>> trade optimism as beijing welcomes washington's in this -- imitation to come back to the table -- invitation to come back to the table. day, anbank decision announcement from the ecb and the turkish central-bank. only the latter is expected to take any action. welcome to surveillance. it was risk on in the equity session. we start to see that with a

tepid start. an outperforming, commodity producers and carmakers suggesting a knee-jerk reaction to the headlines we have seen on trade. no decision at expected from the meeting. 1.16 handle, lower expectations from the turkish central-bank. predicting a 325 basis point hike. will we get that and how will the lira react? a touch of weakness today. let's look at oil as well. after two days of gains, doubling back under -- on wti. higher oilning prices as iran and then as i'll deepen.enezuela losses coming up, we will bring you more of our life after lehman

coverage with the former cfo of lehman brothers. he joins us at 11:00 a.m. u.k. time. for first word news, we go to taylor riggs. taylor: the u.k. union -- that you union -- according to eu diplomats, officials are starting to -- startinghe iraq border.ft on the irish the eu team indicated it is ready to do so once the conservative party conference is out of the way. toricane florence is set park itself off the coast of the carolinas, threatening a huge swath of the coastline before making landfall. the u.s. national hurricane center says the category 3 storm is forecasted to deliver three inches of rain and trigger catastrophic flooding.

a stormpected to drive surge to resort tyrone's -- resort has a have been evacuated. the typhoon is expected to make landfall in the philippines saturday. 17 areas are on alert. it is forecast to lose sans power in the coming days before heading to hong kong and south china. has showntest iphone how even the world's largest company has to surrender to the dictates of a crucial chinese market. the new model supports two cellular services and easier switching between carriers. but that technology will not be available in china, hong kong, and a cow. in a rare move -- and macau. in a rare move, apple will

offer -- iphone 10 will offer two phone numbers in your phone when you get the call. which everyone gets it becomes the active line. we have added our technology. >> jamie dimon picks a fight with president trump and immediately regretted it. he said he thought he could beat the president in an election. just hours later, the bank issued a statement saying he shouldn't have said that and he would not make a good politician. the white house did not offer a comment. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. ♪ much. thank you so

the white house has proposed another round of talks with aging to death with beijing -- with beijing. we see dollar weakness in yesterday's session. beijing welcomes imitation. jpmorganachs and weighed in potential dangers to corporate america if a full-blown trade war wreps -- he trade war errupts. progress. is ideally, the -- any talks is progress. ideally, they do not impose tariffs on each other. sides talko seriously and have an armistice in between. there is no significant sign yet that the mandarin chief, donald trump, on the u.s. side, actually wants such an armistice

now ahead of the midterm elections. that is the basic call. is it better for him in his thinking to please his base with i am a great dealer or i am the hardline guy against the chinese? nejra: we have seen dollar strength this year. we saw dollar weakness yesterday, but we mentioned some of the calls from wall street. goldman sachs say, if we get 10% on all those chinese imports, that level of tariffs, 10%, we could see the s&p 500 drop into a bear market. how vulnerable is u.s. growth in an escalation in a trade war. >> it would have to be a major escalation to get that. 10% tariff on all chinese imports would be that trigger. if that word to be seen as the start rather than the end of it, the start of something more pernicious, after 10% comes 20%

and so on, it would be a very disruptive thing. in the u.s., we have the interesting phenomenon that the u.s. economy seems to be largely isolated, insulated from what is --ng on in the trades fear traits sphere because they have the long domestic stimulus from tax cuts and deregulation the u.s. does not feel the effect of the disturbances. the u.s. probably would not be that much affected if this goes on a bit further. it would hurt the u.s., but not to bad enough to have a bear market. nejra: it would not hurt the u.s. that enough. how about china? >> chinese, when it comes to the trade relationship with the u.s., pretty exposed, yes. beth her china, they have the means to re-stimulate their economy if they wanted and have to. they don't really want -- if they want to our have to.

you don't really want to. forced into doing it, they would probably reopen the credit tax rather than let growth decelerate so much that the people would notice the significant deterioration and get unhappy with the ruling party. what you have said about the u.s. and china, a lot of why wall street is positive on global growth for the rest of this year and next year despite the escalation in trade tensions and what is happening in imaging markets? >> we have a number of issues crises, problems here and there. they all add up to being something. but they don't add up to a strong domestic fundamentals in many parts of the world. strong u.s. economic performance likely to go on for another roughly two years. we have the eurozone being basically in good shape, a little problem here and there. we have china able to

restimulate the economy if needed. and with these three major regions likely to enjoy decent don't again next year, i think the world economy is heading for a very negative surprise in 2019 are at the end of this year. nejra: a hawkish meeting. thank is so much. plenty coming up, including exclusive for an interview. we will talk trade, drug pricing and the company's outlook. this is bloomberg. ♪

♪ naral: this is bloomberg surveillance. that's get to the bloomberg business flash. taylor: another high-ranking finance executive at tesla is leaving the company. -- justincca mayor mcnamara is leaving. did not respond to requests for comment. jeff baker, the executive producer of "60 minutes" has been fired in the latest fallout of sexual allegation -- sexual harassment allegations. this comes days after les moonves was forced out. planning to pay a special

dividend bolstering french banks for potential dealmaking and other business lines. banksrent group, the two dividend is contingent on an acquisition project. 11% ofnned sale without allowing it to meet its capital target. raised after rising its hong kong ipo. the chinese food review risen.ales have the offering attractive personal investments from hong kong's richest man as well as the chairman of lifestyle international.

nejra: thank you so much. a big day for central bank watchers, starting with the boj division. same time, a moment of truth for turkey. the central bank is expected to hike today. after stunning investors in july, nothing is for certain. the ecb makes its first policy announcement since the summer break. mario draghi and his team are ready to lower the forecast for european growth. matt, you first. no change expected in terms of rates from the ecb. we heard there could be a downgrade to the growth forecast. what will you be watching for in the conference? matt: it's pretty rare that the ecb changes rates. i can't remember the last time that happened. theyll be interesting when

confirm the change to quantitative easing, for example. they are expected to say they will cut back her justice from $40 billion a month to $15 billion a month in october. at the same time, they are expected to reduce their growth forecast. they will say growth is slowing down due to the effects of the trade war on global growth. but that is not deterring them from pulling back the quantitative easing intervention a little bit and getting ready to raise rates in september 2019. it will be an interesting balancing act for mario draghi today. nejra: we keep wondering what that means in terms of the rates. here is where we could see a lot more market reaction. really high expectations ahead of the turkish central bank meeting. are we expecting a delivery of that rate hike?

ramy yousef: it is turning out to be a historic day. there is a letter pressure on the banks to make a move. you immediately notice that prices have shot u john -- shot up dramatically. that the economic growth data which slowed quarter on quarter. that raises the stakes for the bank. you mentioned the expectations for a rate hike, 3.25%. it is hard to talk about a consensus. maybe it is not a consensus. it is an average. the range is very wide. as high as five percentage points all the way down to no change. the key question will be how will mr. anyone get involved -- mr. erdogan get involved in this conversation companies will be asked to settle contracts in

lira instead of foreign currency. pv security thinks the central bank will disappoint. nejra: thank you so much. let's keep the conversation on central banks. givenstart with turkey, that expectations are so high. is the hike today the lower bound the central bank needs to deliver? >> i think it is the lower bound of what the central bank needs to deliver to really impress markets for the significant amount of time. may they get away with doing a little bit less. might comeubts easily in coming weeks. but that has been enough, especially after the president got so heavily involved with interest-rate decisions, including something he said here

a while ago, that he is de facto the boss of the central bank. against that backdrop, the central bank needs to show it's kind of independence by independence its by surprising to the upside. it may get significantly easier for turkey. if they underwhelmed today, the doubts will not go away and we will probably have to talk about turkey quite a lot more in the future. nejra: if we get a rate hike today that is high enough to get a relief rally in a turkish lira, is that rate hike going to be enough for turkey longer-term? it has other issues to deal with other than just inflation. >> the biggest issue is credibility. solving. all the other issues will be much easier if the central bank reestablishes its credibility with foreign investors and with turkey's own people. see -- feel

confident again to hold their own currency, then turkey's biggest problem would be solved, the biggest acute problem is they likely surging consumer prices in response to this currency weakness. nejra: let's talk about the ecb. this perhaps will go down with less fireworks than what we will get from the turkish central bank. the rate hike is not something we are talking about at this point. what could be surprising or market moving, if anything, out of what mario draghi might say? that isa tough -- >> a tough question to answer. having said that, because we all impressedrd to a less conference, even a slight word could make headlines. they cut their growth

forecast for this year is interesting, but doesn't really matter. the council has told us what they intend to do roughly for the next year and it would take a major surprise for them to deviate. we will get more offices on the risks to growth coming from emerging markets, to some extent coming from trade tensions with china. but most of the confidence data recently has been ok despite a very odd weakness in some industrial data for july, which would be an. oddity. the ecb -- for an oddity. nejra: the ecb on autopilot for quite a while. when it comes to the bank of england, no change expected today. is there any argument we could get a hawkish signal given the pricing in markets of future

rate hikes? >> the u.k. economy does have a little inflation problem. it is not big. it has a tight labor market. the case is clear. the u.k. needs higher rates. hikes nexto rates year and tomorrow the following year. it is too early for the bank of england to really provide clear clues as to what they would do if brexit goes ok. i don't think there will be a major hawkish tilt in the minutes today. all week, we have been marking 10 years since the collapse of lehman brothers, the defining moment of the worst finance a analysis century. discusses the meltdown and what it means for europe and the united states. barclays was a major player.

trees were quite imported in investment banking. the u.s. were absolutely taking over that market. that is good in a climate of america first. should europeans try to change that and to have one global investment bank because capital markets is absolutely going to dominate the future. people are investing. others are pouring into the money market, not the lending market. the u.s. has to give your major advantages. they reached -- has two major event just. the -- r into levers, it isout -- leverage, it is no real comparison with the u.s. and started to grow interest rates went up earlier. all very difficult.

let me add one point. we are still operating in a benign credit environment. comes intofitability recession or a different credit market, credit environment, then europe is in for a lot. >> does your go backwards now post brexit, you take the city of london out. where does that leave the european banking? towe have to do everything somewhat create a single market and a european market with the same regulatory environment so we can more consolidation moves in the future. tot is the only way i see consolidation.ic it is very challenging, given

the restructuring, given the integration in the markets. unions and others are opposed to that. you are just at a more into a very competitive market. there will probably be a better solution. ackermanat was use of speaking with guy johnson. to learnad 10 years from the last financial crisis. what do policymakers need to do now to deal with the next crisis in the best way possible? >> first of all, i hope a crisis like the lehman crisis will not reappear shortly. secondly, policymakers haven't learned a number of lessons yet. they seem to know that they have to watch leverage and credit growth. they have taken significant steps to make finance a bit more boring. of course, credit growth in recent years has been comparatively muted.

that, ifers also note there was another crisis, they shouldn't just close down the financial institute like lehman. we have better procedures to wind down a financial business in an orderly fashion so the problems at one institution don't cause a collapse of the entire system. fairly sense, i am optimistic that, for whatever problems will appear and problems will appear, we won't have as catastrophic consequences as lehman had 10 years ago. nejra: what is the next crisis does not come from the banking sector? >> then it will be less dangerous. crises are bad. the u.s. reald estate correction into the worst economic crisis in 80 years was they do factor -- the do factor collapse on the 15th of september 10 years ago. this is what is unlikely to be repeated for the foreseeable future. we are more likely to see a

problem in emerging markets, ok, we have a growth slowdown. the u.s. economy may have more inflation than it should, so maybe we have a u.s. recession 2021. we are more likely to have a garden-variety of crises rather than this once in a century event that we had with lehman. nejra: let's hope so. thank you for joining us. coming up, fleeing florence. companies in the carolinas halt operations to let their employees flee the area. this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. nejra: economics, finance, politics. this is "bloomberg surveillance." i'm nejra cehic in london. let's turn to hurricane florence. tois still big enough

deliver a rainy punch. duke energy is one of the biggest utilities in the region. duke's president for north carolina, hurricane florence kobe a life-changing event for many people. -- will be a life-changing event for many people. north carolina is also the country's leading producer of tobacco. hurricane florence could wreak havoc. for more, go to hurr go on the bloomberg terminal. let's go straight to the brexit bulletin. secretaryrmer boris johnson called the prime minister's brexit strategy a humiliation. he savaged theresa may's

closely keeping britain tied to eu trade rules after brexit. an eu's budget chief gave assessment of the poorest talks with brexit. >> they are ongoing. reallyef negotiator is active, constructive and present. our expectation is that there is a good chance to come to a smart -- taylor: the pound surged monday as the eu's chief negotiator says an early withdraw from the block is possible. the u.k. and european union were said to be preparing for a special summit in november to plan a brexit deal. brussels is ready to schedule a one-off gathering so leaders can formally agreed to terms of the split.

plans for the summit may officially be announced in an eu meeting in austria next week. that we are about to reach an agreement on the first stage of this negotiation, which is the brexit. 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. riggs.lor this is bloomberg. nejra: thank you so much. the eu is said to began bling on theresa may making concessions on the irish border in an seal.t to reach a divorce meanwhile, the bank of england is back in a holding pattern. policymakers will leave interest rates unchanged at 0.75% today.

joining us now is a director of the national institute of economic and social research. thank you for joining us and good morning. looking at the cost of brexit, ubs said the cost of brexit so counting. gdp and is that the sort of cost the economy has seen before it has even happened? >> we haven't left the european union. i think what we are able to observe after that is that u.k. performance a year or two years later has fallen to the bottom of the g7 and towards the bottom of the oecd. a number of factors to think investment has remained very low in the economy. that has been driven by the level of uncertainty over not only the way the u.k. will leave the european union, the terms, but also trading

arrangements it will have with the eu and other important blocks with the rest of the world. these cannot be sorted out until we leave. that whole level of uncertainty is driving investment both internally and externally down far below levels we might have anticipated had we not had the referendum vote. nejra: that uncertainty making the job for the bank of england very difficult. is the bank of england handling it in the right way at the moment? jagjit: what the uncertainty does, and continuing reduction of productivity, labor productivity in the u.k. has suffered below trend. it has been twice as bad as the rest of our trading partners. we are in a shortfall relative to where we expected it to be 10 years of around 20% compared to 10% of our trading partners. it will only exacerbate that

trend.that means the overall capacity of the economy is somewhat diluted compared to what we might have otherwise anticipated. that means that a given level of demand, what you want to try to have as higher interest rates than you otherwise have. in the presence of uncertainty, you have to move very carefully. we know that consumers, both in terms of mortgage debt and unsecured debt, are holding relatively light have -- high levels of debt at the moment. we are not quite sure what the reaction of them will be to changes in interest rates. even if you wanted to raise interest rates to levels consistent with historical norms. rates areest negative. that is not the way you typically run economies. you would like to get back to normal space, but you have to move very carefully. that is essentially what policymakers are doing. nejra: if we do get some sort of deal, at least on the withdrawal before march, from that point on, does it give the bank of

england room to hike more than perhaps the markets are expecting at the moment? one of the things you seem to be referring to is the speed of the economy. if we get an agreement, that removes one form of uncertainty. that is will we leave and what terms will we leave upon? timeong-term -- a long with thought it would be something close to an ea type deal. the actual impact on the economy directly would be limited. there is still uncertainty over the nature of future trading agreements that may take several decades to work their way out, as well as terms already integrated in the u.k. economy. the banking sector, many fracturing sector, determining how they reallocate the resources. that will continue to be a story you and i may be talking about over the next decade. that is not going to resolve

itself next year. nejra: when we talk about the u.k. economy, it always seems to come back to brexit.there are a lot of things happening around the world, emerging markets, currency crisis happening. we keep talking about trade wars as well. what about all those other global elements. how are they feeding into your outlook? jagjit: one of the things we started in the 1990's was this move to globalization, liberalization. the sources have impacted economies and quite complex ways we don't fully understand. it is often lead to problems in individual domestic economies. one example would be in the u.k. the opening of trade to china has accelerated the decline of manufacturing jobs. that lead to higher levels of unemployment in areas that have manufacturing. some of those things led to the so-called protest vote.

these same effects of globalization are affecting and other parts of the world. if we don't respond to them with domestic policies in an appropriate, manner there is a danger we will pander to populism with the inward looking policies that i think don't help in the long run productivity and income to grow in a sustainable way. it is a time of great danger in the world economy. nejra: thank you so much for joining us. we will bring you the bank of england's policy decision at 12 p.m. u.k. time. francine coming up. london fashion week coming up tomorrow. we talk about the farmer industry with the ceo of roche. be sure to tune into that exclusive interview later. this is bloomberg. ♪

nejra: this is "bloomberg surveillance." luxury brands are about to walk down the runway at london fashion week. event kicks off tomorrow showcasing more than 80 designers and attracting guests from all over the world. the fashion industry is an important part of the u.k. economy. morerectly contributed than 32 billion pounds to gdp last year. delighted to have you with us on surveillance. a lot of people don't realize what a big part the fashion industry is of the u.k. economy.

how does it compare to other industry groups? it is a they can industry and is often not taken seriously because it is considered frivolous. it considered 32 billion to the u.k. economy. it is larger than the car manufacturing industry. it employs close to 900,000 what thehich is financial services industry employs. seriously,taken especially at this time when the u.k. need to put its best foot forward. it is a very visible industry to champion. nejra: yes talked about the comparison in terms of the number of employees. one may look a financial services, we always think about how brexit is going to impact the industry. what sort of impact are you seeing, given the brexit negotiations and headlines we get from day-to-day? stephanie: it is definitely a conversation that needs to be had. is british fashion council

having conversations with government because it is one of the most complex industries. it is about goods, free movement of people and talent and friction. it really is a very complex industry. part of the design here, it is manufactured abroad, brought back here to finish and shipped out abroad again. if it can be worked out for the industry, it could be a template for other industries. nejra: in terms of what we have seen so far. theresa may's white paper and what is being discussed, we could get a deal at that summit is what we are hearing. are you satisfied with the deal on the table at the moment? stephanie: we are still looking at it and in conversation with government. progress.ainly i think it is the uncertainty that is difficult for anyone. as long as we can continue pushing the conversation forward.

that is our role. nejra: what would you need to see if we don't get the free movement of people? what kind of impact would that have? stephanie: you mentioned that london fashion week has over 80 shows. that is a lot of models walking the catwalk. models, is a good example of where we need help to be able to have free movement of people. inhave seen progress there conjunction with the british fashion model association and dcms. we have seen progress there. we are encouraged and optimistic that we can push the agenda. nejra: what about the outlook for the u.k. economy, the impact on consumers? i'm assuming at the moment, that is not having such an impact on the fashion industry because fashion seems to be holding up. brexit isont, perhaps

a better concern? stephanie: the two luxury industry is resilient, as is the luxury industry in general. it is holding up. for us, when of the most important parts of what the british fashion council does is champion global exports. china is a big market for that. britishopeful that design and creativity and talent, whether homegrown british designers who start their own labels or british designers that work at global labels, will be one of the things that really continues to make the british fashion industry very strong. nejra: when you talk about exports, i can't help but think about escalating trade tensions. does that concern you at all? stephanie: i think it concerns

everyone. we will gather the information our designer communities and business communities, and hope to be able to work with government to come up with the best deal. nejra: thank you so much. as mentioned, we are marking 10 years since the dramatic collapse of lehman brothers. is the financial world now and a safer place? first, let's hear from former bank of england governor, mervyn king. mervyn: we could have gone back to a repetition of the great depression of the 1930's. i think we would have taken action as we did take in late 2008 and early 2009 to try to offset the consequences of that. we wouldn't have prevented it all together. it would've been a much deeper recession than the one we actually experienced. in that sense, it was an

enormous tail risk. exactly what we would have to do to prevent that happening, which was to lend large amounts of money against collateral and security provided by the banks to keep them afloat. it wasn't that we were facing a tail risk, which is a calamity we didn't know what to do about it. we did know what to do about it and we did it. in many ways, it was a rather straightforward thing to do. , our decision to lend money to it against a letter the assets they have was the right thing to do to prevent the british economy from grinding to a halt. the money was repaid two or three months later with interest. we got all the money back. that action did help to prevent what would otherwise have been an immediate collapse. waskey policy difference

not just initially lending money to stave off an imminent disaster. it was trying to deal with the underlying weakness of the thatng system, which was they had not issued enough equity capital to give confidence to the market. it was all very well for the central bank to lend to banks. what we had to do was take steps to ensure that everyone else had confidence in the banking system. that meant what became known as the recapitalization of the banking system in which either private money or public money was put into the banks to ensure withoutld absorb losses posing a risk to the various people. guy: you talk about the straightforward nature once it became apparent. what are the things you spoke about at the time, and i'm curious to know your thoughts. you spoke a lot about moral hazard in the creation of moral

hazard through the process. do you think you wouldn't have said that? do you think that wouldn't have been a focus? says at this point he does have to get on with it. lehman brothers has failed, you have to get on with it. when you take any policy intervention, you have to ask if the market will respond to it. what will the banks do if we let them this money? you have to have some feeling to what the response is. how will people react to it? if you don't think about that in advance, you will make mistakes. i certainly wouldn't do anything differently. i think we did think through the consequences of what we would do and we follow the traditional precepts of ensuring banks didn't get money without paying it.weerest rate on

talked security against the loans we made . we didn't lend them against no security. we took security for the loans we made to them. that has to be the right way to banks will have an incentive to get themselves into deep trouble knowing they will be rescued in the end. the big lesson to me from all of this is all the banks today are safer than they were then, they are not safe. what we need to do is put in place a system in which banks have to provide the security to the central bank in advance of a crisis, so that everyone knows that the banks have got enough assets to provide security or collateral on the loans the central bank may have to make to them to deal with a run on their deposits, or in the case of 2008, the wholesale bank run on the financial system. nejra: that was mervyn king

speaking with bloomberg's guy johnson. -- the world's biggest maker of cancer medicine said sales will probably rise boosted by tax reductions in the u.s. joined with the ceo of roche. thank you for joining us. despite what you said in july, shares are down since then. you are also lagging your peers when it comes to share price. what can you say to reassure investors? >> my confidence level has gone up tremendously over the last year due to two elements. we see good uptake in demand for our new medicines.

we haveame time, transitioned an number of compounds.the portfolio has become much stronger . both in the short-term and mid long-term, the prospect has improved. nejra: how satisfied are you with a portfolio? severin: we are at a record level in terms of new medicines in our late stage pipeline. we now have 15 molecular entities. that is a record. that gives me the confidence that the growth and momentum for the midterm and longer-term. nejra: you steered away from major m&a. what are you currently looking for in terms of acquisitions and partnerships? severin: our m&a approach has not changed.

we focus on smaller, midsize expositions to complement our portfolio, to consummate our technology. that is what you have seen over the the more recent past. we had some midsize transactions, but you're absolutely right. we do stay away from these big transactions. nejra: if we see more m&a in the sector in general, which companies do think could be targets? industry,n our innovation can pop up in all parts of the world, and in many diseases. our philosophy is that we follow the signs. is a new interest in technology comes up, if a new medicine delivers promising -- that is

when we would get interest. it is a very opportunistic approach. it is not an approach where we say we have a strategy to go into this or that. our approach is opportunistic. we follow the signs. that is reflected in turtle he and in terms of how we do our research and development. what is your approach in giving with a prospect of a hard brexit, if there are challenges and stockpiling some of your more sensitive medicines for u.k. consumers? severin: we are confident we can provide access to our medicines. part of our precautions are also to increase our inventory levels in case there is a hard brexit and in case it is getting more complicated from a supply chain logistics point of view. we are confident we can supply citizens in the u.k.. nejra: on the supply chain,

could there be any negative impact from an escalation in a trade war between the u.s. and china? seveirin: what we have seen so is lessthat medicine concerned. there are no discussions about restricting the access for medicines. all of those countries have their own interest to make sure that the export of medicines out of their countries will continue. i see less of a danger in this respect. nejra: you have been in this role for 10 years. i've spoken with you before and look forward to speaking with you again. sure in the future science has progressed. i am sure health care delivery will have tremendously improved by that time. i do hope that we continue to

iny a leading role contributing to the development. nejra: with you as ceo? severin: i hope so. nejra: thank you so much for joining us. "bloomberg surveillance." continues in the next hour. anna and tom will be here. this is bloomberg. ♪

tom: this morning, 10 years out from lehman, look forward to the

next decade. watch italy. lira-ization of turkey. this is "bloomberg surveillance." i am tom keene in new york. anna edwards in for francine in london. just as i look at the camera, i am sure there are new ones solving the fx base rent issue. i really like the one i put out a minute and a half ago. tough times necessitate tough decisions. see tough we decisions being made by the central bank in turkey later today? could we see more than 300 basis points added to interest rates? will that be enough to stem the rock we have seen in the turkish

lira? tom: quiet in the last couple of days. adam pozen will join us in our next hour. here is taylor riggs. taylor: the governor of north carolina warns disaster is at the doorstep. hurricane florence is set to park itself off the coast of the carolinas and donald to feed of wo feet ofre -- dump t rainfall before making landfall. it is estimated that up to 3 million residents will lose power. damage could approach $20 billion. a powerful super typhoon is also taking aim at the philippines. this storm has topped winds of 140 miles an hour. it is expected to come ashore on saturday. it is likely to lose power before heading to hong kong and south china. the trump administration is now trying to avoid further escalation in that trade fight

with china. the u.s. is proposing another round of talks with beijing. bloomberg has learned that senior officials recently extended the invitation to their chinese counterparts. last week, president trump threatened to impose tariffs on almost all chinese products. the european union is counting on theresa may compromising on one of the roadblocks they brexit deal. sheiplomats tell bloomberg is likely to make concessions on the irish border after her conservative party's conference next month. is drafting the language on the border to make it marks at the ball to the u.k. 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. i am watching turkish lira here with erdogan headlines weaker as well.

not all that much going on this morning. curve flattening over the last 24 hours. thank you for putting lira down there. morning?ou have this anna:. thanks very much -- thanks very much. i also have the turkish lira, also oil prices. markets asking themselves whether anybody in the oil industry is going to fill the hole.n-shaped the ftse move is underperforming today. that is also topical. tom: with these headlines flooding out, mr. erdogan says turkey will shell some investments in product. let's look at the theme of

lehman tenures out in banking. i was surprised at the c hart. here are some of the lehman lows of 2009. remarkable to see jpmorgan launching. i did not the rbs said. . -- up here. i have been talking about bank capital this morning. that is what i am focused on. hadley been regulating in the last crisis instead of the one to come? it is day four of bloomberg's coverage of the lehman brothers collapse. now, we turn our focus to the effects of the meltdown. some of theneup of world's most influential voices sharing what they learned.

if the funding disappears, that could happen to other institutions as well. then, you realize how interconnected we were in the financial system. learn thatwe can all things are much more interconnected and complicated than we could imagine. i think we also learned that we have to monitor what is going on in financial markets much more than perhaps some thought earlier. >> one major legacy of the crisis is that people now understand the importance. you can't just regulate individual institutions and have stable prices and think everything will be ok. had too littleks equity. regulators had retreated to much from regulation at the peak of a very heavy phase of

deregulation. supervisors had underestimated a very important component of risk. >> it is absolutely correct that we didn't understand the interconnectedness. i think there is a much better understanding today. i think banks are much safer and sounder. all of thenderstand complexity of the interconnectedness would probably be a bit optimistic. >> we could have gone back to the repetition of the great depression of the 1930's. i think we would have taken action as we did take in late 2008 and early 2009 to try to offset the consequences of that, but we wouldn't have prevented altogether. anna: some of those key voices. our next guest poses a big question. was the financial crisis wasted?

howard davies joins us now on set in london. when you refer to patchwork quilts, can you talk about the world in one conversation or do we have to break it up? the u.s. did one thing and the u.k. did something different. howard: the main point i was making, one is about the united states specifically. there, i think people should pay more attention to what paul has been saying. paul is usually right. he has pointed out that all of the analyses of the crisis points to the fact that the u.s. regulatory system was balkanized and it was hard to produce one. coherent view the u.s. remains the one country

on the planet which regulates cash equities and derivatives by different regulators. it is the one country where there is a multiplicity of banking agencies, the federal reserve, the occ, the fdic, the state regulators, and where almost nothing has been done since the financial crisis to rationalize that system. there is a second point at global level. one that golden brown has made at the timeis that of the crisis in 2008 and 2009, there was a coming together globally of people who saw the world in the same way, who understood each other's problems and reacted decisively. can we say that the basis of international trust is there at the moment with the war of words between donald trump and the eu, the u.k. splitting from the eu, not exactly warm relationships with russia and china on these fronts. would there be the basis for common agreements internationally if there was

another crisis? withins this a real fear financial services? he said george bush junior at the time was president and he was the one who approved some of the fed's action even then he said congress stood in the way. could we rely on the president of the u.s. to allow the fed to do what was needed in terms of cooperation? howard: i think people are concerned. they are also concerned about what weapons the authorities now have because interest rates remain extremely low. at the time, there was quite a lot of headroom for the federal reserve and bank of england and ecb to bank interest rates down and engage in a large amount of qe. interest rates, although they have started to go up, nonetheless, there is not much

weaponry left in their arsenal. i think those two concerns are linked. morning. i want to talk about lehman and then we will have to migrate to turkey and the movement in lira. i really want to keep up-to-date on this worldwide. mr. erdogan is speaking and we have a real explosion in turkish lira. could. lehman, if we you took a commanding heights position as head of the fsa before the crisis. more than anyone else i know, you are the one that was supposed to maybe see it coming. by no means for you wronged in your insight at the time, but to me, it was the amplitude that surprised howard davies. the amplitude that surprised others. what did we get wrong at the time about scope and scale? beard: i don't want this to

an exercise in self-justification, but just to be clear i did leave the regulator in 2003. if you look at the explosion of leverage, it took place between 2003 and 2007. tom: you are absolutely right. in june of 2004, we saw this. tell us about that moment when the leverage exploded. surprising, ias think we did see the beginning of a in 2003, was the arrival on the scene of derivatives like the charging of securities which allowed people to magnify the credit. cbo's just, these started to come on the scene. i did comment on the scene that i was concerned about the toxic waste which i have described, at

the bottom of this system. whereby, the lower charges were nonetheless being traded as if they were fairly solid assets. status bygiven aaa the regulating agencies.i did think we saw the germs of that . the way in which it exploded was a surprise to everyone. i think looking back, you have to say should monetary policy has been tougher because monetary policy is after all the most effective thing. i think in retrospect, interest rates in the u.s. should have risen more. should regulators also have started to embrace these derivatives? i think that goes back to my point.zed regulation as we know now, there were lively debates in the u.s. whoeen the fed and usoc

couldn't agree on quite how these derivative products should be regulated. you say he is right and we should listen to him. lots of breaking news. i just want to draw your attention to a red headline with regards to the ecb. banks choose ester to replace eonia. this has been coming for quite some time. they are giving us some guidance as to when it will be produced, which will be at the latest october 2019. because we have these headlines coming from president erdogan. we should cut this high interest rate. we will get more on this in a moment. this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance." we are thrilled to bring you .oward davies that now, we are fortunate yousef is -- did we see this coming? the market has moved substantially. yousef: there was the thinking that the central bank might be chance it to reassert its independence going into the central bank meeting and a couple of hours. it would have to make a decision. how to get back investors and how do not lose out on keeping

growth momentum in the country? the president has come out and drops a few bombshells and underscores his combative stance. i'm going to run you through some of these lines. he says tough times necessitate tough decisions. he says the sensitivity on remains.rates he underscores that interest rates are a total of explication.interest rates are the region result.ation is the of the key that interest rates should be cut. out ofpulling the rug the feet of the central bank hours before they make their announcement. that anyuld suggest reading would be that markets would take over and tell mr. erdogan what to do. on lira whenlevel the turkish economy begins to freeze up? lira.e in with a stronger

if it backs up, do you have a number in your head from our different sources where things get tough? point, there is no firm line. it is clear the lira has stabilized in the last few weeks. the inflation numbers were 15 year highs. morgan stanley made it clear that inflation could shoot up to 27% of the lira stays at 6.4. with the latest development, the stakes are much higher. the base case from the market was for a rate hike of 300. all of the surveys that have been done might have to be revisited. you. good morning to i'm actually quite amazed that the turkish lira has only fallen 1.5% on these comments. the eastern market has really been pricing in all of those rate hikes. you might have thought that it

was fall a little further based on what we heard now from the president. yousef: it is not the most accurate reflection, the trade of the turkish lira because the government has been interfering with collateral management, liquidity management tools to try and make it harder for sure fellows to stand into the market. a much moret is functional market, it could be bigger. keep an eye on turkish bonds and stocks. we will wait and see what the central bank says in the coming minutes. tom: thank you so much. howard davies of rbs is with us. we have to rip up the script and move over to ham and turkey. mr.ow the headline from erdogan talking about fake moves in the economy.

i want to be sure to quote that accurately. fluctuation ine the economy. i've never seen headlines like this. what playbook is mr. erdogan using? howard: it is a bad one, whatever it is. i think once you get into a position where you seem to be marking the central bank's card in the advance ahead of big decisions, in the long run, you will pay quite a price for that because this is quite damaging to central bank independence. investors have taken some comfort. maybe they will be balls the enough to go ahead anyway. if they don't, i think all bets are off about the level of the lira. tom: again, with the level of the lira, i noticed the lira-ization demanded by erdogan, the fact is the dollar

is the economy. we learned from kenneth rogoff dollarization of the global economy is what makes this time different. ed is the em system right now? howard: a does vary from place to place. there are countries in domestic markets. ecuador and zimbabwe are examples where dollar has crept into turkey where the dollar remains the dominant back currency. rogoff is right that emerging markets cannot exclude themselves from the pressures of financial markets. anna: i want to get your thoughts on another line icy. --i see. president erdogan says laws will be used against expressive --

excessive rate hikes. us operating in economies were we don't see an anonymous amount of price control, you remember a time where we did that. how on earth does that work? howard: i'm old enough to remember the department of prices and consumer protection that we had here in the 1970's before the great winter of discontent where the government did try to control price increases, sometimes directly through its influence on nationalized industries. sometimes indirectly bite imposing limitations on price increases. it is a disaster because relative prices change a lot in an economy. having blanket price controls is absolutely impossible when some things are going up very rapidly and some things are falling. this is a nightmare and i really hope someone gives him a little history of the u.k. in a 1970's to show where this will lead.

anna: maybe someone will send a book. contagion in emerging markets is something we talked about a lot. these are very idiosyncratic stories and developments. as we have been discussing, this is not happening elsewhere. howard: i think so. the turned em is not particularly helpful in this. lots of emerging-market countries have managed themselves pretty well. i do hope that we don't see a generalized contagion from turkey where there are s in financial markets and a political situation which is delicate. i really hope that the countries that the managing themselves don't get affected by this. tom: when we look at the em and the full effect on lehman tenures on, the great humility that i hear from everyone including you, is it is

part of capitalism that we are allowed to fail. are we trying to be too perfect right now whether it is em or argentina, turkey, the banking system, the challenges of european banks, are we just trying to be too perfect and be fail free? is ad: i don't think that completely fair criticism of the regulators. two things have happened. they have the capital ratios up to try to reduce the incidence of failure. secondly, they have put in place recovery and resolution plans which are designed to ensure that there is a way that banks can recapitalize when they need toand to resolve themselves, wind themselves down in a way that does not produce the degree of contagion and associated crisis that the lehman brothers failure did. i think if you look at the

system carefully, it says you have to be safer but also you have to have a plan as to how you can fail in a way we can allow to happen. i don't think it is fair to say that we are try to make all of the regulated banks so safe that they can't fail. a we have tried to do is make them safer and put in place a situation where they can fail without creating collateral damage on a massive scale. tom: what can the central bankers do? carney get an extension out to 2020.what can central bankers do now ? tot is their task to get us the next stage of quiet instability? ofard: i guess i am one those who has been thinking that they perhaps should have been acting a bit more in the last 18 months. i would be more comfortable if interest rates were a bit higher now. partly because i am slightly concerned about wage growth in

the u.k., but also because i do like the idea that there is some petrol in the tank if things go wrong. i would like to see the central bank continue with a little bit of tightening to ensure that we do have some weaponry available if things get in trouble. at the moment, western economies are doing pretty well. ours has picked up again. i do think they should not be diverted. tom: we are going to come back with howard davies. we are thrilled that he is with us. turkish lira weaker. next hour, adam pozen. this is bloomberg. ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. good morning, this is "bloomberg surveillance." tom keene is in new york. francine lacqua is off today. rbs and u.k. banking, a lot to discuss with howard davies of

rbs. it's been 10 years since the lehman crisis and we are still dealing with the aftermath in a sense and u.k. banking because we still have large government ownership of some banks, including rbs. there were headlines in london talking about whether your bank is going to pay a special dividend. rbs has said it will return money to shareholders. update us on the policy and where your thinking is. howard: we have got a position where we have paid off our to the outstanding fine u.s. department of justice and have tier one capital of 16%, which is well above our target. there is a stress test which the bank of england is carried out. subject to the results of that stress test, if that reveals that we still have surplus

capital, then we have to think about how to return that capital to the shareholders. principally we were thinking of a buyback. we do need a lower capital base now for the bank, which is somewhat smaller than it was now. a share buyback seems to be the most logical route. i asked if there could be a special dividend and much a clear the answer to that is there could be. the government still owns and wishes to sell down. that seems to be the most likely route and one which will benefit all shareholders. those shares would be bought back and simply retired. anna: those are the possibilities you are dealing with and a buyback more likely. we don't know the size of this yet, do we? howard: that's right, we don't know the size until we see what the stress test tells us. merely that if

you subtract 13 or 14 say from one andet 2% of tier that gets you somewhere around 4 billion. that is not a figure i produced. that is the territory we are in. anna: what you have thought that 10 years after the crisis would still be at this point? this has had a long shadow over u.k. banking, in this particular area. howard: i don't think people would have expected it to take 10 years. my lecture yesterday tried to explain why the bank is so much smaller, which has been attributable to the fact that it was the world's largest bank at the end of 2008 in times of assets. that was the worst time to be the world's largest bank. the scale on the losses on property lending, on irish property, which was something like 12 billion pounds, also the

cost of all the requirements imposed by the european commission as a result of the bailout by the u.k. government have been much larger than were foreseen at the time. all of those factors have gone to make the net asset value of rbs now below three pounds per share. we are trading roughly alongside barclays and standard chartered in terms of our price to book, but it's hard to imagine that are price-to-book could be back to the level at which the government bought the shares. tom: a delicate question and if you want to attempt to answer around it, i understand. what does anglo-american banking, on a day-to-day basis, when people talk about the continental banks becoming more anglo-american, what does that really mean? well it is the case that

over the last 10-15 years the big continental banks have concentrated a a lot of their investment banking, wholesale banking, a lot of their fundraising in the london market. i think we may be seeing a change of trend in that as a result of brexit, but i guess that's what people mean. if you look at bnp paribas or socgen's trading operations in london you're in honestly impressed by their size and scale. i guess that's what people mean by the way they have become anglo american. i think we may see rather a change in that in the next five years. tom: thank you so much. we greatly appreciate it. i want to show turkish lira here right now. we have had an explosion in weaker lira. we explode out right now to 6.51. this is of course after explosive erdogan comments.

to our first word news with taylor riggs. taylor: hurricane florence is being called a once-in-a-lifetime storm. power as itsome approaches the coast of the carolinas and is now a category two storm. it is expected to stall before making landfall and battering the region with catastrophic wind and it is expected to trigger historic flooding and cause a 13 foot storm surge. it is unclear exactly where it will come up short. some lawmakers from both sides of the aisle claim that president trump's executive order on election meddling does not go far enough. the president has threatened foreign sanctions if form powers interfered -- threatens sanctions if form powers interfere in the elections -- foreign powers interfere in the elections. ben bernanke admits the central

bank made a mistake in fighting the crisis 10 years ago. he disagrees with those who stay the hell the price bust was the primary factor -- housing price bust was the primary factor. president recep tayyip erdogan is calling on the central bank to cut interest rates. independent experts say turkish it actually increase rates to help stem the selling pressure on the lira. erdogan wants rates to lower to encourage growth. 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. much.thank you very the ecb will make its first policy decision today since the summer break and mario draghi and his team are said to be ready to lower forecast for eurozone growth.

joining us from frankfurt is bloomberg's matt miller. our colleagues in frank for kind of spoiled your date perhaps by some of their great reporting yesterday suggesting that they know what the ecb will say, with regard to the outlook at least. we have spoken with some economists over the past few days who has set the ecb will lower their growth forecast and possibly even the inflation forecast. h forwould be toug mario draghi to pull off. those are things you do when the economy is getting worse. what they want to do is do -- when theyou do economy is getting better. they want him to prepare the path for finally raising interest rates to back to normal.

what they will have to do today is explained to global wall street why they are cutting their growth forecasts and at the same time remaining hawkish on the economy, which doesn't really make much sense. those two things don't really go together. anna: we will see how they are in the same breath -- will in the same breath lower the outlook but then go on to talk about higher rates and normalizing interest rates. it is see -- italy still a big issue. it's back with a vengeance today. lots of reports today. is this something that is going to be part of the conversation in front for? matt: it will be -- frankfurt? matt: it will be one side of the conversation and journalists will undoubtedly ask questions about it. it's unlikely mario draghi what answer questions, -- will answer questions, but it's something he

will have to think about longer-term. italy will be more able to put a budget together that breaks the european union rules if -- decides to leave. tom: matt miller, thank you so much. look for that on monday in time, 12:45 p.m. -- on monday in time time at 12:45on p.m. we have a surging turkish lira. bring up the chart, riley. from 6.35 ofred the 5.36. no end in sight to this weaker

turkish lira. 65 andach through a 6. revisit a seven level would be important. emotional lines from mr. erdogan on fake fluctuations as he battles. much more coming up in london and new york. adam posen joins us in the next hour. please stay with us. this is bloomberg. ♪

♪ anna: good morning. francine lacqua is out today. we need to talk about what is

going on in italy. the newspapers in italy are full today with reports about whether the finance minister tria will or won't stay. who better to speak to about this than mario monti. great to have you with us, mario. very nice to see you. we are asking questions about the finance minister tria and his future. do you think he will consider resigning? there are newspaper reports that suggest he will consider resigning if he continues to follow with five-star. you think that could happen? mario: it could happen, but i don't think it would happen -- will happen. acquired significant market value for the country so far. i think it is more likely for him to drop out when the initial tensions materialize with the

parties in the majority. now i believe they will continue to disturb him in terms of wanting more deficit, but i enough ins stubborn the first place, and then other people in italy are beginning to putize that as the minister at the conference over the weekend, what is the point in making a greater deficit if that up by a higher spread? anna: yes indeed. the lord of the spread is a delightful phrase that has been discussed by the italian government. do you think the lords of the spread will keep the government's ambitions for spending in check? o some extent, yes, especially when the government discovers there are

no lords of the spread. this is a lesson that italy should have learned already when i was asked to remedy to a much more difficult than today's situation. the spread is quite sensitive towar what national governmentso and to what the ecb does. in this sense, i believe that this somewhat unrealistic discussions in italy about huge increases in spending and fact the result -- the unwanted result of a prolonged and deep quantitative easing. tom: you standard -- studied under james tobin at yale

university. we spoke yesterday to kenneth rogoff of harvard university, made clear that italy is important and yet italy cannot clear that economic system. does italy need to find a new capitalism or can they solve their challenges given the fractious original nature of the capitalism? -- there capitalism? capitalism? isio: italy's capitalism fragile, but i think paradoxically that with the government like the current one -- we the government, like the current one, which does not have traditional links with the italian circles of capitalism, they might as well become a force for change. farst say, my big regret so is that the league and the

five-star movement have hit at the european union and its rules main adversarial target, whereas if they were concentrating their actions on modernizing, including with tough measures, match increase competition, much more vigorous fight against tax evasion, if they focused on modernizing italian capitalism, italian society, i believe they could do so and the european union would be on their side. -- eu has always modernization. tom: i know the comparison to greece is unfounded, but there is a fear of a flight of capital. does the present government of italy risk a substantial flight of money of capital out of italy? there and iisk is

believe that precisely the awareness of this risk is a'snforcing minister tri being quite determined and not accepting all the demands for more spending and more deficit that come from the parties in the majority. anna: stay with us. mario monti will be staying with us. more coming up here on "bloomberg surveillance." coming up on bloomberg markets, at 1:30 p.m. in new york. this is bloomberg. ♪

♪ this is -- taylor: this is "bloomberg surveillance." it's been a rough year for one-time bond fund gained bill gross.- king bill he suffered big losses on those tight to interest rates.

his unconstrained bond fund had almost $153 million of losses on interest-rate futures, a big dent for what was a $2 billion fund at the time. another high-ranking finance executive is living tesla. the vice president -- leaving tesla. nobody is saying why he is leaving. last year the chief accounting officer quit. pharmaceutical may --. bloomberg has learned that they are looking at the eye care business and considering the sale of medicine used to control low blood calcium levels. that's your bloomberg business flash. anna: mario monti, former prime minister of italy, is still with us.

in the low post post, certain policies to put american industry first may clash with policies to put american consumers or workers first. for example, antitrust. trump has not articulated how he will resolve this contradiction. in contrast, europe has mostly found the right balance between these divergent interests. so writes the former italian prime minister mario monti, who is with us. if we discussed this and what it means for u.s. business, i am thinking about trade. you can argue that the trade policies that president trump will push highs -- push prices higher for consumers in the united states. are you arguing that the policies of president trump will eventually do damage to the u.s. economy? mario: are at the very least the policies of president trump will

require some internal resolution of trade-offs and conflicts. america first is very nice, but as i said, by the way, yes i have been the italian prime minister, but in discussing these topics i go back very much to my experience as europe's competition commission and working very much with american colleagues, so yes, it says a lot psychologically, america first. it says virtually nothing economically and politically. anna: on the border question of european capacity -- competitiveness, how much has that failed to live up to your expectations are met your expectations since the financial crisis? do you think we have had a missed opportunity or made increasing terms of the competitiveness of the european economy? mario: we have made progress, certainly not enough.

one thing i say is that europe promotes competition through competition and liberalization policies more consistently and more forcefully and last 20 years than the u.s. another thing is that the overall competitiveness of europe which depends on some of the factors, including the situation of labor markets and different member states etc., is better than the u.s. betterrs are coming out recently in the eu rather than the u.s.. there is quite a powerful study by professor of the stern business school at nyu which supports with empirical research all of this. sayingdame lagarde she would not want to be ecb president.

what christine lagarde be proper as ecb president in frankfurt, germany? tradition, i disappoint, right? [laughter] because i keep internal excitement of these name guessing strictly internal. tom: ok. mario monti, thank you so much for joining us today. it's greatly appreciated. we are going to continue forward. adam posen on turkey. stay with us worldwide. this is bloomberg. ♪

morning, 10

disbelief, and who held lehman

exposure was the question. they needed to make it less of a .risis we have a recent book that came out. was should they .ave and would they have tom: let's bring in my colleague.

francine: do you think when you look at the markets we have any firewalls in place? does that make any sense if we had another lehman to contend with. they had no information on this in 2008. the banks have a bigger liquidity reserve error. leverage is down. the size of trading books are down. an event, butve says we are better prepared than we were at that time.

we are better prepared from a regulatory perspective, but what about in the minds of analysts and markets? has everybody been forced to learn the lessons and dangers of group think? no come the dangers of groupthink still exist. piece of research was p said they when bn could not mark the value of their two mutual funds. tom: no one talks about the

lehman board. do you hold them at fault? >> you have to look at lehman as a greek tragedy. lehman was spun off by american if one word to 1994, he took in lehman'sfrom management loved short-term funding.

was the board guilty? other financial services boards. washat short-term funding one of the reasons northern rock was a different business model, didreliance on markets in northern rock's life in the u.k.. has that conaway. more regulation? do you see groupthink around that still? >> if you look at the funding base of the largest banks, they have much more core funding and long-term debt than what they had before. what we have learned is repo is not stable.

counterparties have to be willing to take risks. you can't take money market funds and put them into repo and say you are willing to take the risk. is analogy i use in classes typical repo rounde counterparties, they were painting stripes on them. tom: you use that in class? >> yes. tom: i should sign up. that was extraordinary. we will have this on all our different platforms. coming up, an exceptionally important conversation. we will rip up the script, adam pozen and the international unique international economics and finance of president erdogan. this is bloomberg. ♪

tom: "bloomberg surveillance" we are thrilled you are with us. an extraordinary conversation on lehman brothers. have that on all our platforms in a moment. we rip up the script on turkey. bank to act within an hour or so. adam pozen at the peterson and the linkages into markets in finance and fiscal policy. has president erdogan for minted a new crisis? could it further move turkey into crisis?

is doing the textbook way of trying to personalize things and make it seem as .rbitrary this is strange. ofhas played the long goal moving towards more power in turkey. he may have been emboldened because he got away with this lockup of people, but the markets will not sit still for this. with great respect for ecuador and other nations, i would suggest turkey is not ecuador, a big country, a internationaly of relations. how did the institutions respond to president erdogan? >> you are right. part of the reason we got here is that for all the political

shenanigans, he has run a good economy until a year, year and a half ago. it's like the sovereign wealth ,und, the latest announcements he is intent on saying whatever the economic fundamentals are, look at me, and that is not a good look for an economy. ,n terms of the institutions like many before he will have to get a bailout from the imf, meaning reforms, restructuring, bridge financing. two questions. first, does the eu step in as the u.s. did with mexico 25 years ago and make it softer and more ample than the straight imf program? does the trump administration used their veto in the imf and politicize the program? that is a risk i am more read about. >> good morning.

that is interesting in terms of the complications of going to the imf. back toting my mind mint, in turkey was the t in mint. osethere any way back to th days were the financial community was excited about the opportunities turkey represented? something, heis would have to make a credible .ommitment it requires a commitment he will at be personally lording over major economy. >> turkey seems to be busy

trying to buy new friends. will that make a difference? will turkey reaching out in the direction of iran or russia, will that make a difference to the options they have. it will be hard. a big difference for foreign policy and economic orientation. a break with the west and a reorientation would be a fundamental shift. in terms of short-term financing, unless the chinese get involved, which they won't, they're only out is the european union. tom: we have satellite linkage to istanbul right now. the peterson institute has written about turkey. how much will turkey affect

mario draghi at the conference today? almost none. if he starts getting involved in turkey, then it will ask for trouble from the politicians, especially since it's not like he will extend a swap line in euro to turkey. >> stay with us. adam posen with us. the former lehman brothers cfo still with us. both staying with us. fascinating talking point with regard to eu help for turkey. let's talk about that. yousef gamal el-din, we have seen these stunning comments from president erdogan before a rate decision in turkey. raisingn the prospect of some kind of eu help for turkey. the germans and turks have been

talking, haven't they? >> the political dispute has not been resolved. they made it clear that needs to be addressed. now thatey has then the situation with the u.s. has deteriorated, they've reached out to china and russia. the heads of state will be meeting this month as well.

around migrant flows through turkey. there is a lot at stake for germany in the turkish story. >> the europeans very aware of the role president erdogan plays in that migration crisis. in terms of reaction in the markets, why is the turkish lira not falling more. you pointed out the restrictions, some controls of doing business and ou in dollars that has confused markets. what is happening there? this is one of the most read stories on the bloomberg. this is a decision by the president and turkish government to disallow contracts in foreign currency, requiring companies to convert contracts into turkish lira's. the buying and selling of real estate, transport and leasing. how it will be implemented is unclear. ,n terms of additional measures capital controls could be on the table, which would effectively take out the shorts as the downside pressure on the trade remains. >> thank you. el-din yousef gamal joining us from istanbul. cover the back to turkey story at the top of the

next hour. we know what the president would do. decisions, the bank of england later. that policy decision at 7:00 a.m. in new york. we look at ecb policy decisions at 7:45 a.m. that is followed by the mario draghi's news conference 45 minutes later. he might be asked about italy. how much italy will tie the hands of the ecb? he has been hesitant to talk about that in the past. also, trade tensions weighing on the blocks prospects for the future. this is bloomberg. ♪ this is bloomberg. ♪

>> i am and edwards in london. francine lacqua has the day off today. turning our attention to

hurricane florence. it has weakened, but is still big enough to threaten the carolina coastline. duke energy is one of the biggest utilities in the region. it anticipates 3 million customers will lose power. to duke's precedent for north carolina, hurricane florence will be a life-changing event. hogs, cotton, and lumber should .et a boost north carolina is also the country's leading producer of tobacco. hurricane florence could wreak havoc on freight networks with eastern exposure. see at sex and nort norfolk southern could face disruption. and norfolk southern could face the russian -- disruption. with our guest

analyst this morning. not only the hurricanes and the typhoon in the philippines, the single-line i see is the idea that there are lots of adjacent fronts that are part of this story that people aren't talking about. how does greenland or a warm front in ohio affect north carolina? >> you are hitting this perfectly. we can't look at this hurricane by it self. frontsre all these area and weather systems we have to pay attention to. two has happened is we have toas of high pressure acting keep florence in its place, slow .own, spread out, and we can

what does that mean? of rain in spots. the wind field will spread out. tom: there will be commercial damage. are we overreacting? gone from media hysteria, houston, new orleans, to the next big event, or is this a real deal. >> this is a very dangerous storm. there is a lot of damage and a lot of liability. tom: a lot of liability coming up in the next 24 hours. >> yes, we have the eye of the storm, and that can break down , and thatrate determines the storm's trajectory. that is what has happened over the last 48 hours. we are in the final stages

before landfall. we expect florence will stay a category two, but that wind field will spread out, a life-threatening storm surge, and a lot of rain. anna: what is it about florence that will be most destructive? speeds that does all the damage, or the flooding and damage to coastline from other parts of this weather system? what is it that wreaks havoc? surge will and storm reshape the coastline. the second most important piece is the flooding. it will wreak havoc, even inland into the carolinas, because of the rain we are expecting. that is something to be concerned about. in terms of the

commodities you cover, this started out as a soft commodities story. this part of the country is important for tobacco, cotton, but also turkey, chicken, and other industries. gas as well.ed on what impact will it have on the energy sector? >> one of the areas we have been focusing on our nuclear power plants. the u.s. contains a quarter of the u.s. nuclear fleet by way of power generation. it means these plants will have to shut down as soon as they experience hurricane force winds . that is under a mandate from the nrc. in the aftermath of the storm when demand slowly comes back online, homes and businesses get access to power come in natural gas and some coal will have to

fill in for that demand. tom: greatly appreciated. smart talk on florence. i want to change gears to the story of the day. i was stunned by it. let's bring up my morning must read as we go to kevin cirilli in washington. this from the new york times on the senses, not 2020, but the annual census interpreted by the brookings institution. the u.s. has the highest share of foreign-born's since 1910, with more coming from asia. the number of immigrants arriving from mexico has climbed, well china and india have surged. then they go on with an , theesting education angle foreign-born population stood at 13.7% in 2017. in ohio, 43 percent of foreign-born population is college-educated, compared with

just 27% of american-born ohioans. campaignu are on the trail with mr. trump and all the politics. and 2020, itdterms is a different america, isn't it? yes, it has been trending that way for the past couple of years. there are democratic strategists who have made note of that. it is when you talk about identity politics that this gets interesting. the democratic party has surged in recent months to get to the polls ahead of midterm elections. when you go into a state like ohio and wisconsin, so much of what we talk about is white, working-class voters. point,his census studies there are other shifting dynamics, the cities and suburbs as well. tom: mr. cuomo, i guess i saw a

poll that said he is doing better, but what have you learned about the democratic party's future from this election? kevin: it is fascinating to watch governor cuomo struggle. he maintains a solid lead in the polls. the fact it is getting as close as it is really shows how activism issues can propel a candidate to make a race close. -- we are seeing that in new york, but we are seeing that in various races, in boston as well. those issues as we head into the 2020 cycle, especially new hampshire and iowa, it will be fascinating to watch a primary or caucus cycle. candidateential really tries to claim the mantle

of being the activism candidate. tom: thank you so much. greatly appreciated. us.guests with adam, if we could turn to trade. and on andt-for-tat on and on. it is not linear. it is quadratic. at some point it's going to get ugly. are we there now? >> not quite. i would like to say for political purposes that the terrible trade policy will immediately hurt people. it will not hurt enough people in a visible way yet to hurt politically. you will see the christmas tax, but that will be it. anna: tell me more about that. how do you contextualize what we heard from the trump administration, reaching out to china weeks ahead of the midterms. thatis an administration

knows about performing to the cameras. do you sense things will get better or worse before the midterms? >> on a fundamental level, things will get worse. we have seen this cycle before. fromistration officials the u.s. in seemingly good faith go to meet with their counterparts in china, but the white house and president trump decides whatever deal is made of progress is made is not good and he puts on more tariffs. unless president xi jinping and president trump agree on something as a short term forecast, i assume trump will put further tariffs on china, china will retaliate. i'm not saying the cost will be zero, it will take a six months to one year to fully feel them. tom:

corporations whose heads are spinning, mid-caps, small cap multinationals. how will they respond? >> through the business roundtable, you will have pressure saying what are you doing? on the other hand, is this simply political theater. is he trying to scare a somewhat better deal than what he has now? this is unpredictable. of this, this throws their long-term planning in the trashcan. everything is done on a global basis. sourcing on a global basis. do that come optimality changes and there is a fundamental problem. anna: you raise the question of

what is material and what is political theater. the closest we have to resolution is with mexico, and other voices have made the point that the difference between the pre-nafta and post-nafta deals is not that great. the heart ofy at what we are talking about here? >> yes, but i do not want to read president trump's mind. other than me on that one. >> i'm sorry, can i quickly say that characterization of nafta is incorrect. the nafta deal, the u.s.-mexico deal is a step backwards. it will put autoworkers out of work in mexico, the u.s., japan, and possibly germany. it will raise the prices of cars. the only way the deal works is

putting in these national security tariffs. this is major. this will not turn us into recession, but thousands of lives will be affected by this nafta deal for the worse. ,nna: that is the other view adam. i understand. how important is it that canada signs in? not just another view. it is analysis, fact. but theys more room, will sign because this is a deal that hurts them far less than mexico. if prime minister trudeau and the finance minister decide to stand on principle against trumps bullying, then they could hold it off, but it would be ultimately harmful to canada, so they will just sign. tom: we will continue this discussion. with us in washington.

, aimportant conversation call for a pullback in american economic growth. an important conversation at the 10:00 hour. stay with us. this is bloomberg. ♪

tom: thank you for joining our conversation. francine is out today. some an guests with real nuances. on eu banking and american banking, you talked to brad of new york university with but whatr at lehman, may seem odd is you talk to adam

posen, one of the nations germanic culture. what did the germans need to do to be less german. is that asking too much? not in the banks. when they try to be non-german, they get in trouble. they were chasing after bad loans in 1997-1998, and they and 2012,ng in 2008 so every time they try to go international, they mess themselves up. the real issue for germany and europe is there are too many banks and too little consolidation. tom: exactly. for? what are we waiting i used to say small banks in america did emerge because the ceos like to go to lunch at the rotary to keep them to see before the golf course.

when will we see the rotation? >> it is difficult. tom: why? nationalne once a leader. deutsche bank is in a desperate situation. the retail business in germany is not a high-margin business, unlike the u.s. banks. this would be one where because you are competing with those banks, it is difficult to make money on that. they are too reliant on the capital markets business. fixed income oriented. they are good in certain parts of the world, but this is a management team that has tried almost every trick in the book. the only choice is sort of continue to shrink. of peoplear a lot calling for consolidation of the banking sector, but i spoke to someone this morning with a different view, a professor in

the u.k. he talked about how the banking system 10 years after lehman would be safer. he is not calling for further consolidation. is there another view against that group think that says we have consolidation and bigger banks in europe? >> no. that ifmake an argument the pricing were different, you could have a lot of small capital markets, then risktakers could take risk and it could blow up and it would not have an impact. that is a long time ago. in the banking world, scale remains the issue. a lot of these banks are just too large. there is just no reason for all the brick-and-mortar that exists in the banking world. until theink

europeans become europeans we will have a consolidation across the country. we will have some consolidation within, but it remains problem. the european banks, the large ones, none of them are meeting the cost of capital. 10 years after lehman is a long time. u.s. banks are barely beating it. is reallythe sector doing brilliantly, but the u.s. banks are ahead. anna: we talked about germany. another part of europe that .eeds fixing is italy more consolidation there needed? >> what we need to think about is consolidation usually means making it bigger, but it can also mean shrinking the sector. that is where i agree with your

other guests. vulnerable to a downturn in the economic cycle. their biggest banks have cleaned the government could undercut all that. that is where the focus is, less than the banking system. anna: atom, thank you for your time. brad you stay with us. this is bloomberg. ♪ ♪

tom: good morning. "bloomberg surveillance" in london and new york. how about a chart? three european banks. i showed this earlier in the hour. the blue line is going up. yorkis with us from new university. if the blue line goes up, you should run for president. have you heard of the bank are being asked to run for president? op-ed,ton post with the

president jamie dimon? >> would he be a good president? he is a wonderful leader. on the other hand, you are talking to somebody who wanted bill bradley to run. the issue jamie dimon will run into is he is recognizable in a tri-state area. tom: west of the hudson river? >> those are real issues. recognized that no one likes rich bankers. you can be the most pleasant person on earth and if you are a banker, you are not popular. his industry, which will not the good. -- writeeady righwriote the opposition attack. that is a tough one. anna: i guess you could have , a guy those oppositions

who made his money in real they would both be wealthy gentlemen, which is perhaps what it takes. >> fair enough. you can spend your own money on that one. tom: we all know brad, your loyalty and legion to purdue. two losses in a row. it is crisis. you could be the new football coach if they lose. can jamie dimon play in indiana? i don't buy it. in can an industrialist manhattan play in indiana? >> that is a good point. you saw yesterday with ben bernanke and paulson.

they are justifying the banks. think they saved wall street. there is the fundamental problem. we all know they do good things for the economy. tom: thank you so much. emails from brunswick, maine, what is purdue? maybe we would do a remote from west lafayette. stay with us through the day. this is bloomberg. ♪ xfinity mobile is a new wireless network

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investors brace for rate decisions. bracing for florence, the hurricane weakens as it moves to make landfall, but rain, flooding, and storm surges threatened. , the s&p bear warning falls into a bear market if the u.s. imposes a 10% on all imports. it is starting to quantify the trade impact. no rate decision is out, change at 75 basis points. david: checking their it gdp growth estimate. they see more growth, greater uncertainty around brexit. that is a surprise. uncertainty is going up, not down. alix: more options bet on an interest rate cut in 2019, interesting. increased global risks from trade and emerging markets. we are seeing further