♪ >> we are an iraqi period -- in a rocky period. >> the risk that we are mostly unhedged for is this rise in inflation. >> we have a lot of supply bottlenecks due to the fact that the world is not being vaccinated enough. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa

abramowicz. jonathan: this week is just getting started. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. in greenwich, connecticut, tom keene standing by with a fantastic lineup of guests through the next hour. tom: we knew the greenwich economic forum would be important. ray dalio later to speak to governor lamont of connecticut. jonathan: let's not waste any time. shaping up as follows on the s&p, advancing 0.75%. yesterday, the biggest one-day all the way back to may. crude positive by 1% to $71.

bank of america, those forecasts for chinese growth, that caught my eye. i know it cut yours. kailey: there's a multitude of factors here, not just the potential default of evergrande. the fact that commodity production is going to be lower, as well as the delta variant. how strict china has been with some of its restrictions when you see resurgence in cases, that sits china apart from what we are seeing in other developed countries. all of that factoring into the forecast for bank of america. jonathan: it is about china, and you've got the perfect conversation. tom: dr. nouriel roubini got way

out front of that crisis into thousand five, seeing things up to 2007. a little window right now before we get to the present moment, there was you and i in davos at a hotel. it was a late night. we sat there and penciled out the reversion of the mean of the housing market. you said, it has got to end, and it did a year later, maybe 18 months later. bring us forward now, that we are so debt encumbered. do we have the degrees of freedom we had when you and i sat at that quiet bar in davos? dr. roubini: my concern is that

we are in a debt trap, not of fiscal dominance, but one central banks essentially went to phase out unconventional monetary policy, therefore they will be in that debt trap and unable to normalize policy rates. that is why you see inflation. tom: i am so honored that you are here. this is a guide to talk to. from greenspan over to this new debt crisis now, how do you interpret the outcome of this buildup in debt, which is life at the zero bound? dr. roubini: whenever there is a crisis, we have to backstop the financial system. there's more buildup of public that. there's more buildup of private debt because we see negative

policy rates or quantitative reasoning. so we are in a debt super cycle, and eventually, central banks are in a trap. with these levels of private and public debt, there will be a market crash, and economic crash, and therefore, i think the path of least resistance is going to be to wipe out the real nominal debt with higher inflation. that is one of the reasons why i see loose monetary policy, loose fiscal policy, loose credit policy, and eventually inflation being the source of debt. tom: i went through the new york emboli. will they do the same thing in venice, which is inflate our way out of our present challenges. dr. roubini: will we cut spending?

do more spending to deal with wealth and income inequality? will we raise taxes on the rich? there will be constraints on that. therefore, the path of least resistance would be to monetize and then try to wipe out higher inflation. of course, over time, short-term debt is going to be higher interest rates with higher inflation. that is going to be a solution in the short-term, and eventually, high debt ratios and real rates rising over time is going to imply that the forces will be unsustainable. in the private sector, we see both inflation and debt crisis ahead. jonathan: woke me through with that means for the next 10

years, given everything you have described. dr. roubini: on one side, debt ratios are currently unsustainable. growth lower, inflation higher is not just driven by short-term supply bottlenecks, but in the labor market, i see over the medium-term nine negative supply shocks that reduce potential growth and increase the cost of production over time. what is going to happen is deglobalization in global supply chains, restrictions to migration from south to north, decoupling between the u.s. and china on trade, technology, data, information. global climate change is going to increase the cost of energy and the cost of food rices. the pandemic is going to disrupt again global supply chains. we have also cyber warfare that is going to be a source of disruption. finally, the rising income and

wealth inequality implies trying to help workers and labor unions, and that is going to put upward sure on wages. these negative supply shocks, you could end up in the medium-term in a situation of stagflation like in the 1970's. that is the situation i worry about. jonathan: a lot of people are making this call based on loose fiscal policy. you are focused on the structural issues that you think are just going to stick beyond the physical push that we have seen over the last year fighting. how underappreciated is that view, when you go to events like this and have that conversation on the sidelines of economic forms let you are at -- forums like the one you're at? dr. roubini: the source of

inflation is essentially going to be overheating from the economy, given that credit policy is to lose. i agree that aggregate demand is going to be overheating, but also worrying about the medium-term aggregate supply of the economy and seeing these global trends, they are just the reversal of keeping inflation low. all of them are going in a direction where potential growth is going to be lower, cost of production is going to be higher, and since monetary and fiscal policy are going to be loose, eventually we end up with inflation and silver oath. that is stagflation. tom: i want you to express the optimism you have for the american economic experiment. i have bought for a decade less of calling you dr. doom. i don't buy it for a minute. you've got a lot of worries out there. but state the optimism you have

on the american experiment. dr. roubini: i would say there's going to be a huge amount of innovation, whether it is ai, automation, or essentially the applications of it going to overtime increase productivity growth significantly. however, i worry that ai, automation, robotics is also going to have negative spillover. it is going to increase wealth inequality. . . tom: is it the responsibility of the central bank? michael: -- dr. roubini: there's a list of factors, and there is a risk that them becoming highly

differential will lead to higher inflation, by unconventional monetary policy been around for much longer. jonathan: thank you, as always. i thought nori a -- i thought nouriel likes dr. doom. he's smiling. tom: he represent an old world economics worried about the solidity of balance sheets and financial statement versus an american modern income statement dynamic. that is the difference. he's not dr. doom. he's dr. istanbul. jonathan: he's been a good friend of the program over the years, and we appreciate it. in the bond market, yields are higher by a basis point. at the futures up by 0.75%.

this tuesday morning is just getting started. next up on the program, governor ned lamont, the republican from connecticut. then ray dalio of bridgewater, it: 30 eastern time. tom keene sitting down with him in greenwich, connecticut. then we've got a fed decision on wednesday. futures up 33, up zero point 75%. this is bloomberg. ♪ ritika: new data suggest of johnson & johnson's vaccine increases the potency of the one-time shot. the booster was 100% effective against disease when given two months after the first inoculation. a second study found that the additional shot lead to a 12 fold increase in the production of antibodies when it was given six months after the first one. won in canada, prime minister justin trudeau -- in canada,

prime minister justin trudeau won a third term in parliament, but failed to secure a parliamentary geordie -- parliament three majority. boris johnson meets president biden washington today. johnson says he would rather have a good deal than a quick one. uber posted a corporate loss, now saying it may be about to post its first profit. the company said adjusted earnings in the fourth quarter could range from flat to $100 million 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. 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. profit. . i'm ritika gupta. this is bloomberg. ♪ this is bloomberg. ♪

>> the huge source of

uncertainty is obviously inflation expectations, and we need both central bankers and fiscal policy makers to give clear trajectory on their tools on the budget and monetary policy to make sure that those inflation expectations actually remain anchored. jonathan: the oecd chief economist. good morning. alongside tom keene and kailey leinz, i'm jonathan ferro. the s&p up 0.7%. in the bond market, yields higher by a basis point to 1.32 26%. it's the headline we have been waiting for and largely expecting. ever grand did miss payments monday to at least two banks. it is on thursday and through

the end of this week, whether the solution was the plan. kailey: thursday is really going to be key, and if we get any beijing action, do they take any steps to directly intervene? it will be very interesting to see what we see from the policy response over the next 48 hours. jonathan: tom, i know you've got an important conversation in greenwich, connecticut. wanted to bring you this story. tom: it is the greenwich economic forum, and it is about your image of connecticut. it is a connecticut that mirrors this nation. the income disparities in this

state are extraordinary. ned lamont's governor, steering the state forward. we have a conversation now on the inequalities of this state. you had the courage as a fancy guy growing up, you went down to bridgeport and taught. what were the lessons you learned in bridgeport, away from entrepreneuriprities of your state? gov. lamont: good morning. welcome to connecticut. here's what i learned. i asked them to write up a story about someone who started a business, and they didn't know. so i brought in entrepreneurs to try to inspire these kids, you can do it to. tom: of all of the people, what

do you need holistically from the biden administration on a new tax policy? gov. lamont: i want to see this infrastructure bill passed. tom: does it all go into i-95? gov. lamont: metro-north. [laughter] i want to do everything i can to speed up train service. that infrastructure bill pays a lot. you've just got to do it cautiously. tom: stay tuned -- states to us nationwide the importance you felt of this 9/11. jonathan: i was in the city that gov. lamont: -- gov. lamont: gov. lamont: i was in the city

that day. there we were with the new leaders of new york, kathy ogle. i was very impressed. we live and die by how -- kathy hochul. i was very impressed. we live and die by how successful new york is. we've got to do it together. . kailey: the pandemic is front and center, and with many students not able or eligible to be vaccinated, why is it that those who are eligible don't need to be in the state of connecticut?. gov. lamont: what i can tell you is our schools are open. our schools were open last september, and that made a big difference. i think a lot of families started moving to connecticut because they wanted their kids in school. we are able to do that safely. this year, schools have been

open. very few quarantines because teachers are vaccinated and kids are wearing a mask. we will do that a little bit longer, so kids can stay in school and their parents can get back to work. kailey: that means the mask mandate is going to be extended? for how long? gov. lamont: i've got to work with my friends in the legislature on that. as a heads up here during the flu season, i went to be careful. tom: the salt tax, i hear you stop conversations when you talk about it, my ability to deduct my connecticut state taxes over a certain level. gov. lamont: obviously when i

ended the salt deduction, it hit states like ours a lot. you can argue about the intellectual merits of a salt deduction. i can just tell you that connecticut is one of the few donor states. we send a lot more money to washington then we get back. so i am fighting for connecticut. that is why i think anything that produces taxes for people in all income brackets at the federal level makes sense. that includes getting back to salt deductions. tom: governor, thank you so much for joining us. . at the greenwich economic forum. jonathan: just went to go over those headlines from evergrande. some additional details from the team at bloomberg we have put together. evergrande had not made the payments as of late tuesday local time, from people familiar

to the matter who asked not to be identified. they expected evergrande to miss the deadline after the housing ministry killed them they would not be able to pay on time. the next stage of this conversation is unclear whether the banks will formally declare evergrande in default. this may take a few days, a few weeks, several months. we know there was a single day grace period for these particular payments on these particular loans. i understand that on thursday, when the interest comes due on those bonds, i thing it is 30 days after that. so there is just some stuff to work through here. it is the logistic a scum of -- the logistics of that. kailey: to this point, we haven't seen much direct intervention from beijing, from the pboc. the question is if we are going

to get it in the coming days, especially if that thursday deadline is moving. jonathan: full coverage right here on bloomberg. before we get to thursday, we've got to deal with the rest of tuesday, getting to wednesday and a fed decision. equities are positive 0.7% on the s&p. heard on radio, seen on tv, this is bloomberg. ♪

jonathan: live from new york city, good morning. alongside tom keene and kailey leinz i'm jonathan ferro. lisa abramowicz back with us on thursday. evergrande still at the epicenter of concerns. we can confirm evergrande did miss loan payments to banks. another deadline on thursday. yields higher one basis point on tens this morning. 1.32 is your yield on the 10 year treasury. an important conversation in connecticut. we've been building up to this one all morning. tom: a timely conversation. always with ray dalio. we will finish with china.

we welcome all of you on bloomberg television and radio. jon ferro mentioned evergrande. does bridgewater have any evergrande? ray: no. tom: i have to make some news here. [laughter] in his high school years ray dalio was a mediocre student. what happened? ray: i liked markets. school where they cram stuff down your throat, that did not interest me. markets interested me. tom: the markets interested you in the mathematics of the markets. the dynamics of it, the dynamics of the market, when did that clicking for you? ray: i caddied. this was the 1960's.

that was the hottest time of the market. every time you got a hair sign or a shoeshine -- a haircut were shoeshine people would talk about the markets. i got some money and put it in the markets. my first was my only company that was selling for less than five dollars a share. northeast airlines. my investment criteria was i could buy more shares so if it went up i could make more money. this company was about to go bankrupt and somebody acquired it and i tripled and i thought this was easy. [laughter] ray: of course the game is not easy tom:. the game has not been easy for bridgewater. the difference is in 2007 or 2008 you had challenging years and bounced back with a vengeance. can you bounce back with markets

at the zero bound? ray: 2007 to 2008 was a great year because we anticipated the financial crisis. recently we missed the covid coming and we got hit by the covid. then we bounced back from that. we did not take as much risk as we could because we added value but not as much as we could have added. tom: i what you do speak to bridgewater clients now and those considering giving you money. what are the new procedures at bridgewater to be more subtle in the market given where credit markets are again at the zero bound? ray: i do not think there are new procedures. it is the amount of risk one wants to take at certain times. i think our all weather fund is up 10 plus something this year.

it could have been more aggressive. the question is how much do you want to be aggressive? we are always looking at things that could be done better. by and large, it is the same, just more of it. tom: stephen roach of yellow university -- of yale university says it is the single biggest miss he has ever missed -- how we come out of the pandemic. how do you believe we will come out of the huge debt buildup we have. ray: this has happened all over and over again. when you give a zero interest rate and you have too much debt and everybody needs money, the way it works is the government sends out the checks but the government cannot print money so it has to borrow money from the federal reserve.

they do not have enough money. they print the money. the value of cash and the value of bonds has negative real returns, significantly negative real returns. money goes somewhere else. it goes into equities, it goes into gold, goes into property. tom: the house over there just went up $300,000 when you sat down in the chair. ray: the same thing happened in 1971. the same thing happened in march 1933. that was when they produced a lot more money and that monetization, which moves its way through the system. the federal reserve buys a bond. it gives it to investors. that investor puts it into other investments and gives it to the government. that is the way the mechanics is. tom: ray dalio with us.

let's go to china. so much in the news i wanted to wait but i think we have to go to china. this is a new beijing. is it a return to an old beijing you and i knew when you are buying northeast air? or do you envision a beijing moving to a new territory? ray: you have a son-in-law in shanghai. tom: we are living in real high -- in real time. ray: the more you have contact the more you understand. for a long time the question is howibution.

we have four things still going on in china if you understand their intent. common prosperity is the word now. it has been the objective to raise money and broaden the base. that is common prosperity. if you look at their tax rates, they are lower than the united states. if you look at the measures of global capitalism, they have much more capitalism then europe. now they are in a process to broaden that. i think there is a tendency to think because they are maoists and communist they will go back to that kind of thing. they are not.

deng xiaoping -- xi jinping just introduced the newest stock market in beijing. he made a point of being the one who dissed -- who introduced the market in beijing. they know it catches mice. the issue is that the capitalist is not in control. there is a system, and what they want to do is m sure it is not a capitalist driven system. then there is data control. there is micromanagement. there is a top-down versus bottom-up. tom: how can our listeners and our viewers prosper from their micromanagement of the real estate collapse we are beginning to see in china? what is the opportunity if we see their dominant investment position domestically go down in

price? how do you play that? ray: the mechanics of the same as the united states went through everyone else went through. it would be similar to our 2008 mechanics? what we do is the central bank makes a decision of moral hazard. they never used to have moral hazards. tom: you believe that after this week we have seen in the markets? ray: they knew this was happening and there was preparation for this. that is a good thing, not a bad thing. in the past that used to be they would guarantee it. five major banks would've loaned state owned enterprises and local governments with implied government guarantees. the process is the same. expect the exact same type of process as we would go through, which is to say investors will be stunned, that is how it works

and the system will be protected because it is denominated in their own currency. tom: i want to get this on the record. every wall street firm is saying this is not -- explain why this is not a lehman brothers moment. ray: a lehman brothers moment could produce pervasive structural damage through the system that was not rectified until the treasury came across it in terms of its borrowing and the fit came across quantitative easing. this is not that kind of a shakeup type of thing. $300 billion is what they and this is all manageable. the basic economics for all countries is if debt is in your own currency you can deal with it. you can work it out. it is a good thing that lenders get stung or the borrowers get stung.

that is how the system works. tom: my number one question. you and i have sat at the mandarin in hong kong and looked at that spectacular experiment. we had -- the day of the hong kong collapse. how should our western banks, how should the western banks adapt and adjust to hong kong to new china realities? ray: you have to decide whether the roles is a place you are comfortable with. they will set the rules and you decide if you are a good citizen or you're not. you cannot jump in and out. china is a strategic play. you will not jump in and out. the amount you are in should be that what you're comfortable with. it is the same with that

investor. it is not smart to sell off the break. it is a strategic play. most investors are very overweight in the united states or other places. there is a big competition, a war of sorts going on in technology and so on. the diversification, both the amount and the exposure you want to have, you want to have money on two chips because there's interest in the united states. tom: when we look at technology -- when does the book come out? tom hanks is playing ray dalio. it president xi said principles, what chapter would you want him to read? ray: like everybody, the key is

know what you don't know. tom: what does he not know about the united states of america, from the pacific rim up to tokyo? ray: there is a totally different approach. whether you like it or not we are a bottom up, individualist. tom: you are the example. ray: the individual and bringing immigrants to the united states at the power of the individual. in china it is the top-down and extended family. one of the leaders said -- when we deal with things like video games. do you want your kids to watch video games? in the united states we would say that is a parental position. they would say it is terrible what is going on in the state will mandate it.

there are those two approaches. i would say the understanding the relative merits and understanding how we can get along. there is a risk of war. there is a risk of conflict. understand how we can get along. i wish the chinese understood americans better than americans understood china better. tom: i want to bring it back to the alternative investment business. again, zero bound. you've written about this. bridgewater has a great series walking through the realities of being in the lower bound. is the game over? is the volatility so taken out that we cannot provide value anymore? tom: the value -- ray: the value interest rates has been largely taken out.

he will not have that kind of volatility. -- you will not have that kind of volatility. it has changed. then you get quantitative easing. when you need easing you get the printing of money and then you have the reflation dynamic. the volatility is transmitted. we have plenty of volatility in markets but not the bond market. look at how the markets have behaved since last april they printed the money and sent out the checks. tom: what will the consultancy business be? we've all been wrong with the assumption of single digits. people have been looking at double-digit returns. are you at bridgewater steeled for a single digit future or can you be more optimistic? ray: i think we are going to get

another round of q.e. tom: you are predicting another round of qe? ray: not immediately. every tightening interest rates has been less than the one before since 1980. every peaked every trough in interest rates has been lower than the one before. then when we have zero we did qe and every qe has been larger than the one before. we accumulated so much debt and we are now printing. i think you will have probably one pullback and then you set the markets down. the duration of the bond market and the duration of assets is longer. that means interest rate sensitivity is greater. you have that correction and then you will have another round. that is the nature of the beast we are in.

that means negative real returns. things that must happen is cash will have a lower interest rate from bonds. tom: is america ok with negative interest rates? ray: let me get my thoughts through. what you will get is a significantly negative real cash rate. a negative and probably more significant real bond rate. you will continue to have interest rates significantly below nominal gdp growth. in other words inflation pressure. the average thing is going to increase. state nominal gdp is production of inflation and growth, with those things combined you would rather own a piece of that and you would want to own interest rates. that is the environment. tom: we have to wrap it up. people are listening to this worldwide. my colleague matthew miller is in berlin listening and he is in

my ear with bloomberg technology saying can you just ask him about bitcoin? paulson of the hedge fund game, not henry paulson, the great benefactor of central park, john paulson's think bitcoin is a fraud. i speak with my own words. what do think about bitcoin? is it a durable thing for banks or institutions? ray: i'm not an expert on bitcoin but i will tell you what i think anyways. bitcoin has an imputed value, not intrinsic value. it depends what it is perceived as. it is a tremendous accomplishment to have done that program. it will have the perceived value

it is given by the marketplace. right now if you take the value of bitcoin and you take the price, what should the price be? since the quantity does not change you know whether it is a function of demand. right now bitcoin is worth less than $1 trillion. all golden existence is worth about $5 trillion. it is about 20% of that market that represents the hedge market. i think if it is successful it is not going to be a lot more than that. if it is successful there's a chance the government will outlaw it. tom: 20 seconds. i believe there's a new book coming out. ray: it is a study on the last 500 years on the rise of reserve

currency it is called the changing world order. it describes the changing world order we are in and putting it in historical perspective. tom: stick around, we will go for another hour. i am kidding. ray dalio with bridgewater. a huge impact with principles years ago and look for the new book in the coming weeks and months. so much to talk about over the next number of hours at their greenwich world economic forum. kailey, i believe the markets are open. did dalio move the markets? kailey: we are still seeing the buy the dip behavior, but with -- but not with as much vigor as earlier. the s&p futures up about .7%. the bond market has taken a round-trip. yields were high earlier now they come in flat on the 10 year yield, right at 1.30. it is a weaker dollar story

across the g10 space. the euro stronger against the greenback, up to 1.17 $40 on the euro. -- 1.1740 on the euro. tom: thank you. barry ritholtz joins us. once again, by the dip. did we buy the dip yesterday at 2:00 and up we go? barry: this was an overdue correction that has been out there since last november, the last time we were down 5% on the s&p and it was june and's had a down 2% day. i do not think we finished down 2% on the s&p. there is tons of capital sloshing around in no reason to think this market will roll any time soon. yesterday was a gut check day. down 2% and a handful of people panicked? that is what markets do. kailey: we usually get a couple drop downs of at least 5% every

year. we have not gotten one in 2021. do you think there could be a catalyst to get one by the end of the year? barry: you have to be careful about imposing a narrative on market action. it is always easy after the fact to come up with some sort of storyline as to why the market did what it did. if we have learned anything over the past couple of decades, the day today action is so noisy, it is effectively random. i try not to get too wrapped up in what happens. what is the catalyst that will drive this market down or up? i don't know. my best guess is if delta continues to run amok, if we continue to see 25% to 30% of the country refusing to act like adults and get vaccinated so we can get back to normal, if

earnings, which have been spectacular this quarter start to fall short due to supply constraints or people cutting back on spending, those are the sort of things that could damage this uptrend or something unexpected, it is so hard to tell you what the next three months will look like. kailey: what about the china risk? ray adding his voice to the chorus of those saying this is not a lehman brothers moment. do think there to be more in terms of that playing out in global markets? barry: here's the big question. i'm very familiar with ray's philosophy. i've a somewhat different view than he does. where we agree is china is a massive economic player. where i think the u.s. perspective versus china varies is that we drank the kool-aid and we believe in capitalism and

free market economics. to china, capitalism is just a useful tool. it was helpful to bring in western companies to help build out their demand for their manufacturing and their software and their technology and all of the different things that have made china one of the fastest growing nations on earth? where we really do not see i to i is i am not sure if china wants to be investable to u.s. and other investors. the bottom line is they do not respect private property, they do not believe in the sanctity of contract, they certainly do not believe in a free market economy. you can get these changes at their goes 50% of a sectors market cap. tom: i want to come back to you in the coming days and talk about the zero bound and what we talked to ray dalio about because a heated opinion about

what that has rendered and how we get out of it. barry has been upfront with his podcast and writing in bloomberg opinion about it. kailey, the markets come off of 2:00 yesterday, it is been better than good. kailey: buy the dip as always. any kind of pullback in the equity market, it seems the next day they take advantage of the cheaper equity prices. my question is with the fed tomorrow coming up, which we all seem to have forgotten because of this evergrande conversation, but that be another downside catalyst the market has to consider? tom: it has been an extraordinary day. thanks to steve and all of our team. they brought perfect weather to greenwich. orlando bravo will join us as well. we look forward to the discussion on what he sees, particularly in private equity. looking forward to that

conversation. we thank the greenwich economic forum. i am to be here tomorrow, next week come into the autumn, perfect. this is bloomberg on radio and on television. ♪

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jonathan: a small bounce back on the essence the. , good morning, good morning.

the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: from new york, we begin with the big issue. bracing for contagion. >> people are concerned the problems in china could continue elsewhere. >> there's a little bit more worry in markets. >> the idea this is going to be a worldwide contagion. >> we are seeing more evidence of contagion. >> it is not going to be isolated. >> this feels like a self-inflicted wound. >> i am more worried about the economics. >> in these