logic -- there is a certain logic in the markets doing better than the economy here. >> we are looking for continued improvement in the economy, but the pace will probably slow down now that we've had this quick rebound. >> the fed has been thinking about changing its monetary policy framework for a long time. >> this trend in the dollar could 10%, 20% over a 10 year period. >> this is "bloomberg surveillance," with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. an extraordinary august i can only parallel to 1998. we got about a seven hour program we are going to squeeze into two hours today. jonathan ferro still on sabbatical. keene onmowicz and tom this friday. there's little anecdotes along the way. the trump speech, chairman powell, on and on. and there's coca-cola in the real world. they've done 9% per year for the

last 10 years. that doesn't get it done. guess what? job cuts. lisa: how much more can central banks do to juice job growth at a time of zero interest rates? i find it fascinating that coke is offering voluntary separation programs with its employees, read, job cuts. more interestingly, yesterday salesforce.com, one of the winners of this, and also job cuts. tom: coca-cola managing the message as they always do. i don't know what their cute phrases for firings. lisa: separations. tom: exactly. that is just as phony as all of the rest of the. what is so important in that set of announcements across the bloomberg, as they make clear this is an international strategy to right size on 86,000 employees right now, what we really need is a morning brief. where you start? lisa: at 8:30, ancient history,

which is u.s. july income and spending data for individuals. this is very backward looking based on how quickly the jobless benefits are running out and the changing scenario. we are also going to be hearing the kansas. today, city fed holding its annual policy symposium, governor andrew bailey of the bank of england speaking. we are both very curious about what he says about negative interest rates. at six a clock p.m., president trump heading to new hampshire to speak their at an in person rally. they are going to be handing out masks. they say they will be advised for people to where. i want to know, especially after last night's speech, how much is this presidential race shifting from an economy focused bait to one about law and order, and how is that pit going to be made? is that going to resonate more with voters? tom: i would suggest, and this

is off of the work of kevin cirilli and david westin's coverage, it is pivoting moment by moment. that moment last night with senator paul of kentucky, a constant on the street of washington, i've seen it played about every 42 seconds on fox news this morning mind you would expect to see that come up at this law & order debate really harkens back to what we saw in the late 1960's and early 1970's. the other thing that i think is so important is the reaction to the powell speech. as you mentioned, and i don't underplay it, andrew bailey at 9:00. what is fascinating if you don't have the media assembled at jackson hole to ask tough questions. lisa: and there are many of them, such as, what more tools tos the fed have to deploy make an implement rates lower? -- make unemployment rates lower? at this point, what can they do to increase inflation?

tom: that's a really sophisticated question, and we have 12 seconds to answer it. [laughter] lisa: go ahead. tom: what i want to do here, let's look at ellen's and their right -- at ellen's and -- at now, aentner right wonderful quote here. solidified anow more dovish path compared with previous recoveries in which an outcome based approach now inflation first before raising rates, rather than simply forecasting it to rise. david stubbs of jp morgan will try to translate. classic debate. as i mentioned yesterday, one of the great when some this is ellen meltzer, richard timberlake of the georgia school

as well. how seismic a shift have we seen from chairman powell? david: good morning. i think this is an important shift, may be more evolution than total revolution, but one that i think in a very long time coming. in my opinion, this kind of shift should have been made a few years ago. i think it was quite obvious in 2017 and 2018 that the relationship between the unemployment rate and the so-called phillips curve had broken down. sustainedbeen a major under should have inflation -- under shoot of inflation which was harming inflation expectations, and should have led to root less rate hikes. i think there's still no question of exactly how do they operationalize this shift. we will find out more in september. what kind of shift in the forward guidance are going to get?

we are absolutely going to get more of a focus on inflation to materialize, but what exact leaders that mean? i am not sure if the fed has gone quite that far. tom: the shift heard round the world. how will governor bailey, how will president lagarde adapt and adjust to a new non-forecasting fed? david: i think all central banks are struggling with their core mandate of getting inflation up to around 2% and controlling inflation expectations as well. we have seen them struggle in era, and covid is not making it any easier. will negative rates actually help the economies like the u.k.? will negative interest rates lead eurozone inflation higher?

i think all central banks are playing with the kind of implementation. all of them have learned you need to see realized inflation and inflation expectations and other measures of forward leaning price pressures consistent with, if not slightly above target inflation going forward. that means we are going to stay in a world of very dovish central-bank policies that few years. lisa: i have been sounded like a broken record this week, but how do you measure inflation? we speak about it as though it is a monolith. we've got record highs on the s&p on the nasdaq. a --excuse me, up the was cfa talk.oo with you've got to go to chicago to say up the wazoo. [laughter] you: well, up the wazoo, are seeing inflation. does that seem to be the fed's

goal? david: that is a long-standing debate. do we have the right focus on inflation in terms of consumer prices? do we integrate housing correctly? should we have a measure of credit in there? think the i do statisticians do as good a job as you can to get the entire experience into one index. it is incredibly hard, obviously. there is a difference between consumer inflation and i said inflation, and one of the tensions we will continue to see is between central banks that you asset prices as a way to manipulate the economy and help reach macri have a -- reach macroeconomic goals, and investors that see the end goal, and unfortunately we see a feedback between efforts to help the economy pushing up potentially asset prices more

than they are justified in the short-term. this is not going away, though. you could have this debate all you want, but i see absolutely no prospect of the inclusion of asset prices and inflation benchmarks, and furthermore, you just see evermore intervention into central markets in the hope of helping the economy, and that is the wind at the back of investors right now. lisa: i'm also a little confused about this. you have a federal reserve aiming for an inflation rate that overshoot rather than under shoot, and at the same time, they are hoping to create easy monetary conditions. read, low longer-term yields. these things seem like they are at odds with one another. if they get the inflation they are looking for, shouldn't long term yields rise substantially? david: yes, in theory. right now the battle in the market is between the creditors, the fed trying to get inflation

up to target, and the ability of the fed to get the inflation rate up to the target. if we look at financial rates right now, real yields, that is the debate. i think the fed has come along way in the last couple of months and enhancing its credibility behind its intention to keep policy loose, but there is still justifiably,rk, about whether inflation can be sustainably risen to target, if not beyond. once that starts to go away, once we start to see economic healing and potentially see inflation resolute but, you would expect curves to steepen and be asking yourself the question, can it allow this? can we have higher nominal yields on the backend? you might get a little of this if all goes well with reopening and may be vaccine. that, doesn't want to

stamp down on that and do more asset purchases, guidance, maybe yield curve control? they haven't got there yet. frankly, that is a high-cost problem to have right now because that shows the economy is on a robust recovery trajectory, and the central bank is at a credible inflation target. i think the fed would like to have that problem. tom: thank you so much for the dissertation here on what we got for mr. powell yesterday. we have a "surveillance" correction for you. z is correct, the is from the tribes of years ago. but it is the yasui river, so you got it sort of half right, which is better than i do. lisa: i am so glad i came back

from my week long sabbatical over in the adirondacks of the wazoo river. [laughter] tom: coming up, this is our conversation of the day, without question. william dudley on the powell change. tom: with the first -- ritika: with the first word news, i'm ritika gupta. the longest serving prime minister in japan's history is resigning. shinzo abe is stepping down because of health reasons. the government has provided few details. he has been undergoing treatment for a chronic digestive condition. abe plans to stay on the job until the ruling liberal democratic party picks a successor. president trump made his case for a second term on the last night of the republican national convention. he promised to cut taxes, create 2 million jobs in 10 months -- create 10 million jobs in 10 months, and turn 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 employment, soaring incomes, and record prosperity. warns: the president also that joe biden can't be trusted to deal with the coronavirus pandemic or you will the nation's racial divisions. the fed's new plan to run the economy hot looks easier said than done. says theyay powell will sometimes let inflation run above target, but the fed has to confront multiple forces that are holding down inflation. hurricane laura left chemical fires, wrecked buildings, and flooded roads in its wake in louisiana. $15e could be more than billion in insured losses. the hurricane has now been downgraded to a tropical depression, and moved

through arkansas overnight. 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. gupta.ika this is bloomberg. ♪

pres. trump: 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. tom: the president of the united states last night from the white house at the republican national convention in this year of pandemic. with us now, kevin cirilli, our chief washington correspondent. upos this morning tallied it , a total of 67 days yet to go, and the president used biden's name 47 times. vice president biden didn't mention president trump's name once. by biden/harris win annoying mentioning donald trump's name? kevin: the democrats think that they can, and that is the strategy they are banking on. whether it was in subtle comments made yesterday by speaker of the house 90 pelosi, questioning whether or not there speaker ofebates -- the house nancy pelosi, questioning whether or not there in september,tes

which is not something the campaign is backing, or in regards to senator harris being much more politically drawn that contrast in sharper terms yesterday i had of the president's speech, they feel that by keeping the nominee himself after the -- himself out of the back-and-forth, that will be a winning strategy. tom: sometimes distance gives you a better perspective. president obama didn't run red state versus blue state, but ran for a united states. is that the biden prescription? saying that this fight for the soul of the country is going to be a return to somewhat normalcy. yesterday i spoke with meg ceo,an, the former hp republican gubernatorial candidate for california, who spoke at the virtual dnc last

week. she said she believes biden would be able to form coalitions. . i want to contrast that with the strategy republicans are banking on. you heard this from president trump last night. he made a populist speech in a suburban america town, whether it relates to lowering taxes trying to push for the payroll tax cut, or really saying on a foreign policy standpoint the democrats have a relationship with china. much of the republicans are trying to link nominee biden to aoc and senator elizabeth warren and bernie sanders domestic economic issues. they are now trying to link the democratic party to beijing on geopolitical issues. lisa: this is a lot to address when we talk about fighting for the soul of the nation. what is the main issue? are we talking about law and order, talking about the economy, or talking about

foreign policy? what do we see in the polls? kevin: in terms of the strategy, the east house appeal -- the appeal the democrats are using, it relates to what is coming out of the white house. i would tell you that in public remarks yesterday that the administration made, whether it is on the culture wars of what you are seeing with regards to the nba, whether it was jared kushner saying that he doesn't believe that most americans have the luxury right now to take two weeks off of work and nba inyers were, that is a dig terms of where the debate is headed, and it is a real foreshadowing that what is playing out in kenosha is something that the republicans are not going to back down from, and you are seeing this in comments that the president made at the podium at the white house

at the convention last night, which was essentially, republicans are blaming the democratic political machines in the cities for the unrest, while democrats are blaming the rhetoric coming from 1600 pennsylvania avenue. lisa: i want to go back to polling, how this is all being received, because as we look at that poll, biden is still in the lead. correspondentomic put out a survey today showing that there are still shy trump voters, people who, in those official polls, will not admit to wanting to vote for president trump in the polls. do you find that that is consistent with your reporting? kevin: yes, and there is one thing i learned from the 2016 election, the national polls are incredibly useless. you have to look at the battleground states, and the president is within striking distance in all of the battleground states, including a recent poll that came out this

week by one of the networks that has him trailing in pennsylvania by only 5.5%. when i talked to republicans, they concede privately that the president had a politically disastrous summer, but what they are confident about is the notion of how he is trending with working-class voters. x number night, we saw of people on the white house lawn, shoulder to shoulder without masks on. here's the reality, kevin. villanova isom, going to be shut down as a bar if they don't have masks on at that bar. how can we expect kelly's taproom, the best bar for business ifo do they've got to wear masks there, but they don't wear masks on the south lawn of the white house? kevin: it's the same debate that mayor de blasio in new york city is facing criticism for with regards to jim's, that -- two

can, that gyms partially reopen, but fitness classes can't. there's another rising republican centrist star in the party who came out and reversed his decision on reopening schools, governor larry hogan of maryland, who gave a press conference and said that reopening schools for the entire state of maryland, including baltimore city, is going to have to reverse course. so even individuals who at one point have been more cautionary are now looking at the data, as well as the politics, and shifting course. tom: i'm sorry, folks. kevin and i don't want to editorialize here, but there's going to be six bars in new york city shut down this weekend, and you just saw the video of a zillion people. for those of you on radio, it is stunning video. i don't know what else to say to

it when we speak to epidemiologists as we do. i am all wound up. we are going to have to have a beverage in kelly's taproom. our chief washington correspondent kevin cirilli. i'm sorry, lisa, this is absolutely insane. you and i are dealing with kids going back to school, but we've got a party last night with no masks on. i don't get it. lisa: they are saying they were all tested. laboratoriesid just got approval for their 15 minute tests, but there is inconsistency. the reality is there is so much we don't know about the spread of the virus, about how quickly a weekend will go up and down when it comes to loosening or tightening some of these restrictions. tom: i can just see one of the abramowicz brats turning to you this weekend and saying, vice president pence didn't wear a mask, why should i. lisa: i actually can, too. tom: william dudley will join

us, the former president of the new york federal reserve. this is must watch, must listen on our simulcast. this is bloomberg. futures up 11. ♪

tom: "bloomberg surveillance." good morning. we welcome all of you worldwide. lisa abramowicz and tom keene. jon ferro is off. your thoughts on the bond market off the powell speech? lisa: long dated bonds, 30 year yields rising on whether the fed will be able to reach his goal of an average 2% long-term inflation rate. the idea it could go above that and they are going to wait for a long time before raising rates. tom: in days of old, this would be a one hour conversation. we will compress that now with william dudley. for years at goldman sachs, and given great credit for inventing modern goldman sachs economics, and then at the new york fed. bill dudley out of berkeley has been one of our greatest students of our theory of monetary policy. what did the chairman wrought

yesterday? we knew this was coming, but the scathing notes i have read from selected economists has startled me. what did he do yesterday? bill: what he did yesterday was he basically changed the inflation objective of the federal reserve. before, the fed had a bygones policy. they missed for five years, 10 years, 1000 years. next year they would try to hit 2%. if you keep missing on one side, inflation expectations become unanchored, and that was troubling the fed. the fed has had trouble hitting 2% on inflation for many years, so the fed has said now we don't want to hit 2% every year. we want to hit 2% on average. so if we underperform for a bunch of years, we need to have inflation above 2% a while in order to keep inflation expeditions around 2%. that is what this whole shift is designed to keep inflation expectations anchored at 2%.

tom: well explained. demographics and population with the history of your institution, if we assume a assumenominal gdp, if we a more dampened economy, why don't we just lower the 2% target to 1.9% or 1.8%? when i do that? bill: the reason why the fed wants to have an inflation target of 2%, not lower, is they want to have enough room in an economic expansion to have the nominal interest rate high enough so that there's enough to stimulate the economy and get the economy out of recession. let's say the inflation target was zero. in the short term fund rate at the end of the cycle would be 2% or 3%. there wouldn't be much room to cut rates, and therefore there wouldn't be much way to stimulate economic activity. lisa: with fed chair jay powell

essentially writing the obituary for the phillips curve, this relationship that was previously believed that could get an limit lower that would lead to a rise in inflation. bill: i wouldn't say it is quite the obituary, but now saying we will focus on inflation to god monetary policy, not the level of unemployment. so they changed the language with respect to employment goals rather than deviations around employment goals. they are basically saying that you can push the unplanned rate whatever level we can as long as inflation is low, and we are going to keep going. in this last cycle, we saw the fed start to raise rates even before we got to full employment. lisa: we are getting inflation in certain areas, and we were talking about this earlier in the show. certainly asset prices have gotten incredibly inflated, and continue to do so on the promise that the fed will keep rates low. at what point does this have to make the fed stock and raise rates? bill: i think they are a little

bit uncomfortable with the fact that asset prices are so buoyant, but remember, it is also partly by design. the fed basically did what they did in march, april, may to make monetary policy easy and conditions accommodative, and they succeeded. the stock market is going up and up. that will cause some anxiety about the fed, but remember, stock markets go up, stock markets go down. the consequences historically have been pretty modest. we had the stock market crash in 1987. a lot of economists anticipated a recession. there was no recession. i think we and see in the stock market is probably less risky to the economy because there's people that use leverage to him stock. tom: robert 10 you will send -- robert samuelson of "the washington post" wrote a fabulous book centering on the theology of well many people trying to contain budgets and

such. stephen stanley of amherst pierpont wrote a wonderful essay over the weekend, and he harkens back to the volatility that could be assumed here through what are called stop go policies. the idea of a fed that has to adapt. suddenly we move away from the greenspan careful, sequential policy back towards the walter of thestop-go policies 1960's and 1970's. is that a risk? bill: i wouldn't put it quite that way. the fed is saying we will wait until inflation above 2%. that means when they start to tighten, they will probably have to tighten quite a lot. the markets are saying this is great, the fed is going to be on hold for a long time, but it also raises the risk that when inflation gets above 2%, the fed's objective, the fed will have to slam on the brakes a little bit harder, so it does increase the risk of an economic

downturn on the other side. tom: is the greenspan era ending? if alan greenspan was of a gradual approach of sixteenths and eighths of a percentage point, are we going back to larger increases? did the greenspan era and yesterday -- era end yesterday? bill: i am not sure that greenspan would necessarily disagree with what the fed is doing, but we are not in the era where you tighten pre-into the lead because using the economy is getting to full employment. you wait until it translates into rising inflation before you actually change monetary policy. so it is a meaningful shift. with that said, i think the fed is already acting that way today. the fact that when the fed stopped raising rates and reversed course a year and a half ago, that was partly due to the idea that we want to get inflation above 2%.

so we have already seen a shift in policy. lisa: does the fed have any control at this point in actually boosting the inflation rate that they want to boost? bill: that's where a lot of skeptic.have been you haven't been able to a compass that over the last 10 years, so what are the tools you're going to use to a compass that outcome? so there's quite a bit of skepticism on whether the fed will be a successful, and the japanese experience is a cautionary tale in that regard. lisa: fed chair jay powell said we are prepared to use all of the tools in our toolbox, and didn't go want to say what those tools were, and we are left in the dark. what do you see as the most plausible tools that the fed will engage next should there be another likely downturn? bill: i think they will be more of the same. they will do asset purchases, keep credit liquidity programs in place, but i think the reality is we have to acknowledge the fact that the

power of monetary policy right now to stimulate the economy is pretty low. interest rates are already very low. the stock market is already very high. credit kits are very open and accessible. so the idea that the fed can do more, they can do more, but how much of an effect will it have on the economy? thefed understands that power for monetary policy to support the economy today is pretty modest, and what the economy really needs at this point is further fiscal stimulus. tom: i want to go back to the heritage of berkeley economics. it is a fabulous heritage. the heritage back to the time of bill dudley is absolutely extraordinary. bill dudley, when you look at the heritage of berkeley economics, can you say that the speech yesterday will have a global impact at other central bankers, including andrew bailey speaking here in an hour of so

at jackson hole, that they will have to adjust as well? bill: i think people are generally understanding more and more that the importance of keeping -- more and more the importance of keeping inflation expectations well anchored, so i don't think the fed is in the vanguard here. i think they are responding to a problem that has been evident for a number of years. tom: what is the statistic above 2% where this policy in place, where the sweat goes up among fancy guys like you? is it 2.1% or a number substantially higher? think it depends on how long you've been below 2%, and by how much, and how that has then affected inflation expectations. what they care about at the end of the day is keeping inflation expectations anchored at 2%, so the inflation outcomes necessary to do that are what is going to drive the decision-making.

it turned out that they needed inflation to rise to 2.5% or 3% to get inflation expectations well anchored. tom: this is fascinating. bill dudley, thank you so much. a very generous interview with the former president of the new york fed. we are going to drive forward this conversation with the leadership of michael mckee, his conversation with mr. bullard of st. louis yesterday. robert kaplan of the dallas fed. look for that in the next hour. where else are you going to get economics like this? you're not going to get this up the was -- up the wazoo river. lisa: i do want to note that as people do just fed chair powell said yesterday, you are seeing the dollar completely break down. the uber spot dollar index now the lowest level since may 2018,

with the likes of pimco saying they see more weakness ahead. at juckes putting out a note socgen, saying the dollar is falling too fast, but has much further to go. this seems to be the strongest market move following what we saw yesterday at jackson hole. tom: the way you triangulate this on global wall street if -- atok at lowball euro global euro, a big deal. what the pros do is they take out the dollar and look at euro-yen, which has been remarkably unchanged today, so it is less about the abe resignation and much more, as we heard from dr. dudley come the effect of the speech. what do we see in the bond market? lisa: we keep talking about inflation expectations up. if you look at 30 year breakeven rates, still below 2%. basically, bond markets saying, we don't buy it. we don't think you can get inflation up to that 2% target.

in and saidmailed he loves the four digit number. nice to hear from you, roman. futures up 10, dow futures up 119. stay with us this historic friday. this is bloomberg. ritika: with the first word news, i'm ritika gupta. in japan, prime minister shinzo abe is calling it quits. the longest-serving prime minister in japan's history is resigning due to illness. the ruling party will pick the excrement there. he's perhaps best known for the project called abenomics, aimed at arriving japan's economy through unprecedented monetary easing. president trump arguing for a second term and attacking his opponent. he said that joe biden cannot be trusted on the virus, racial

strikes, and especially on china. pres. trump: 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. in recent months, our nation and the world has been hit by the once in a century pandemic that china allowed to spread around the globe. ritika: the president largely sidestepped the issue of how he plans to finish the fight against the coronavirus. the national basketball association playoffs are back on. they will resume today. players voted to continue the rest of the playoffs after sitting out a night to protest police shootings and racial inequality. president trump spoke out against the protest, saying the nba has become like a political organization. elon musk has confirmed that the tesla factory in nevada was the target of a thwarted cyberattack. according to a tesla news in riverside, a russian man -- and

rumor site, a russian man has been arrested in connection to the case. 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. ♪ . this is bloomberg. ♪

>> i think he and the rest of the fed are really haunted by the example of japan, that despite an astonishing amount of asset purchases, the bank of

japan balance sheet is more than 100% of gdp, and going higher. they still have inflation below one person. they don't want to get in that situation. tom: truly one of our nations experts in financial economics, randall kroszner of the university of chicago. that conversation with bill dudley i thought was just penetrating right now, our chief theorist and correspondent michael michie -- michael mckee joins us on his way to a very different interview. this is your wheelhouse. each of these people is different. let's start with mckee 101. how is kaplan of dallas different from dudley of new york? michael: they are two of public the more similar members -- bill dudley no longer on the fed -- but they both came from wall street, and both came from goldman sachs, so they had a

similar formative experience in the markets, and understand the markets perhaps better than others on the fed who had different backgrounds. tom: what will be the market reaction? lisa mentioned this earlier, curve steepening is a benefit moynihan, and the others, isn't it? michael: the question is, do we get any new traction with this policies, or do we see continued stagnant inflation numbers well below their goal, and we get a sort of middling recovery that takes a long time to get moving? in that case, you might see some more flattening, and the benefit for the banks comes out of it. lisa: another way we could put this is japanification of the united states, which seems to be a dirty word that people say, and yet here we are. shinzo abe, the longest serving japan -- longest serving prime esther of japan,

unexpected liver signing -- prime minister of japan, unexpectedly resigning due to his health, and we call abenomics a success. why is that? michael: we were seeing declining incomes for the japanese, and they have come out of that. they have not been able to grow very quickly come but they have been able to move up to zero and tread water. basically, and part because of the size of the population the per capita gdp has gone up in japan, so the average japanese doesn't really notice that the economy isn't going anywhere. so it hasn't a success, but it hasn't been a failure, and compared with his predecessors, it has been a success. lisa: that is a fascinating way to frame what we could be looking at over the next decade or two to come. there's also a question of how much the lack of a market response and dictates that the true person in charge is really defective japan's kuroda more

than shinzo abe at this point. michael: definitely because the markets are reacting to what is happening with the central bank. the stock market has gone up in japan because they feel like they have gotten themselves out of deflation. there hasn't been inflation, but they've had this qe program for years now, putting extra liquidity into the market, so as long as kuroda is there and following his do whatever it takes philosophy, than people in the financial markets are going to think life is as good as it can get. tom: the big issue here, the fear of japanification in europe, and now in the u.s., and that is why the fed acted, etc. texas is the dynamo of this nation. we all know that. are we at risk of a japanification of robert kaplan's texas? michael: i think if you said

that down in texas, you would get thrown out of the saloon. tom: that's happened. [laughter] lisa: nice moving on from that. michael: lisa, you can ask him about that later. lisa: oh, i will. michael: this is an interesting country here because we are so big and we have so many different economies that you can't really ascribe japanification or any kind of adjective to the whole country itself. texas prides themselves on a lack of regulation and on low taxes, and they feel that has created a strong business at the sphere -- strong business atmosphere. tom: i talked to the economist roman mackiewicz this morning, and he went right to the heart of the matter. we are not europe. the reason powell acted is the money market fund structure we have, and they simply can't under any circumstances go to

negative interest rates because of the financial system. we just can't do negative interest rates. michael: pretty much. that's one of the major problems. the fed doesn't like to talk about it, but a lot of money market funds have eliminated fees because they can't make any money right now with rates so low. you're not getting any return, so to keep their customers, they are getting rid of fees, and basically doing the job for free. tom: lisa, you have been way out front on this. we are not germany. we have money market funds that don't want to break the buck. lisa: and right now you have big companies getting out of the money market business because they don't want to break the buck. at this point, are people talking about more negative consequences from this perennially low rate regime then positive consequent is? michael: it is hard to say they

are talking about negative consequences more than positive consequences because there certainly are some positive consequences to low interest rates. we are seeing that in the housing sector in particular. but financial repression, as tom has talked about for years, is a bad thing, particularly for seniors who can earn nothing on their savings, and then you have the question of profitability of financial firms, and the idea of whether the fed has any ammunition left to try to simile the economy. charms is imy will even give credit to be who still 100% of my ideas. that would be what one william gross, the stamp collector, told financial repression years ago. what i find fascinating about mr. kaplan, he is hardwired to corporate practices and the reaction of his misleaders to

something like what we heard from mr. powell yesterday -- of business leaders to something like what we heard from mr. powell yesterday. lisa: since we are talking about texas, tom, it happened with you getting kicked out of a saloon? tom: i was north of kerrville. it was a saloon. they looked at me and said, catch him. they caught my ear and bounced me right out the door. had a little bit to do with my father. i was in austin, the land of the longhorns. they said, your father was an aggie? see you. that's all there is to it. lisa: i want pictures. tom: there were a few. futures up 11, dow futures up 133. for all of you in college station, texas, we say good morning. yields higher. the 30 year bond, a stunning 12 basis point move, 1.52%.

coming up, michael mckee with robert kaplan of the dallas fed. this is bloomberg. good morning. a simulcast. ♪ hike!

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for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music) >> there is a certain logic in the markets doing better than the economy here. >> they will keep rates at zero for a long time, maybe forever. >> we are looking for continued improvement in the economy, but the pace will probably slow down. >> the fed has been thinking about a change to its monetary policy framework for some time. >> this is a change in the dollar that could be 10%, 20% over a 10 year period. >> this is "bloomberg surveillance," with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. radio and television worldwide. int an extraordinary week