and you speak of resiliency, but we need scale. he told me we would have scaled and media like we have with fox and disney and maybe we can address that later on. tell us about scale in banking to try to avoid the agony of the next financial crisis. >> think about where some of the lessons came out in the last crisis. one of the challenges was that we had a global banking business model where everyone, or most big banks, were seeking or trying to execute against similar plans. be everything to everyone. 0607.member that was the talk, that was the rage.

i think what is different today is coming out the crisis, what you've seen banks do, is go back to their basics or go back to the areas they believe they have a competitive advantage. and that competitive advantages oftentimes steeped in scale. when we think of scale and whether scales in markets or business bank it's -- or many business. today's age of slower growth and more regulation, if you don't have scale, the odds are you can't buy it. you are not seeing big banks get bigger through acquisition. you have to build it. slower growth, it's tougher to do. ,hat we've seen is the industry in many ways, pull back to areas of strengths. you've ended up with very different business models, which in itself are far more resilient. we can use different examples of firms out there in terms of how they change. examples, cities as

we are not an insurance company. we are not an asset manager. we're not a hedge fund. we are not any of those things. we're simply a bank. that's the scale that we have pulled back to. banks and and look at see the virgins of business models. i think that's quite powerful and what means for resiliency for the system. tom: how do you keep track in the scale? had a court may your global bank if you have bigger and bigger scale? the endless conference calls doesn't do it. how are the communications going a given within institution if we scale up. side,the institutional and business and others are great examples, is they are scaling as well. it's not that we are necessarily covering more clients.

or not, actually covering less. it's not that we are entering more countries are doing more things. we are just doing more with what we have. we're using the benefits of scale. we are not adding complexity. in fact, we have taken complicity out of the system. you and i were talking and you said that you would like to respond to what is clearly part of the western zeitgeist in this january of 2018. it's not that it's about china or its china's fault, but that china is the number one risk. we enjoy with bloomberg surveillance working with eurasia group early in the year. they did place china as the number one risk of the number that they had. through their annual review. you take real issue with that. why is china not a risk?

before i answer your question, let me say, since i'm here, i thinkator as a regulator you have to always stay alert. any financial risk that is coming up. although the economy is doing quite well, globally, we cannot be complacent. risk, i of financial almostvery crisis is seeming to be associated with some kind of asset bubble. that, it could be something else. this is the sign that we should look around here. are there any asset bubbles? some emergingd asset bubble and it's a regulator, you have to do some big about it.

this is my opening statement. question, it your seems the chinese economy is so large. if something bad happens to the chinese economy, the rest of the world will be affected. the concern about china is justified. we realize that we have some problems. quite some years ago. with a problem is mainly lot of debt. we have too much debt in our system. macro in debt and this ratio. we are using nonfinancial sector debt and its rising of time. it's now to order 50%. agoealized that some time and we began to take action two years ago. the good news at this point is that that ratio, for the first

went down in the last quarter of last year. it did not rise. furthermore, into, divided by gdp, is also not rising. the growth rate of them to in china last year was only 8.2%. it's almost two percentage lower than nominal gdp growth rate. you can see the effect of taking actions.htening since the macro debt level is so high, so people will still be worried about the consequences of something happening in the financial sector, and i can tell system, ifese something bad happens to certain small financial institutions,

what we will do, and this is a lesson we learned from the u.s. financial crisis, what we will do is that we will move very swiftly to contain that risk. to make sure that whatever panic is caused by this small institution does not spread into the entire system quickly. that risk andtain make sure the panic is not spread, then the entire financial system will be ok. the way that we move swiftly in china is, i'm on the sure something like that happens, the central bank in china will come in immediately. some of the large, healthy financial institutions will be brought in to take care of that immediately. the interbank lending does not freeze. the system can still function. this is something that the chinese government always does very well. our system can function really

quickly. of course, the larger problem is so big. even if you move swiftly we will not be able to move to the bigger system. it's a big risk in the system. we work earlier to contain the scope of the entire system. the risk of the entire system is so important. as i said, we made some progress in that area. tom: i left david rubenstein for last because i think he can provide us with a terrific perspective. i was thunderstruck by richard trust barometer released yesterday. every year is different and i think it's incredibly important. the fracture is the word of the moment here. within ourtured nations.

it really shows, as you mentioned, the geopolitical mix that we are in as we speak the bankers and managers of money. it speaks to me, david rubenstein, about shocks that get us out to the next crisis. i'm most worried about is these lights. they are very hot. i hope they're getting vitamin d into me at least. very very hot.e global warming is coming here. right now, the biggest concern is that most people don't think there's any problem with a likely recession this year or even for the next year. generally, when people are happy and confident, something wrong happens. as you know from your own

research. i am nervous that the conventional wisdom is that we have no recession problems around the world. everyone is doing quite well. as the famous faculty member said, the conventional wisdom is usually wrong. what would produce a recession this year? what is the thing that i'm most worried about? i am worried that governments maybe have a little bit too much debt and maybe they have too much entitlement programs that there not ultimately going to be able to honor. at some point, people wake up and see the u.s. government's 20 train dollars in debt. -- $20 trillion in debt. i worry about geopolitical things we can't anticipate. an unanticipated 9/11 type of event. . dirty bomb goes up russian insides -- decides to invade a place. the middle east gets hot and parts that are not yet hot area

we don't know. maybe something between china and japan. you never know it's good to happen or it could be a pandemic. when everyone is complacent, that's when you have to be nervous. while the lesson of the last recession? by your own debt back at a discount. those who bought their debt back a discount made great fortunes. if you can't, hold on, hold on, hold on, don't get back the keys to the banks. if you hold on, you will make a lot of money. the people made the most money or people who bought their own debt back or managed keep the banks away and hold onto the assets. what happens. grace fortunes were made and great rotations were made while you want to assets or buying your own debt back a discount. when the economy starts going this way, don't run for the fences. hang around the hoop. you're going to buy some things at great discounts. we are: -- tom:

streaming. i think bloomberg for their commitment to this. around once. it can go a lot of different ways. i want to delete it off. with a more open discussion about the things on your mind. i want to keep this open as we look at the crisis. just expand further please. >> it all seems a rosy at 4% global economic growth. i think we saw the economic calamity when we missed the last financial crisis and the damage that was done globally. i do think one thing that is different this time, that we need to utilize. , i think the connectivity and the collaboration between regulators and academics and private equity firms and investment firms and banks is a

whole mother level than it was precrisis. and 2006,k to 2005 your bank would meet maybe once every quarter. the bank everyday. tom: to the british to this better? >> i think it's both sides of the atlantic. of innovation or work between the regulators and the banking community. donnelly to fix what happened last time but most of the corrections through bank relations have occurred and it really is -- we need to work collaboratively with the regulators to avoid the next crisis. on one level, pre-2008 and 2009, the regulators were there just of their witness. witness.o bear they would try to course correct the economy in real-time. have, the political body

told the regulators, i want you to regulate the systems so you avoid the next financial crisis. career, we've never financiale next crisis. i think what is incumbent upon banks and asset firms and academics is to work collaboratively with regulators to avoid the next financial crisis. rightly so, political costs of the banks have endured because what happened 10 years ago. we need to sit down and forms like this. what could we be missing? what could be happening in a nonbanking financial markets? is it levels of debt? how much short interest is there. in volatility. much are we trying to enhance yield by volatility.

if this thing turns, hold onto your hat. tom: are you worried about this? damped ink at the volatility that's out there. --it you have to pay attention to it again. we went through government shutdown over the weekend in the market is up. you go to these events and you have to ask question. the challenges, from the asset management with investing side, is along the way, he saw brexit. if you sold president trump, you bought it back higher. ande's a numbness out there an ambivalence out there that is concerning. when the next turn comes, and it will come, it's likely to be

more violent than it otherwise would be. as you mentioned, the new bank, if you will, with all the trading and jobs, you see a new trading process in banks as we go to the next financial crisis? and commodities going to be something different for the banks? certainly different than what was in 2006? talkedof the things we -- stop talking about is the central banks taking on the role of being the significant liquidity provider. bank balance sheets around the gold are much stronger inc. terms of their dedicated capital and risk-taking tolerance. when the great science fair project ends around qe, and we're talking potentially -- that, the science

fair project. >> and we see full liquidity to tighten. next year we see things start to change. what is liquidity going to look and feel like? it hasn't really been tested? how can you send? is wonderful banking experience? chairman powell has some challenges. inflation could come on us suddenly. i think u.s. inflation will exceed 2% this year. we may start seeing it elsewhere. if they start typing faster than markets expect, how are capital markets could take it? mention what david said about geopolitical risk.

normally when we are reaching at what could go wrong and we are pointing a geopolitical risk, things are pretty good. your racking your brain's. we haven't had president trump before, and that i think introduces a certain randomness. we got 32 minutes into the panel before he mentioned to word. >> i'm torn between a crisis and china and an artificial crisis in the united states. way, ick market, by the don't think an equity market collapses nearly as bad as adept christ's -- debt crisis. it's not pleasant but it won't be as bad as a debt crisis. it is not hard to imagine a stock rice collapse. i think the stock prices are built on the high-growth. i don't know how everything from

art and bitcoin to stock prices will react. tom: i'm sorry i've ignored you. you are the one who has to sit and actually make investment decisions. how was your decision-making changed? when we come out his crisis? listening to all that conversation, if we are talking really about a financial crisis rather than an equity market correction, and i think you have to look at what is systemic. i think, listening to this conversation, the one thing that hasn't been mentioned at all, i don't buy the political arguments. geopolitical stuff happens all the time. it has to be something that fundamentally changes the way people react to events rather than the event itself. in us to change the animal spirits in some way.

the evidence points to the fact that there are relatively seldom geopolitical stuff. we have not talked about systemic risk from the cloud. we have not talked about the fact that we all have businesses that are reliant on a very small number of people who provide the pipes that we all put our businesses through. what that is happening that is systemic, it's a technology thing. it's interesting to think how markets would respond. if none of us could actually trade for one or two or three days. the other thing that has changed fundamentally, you have the point about the banks being risky and terms of the balance sheet. but the things that have become more connected is regulation. there is a certain systemic risk.

are effectively looking the same sort of things in their stress test. all big insurance companies are sort of regulated by the same rules. of ising you can be sure that the scenario isn't one of the ones that features anybody's stress test. it never happens like that. i think there are systemic challenges out there. but maybe none of us is looking at the right place for it. you try and look right through to the fundamentals and find stuff that the hayes differently through the cycle. >> geopolitical events -- geopolitical events can affect the economy. thatnk it's unfair to say if you have a major geopolitical event that is unanticipated, the economy would just move on. we can't anticipate these events.

you can prepare for them but when they happen, you should this -- expect the economy will act differently. mood of sayinghe something is going to happen. i don't know what it is but it will happen. i think we frighten people a bit and they pull back. we don't know what it will be. too think that it is harder figure out what is going to cause the recession and figure out how to make money from it. ,eople who are good investors and people who are watching us to take advantage of this, the best way to take inventor this is to wait for things to settle by, a bit and then probably to get the bottom is never possible, when you recognize there are fundamental strengths you do make investments along those lines, the geopolitical events go away and the economies come back.

the people who made the greatest fortunes are people who bought things know the bottom and wrote them to the top. i suspect that will happen again. tom: last year we had president xi speaking here. thursday and friday, the president of united states is coming. what would you anticipate from president trump within the new international relation that is upon this valley. the idea here -- idea here is the washington consensus. where is it? do you see a regime that the president can address in international relations? when it was announced i think jobs dropped because it was not seen as his crown. this was the center of the globalization movement and he hasn't been seen as the biggest supporter of globalization. i think he is coming here to do one of two things.

ander to say he was right globalization is not such a great thing and we ought to accommodate his views and change our views or he will say he has been misinterpreted and he actually believes in some the things that people here believe in. not communicated adequately but he actually believes in many of the things here. i don't know what message he will have. i believe it'll be a message that is carefully thought through. what is the message of china one year on from the historic moment with present g last year? it's so interesting to see the different themes. is the simple message in the theme you see day today from your home in shanghai and working now in beijing? >> china needs a global trading system with its own economy.

realizes that as the economy grows bigger and bigger, challenges open up more. that's a president she said last year here. that's something china is doing. trump visit china last november, he announced that the financial sector would be opened up in a very big way. the details are coming out soon. so we continue to see globalization and worldwide trading systems that are good for china and a system that china wants. if china has a demonstration of present so distrustful china, and we talk about this with mr. macron, the most quoted namely a scene in the first two days of davos.

what does china need from the united states as part of the government? we just want a normal relation with the united states. >> good luck. tom: the professor said that, not me. of thenot part ministration about speaking for president trump, but i imagine that he was widely seen as having made an impressive speech. talking about points of globalization and for economist leader to come captured the world economic forum was very impressive. i think trump recognizes that if he comes here and makes inarticulate speech, he cannot reassert the u.s. president as being the most important position in the world. right now you have two people vying to be the most important person in the world.

i think the president of united states would like to regain some of the luster that he lost in the first year. by speaking here, i think he feels he can regain that luster. how do politics plant your research? did discussion fall into it or were you removed from the geopolitics that david speaks of? it is human nature and not so much geopolitics. crisis, thiscial is very typical. polarization, the political sciences, maybe he will ameliorate if growth continues. something i think partly because of the financial crisis. i believe we had tax cut

legislation that the imf clearly says is cyclical. maybe even longer. how will you adapt and adjust? one-off that benefits us with growth to keep us away from a financial crisis? or can it really have a long-term structural benefit in that it changes banking and changes your business? it has the ability. tom: we don't know yet. >> we don't know yet. when you think about the economy, if you look at the consumer in the u.s., the consumer in the u.s. is very important. if you look in employment, if you look at housing, if you look at savings, all of those are in pretty good shape. get we had the calming it was only growing up 2.2%.

not just as he traveled the u.s., but as you travel around the world in your conversation with business, tell me about your business. what is your business feel like. time and time again, we are eking it out on top line. we are being tough on and hiring. maybe this is the catalyst. maybe it's the catalyst of the texas from optimism to confidence. go ahead, you have an observation? bank.clays is a british our strategies to be a transatlantic and wholesale bank. alignedthis tax cut with other measures taken by the u.s. treasury, to certain , went, as a global bank want to have oregano record tory environment, tax environment, that is is equalized as we can. one of the good things that the g20 did, as it reregulate the

financial industry, it cap the record tory environment equivalent. recognizing that a functioning withoutapital markets -- >> are we doing better without that? the think we have preserved obligatory nature around the road. there is a question as to whether that is holding right now. states has made a bold move of dramatically increasing the economic impact for the shareholders. what does that mean competitively with other countries? and how will other jurisdictions respond to a dramatic drop in corporate tax rates? >> you are likely to see other

countries saying, if the u.s. can have the big tax cut maybe we will have one as well. one of the things people might not realize is when we have these tax cuts in the u.s., they are based on 10 year projections and we really do not know. what we often do is say, this will give you a benefit and we will make up for it in years seven, eight and nine. nineyears seven, eight and will not happen soon. they will make more stock buyback and m&a acquisitions. trickle-downeve in economics. >> after a leading question like that -- inknow, but you grew up baltimore, do you believe in trickle-down economics? >> i do not want to say i

believe in trickle-down economics, but when you have a tax cut of this amount, it will have beneficial outcomes. i don't think it is only a trickle down effect. tom: my number one observation wow, continue to change and in continued enthusiasm in london. the message i have heard interview after interview, including jim o'neill, is it will continue to defuse across london. do you see that? is it a better united kingdom, even with the soap opera known as brexit going on? >> i do think the bank of england has done quite a good job managing the transformation of the financial crisis and we see reasonably strong economic growth. countries, ithese want to go back to technology.

one of the things playing well within the united kingdom's technology. i said this during a couple of forums, perhaps the biggest economic event was the decision to make london the center for google, with 7000 engineers in london. the u.k. has got to have an outstanding academic base that is at the forefront of what is happening with technology and there is not a business in the world that is not deeply impacted by technology. if we could keep the borders open, and use that plan to allow a barclays to be in the forefront for mobile banking and digital safety, that is good for the bank of the u.k. >> europe, many people thought was dead and gone years ago and would be a weak sister to the u.s. and when you have brexit, that

made more people think that would be the case. despite brexit, the problems in the weaker german government and new french government, europe has done quite well. tom: [indiscernible] >> we don't understand it. and it has grown in importance. and the idea that something affectsppen that technology prices is not that far away. tom: what is interesting here is i was told that during a radio booth, i remember this conversation 14 years ago and as you mentioned, technologist has become so many different things and so embedded in our life. i remember at davos, at these meetings, the uproar over cell phones. wait, we can't have these in the building. course, the next year we had

three assistants telling them what to do with it. when we say technology in 2018 and 2020, what do you mean? >> it is the interconnectivity. the amount of stuff, the amount of data and transactions -- the amount of stuff we put into a shared space -- for example, in the cloud, it is interesting. stopf our resistance would for some reason, is most of us understood. the grizzly don't understand -- because we don't understand. tom: are you talking about something more systemic? >> i am just posing the question. what could cause a systemic risk? if we had the inability to access wi-fi-based systems or cloud-based systems, simple stuff like that. i am hypothecated. the answer is that nobody knows the answer. how would our businesses all if cell phones

went down simultaneously? do you know what happens when a satellite goes? tom: and every year there seems to be a change at these meetings will step i want to say welcome. we are streaming across the world economic forum site and thanks to bloomberg for that commitment on bloomberg radio and bloomberg television today. i'm going to go for five more minutes and then we will open for questions. doctor, you get the first question, so you better be ready. we'll lead with this question in a moment. how's bitcoin? you are in the hub of it, aren't you. >> you mean china. tom: and if we look at korea. but if you look at bitcoin, you have had to live it as a regulator in kor china.

you are in the meetings. tell us your experience. >> our attitude is that this is is new to the economy. it is something that has to be proven. investors do not want them to china. largely traded in that is why the central bank has the trading of this court in china, which i support wholeheartedly. let me just add one thing, mr. rubenstein talked about how to make money during the financial crisis. i want to say something to the crowd, maybe here or over the internet. if they bet that china would somehow have the financial collapse and during the collapse

they could make some money, i would tell them they would be wrong again. because the nature of the chinese system actually prevents a financial crisis, a financial collapse from happening. as i explained, we always move quickly to contain. as the government moves to alwaysne, there's something -- it could be spending money on things that should not be spent, it could be slower economic growth in the furtherear, it could be unequal distribution of income. that is why i agree very much with jeff. you said these regulator's work closely with financial institutions to prevent that situation from happening. that is what we are doing. tom: you have charts? we are doing radio.

what have you got? [laughter] >> regulators always have to watch out for the asset bubble. something called cyclically adjusted earnings ratio. francine: that is the arose going up? >> yes, and that is lower than in december of 1999. it is higher than september. tom: i know you want to talk about this. the chinese economy collapse is not good and i do not think it is going to happen. people have been predicting it for 10 years and they have been wrong. the chinese government can move much more quickly. nk that is something to worry about. the biggest thing i worry about increasingly is something we have not talked about and it is not local warming but a phenomenon i have

noticed, the increase in gravity. as i have gotten older, i noticed things sinking more and my inability to jump for a basketball. plenty will get to my age, you should worry more about gravity than anything else. [laughter] tom: would you like to speak about gravity? this brings up a point from the professor. mm over r squared. did you learn that the models don't work? in road still a believer hodoff? or is there new math involved? >> i think the models failed miserably, not just in predicting the crisis, but in

predicting what would happen afterwards. it is much more truthful to look at historical examples. we saw after the high level of the stock market, interest rates are very low. it is easily half the story. maybe 3/4 of it. if interest rates go up even modestly halfway to their normal levels, you will see a collapse in the stock market. i mean real interest rates. and i don't know what will take place. >> the biggest worry i have with the stock market, the technology unicorns, if they try to go public at a lower valuation than their last private round, that will make people very nervous. tom: when will we see that? >> we are already seeing that now. is something that we already see and will be the theme for the next 24 months. >> when you see the president speak about the high in the

stock market and takes pride in that, it will impact the regulators. the regulators may not move as quick or adamantly as they should. good point. very even though the financial regulation has changed and has gotten better, it is enforced by people. we have systematically seen the regulators change. that's changed the implementation. >> independently, i thought, oh, well that's a theory. tom: i want to go back to gravity. hotel in london that was at the height of pseudo-edwardian banking. build as a monument, jes, to what was before then. what is the monument that we are doing now?

1997r that matter, from when the financial crisis of 1990? what is the monument for the financial architecture now and the one we need to most avoid? >> what i think we can't forget is that the beginnings of finance. what finance really did, going back a couple centuries ago, and very much in the u.k., was really to democratize economic growth. it was the means by which wealth could be transferred from a diverse population, not just to a family member who inherited a big farm, but rather to an innovator or entrepreneur who had a new idea. finance allowed for the funding of somebody who thought of building a car or railroad. and we obviously went through a

dramatic period of 2008 and 2009 in the aftermath of the financial crisis, but i think citibank does an extraordinary job at it. we should not lose sight of the value of finance in providing for global economic growth and that it does provide a very central function that benefits everybody. >> one of the things we have not talked about, we talked about the class of civilization. now it is the class of technologies. the chinese large technology companies, will they be able to take their technologies outside of china and dominate the world? or are the american technologies be able to take their technologies out and donate the world? it will be a fight between the chinese technology companies and american technology companies for course of primacy. core supremacy. >> what i love about the

monument is that it is not physical. it is digital. it is not a building. it is not the infrastructure of debt but the fact that finance today is about inclusion and getting to more people in the world and making that easier. and technology digital is changing that. we talked about people's proclivity to use technology. there's some that is disruptive. most has actually been life enhancing, where you can get your balance online, you can spend and borrow online. you can do those things, putting more time back into your life. when you think about that monument, i think it is this push. tom: i want to make clear on television and radio, and as you get up, please try to avoid diving in front of the cameras. i am honored to have the first question today from jacob

franco, did original research in chicago years ago on foreign-exchange economics. he served the governor of the bank of israel. he works with james dimon now. a question for our good panel? >> thank you. we are celebrating the anniversary of what you have been talking about, the 20th anniversary of the asian financial crisis that came before. the 30th anniversary of the debt crisis of latin america. in davos. presidency a invariably, in all of these events, the conclusion you have btarted with mainly, a de problem, is much more serious than an equity problem. it is common. there are always two questions

you have always asked. number one, where is the risk today and number two, is it being priced properly? and if it isisks being priced properly, it is a different dimension. to price it properly, that is when regulations come in, etc. you were asking about the future. is it being pricedand if wknsk properly? that is when we know how to act. tom: i we pricing correctly the short-term paperwork. do we have confidence we are pricing this properly? i was addicted to ios and games for years. are we smarter? unprecedentedhis monetary experiment. it's going to turn around. qe. not ethe

it is not transparency. china has done a phenomenal job. when i hear, this time is different and china is different, though it looks the same, you have to wonder. tom: i have asked this before, and i will get to mr. corbat, but the idea that how much of our debt is still at a negative nominal rate, do you have governance we can unwind from a negative interest rate to be more normal and real? >> confident? i am more worried not about the unwinding, but if we had a significant recession, it could happen. david gave reasons, jes gave reasons. if it happened, there is not a plan a. they have done so much already. there would be a big fiscal stimulus. there would be a big quantitative easing.

i don't think both would work as well. do: should mario draghi something on thursday at the ecb meeting? does he need to act quicker? >> mario draghi is doing a great job. tom: that was the banker's answers. >> when he goes, a real giant will have left. he's done an incredible job. italianmarch 4, the election is happening. macron's france happening? germany e has been a

phenomenal story. even during the salad days of european growth, italy did not grow so well. when i look at their political system, which i cannot begin to understand, it looks like it is sorting itself out. you have to worry about the long-term. they do have a lot of debt. and if the rest of the world and slaves interest rates, italy could not keep up. tom: did you capture the booming era? when you look back, do you feel like you saw that your business was able to capture that? and how do you recapitulate that during these good times? >> in europe, we were fortunate to be on that trend quickly. the political noise dominated the headlines. low basee coming off a , anything is better than nothing.

qe sense. i think europe continues to muddle through. we have been analyzing the games we have made so far this year. in europe, can that carry on through this year? clearly not. the smart money is taking some risk off the table. not all the risk off the table, but some of it. nt goes back to what kek said. they will be a bunch of people who have borrowed money from potentially people around this table or in the room will not be able to pay it back. and the market will not in aggregate price that. that does not mean every company who has ever borrowed money will not be able to pay it back. but there are some. there is very little margin. rise,the dollar were to

above where it is now, it is actually at a really low point, that could cause problems for london companies paying it back. they will not be able to earn it in their local currency. three countries have had surprising economies of late. one is brazil, which is coming back from the dead. i think you can buy -- you can purchase inexpensive things now. we have not mentioned india. india has been booming at a higher growth rate than china for the last couple years and ohdi has done a tremendous job of getting money into the country. and russia, because oil prices are coming back and gas prices are coming back. it should not be written off as much as it was. tom: we will circle back here, and we can open it back up to the panel. we have somebody from the united states coming here, who look

that india and is focused on russia in a completely different way than the conventional world. what do you want to hear from him as you look at brazil, india and russia doing better? he does not want to talk about those countries. >> i don't speak for him, but what i think he wants to convey is he does want to work with other countries. he wants to do it a little bit differently, but i do not think he is coming here to castigate people. i think his mission is to come here and say, i can mark with you, but you have to work by different terms. he's a politician, remember. he comes here to play politics. not to convey some kind of new economic agenda of his administration to the rest of the world. because there is no economic agenda.

i just want the people to knowon his remarks they are not working on a castigation speech. >> is china different at this time? actually, china is different because we openly admit that we have too much debt. that is why we have a new pricing policy in china. everybody sees it. you don't tackle it. we have a problem. what i was trying to say is the resolution of the problem, the resolutions in china will be different from other countries. economics at

stanford, how do we clear markets and do we clear them the same? how do you clear those markets in china? >> it is abination of the market itself, as well as government intervention. that is always the case in china. tom: is the will of this government different than the previous governments? >> if anything, the will of this government is even stronger to help clear the market sooner rather than later. >> i want to follow up on something president trump might say. i think he will address this group and say, i understand a lot of you might not like me, but if you look at your wallets, you should love me. the danger i think is what feng said, if the stock market goes down, will he pressure the interest rates to remain lower.

turn what should be an equity market correction into something much deeper? to take somery credit for the economy doing well around the road. he will say, look what i have done in the u.s. i suspect it will take some credit, rightly or wrongly. >> i do hope the world economic forum this week stays focused on an issue that has been in focus for the last couple years, which is income inequality. i hope we do not take our eyes off that challenge. tom: let's leave it there. it has been interesting. to our audience here, i would like to thank you. to bloomberg, bloomberg radio and bloomberg television for their coverage. but i want to thank -- i have never done this in 14 years -- the audience for fighting through this note. -- for fighting through the snow. thank you so much for coming

here today. [applause] that was a great panel on the future of finance by our very own tom keene. interesting to hear jes staley talk about barclays. if you look at the possible causes of the next financial crisis, people will say muscle memory is a concern. 2008.will draw from but what if the next financial crisis comes from something different? tom will join me here on our davos set. we will be talking about protectionism, donald trump with his tariffs, not only on solar panels, but on some of the washing machines. the president slaps duties on imported solar panels and washing machines in his first major protections move.

china slams the decision. back to work. the government is back open. have they just kicked the immigration issue three weeks down the line. netflix's vlue tops $100 billion as shares surge in after-hours trading. good morning and welcome back to "bloomberg surveillance," and '' m francine lacqua at the world economic forum in davos. tom keene is joining me shortly, he just wrapped up his panel. it is the first official day. we have the indian prime minister speaking for the first time for an indian leader in about 20 years. that is in about five to 10 minutes. we had about 10 world leaders coming up and on friday, we have president trump possibly coming with his agenda first speech. we also have some great

newsmakers ahead of the next couple hours of "bloomberg surveillance" coming up intimately. chairman of the mitsubishi alliance. tom and i will be speaking with joe about the euro. he wrote a very interesting book about the region and i want to talk to him about the cryptocurrency. and then we will be speaking with stephen schwarzman. we have a lot going on, but let's catch up to speed with the first word news. here is taylor riggs in new york. hasor: president trump signed a government spending bill that ends the three-day partial government shutdown. capitol hill is inspected to fight over immigration over the next three weeks. senate democrats agreed to a deal from mitch mcconnell, giving in on the spending bill. mitch mcconnell agreed to address demand that congress protect undocumented immigrants deportation.

president trump has taken his first major protectionist move one year into his term. the president imposed tariffs on imported washing machines and solar panels, some as high as 50%. south korea condemned the move and china called this a misuse of trade measures. in davos, the dangers of protectionism were warned of. this could slow down the economy. protectionism has never been good for effective trade and growth. five oil workers are missing after a natural gas well exploded. owner says it would be unwise to speculate on the cause. in japan, the central bank maintained its massive monetary stimulus. the bank of japan kept the economic forecast and price unchanged. aid expectations for

inflation had stopped falling. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. riggs.lor this is bloomberg. still in you are davos. francine: i certainly am. ceo rainsover the to the japanese carmaker last year. this year he told the french parliamentary hearing he could take over a more strategic role in the renault and mitsubishi merger. it is always one of my highlights speaking to you because you have an eagle-eyed view of the world economy. we wake up to donald trump and imposing tariffs. i don't know if it is aimed at china directly, but it will hurt the solar panels made in china.

his 2018 the year we will see protectionism? >> i don't think so. i think we will see a renegotiation of existing contracts, but i don't see anything that will be leading to protectionism. francine: why the tariffs? -- frankly we have been through much tougher times during the last years. reasons tosome protect oil, but i don't think now, particularly with the growth we are expecting this year, we will see anything significant. francine: when president trump shows up in davos, the first time we have had an american president since 2000, how will he be received, if he does do in america first agenda? >> i think with a lot of interest. there will be a lot of curiosity. the people have the same

opinion, they will not change their opinion over what they have already been convinced of. francine: people like you also have to build an industry. in the carmaker industry, you have components all over the world. how can you protect yourself? can you hedge? >> we will make decisions based on decisions, not on speculation because we have so much at stake. we will be very cautious as carmakers before making any decisions, particularly when it comes to changing our plan. we will be looking very carefully to what is going to happen really. francine: i started talking about a possible successor to you. are you thinking about it, is it to name an operational manager or ceo. >> what you said, is pretty well set. you have all the information available. francine: you don't have any breaking news today? >> he will have to wait for the

timelines. when i wasreassured, in front of the house of representatives, the fact that i will be seeking to solidify the alliance. today we have three companies, andan, renault, mitsubishi. francine: what would you focus on? do you have some things that are close toi o your heart? >> i think the future is very important. the technology will be a major focus. francine: what are you working on at the moment, apps? onomous cars, cars without drivers. we are making sure we are meeting and exceeding all the emissions targets. we will need a lot of technological breakthroughs. francine: builds in-house?

>> built in-house and with collaborations. francine: houston cannot come? >> over the next three to four years, you will see a lot of change. we are working with regulators. we are informing the regulator in france, japan, and the when wemake sure that need regulation, it will not surprise anyone. tom: are you looking for partners in technology? >> we will be doing and selling with partners, and by ourselves. we are not leaving any path blocked to the advent of driverless cars. francine: what partner would you be looking for? >> we have many partners that will be interested. the large companies like uber, or the likes of uber, is one

example. but you also have the large companies like alibaba or amazon who are very interested also. francine: how would this work? do you have to choose one partner? is it all three partners coming together? >> we are working with the car manufacturers and all the car manufacturers are working with many companies. there is no exclusivity in the field. everybody is trying to find the best partners for the company to do this. francine: how often do you talk to potential partners? >> probably twice a year, personally. we have ongoing discussions with the teams. there is a lot of change between the industry and the company. francine: are people realizing is coming to a change? so. think you are projecting images of prototypes going on now. consumers are getting used to it. of of theseketing

cars will not come for years because regulars have to accept a lot of things that for the moment are not. francine: you have been talking about diesel cars in europe. >> there is a big draw. i think the drop will be even bigger. athink the consumer is in situation where he is flying out of diesel. there are many announcements that say they will be out of the cities in this period of time. the consumers are looking at the resale value three to four years done the road. we need to be ready to have an offer, which is not diesel, adequate to what the market is demanding. what you see today is only part of the job. francine: what is your offer? >> i think we went from in europe to a 60% diesel rate to less than 50% and i think we

will be moving below 40% quickly. francine: what happens, and i'm trying to figure out -- automation, in 10 to 15 years or less? >> of cars? in four or five years. everything is going to happen within a six year time frame. you will see connected cars, automated cars, you will see robo-taxies. francine: but in six years i don't have a car anymore. >> you can purchase electric. you can buy gasoline. francine: but what happens in six years? >> well, you will have much more to offer with electric cars. francine: do i sell my car? >> some of you will. idle think there will be one option or the other. francine: do governments come and tell you that you need to slow it down or are they worried

about the impact on employment? >> the government is very autonomous cars. they are much more interested in electric cars. they know a lot of damage will exist. that is why the transformation does not only touch the carmaker. francine: how will you be impacted by nafta if president trump tears it up. >> we built everything in america based on nafta. at the moment, we do not know the change. frankly, i don't think it is a competitive issue because all, makers are in the same situation. francine: is there anything you can mitigate? withow, we are changing the administration. we are giving them the data. when they do change, we will know the impact from two sides of the border. that is the only thing we can

do. francine: will a baby born today know how to drive? >> i think so. maybe not as much as our generation, but yes. it will be a different kind of driving also. francine: so, what kind of driving will it be. >> we will have a lot of autonomous cars. it will be how to handle the car, how to let the hard drive -- how to let the car drive you and how to drive the car when you want. francine: that was carlos ghosn. let's get back to the markets. >> a fascinating conversation. one of the big questions in davos would be what would pose a risk to the growth and markets right now. equity markets continue to build on record highs. i will sound like a broken record when it comes to that. the hang seng closing at a record and the stoxx 600 in

europe heading for its highest close in more than two years. the msci old country index also heading for a record close and u.s. futures pointing higher as well. building on a fresh record high that was hit yesterday. those markets are really shrugging off any potential risk to trade that might come from president trump's announcement overnight over the tariffs. if we look at the fx market, the bloomberg dollar index sees its biggest rise in more than two weeks, and the dollar gaining against most of its g10 peers, except for the yen. the yen strengthened after the boj camped its stimulus unchanged, and just tweaked its language when it came to the inflation forecast. kuroda fell when push back against these markets, which have made the expectation of tapering in 2018. the yen fell against the dollar

after kuroda spoke, but now the dollar-yen weaker by 0.3%. the yen, making a comeback. cable is showing the biggest dip in more than three weeks, and this is after cable went through 1.44. hedge funds are at their most bullish on sterling since 2016, but generally the dollar is on the front foot and looking at yields moving lower. the 10 year yield in the u.s. shows its biggest drop in almost four weeks. wti crude is higher. decline forsted to a fourth week. that would be a record run. let's go to taylor riggs. taylor: british regulators say fox.entry the competition in markets authorities says the deal could give rupert murdoch's family too much influence over british

media. there are concessions. netflix is now on par with companies like goldman sachs and qualcomm. the market value surged past $100 billion and netflix added 24 million customers during 2017 and now has almost 118 million subscribers. president trump has delivered these sort of trade blow his base has been craving. the president imposed tariffs up to 50% on imported washing machines and solar panels, raising concern that protectionism could hurt the economy. the global economy has never been more integrated. all engines are firing up. we have synchronized growth, and that is good news. we don't have to worry about ending this too soon. it is clear the biggest risk is

trade. trade in a number of ways. fundamentally, are we questioning the kind of global trade order that has been marking this global economy for so long? that is the biggest risk out there at the moment. taylor: that is your bloomberg business flash. a goodbye to the world economic forum in davos. francine: taylor, thank you. after signing a spending bill, ending the three-day government shutdown, president trump took his first major protectionist move of the year, slapping tariffs on imported washing machines and solar panels. our next guest says the most significant little risk is the united states. here to discuss this is professor joseph stiglitz. how concerned are you that donald trump will show up here with an america first agenda and we are going to have a protectionist 2018? trump has donald

already been discounted, as we say in the financial markets. people have watched his -- for the last year, his rhetoric was fierce during the campaign. his actions have been fortunately, much milder. the tariffs he slapped on today are the kinds of things everybody expected. obama had solar panel tariffs. this is not a new thing. i thought it was wrong when obama did it. i think it is wrong when trump whenit, particularly accompanied by the protectionist rhetoric. it is bad for the global environment, for the american economy and for jobs in the u.s. washing machine, it goes against korea. we are trying to work on something with north korea. francine: right, but this is not

the beginning of a trade war with china, is it? >> i have talked to people in china. they are going to be restrained. they have taken the measure up front. my sense is they are more responsible than trump. francine: are we having real growth here? toothe davosians responsible about growth? we are not hundred percent certain about where the politics will go. >> i think is likely to be a good year, but i think there are bumps ahead, probably not realized this year. for instance, if interest rates return to normal? -- for instance, if interest rates return to normal, and that will take a couple years, italian debt is officially high, that if they ever got back to normal, 3% to 5%, italy has a

very big problem. areitalian politics complicated. italy has not really been participating in the resurgence of growth in europe. francine: is italy the biggest risk for growth in europe? >> i think it is the biggest risk. if that happened, the euro prices would move again. francine: are you worried about the coalition, which would be spearheaded by berlusconi cutting back on reforms, or are you worried about the far left fighting the movement coming into power on march 4? >> i am not worried about the five-star movement coming into power. what is a concern is that a coalition would -- could put the question of the euro up to a vote. very popularis not among many people in italy.

because italy has been struggling. youth unemployment remains very high. eurozone,s in the that is where i worry. the reforms in the eurozone have not gone very fast or very far. what i worry about is the fact ist europe is recovering actually -- and the problems in the german political scene are making reforms in the euro very difficult. francine: professor, tom keene joins us. tom: it was a wonderful panel tz came up three times. we are talking about the discontent not in davos. this feels a lot like 2006. goff is talking

about this, we have learned lessons, but we are not out of this. do you get the feeling of 2006? >> i think 2006 is an interesting reference point because it was not 2006 or 2007 at the financial crisis happened. it was 2008. we were setting up the conditions that eventually led to the crisis and there was this euphoria in 2006. i think they are not fully on board with the risks of what will happen when we return to "normal" with normal interest rates. tom: one of the high points of ghaianel was with feng xin of china. he took his phd with few years ago. we cap quizzing him about how china clears markets. you are the expert in the world of, how do weekly

or markets? how do we clear price? how do we clear information? are we doing better now at clearing markets to find a better market? >> china has a distinctive kind of market economy and they call it a social market economy with chinese characteristics. they are very aware that their model is not likely to work elsewhere in the world. they understand trying to understand that it works for china. they realize that markets on their own don't work very well. tom: four you get into trouble. >> it can get you into trouble, like we saw in 2008. they are trying to get a balance that works for them. francine: should we worry about deleveraging in china? or do they have a handle on it. should we worry about shadow banking in china? or do they have a handle on it? >> they are very aware of the

problem, which we were not. jackson hole right before the crisis there were all kinds of statements coming out of the economic leaders saying -- poo pooing those who questioned it. they are very aware of the problem and they are trying to -- actually, this last quarter, -- notwth of debt financial debt but gdp, stopped in china. they have been able to restrain it. so, i'm optimistic. tom: i want to go back to what francine was talking about. we kept score at my panel and we had 32 minutes before the end of the panel before somebody mentioned president trump. francine: of course. tom: you are somebody president trump does not want his week two. he will not take advice from you.

he does not believe in your discontent. but his handlers, his entourage, his advisers must listen to joe stiglitz and this scream across america about this great inequality we have. how does a president after historic legislation discover trickle-down economics to boost and improve the terrible inequality? how does he do it? -- it me say, the tax cut do not call it a tax cut because by the time it is fully implemented, the whole middle class, a majority of those will see a tax increase. lowered a tax bill that taxes for corporations -- rld: everybody in the wo shake their head and goes, this is good legislation, etc. tom: you grew up in indiana, a small city to the northwest of it. you grew up in gary, indiana.

how does president trump's theory benefit gary, indiana five years from now or 20 years from now? t doesn't. you will need a tax cut to help these people, but more active policies that -- look, you cannot build the world we had in 1950 or 1960. that will not come back. we are not going to re-industrialize. we can bring back manufacturing, but it will be jobless manufacturing. we have to find new industries, like installing solar panels. tom: and washing machines. >> and what are we doing? we are making it more difficult to install solar panels. we have five times as many workers and solar panel installation then we have in the coal mine. and he is trying to help them.

francine: but president trump supporters back him and he has gotten more support since the tax cut or whatever you want to cal litl it. how do you explain that? >> america does not have a good education system. there is under investment in the public sectors. one of the things we have learned is you can sell bad products. you can sell things -- cigarettes that hurt your health -- you can sell that ideas and that is what they have been trying to do. they have sold a bunch of bad ideas. the problem, eventually they will wake up. and whether it is in two years or 20 years, we will pay the consequence as a country. tom: you wrote a historic book on the iraq war where you and your colleagues analyzed the injured, the wounded, the killed.

we have had a number of wars with a long-duration, two times the civil war. intellectual relations in retreat. what do you see when you see in america that wants to pull back after these wars? how do we reassert ourselves? what is your formula to reassert a better america, as president obama would have called it? >> it requires an engagement and militarycrease in our power. our military power has not been able to pacify iraq. what has always been the source of america's strength is our soft power. what worries me is the kind of america first rhetoric we hear over and over again and what he promises to bring to davos. it's eroding our soft

power. climate change is the biggest problem facing our planet. the united states is the only country that has withdrawn from the paris accord. we are viewed as a pariah country and that undermines our soft power. if we are going to step in and create a global framework of peace, it should include a rules-based trading system. you have to be a global citizen and unfortunately, under trump we are not. francine: but who gains at soft power? if the united states is losing it, is it china, five years from now? >> i think it is going to be hard to tell. xi's lastsident speech was the statement speech. everybody will be looking in contrast that president xi. some very goodn

addresses. he gave a beautiful address about european unity earlier this yeear. so, there are some young leaders stepping forward to give a vision of where this goes. they have the vision. tom: who is joe stiglitz? many of you know this one or that one. let's talk about joe stiglitz of the little g. you are acclaimed for your analysis of the rate of change of growth. you have really thought about the dynamics of the economy and the growth great. the president wants 3% economic growth. even 4%. that is a remarkable little g. could he get that? is that a pipe dream from another time? >> he can't get it with his

policies and i don't think anybody could get it, but his policies will undermine growth. let me explain. tom: please. >> there are two determine ces of g. one is labor force growth. the basis for that has been immigration and he is trying to cut that off. the second thing is productivity. productivity depends on investment and education. taxr before have we had a on our private universities that have been the basis of our innovation. harvard, stanford. tom: that is called the stiglitz tax. they are going after guys like you in ivory towers. >> this is the source of the big innovations, the things that have increased our productivity. you might not like these techie guys, but they are increasing

our productivity since the enlightenment, for 225 years. this is not a american agenda, but a post in my judgment agenda. francine: i know you are not a fan of bitcoin, but will some cryptocurrency come to the form? >> we have a good exchange with the dollar. we can trade in that. what if it isle want regulated? joseph: why need it? we have a perfectly good currency. we are moving towards an electronic payments mechanism. i would like us to move more towards an electronic payments mechanism. you do not need a bitcoin for that. tom: this is critical to your quote when you said bitcoin should be outlawed. is that what korea did? joseph: i think so. i was maybe a little hyperbolic.

i want it regulated. we regulate so we could engage in line -- money laundering -- so there will be no demand for bitcoin. by regulating the abuses, you will regulate it out of existence. because it exists because of the abuses. francine: professor, thank you. that was joe stiglitz. he stays a little to talk more about merging markets, as the prime minister of india is giving remarks. nejra: we are seeing risk on globally. the msci all world country index heading towards a record close to you this after the hang seng hit a record close. european equities hitting a record close in more than two years. in u.s. equities, we will build

on that record close yesterday. if we look at what is happening in fx, the dollar on the front foot in today's session. the dollar rebounded for its weeks, or atin two least it was when it was up 2/10 of 1%. i want to focus on dollar yen. that has been interesting. we have the boj decision earlier. when we got that decision with stimulus unchanged but the boj tweaking language around inflation, the yen strengthened. strengthened and pushed back against tapering expectations after governor kuroda spoke. weaken, but it is back again. cable down 3/10 of 1%. earlier, it touched 1.40 for the

first time since brexit. now let's get to first word news. the u.s.he battle over government shutdown is overview of the fight over immigration has just begun. the president signed a spending bill that ends a three-day long shutdown. allotted third promises to deal with immigration within the month. the u.s. and turkey stepped up their war of words over turkey's offensive over kurdish fighters armed i the u.s. u.s. weapons ship to the kurds would eventually be used against turkey, they said. elected it putin is to a fourth presidential term, he plans to offer rush of the biggest increase in domestic spending in years. putin will propose possible

increases to the pension age and income tax. he may also call for cuts and some tax break. s. south korea remains the top ranking in the bloomberg innovation index. sweden stayed number two. the u.s. dropped out of the top 10 for the first time in the index's six year history. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. back to the world economic forum in davos. tom: thank you so much. wonderful to have all of you here at the world economic forum. we begin our first really active day here. joe stiglitz is with us. and one of the most interesting woman on capitol hill -- it was a gray day in 2011 when she

walked out of the door. , a liberal -- the only reason she joins joe stiglitz. [laughter] talk about a democratic party that, for whatever reason, went down in flames that election night a few years ago. a more popular vote, what does the democratic party have to do to take back the and take the country, back the soul of someone i knew your family new, jacob javits. jane: reach for the center. i one of the surviving democratic centrists. i should be in a dinosaur museum, i guess. reach for the center on economic and defense policies. stay where we are on social issues. i would defend strongly the view. i am ascoop jackson --

scoop jackson democrat. that is what he is. you spoke your mind and i got you in trouble time after time on capitol hill. how do you teach progressives to get back to the middle so the people who voted for senator jackson and senator javits will do it again? jane: losing is not fun. i would think democrats want to be in the majority. there are a lot of good people in congress in both parties, but the business model is broken. if you spend all your time blaming the other side for not solving the problem and if "bipartisanship" is a dirty word and gets you hurt in your primary, we are doomed in the country. jake javits is a republican, by the way, but in the middle and a problem solver. that is what we need. francine: who is your leader? how can democrats find a leader

that can actually go against donald trump? tom: you need someone from england to ask the smart questions. [laughter] jane: i am, in my -- i am in my nonpartisan role as ceo of the woodrow wilson center. but there are a lot of good people in both parties. governors, former governors, some members, former members, who could change the equation. winning matters. just ask our president. if you want to win, you have to have enough people to get you over the finish line. i think the democratic party, sadly, did not bring its a-game. i think donald trump was not in either party and brought his disruptive party. francine: you could argue the last election changed both parties forever. joseph: right. we have to understand the middle -- if you want to call it that -- clinton and obama did not

address the problems of america's inequality. it grew worse. that is why we need a progressive social and economic agenda. it is important to reach out across the whole spectrum. you may not be able to get the whole 100%, but a wide spectrum. it is also important to get enthusiasm for your base support. i think we can do both. there are leaders who can do both. but it will take a progressive social agenda that recognizes the failure of obama and clinton. tom: let's go back to the woodrow wilson mandate, if you will. thinking about government and politics. what is the international relations of the president, and do we go to something new or do we need to re-find a washington consensus? jane: someone said recently that

trump is asking the right questions, he is just coming with the wrong answers. thinkingome disruptive is very useful right now, in both parties and in the world. what is davos doing here -- what am i doing at davos? helping to be a little disruptive. it depends what he brings here. there is a "wall street journal" op-ed asking what game is trump bringing to davos? he could not resist saying democrats caved -- everyone came together. why doesn't he celebrate that? joseph: he is so divisive. in the world, we need to be brought together. francine: but he is disruptive, specially with trade. we also need -- we have the prime minister of india speaking right now, so we are taking a little bit of those comments. mr. modi saying the world is

facing some challenges for achieving peace and stability. joseph: obviously, he is. you do not try to address that by saying we will throw a hand grenade in a system of, for instance, rules-based trade that has been created over 65, 70 year period >. we understand in our own country we need rule of law. he does not want there to be an international rule of law. it is not the same as giving up your sovereign tree -- sovereignty. it is how do people work together. tom: do you look at trumpology, if you will, as a one-off moment, or is it a beginning of a larger voice for a hyper populist almost william jennings bryan america? jane: trump did not create the problems he addressed.

the anxiety in the middle, the lack of new jobs, economic inequality, and a number of people scared by the social revolution, which is coming very fast. he did not create those problems. he was masterful in using those problems to fuel a movement that got him elected and blew out everyone else. what happens next? trump is not governing that way all the time. i think that is good news. some of his initiatives are good, internationally. the focus on north korea -- i hope we get somewhere on that. not all by himself, but i hope we get somewhere with that. build alliances -- there are a lot of folks here who should be trump's friends. on the subject of india, i make this point -- india is rising. china has risen. this is the asian century. and we pulled out of tpp -- huh? we had a chance to write all of

the rules on economic growth. joseph: that was a big mistake, to think that we could write, in the 21st century, the rules for asia. a has to be done cooperatively. asia will have to take the leadership of writing the rules for asia. francine: will the president pull out of nafta? so,ph: i do not think mainly because of american politics. there are so many republican states so dependent on nafta. there are at, least some trade lawyers who say even if we were out of nafta, forementing the legislation terrace remains in place. it would get an act of congress to get those tariffs down. even if that were the case, then we go to two -- wto tariffs. those are actually relatively low. their tariffsaise

more than we can raise hours. jane: we would loose so much if we did that. the economic interdependence and the french between us, mexico, -- canada is in the have to and friendship between us, mexico, and canada is something we have to prize. francine: coming up here on "bloomberg surveillance," a conversation with richard edelman. look for that interview at 9:30 in new york. the prime minister of india continues his speech here at the world economic forum. this is bloomberg. ♪

nejra: the hang seng in asia close out a record. seeing european stocks higher in more than two years. and it looks like u.s. stocks could their gains after a fresh record high from yesterday. looking at fx, the dollar gaining against most of its g10 peers. up 1/10 of a percent. it is not gaining against the yen. the yen is interesting. after -- it strengthened after the boj decision, then it weakened when governor kuroda spoke. now, it is back up again, the yen, that is. the dollar-yen down 3/10 of 1%. cable also weakening 3/10 of 1%

year it went above 1.40 for the first time since brexit. the euro on the back foot as well. yields moving lower pretty much across the board. 10 year treasury yields down two basis points, pulling back from the 10 year high. lower as well. the second day of gains for wti. crudehead of u.s. inventory data, forecast to decline for a 10th week. that would be a record run. tom: thank you. greatly appreciated. it is a perfect morning in davos . wonderlandugh winter morning. cue music from "frozen." it is best to do that with the only woman who has seen more

snow. once in new hampshire. jane harman with us, the former congresswoman from california and the force of the woodrow wilson center. i go down, not here, and there is the messaging and the properg and all of the phrases. one of the great themes is on women's rights as a general statement. i stated yesterday in an interview -- i believe it was jeremy hobson. i said jeremy, the world economic forum was way out front on women's rights. but it is different now. what is different in women's rights and the debate in america now from when you were coming out of smith college? jane: well, i am not sure the left was -- the west was way out on women's rights back in the day, but the west has evolved. womenare seven women's --

cochairs now, including my friend christine lagarde. what is different -- women are everywhere. when i applied to law school from smith college, it did not offer the law board. of course, i took it anyway in the men's college. we are at critical mass. we have not broken the glass theon -- glass ceiling in united states, but we have broken glass walls. i focused on security and defense might 17 years in congress -- but who is counting. those were field women were not in. we are doing an index, not just in women's participation, but the effectiveness of women's participation around the world. we will discuss it tomorrow morning here -- i will, with christine lagarde. leaders,in those leaders in general, there is, underneath, and impatient -- in

patients to hit the glass ceiling more and more. had a response woman who say faster, faster, faster? jane: the energy is wonderful. wiser, wiser, wiser would also be some council. want are 26,000 women who to run for public office this year, according to emily's list. that was terrific kid iran, it was called the "year of -- when i ran, it was called the "year of women." tom: to get back to international relations, it is europe ascendant. major credis getting for going around the world. does our president need to show the flag, get out there, meet the people? jane: i think he shows the flag and his america first mantra.

what he needs to show is america is willing to partner in a new world. this is not a bipolar or unipolar world, it's a multipolar world. india is rising, russia is meddling. thus, the fact that powers bottom up because of social media. social media titans have more power than other countries. tom: should the democratic party learn from the president's tweeting? jane: i would like less presidential tweeting. that would be more beneficial. use of socialnt media. of course we need that. but messaging about a vision, not just messaging about how bad the other guy is. ourbusiness model and politics is broken. it should not be the blame game, it should be the vision game. harman, thank you for

joining us here. she is from the woodrow wilson center, the former congresswoman from california. i should say "the" congresswoman of the defense industry. right now to new york city with our business flash, here is taylor riggs. taylor: a company known for making rum ordered a shot of tequila. the purchase will combine to them of the world's largest distillers. sales of premium tequila group eightfold. shrinking assets have led to job cuts at pershing square capital. bill ackman's hedge fund has cut 10 employees. pershing oversees $9 billion, less than half of the assets it had in 2015. that is your bloomberg business flash. tom, you are still at the world economic forum. tom: thank you so much.

greatly appreciated this morning. what a wonderful panel this morning. a packed audience. david rubenstein was with me. anne richards of m&g. i begin with the author of "the curse of cash." >> if we have another financial crisis, there really is not a plan "a." tom: let's talk now about the do youf your work -- feel that this time is different? : i do not. i feel we are still coming out of the last financial crisis. a systemic financial crisis we have experienced has a long afterlife, taking -- and taking eight to 10 years to recover is not unusual. and i have to say that talk could inflateon

genuine issues like productivity with our financial crisis. so i am not going to tell you there will not be another financial crisis. sales of my book would collapse. but i am kind of optimistic going forward about where the world economy is at the moment. we could talk about could there be a financial crisis -- of course. could there be a recession? absolutely. by think we are at the tail end of the last one. and in a typical trajectory. tom: what was the number one lesson we learned coming out of this crisis? i only have three questions, but from where you sit -- in the middle of your book, you go into this whole thing with the spanish armada collapse -- the collapse of spain, and it was longer than 10 years. kenneth: i certainly think this time is different. that people convinced themselves

that everything will go to the moon forever, and it never does. particularly when you see debt rising at an aggressive pace, you should look out for that. in the current environment, interest rates are really low. you can say debt levels are higher around the world, but not compared to the interest rates we have. i would actually throw out that the biggest risk to the global economy is that we are probably at an inflection point, where the tightening of labor markets, the demand, could get inflation, could get investment, which we have not had. then, if something pushed up real interest rates -- it is not my baseline, but we do not really know why they went down so much. the places that were not enjoying as much growth and have japan,f debt -- italy, for example, some emerging markets, they could have a lot of problems. i certainly see china as a place

did a great job and they did not have the financial crisis. but they do have a lot of the characteristics of a difficult financial crisis building up. tom: and i thought you had a very important perspective in the room about our collective memories and a number of people in the financial business that really have not enjoyed how you get into a crisis. what would you say to the young crew have not enjoyed 2007 or some of the romans in 2008 and 2009 -- or some of the moments in 2008 and 2009? >> we have quite a few tools to deal with any event that happens. and it will have been -- it never happens where you're looking. and it was happen somewhere else. if you look at what has shifted the last 10 years, we have had

years without any form of credit cycle. we now have a whole bunch of people who have never on -- gone to a default cycle. it always starts with someone borrowing short and lending long. elementsw that the will be there, we just do not know what the triggers are. tom: and that panel ended in a fist fight -- you will get there later. what a wonderful panel. thanks to kenneth rogoff and anne richards. we continue at the world economic forum in davos. ♪

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comcast business outmaneuver. ♪ tom: from the 48 meeting of the world economic forum, good morning. from a picture-perfect davos,

in 20nd, the worst snow years across all of switzerland and northern italy this morning. serious concerns about avalanche, but it is extraordinary, sitting atop the congress hall of the world economic forum. extraordinary morning. good morning to all of you. i had a panel earlier this morning. francine lacqua off on assignment. she has a special panel in this hour. much to talk about. yes on economics, finance, and investment, but really on some of the themes we are sharing about in davos. vice-chairman of standard and poor's global s&p. anne richards, she was on my panel. we are still on speaking terms. she will join us from m&g. and martin gilbert with a really interesting year at standard life aberdeen. and an annual conversation --

our erik schatzker torn by blackstone chairman stephen bywarzman -- joined blackstone chairman stephen schwarzman. right now, here is taylor riggs. taylor: the president signed a government spending bill that ends at three day partial government shutdown. now, capitol hill is expected to fight over immigration the next three weeks. senate democrats agreed to a deal from senate majority leader mitch mcconnell. they gave in on the spending bill, and mcconnell agreed to address the man's to protect young undocumented immigrants from you partition. the president imposed tariffs on importing washing machines and solar panels, some as high as 50%. south korea condemned the move. china called them a misuse of trade measures. in dallas, the ceo of societe oferale -- in davos, the ceo societe generale warned of

protectionism. >> we could slow down the economy. not good for is maintaining growth and trade in the world. taylor: in eastern oklahoma, five oil workers are missing a fire. patterson-uti energy says it would be unwise to speculate on the cause. in japan, the central bank maintained its massive monetary stimulus. the bank of japan also cap -- kept its economic forecast unchanged. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. wonderful. thank you. joining us now is a most important australian economist, four years associated with

global wall street. now at s&p global, where he is vice-chairman. paul sheard is one of the world's authorities on japan and their economics. wonderful to have you here. one of the great things i notice is we have a bank of japan meeting, an ecb meeting -- a couple of the ideas in early davos. i have been surprised how many people are talking about the quantitative easing to quantitative tightening exercise we will go through. david rubenstein calls it a science fair. is it a science fair, or is it based on good economics? paul: great to be here. i am not sure what a science there is, but my take on, to boil it down -- quantitative eating -- quantitative easing is what central banks do -- it is what i call a debt refinancing

operation of the consolidated government. the twist is the central bank is doing the management. so retiring long-term debt securities. quantitative tightening, so-called, is a reversal of that operation. tom: but this goes to your true and -- international acclaim, which is the cultural and almost demographic realities every central bank faces within their politics. the bank of japan is not the federal reserve. which bank are you looking at to see best practices of quantitative tightening? first capfed is the off the rank pay you have to take your hats off to them. unwind ofhe so-called de, but look at the end of janet yellen's term did she really steered the fed through an important period of finishing tapering. she had -- we had five interest

rate hikes now. the idea is that something central banks were keen to emphasize, to add potency when they needed it. they are now trying to suggest it is not that big a deal, led the balance sheet unwind gently. i think the fed is setting the template. is all ofating thing the central banks have sort of been engaged in this sequential learning. one central-bank innovates, the other central bank says we might try that as well. the central bank is in the mix as well. tom: this came up in my panel. are we working with the old economic models? respond, as a true economist, in waiting for wage growth in the atlantic world? paul: it is a big uncertainty at

the moment. within central banking, there is this question of is inflation around the corner? normal history and models would say surely it is. but the other thing is you get the fourth industrial revolution, the machines and robots are coming. it has the -- has the whole structure of the economy shifted in a fundamental way? they are not just competing with other workers. tom: do you believe labor will get power? that is the arch question. does labor finally get its day or not? relatively speaking, they will have more bargaining power than they had deep in the recession, but i think the game has changed. if you believe 60% of what you hear about ai, the rise of the robots, that has to imply that

labor has much less bargaining power. tom: i must turn to your expertise in japan? do they believe in trickle-down economics in japan? in bank of japan challenges the early 2000 had to read kant -- do they believe in trickle-down economics? paul: you do not hear in the japanese debate a lot of chuckled on economics. the question really is -- it goes beyond japan. there is a lot of confusion in the economic policy debate between the different policy realms. we have macroeconomic policy, but then we have structural policy. they have different roles. structural policy is to improve the supply side cycle. macroeconomic policies designed to make sure that i'm a your supply potential, you are filling that with requisite demand.

there is a need, not just in japan, but more generally to rethink of the whole policy framework. if i take aim at macroeconomic policy framework, there is too much emphasis on monetary policy. the separation of fiscal and monetary policy has a very strong benefits attached to it, but it is not the be-all and end-all. tom: that is where i wanted to go. with your remit at standard and poor's, you have a huge combine in credit analysis, but also cfr and all of that. do you believe in 3% gdp? to tell as difficult story about how you get from 2% to 3% anytime soon. because it has to come from somewhere. it is -- is it labor, capital, or productivity? the other question on measuring

gdp -- there is also a productivity puzzle. that gets to the idea that a law of what we intuitively think of as being the benefits of technology are not really whiched in p numbers, sort of misses the consumer surplus. obsessing too be much in gdp numbers and, therefore, productivity numbers, misses something bigger going on. tom: finally, let us address for the end of 2017, the debate around tax policy. that is the idea, in any country, on whether if you stimulate a country through policy, you can generate growth out of it. this was set up on a polarity of -- from the president the chairman of the president's council on economic policies. can we just say we will get growth out of a good tax policy? paul: it depends on how it is

designed. we are seeing, there are two angles. one is improving the system itself, so you unleash more capital investment and more productivity growth. that will help you move the needle on the 2% potential. it is also fiscal stimulus coming in an advanced stage of this expansion or recovery. that brings into play what does the fed do about it? there are two them big issues. one is how much does that improve capital efficiency? reignite much can you the animal spirits in the labor market? issue weack to that talked about before. there seems to be at emerges between what the fed is saying -- we are pretty much at full employment -- and if you read into the trump administration, their view of the labor market is we have oodles of slack, we have to run the economy hot. tom: we will see that from the

president later this week. paul sheard, thank you, vice chair of s&p. something talk about really important. we have to go to nejra cehic. she has our market check. nejra: and we are seeing risk appetite across global equity markets. global equity markets heading towards a record close. looking at the msci all country world index. european stocks heading for their highest close in more than two years. we perhaps ea touch of softness in the u.s. session. you can see futures edging into negative territory. let's take a look at what is happening in the fx the dollar on the front foot. seeing dollar strength against most of its g10 peers. that means cable pulling back from the 1:40 level it touched for the first time since brexit. seeing a little euro week this as well. the yen has been interesting, strengthening initially when we got the decision from the boj.

then weakening when governor kuroda pushback against any signs of early tapering. now, the young back in force. 2/10 ofen stronger by 1%. yields generally moving lower, at least when we look at the 10 year treasury yields down by three basis points earlier. pulling back from that 20:14 -- 2014 high. we are seeing the 10-year gilts little weaker as well. oil gaining. their bti briefly above $50 a barrel. -- $54 a barrel. let's get to taylor riggs and the bloomberg business flash. tom: british -- taylor: british regulators say britishtury takeover of

broadcaster sky would not be in the public's interest. the cma says the deal should go ahead only if there are concessions, such as divesting sky news. countryis on par with -- company such as goldman sachs and qualcomm. the world's largest online tv network surged past $1 billion after their reporting its -- surged past $100 billion after reporting their highest subscriber numbers. and the president imposed tariffs of up to 50% on imported washing machines and solar panels. that has raised concerns that protectionism -- could hurt the economy. bloomberg spoke with blackrock's vice-chairman in davos. >> all engines are firing,

basically. we have synchronized growth. there is slack left globally. so we do not have to worry about ending this too soon. it is clear the biggest risk, and our view, is trade. of ways. a number fundamentally, are we questioning the kind of global been marking the global economy for so long? that is the biggest risk at the moment? -- that is the biggest risk at the moment. tom: taylor riggs, thank you so much. a great summary of the news. we end on one the discussion points. every morning in davos, there is always something new to talk about. it happens to be about washing machines and solar panels. our "bloomberg surveillance" expert on washers and dryers is kevin cirilli. there was a little surprise on tariffs here in davos. let's start with why.

the president go specifically after washing machines and solar panels? kevin: it looks like they were the low hanging fruit. when you look at the broader trend of what we are on the cusp of, there was a report a couple of days ago about president being frustrated with his economic team for negotiating with china. and we are in the final stage of the third round of nafta negotiations, so it could be foreshadowing tough trade talk to come. be? what will the response we saw that with canada. canada responded weakly when arguments were made to temper -- how will the chinese respond? kevin: we do not know how the chinese will respond, but this does give the president a bit of a prelude for his talks in davos . our margaret talev interviewing

the vice president, who provided a preview of what the president will say in davos. tout this america first strategy. and these tariffs could be the energy he brings when he arrives. tom: there is an entourage coming with the president. who are you watching most carefully? 20 or so traveling with the president has the attention of kevin cirilli? kevin: you have to pay attention to treasury secretary steven mnuchin. he really aligned himself with the president and, as of late, withot at all butted heads the president publicly. he is one of the rare, few folks in the president's cabinet last on that. we have seen that with tax reform and in the past couple of weeks. this is someone very entrenched in the global economic community. someone who has the president's

ear. secretary mnuchin and that relationship is definitely one to watch in davos. less than three people ask me about the shutdown and now the reopening of the united states of america's government. people are always bewildered or mystified about the action. i guess, what is to come -- did the democrats win or lose or is chuck schumer the smartest guy in the planet, because he knows what is coming around in three or four or six weeks? kevin: i talked with a senior aide of a progressive senator who goes "the dems caved." then i spoke to more moderate members, who said, "we are playing the long game." i interviewed a democrat from delaware yesterday as well, right before the vote. said he has full confidence

in senator schumer. the bottom line, it depends on who you ask. same typesed for the of fights on february 8. tom: i asked that you be in washington. i spoke with someone who said that tom brady still has the pixie dust. kevin: it is too early for this. i will be very careful with what i say about mr. brady, but go eagles. cirilli, thank you, our chief washington correspondent. that brings up my panel today. one of the great things about our panel of six people is you have the collegiality, the respect, and the differences of opinion we saw there. there was none better than jes staley on barclays and the american banker, jeff corvette, of citigroup.

>> we saw the economic calamity this last financial crisis and the damage that was done globally. one thing that is different this time that we need to utilize is i think the conductivity and collaboration between regulators and academics and private equity firms and investment firms and banks is that a whole other level than it was three crisis. -- pre-crisis. you go back to 2005, 2006, the banks would meet with the fed every quarter. now, they're in the banks every day. tom: do the british do this better, do they have more focus? >> on both sides of the atlantic, the degree of integration, or work between the regulators and the banking community, not only to fix what happened last time, but also

most corrections to bank relations -- we really need to work collaboratively. on one level, pre-2008 and 2009, the regulators were there just to bear witness. if something went wrong, they regulate to course correct the economy real-time. today, the political body has pulled the regulators -- i want you to regulate the system, so you avoid the next financial crisis. so her andars or finance, with have never done that. what is incumbent upon banks and financial firms and academics is to work collaboratively with try to avoid the next financial crisis. occurredthe banks have

-- incurred are very high. we need to sit down in forums like this -- and even though it is all rosy and whatnot -- we have to save what are we missing? whether it is levels of that -- debt, how much short interest is there in volatility, how much are we building structure notes around the world, trying to --ance yields tom: are you worried about that, worried about the present game? jes: absolutely. tom: you are not worried about this, the bank of england, if you look at the dampened volatility. you have to pay attention to it again. you think about where we are today. we went through a government shutdown over the weekend, and the market is up. [laughter] so you go through these events, and you got to ask a question.

the challenge is, from the asset management for the investing soldis, along the way, you brexit, you brought it back high. if you sold the president's election, you brought it back higher. bness is a number -- num and ambivalence out there that is concerning. with the next term comes, it is likely to be more violent than it would otherwise be. worriedh the media about trading and jobs, do you see a new trading process in banks as a go to the next financial crisis? income, currency, commodities, is it going to be something different for the banks then where was in 2006? >> one of the things we have stopped talking about, because

the central banks have largely taken on the role of being the significant liquidity provider. but bank balance sheets today around the globe are much stronger in terms of their dedicated capital and risk-taking tolerance to pre -crisis. when the science fair project ends around qe -- tom: can i steal that? i love that. michael: and we see may be the bank of england start to pull liquidity to tighten. maybe sometime early next year, the bank of japan, things start to change. what will liquidity look and feel like? we do not know, because it has not been tested. tom: is this science fair for a one or something like that -- how will this end, this wonderful banking experience? rates rise,st

inflation could come upon us suddenly. i think u.s. inflation will exceed 2% this year. we may are ready it in china. i do not know. if they start tightening faster than markets of -- expect, how will capital markets take it? francine: that was tom keene in his esteemed panel earlier, which included michael corbat and jes staley and ken rogoff. let's get a check on the market. although global equities are headed towards a record close, coming a little steam out of it. the stoxx 600 flat now. it was headed for its highest close in more than two years. u.s. futures down 2/10 of 1% after the record close for the s&p 500 yesterday. we look at what is happening in fx markets. it has been a dollar strength story. it still is, to a certain extent.

we are seeing cable pull back from the 1.40 level it hit earlier. the euro pretty much unchanged. one of the big stores has been the dollar-yen. the yen initially strengthening following the boj decision, then weakening when governor kuroda pushed back on market expectations of tightening. a weaker dollar, stronger yen. looking at asked him,, 10 year treasury yields down -- looking at fixed income, 10 year treasury yields down. the 10-year bund yield at an almost two-week low with 55 basis points. for a second day. it briefly went above $64 a barrel. crude inventories forecast to decline for an eighth week. let's get the bloomberg first word news now. taylor: the battle over the u.s. government shutdown is over, but

the fight over immigration has just begun to the president signed a spending bill that ends a three-day long shutdown. senate democrats broke the impasse by agreeing to a vague promise that congress would address immigration over the next three weeks. the senate majority leader pledged to open a debate on protecting young undocumented immigrants from deportation. the u.s. and turkey stepped up their war of words over turkey's offensive over syrian kurdish fighters armed by the u.s. turkey's president said u.s. weapons shipped to the kurds would eventually be used against turkey. the uss this distract from fighting the islamic state. if vladimir putin is elected to a fourth presidential term, he plans to offer the biggest increase in domestic spending in years. will propose possible increases to the pension age and income tax. he may also call for talks and some tax breaks. south korea maintain the top

ranking in the bloomberg innovation index. amongdex scores countries seven criteria. sweden stayed number two. the u.s. dropped out of the top 10 for the first time in the index's six year history. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. rightly appreciated. this -- greatly appreciated. this is the most important thing in davos. anne richards is chief investment officer of m&g. and we are joined by martin james gilbert of aberdeen. to dive into this, but i have to look at the news flow right now. in your spare time, martin, you

are the deputy chairman of sky plc, which means you do not want to talk about the news of the day. for our international audience and our american audience, we are almost baffled about the relationship with mr. murdock and his family -- mr. murdoch and his family and the united kingdom media. why are they saying mr. murdoch can not and that a transaction like this? about thegood thing announcement today was a got rid of what was the real worry of the investors who want the deal to go through, which is broadcasting standards. they have said it is perfectly ok for the murdoch's to own sky, but sky news is the issue. its domination of news and the u.k. that they are focusing on. the markets reacted positively to it. they think the are remedies to the forward for sky news. thani watched, avidly,

that of the brexit vote, the mix other tv -- what model is best for the united kingdom? is it a new calculus, a more american calculus, or is it the way it should be? martin: sky news is totally independent and has a totally independent the of. it is the way it should be for sky news. very good quality. tom: let's go to this fascinating industry known as asset management. let's check up on mifid ii right now. [laughter] anne richards, this is a heated discussion in new york. mifid ii is a global discussion. what have you seen in the first weeks and months of the collapse of security research? will you do more research at m&g by yourself? anne: there is definitely a trend to the buy side.

i do not think you will see sell side research this appear. but you have already seen some pretty early signs of stress, particularlyparticularly the smy and those that have smaller execution desks as well. i think we are still in the stage of nobody really quite knows where this is going to land. it is changing. where we were with merger discussions last year. you had the merger of the year. what was the biggest surprise affecting this transaction with standard life? traveling around the world and speaking to our clients and not one of them queried the logic of the need to be big or small. thatall were interested the people who managed their money wasn't going to change but the logic of big and small is definitely accepted. i have been looking for a

phrase for davos this year. this is the phrase for this year at least until mr. trump shows up which is davos needs scale. that's what i learned the first few days. do you buy it? do you buy aberdeen standard is the future? >> it's all about execution because there are economies of scale but most mergers don't manage to take advantage of them . if you're not absolutely ruthless in your discipline of executing the economies of scale you just end up with a bunch of diseconomies. to be absolutely focused on the execution and that's where most deals fail. tom: i'm not on speaking terms with sallie krawcheck because we argue all the time over the profitability of making money in the fixed income space. you need scale to survive in fixed income. can you actually within the whole industry make money in

bonds with the yields? a real challenge. the key is flexibility. tom: what does that mean? that is ceo talk. thaten you got a bond fund all it can do his own treasuries it's very difficult to make money out of that. if it can go up and down the credit curve and got the flexibility to move by currency multipleaphy it's got levers to add volume and you can .ee that coming through the bond funds which make money in this environment are the ones with the flexibility to really take advantage. >> i would go into emerging market bonds as well. india yielding 7.5%. isi is here and india booming and now the chinese market is about to open up. there's real opportunity. tom: i want to rip up the script

and talk about this. years you executives have been pitched every idea. if i walked in your office at aberdeen standard and said i've got this crypto that for this bitcoin that how would you respond? >> digital currencies i think are here to stay and watch and has huge potential. that's going to revolutionize our industry. itself has some real challenges. part of the way in which it is constructed. the mining thing. partially to do with the fact that it has a limited supply that it will eventually hit because of the algorithm. i don't think bitcoin itself is the cryptocurrency that is also -- ultimately going to win this game. have we seen a change into a new

world? we have. tom: we have heard that before. >> it's a new world because of what is implied by the bitcoin. >> i think blockchain is here to stay. i'm not convinced about cryptocurrency. tom: should the futures market have gotten into the skin? -- this game? i'm not sure they should have. i think the interesting thing is i listen to jamie dimon who said he wouldn't touch it and now they are making markets in it. dimon'm calling it the recant. >> because his clients wanted it. if the demand is there than the exchanges will traded. -- trade it. tom: i was stunned by the vibrancy of london and i heard

from any number of sources beginning to percolate throughout all of the united kingdom. how is edinburgh doing and how is scotland doing? they were so remain remain remain. are they seeing the benefits of a resurgent london? >> the trickle-down effect is not as great as you are implying. it is still quite polarized. scotland is doing fine. not doing as well as london. we still do have an issue around the inequality and the effects of the inequality on the wider economy. we doused the lights out so

you could see the picture behind us even better. that's an eastman kodak trick from years ago. he went through this merger. do you need to get even bigger once you digest aberdeen standards? >> i would like -- yeah. tom: is this like something going on here we need to know about? >> out so you could see the picture behind us even better. we work together. we would be ideal partners. tom: you realize we have a surveillance feed? it's about revenues. if you've got a global model it costs you money to operate there. tom: it is so important that statement. the penalty talking about a little more inflation. a little more animal spirit. are you and for all the ceos watching -- are you living and dying on you've got to have more revenue because that's the only way to grow? >> do a good job for your clients and the revenue follows in asset management.

sadly asset management is probably not like selling coca-cola or something. tom: automobiles. >> you have to have good talented fund managers and that should lead to results which lead to the revenues. i think what i meant was you need the revenue to pay for the that we both have because infrastructure is more fixed. tom: i strongly agree. this is a really important insight. so many variable costs and of being fixed and it's really true in investment management isn't it. >>this is a really important it is. whichk we are an industry has really been using 20th-century technology and that's maybe being generous occasionally into the present century and that's a mistake. we have the possibility for a radically different operational approach.

tom: we've got four cia phase in edinburgh. in edinburgh. >> there is couple of different ways. you can use robotics to do mass screenings of annual reports for >> there is couple of different ways. cfr policies. the other side is we are very sequential industry. forget about the fund management stockon to buy and sell a at the front end. think about all the processes all the way through to hitting the customer's account in the custodian. they're all sequential and they involve multiple hops of data. imagine a distributed ledger where you can make those things happen in parallel rather than in sequence. is a completely different set of manufacturing pipes underneath it. that's radical.

it's the inefficiency behind the asset management. because we have been an industry that has enjoyed margins that no other industry does it has never really been looked at. it is now being looked at. point that variable costs are fixed is absolutely correct. what we've got to do is make our business more efficient. tom: absolutely fascinating. thank you for joining us today. extensive conversation on investment management with anne m&g and martin gilbert with aberdeen. we'll continue this discussion. nejra cehic is in london. we are seeing your in -- european equity start to tread water. asian equitiesg

higher sending global equities towards a record close. the stoxx 600 pretty much unchanged right now. it looks like we could see a lower open in the u.s. session. up the board. it is been a story of dollar strength for much of the session and we are still seeing a higher dollar at up the bloomberg dollar index. dollar-yen has been an interesting story. bojngthening after the decision. weakening after kuroda pushed back against speculation that tapering might be near. strengthening again. cable pulling back from that 140 level that it touched for the first time since brexit in the past 24 hours. weakness coming through on the euro. we are seeing yields come lower

across the core space. the ten-year yield in the u.s. down three basis points falling from a 2014 high. across the core space. the ten-year yield in the u.s. down three basisand crude did a. stock files data that could see crude stockpiles declined for a 10th week. that would be a record run of declines. let's get to taylor riggs. jpmorgan has announced a $20 billion five-year comprehensive investment. the bank said it is hiring 4000 employees it in new u.s. markets new chaseg 400 branches. jpmorgan said it will expand its philanthropic investments by 40% . make sure to tune into our interview with j.p. morgan chase ceo jamie dimon in davos wednesday. a company known for making from um has ordered a shot of

tequila. combine two ofll the largest distillers. jobking assets have led to cuts in pershing square capital. the hedge fund has cut 10 employees. it overseas $9 billion. that's less than half the assets it had in 2015. billionaire steve wynn plans a fourth hotel in las vegas at a time when tourism is slumping. have 2500 rooms and be connected by an air-conditioned hotels. to two other visitors to las vegas fell almost 2% last year. much of that is blamed on the mass shooting in october. tom: it is good to be with anne richards and martin gilbert as well.

he is the chief executive officer of standard life aberdeen. >> the asset management company is called aberdeen standard investments. tom: did you have to hire eight mckinsey consultants to come up with that decision you go >> we saved millions on branding costs. tom: i want to talk about the exuberance out there. chart. exuberant that we are not as exuberant as we were in 1999. how do you adapt and adjust to that every day where everybody knows we are exuberant but it's not the excesses we have seen before. one other big difference with 99 was the level of interest

rates and the effects that had. -- the relative asset valuation today versus 1999 is much less differentiated. all assets have risen over the last 10 years pretty much. a straight sell equity by something else call is much more difficult today and it would have then in 1999 because so many other asset classes have risen with it. the massresult of liquidity injection we have had in the world. it has been a failed retirement experiment the last 30 or 40 years beginning with the 1974 erisa act in america. what needs to happen in management to allow viewers and listeners to actually have successful retirements? we just have to save more isn't it? more or save save something at all i think would be a good start. america has got

the same problem that the rest of the world does. in saving for retirement. countries like singapore, chile have forced people to save. mathys it ok if we do a single best chart for anne richards? they insisted on this. there it is. dow 21,000. -- hilary clark did this sophisticated chart and that is not bitcoin but that has gamma. that has acceleration. the dow is not in index that anyone actually manages money against. tom: but it's what we all look at. >> we have to really look at the

s&p. it is still a robust picture. there's no doubt about it. it is supported by global economic growth which means it's a slightly easier backdrop for companies to try and make money against. i think there is a technological impact which is driving down costs so companies have in gently expanding margins which is meant earnings have been going the right way so the valuation jump up that you had has been nothing like an extreme. it is still a difficult environment. very few ceos are jumping up and down and making hay. tom: i agree. this is an important point looking at the media play. martin gilbert very importantly i don't hear anybody talking boom and yet many of the media headlines have the word boom in them. it's not a boom. >> especially in asset

management ceos in the u.s. morale is at a record low. it's tough out there in the asset management industry and it's tough everywhere actually. it's just a tough environment. i look at investment management again and i go back to retirement. it's the actuarial assumption. we are all told single-digit and a lower return than what we knew in the 80's and 90's and yet we have had double-digit equity returns a lot of people have missed. returns a lot of people have missed. how would you adapt your actuarial assumption to the latest amount of good news? that's a really tricky one u.k. then the actuarial assumptions are set centrally. you've clearly had a move at the

early part of the century pushing more and more pension u.k. the actuarial assumptions are set centrally. at the same time as the opportunity cost of having those bonds has gone up because equity markets have done so well. people have really been caught in those crocodile jaws. into bonds. suspect the snap back and the size of the deficit once the bond markets due start to normalize will be faster perhaps than people expect. it's going to be a pretty unpleasant period. tom: we have noticed a few bear to remember yield up price down. whendoes a guy like you do you see those obligations you have and price of fixed income is down? >> i am so old that i was brought up to always think the bond yield should be above the dividend yield of a company and when you see the reverse you know that something is --

all cios globally are really struggling to decide where to put assets. the new 20 year bond is seven years. >> the other thing you can do is in bond markets because as long as your liability matches the timeframe and the maturity of the bonds the only thing you need to worry about is the risk of default. if you can manage the risk of you take away a lot of the frictional cost. debtthat has distressed crisis to perfection. i hear a lot of people say credit quality is very good. do you buy it? >> default rates are very low. just because interest rates are so low at the moment. it's difficult to find value again. compressed to in

low record levels. you are giving up liquidity or duration to get more yield. you're going to india as i have are brought up to get your compo low record 7.5% but you are taking a currency risk. there's risk everywhere. people are going more into private markets. cios are raising their allocation tocios are raising tr allocation to infrastructure. tom: how is active management going to do it -- in the next few years? >> very well. we could do with a bit of a rough market because that's when you find out whether active managers are doing their job or not. problem with passive. there is a place for passive if you are a multi-asset allocator.

we need people who believe in active and we've got to perform. >> i completely agree with that. --et -- active management active asset management is all about allocating capital -- there's always a place for that. there's a place for passage. i completely believe in the power of allocating capital well. tom: that means getting away from the drug of 30 years ago. where the portfolio looks so much like the s&p 500. are we going to continue to match or are we going to get toward where active folios look radically different from the underling benchmark? toif you are being managed benchmark it's because your client has some vision that there is a return. if you've got an s&p 500 benchmark and you put everything into indian bonds you would have

a pretty unhappy customer. there's got to be some sort of connectivity between the benchmark you are being managed against. you've got to be willing to back your views with conviction and portfolios. you should be looking at seeing high conviction positions. yourder to maximize chances delivering something that is worth paying for. that's what we are trying to do. tom: martin gilbert, anne richards, thank you so much. i want to give you some thoughts right now on these first couple days at davos. 32 minutes into my panel this morning before anyone mentioned the word trump. there was president trump and that in itself was a shock. here are some ideas. without question the number one word at this meeting is the word scale. i'm not kidding. is theeeds scale

religion of 2018 and of course martin gilbert who lives scale day today is the perfect example of that. the other idea that has been a impact ofise was the mr. macron of france. there's no question. his world travels the last couple weeks have really captured the imagination of the people here at the meetings of the world economic forum. finally, jes staley of barclays had the smartest thing i have heard so far and that is is this 2006? and's a great observation really brings up the humility that was there in 2008 and 2009 that was missing in 2006. gilbert and martin anne richards. right now in london with the market check here's nejra cehic. >> let's take a look at equity markets. a saw asian equities close at

record high and global equities heading for a record high. european equities treading water right now. we might see that softness come through in the u.s. session as well. by .1%.ures lower european equities pretty much flat after record after record in u.s. stocks. the shutdown over that give a little bit of a lift to equity markets earlier. stick look at what's happening in the fx space. part of this has been weakness in other currencies as well. cable lower by .3%. pulling back from the 140 level first time since brexit. yen strength initially on the boj decision. begin strengthening again now against the dollar.

again yen strengthening now against the dollar. the 10 year bond hitting in almost two week low. yield moving lower on the 10-year gilts as well. crude bid ahead of the u.s. crude stocks while data and bitcoin. we are down about 3% just above $10,000. that's your market check. bitcoin. we are down abouttom: the perfe. so much going on. a lot of meetings and a lot of people really have changed this year as people came up from zurich through immense record snow. let me tell you about an important interview today. and his annual edelman trust barometer. hisard edelman out with

edelman trust barometer that shows the fractured national trust across the western world and in asia and the rest of the world as well. i would also like to tell you about an important conversation with mckinsey global institute. we will talk about important research they are doing particularly on inequality and the solution to a better economic growth. i'm tom keene in davos. we will continue through the day with our panels. we will see you tomorrow. much more on bloomberg radio. much more tomorrow and onto thursday and the history of donald trump here in davos on friday. worldwide, this is bloomberg. ♪

david: welcome to bloomberg daybreak. i'm david westin with lisa.

alix steel is off. we are heading straight to davos where erik schatzker is sitting down with steve schwarzman. here in davos be with steve schwarzman. good to see you. as the world knows the president will be here later this week. he is expected to arrive on thursday. he will be making some public remarks on friday. you are a friend and supporter of the president. what do you expect he will say and do while he is here? >> that's always a tough one for sure. you find him equally unpredictable. >> there is a certain unpredictable quality. i have heard they have been working on this speech for some time and the person working on it has done some very good speeches for the president. erik: who is that? >>