>> donald trump -- on china. he threatens tariffs on all imports into the country. swedish gridlock. no party wins enough votes in the election. we are live in stockholm. 10 years after the financial crisis, what lessons has the world learned? ♪

francine: welcome to "bloomberg surveillance." i am francine lacqua in london. understand trying to what the next big bet is. euro dollars,, is. two year yield, which unchanged. we will keep an eye on oil. we heard the assurance by populist over the weekend that is giving a left to some of the markets. we're also talking about the results of the general election. the former prime minister of sweden will be joining us later. politicalancine,

gridlock after an inconclusive election left scandinavia's biggest economy without a clear candidate to lead the government. no party won enough votes to form a majority government. the democratic party had around a fence of the votes. -- fifth of the votes. boris johnsonry has launched what many is seen as a bid for power in the u.k., calling theresa may's brexit strategy a humiliation. in an exclusive interview with bloomberg, the european union budget chief gave an updated assessment. the reading for gdp growth was

thanks to stronger business investment that boosted momentum in japan. this will come as a boost for shinzo abe. italy's deputy prime minister has said economic growth comes first. he moved to reassure investors by saying the populist administration will keep spending within european union limits. to makell do all we can italians pay less taxes, provide more jobs, sticking to our international agreements. growth comes first and the right to work, but we will try to provide everything. we have five years ahead of us. everything out and do it well.

taylor: global news on air, 24 hours a day and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. china's chances of escaping trade tariffs with the united states with only minor damage is looking less likely, after president trump -- on his threats to impose higher tariffs -- doubled down on his threats to impose higher tariffs. former people's bank of china governor has warned that these economic consequences may be larger than anticipated. >> how much does a trade actually hurt the chinese economy? war actually hurt the chinese economy? >> we need to have contemplative

calculations. mathematics to capitalize the negative impacts of a trade war on the chinese economy. amount ishe aillion, buta 00 small impact. people may become nervous because nobody really knows there is a trade war. they may change their minds in

terms of stock market investment. there could be different considerations for how to deal with the currency portfolio. this is much bigger than the impact in the community. we see currency depreciation making people nervous, such as in turkey and argentina. hopefully sentiment will gradually stabilize. francine: what impact will this continue to have on markets? we have our guest.

thank you for giving us your time, as always. concerned about the second round effect of a trade war. china retaliate may be more than it is? the question is no longer whether the united states will press the button on the $200 billion, the question is how high will be tariffs be? the harshest assessment is 25%. when we hear president trump, we think this is what we might see. china bovary tally eight. taliate.re chinese imports of u.s. goods are much lower than u.s. imports of chinese goods. when we reach $250 billion,

china will use all of its potential in terms of retaliation. francine: what does it mean for markets? vincent: it will remain fragile. if we get 25%, some retaliation from china, including making it more difficult for u.s. companies to do business in china, which will be another form of retaliation, this will be to escalation. -- lead to escalation. concerns about growth and markets will be quite substantial. will we see emerging market filter whattart to filter? expectations -- >> we will get to that in a

second. u.s. is quite strong. there will be a difficult tradeoff for the fed. up, but wes picking have tensions on the trade side that will slow down the economy. they will hike rates in september, we think. we see anless appropriation for markets. e.m.propriation for markets. but financial conditions remain quite accommodative in the u.s. rancine: if this inverts, does this mean we are seeing a slowdown?

vincent: we will get a slowdown anyway. the impact of the fiscal stimulus is going to peak this autumn. 2019, wel over into progressively start to see some slowdown in the united states. a full-blown trade war could make this worse. now we see the jackson hole yield curve. i don't think people are too concerned. when the curve inverted before, bill yields are much lower -- real yields are much lower. whether that is a signal leading to a sharp slowdown or a recession, i am not sure. francine: either industries and

you would stay away from because of the trade war -- are there industries you would stay away from because of the trade war? defensive onctor this is autos. we are talking a lot about china. the united states is also investigation potential tariffs -- investigating potential tariffs on the auto sector. this could mark another step in the de-escalation. there is a lot of focus on china right now. ithncine: vincent stays wtih us. including herup, interview with the former chairman of the u.k. financial services authority. we will talk market regulations 10 years after the financial crisis. this is bloomberg. ♪ mberg. ♪

this is "bloomberg surveillance." let's get straight to the bloomberg business flash. : a buyer is being sought for seco, a container leasing business. this is the latest attempt by the chinese conglomerate to reduce its debt pile. the 10th anniversary of the collapse of lehman brothers approaches. there is more on the big european lender's need to merge.

one analyst says there is a need to act in the face of trump's america first policy. people tolingness of upset restructuring is higher than when i was there. taylor: the cryptocurrency bear market has plummeted to new lows. cryptocurrencies have declined for five of the past six weeks amid concerns a broader adoption of digital assets will take longer than anticipated. was underscored over the weekend after the sec temporarily suspended trading into currencies linked to cryptocurrency. growth inf explosive the blockchain industry have likely come and gone. that is your bloomberg business flash.

italy.e: let's talk decreasean spread will once investors realize the real economic situation in the country. our guest spoke in italy. we welcome the declarations of the deputy prime minister and the anticipation of the economy. led to the real attitudes of the government to and to european rules continue the movement toward production -- reduction. we already have stabilization.

we have immediately seen the reaction of the markets. i think there will be further productions. -- reductions. francine: so you don't expect the spread to widen? i think the italian republic, the rates it pays for its debt, will be more reasonable. italy is the second largest manufacturing country in the european union. it is the third richest country in the world for net export surplus.

it is unreasonable we pay such a high rate of interest. when people realize the real the spread will decrease. was our guest speaking with me able but earlier -- a little bit earlier. vincent, when you look at italy, the risks so much concerned -- there was so much concerned they would flaunt the european union budget rules. our -- are markets still confident? incent: we have seen a nice narrowing of the tenure spread. -- ten-year spread. the markets seem to be a little

bit less concerned. when we say respecting the rules, i believe this will be but the plan for next year was a deficit of 0.8%. this is still very substantially the plan. this will create some tensions. there is a bit of stabilization. i think the situation is going to remain tyrants. -- remain tense. francine: is the italian-german ten-year yield the right one to look at? : we have seen some pullback.

room, but iit of don't think it will go too far. mid-october,mber, when the discussion with the eu the discuss will beion -- discussion will be quite tense and i am not sure it will cool until may of next year. francine: and how will the change at the top of the ecb move euro? draghi will stay on until october of 2019. at some point, that will become a concern. could have the ecb some impact on the spread.

you are going to see some changes at the ecb, but the decisions are taken within the rate, i don'tthat think the extent of the ecb will change. francine: what about swedish elections? vinctoo close to call? the market is not acting as badly as some have feared. just below 18%. difficult too be find a majority. the legacy of the financial crisis probably is the rise of populism. that is quite a concern regarding the european election next year.

pretty swedish election, that is not surprising -- for the swedish election, that is not surprising based on the polls. francine: boris johnson has launched what many have seen as power, calling the brexit plan a humiliation. chief gave an upbeat assessment of talks with britain. active, constructive, pleasant. our expectation is we have a good chance to come to a smart brexit. francine: how worried are you with brexit compared to terror gerariffs on carmakers in

many? vincent: there could be a deal. some key decisions might be left for the transition. 50, the blueprint agreement, you don't need all the details. they will find an agreement, but the risk of a no deal has increased. u.k.we are seeing in the i don't think boris johnson will bring any calm to that situation. francine: does it make him closer to be prime minister, or does this push them further away? do we need to wait until what december brings? shows the push on

his side is getting stronger. whenoment of truth will be an agreement is found with the eu, which could be mid-november or later. it is not a done deal. we could see quite a rising political uncertainty in the u.k.. you do withat would u.k. assets from now until then? terms of market valuation, it is rapidly attractive. there is a lot of political risk. this could go lower as the uncertainty remains high,

between mid-november and december. francine: how do you look at sterling? roomnt: i think there is for the downside in euro sterling and the cable. francine: is there one thing you would stay away from in europe? vincent: we don't like german bunds. months, equities will outperform. rm, the weight in equities is reduced because of all the challenges we are talking about, like the trade war, brexit negotiations, so we have reduced the weight in equities and moved some money towards spain, which is very resilient to italy.

we still have a shore in credit. we like the kerry and the widening in nonfinancial credit in europe. francine: thank you. -- 10thk, the 10th of anniversary of the collapse of lehman brothers. what risks remain in the financial system and when we crisis? the next we speak to the former chairman of the u.k. financial services authority. this is bloomberg. ♪ ♪ to rent a movie?

showtime. or buy the hottest shows. even here? we've got you covered. now they are all yours. to take on the go. on any screen. bingo! alright! and watch whatever you buy.

wherever you are. head to xfinity.com/stream to start watching. simple to rent, easy to buy, awesome to go. francine: ecomomics, finance, politics. this is "bloomberg surveillance." about the pound

and what that meant for brexit negotiations and also what it means on whether or not we get a second referendum or not. he was saying brexit is important, but what is more important is what we see with trade and whether it starts impacting carmakers. the gdp is out for the u.k. for the month of july. month on month, 0%, better than expected. i'm looking at construction, better than expected. outputs, many fracturing, better than expected. that gdp figure coming in at 0.3. we will get back to the u.k., backed the financial crisis, but first let's get to bloomberg first word news. may face iten months of political gridlock after an inconclusive election. social democrat led

coalition, nor the opposition won enough votes to win majority government. party nowst democrat looks set to hold the balance of power. in washington, the chairwoman of the republican national committee used to appearances yesterday to set low expectations for her party in november's midterm elections, now less than 60 days away. cbs, the republicans have a 50-50 chance of retaining control of the house. italy's deputy prime minister says economic growth comes first as the government makes decisions. salvini said the populist toinistration will begin

start spending within eu limits. >> we will do all we can to grow to make italians pay less taxes to provide more jobs, sticking to our international agreements. we will try to provide everything. we have five years ahead of us, not five months. over the next five years, we will carry everything out and do it well. taylor: global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thanks so much. this week is the 10th anniversary of the collapse of lehman brothers. we have a slate of high-profile interviews. we will be speaking with the chief executive of deutsche bank from 2008. also the governor of the bank of england at the time.

we will also be bringing you many interviews over the next few weeks. take a look at some of the highlights. >> you really thought that at the last minute, the u.s. government was something. i was traveling from zurich to frankfurt with the u.s. head telling me it was over. we haven't expected that. through 2008, it was clear that confidence in the banking system was waning. only a serious recapitalization of the banking system both in the u.k. and u.s. would resolve the problem. >> when i realized how much debt was of the non-bank financial stimulus, amount of that is what started to worry me. played out, he realized that things were much more interconnected than you thought they were. marketsm to be small can have much bigger fx than you

thought. >> and remember telling a good friend of mine, 100 million quit today. -- quid today. >> as human beings, you always think that today is different. >> as you look at the banking system, there is more capital there today. followed --ut what vulnerabilities are in the economy today. let's look back for a moment on a pivotal time during the financial crisis. here is how bloomberg covered the collapse. >> i think it is a very serious situation. here is what we know. one of the most storied firms on wall street is now gone. >> we have had a historic day on wall street. lehman brothers, which survived railroad bankruptcy and the great depression in the collapse

of long-term management a decade today.led for chapter 11 >> a new world order on wall street emerges. regulators take control of frannie mae and freddie mac. bank of america opens its doors to merrill lynch. lehman brothers goes bankrupt. >> they must be tired. that hearing started at 9:30 this morning. that was the democratic head of the senate banking committee wrapping up after questioning. the head of the federal reserve, the treasury secretary, their bailout plan for the bank is being discussed today. equity.osses on we are down 700 points. through that 10,000 level we first came up through in 1999.

heelsreally comes on the of global equities. the ftse in london falling to a near four-year low. topple, led by banks, the infection has spread around the world. let's bring another leading voice into the situation. derek turner was chairman of the financial system. do you remember when you realized the scale of what was going on? derek: yes. onecame chairman of the fsa september 20, 2008. i knew then that it was big.

i did not only realize how big it was over the five days. what happened was the collapse , a hugen brothers collapse of liquidity in the secured funding market, then spread over the subsequent week to the guts of the global interbank money market. we suddenly had major banks in the world not willing to lend each other money, even overnight because they were worried about who was sold. that wet that stage realized the whole thing was just seizing up. francine: your initial moment was, omg? what was it? adair: interestingly, you sort of know what has to be done. i remember sitting down with mervyn king. were pretty obvious there

three leaders available in that circumstance. central bank liquidity support, government guarantees of the liabilities of the banks, or recapitalization of the banks. you don't need to be a genius to know that you have three lovers. -- levers. everything is about balance of those. those were what the debates were about. francine: should the u.k. have been anything differently? adair: i think maybe we should of just nationalized hbos. to today'sen agreed before i joined. maybe we should have -- two days before i joined. maybe we should have challenged it. i think we should have gone for bigger liquidity in the banks. i ended up as a super hawk on

banking capital. i think we were allowing it to run before the crisis was that ludicrously low levels of equity capital. the debates subsequently about the basil three reforms, i was always a hawk. that meant bringing it up by another quarter percent. i think the banks ought to run ratios at 4%. on the other hand, we did some good things. francine: what you think the main consequence is of the financial crisis? adair: the consequence was the recession, the global recession of 2009, and the incredibly slow recovery. that was really a consequence of two things. one, there was a huge financial crisis in 2008. two, that that came at the end.

50 years of the growth of leverage. we now have to focus on leverage in the real economy as being a big challenge today, rather than the financial system itself. view that weint of probably are much safer than we were in 2007 and 2008 in relation to the financial system itself. i think we have huge unresolved issues in the global economy about our reliance on debt. debt to gdp across the economy is now higher a of gdp than it ever was before. francine: are you telling me that the reliance of debt worldwide could lead to the next crisis? but i don't think it is going to be a global crisis. i think we put enough capital into the banking system to avoid that danger.

i think the bigger concern is that we get a downturn in the global economy, perhaps because china tries to get its high leverage under control, and deliverable he does. there is a slowdown in the global economy, and we start with a major downturn. if we get a major turned out in the global economy, are we going to be able to react with the interest rate cuts and fiscal stimulus we responded to in 2009? we have used a lot of the ammunition already. my worry is more about debt in the real economy, households, incorporates, leading to a slow down and the difficulty of responding to it. francine: it's all about timing. adair: that is right. the issue is we are having a

global recovery at the moment. it has occurred because of massive stimulus. china tickets fiscal stimulus from 1% of gdp in 2015. the u.s. has slowly been bringing down its fiscal deficit and has now completely reversed that with the trump cuts. that has taken the fiscal deficits. it should not surprise us if there is a boost to the global economy, if the two biggest economies in the world both increase the fiscal deficits by 3% of gdp. this must be the biggest fiscal stimulus ever put into the global economy. the danger in the u.s. is that for the first time, i'm beginning to think that might produce inflationary pressures and a faster increase of the effect.

it would suggest we are returning to normal. on balance, i suspect that is an going to occur. i think the deflationary forces in the world economy are still very deep. clearly, one category of debt, is already producing very major problems. thank you so much for joining us. next, sweden could face weeks or months of political deadlock. this is bloomberg. ♪

>> allow will be dependent upon the cohesion of the poor quality alliance that has put this particular election together, and that the aim to form the government together. francine: do you believe the alliance will be able to form a minority government? >> i think they will. -- i thinkoing to be it is dependent upon sweden democrats. will have democrats to choose whether they will tolerate the social democrats. at the end of the day, i think it is going to be the latter. there are going to be challenges and parliament

which is crucial in terms of the governance of the country. --ncine: you don't think could they do it without cooperation with the sweden democrats? you are suggesting they don't want to talk to them? to theccording constitution, at the sweden democrats were to do what we , the leader of the alliance will be appointed. he will be appointed if there is not a majority vote against him. substantial means tolerated but not supported. alliancesdo you see may actually break with the alliance in order to isolate the sweden democrats? that is clearly the strategic game of the social democrats to try to achieve

that, to break the alliance, form some sort of link up with -- the liberals of the party. i'm not quite certain that the voters would like to see them supporting a new government. i think that is very unlikely. francine: how will the political gridlock affect the markets build confidence in sweden? if -- there is going to be two weeks where nothing happens. if i'm optimistic. that is roughly the standard we have in europe these days. so to say inl, europe is to say that we have more political landscape. more lengthy process of forming a government. i don't think sweden will be

from that point of view much different from what we have seen in other european countries. francine: if there is one thing , i don't know whether it is what we have learned from this election, or previous elections in europe, is there something politicians need to be wary of? do they need to speak to the people differently? how do you see this developing? carl: there is always that sort of discussion. the move to the extreme right. they didn't do as well and the selection as everyone had expected them to do in the opinion polling agencies. that was due to the fact that there was a deliberate attempt by the main populist to push back. s the basictrate

value of our society is important and works. francine: thank you very much. that was the former swedish prime minister. up next, we have from the chief of leonardo. this is bloomberg ♪ -- this is bloomberg. ♪

francine: ecomomics, finance, politics. this is "bloomberg surveillance." italy's aerospace giant, the and in ais in talks billion-dollar deal with iran. leonardo's chief executive spoke to bloomberg. >> we don't expect any meaningful impact on both atr

and leonardo. >> how many hr's have been delivered to iran already and how many are already assigned to other countries? lessandro: we have our delivered 12 aircraft and are working to relocate to other countries. talks to sell the remaining ones? are you confident you're going to sell the deal by the end of the year? alessandro: we-- are working very hard on the. francine: that was the chief executive of leonardo. it is time for our stock spotlight. shares are higher after the company named a new chief executive. they posted strong sales growth boosted by asia. "bloomberg surveillance."

continues in the next hour. we had great interviews throughout the weekend. i spoke to the x governor of the pboc. we will also be speaking to the or --r deputy govern governor of the bank of england. also talking about lessons in september of 2008. this is bloomberg. ♪

francine: donald trump doubles down on china.

the former pboc chief warns new tariffs could hit economic confidence. no party wins and a vote to form a majority government in sweden. lehman.er 10 years after the financial crisis, what lessons has the world learned? good morning, everyone. this is "bloomberg surveillance." francine and tom reunited. look at the markets, i had pretty interesting conversations over the weekend in italy with the ex pboc governor. there is a lot more anxiousness when he speak to economic -- academics then there seems to be on the markets. we need to start looking at possible repricing. tom: the academics are all wound up. you look like you are under so much stress in italy.

exactly how lovely was like,? ?- lake cuomo francine: quite lovely. it was interesting to have an economic conference. did a mix and what would be seeing with as -- what would be seen as the elite talking to populous. taylor: it is the end of an era at alibaba. the billionaire executive chairman has outlined plans to hand his title over. ma will leave the job a year from now. now plansco-founder to focus on philanthropy and education. longtime cbs president les

moonves is stepping down. officer will be as interim successor. cbs has ended a legal fight with its largest shareholder. six board members will step down. china'ser head of central bank is warning of the market impact of a trade war. new tariffs could have a huge impact on sentiment in china. nervous. may become suddenly there is a trade war. their mind ine terms of stock market investment. taylor: president trump says he is willing to tack on imports on short notice.

salvini says he will try to keep the budget within european budget limits, although the interest of italian people come first. >> we will do all he can to grow to make italians pay less taxes to provide more jobs sticking to our international agreements. clearly, growth comes first and the right to work and write to a pension, but we will try to provide everything. we have five years ahead of us. over the next five years, we will carry everything out and do it well. taylor: global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: thanks so much. what i noticed is german two-year yield less negative than it was three, for our five

days ago. oil pretty much where it was. 14.95. 30 year bond it shows the risk on steel. it is 3.1. i noticed weakening. weaker in indian rupee. at stocksi am looking in europe that are pretty much mixed. a lot of them are trying to figure out the prospect of further escalation of an american trade war with china. also, the impact of what we heard from matteo salvini over the weekend. i looking at oil rebounding from the biggest weekly loss in two months on speculation of a crude supply shortage.

one of the things about this september is the idea of where we are going. here is a bloomberg chart that plots out not so much this year, but 2019. this is the deficit to gdp. the so-called clinton surplus appear. the financial crisis. recovery. here is the new rollover with the vector going in that direction. worser and worser deficit. francine: what i'm looking at is the spread between italian and german ten-year. the deadline is approaching of one we would actually find out what the italians put in a budget law.

the finance minister told us it all depends on whether or not matteo salvini agrees. for the moment, markets are cooler, more levelheaded than they were seven days ago. staying with our top stories, donald trump has threatened to wrap up his tariff war with china. the president said on friday he is ready to impose levies on all chinese imports at short notice. rupert, let me kick it off with you. on friday, i spoke with the ex pboc governor, and he was telling me he was not too worried about the trade impacting the chinese economy. he was worried about it impacting sentiment. rupert: i think that is right. the main weakness in the chinese

economy is previous credit tightening of very restrictive macro policies that authorities are trying to roll back a little bit. it is too early to be seeing any evidence from trade tensions. savvy, i think the tension is going to be with us for some time. this is a long-term, cold war between the u.s. and china. i wouldn't expect resolution anytime soon. francine: how long do you expect this cold war to go on? the ex pboc governor was talking to me and said people may become nervous, nobody really knows, suddenly there is a trade war. they may be changing their mind in terms of stock market investment. -- suddenlyit from monetary policy in china needs to be roundup. you could look at it and say

that the cold war will persist as long as the republicans are running the white house. there is a secondary question on how long this cold war has to impact markets. tom: of tariffs and taxes, there are leakages. is jpmorgan calculated for any nation, particularly for the u.s., the effect of these terrorists on gdp on economic growth? john: we have. we have come out with an answer that is so small it is unconvincing. of a rounding error, but we are also cognizant of the fact that we have never had a sentiment shock through the trade war on a scale of what we may be facing in the global economy right now. there is a second round

affect here through investment or lack thereof? john: yes. not knowing what the operating environment will be and also a tightening of financial conditions that come from investors reducing their exposure. a lot of players to this. francine: do you see it the same way? china has tried to put a damper on recently. i think that continue dollar strength leads to an environment where the cmy is pushing toward seven. i think they'll start to be concerned about outflows. i think as long as they can prevent that, that is going to be a relatively limited impact. francine: i asked him about defending the seven.

kenny say that seven is the magic number? -- can you say that seven is the magic number? rupert: i think they want to have a little bit of wiggle room there. i think seven is going to be an important number. yet seen a couple of episodes where you get momentum in the exchange rate. far, there is no sign of serious capital outflows, but i think given the experience of 2015 and 2016, they don't want to get close to that. francine: thank you so much. markingk, we are 10 years since the collapse of lehman brothers. we'll be speaking with the former chief executive of deutsche bank. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." leonardo is in talks with other buyers for the remaining aircraft in the deal with iran. they can't deliver those passenger planes anymore because of u.s. sanctions on iran. delivered theeady 12 aircraft there. very hard tog relocate on other countries for the remaining eight. >> are you in talks to sell the remaining ones? a confident you are going to sell the deal by the end of the year? >> we are working very hard on that and are confident.

italy'sthe chairman of second-largest bank is happy the populace government will keep its ambitious spending program within european guidelines. we welcome the differentiations of the prime , especially of the .conomy minister to respect european rules and parameters. francine: thank you so much. sweden may face weeks of political gridlock after yesterday's inconclusive election. neither party wants to --

let's get back to john and rupert. the formering with prime minister about alliances. doesn't hit swedish markets and swedish sentiment? if it translates into the actual economy, should we start worrying? so, becauset think you don't have the populist party entering into the economy. there is not really a debate about monetary policy outside of the risk bank. in terms of external influence on the debate, i don't think the election outcome is one of them. francine: where the election so overall? anything -- do people and politicians realized they need to speak differently? rupert: this makes the arithmetic harder for everything

else. with the exception of italy, maybe the last year, that hasn't been quite as bad as feared. we're nothood is going to see a populist party and government. we are now going to be an a process very like the italian election where someone is going to have to break a promise they made before the election. theave seen that when parliamentary arithmetic makes that happen, when the numbers force it, that is what you get. i guess it was coming in the last couple of weeks, the italian populist had promised a lot of things. is that in general where populists go when they are in power? is a chainnk there of events that happen. there is a risk premium against price and upon markets.

and response to that rise in bond yields, the populist parties can either continue ahead with unwise programs or they can dial back there promises. i think in italy, there is a bit of counterattack against the populist instincts and tendencies. tom: let me ask a rude question. i say this with great respect. if the british had an election today, what would happen? with a have a sweden? rupert: i have no idea. i think we would have something very similar. when you look at the polling, it hasn't changed an awful lot. there is no great love for the government. i think we would end up in a very similar, very difficult numbers. i think the chances of that happening are very small.

i think that is one of the few certainties in british politics. tom: how do we get out of this cycle? ityou look at any article, all comes down to immigration. among others, dr. kissinger has said there is no other topic. how does europe, how does america extract itself from this debate, this centered tendency over immigration? think we are't going to extract ourselves from this debate anytime soon. i think this is the megatrend of the decade is massive inflows of people toward what they think is a better life. it is one of the new constants of our politics. meanesn't necessarily populist politics and government. in the u.k., it is a good example. brexit was very largely an

immigration issue. if you look at the governing don't have extreme voices around immigration in the u.k. debate. it is more about controlling numbers and managing migration. this is going to be something we have to manage for a very long time to come. tom: very interesting. i will wake up at some point. hour, up in our next susan lund will join us as a look back at the last decade of financial recoveries. please stay with us. this is bloomberg. ♪

tom: good morning, everyone. francine lacqua in london. i'm tom keene in new york. turkish gdp rose during the last few months of june -- weeks of june. with us is john and rupert. as the festivities of e.m. and whether e.m. today seems deceptively quiet. what is the deception right now in emerging markets? john: i think the uncertainty is exactly how much it affects our credible. we have an outstanding threat to

put new tariffs on chinese goods. because you never have a media follow-up from anything the president says, i think investors are little nervous about taking e.m. dramatically low because of the negative comments on friday. i think the handwriting is on the wall that the u.s. is playing the long game here. i think that is why em will go down short-term. gtb.we will get to that on this is logged jpmorgan emerging-market fx. the drama and second derivative of this chart is something. what does it say to you that we have seen one brutal move, another brutal move, now a third brutal move? john: that, to me just highlights there is zero confidence in owning e.m. assets right now.

you would even say this is pricing in almost recessionary conditions in e.m.. we are not seeing a recession in e.m. broadly. you could see that in a couple, turkey, argentina. you clearly have a growing versus premium in these markets. francine: when does that change? we seem to have this selloff in emerging markets that continues and there is no catalyst for it to stop. the people take up bargains at some point? rupert: i think there is a lot of people watching right now. i think there is a sort of classic situation you get with emerging markets where apart from the cases we know about, macro in e.m.s is not too bad. it doesn't seem existential to a lot of emerging markets. if we get further down in

exchange rates and inflationary pressure coming through, that becomes a cycle whereby the macro deteriorates and valuations look more justified. a lot depends on whether there will be further outflows or whether it there is enough of a period of calm. it could just take a few weeks of calm. maybe a sense that the negative news is all out there and you're going to get people stepping into buy. francine: thank you so much. rupert and john stay with us. tucker, thext, paul former deputy governor at the bank of england joins us. we talk about the lehman anniversary and lessons learned from the financial crisis. this is bloomberg. ♪

francine: this is bloomberg surveillance. this week is the 10th anniversary of the collapse of lehman brothers.

we have high profile interviews. we will be speaking with josef ackermann, the chief of deutsche 2008 and mervyn king, the governor of the bank of england at the time. we will be bringing you many interviews over the next week. take a look. that the u.s.t government would jump in. i was traveling when i got a call from our u.s. head that it was over and that was the worst case. we had not expected that. it was clear that confidence in the banking system was waxing and waning and only a serious recapitalization of the banking system in the united kingdom and the united states would resolve the problem. >> when i realized how much debt , that was whatet

started to worry me. >> you realized things were more interconnected than you thought and what seem to be small markets can have bigger effects. >> i remember saying to a friend, i am down 100 million quit today. >> you never know because we isays say this time different and history tells us that is not the case. more capital today but there are lessons we must continue to press forward on. to think about what vulnerabilities are in the economy today. francine: joining us now is paul former deputy governor of the former bank of england. book "the chest for -- theacy in banking

quest for legitimacy in banking." thank you for joining us. when you look back to lehman , when didthat period you first realize the scale of how enormous it was? i recall a meeting at the bank of england when i said had it not been rescued, there would have been mayhem and a month later, one of the directors came back and said, defend it. i did. i don't think anyone has said anything intelligent is the wasted six months. why, on both sides of the atlantic, were not the big banks forced to deleverage in their wholesale market commitments in a controlled way rather than their lending to the real economy? reputed tohers is

have been debating and equity injection. why didn't that happen? much discussion about liquidity measures that have been taken that i devised. and not enough discussion about missed opportunities by supervisors. francine: why? they did not understand the interconnectedness? paul: i do not know. say peopleible to did not understand the interconnectedness. i do not think we learned a great deal. if you look at things that the fed, the bank of england in the years before the crisis, people knew the system was interconnected they would not be able to understand how it would unravel. is why people -- if you provide liquidity, you do not solve the problem -- but you buy time. how was the time used?

i do think we have a good answer on either side of the atlantic. on the wonderful voices we heard before you came on, we had loretta mester, who was one of our best mathematicians. i go to a chapter in your book, the limits of design, are we asking too much of central ,anking if the system locks up is the correlation becomes so tight, is there a limit to the design? paul: yes is the simple answer. if you expect central banks and agencies like central banks to make the world perfect, this is doomed to fail. them to deliver a stable and low inflation over the core of the banking system is resilient, they can do that. they cannot manage asset prices.

they can do simple things. in the years during the crisis countries a lot of have expected the central banks too much. politicians vacate the space and leave the central banks as the u.s. cavalry. it is tempting for central banks to occupy that. it is difficult not to try to do something when politicians do not step up to the play. in the united states, the centers around fiscal policy. , theall three of you solution is more capital on the bank's balance sheet. that seems simplistic. is it? john: i think it is. the problem is leverage build up somewhere.

banks moreul to have capitalize. it is difficult to keep households and corporate leveraged with low interest rates. that is why you can expect high volatility decline when we go into a downturn. there is only so much central bankers can do to manage that. rupert: i would agree to that. more capital is part of the solution but that is never going to prevent alien or's -- failures. interestingu.k. is where we have gone further than any other country in giving the bank of england remit to protect the banks from the cycle that to the cyclee cycle -- from the banks. active in account cyclical measures.

i think the politics of that has been acceptable. the public are willing to allow step in,anks to whether that is politicians trying to push responsibility towards central banks, we will only find out the next time it gets bad. francine: paul, where are we more vulnerable today? paul: shadow banking. francine: in china? or worldwide? paul: a bit in the united states as well. there has been a weak appetite to address shadow banking in the states. a policy will monitor it and reform policy to catch up is doomed to failure. by the time something is big enough to be a threat, it has a lobbying power in congress and the elsewhere. have duckedult they

it and that has been a mistake. another one, my generation of policymakers, have pushed derivative market to go via central markets. what happens if a central innterparty fails? no one the united states has said anything compelling about that. it is not clear that are legal powers to address that. europe, it is waiting to try to do something with the united states. imagine one of these things fails. i am one of the few people on the planet who has dealt with a failed one. tom: we have got the phillips curve and all the fancy phrases. where is behavioral economics? are you ignoring robert shiller? think that was

the problem before the crisis. it was partly a problem in the fed. the greenspan doctrine was neglected in the fed. it was not a sexy place to work. the difficulty is people have importance of behavioral economics. i'm not sure they know how to operationalize it. how do you make it part of policy? it is all good talking about it. if you have the job, how do you spot irrational exuberance from harmless? level you spot the debt from the equity bubble? the heart of this and i go back to mervyn king's speech in is so important is the theory of the central bank getting out front, of being

.x-post or ex-ante are we delusional thinking central banks can get out front? we would be delusional to put all our chips on that. sometimes they can do that. greenspan did a good job in spotting the uplift in productivity in the late 1990's. you cannot rely on it. we cannot rely on spotting when the next crisis -- where the next crisis will come from. all we can do is make the system more resilient and that includes being able to cope with failure. be more attention in all of these programs on how make big banks and dealers resolvable so we can resolve them in a crisis.

it is your responsibility to make that sexy. people like you are good at that. francine: there you go, tom. tom: in the years i have done this show, nobody has told me i am making it sexy. thank you. get him off air as fast as you can. paul: there is still time for you, tom. there you go. tom at a loss for words. staying with us, paul turk are and rupert harrison and john normand. boss, want to dazzle your what you want to do is steal our charts. we have good charts on the italian-german spread. you go to gtv and you still them and reuse them and dazzle.

this is "bloomberg." ♪

francine: this is bloomberg surveillance. tom and francine from london and new york. the turkish president will go to the meetings in new york september 23 through 27th and he will visit germany. we need to talk emerging markets. you had a great chart looking at the lira. is a domestic story as much as a dollar denominated story for emerging-market debt. tom: we have seen this before at the meetings.

no word on whether mr. erdogan will visit the white house. for our first word news, here is taylor riggs. election in sweden has left the country without a clear candidate to form a government. the prime minister has presided over and upswing that has led to a rise in unemployment. swedes are concerned about a record influx of immigrants. president trump taking credit for what he called a positive statement from north korea. of the military parade was devoted to the civilian economy and no long-range missiles were on display. president trump saying kim jong-un things things were much better before he took office -- them before he took office. the former head of china's central bank's warning of the market impact of a trade war. zhou xiaochuan tells bloomberg new tariffs could have a huge impact on sentiment in china. >> people may become nervous because nobody knows, suddenly,

there is a trade war and they may change their mind in terms of stock market investment. taylor: president trump says he is willing to tax all chinese imports at short notice. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is "bloomberg." francine: i have to say, tom, i probably should not say it out loud, but i was starstruck talking to the former pboc governor. , he savaged.k. theresa may's policy. bloomberg,view with

an upbeat assessment of divorce talks. the new chief negotiator of active, is constructive. expectation is that they have a good chance to come to a smart brexit. francine: that was the e.u. budget chief commissioner. by john normand of jpmorgan, rupert harrison a blackrock and paul tucker. politics.u were in i guess were brexit is going is boris johnson talking about suicide vests seems to be fueling more infighting but there is the campaign for second referendum getting a boost. where are we now? rupert: the key is the colorful

news has been up scaring signs of a more positive tone in negotiations. that is going to be the driver of sentiment in markets. we will get a positive meeting of the heads of government in september. that is a wish on both sides to get positive sentiment. seeing signs of a pragmatic approach from the u.k. and they want to strengthen treaties. they would rather be negotiating with her than with boris johnson. on the uk's side, it is noisy. you have to keep coming back to, you have to know how to count. theresa may has the numbers. he may try to challenge her during or after the conference. i do think he has the numbers to challenge her successfully. francine: what do you see priced

into the markets? seeing theresummer is more chance of the u.k. crashing out and it looks like it is more likely we do deal. if you look at what is priced into the interest rate markets, there are no hikes. the baseline scenario of investors is malaise. it is going to keep sterling at depressed levels. tom: i want to bring up sterling. i am only doing this because i want john normand back on the show. this is sterling and volatility. directional, the weak over your weaker. can you bet on the one-way bet of a weak sterling? think it is a

great risk award because you are starting at a high level of volatility and a cheap currency. it is a decent risk award. i would rather be short sterling. tom: where is the opportunity? better reward is owning yen given the uncertain trade policy or being short commodity currencies. rupert: i take a different view on the pound. we saw there was a story out of berlin saying some of the details were not that newsy. the german government wanted to create positive momentum but sterling jumped. is heavily positioned short sterling and there is potential for upside news to have significant market impact. francine: how does the market navigate that? paul: i have not the faintest

idea. i think it is mainly nonsense. in terms of the long-term consequences, that is what the smart money thinks. the chart tom showed, which was on options, they are distorted. likes to be short volatility, particularly in a low yield environment. if you think about brexit or mr. trump and the trade war, it is fantastically uncertain. to be long volatility, that is not what people will do because it cost money. you talk about these things too much on this kind of show. i think the bank of england would be focused on the short-term when it comes to the risk of a no deal. francine: the real concern is that markets can move fast.

you have to follow the shorter term money to understand what markets are thinking. markets typically under price risk except when they overshoot in the other direction. what i'm sure central banks are thinking about, is have they got the armor to respond quickly if bad things happen? in terms of disturbances, they learned a lot during the crisis and we have seen that since the worst of the crisis. andhould all be worried they should be worried and they should find a way of talking about this more. their arsenal is depleted. doubly, my generation was able to reduce interest rates and do qe. there is going to be no reducing from 5% to 0%. tom: is that a reason for

chairman powell to raise interest rates? do you buy the idea of raising rates simply to have the ammo when we slow down next time? paul: know, that is not a good argument. it is a good argument for the fed to use the countercyclical, which is becoming a debate. chairthe former fed vice had argued for the fed increasing the countercyclical buffer, using it. i think they should. in a world where the macroeconomic authorities have could do in the face of a recession, the banking system needs to be more resilient. calibrated like me in 2011, we were not betting on a low growth world where central

banks would have a depleted arsenal. this would be a reason for having higher capital requirements of than otherwise and the way for the fed to do that is to use the countercyclical capital buffer. tucker, one of the great voices of criticism. he has gone after the idea of a fully employed america and for that matter, a fully employed elite in london. is there is slack in the labor economy and can central bankers fix that? paul: i do not know the answer to the first question. think central banks and policymakers are in a position where, this was true at the end of my term in office, where they knew less about what is going on in the economy, the underlying than for generations.

people talk about whether the fed will make mistakes or whether the ecb will. it seems to me they will. it will not be the end of the world. the marvelous thing about central banking, they meet eight times a year. they can correct further areas. this is a feature of central-bank policy making. economy, to probe the do what they think is best, and explain they might have to reverse course. i chair powell as showing an ability -- i see chair powell as showing an ability to do that. francine: he is coming under fire from president trump. what does that mean? john: i do not think the fed are going to feel constrained.

i do think is probing approach underpins the approach of all the central banks. it is better to let economies run hot and discover how much weight pressure there is. that continues to inform the fed. this has been wonderful. rupert harrison and john normand and we are thrilled to have with us, paul turk are -- paul tucker with his book. coming up, we will recalibrate on equity markets. chris grisanti will join us. stay with us. this is "bloomberg." ♪

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where is value? where is the opportunity to not lose money? the falling leaves, we will make blue states. the president needs a new lawyer. les moonves is out at cbs. this is bloomberg surveillance, live from new york, i'm tom keene. francine lacqua, what a great our we just had. piecing together 10 years on from lehman brothers. francine: it is valuable to get the former deputy governor together with john normand and rupert harrison. we got into what we could have learned from the financial crisis that we have not. it was interesting hearing paul regulatorsicism that had six months where they did

not do as much as they could have, according to him. the next big concern is shadow banking, china and the u.s. now, your monday briefing, here is taylor riggs. taylor: it is the end of an era at alibaba. jack ma has outlined plans to hand his title over to daniel zhang who spent three years as ceo and presided over an ambitious expansion. mom will leave a year from now. the cofounder plans to focus on philanthropy and education. longtime cbs president les moonves is stepping down after new allegations of sexual harassment. moonves called the claims untrue and said he is saddened to be leaving the company after two decades. chief operating officer, joseph ianniello, will be his interim successor. cbs has ended a legal fight with its largest shareholder, redstone amusements. six board members will step

down. the former head of china's central bank is warning of the market impact of a trade war. zhou xiaochuan tells bloomberg new tariffs could have a huge impact on sentiment in china. >> people may become nervous because nobody knows, suddenly, there is a trade war and they may change their mind in terms of stock market investment. taylor: president trump says he is willing to tax all chinese imports at short notice. italy's deputy prime minister, matteo salvini, says he will try to keep the budget within european union limits although the interest of the people come first. he spoke to bloomberg. >> we will do all we can to grow to make italians pay less taxes, to provide more jobs, sticking to our international agreements. growth comes first and the right

to work, the right to a pension, to health. we have five years ahead of us, not five months notwithstanding , what others think, we will carry everything out and do it well. taylor: he was referring to italy's former prime minister. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is "bloomberg." tom: thanks. equities, bonds, a quieter day, with futures up, dow futures up, unchanged and the curve flattening. , 14.67. and thebond moves out, dollar-remnimbi, weakness.

indian rupee, 72.40. francine: stocks mixed at the start of the week. european shares, u.s. futures rising. investors trying to figure out the prospect of an escalating trade war with china. recalibrate away from international relations with what do you do with your money? chris grisanti looks that value. he avoids that the value traps with his portfolios. where is the trap right now? technologyink that is starting to tread water, face a headwind, i think it is going to be harder to make money in those winners of the last two years than if you look at the folks that have lagged.

i think cash is always legitimate. do nothing is not a bad program sometimes. tom: is right now a good time to do nothing? chris: every time is if you are not sure you can make your rate. what we're looking at now is cautious, plunking down money for three to four years from now. will there be a recession and how will our money be protected? what we're looking at is stuff that has not kept up. francine: where is it? here is an idea, oil service. aa take a company that has a balance sheet. it is hitting five-year lows. reason is oil companies have gotten wisdom and they are not spending capital on drilling new holes, on digging wells, but

they will. continues its upswing, we think these companies offer one of the few spots of value. francine: is there anything in a bubble? chris: if i knew that i would be on my own island. i think there is hyperbole about how expensive technology is and expect for a few places, you can point to netflix, we do not see the bubbles we saw in the late 1990's. i do not lay awake waiting for a bubble to burst except for these political situations. tom: let's go back to oil service. we will get it out on gtv . this is not an amazon chart. how cheap -- you want me to buy that chart on the right?

it is textbook short. come on. look at this bounce. chris: you are giving me a bull market speech. aa balanceouble sheet, a company that goes back a ways and has made it through lots of ups and downs and they will be back. i cannot tell you when but you invest for the long-term with the winners. tom: are you selling your apple shares? the easy answer is no. we have been owners for a long time and they have gone from success to success. it is an iphone company but up-and-coming are the services. tom: you do not give yourself

enough credit. you own apple through thick and thin. every 18 months, there is a reason to sell. every 18 months, there is a reason to sell. how does chris have patience to hold winners? chris: that is a problem. that is something we like to do. many of our clients are taxable. they question is, in technology, are they going to be replaced? --this ibm tom: or the recovery of microsoft? chris: it is not either because they are on the first generation of good stuff. we go to services, it is a winning combination. francine: thanks so much. chris grisanti stays with us. we are marking 10 years the collapse of lehman brothers. we have interviews coming up for the anniversary. be speaking to the former

chief executives of barclays and deutsche bank. this is "bloomberg." ♪

taylor: let's get the business flash. luxury goods maker has done a u-turn and named the ceo. they promoted jerome lambert, he is a veteran who had his career in watchmaking. the company had abolished the position two years ago. the chairman had considered it too big for one person to

manage. in talks with other buyers for the remaining aircraft in a deal with iran. the narda cannot deliver passenger planes because of u.s. sanctions. we spoke with the ceo. we already have delivered the 12 aircraft and we're working hard to reallocate the remaining eight. >> are you in talks to sell the remaining ones? are you confident you're going to sell the deal by the end of the year? >> we're pretty confident in the fact we will finalize the allocation. chairman of italy's second largest bank is happy it will keep its program within european union guidelines. he spoke to bloomberg in an interview. declaration ofhe

the prime minister of the deputy prime minister, and of the economy minister that have said the real attitudes of the government, to respect european roles. taylor: that is your business flash. tom: thanks. america, the of columbia broadcasting system. an executive.f now, on the future of cbs, paul sweeney joins us. mr. twain says the graveyard has a replaceable men in it. i am sure mr. moonves will be replaced. what is the process? paul: this is a major issue for

cbs. you think about media moguls, less moonves is there. he has been critical to the success of cbs since he has been there. this has been an issue. the coo is going to be interim ceo. they will look both inside and outside cbs for a new ceo. they stocks have been trading better over the last few days, if for no other reason we are getting some of this noise up. aspect,m a distribution cbs seems alone. do these events affect some storm -- some form of combination with cnn? paul: they do. one of the parts of the resolution is it allows for cbs to pursue another combination on its own without interference

whennational amusements redstone either passes or becomes incapacitated. that is a change. it gives them and its board more autonomy to pursue deals. francine: overall, merger speculation is all over the media industry. who do see emerging? bel: there is still cbs-buyer, on the table. there is going to be a standstill between the companies. in the past, it was reported that verizon was looking at cbs. about theink consolidating landscape, there are not that many players. dominate broadcast television network and you have the showtime pay-tv service, which are valuable. you have cbs studios produce a lot of television shows and

produce content and for a technology company looking to get scale, cbs is attractive. come --: what does cbs become an five years? -- become it in five years? paul: i think they're going to be part of a larger media conglomerate. what is happening is we are seeing you have to take a look at what disney is doing. they are trying to get bigger, not to compete against other companies but to compete against technology companies. with tim armstrong, i was fascinated by his comments, i do not know what to do with them. what do you do with cbs? what was his first-order skill set and what is the new skill set running cbs? paul: he was the best television

programmer in hollywood. he was able to make that into a ceo slot. what they need now is a strategic ceo and to think about where cbs fits in. not, there is is bad will on the balance sheets. can you own this stuff? chris: we can if it gets cheaper enough. viacom is a value trap. tom: do you agree? paul: until they show some growth. chris: it is all about content. they do not have the good stuff. the biggest thing they can do is get out of their failed marriage. watching three episodes of i love lucy is not going to get it done? chris: 50 years ago but not anymore. chris grisanti telling me

how old i am an paul sweeney. we will hear much more on mr. moonves. bloomberg radio, your morning brief coast to coast. stay with us. this is "bloomberg." ♪

tom: the view from the .urveillance

let's see if we can get the wiper going. ugly rain. the first sign of autumn. mr. erdogan scheduled to be at the yuan in about -- be at the u.n. in about 2.5 weeks. right now with us, kevin cirilli. the idea is the replacement for mr. mcgann, the president jumpstarting his new legal approach. how will he do that? kevin: it is going to come down to him to put together a team in which he is the leader. this is someone who back in his private citizen days is someone who felt he was his best advocate. he felt he could argue through any type of legal case with him arguing for himself. not going to work

on fronts if the democrats take over. who is going to help? kevin: even beyond the legal system in terms of who will help , he has relied on rudy giuliani in terms of him echoing what the president wants to see. you saw this last week, with a response we saw to bob woodward's book and the anonymous op-ed story in the new york times with the president , puttinging together his offense. you are seeing that white house focusing in terms of the political, focusing on former president political -- barack obama. , the former president and the current president, battling each other, that might help motivate them.

democrats feel it will motivate their base as well. tom: talk to us about -- francine: talk to us about the trade war. the rhetoricrstand from president trump about he may escalated at any moment. kevin: we have heard this in the past. i spoke with republican strategists who told me that on the issue of trade, they feel republicans had the advantage in terms of how to negotiate. i have got my eye on this ohio , thatsenator sharon brown lead has been cut close. of trade theissue republicans are mobilizing in ohio. tom: kevin, a wonderful essay in but iashington post" thought this is a was for everyone.

the senator positivist funeral, people spoken code, white house officials do not feel they are living in a legal state. the result, administrative chaos. washington feels like the capital of a state where the legal order has collapsed. do you get that feeling? , i would also note that less than 72 hours after -- afteror mccain senator mccain, after the funeral, we saw the political theater of the day at the judge kavanaugh hearing in which democrats and republicans sparred. heightened political toxicity in washington. i do think there is legal order. some number ofs days, 57 days.

kevin cirilli, thank you for appearing with us. he appears only after the philadelphia eagles win football games on monday. aboute got more to talk on economics, investment, and finance and a look back 10 years. susan lund will join us. thrilled she will be with us. chris grisanti with us as well. the view back 10 or 11 years. more to talk about here on washington. westin,orget david noon, balance of power, a focus view of washington. stay with us. this is "bloomberg." ♪ xfinity mobile is a new wireless network

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and ask how you get xfinity mobile included with your internet. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. surveillance. good morning. francine lacqua in london, i am tom keene in new york. it is on, from the lehman

crisis, whatever crisis you would like. it is important we take a look act to 2008. let us take a look now. >> it is serious. we do not know how it is going to play out this week. here is what we know, one of the most storied firms off wall street is gone. >> a historic day on wall street, lehman brothers, a firm which survived bankruptcies in and the collapse of long-term capital management a decade ago, filed for chapter 11 today. a new world order on wall street a merges as investors digest the changes of the last six months. bear stearns becomes part of jpmorgan. regulators take control of fannie mae and freddie mac. bank of america opened its doors to merrill lynch and lehman brothers goes bankrupt. >> hearing start at 9:30 this

morning. that was the democratic head of the senate banking committee, wrapping up after questioning the head of the federal reserve member ben bernanke and their bailout plan for the banks. >> big losses on equities. take a look at the dow, down 700 points. well down through that 10,000 level we came up through. >> today comes on a global stampede out of equities, in particular western europe where the dow jones 600 had its biggest one-day drop since 1987. the ftse falling to a near four-year low. >> stocks topple, led by banks and the credit crisis widens and the infection has spread from europe to brazil. tape of scarlet

fu. grisanti and chris yum and own are in -- yalman onaran. susan lund joins us from washington. ongratulations on your jewel what happened and what did not change. changed.hat has not susan: the world has a lot of debt. it is a different kind of debt. is taken by governments and corporations instead of households. 2008, we expected there would be deleveraging or debt reduction. instead, we have got more dead than we had then. tom: within the -- more debt than we had been. the two professors do not

make a distinction. they say you have got to add private debt to the public debt. how ugly is the picture? is higher in the united states, the u.k., ireland than it was on the eve of the crisis. those are the core crisis countries of that had over indebted household sectors and real estate bubbles that ended badly. world, thatof the was not at the center of the crisis. all forms of debt had continued to grow. canada, the land of sound banking, their household debt is at the same level the u.s. was in 2007. when you look at developing countries, the change has been

dramatic. this is why we are having problems in turkey, in argentina, and other countries that were able to borrow because interest rates were low. investors were willing to take higher risk to get returned. emerging markets were able to borrow at unprecedented levels. as we look forward to rising combined with, in some countries, unsound macro economic policies, we are going to see problems. francine: where are we going to see problems? if you look at the spaces that are more vulnerable today, where is it? susan: in developing countries, it is a combination of too much debt combined with the macro economic shock. in turkey, we have seen the lira plunge nearly 50% since the start of the year and their debt

is in foreign currency. a company that was paying a certain amount on that service is paying nearly double. same problem in argentina which asked for a bailout. in emergingtremors markets as we look ahead. beyond that, in the u.s. and europe, the troubles are more specific pockets. for instance, u.s. retail. overall, the picture does not look so bad. francine: through your what the consequences have been from the crisis and i've heard everything from this was a stepping stone of populism because of central-bank action to banks being overregulated. you see as the consequence of the financial crisis? yalman: the banks have been

regulated more. banks say they are overregulated. critics say they are not regulated enough. they are safer. up until the crisis, a lot of , they did worldwide increase capital requirements, all kinds of things that make the system safer which meant they shifted to shadow banks. shadow banks are everything that is not a bank. it is involved in lending. that is harder to monitor. they pay more attention to it. they did not before. there have been political and , analystsepercussions

have said that is because of what happened after the crisis because of monetary policies which lowered interest rate and bought bonds by the fed and other central banks. all of these things, it has changed the world. from theisk shift banking system to other corners of the financial system. the dangers are there. there is so much more debt that it is not safe. tom: you lead our coverage on this. what was going on at the time was forensic reporting and part of that was the banks. do we need greater bank concentration in america or do the too bigiffuse to fail regional banks? yalman: when i first came to the

u.s., i thought there were too many regional banks. my first bank had one branch. then, as i covered banking in this country and around the world, i have looked at systems around the world. smaller banks, the biggest advantage is that risk is spread out. won fails. -- one bank fails. the big banks are threatening and it is tough to make sure their risks are not too much. tom: i have got to make some money. can you buy the banks? chris: you can but i get a feeling we're talking about the last crisis. tom: that is the theme today. chris: i do not like looking

back. the weak point is not going to be the big u.s. banks. i look at emerging markets, where the stress points are. we have more debt but our gdp is higher. it is china that is leveraged up. we have nationalized it, moving it to the public sector which is what we wanted. tucker ande had paul he was saying what we should be watching out for a shadow banking in the u.s. and china. what should we do with shadow banking? banking is a troublesome area because we do not know a lot about it. at this point, in the united states, half of new mortgages are coming from non-bank entities. mae, are going into ginnie

which is the third government owned securitizer. that is an area worth watching. i will tell you what is different. there are positive changes in the system. we do not have the trillions of dollars of derivatives and collateralized debt obligations, credit default swaps that were built on the subprime mortgages. that was what allowed a small corner of the u.s. mortgage market to create this global damage and through the world into a global recession. all of that has disappeared. could create losses but it is not going to have ripple effects. in china, they've got a different story. francine: talk to me about china, sorry. susan: china has leveraged up. the good news for the rest of the world is that that debt is

coming from chinese investors and chinese banks. if there were to be a crisis, it is going to be domestic within china. it does not have obvious international repercussions through financial channels. it is the second-largest economy. if growth were to slow down, that would affect countries around the world. francine: thank you so much. susan lund from mackenzie. chris grisanti is staying with us. power,up on balance of former u.s. secretary of energy. that is coming up at 12:30 p.m. in new york. this is "bloomberg." ♪

morning, everyone. francine lacqua and tom keene. here is taylor riggs. novak: in tennis, djokovic won his fourth straight title. has been fined $17,000 for a rules violation during her controversial loss to naomi osaka. she was penalized for verbal abuse of the chair umpire being warned of coaching and breaking her racket. les moonves is being forced out of office after two decades of running the network. foras being investigated

allegations of sexual harassment when new claims were reported. he will be replaced by chief operating officer, joseph e and yellow. -- joseph ianniello. cbs has ended a legal fight with its largest shareholder, redstone amusements. six board members will step down. an inconclusive election in sweden has left the country without a candidate to form a government. that could mean months of gridlock. stefan lofven has presided over an upswing that has led to a rise in unemployment. swedes are concerned about a record influx of immigrants. president trump is taking credit for what he called a positive statement from north korea. nearly half of the military parade was devoted to the civilian economy and no long-range missiles were on display. president trump saying kim jong-un said things were much better than before he took office. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists

and analysts in more than 120 countries. i'm taylor riggs. this is "bloomberg." tom: thanks. i want to point out, brian forivan is a jewel bloomberg and he has written a story about florence, this hurricane of that is coming to carolina thursday, maybe friday. it is a wake-up call. it is a story the size of this hurricane to come. the autumnrward in of our discontent with chris ,risanti on the equity markets the financial engineering, the use of cash, dividend growth is going to fail. we are going to die. therefore, the market is climbing the wall of worry and doing well. i cannot recall a time when we've done so well with so much

pessimism abroad which gives me hope. tom: what happens when gdp comes down and 8% becomes the new 6.2%? chris: the new tax law has pumped up, it is the steroids of 2018, the question is what will happen next year. the hope is that the wage gains we have been making to continue to propel this economy and i think there is truth in that. someine: when you look at participation, what is priced in in terms of a trade war? i do not know whether people are coolheaded or whether there is a. angstther there is chris:.

people are cool about it. we worry about is a trade war and within that, it is the chinese issues. we think mexico has been solved and we think canada will follow and the u.s. will take them like dominoes. china, which the president has been complaining about, the one thing you can say about the president is he does what he says. , wes not going to accept are in for things getting worse before they get better. do you worry about the trade war increasing and hurting world growth and like a collapse in the market, would that be too strong? chris: that is not our base case. the chinesee is make concessions because it is worth more to them than us.

having said that, it is going to be tough negotiations and we expect more volatility. we are expecting a good outcome. in: are u.s. multinationals international currency? the tried-and-true u.s. multinational, does that hold? chris: i think it does. dupont, it has a high r squared with trade news. what you're looking at is headlines about trade. we are hoping the fundamentals come back. tom: chris grisanti, thank you so much. within equity update. are 26,044.

bloomberg users can interact with the charts using gtv . you can browse recent charts and features on the bloomberg. tom had a good one, the third derivative of em fx. this is "bloomberg." ♪

tom: bloomberg surveillance. francine lacqua in london and i'm tom keene in new york. --k together again to bring begin the season. we do that with chris grisanti. how about a single best chart? let us go back. here it is. there we are. ,p we go from the depression how can you go against this chart? you can long-term that is

why we are bullish on equity long-term. if you look at this closely, we're above that line. you can go for a year and go above that line. going flat is not going to get you 12% a year. francine: hold on, bring up your chart. it is good. equities,k at rise in it has to slow down because we are and cycle and the tax cuts and the tax cuts will end having their effect. when does that happen? are in the said, we eighth inning but i'm not sure it is a nine inning game. the financial statistics are good and i do rely on the fact it has been a slow recovery from 10 years ago. the recovery can last longer. having said that, trade is an issue. i do not see the usual things

that end a recovery. we do not see inflation picking up. so far, so good. said, youcollender, have got the deficit projections , itif you got a slowdown works out to eight $2 trillion deficit. of youromes part calculus, does it not? chris: you cannot ignore but you are in a dynamic system. the democrats take the house, other changes, we had low corporate rates since the 1950's. if that happens, you will get lower interest rates so the debt will not be an immediate problem and you can start to raise revenue as we come out of a recession. it has been 10 years. we are going to have one

eventually. we are not afraid of that. that is the healthy part of the chart. tom: what we are featuring this week is people who had the courage to stay invested with all the other distractions of the last decade. chris grisanti with us. i'm going to migrate over to radio. jon ferro and i will be in the same room together. bloomberg radio, we do that coast to coast, worldwide. digital listens on london three. how cool is that? this is "bloomberg." ♪

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cbs. he will leave the company after explosive allegations of sexual assault. its swexit moment. the national party tenderly 20% of the vote. president trump threatens a tax on all goods imported from china. china promises to support the exporters. >> it was a big weekend for news. watching the women's final on saturday it was really something with serena williams melting down. >> we were talking about when naomi one and how she was crying at the press conference. >> she did a fabulous job. she was going to win the match in my opinion anyway. >> and what it lines up meeting for overall