: good question. francine: short-term is him? think they aren't investing in research and development and they aren't

investing in their workers. we need to find out why that is. that is an area where government policy can help incentivize more of that. the government supports worker retraining directly. the key thing for that to work is that it must be linked to employers' needs. abstractpeople in the is a waste of money. in the countries that are successful at this, germany, netherlands, those training programs are closely aligned with employers, and employers define the skills they need. minouche, thank you so much. please come back. minouche shafik joining us on "surveillance." "bloomberg surveillance" continues in the next hour. tom keene joins me. we will be talking to the

societe generale chairman. we will be talking a little bit of bitcoin. i think we are getting a little bit of breaking news from the london mayor. he's talking about donald trump and he says any official visit from donald trump will not be welcomed. i just want to make sure we do it right. twitter, this is on the back of the spat between theresa may, donald trump, and the retreating of something that people,ok by a lot of saying that if he used twitter to promote an extremist group, he's not welcome in the u.k. that is the london mayor. this is bloomberg. ♪

francine: the u.s. senate tax bill is headed for debate and the final vote could be today. could be an abrupt sell-off for it coin. oil higher as they are ready to extend their production cuts. this is bloomberg surveillance. francine lacqua in london. tom keene in new york. we have a packed show. i'm getting unemployment . gures out of the euro area inflation accelerating to 1.5% and a little bit below estimates and will be joined by the chairman, a former executive word member of the e.c.b. so can't wait to talk to him about inflation. tom: a wonderful time to catch up not only on european banking

but his italy as well with mr. smaghi. francine: now to taylor. taylor: they're playing beat the clock and trying to reach a compromise on the border to allow a breakthrough at the brexit talks at the meeting next week. the u.k. needs to find a way to promise e.u. won't mean a hard the running back of ireland. trying -- republic of ireland. beijing says if south korea doesn't take action, washington will. the ambassador nikki haley says america can take the oil situation into its own hands. oil prices are edging higher hours before opec meets on supply cuts. according to delegates in vienna for today's meeting, the cartel in russia are ready to extend production curves.

bloomberg spoke with iraq's oil minister. >> it was for nine months, not six months, ok. so this is solid, you know. the majority would depre. taylor: the goal to firm up prices before stockpiling for a five year average. president trump picked a transatlantic spot and told teresa may to mind her own business after she rebuked the president for tweeting. the president responded tweeting may should not focus on him but instead focus on the quote, islamic terrorism taking place within the united kingdom. global news 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries. i'm taylor rigs, this is bloomberg. tom and francine? francine: thank you, taylor.

we're getting to breaking news. euro zone and euro area inflation missing estimates as unemployment falls and goes to the e.c.b. is looking at how you measure things, i talked to ms. shafiq which is a e.o.b. problem and western world problem. then we're getting breaking the out of mr. sadik kahn, london mayor and said after that retweet to promote an extremist group, an official visit from donald trump will not be welcomed. that is the very latest from the mayor here in london. tom: i saw 9:00 or 10:00 p.m. when would we hear from the mayor of london on this matter. there it is right now. a hugely important matter in the geist of washington and new york and all of america in the last 12 hours as well.

tom: let's do a data check. i'll let francine talk about sterling and they're up four with a lift to the market and everything else is churning. what else do you have? francine: quite a lot. you look at some of the movers, i'm looking at definitely a pound, on the fact we're expecting possibly a little bit a agreement and pushing sterling higher. sterling gaining on the back of the brexit negotiators leaning closer to a divorce agreement. we're also looking at the european stocks seem to be shredding off in asia where the technology stocks are lower and oil rebounding aso peck and russia set to extend production cuts. tom: we get inflation data as well in the united states. the p.c.e. deflator. let me show the interesting chart on the back of the idea of marvin goodfriend becoming a

governor of the federal serve system and michael mckey will join us the next hour. here's the crisis of the deflator and the huge interest is how we've been over 2%. the boom of the last decade and the regression here at 1.5% trend on p.c.e. deflator, that's the corrugate on core p.c.e. at the fed. francine: it's also an inflation chart. tom and i sometimes talk before the show -- no, we don't. the inflation missed estimates. the unemployment rate here in the euro area kept on falling and this is my chart. it basically shows the conundrum and what central banks seem to deal with. joining us exclusively from rome is mr. smaghi, the chairman of the second largest bank in france and the executive form member of the e.c.b. he worked for much of his career outside the country in

belgium, the u.s., germany and now france, his latest book is called "the temptation to leave outside europe, is there a future for italy." always a pleasure to speak to you so thank you for coming on. let me talk to you about inflation, first of all. is inflation ugly? do you worry europe is becoming a little bit like japan? guest: well, you know, 1.5% in that range is not that worry in the end. it's not close to 2%. it's not that far. the monetary stimulus which is going to take place the next year, although at a lower pace is going to help. and the economy is going to recover. we're behind the united states in terms of cycle, so it's not surprising that inflation is much slower to pick up but it will pick up i think if we look at wages and if we look at the economy in general, investments, signs are encouraging, so i think there's

no reason to change right now. francine: overall, does it feel good, the euro area? away from politics, seems that growth is on the mend and some of the reforms are taking place? how would you put that compared to, for example, an angela merkel not being able to find a government and does it still eel good in the euro zone? lorenzo: i won't go to the points at saying politics don't matter. politics matter in the sense if we have to avoid major shocks, major problems and brexit has to be dealt with in the next few months and we need a united euro to tackle these issues together with others, i think in the end, merkel will be able to form a government. i think it's normal these negotiations don't take long, hopefully not as long as the nether land but we live in a

world where i think also looking forward to italy, we need coalitions. and it's good we made the transition between the period period before elections to where the parties fight with each other to after the election when we need to find a solution. that's a novelty but germany has experience in that area and i'm confident that we'll find a olution. francine: do you think the economy is on track? lorenzo: the coalition s.p.d., is very much more european than america coalition with the liberals in. if that goes on, it would be pretty good news and the economy continues to move forward. we see the numbers all over europe, unemployment going down , consumer confidence

strengthling but i think in my view, one of the key elements is the oil prices, as long as oil prices remain low, i think this supports consumer confidence, supports purchasing power, and will continue to support consumption and domestic demand and that's so important. francine: should we worry about euro strengths? is that the only unknown about what happens to the economy next? lorenzo: i think that, you know, the european economy typically starts the recovery with exports and exports have benefited from a weak euro but now i think the recovery is already in the next stages with consumption and investment. i think if the euro remains as strong as it is or even

strengthens further it will not really hamper the recovery going forward. we see exports are really very strong and further opposition would not really create problems over the near term. tom: i'll continue with dr. smaghi in rome in a moment. coming up later did, a most important and timely conversation. somehow i think marvin goodfriend will come up with carnegie melon and will be the conversation with the president reserve of the bank of cleveland loretta master. stay with us. this is bloomberg. ♪

taylor: this is bloomberg surveillance. let's get to the business flash. credit swiss plans to distribute half net income primarily through share buybacks and dividends. credit swiss said it will beat this year's cost base target. the u.k. is stepping up battle with the u.s. over who will get the stock market listing for aramco. teresa may says london is well placed to secure the i.p.o. of the world's largest oil producer and president trump lobbied the king to have aramco placed in the u.s. norwegian air is planning an expansion with the argentine unit. they want to fly from buenos

aires to los angeles, new york and istanbul. norwegian is looking at flights in other u.s. cities in south africa. the airline has projected assertions it is stressing itself too thin. that's your bloomberg business flash. tom: francine lacqua and i'm in rome. lorenzo smaghi by way of southern california to chicago and with us an executive board member of the e.c.b. doctor, you know where the italian two-year is. it is a stunning statistic to see the italian two-year truly at the zero bound. bring it in here with this chart, jason. it's amazing to see us come down through the last 20 years from a 10% two-year, down to precrisis, call it 4% and now down here at the zero bound. can you say, doctor, this is all about mario draghi and the .c.b.?

lorenzo: no, i don't think so. it's part of a result in the address of fiscal policy which may have been a bit slow but is happening and in my view it's a result of global saving. people are looking for yield and we're seeing this in the u.s. the fed has raised interest rates, the policy rates but long-term rates and even medium term rates have really not gone up and the yield curve is flattening. so my impression is that the long hand of the curve is really determined not by monetary policy but by the global financial conditions. tom: we had stan fisher at citigroup and howard davies at the royal bank of scotland and you're one of our experts on economics, finance into our banking system.

how long can the banks get along with a flatter yield curve in these distortions in the fixed income market? lorenzo: well, certainly it's a problem for the traditional banking, traditional retail banking that, you know, you cannot borrow short and land long and work on the spreads to make part of the revenues and we're seeing revenues going down all over the world now in europe, maybe we are behind the u.s., so some steepening should happen. on top of that you have to add competition from fintex and digitalization and so many challenges which makes retail banking more difficult than in the past. and this is why in order to address these challenges going forward, you need some kind of consolidation of the banking industry in europe and this is

not happening. the supervisor, the e.c.b. said they would like to see some consolidation but this is not happening and it's not easy as the banking union is still not omplete. francine: there's so much speculation over the fate of the german bank and speculation surrounding consolidation is taking hold more and more. do you see 2018 the year where e are going to see more m & a. ? lorenzo: again, it's not easy to consolidate cross board in europe. there are still regulations which make it difficult to exploit cinergies, you know, some kind of or cinergies out of the mergers and it's difficult to look at the retail sector and find

cinergies in the retail sectors because the load is different and on the investment banking you may have more cinergies but you'd need the european central bank to really make it possible to move liquidity in the euro zone much more freely, to net the intraeuro zone positions to assess the size of the balance sheet in terms of capital and you know, the surcharge for large banks. still a lot of measures to be taken to make this cross border americanner really viable. francine: if there is a wave of deal making, how would it reshape the european sector? if it's not 2018, at some point what do you foresee? lorenzo: i think if we look at the experience of the united states, how the bank

consolidation process together with the creation of a much deeper and liquid capital market, these two things which started after the savings and loan crisis, i would say during the 1980's, these are two processes which take place in parallel. now, in europe we started the later, as usual, but you need to see these things moving together. you need to see capital markets union which progresses much more rapidly and at the same time, the consolidation of the banking system starting to develop. conditions now are still difficult but, you know, in a few years, couple of years maybe, things will start to move. i think politicians and the regulators understand this is a sanction to make the financial system in europe more resilient for future crisis. tom: coming up later on

bloomberg television radio, a conversation with the leader of goldman sachs, mr. blankfe imbing n in conversation with our michael bloomberg. we look forward to that. we'll speak with alex steele looking at small business. this is bloomberg. please stay with us. ♪ no

tom: bloomberg surveillance. let's talk bit coin.

his is the intraday chart. let's see yesterday's festivities and the idea of bit down, dow 10,000. bit coin, 11,000 with the this leads hot up to volatility and clearly indicates item not a currency thanks to joe stiglitz on his comments of it being outlawed. with us lorenzo smaghi, economist. should bit coin be outlawed as the laureate from columbia uggests? lorenzo: an tempt by somebody make pames are use currency

to avoid money laundering and maybe anti-terrorist financing. i have the impression that policy authorities have not yet focused on the dangers of the government of these scams and when they will, i think some people really get hurt. the thought this was a new ininvestigation we lose money and makes me think former chairman of citigroup before a crisis as long as the music plays we dance and as long as the prices go up we think it's fantastic. francine: when do you think egulators will look at this? lorenzo: you need national cooperation and we're living in times international cooperation is not really at its best.

without the united states, without china, it's difficult to move on this area. but i think this will happen for some reason, we will discover behind these bit coin scam, some funds were channeled maybe to finance terrorism and at that point we wake up and realize this is not appropriate. francine: thank for you joining us. that was lorenzo smaghi. coming up next we speak with nigel wilson this is bloomberg. ♪

prim: this is bloomberg surveillance from london and new york. we have to talk about vienna and oil prices edging higher as we watch for the next move of

production cuts. we spoke to the saudi minister and he said there is still a lot of work to be done. you receive joins us from vienna. what did you find out from this morning and is it a warming act to when i.u. russia show up? usive: we saw a united front in the scrum and had a conversation with quite a few of the ministers including the saudi minister who was happy with the progress this agreement has done so far and does prefer a nine-month extension and the talk of an exit strategy is too early. and a quote, if something is working downtown let it go. and that sums it up nicely and we have to figure out the role of russia and that's the unknown variable that may cause anxiety because they've been pushing uncertainties around this. francine and tom?

francine: i was telling everyone you spoke to the saudi oil minister. here he is. all right. we don't have that sound bite but what we were talking about is basically what yousef just wrapped up nicely. you said right now they're behind closed doors so we find out more officially what is decided in a couple hours? yousef: yeah, so at the moment the market is pricing in a nine-month extension of the program and now deliberating. we heard from the minister of petroleum from nigeria as well and said nine months is the base case and makes the most sense. he also said it's important perhaps to think beyond that and see what you'll do after that. and we'll get to hear a decision whether or not they're going to actually confirm those nine months of an extension but then of course the russian equation needs to be figured out but we'll wait for the decision in the moments to come. tom: jeffrey curry at goldman sachs made clear to me it's a different vienna meeting and

it's usually a snooze fest and you know that and our team knows it. what's in the back hallways of this meeting in the next three days? what is really going on in ienna? yousef: there are themes floating around and one is the threat of the american oil production, the rising oil production there. overnight you saw the data, was the high nest three decades. that's playing into the overall picture for the planning here. look, how can you plan ahead and know what you'll do in the second and third quarter of next year if you don't know how the debate will shape up and number two are the geopolitics which is critical with our experts on the ground, is you had a lot of tensions with iran and saudi arabia and qatar and russia is trying to get more of a role and they're saying we'll come onboard with a deal but extract a price and a greater role for russia in terms of politics and economics.

francine: i need to interrupt. opec is many things, a snooze fest, it's never been a snooze fest and covered it 10 years. possibly you could argue snooze fest, not opec. tom: we'll go with that. thank you so much from vienna and it's not a snooze fest, you're wide awake in vienna as we speak. in new york, our first word news with taylor riggs. taylor: the senate is moving towards what could be the final vote on the senate hill as early as today. lawmakers voted along party lines to begin the debate. it doesn't necessarily signal republican leaders will have the 50 votes they need. if senate republicans pass the tax bill, they'd still need to hammer out differences with the house version. president trump is nominated a sometime critic of the federal reserve to be governor of the central bank. marvin goodfriend is a professor at carnegie melon university and former research director. earlier he told congress the fed had failed to secure the

credibility of its inflation target. now, the problems have gone international. they want more information about the television host fired by nbc news for allegations of sexual misconduct. the largest state on new zealand's south island and they say there must an good character. bit coin plunged after hitting an all time high of more than 11,000 and fell to $9,000 before bouncing back today in asia. it was part of a, let me get my notes here, triggered by intermittent outages of crypto currency exchanges. global news 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom and francine? francine: thanks so much. we're joined by nigel wilson.

i'm looking forward to the interview because we have to talk a little bit what is happening in his world, the c.e.o. of legal and general, the expertise in managing pensions has made it one of europe's biggest asset managers with more than 900 billion pounds under management and expanding further, aiming to become a top 10 player in the u.s. nigel, always great to have you here because we've become smarter and also we glimpse in your world of deal making and everything in between. does it feel good as head of a big c.e.o. at the moment, is growth ok, do you feel pretty positive about the outlook? nigel: the world is good good for those who want to invest because we see a shortage of people who want to be bold and invest in the grit opportunities, enormous infrastructure deficits everywhere in the western world and if you step up you can make a good return. francine: you're bold and not everyone is. growth is increasing and seems to be steady. inflation you don't see much,

actually it's a goldilocks era for c.e.o.'s but they're not investing, why? nigel: it's confidence of their shareholders and boards and themselves individually. people are looking too short termism and we should be looking out and encouraging them to invest for the long term. we rarely will have an opportunity like this. history judges badly if we don't step up and invest. we have a massive productivity problem and 35 first worse than the americans and germans. we have to close the productivity gap and the only way to do that is massively increasing investment in the u.k. francine: there's a line of thought that says because of this cheap money it's been keeping zombie companies alive and so what if you get your investment projects wrong mp? nigel: that's a negative attitude. the people haven't been willing to step forward and do this. the execution risks around what many of these projects are

relatively small and people should be much more willing to step up. the great companies of the world market cap companies in america, they're all the biggest investors in the world, there's a massive correlation between the successful companies and biggest investment companies. we're in the second division but hoping to get in the premiere league going forward. tom: you hold a piece of parchment out of m.i.t. if we were to go to m.i.t. we could use legal and general as text book case of disruption. literally back to 1840 and you've blown this thing up successfully time and time and time again. you have to deal with brexit. what are the big slow companies of the united kingdom need to do that is more legal and eneral like?

nigel: we have to disrupt ourselves. and the biggest are disruptive investors. we've been way too conservative in europe and it's catching us out, particularly in the u.k. whether the government hasn't encouraged investment enough and companies haven't been recognizing these huge global macrotrends and investing for the future and have been very cautious. they should be measured, delibbed rather than cautious. tom: i don't know if you studied with rudy or stan the basic . i.t. but idea is the actuarial assumption you should gain. how can you gain stability among any insurance company given the distortions in the fixed income market. do you know your actuarial assumption? nigel: i had the privilege of learning from rudy and stan who are insightful and great

professors and i'd like to thank them both. rudy is no longer with us. but for a slow learner like me learned a lot while i was there. look, we are very different from banks. we have no maturity risk and very little liquidity risk so we're very financially stable and able to involve our model based on the fact we have a inherently stable situation which is different from banking. finally the bank of epping land and treasury and the government realized it's really helpful to have big insurance companies willing to invest because they don't have the -- tom: it's great. we have marvin goodfriend coming in at the federal reserve system. you want higher interest rates to normalize your actuarial structure. is governor carney going fast enough for you? nigel: i'm happy with any interest rate. the productivity gap bothers me with the u.k. it's easy to sol and we can

solve it through investment and that's relatively straightforward to do. mark has done an amazing job in the u.k. he's a deep thinker about what is happening in the world economy and helped steer the u.k. economy through some very difficult waters and will be a sad loss when he leaves. but i and many others realize we can't just invest in london which has been an enormous commercial success but we have to build a exclusive capitalist model in u.k. and not just london but the rest of the great towns and cities. tom: we'll stay with dr. wilson here and continue this discussion and go about it eight ways here with him. and we'll of course continue and i'm sure francine has important questions for brexit and what it means for london. bloomberg daybreak on radio. you're trapped in your car, karen moscow and others will save you, coast to coast, this is bloomberg. ♪

>> when it's time to adjust to normal production levels we'll need to do it gently and in a very thoughtful and considered way and we'll do it in consultation among the participating countries and country with spare capacity will gradually bring back their production to meet market demand.

francine: that was the audi oil minister speaking with bloomberg a little bit earlier on. the speeches are over. now there's a closed session in vienna and opec but this really is a warm-up act when russia shows up later this afternoon and we did hear from the saudi oil minister that he will only cut production if russia joins along. they have in the past. let's see what this afternoon brings. on monday the british prime minister teresa may will sit down to what may become the most expensive meal in history, the european minister will join her at the key brexit lunch in brussels and may work to progress talks to a new trade agreement despite the issue of the "wrish border at home. they'll expect her to produce a final offer which could be as much as $60 billion euros. let's get back to nigel wilson. when you look at the

corporations do you view them as a c.e.o. that does business and does it impact your company and is it the future of the economy? nigel: the future of the economy and going the way we thought they'd go action, and difficult and awkward and done at the last minute. that's everyone's expectation. one of the number we've seen in the u.k., particularliened the sound and cities outside of london, the political leaders realizing they have to sell to determine their own success and not deliver on another outto. manchester, birmingham, lampson, all step under a rebaseball their investment to achieve economic growth to offset what negative impact there is from brexit. francine: this could be a opportunity brexit gives the government to try and bridge this income inequality and try and get the north much more involved with the south. nigel: absolutely. that's how we have to look at

this. it's a catalyst for change. we have to become the duers and not sitting on the fence and doing stu. we have to determine our success by taking positive action. investing in all the great units in the u.k., second only to america in having great universities, america has a few more than we have, but they're much more commercial. we're 20 years behind and have to catch up. and we can catch up. mr. patterson: you were talking about the investments you were doing and any m & a you want to be a part of and say why not buy it? nigel: we bought an e.t.f. system the other day to increase our activity in that particular sector. we're looking at the well sector and the direct real investments in the united states. the united states is about as bad as the u.k. in terms of its infrastructure. it's really done a shocking job the last 30 years and we put 12

billion so far in the u.k. and will do something similar in the united states. we're looking for long term real assets because the new stuff is better than the old stuff. america looks like a tired economy and large parts of it. tom: to the west of your institute of technology is a small school named boston college and do well in hockey. alicia run as retirement franchise there and says 81% of americans are nowhere near their ok chew aerial assumption on retirement. what do we need to do to fix it? we started the idea erisa and -- and it was a failure. what's the prescription to get more people actually comfortable? 9/11 ell: it's very nigel: it's very sad and people have underserved for their retirement. they think of their house as part of the retirement and we

haven't created enough financial products away the house which will allow people to get income from their house in the retirement market and have done so at the u.k. where we have 35% of what you call reverse mortgages, we call lifetime mortgages over here and has to be a bigger market in the u.k. and u.s. and the regulators have to make it easier to do that. we have soft compulsion and people have to buy auto insurance. we have to have an sbment of hard com pulingts and not just self-compulsion. tom: as we speak, i know you've been following it, the senate of the united states of america is doing everything they can to peel back incentives to retire. it's almost as if these governments are clueless as to he day to day blind of investment holders. what does the senate need to do

the next 48 hours to help retirees? nigel: that's a great point. we've seen people make wrong decisions, the australians have gone down the route they give too many pension freedom and the 70-year-olds in australia spent their pension money early because they made incorrect consumptions on how long they're going to live. we see governments all over the world making these poor assumptions around pensions. it isn't sufficiently up the political agenda. there's more minor problems like stamp duty for first time buyers in the u.k. is a great example. it's a tactical problem but not a strategic problem and we're not addressing the strategic benefits. and to listen to the wise counsel not getting access to politicians to include them on things that really matter. francine: thank so you much. of legal and general group, stays with us. if you have questions for tom

and me. log on to bloomberg go. grab the school charts. you can ask questions to nigel directly and tom and i by clicking under the video screen. it's an i.d. function. this is bloomberg.

taylor: this is bloomberg surveillance. i'm taylor riggs. the second largest operator of radio stations has filed for bankruptcy. cumulous warned for months of getting out of debt. the chapter 11 filing is aimed at cutting the company's obligations by more than $1 billion. cumulous has more than 46 owned and operated radio stations. nokia has denied a report it's n acquisition talks with union with juniper. which has been struggling for

growth because the networking market has shifted away from combinations of custom hardware and software. and the computer system problem has left american airlines without enough pilots for 15,000 flights during the holidays. the glitch allowed too many pilots to take time off in december. american says it expects to correct the problem in time. the airline is offering pilots 1 1/2 times their normal hourly rate to pick up some of the flights. and that's your bloomberg business flash. francine and tom? tom: we're thrilled to bring you from our london studios, michael wilson out of m.i.t. nd run the ship at legal for the c.e.o. nigel, is all the debate legal and general wants to stay in the active business, when will you give up and ecome an all passive shop? nigel: we're huge in the passive business anyway. if you're a passive house you're active with the shareholders because you're in

for the long term. it's a peculiar phenomenon. whereas if you're active, you're very inactive about the shareholders because you trade and sell out of position all the time. the source of worthiness of passive is really very much underestimated. and the economics. people should have a huge part of their assets in passive and particularly if you put them with the mighty legal in general. francine: does that make you concerned about market movement? there's too much passive and a huge stain. nigel: the active people worrying. francine: i did hear it from the active people. 6r9s fikeell nigel: so much derivative going on in all markets. we're more concerned about markets which have been inherently liquid and don't have enough market activity such as real estate assets and everybody headed to the door at the same time causing financial destruction rather than the

active-passive rate and we'll have more passive assets going forward. tom: can't wait to see you. on your way outlook at the roman rouen in the basement. i think you'll find it interesting. dr. wilson is with legal and general. let me show you this chart. i've neve done this. why am i doing market checks on bit coin? up to 11,000. bit coin rolls over, under 10,000 again. oh, the humanity. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. tom: let the debate begin, as well this thursday morning, the debate is on the corporate tax. get dent trump says 20% to

this deal done, maybe 22%, 23%, maybe 24%. surprise. an opec meeting in vienna that may matter. all eyes are upon crude inventory minister who brush off on their oil microeconomics. in bit coin what is there to say? the marxists hate me on twitter. i get hate. the black chain boys hate the laureate. joe stiglitz, i'm going to retired and go tulips. good morning, everyone, this is bloomberg surveillance, live at the headquarters in new york and i'm tom keene with francine. bitcoin rolling over after a huge 12 hours we've seen. very tumultuous. announcer 1: francine: this was linked to some of the accounts being frozen and then defrozen and we have to be updated by ed robinson because only he knows what's going on.

tom: we'll have him on next hour. he's been around the raging debates with bitcoin. first word news with taylor riggs. taylor: the european union is playing beat the clock and trying to reach a compromise that will allow a breakthrough in the the meetings next week. the e.u. needs to find a way to promise brexit won't mean a hard border from the northern ireland and republic of ireland. that's the next major obstacle in the negotiation. the trump administration is asking china to cut off all oil exports. and the u.s. warns if beijing doesn't take to them washington will. nikki haley said america can take the oil situation into its own hands. president trump has told british prime minister to mind her own business after her office we buicked the president for retreething anti-muslim,

but first by britain first. the president tweeted focus on the quote, destructive, radical us islamic taking place inside the government government. pow pered by more than 2,700 journalists and managers in more than 20 countries. francine and tom? tom: to the data check, is sears roebuck and they are supporting losses, they talk and adjusted things didn't see store closings. it's the usual headlines of a really, really beleaguered platform as you will the some point you have to make ears, quarter after quarter. we have had a lift to equities as well. futures up eight, more so than the last hour.

the rest of it is one big churn. bit coin understand $10,000. and i like the fact it's made it to an asset check, tom. it's significant in itself. the liar r euro sliding, less than expected but better news unemployment. i'm also looking at the euro reversing earlier combains as a drop in unemployment failed to ignite inflation so we're not only seeing an impact on stocks and euro and towns, studenting gains, moving close to a divorce fwrem. is is my check of the berm natural. first imlooking at what that means for the government and angela merkel putting something together. and goes pack to the e.c.b. they've looming hard and that's

the spread between the 10 year german and italian bond. tom: let me get up the telestrator here for a look at deflator now. very quickly this is a challenge for the fed, good friend to be apointed as governor. the financial prize, the 2% level for core c.p.i. 've rarely been above that % -- that 2% level. kevin sirily joins us, our chief washington correspondent. my reading of the tea leaves is it is finally going to be an negotiation for the corporate tax rate. will they allow the president to adjust and not be embarrassed and bring it in above 20% corporate tax rate? kevin: yeah, all of this is pointing to it. but the senate today will vote on this by, if not today,

definitely tomorrow. all the momentum is the side of mitch mcconnell and president trump to get it done. the president speaking out in the midwest trying to urge supporters and these republicans to come opposing and coalesce. the senate bob corcoran, when i was covering the federal chair with janet yellen and asked about the national debt, she said she was worried about the u.s. debt trajectory and he emerged saying he's working on a thriller point with pat toomey of the government of pennsylvania. are way is the americans talking about the tax plan. tom: let me bring up zitegeist. i thought there was a great writeup, it is remarkable how irrelevant the president donald trump has become on capitol hill in his public statements, he's given very little evidence

he unders the issue involved. but we lash out using the power of attempt to get what they're arguing. well, look at the white house strength now is they have a complete ability to activate the base and that's why you saw president trump yesterday on the stump essentially urging the base to get behind them and pressure lawmakers. there's no republican here in congress that feels the president trump doesn't have at least some sway with the core base of the republican party and their districts, especially in the house of representatives. bernstein's r. point, president trump is not rolling up his sleeves and cracking this tax reform bill line by line. that said senator marco rubio put forth an item, an order on the tax plan last night regarding some things and the white house said no. they are involved somewhat in

the negotiation but look, if this is going to move ahead right now, we're in the final stages and the whip count which is typical of any administration which is the one driving the effort. farron: how francine: how difficult is it to look to see who is on? kevin: you have the deficit hawks and folks concerned about repealing of the individual mandate but again, i think that the signal that we're hearing from major bob corker, of course we all know, an outspoken critic of president trump is that he's moving in line with leadership and that i'm interpreting as a big signal this is nearing the end of this. anything about happen, any last minute things can happen, looking for senator john mccain for what he has to say but would appear the likes of senator ron johnson who had issues before are starting to coalesce behind leadership.

francine: there's one story in the u.s. and that's the president lashing out at the prime minister teresa may after her office rerebuked him on tweeting a video and then the mayor saying president trump is not welcomed in london. are people talking about it in washington or have they moved on kevin: i would say that here in the halls of congress, much of the focus is on tax reform but outside, i think the national mainstream media level, yes, there's some chatter about that. we should note republicans generally feel the president, while controversial on this topic, is still again in touch with his base. the democrats of course are a heavy faction of the republican right of center movement, feels he's well over the line on this and of course the united states is a nation of immigrants and celebrating all religions. tom: sounds like you memorized that at penn state.

we're all distracted by this date. michael mckey is like where is the beef in the bill? there's the voting and politics and all that. kellyanne conway is our opiod czar? i know that slipped through the last 24 hours. what has been the response, for example, senator portman of ohio to our new heroin opiod czar? kevin why kevin: i think kellyanne conway worked with the folks in the administration on these issues and i wouldn't count her out in terms of her passion on this issue in particular and of terms of uniting the right on this. this is no question it's an opportunity for lawmakers in both parties to come together to address this national crisis. and we saw it the other week with what president trump did. but you know, look, tiing it to immigration, it's a bit more of a partisan issue but something

can agree something has to be done on opiod addiction. tom: thank but the titanic tax bill update. coming up, two things that michael mckey will talk about, marvin goodfriend of mar neegy melon and then we make note of an important interview, michael mckey and loretta mester. this is bloomberg. ♪

taylor: this is bloomberg surveillance, i'm taylor riggs. to business flash. credit swiss will distribute half its net income primarily through share buybacks and dividend. credit swiss says it is confident it will beat this year's cost base target. the u.k. is stepping up to battle with the u.s. over who will get the stock market listing for aramco. teresa may says london is well placed to secure the i.p.o. of the world's largest oil producer. president trump lobbied the saudi king on a phone call to have aramco lifted to the u.s. norwegian air is planning a major expansion with the argentine unit. the airline wants to start direct flies from buenos aires and to new york. and looking at other cities in

south africa and the airline rejected assertions it is stretching itself too thin. that's your bloomberg business flash. francine and tom? tom: he's the melter professor out of union college of schenectady and another time at brown university. michael mckey is here to speak of marvin goodfriend of carnegie melon. i dredged up from 17 years ago an interesting set up quotes from the acclaimed william white, the canadian performance of goodfriend at the bank of international settlement. professor goodfriend is more than aware a central bank can become a victim of its own rhetoric. you think? how can the central bank raise interest rates in the face of low c.p.i. inflation. you think? i love this buried in the test. d goodfriend's macroeconomic

processes have a rather austrian flavor. >> his economics are in line with what you see in the central bank these days. it's the processes and methods he disagrees with. he thinks the fed should not have a dual mandate but a single mandate and set a inflation target and accomplish your employment goals through low and stable inflation. set a inflation target set in law by congress and then aim for that. tom: is he a rules based tailored -- were it's subtle. tom: here's the subtle part of bloomberg surveillance. >> he wants the fed to discuss and compare its results and its policy setting to a rule, not necessarily make the decision because of the rule but put it in the framework of the rule to better under what they're doing. tom: jeb hensarling is more

excited of goodfriend joining the fed than powell becoming chairman. he's an arch critic of the fed. is marvin goodfriend a creatic of the fed? >> no, but a critic of how the fed works and some things it's done during the great recession and after math. he's not a fan of q.e. and didn't think they're effective and didn't like them buying mortgage bonds and is a face cal intervention and the fed shouldn't allocate cred pit. he's a big fan and this is where it gets word, a big fan of negative interest rates. central bankers tell you negative interest rates don't work and hold cash instead. marvin would get rid of cash and say the fed would no longer guarantee your dollar at a dollar, you put a dollar in the bank, negative 10%, you get 90 cents back. tom: this is a huge controversy. let's talk to somebody in the real world, jeff dennis on

marvin good friend. of big, negative interest rates and no cash an democrat yeah or will he shift to the real world you live in today? >> i imagine he'll shift. we're not remotely in our opinion a world where you need negative interest rates in the u.s. we're doubtful how rapidly they go up but you're looking at interest rates which are obviously positive, round 1.25 and probably going higher. it may be a theoretical nicity he's in favor under certain circumstances but nowhere near that but the issue with respect to the fed, whoever will be on the board and as j. powell come in with till within how far do the interest rates go up. michael: shameless plug for bloomberg surveillance. he said in march the interest rates are too low. tom: jump in, francine. francine: what does the real economy need from the fed?

and what happened to inflation. geoffrey: our rates of inflation seem debuted and don't see the macro line by line and obviously energy prices and our intention is you need steady tightening, gradual removal of the extreme accommodation michael mentioned from the last global financial crisis. so we think rates will rise next month in december. that's a straightforward call. probably excise more next year but very slow because frankly the economy doesn't have a lot of momentum. what you will see is it you get a major fiscal boost which we still think is unlikely, if you were to get that, the fed would possibly move more quickly. as i said earlier in the program, the fed is not happy with a major fiscal boost at this stage of the cycle. francine: what happens if the fed actually raises interest rates four times, what happens to emerging markets?

are they ready for it? the equity gains we've been talking about in emerging markets haven't come from reforms and equity markets are pushed up because technology stocks are going higher. michael: obviously tech is a big driver and we benefited from a weak dollar and low cost of capital. the point we're making is it the fed moves through 2018 the yield curve flattens and bond yields go up but not by much and if they go from 235 to 240 now it's not a major hurdle. slightly more complicated this year but not a reason for emerging markets to sell off. the surprise would be if inflation picks up with economy you might see a more aggressive move and hurt e.m. but they're doing well out of what is coming next year. tom: i want to come back with you, mike mckey, and talk about brad long and what he said about marvin goodfriend with the interviews we did with professor goodfriend over the years. mr. mckey of course speaking today, you'll hear it here with

the cleveland fed president. what a perfect time to speech, too. we continue with jeffrey dennis. stay with us. this is bloomberg. ♪

dd

tom: tom keene and francine lacqua in london and new york. jeffrey dennis with us from u.b.s., head of their emerging

market strategies. let's dive in that right now and all around the dollar. does chairman powell matter and will jerome powell be central anker to e.m.? goffry: what my markets are taking from powell's appointment is the likelihood of continuity in monetary policy and doesn't look like we'll see a sharp adjustment relative to what yellen was going to do. tom: continuity is easy, there's no continuity with a standard deviation move dealing with short term rates snn geoffrey: and all we're simply saying is we don't think what the fed will do the next 12 months is all the material for the outlook for emerging markets given what i laid out, a rate cut next month and a raise next month and two next year. we think what matters much more is do you get a major fiscal stimulus or a bond market sell-off because the economy

accelerates or because inflation picks up sharply? that's the thing that will suck money out of aamericanning markets. the fed could contribute to that but the fed won't move aggressively versus expectations unless you have the growth or inflation pickup. that's why to us in e.m., what happens in washington now on the fiscal side will be absolutely critical. is the u.s. economy stuck north of 2% growth? we think it probably will stay but if it doesn't -- francine: sorry, go ahead. geoffrey: no, please. francine: you say what happens in washington is critical but what happens in washington, you're talking about tax reform, does it help with growth, because we hear a lot of the c.e.o.'s will reinvest to shareholders and doesn't necessarily impact the economy. geoffrey: to be fair, the economists aren't expecting a broad tax bill 1986 style and saying the likeliest outcome of anything is a modest tax cut

which has probably very low multiplier impacts on the economy because the tax cuts go to the uppers and corporates and no guarantee they'd invest. and short of there beeping a massive tax refund bill i doubt the economy will accelerate and will create a pretty reasonably fair environment for emerging market equities. tom: geoffrey will continue with u.b.s. it's a special issue, bloomberg business week has done it again. in the year 50, important people you need to be briefed on. it is a briefing, important. bloomberg business week. . ♪ .

♪ francine: these are live pictures from the house of parliament, for our radio listeners, there is a lot of pushback and president trump is

getting blasted by the house of commons for an islamic phobic tweet. we heard from the mayor of london and said that donald trump, you are not welcome in london. session a special mp demanding the government to condemn the u.s. president about these posts. we will keep an eye on anything being said. this is getting a lot of attention in the u.k. -- after theresa may reviewed the president and said he should not have done that, we have not seen this in modern history. something we need to watch. tom: for our global audience and in london, good morning on radio actio'snd point out how , mike allen, jonathan swann summed up yesterday, the last 24

hours for the president is being 24 hours of anger and this was only one of the 4546 stories in their here -- four or five or six stories in their. hill, theg on capitol senate moving towards what could be the final vote on the massive tax overhaul bill as early as today with lawmakers voting along party lines to begin the debate. that does not necessarily signal that republican leaders will have the 50 votes they need. passed, they need to hammer out differences with the house version. president trump has nominated a sometime critic of the federal reserve to be the governor of the central bank, margaret goodfriend is a professor at carnegie mellon again and a former research director at the richmond fed. he told congress earlier that the fed has failed to secure the credibility of its inflation target. matt lauer's problems are

international, new zealand wants more information about the television host who was fired by nbc news for allegations of sexual misconduct. he owns a large estate on the new zealand south island and foreign buyers must be of good character. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. .rancine: thank you oil prices have gone higher as investors watch for the next move by opec's on production curves. we spoke with the saudi oil minister ahead of the meeting in vienna and he said there is still a lot of work to be done. >> but it is time to adjust to normal production levels, we need to do it gently. we will need to do it in a thoughtful and considerate way. we will do it in consultation among the participating countries, and those countries

was fair capacity will gradually bring back their production to meet market demand. francine: a lot of work to be done. does that mean -- i am waiting for russia and if they join in, i will too? >> that will be the key questions. you look at what is going on with inventory, and in the united states, coming back closer to the five-year average, the consensus is growing around a nine-month extension after the cuts expire in march. the saudi minister was not too convinced about annexes strategy just yet. he said it was too early. we are waiting to see whether we will get more input from the russians, in the past they have extendingations about for the sake of extended and they want to see how we draw this down as we have to tell our companies what will happen in

the future. francine: what happens after 2018? the concerns is that opec and non-opec do not for didn't show producers in the u.s. and those have a huge production swings. on and offrn them like a light switch. , the is remarkable versatility and the ability of u.s. producers to bring capacity back online. it surprised people even at opec. , howuestion is after 2018 gradual a drawdown will you do in terms of reducing the cuts and bringing the market back to normal conditions? minister andrgy many of his spear from iran and iraq said it would be a gradual process, something we are watching. there could be an upside surprise in terms of what, if the price rises very quickly in the first or second quarter of 2018, that is when the summer meeting comes in and

recalibration to adjust to market realities and the data. tom: thank you. at these important opec meetings. philadelphia.in we have a range breakout on oil right now. i have a fancy chart of an elegant, ever so slightly breakout in west texas intermediate. is it for real and are we breaking higher? >> we have had a heck of a ride higher. i will not rule out the potential of $60 on oil. as far as the opec meeting, the big question now is the ability or the speed at which north american shale producers can respond to price signals. until this point, we have seen four consecutive weekly highs in u.s. crude oil production. eia is projecting record production next year.

when we look at the high prices -- when we look at these high prices, and this rally, now the position in brent crude oil is up 22%, the short, the hedge is made by producers. producers have sold enough oil in the bread market to offset a one year where their production in or demand in the north sea. we have seen an in version on the nymex, speculators have recently push their highs to a 36 week i while the shorts have pushed their positions with 30 we glow. -- week low. tom: your magic is a granularity of the american system and you know the elasticity like no one, can they bring on the production? >> absolutely. right now, when we started to see opec and -- take a more dovish view and we had the price

collapse in 2014-2015, opec did north america a tremendous favor , they did what the fed refused to do, regarding the cost of money and we had an explosion in shale. in north america, now over the past two years, three years, increased efficiencies and now they do not need oil necessarily as high as they did three years ago, four years ago. you are giving, north american producers and opportunity to reset hedges and clear the path for increased production into 2018. francine: we are talking so much about production that we forget to talk about demand. thesaudi oil minister said cost was too glum, where is the man coming from? >> opec is forecasting and in balance demand exceeding supply by 600,000 barrels per day in the new year on the iea is that projecting a deficit

trailing supply by 100,000 barrels per day and we have a 700,000 barrel disconnect between the two agencies. i am not confident that opec has fully gained this. we have had, as far as demand elasticity, the first variables over the past 40 years to impact consumer behavior. that has been a price signal. had, untiler recently, the other variable that impacts behavior, that is the substitute. we have the tremendous growth of the electric vehicles and we will not see -- the whole dynamic has changed and you will not see the demand respond to prices that we are used to. therefore, i think, i am more on side that demand will trail supply response in the new year. francine: does that mean that opec and non-opec and russia may

have to cut production beyond the nine-month extension, if we get that today? opec hasct to see painted itself into a corner, the linchpin will be russia. i am expecting to see an extension of the cuts through the end of next year. ask the previous report said, they will need to recalibrate. wall street loves higher oil prices. and are betting that way the positions are near all-time highs as far as length is concerned. from a risk parameter, with the way we measure it in our report, only 5/7 of the way, wall street has demonstrated risk tolerance which is an all-time high in the first quarter of last year. i expect significant money continuing to pour into the market and being supportive of price. we will need to recalibrate on production when opec meets again in the new year.

tom: i am sure they will be watching your philadelphia eagles this weekend in vienna. >> 10-1. tom: thank you come in philadelphia. -- thank you, in philadelphia. this is the opec chart, you get this pretty chart at opec go, what is not in their is indonesia. i was kidding francine, nobody in america cares about vienna, francine is right, other people really do. indonesia really cares about vienna. geoffrey: no question, indonesia is an oil producer and it does benefit from higher oil prices. of other emerging markets is that way as well with russia the classic example. -- most of the emerging-market countries are net oil importers, india, korea, taiwan.

there are plenty that are exporters, russia, colombia, mexico. it has an uneven effect. what we have assumed and what we have shown in our research is that, when the price of oil goes up because demand is high, that is good for emerging markets because it signals stronger growth in the economy. when oil prices go up because supply is constrained, that is more challenging because it could cut demand. the oil price moves we have seen recently are a little bit beyond what the fundamentals would dictate. we like the market long-term in oil and suspect it is overbought in the short-term. francine: i need to push back against tom, u.s. does care, if you are texas, you look at vienna, if you are a shale gas or oil producer, you look at vienna right now. what does it mean for saudi arabia, can they balance the books with oil prices at these levels? tom does not buy it. are now compared

to where they were a few months 2015,d certainly in late early 2016, they can get much closer to balancing the books. oil was at $27 for britain in january -- much better outlook now. we look at saudi arabia now, of course the prospects for this big offering at some point down the road. saudi arabia is now being considered by the index provider for entry into the emerging-market index at some point. if that happened, it would be very interesting opportunity for investors down the road to take time for that to come. oil prices at this level are something -- saudi arabia would like to see them higher but much more viable at this point than before. tom: an interesting debate. a lot of it coming to microeconomics and coming to oil demand. we will continue with geoffrey dennis and maybe do an update on

bitcoin. under $10,000. from your radio, across canada, bloomberg daybreak, this is bloomberg. ♪

♪ francine: this is bloomberg surveillance with tom and f rancine. a great chart on bitcoin. eating concerts eight abrupt selloff may go into something deeper. yesterday it soared to a record. usffrey dennis is still with from ubs. ed is the only person who can make up what is going on with bitcoin. what happened yesterday, down 20%, certain exchanges were frozen and you could not access your account if you are a holder but they recouped. >> that show how sensitive the market is and when some exchanges went down and people were getting error messages as they try to buy or sell bitcoin

it just sent a lot of people for the hills. it created a disruption. once people sorted out it was just an infrastructure problem and would get sorted out, you saw everyone go back in and it rallied. francine: what is the next big thing? --r weeks ago, five month five weeks ago, a technologies with we expected that did not come here are you looking for more appetite for bitcoin or something more concrete like an advanced technological thing? >> both, demand will continue to soar and you will see tests on the infrastructure, can the exchanges handle the flow and secure all of the transactions? there is a potential and exchange gets hacked or a wallet gets hacked. these could rapidly move these markets and at the same time, bitcoin computer scientists are trying to solve the scalability

issue. tom: i do not want to give my opinion on this. i would not want to do that. i was toward to shreds on twitter by the bitcoin boys yesterday. bring up the chart, intraday bitcoin. the volatility we saw yesterday, this is clearly not a currency. as you alluded to, do you have any understanding of the market making process of bitcoin? i don't get it. >> that is because bitcoin is unprecedented and unconventional. it is almost as if we cannot really use the normal metrics that we would when looking at stocks, bonds, commodities. it is being made up as it goes along. it is hard to answer questions like that. it is a decentralized thing. who knows how it -- the market

is being made. tom: ed robinson has been phenomenal on this debate, the best reporter out there on a balanced view. be 1852 edition of 1841? >> he should. i am not an expert on bitcoin but i like the application to the tulip boom in holland all those years ago. talking to my investors, we do not have an official view on bitcoin. we find that it comes up in conversation because people are intrigued. they are intrigued they think i know something about it that people are doing personal investing in bitcoin. still not something mainstream in terms of our investors. we have to see how strongly it develops. ed is the expert, not me.

tom: we appreciate it, and robinson. feared tv -- ed robinson. tv , you can look at the chart of bitcoin. you can use this at your meeting at 10:00 a.m. this morning. this is bloomberg. ♪

♪ tom: bloomberg surveillance. i am tom keene new york. -- in new york. it is twisted and different, megan murphy from liver business week with your bloomberg 50 -- bloomberg businessweek with your bloomberg 50. one name our audience really needs to know. >> so many, we love patty jenkins, the director of "wonder woman." only the second woman a director of a movie over $100 million

budget. billionrossed nearly $1 globally. softbank. the president it venture fund and that's unprecedented venture fund. we are thrilled with the list and what kind of people we have -- have defined the global business landscape. francine: congratulations on businessweek. i am looking at the list and try to figure out what we should be looking out for. how did you compile the list? >> we look for definable metrics of people who had done things we could put out in 2017 to say, these people always on the list, who turn up time and time again, but we look for people who had a quantifiable data point, metric, something we know they can

define this year and that people we think you should know about this year and a whole list of people you should know about up and coming for next year. reporters,all of our 2700 people around the globe, to unearth people we think set us apart and make these lists different. francine: who are you most looking forward to hearing and 2018 -- in 2018? >> one of the hardest parts was politics. when you look at who has the -- done something definable, not interesting and people on the list i'm looking forward to is -- mueller, the fbi director former fbi director leading the russian investigation into donald trump. the person who kicks off our list, nikki haley, at the united nations and an important job and good have a bigger job during next year within the trump administration. francine: thank you, megan

murphy. we will have more from her throughout the week. later today, michael mckee sits down with the federal reserve bank of cleveland president to talk about inflation and get her thoughts on dollar. a little bit of movement on treasuries. we talked about the impact the federal reserve could have on emerging markets which was throughout the day and euros swissie, the euro seems to be reversing an earlier gain and european bonds are rising with consumer prices in the region missing estimates despite a strong labor market. this is bloomberg. ♪

jon: deficit hawks turn up the pressure.

senate republicans title for the votes to get the tax bill approved this week. president trump continues to make his mark on the federal reserve. opec sealing the deal. the oil cartel is ready to extend production cuts. good morning. this is "bloomberg daybreak." let's get to the market action this thursday. calmrday, it was all on the surface, but volatile underneath. the euro just a bit softer after inflation comes in below estimates. crude gets a bit of a bid as well. alix: they put brent on my board or bitcoin. i went with bitcoin. you have yields moving higher by two basis points, 11 at 12 basis