belief that a central bank can let inflation rise to spur economic growth. forecasting inflation is so 2007. up, up and away with my beautiful inflation. to the fled re -- to the fed reflate, can it help america? and president will preserve "american way of life." givet reelected, "we will free reign to violent anarchists , agitators and criminals." good morning, ivory one. i'm tom keene -- good morning, everyone. i'm tom keene. for francine in london. we have been watching a most difficult speech from shinzo abe and japan.

stabilityas brought he brought his three arrows around monetary policy, fiscal policy, economic reform area how long will those policies be ?arried on in japan it is certainly something moving fx markets. tom: our stephen engle with us in a bit. to 1955, between essentially the rural party, the natural lbp party, and the parliamentarians. mr. abe has straddled that divide for many, many years. with our news in new york city, here's what -- here's ritika gupta. ritika: the longest serving prime minister in japan's history is resigning. shinzo abe is stepping down after eight because of health reasons -- after eight years because of health reasons.

reports say he has been undergoing treatment for a chronic digestive condition. he agreed to stay on until the ruling party picks a successor. donald trump made his case for a second term last night at the republican national convention. he promised to create 10 million jobs in 10 months enter in the u.s. into a manufacturing superpower. pres. trump: in a new term as president, we will again build the greatest economy in history, quickly returning to full incomes, andoaring record prosperity. ritika: the president also warned that joe biden can be trusted to deal with the coronavirus pandemic or heal the nation's racial divisions. hotplan to run the economy looks easier said than done. jerome powell said the fed will sometimes allow inflation to run above the 2% target and let unemployment run lower then officials have previously tolerated, but the fed has to

confront multiple forces holding down inflation. hurricane laura left flooded buildings and wrecked roads in its wake. there could be more than $15 billion in insured losses. the hurricane has now been downgraded to a tropical depression and moved through arkansas last night. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. tom: thanks so much. i am really looking at the data around the reaction from the powell speech. michael mckee scheduled to join us later. we've got some great insight from the street. futures up as well. on the vix, 24.99. what really matters is the dynamic between interest rates and the slope of the curve. the real yield is advancing. it is a smaller negative yield,

-0.99%. i would say that is a more constructive statistic. that is all have a higher nominal yield. you see that in the 30 year bond, which has gone to 1.53%, roughly a. 13 basis point move. -- roughly a 13 basis point move. that is a huge move. higher long-term yields off of the powell speech on a changing view of how to direct inflation. the dollar weaker, and that is another presumed call. anna? anna: picking up there on the powell speech and the impact it had on yields and the steepness of the curve, that lifted stocks in the u.s. yesterday, and lifts bank stocks in europe today, up by 1.9%. that is almost hidden by these overall market moves. the stoxx 600 down 0.2%. the ftse 100 outperforming just a touch because the banking sector is so strong.

the big moves coming through overnight in the fx market. we saw a substantial move in the yen, and also a substantial move therefore in the dollar, into euro and pound. the euro and the pound are much stronger, something that european equity markets have been wrestling with all morning. tom: you nailed that on the relationship with the banks, looking for presumed steeper yield curve, something more adventitious to the american -- more advantageous to the american and international banks. we will have more of this on "bloomberg surveillance." right now on mr. abe, on the future of japan, our stephen engle. except has been dominant for two moments since 1955. the great divide is urban tokyo and the parliamentarians, and the rural non-tokyo community. mr. abe has straddled that. is there a successor that can be

like abe? stephen: that is the big question because there's not a deep bench of leaders and waiting. there's no real front-runner for succession here. by retiring a little more than a head ofore his term as , he doesn't have that ability to groom a successor as well as he probably would like to. for all the japanese leaders, francine talked about this revolving door before shinzo abe had this second run as prime minister the last eight years. he's been bold. agree, it is bold stimulus, those three areas. on economics come on gender equality, trying to revise the constitution. he was the first one to go to the white house and greet donald trump when he became president. he's been bold, and it will be

missed because it is going to be hard to find someone to fill those shoes. tom: part of this is the legacy of the 20th century and the ultranationalist -- i hope i am pronouncing that correctly -- but the idea of an ultranationalist strand of the ldp, is that prevalent in the younger generation? stephen: not as much. people whohard core want a change to the pacifist constitution, they are the old guard. there's been some resistance to shinzo abe and the traditional arm of the ldp, but abe, as you said rightfully, has been able to straddle different elements of the ldp, as well as in the opposition. the opposition has been in disarray because of a has been a

fairly strong leader. the last time he called a snap election, we thought it might be close, but the opposition crumbled. ifwill be interesting to see the successor will continue all of these bold moves by shinzo abe, or take japan i did different path -- or take japan on a different path. it is yet to be seen. lisa:lisa: you have to go back you006 defined -- anna: have to go back to 2006 defined a prime minister other than shinzo abe who lasted more than a year or so. is the tight rope relationship between the u.s. and china, trying to keep on the right side of the u.s. and the right side of china. how do we see him handing over that geopolitical battle to somebody else -- that geopolitical baton to someone else? kinden: he's been taking a

of steady as she goes approach with xi jinping, not to ruffle feathers too much. but those waiting in the wings, you have to look at two of the names. one is the former defense minister. the other is the current defense minister. restrained to ruffle the feathers of china. , perhaps heo kono could take a more hawkish approach toward china. he's the supporter of the so-called 5 i's intelligence alliance. if he goes to the forefront, he's a georgetown graduate. he would have high international appeal. but what he ruffle feathers in beijing? again, it is not the deep bench, so you have to look at what these individuals have said over the past few years. there's some continuity in some of these ldp officials. there might be some new blood needed, though.

anna: it is interesting that a lot of the guests we spoken to so far in european programming have played up the need and the expectation in some cases for continuity when it comes to abe's three arrows around monetary, fiscal policy, and economic reform. there does seem to be a suggestion from guests we talked to that there is not really the opportunity to change course on those because of the virus. stephen: that's right. you heard it in the press conference with shinzo abe. he said the number one thing that is occupied is time has been combating this coronavirus, and said he had to choose between the two, his health or battling the coronavirus. after hiso look health because the coronavirus is such a daunting task. as for continuity, you're right, that is why the markets saw turmoil because there is speculation perhaps that a lot

sf this momentum of abenomic could loose some steam. ,ill we get a caretaker leader like the chief cabinet secretary? he's 71 years old, though. there's taro aso, the finance minister. but he already served as prime minister back in 2008-2009. very unsuccessful. financialt was the crisis. he would also be a caretaker leader at age 79. the devil is in the details on who gets elected in a private ldp election coming up for his successor. tom: stephen engle, thank you so much. just a terrific brief from our chief north asian correspondent. there is much going on. and want to mention, euro

yen are stronger, with a weaker dollar presumed. euro gets out to a recent high, $1.1919. $1.20 would be a big deal. of theup on the changing guard in japan, mark mobius, also on this historic speech of jay powell. michael mckee at the bottom of the hour with huge economic reaction. this is bloomberg. good morning. ♪

pres. trump: my fellow americans, tonight, with a heart full of gratitude and boundless optimism, i profoundly accept this nomination for president of the united states.

in a new term as president, we will again build the greatest economy in history, quickly returning to full employment, soaring incomes, and record prosperity. i will cut taxes even further for hard working moms and dads. i will not raise taxes. i will cut taxes. we will also provide tax credits to bring jobs out of china back to america, and we will impose tariffs on any company that leaves america to produce jobs overseas. biden voted for the nafta disaster, the single worst trade deal ever and i -- ever enacted. he supported china's entry into the world trade organization, one of the greatest economic disasters of all time. the biden plan would eliminate america's voters in the middle of a global pandemic, and he's even talking about taking the wall down. how about that? joe biden's agenda is made in

china. my agenda is made in the usa. china would own our country if joe biden got elected. unlike biden, i will hold them fully accountable for the tragedy that they caused all over the world. we will greatly expand energy development, continuing to remain the number one in the america energy independent. together we are unstoppable. together we are unbeatable. because together, we are the proud citizens of the united states of america. [applause] anna: that was the president speaking at the final night of the rnc, the republican national convention, from the white

house. and there was a crowd at this one. for more, we are joined by matthew goodwin, university of kent professor of politics and international relations area i know that back in 2016, you were pretty sure that president trump is going to win, and he did. last night we heard a lot about law & order area that is a course that has been plowed before by hopefuls, by all of those who want to hold onto power. it on an incumbent to make that case? matthew: i think it is going to be difficult for trump, and we are coming to the nixon strategy of pressing the button with an appeal around jobs, tax cuts, and i think what is probably most important is this repeated claim that has run through all of the speeches at the convention this week, which is that in the words of the republicans, the democrats are a radicalo america, a

left socialist party, etc. one reason i thing this is really important, the one thing a large majority of americans say they don't want to live in is a socialist society. that is why i think this framing really does matter when it comes to the selection -- to this election. anna: i will let tom, the american indie conversation, have his say on that one. mention ofardly any covid-19, and yet this remains the clear and present danger to many people in their daily lives. it is something that preoccupied everybody globally. what difference does it make, the fact that that was not a point? matthew: there's no doubt that the coronavirus has hit trump. london,ing to you from england.

certainly the perception here is that his handling of the coronavirus has been poor area if you are looking at this as an analyst, i think there are two currents you want to be watching. i think the first is what happens with the number of cases because trump is going to want to be able to say this is subsiding, and the second is what is happening with those jobs numbers because trump is going to want to say that the jobs are coming back. let's just carry on and get back to where we were in 2019. so i think a lot can change between now and the election. tom: we are thrilled to have you on "bloomberg surveillance" this morning. matthew goodwin won the richard rose prize, hugely coveted. his book "national populism" is outstanding on the nativist tradition worldwide. i am absolutely fascinated by your take on politics on the

stretch from 1856 and the american party before abraham throughand all the way on america that was personified by the fear of the president, and he is hugely popular because of it. of aus this distinction nativist tradition we see with donald trump. matthew: i think that's right i think trump is not an aberration in america. i think he is the continuation of a long entrenched nativism in american politics, going back to bigpeople's party of concentrations of power and wealth, a suspicion of people from outside of the country, and he designed promote the interests and the culture of america itself area i think that morey in 2016, trump has

of an advantage than many people assume. this wasn't just about jobs and gdp. populism is never just about jobs and gdp. it is about a profound sense of cultural insecurity, a sense that somehow, the nation has come unstuck. that is what you heard this week through the speeches, where trump is trying to convey something a little bit better then what perhaps our debate is tapping into. tom: we will certainly talk about the response to this we will see from mr. biden and his team. that's always the way it is in the american conventions had matthew goodwin is at the university -- american conventions. matthew goodwin is at the university of kent. we are thrilled he could be with us. coming up, david rubenstein of carlyle group is out with a new book. we will also talk about our central bank in the 1960's. stay with us. futures up 13.

assets appreciate. i'm shocked. this is bloomberg. ♪

♪ edwards innna london, with tom keene in new york. let's check the data for you. we've got ongoing reaction to the asian session to what we heard from jerome powell. we've also got plenty of market reaction based on what we heard from shinzo abe, stepping down as the longest serving prime minister in japan.

that has certainly sent the yen higher. we also see some strength coming through for the euro today, something that european equity markets have been wrestling with. european equity markets down by 0.3%. the ftse 100, a little bit of an outperformer because we see some strength in the banking sector. all of that in response to powell and the expectation that we could possibly see a steeper yield curve, and as a result, we see the banks moving to the upside. in fact, the banking sector in europe now up by more than 2% a today session. robert kaplan, federal reserve bank of dallas president, joins us later. this is bloomberg. ♪ you doing okay?

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transfer your service online in a few easy steps. now that's simple, easy, awesome. transfer your service in minutes, making moving with xfinity a breeze. visit xfinity.com/moving today. tom: "bloomberg surveillance." good morning, everyone. the news flow continues today with the resignation of shinzo abe, among others.

right now, anna edwards and tom keene. we've got michael mckee coming up in a bit, but we continue with matthew goodwin we are thrilled to have the canned professor with us -- the kent -- with matthew goodwin. we are thrilled to have the kent professor with us. what would you expect to be the response of biden/harris after what they've observed over four days at the republican national convention? matthew: my view is they have to get the narrative to being positive because at the moment, it is quite the donald trump and mike pence and others are --ming the mcgrath as being framing the democrats as being a deconstructive movement, a movement that wants to deconstruct america. that is very potent when you try to look at that through the prism of ordinary voters. in my mind, biden, harris and others have to get the how theyion back to

want to make it more positive, and that is going to be much more profitable territory for the. tom: the analog is nixon/mcgovern, shades of that across three and four election cycles. what can mr. biden and senator harris learn from the nixon/mcgovern era so that they can do better against trump? just as a general statement, what should the plan be? matthew: i think the plan has got to be to get to that central point of why they believe in america, and how they want to change america for the good. the reason i keep coming back to that point is because the more trump is able to frame them as being almost un-american, as being "radical left socialists that want to tear down the wall and bring chaos to the streets," in middle america, in flyover america, that message

will resonate. it will cut through. so biden and harris have got to get back to telling a positive story about how they want to change the country for the better. it has to be a unifying story. it can't be a fragmented story. that is what obama did so well. that is exactly why he did so well. he talked about transcending boundaries. it wasn't red states and blue states. it was the united states of america. biden and harris have to get back to that narrative. also how me ask you the economy is playing into all of this because trump has talked a lot about the economy and his successes in the earlier part of his presidency. clearly that has changed entirely with covid-19, but how is that going down in the polls? i saw some republican voters still rewarding president trump in some of the recent polling around the economy, despite what

is happened, because i'm sure they are also cognizant that this is a big external factor. matthew: it is almost cliche to , it is theclinton economy stupid. what trump is going to be hoping in meeting are for job numbers to be coming back, and also listen to what he is saying about taxes. he's now going to try and turn this not just into an election but an election about tax increases with the democrats, tax cuts with the republicans. it is a classic political strategy. for that to be successful, the jobs have got to start coming back. got to start moving away from the immediate damage of

coronavirus. the cases have got to start coming down. as trump goes into october and the very early days of november, he's going to want to be able to say everything is moving in the right direction. don't rock the boat. the million-dollar question is, will things move in the right direction? anna: thanks very much, matthew. really good to speak to you. professor matthew goodwin, university of kent professor of politics and international relations. coming up, we will speak to the goldman sachs cohead of global foreign-exchange. this is bloomberg. ♪

>> and the committee's judgment, it would be wise to allow inflation to run above target for some time to make up for side,isses to the low and then markets, having expected that, will cement their targets at 2% inflation. if you wanted to stay on the price level path that was established from 1995 to 2012, you could run 2.5% inflation for quite a while. you could do the calculations yourself. that weidea would be are going to try to make up for past misses, but it will be up to the judgment of the committee , and there are different opinions around the table. tom: james bullard. good morning, everyone. right now, we are going to pause and really dive into the history

making of this powell speech. i want to begin with stephen stanley of amherst pierpont, who wrote an essay yesterday, and i am going to use the word scathing. and incredible shift -- an -- "anble shift incredible shift. said policymakers have fully embraced the prevailing economic use in the 1960's that eventually brought us the great inflation of the 1970's. this policy approach leads to what monetary historians call stop go policies. the fed has moved to free lunch economics, but eventually we are all likely to pay for it." michael mckee joins us now. wow from stephen stanley. michael: he's in the more extreme camp, looking at the overall policy. the real question for most people is how does the fed get to 2% inflation? we have a chart that shows you what happened, if they can pull that up.

basically, over the years, you can see that the white line inflation has remained well below the redline, the 2% target. when inflation started to rise, you can see the fed followed with interest rate and. that is what they are saying they are not going to do anymore. they are going to let that rise, and they will try to be somewhere in that green band with inflation. but can they get it up to that level? that is the question everybody has. the i tweeted out to emeritus of ucla, the guy coming out of the bunker with 14% inflation or whatever it was. theyel mckee, why can't just lower the inflation target to 1.8% and get away from all of this mumbo-jumbo? belief isheir basic that the lower inflation is, the lower expectations are, the less

room they have to cut rates in the event of recession. if you bring down the target, then you're going to be that much closer to the zero bound, and less ineffective when it comes to some sort of recession. the idea that we are going back to the 1960's, i did ask jim bullard about. he said things have changed since then. the dynamics of inflation have changed, and also the dynamics of the labor market have changed. there aren't automatic escalator charges that push us into that inflationary cycle back in the 1960's. anna: good morning to you. really interesting conversation there with james bullard. i want to bring in a red line that just crossed the bloomberg. the yen crossing 1% -- sorry, climbing 1% after abe says he will resign. we've got so much going on in fx markets overnight, haven't we? in terms of what is going on with the again, there's obviously -- with the yen,

there's obviously reaction going on to the resignation, but there's also powell in here as well. we got a lot of dollar we come against a lot of other things, too. what is the assessment you are hearing about where the dollar heads within this new universe of average inflation targeting? michael: it is going to have an effect in the short run, and there is a feeling that the dollar is going to be moving lower. it's been in the process for some time, but it is still not anywhere near the lows it reached in 2015 and 2016, when we had that industrial recession. the question is, does it bounce if we get better data? that's going to be hard to know for a little while, but you're right, it is dropping around the world. we are also getting a bit of a steepening of the yield curve, which is something the fed does want to see. tom: you and i know the shadow fomc is out there. was's mickey leavy, who

part of that with baron burbank. plywood the fed's monetary ease -- why would the fed's monetary ease since the financial crisis failed to substantially lift inflation to target? the fed's new strategic framework supports higher stocks , and as you just said, a weaker dollar. what i find so interesting is we to exone from ex post ante. where is the evidence that has ever occurred? michael: there isn't, unless you want to use the 1960's as a particular example. mickey leavy goes on to point out that the fed doesn't understand completely why fed dynamics have changed, and what it is holding down inflation. robert kaplan puts all of the weight on technology. if that is the case, then it isn't going to change. they are not going to be able to

get inflation higher. tom: what you just got is a clinic for michael mckee. i can't convey enough the importance of this speech. anna edwards, this will resound everywhere, including the bank of england. big questions about how other central banks follow on where the fed is leading here. that is a really interesting one. michael mckee, thank you very much. bloomberg's international economics and policy correspondent, thank you as always. let's continue this conversation trivedi, goldman sachs cohead of global fx and commodity research. digesting not just reaction to powell, but also the news out of japan. we do see the yen climbing more than 1% from where it was. i did hear some voices suggesting if abe could get igo, the yen would strengthen.

if that because continuity is expected here in japan? what is driving the yen this morning? kamakshya: thanks for having me. i think that is absolute right. i think alyssa continuity is key from a market standpoint or a yen standpoint. the overwhelmingly dovish monetary policy that has yield curve control -- you know, bond buying orchestrated by governor kuroda at the bank of japan, he still has another look couple years, so that should ensure some continuity. also there is the likelihood that there may be an election later in the year in japan, and there isll be that going to be a new candidate, but there will not be the same degree of agitation or desire

for positive change, even within the ldp, relative to what was the case prior to abe. in that sense as well, my guess is that both on the fiscal side and political side, whoever is coming in as prime minister after abe, certainly from the ldp, you should expect policy to continue. , from the banky of japan standpoint, i think the fact that you still have a significant term of governor kuroda left, that should help to soothe markets that this is not going to be an abrupt shift that needs to cause a very violent reaction in yen. anna: we certainly got some messages of continuity round that this morning. let me ask you what is driving other things in the fx market. yen strength we understand. therefore goes some dollar weakness. but we have a lot of dollar

weakness and a lot of euro strength and a lot of pound strength. draw some lines between the news flow of what is driving european currencies much stronger today. kamakshya: kamakshya: i think --kamakshya: i think the big develop men here is not what is going on in japan. that is relevant for some of the incremental yen strength, but the big development from jackson hole was the chair powell speech and the fact that the fed's move into a more flexible average and nation targeting regime. it was to some extent expected. they had been discussing this framework review for some time, so it is perhaps not as big a shock to markets as some of the headlines suggest, but it is a pretty big shift in a dovish direction from a medium-term standpoint. i think that the real effective it will be felt -- real effect seet will be felt if you inflation move higher somewhere

down the line yet i think that is when the real impact of this shift in policy will be felt because essentially, what the fed is telling you is that they going pasto consider on inflation. tom: this is really important. i know you have probably been briefed as well. what i find absolutely fascinating the fed setting itself up for exalting us shocks -- for exhaustion us shocks -- for exogenous shocks. is this a more fragile central bank because now they are more exposed to exogenous shocks out in the future? kamakshya: i think this is to some extent a response to the fact that you had the period after the financial crisis where, despite recovery in the

economy, despite the on -- theent rate unemployment rate coming down quite significantly, they really struggled to push inflation backup to the 2% target level. i think the real concern here is that if you get new shock, either exogenous or internal from the economy, your ability to respond is much more limited. so i think this is partly a response to that realization, and that discussion has been going on both within the academic community, but also within the central banking community for some time. anna: this is so and -- tom: this is so important. the idea that we can't calculate right now the technology shock of the last decade, even the last two decades. are we certain we can quantify and understand the effect

y ingenously and exogenousl america? kamakshya: i think that is a great point. even when it comes to inflation statistics, there are lots of question marks about how we incorporate the kind of all of the improvements that technology averageided into the consumer basket and consumer indices. there are questions about whether certain confidences are being missed measured. but inflation generally has been lower. even the conversation you are having, the nature of the labor market has changed quite significantly, so it has been a hard slope to get inflation up to 2%, leave alone beyond 2%. talkingmething, we were about japan earlier, that the bank of japan discovered when

governor kuroda and others made the commitment to overshoot. that was met with a lot of skepticism as well, whether they would be able to get to 2%, let alone overshoot. but the way central bankers are thinking about it is even if you don't get that overshoot, even if you may be skeptical about that, the risk that you get a exogenous shock, in the counterfactual that you could slip into deflation is worse, so i think this is a response to that. anna: thank you very much for your time. we appreciate it, kamakshya trivedi of coleman sox, state -- of goldman sachs, staying with us on the program. let's discuss this breaking news on the fx markets. credit suisse uncovers client fraud at its wealth management unit. the company saying that clients

affected by unauthorized actions. they took a $10 million loss after the unauthorized client actions, so that is a size and scope line for you. they outed the banker who forged acumen tatian -- who forged documentation. no doubt there will be further response from the business on that front. this is bloomberg. ♪

ritika: this is "bloomberg surveillance." elon musk has confirmed that the tesla factory in nevada was the target of a thwarted cyberattack. according to a tesla news and rumor site, a russian man has been erected in the case that has been arrested in the case -- has been arrested in the case. more problems for boeing. it reportedly told several airlines to pull dreamliner from service.

boeing found structural problems that could cause the planes to fail. the airlines are united -- united, singapore. some customers have complained that limits have been slashed by 1/3 to 2/3 capital one. that is your bloomberg business flash. tom: thanks so much. sleepy friday, not. we've got reaction to the president's speech in washington, the historic speech by chairman powell. we will do all of that through the morning. let's take a look. assets up, equities up. futures up 13, dow futures up 130. the vix, 24.84. it is really all over the place. steve stanley at amherst pierpont was talking about curve steepening.

you really see it in the 30 year space, way out on the curve at 1.51%. i'm going to call it 11 basis points, maybe 12 basis points of movement. that's a huge amount of movement over the last 48 hours. strengthens., yen no question about it off the powell speech, less so off the shock resignation of shinzo abe. we will touch on that, of course, throughout "surveillance" this morning. stick with us. -- matthewz eddie luzzetti deutsche bank next.

tom: this morning, it is truly back to the 1960's, back to the

belief that the central bank can let inflation rise to aspire economic growth. as michael mckee pointed out, it is so 2007. up up and away with beautiful inflation. so 2022. can the fed reflate? can they help in divided america? they don't own apple and amazon. president trump will preserve the, "american way of life." "we will giveed, free rein to agitators and criminals." good morning, everyone. "bloomberg surveillance." focused on tokyo, where, anna, we see shinzo abe resigned. anna: absolutely, you can draw a direct line between what we are seeing from the markets last night from shinzo abe and also jerome powell. stocks in