>> it's incredible how quickly the lending market is shutting down and we are worried about whether the fed will raise rates 25 basis points. >> from the fed perspective, their concern is the wage/price spiral. >> we've been calling for a tighter fed and that will surprise you in some way, shape or form. >> i think you will go into a second-half recession but not all recessions are created equal. >> i think we will find it hard to get back to 2%. that will really be where the rubber hits the road. >> this is bloomberg surveillance. jonathan: live from the nation's capital for our audience worldwide, good morning, this is bloomberg surveillance on tv and

radio. bramo we'll make a return potentially tomorrow. futures right now on the s&p 500 are positive, about a quarter of 1% on the s&p 500. citigroup economists say the banking stress is contained. some say the credit crunch has started and those are different conclusions. tom: i agree, that's that single question. it could push aside the meetings of the imf and world bank. the word accelerate was used. jonathan: we got a big division between with the fed is projecting and what the market is pricing. john williams of the new york fed is not worried at all. tom: i was surprised. jonathan: he said time will tell

but that's not on his radar. tom: i was surprised by that. he is a great theorist and economist out of san francisco. he may be codified the big theme here this week. i was surprised by what he said, pushing away but most people disagree. jonathan: controversial comments about the speed at which they tightened and potential blame about what happened. tom: i mentioned this yesterday, the kind of choices that had to be made along the way and by the ecb. jonathan: the questions change. a few months ago, it was about how far we would hike and now it's about what we -- what will we reduce rates to? we will be talking about the headlines this week from the imf meetings later on.

they are making the point that rates could go back to pre-pandemic levels. i've heard push back that. jonathan: rich miller today said there are two wide debates and i would suggest if you say the consensus in these meetings is to push back against the grimness of the ims -- imf and the world bank. i want to pick up on the price action. if you are tuning in, welcome to the program and we're are just about positive by 12 points. yields are back in by a couple of basis points. no drama on the 10 year and the two-year is down to basis points. jonathan: the drama is the three-month compared to the 10 year and here is the key phrase

-- we've never been here. rarely do i say that but you go back decades and decades and you see the three-month, the 10 year is way down here and that's the tension point on this tuesday morning. jonathan: you can see the cuts starting to cut just come through on the front end of the curve. if you think about where the two-year is, we've gone from north of 5% to south of for just like that in a month or so. jonathan: there is still a lot of 5% tension. it's out there and that goes to the bank to bring it full circle. that goes to the banking crisis. some of those charts are pretty fragile. tom: jonathan: peter oppenheimer joins us now. great to catch up with you. let's start with this question -- citigroup economists a banking stress is contained and

others say the credit crunch has started, is it one or the other? >> i think it's a little bit of both. the banking crisis has been contained given there is good access to liquidity and the strongest banks have very strong capital position so nothing like the situation we were seeing during the financial crisis but nonetheless, you are seeing a big pullback in bank lending particularly in mid and small size regional banks and that will have an effective tightening financial conditions for a large part of the economy given the smaller companies rely disproportionately on loans from that part of the economy. the big question is what spillover this has to the real economy and does it avoid recession? i think the market is very much already pricing in a soft landing. there is a lot of optimism. the u.s. was up in the first

quarter the strongest since the beginning of any year since 2019 so there are still risks for the market. jonathan: also pricing in some profit headwinds on the financials. that was a sector that you have advocated for we saw the big move off the bottom last year in european banks. what are you advocating for no given the developments of the last month? >> can europe's case in particular i still think u.s. markets offer better value than they generally do and that could continue. we like the banks in europe. we like the oil sector and they had a fantastic year last year as rates rose. they've had a difficult start to the year but they've made -- they are cheap on a relative basis, as cheap as they been at any point since the financial crisis if not cheaper.

the fundamentals are better. we've been pitching that against the kind of barbell of having a focus on what we call the big defensive 11 companies that dominate the index and make up about a quarter of the european index and we like it in the u.s. as well with the strong balance sheet and that's dominant in the index. that's one of the reasons why the index level, things have been holding up quite well. companies are quite defensive. jonathan: in europe, banks have substantial dividends and maybe subpar dividend growth. in america, maybe some growth in banks but i have shattered banks. what does goldman sachs do in owning banks and also in the partition of what to buy? >> the focus i think we haven't banks globally is more in europe. you've got strong balance sheets

in a heavily regulated system. one point $8 trillion in excess reserves and 15.5% and i think they are reasonably robust given the valuations. in the u.s., it's a mixed picture because you have this regulatory system and the regional banks are pulling back and they have to pay more in deposits and that will hit the revenues. tom: is the financial crisis over -- excuse me, is the banking crisis over? from your view from london, are we clear of the trauma of six weeks ago? >> i don't think we are all clear in the sense that we have to recognize and see a massive change in the cost of capital. we've seen 10 years of around

zero. the shift over the last year is dramatic and as you said, you can still get close to 5% at the short and risk free zero volatility in u.s. cash. that's a very high earning for many assets to beach. inevitably, with the fastest rise in interest rates, not highest level but fastest rise since 1900, i think there will be other negative fallout from that but where that occurs as yet to be seen. there is a lot of focus on commercial real estate and other areas of leverage but i think there will be other fallout from this. i think it will be less systemic because the private sector in aggregate has a healthier balance sheet and therefore it's able to absorb shocks like that then we were seeing a decade ago. i think there will be more

ramifications from this shift in rates we have seen. jonathan: wonderful to get your perspective as always. bank of america puts out a weekly note and this week, he said sell the last rate hike. tom: there is a history to that. the question is when is the last rate hike and there is a select group of guests who say it's not over with one more rate hike. there is a substantial crew that says wait for the data to turn. it's -- it has not turn. we are still seeing inflation and we get a read -- and inflation report this week. jonathan: cpi is coming up tomorrow and people think the last time was the final hike. that's a big divide. cpi comes up tomorrow and we

talked about the financials and the banks that report later this week. i spoke to a couple of guests yesterday on this program and off the record and many people are saying that for them, the financials reporting this weekend through next week are just as important or maybe more important than what they will see from cpi or payrolls last friday. tom: setting up for the imf and the world bank and great conversations. from friday to now, there is a new fragility in the short term paper market that has to be studied carefully. it's a really odd moment on tuesday. jonathan: what are you concerned about? tom: i have not seen any reporting of scandal or crisis. i think it's a reality of what deposit flows do and what the american public does in their choice of where to put 5% money.

jonathan: this is what was said yesterday -- we are obsessed with the idea that it was about credit risk. he said it's about interest. tom: i totally agree, its decisions made in the kitchen, do we want to go to jp morgan but where will you go? jonathan: equity futures are positive by about a third of 1% on the s&p 500. cpi is coming up tomorrow and then it's on to bank earnings friday. we will be in washington all week for the imf meetings. from washington, this is bloomberg. ♪ lisa: keeping you up-to-date with news around the world -- the pentagon says those leaked documents that detail u.s. spying on other countries is a risk to security. they include an assessment of weakness in ukraine's military.

the pentagon is conducting a damage assessment and the justice department is trying to find out who leaked the documents. in north korea, kim jong-un has caused for what was described as practical and defensive war capabilities. john gang cut off communication linked with south korea to reduce tensions on their border. north korea has tested new weapons and systems to deliver nuclear strikes against the u.s. , south korea and japan. in england come the state run health service is bracing for its most disruptive strike yet. tens of thousands of junior doctors walked up the job today for 96 hours. they are joining other public-sector workers who are demanding bigger pay hikes to make up for inflation. the new york fed president john williams is rejecting the idea the fed's rapid interest rate hikes led to the problems in the banking industry. he says there were some specific issues with the two banks that failed. the fed's benchmark rate is in a range of 4.75%-5% up from near

zero year ago. u.s. gold giant newmont has weakened its bid for its australian rival. it is not willing to pay $19.5 billion to close a deal that would create the world's largest gold miner. it would also increase its exposure to copper. global news, 24 hours a day, on air and on bloomberg originals. powered by more than 2400 journalists in more than 127 countries. this is bloomberg. ♪ what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments

shape tomorrow today.

>> despite the remarkable resilience of consumer spending in the united states, in europe, despite the uplift from china's reopening, global growth would remain a low percent as we projected earlier. what is more concerning is it would remain around 3% for the next five years. jonathan: a pretty gloomy start from the international monetary fund manager. from washington this morning, good morning to you all.

on the s&p 500, futures look positive by zero point 28%. we are struggling to break out of the range the s&p 500 is in and some expect to break out to the downside with one exception. some think we can break out to the upside. tom: no one else believes it. i think the headline of the last four weeks is have the equity market has been resilient. it's a seasonal factor with retirement plans and tax season where you get a little bit of this but the headline here is spx 4100. jonathan: then we returned to earnings. if the federal reserve can change his view because it was

too soon after the banking failures in the last month, why will the c sweet be any different this week? tom: it's an important question. i will get guidance from federal express. everybody will find some form of restructuring. the only one in washington remembers this is terry haynes and the conglomerates divided and then they got back together again. do you see the houses when you fly into washington? it's so romantic. the smallest house is 5000 square feet. the hallway is bigger than our apartments. it's a very different city. let's bring in our guest on real

estate. terry haynes is with us and he knows that when there is a conventional scandal you have to go there. finally, the washington post catches up today with huge layout of secrets given away from the pentagon. how upset is the city over intelligence secrets leaked including on egypt? >> i think it's a big deal. it is not catastrophic. it is a situation where we all understand we all spy on each other. secondly, this sort of document dump is not really been done in at least a decade or more. we get about one of these per decade going back to the pentagon papers. that was different. joe biden will have some cleanup work on the aisles with allies.

overall, i think it's not that big a deal because it will not shake the foundations of alliances around the world. tom: there is a new technology involves that everyone has to adapt to. do you have confidence our defense establishment will somehow adapt to the new technology, the new speed of transmission? >> they will do so but slowly. there is always a lag time but my suspicion is what we've had is a situation where the systems have not been upgraded for the last several years and now they will need a fresh program. tom: they are stuck in traffic in herndon, that's the real issue. that's a washington issue. jonathan: let's talk about the comments over the weekend.

what did you think of them? >> i thought what the president was doing was to try to mediate between the united states and china and position france and be in a position to be between the united states and china. we talk about the european union like it's a unified body and its 27 countries that have different agendas and -- in different places. the french agendas to make sure france has markets in defense and otherwise and he made that clear. jonathan: do you think the euro will repeat the same mistake they made with russia? >> i do, absolutely. there is such a thing as mediation and making sure you have communications open on both sides. there is also a serious possibility for willful misinformation, a desire to abandon yourself to the idea

that we can deal with china and the same way we can deal with the united states but i don't think that's so. jonathan: what can the white house do about this? >> they can rally the other countries in the european union and i suspect they are already doing that. germany doesn't want the to make the same mistake again and you've got an awful smaller countries that are on borders whether they are the baltics or the eastern european countries that will not want to make the same mistake. got a situation where i think that area will get surrounded a little bit. jonathan: i see nashville rapid response of democrats against republicans area one of our staff is it disney world as we speak spending $3000 on tickets.

it seems there is a new democratic rapid response to the trump part of the republican party. is that a sea change in strategy and policy by democrats? >> i think it's a new thing. both parties end up doing this. republicans seem to be flat on their feet right now and they will probably get back and start responding. what went on in florida with desantis and what goes on in many other places appeals to a broader base. we are at a point now where the political rapid response is more obvious and more important in some ways than the substance of what's going on. that's out of whack, certainly. jonathan: the speed of responses is the new technology. jonathan: who is the winner of

the last month? is it the former president? >> which former president? jonathan: donald trump. >> no, i think we are watching a very long, slow slide down with trump. there is a hard negative support -- nugget of support for what you see is a situation where the hard nugget still exists but the increasing influence is people looking for trump is in without trump. a lot of the trump agenda including the china agenda has now gotten adopted largely by both parties. people are looking for a candidate without baggage. jonathan: who is that? >> today it's desantis. he's right where he wants to be. there is a guy you will remember , pat buchanan. he was a young guy working for

richard nixon be -- and the 1967, romney was winning the nomination and richard nixon said i want to be in second place today and desantis's where he wants to be. jonathan: i am aware, thank you. tom: that was brilliant. jonathan: just wonderful as always. live from washington, this morning, equity futures are positive by about a quarter of 1%. this is bloomberg. ♪

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jonathan: live from washington, good morning to you. equity futures are positive by zero .2% on the s&p 500 and the nasdaq is was it by zero 3%. the nasdaq is the winner of the year so far. over the last month or so, just short of 4% on the two year. similar move on the 10 year. let's finish on foreign exchange. euro-dollar, the high of the year $1.10. it was before that monster

blowout payrolls report. i think that was february 3 and february 2 was the intraday high of the year. we are short of that right now. we are positive on that currency pair by a half of 1%. tom: you see things go up against resistance. i'm watching the 10 year and it's sort of there in the last week but with any kind of news flow, which way does it cut and that's the mystery on that one parameter. there is people looking at $1.20 strong euro. jonathan: i think we are working through the calendar. cpi comes up tomorrow we will have full coverage here on bloomberg tv and radio. citibank expects inflation to come in a touch higher than others expect.

the call from citibank is they don't necessarily stop in may, they will keep going. tom: veronica clark reaffirmed that. it's an important conversation for those talking rate cards. not only do you talk about the place of inflation now but you say you will be surprised to the upside. what part of american inflation pushes us to the upside? >> when we do our forecast, we do a detailed bottoms up forecast. we are still seeing strength and things like shelter prices. people may be overestimating how

quickly those come down but it comes down to the core prices. things like medical services and recreation, we can see a lot of upside there as well. tom: focusing on medical inflation, what is your year over year forward on medical inflation? is it double digits? >> i don't know if we will quite get there but i think we could see that component picking up. not necessarily in cpi data but it i would look more for ppi data which is what will matter for pci inflation. that will run consistently at five or 6%, getting closer to double digits but not quite there. jonathan: do you think the federal reserve can go further? to what extent the bank stresses a substitute for rate hikes? why do you and the team think

that what we've seen develop in the last month is contained? >> i think we are seeing things stabilize now it is not that we wouldn't expect no impact on activity for inflation and lending but it means that lending standards tighten more and credit holds back a bit more but we should have been expecting some of that from higher rates. it's not that you will see it immediately. this is more second half of the year/end type issue for the broader economy. for the fed, the pressing issue is you will still have three months or so of pretty consistently strong inflation prints and it seems hard to see a scenario where they pause and we are still running core cpi at 3.5%. jonathan: you are well aware the market is trading well below the fed's year end. you are on the others of this. you are well above their estimates so where do you see

the terminal rate for this federal reserve? >> we still have the terminal rate at 5.5-five .75% -- at five .75%. it comes down to the timing issue where the cpi report will come out which is a lower bar for them to hike in may. before the june meeting and after the may meeting, we will have two more cpi reads and they should stay consistently strong and at the june meeting, we will have an up a two projections for nation, growth and the datsun seems unlikely that it will have to be revised higher. i think that keeps them going. the markets will get there over time as we get consistently stronger. tom: what you said there is important. you and andrew are confirming a set of rate moves higher.

when you talk to keith horowitz and i know you're not on speaking terms, but how does your banking team at citigroup adapt to the crisis over but adapt to flows in banking given your economic call? >> i certainly don't want to speak for them but i think the system as a whole, we know there are issues but it does seem the fed facilities are working to control liquidity issues. if things stabilize, we know the fed has all of those other tools to deal with financial stability but we still have this price stability problem and their only tool really with inflation is rates. tom: where does a money market fund go? if i get the call, i'm looking at a money market fund of 5.5% or higher. >> we certainly would have

short-term yields going higher again. you could see more and more deposit outflows but those are already happening even before the banking crisis. that's what needs to happen, unity need people to stop spending and credit to contract and that's what slows the economy and brings down inflation. tom: if you get a citigroup framework, what does that do to libor? what does that do to someone watching this who listens to this for the money market choice at 5.6%? that's a bigger percentage. jonathan: that would be a feature and not monetary policy. do you not think that would contribute to renewed stress in the financial system?

>> yeah, that's a risk and we have seen some of those cracks show up. for the fed, they would see their other tools, the discount window helping to control the financial stability issues. that's a really tough situation and it's not an easy thing for them. you still have an inflation issue. jonathan: let's talk about the labor market. we saw a resilient payrolls print friday. we've had a year of those with upside surprise after another but we've had a downside surprise since the march report of last year. some people look back to the date of last week and are looking for noise versus signal. was the data before the payrolls print the noise where the signal? we have a string of misses going into that print. >> we had some softer ism

readings and job openings that came down, revisions to jobless claims that may be are trending a bit higher now. a lot of this data we should still take with somewhat of a grain of salt especially the claims data. it looks like there is a seasonal pattern that didn't get worked out. all of it is consistent with an economy that should be slowing but certainly is not headed off the cliff. we should be expecting ism services in a 55 range and expecting job openings to be coming down. the labor market data friday, is still a strong labor market and the unemployment rate is still low. it looked like a 2019 job sprint but when you running core inflation that's consistently at 5%, you have to be worried that a tight labor market will add to the upside risk for inflation. jonathan: this was great as

always. thank you for being here. a call for the fed to take rates to 5.5%. tom: bramo would have fallen apart. there is a whole group out there and lisa is comfortable with this and she will speak about it tomorrow but the basic idea is simple -- there is a group modeling out rate cuts. i didn't hear that there. jonathan: you don't hear from the fed or citigroup. i don't think the fed is willing to come out and make the call that the stress of the last month is contained in they have a deeper understanding of how much the spillover is and how much it looks like. citigroup is making the call that they think the spillover you get from last month will be limited and for that reason, more weight will fall in the federal reserve to do more. tom: they will need security to

walk by the imf building because they are miles away. maybe they will go there someday but anna global gdp -- but on a global gdp call, they are miles away. jonathan: they still believe that rates will return to pre-pandemic levels once we've dealt with inflation. i've heard tons of people say the opposite to that for many reasons. they say this will drive rates higher than they were before. tom: a great set of guests will join us this week to talk about this. they might return to where they were, powell has to say we are going back to 2%, above 2% is the former vice chair claire hood, richard clara data is saying maybe not and others as well and then you've got another group looking at an entirely new

regime and the debate is where is the new regime? is it 2.8%? jonathan: in about 20 minutes, we will catch up with wells fargo and have that conversation after an amazing call from citigroup believes rates could get close to 6% even with the threat of recession still lingering in that conversation continues. equity futures on the s&p are positive about 0.2%. live from washington through the week, this is bloomberg surveillance. ♪ lisa: keeping you up-to-date with news from around the world with the first word -- president biden will go to ireland today for a long-awaited return to a sense -- his ancestral home. his first stop is belfast where he will meet with the u.k. prime minister and then travel to the republic of ireland to mark the 25th anniversary of the good friday agreement and celebrate

the recent brexit deal. senate democrats want an investigation into undisclosed luxury trips that supreme court justice clarence thomas accepted from a wealthy republican donor. they have asked the chief justice to conduct a probe. the senate judiciary committee controlled by democrats will hold a hearing on the ethical standards. the government of china plans to require a security review of gpt bots. they must ensure content is accurate and neither discriminates or endangers security. it casts uncertainty over ai bots in china. the swiss government told parliament the intervention was needed to stop the collects of credit suisse. the takeover cannot be derailed by legislation. warren buffett is turning his focus back to japan.

berkshire hathaway has kicked off aen/bond sale. he said he plans to boost his investments in the country and there are shares of japan's major trading houses that jumped after buffett said he would raise his holdings. global news, powered by more than 2400 journalists in more than 127 countries. this is bloomberg. ♪

>> there is losses being allocated by the world system now, but we should keep in mind that if you just lower the interest rates back down, it won't solve the problem. that means that people will suffer from inflation. the dollar weakens, the

inflation rate goes back up and that hurts the poor the most. i think there has to be a goal of finding a low-inflation environment and dollars stability for the future. jonathan: david malpass, the world bank president. who does that remind you up? who could that be? where do you think she learned that check out i wonder if she got that from you? let's check out the price action, equity futures on the s&p are slightly positive by 0.2%. yields lower by three basis points, 3.38 on the u.s. 10 year. lisa will kick off a new surveillance newsletter today. you can sign up at bloomberg.com/newsletters for daily insight.

tom: if lisa is driving this bus, it has to have some worries. jonathan: it's the daily anxiety. we will find out. i believe the first addition is today. tom: there is lots of digital stuff we are planning going forward. this is an important conversation because of the number of narratives in washington. the spring meetings of the imf in morocco later this year in october, it's like howard johnson's years ago, there are 20 flavors of narratives. a student of this is douglasroedecker from international strategies. thank you so much for joining us. you said there are two narratives to the imf.

>> i don't think you can start with the imf of 20 or 30 years ago. right now, it has little to do with the imf and more to do with the world. there is not one overwhelming crisis if you go back to the greek or euro crisis and covid, those were dominant themes that squeezed everyone else out of the room. the fact that we have multiple different narratives is probably better than being overwhelmed by a single one but it doesn't mean any single one of those is easy to resolve. they won't come out with anything concrete but it's better than one thing because it's existential. tom: i've been searching for this for three years, what is the right phrase for the attitude we have for the great financial crisis? it's been nailed, calling it the

rescue culture. is that what we are trapped in where every institution says there can be no pain and no one can go out of business in every deposit has to be covered? do we have an international rescue culture? >> yes, whether it's called rescue culture or entitlement culture, everybody assumes there is some form ofput weathers from a central banker fiscal authorities, everybody feels somewhat in title. -- you have me more pessimistic but yes. tom: imagine if lisa abramowicz was here. jonathan: do you think that sense of entitlement is misplaced? >> i guess it's well placed in the end. that's if the authorities blink and write the checks. if the game is avoiding a moral hazard play, fundamentally

countries, companies and investors believe when things get really bad, some institution will bail me out of of the worst consequences. it's been a fairly solid bet today but i don't think it's sustainable. that could be two years or 20 years. jonathan: what did we learn last month as far as this? >> it's too early to know what the long-term consequences are. the svb and credit suisse and i divide the two into different camps. yes, rather than letting unfettered capitalism create a destruction play out, everything is systemic. we learned that everything is systemic. when svb is suddenly systemic, it was the 16th largest bank in the country and it was not systemic by traditional metrics,

but when it turns out your zoom call might not happen monday because zoom was a big depositor, that is systemic. jonathan: if everything is now systemic, does it imply that all deposits are insured? >> i think secretary yellen and other authorities have gone far to making sure they send a message that implicitly, yes but explicitly, they don't have the congressionally mandated authority to say yes so they say yes with a caveat or no with an asterisk. they say go to sleep at night knowing your deposits are insured. tom: your work is to combine economics with the law. i am fascinated how you respond to the imf five-year call of global gdp 3% or less.

that's not barack obama's better america that are global. how did we get negative so fast? >> i have high regard for the economic teams. there is a caveat coming,the but is there is a certain amount of groupthink that trickles into this. you have economist to factor in their individual country projections into the regional, into the weo and what you end up with is not necessarily a holistic, strategically oriented five-year forecast. it's almost bottoms up to the point where it's two bottoms up. tom: that's the single best discussion of that ever. jonathan: i will take it a step

too far -- is the space to make the accusation that some of the food these -- these forecasts are not based on economics? >> it depends how you for defined political. i actually think there is a lot of people who are very technocratic and keep their heads down and have their pencils to their papers were the equivalent and they are making their forecasts based on their best estimates without regard to politics. program lending and policy choices are highly politicized, probably more than ever before. tom: you are being way too polite. it's been scathing that the imf has become the world bank. >> it hasn't been, but it's trending in that direction. the current managing director of the imf's instincts are more aligned with experience at the world bank. i would make the counter argument that david malpass and

taking a hard line on lending to china, reinforcing bringing china to the table is more transparent and that has taken a more stingy, imf style approach to emergency lending coming out of covid. jonathan: are you suggesting that david malpass should be at the imf? >> the seat has already been taken but whether they were the perfect fit for the job under the circumstances we now have, let's say i think the two leaders have done admiral jobs in their current positions and i wish them the best of luck. tom: they were given up pandemic. >> and they inherited this china card and the imf deals with debt restructuring and debt relief and debt issues in emerging markets and frontier markets.

that certainly is something that each one has handled in a different way. jonathan: this was great, we should do this more often. tom: this is what's beneath the headlines. the backtalk is what people are talking about. this is an imf that's taken on a pandemic mission very much like the world bank. jonathan: equity futures on the s&p are positive by 0.2%. coming up later, mike shoemaker of wells fargo. yields are a little bit lower by three paces points on the 10 year. from washington, this is bloomberg. ♪

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>> it's incredible how quickly the lending market is shutting down and we are worried about whether the fed will raise rates 25 basis points. >> from the fed perspective, their concern is this wage/price spiral. >> we've been calling for a tighter fed and that will surprise you in some way, shape or form. >> i think you will go into a second-half recession but not all recessions are created equal. >> i think we will find it hard to get back to 2%. i think that is going to be where the rubber hits the road. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. jonathan: live from the nation's

capital for our audience worldwide, good morning, this is bloomberg surveillance on tv and radio. lisa abramowicz will return to the program tomorrow. she will launch a newsletter a little later this morning and i will bring you details on that in the next 30 minutes or so. equity futures in the s&p 500 are slightly positive through most of this morning going into cpi tomorrow and bank earnings later this week. equity futures on the s&p are slightly positive with yields lower by about three paces points -- three basis points on the 10 year. tom: we look at the two-year and the 10 year and you have to go inside that and see the real dynamic. you wonder how that folds into deposit flow decisions. do i want a high yield cd or go

to a low yield cd because i'm afraid or go to a higher yield? jonathan: that situation could get more interesting of citigroup has their way and their projections materialize. you got the federal reserve projecting the dot plot maybe one more hike north of 5% in the market pricing in a ton of rate cuts. citigroup says 5.5%-5.75%. jonathan: tom: we will have michael schumacher here with us in a moment. that's the debate here and you overlay that with the 60,000 foot imf slow down in the economy. the lower rate regime i miss

bramo, it's a toxic brew here. jonathan: the imf says rates will return to the pre-pandemic level. the idea that we go back to 2% once we dealt with inflation. i thought we spent the last six months saying things have changed and we are not going back there. tom: we've got to do the data check so i don't want to get into it right now but i cannot say enough about the intellectual divide about other factors out there. do you believe there are depressants like technology, immigration may be, may be hydrocarbons that bring that yield down or not. that's a raging debate that will be addressed over the next few days. jonathan: let's go to michael schumacher. good morning. let's talk about the call from citibank, veronica clark 30 minutes ago talked about rates

of 5.5%-5.70 5%, or you in that camp? >> not at this point. the fed wants to hike maybe once or twice more but it's torn because it has these obvious troubles and regional banks and 5.70 5% seems like a stretch but we are not in that camp right now. jonathan: the conversation shifted and has gone away with from how far the fed will go with how far they had to come back. the imf put out its research suggesting that rates will return to pre-pandemic levels. would you go that far? >> the imf is entitled to make a forecast like anyone else. when you think about the dynamics over the last 6-12 months, complete shift in psychology and inflation a stubborn many countries, i think that will keep rates pretty well above pre-pandemic levels for a long time. not any time soon, maybe years. tom: is your macro strategy

based around service sector core not coming down? you've got a better view on headline and core is somewhat persistent here. what does service sector core due to the wells fargo call? >> frankly, people care about service sector core because jay powell thinks about it. if it's important to him, it's important to me and investors. we've got core staying pretty stubborn for a while. you probably see some moderation but maybe not tomorrow when it comes out but fairly soon but still well above where the fed wants it to be. we focus on a but not anywhere near the correct zone yet. tom: if i look at the three-month t-bill and i look at the three month t-bill guesstimate out 18 months, i see a very sustained three-month

yield. does that drive even higher in the coming quarters? >> it's interesting to think about how much easing market has priced in. one factor is inflation in the fed wants to squelch it and then implies more hikes and financial system it -- has angst which implies more cuts in with think there are too many cuts priced in this year and next year. the big test will be in the second part of this month with earnings releases and at the system gets past that, you will see a number of cuts priced for 23 and 24 go down a lot and that should push up things like the two year yield. tom: a managing director of the imf just emailed me and asked schumacher what we will see tomorrow? >> focus on core with us coming in at 4.1% and that will

probably not shock anybody but we look at how the market reacts to things but we think it's very's to -- but it's very skewed. there is much more reaction to a hot print than a week one and the fed wants to hike and in our calculus, the fed will ease only if something breaks. cora coming in at .4 point 54.3 doesn't really change that aspect of the fed decision-making. jonathan: hasn't something broken already? >> something additional, we've got a huge band-aid on it whether it's credit suisse or svb and now it's the question of where is the strike? is the put still there and should investors think it is, perhaps so but you need to have for the fed to come in or the ecb, another big debacle out there for the markets to become more unnerved. jonathan: they may be concerned

with spillover. if you draw conclusions on how much spillover we will see from those incidents, what would you say? >> it's tough to quantify this point. svb seems like it's localized. credit suisse is more challenging and difficult to unwind but assuming that deal closes soon, probably not a time spillover. the bigger issue in the u.s., thousands of banks that range between 10,000,000,000-100,000,000,000 dollars in assets so we don't have a lot of visibility into those balance sheets right now. they are not huge but collectively there could be a problem. jonathan: what are the longer variable legs or banks and is it too soon to draw conclusions? do you have the incoming information you need to make that call? >> no, you will know if you have an immediate problem in the next week or two but there simply is

not enough time to know if the system is really on solid footing. many clients talk about commercial real estate, it probably doesn't look that great. what about deposit betas? how much does having a fancy iphone change that? the fed can tell and neither can we. -- can't tell and neither can we. jonathan: these incidents are idiosyncratic so would you take the same page as john williams at the new york fed? >> i think you have to focus on monetary policy versus the fed's regulatory authority and does it make it since to have those embedded in the same institution? sheila bair said no they should be split. monetary policy has been aggressive but the fed waited a

long time to get tough. they could have moved back in 2021. they chose to wait. tom: there goes his governorship. jonathan: thank you, sir. many people share that view. i think the language the fed used was misplaced. this was back loading. they had to because they were late. there is a big difference there. tom: i call it the slew rate which is electrical engineering 101. they delayed and up they went. what do you do now? this is why i keep bringing up a pause because is there an easy solution that gives jerome powell options? jonathan: mohamed el-erian wrote into both of us on this point. tom: he's speaking to me? jonathan: there will be three potential scenarios -- you can

pause and pause for the rest of this year, you can pause and start cutting or you can pause and then you need to start hiking again. that's the problem. tom: our guest yesterday was heated that he doesn't agree with deutsche bank. he said they will cut off of pause and it's been said it's not asymmetric. jonathan: should we promote bramo's newsletter? it's written by her every day. it's called the flavor of gloom. the daily anxiety. tom: i love that name. jonathan: you can sign up at bloomberg.com/newsletters. it's very cool. tom: is she making a fortune on this? jonathan: i think she will do

that in the future. she will take a paid monthly subscription. tom: it will go into number of the themes. the anxiety will be there if she's driving the bus. there is a lot of different themes. look at veronica clark and michael schumacher, quite a difference. jonathan: lisa's not taking subscriptions, it will be free. you can sign up at bloomberg.com /newsletters. the next hour is coming up shortly, this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word -- the pentagon says those leaked documents that detailed u.s. buying another countries is a risk to security. they include an assessment of weakness in ukraine's military. the pentagon is contesting -- conducting a demo department and the justice department is trying to find out who leaked the documents.

north korea has called for what was described as practical an offense of were capabilities. pyongyang cut off communication links with south korea used to reduce tensions on their border and north korea has tested new weapons this year and systems that deliver nuclear strikes and the u.s. and japan. the state run health service in england is bracing for its most disruptive strike yet. tens of thousands of junior doctors walked off the job today 96 hours. they are joining other public sector workers demanding bigger pay hikes to make up for inflation. the winklevoss'are using their own money to support a trust after they made a $100 million loan to gemini and the firm has faced numerous setbacks during the year long market downturn for digital assets. warren buffett is turning his focus back to japan. berkshire hathaway has kicked off a bond sale and he plans to

boost his investments in the country. shares of japan's major trading houses jumped after he says he has raised his holdings in them. global news, powered by more than 2400 journalists in more than 127 countries. this is bloomberg. ♪ the first time your sales reached 100k with godaddy was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com

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>> the president has been briefed. he was briefed last week when we all got word there were some documents out there. we don't know who's behind this. we don't know what the motive is. do you believe the leak is contained or are there more documents? we don't know it's an ongoing threat. jonathan: what a story in washington for john kirby, the white house national security spokesperson, referring to a recent military intelligence a leak. we will catch up for a minute on that. here is the price action on the s&p 500, futures are positive so far. on the nasdaq, just about positive by about 0.1%.

yields are lower on the bond market by a couple of basis points. the two year yield has been dancing all over the place for the last month. a stronger euro and weaker dollar. tom: maybe it's just churning but the short-term paper market is doing more than churning and it goes back to, at what level is this banking angst over and nobody knows. jonathan: we've seen a loss of deposit flights. the deposit flights is not just about perceived credit risk at individual banks. it's about interest available. tom: we will just have to see what happens there.

we do surveillance research when we come to washington so which of thebourne movies are more important? annmarie hordern has seen them all. she joins us today. we want you to come to the rescue, the movies, are the intelligence community like this? he drives a cool car. annmarie: like you? this is difficult for the administration, this is potentially the biggest data breach since edward snowden and this has to do with u.s. allies so what we see from south korea is a difficult moment for their leader. he is coming here for state visit and the opposition is saying the united states is intruding on our 70 but they don't know if this week is done and it's an investigation to find out how this happened. the biggest document revelation,

potentially some are saying they could've been dr. but the biggest comes to the war in ukraine and the issue going into the spring and we know russia wants to have a fresh offense of but will they capitalize on the vulnerability of these leaked documents. tom: in the movies, it's under a bench in east germany. this is the new internet like with former president trump and others that the whole issue is modern technology in the intelligence community in washington. is anybody dealing with annmarie: this? annmarie:they had hard printouts. the current president has special counsel investigations into these being hard documents. these intelligence documents were leaked on the internet, things like social media.

jonathan: they were late -- they were leaked months ago but we are just learning it now. annmarie: some of these are obscure sites and some of the stories are coming out even today as we learn more and more. the washington post is saying what egypt was trying to do which was sell rockets to russia but to make sure that the united states was not going to be aware of it and keep it on the down low because egypt is a huge recipient of u.s. aid. as the days and weeks progress, there will be more we will learn from the documents and is causing a huge headache for the administration. jonathan: it is said that we all spy on each other. can we be outraged about the chinese spy balloon's flying over the country when we know this has been going on? annmarie: that's a great point, if we know we are spying on each other, the global leaders need to accept it. you have the issue with the balloon is that it was obvious

to the naked eye that this was over the united states and over critical military infrastructure. this is something we know is happening but you don't always see it and now we are actually seeing it. what is the fallout? does this compromise how the u.s. gets this intelligence? tom: the cambridge five is mohamed el-erian and for others. jonathan: are you suggesting he is a spy? tom: this park inspected 1963 and we grew up in an america with this arrogance that error intelligence community was far superior to those crazy brits. that's gone. with snowden and this mess. annmarie: i would say so although the u.k. in united states, the five countries share

intelligence so there is concern for those countries that share a deep amount of intelligence with the united states with their messaging resources that has been breached. jonathan: you mentioned intelligence gathering being compromised. have we compromised any individuals with this? annmarie: we don't know yet and that's with this investigation is about and that's why the u.s. administration is concerned their allies are also concerned but they are not trying to have this public outcry. they are trying to do this in back channels through diplomatic back channels to try to save face but it is a huge issue. tom: the washington post headlines are catching up with this. would you say we don't know it's all out yet? annmarie: we have a news story about egypt. potentially the documents are out there but we haven't gone through all of them to verify

those stories. jonathan: which one is the most controversial? annmarie: the most controversial regards a war in ukraine. this can have serious consequences and how the rest of the year looks in terms of the spring offensive that russia wants and the fact that the u.s. doesn't think ukraine has a defense it needs to fight this off. this is a capability that russia could jump on. jonathan: does the united states have reservations about leadership in ukraine? annmarie: i think this is more about the status of the ukrainian military. tom: so what is their status? annmarie: the concern with the ukrainian military is that they will not have the ammunition they mean -- they need. this is not shocking to anyone. it was set at the security conference that if the prior year was about needing weapons, this year's vet ammunition and

the speed of that delivery. jonathan: it's amazing when you find out these things. we know these things happen but when you find them out to this degree, you realize how effective some intelligence gathering is. the level of detail the united states has on individual countries is remarkable. tom: i think the media, we will not speculate and guesstimate what that level is. you mentioned the balloons and there are all sorts of rumors with the balloons because they were jonathan: jonathan: not shut down. we set at that time, who was the outrage for? was it for china or public consumption? to some degree, it felt like it was public consumption because the administration was aware it was happening. annmarie: antony blinken was scheduled to go. the issue with the spy loon is that it became public.

jonathan: great to catch up as always. annmarie: i should say alleged chinese spying. jonathan: they said it was not spying. the alleged weather balloons. tom: is this where they do balance of power? annmarie: you are sitting in my seat. jonathan: thank you. from washington, through the week in annmarie's seats, this is bloomberg. ♪ inspired by, created for and powered by you. ♪

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♪ jonathan: is it too early for the countdown clock? tom: can we get a countdown clock? jonathan: three hours away, maybe. from washington, d.c. this morning, good morning to you. on the equity market, futures slightly positive for most of the morning on the s&p. now turning just a little bit negative on the nasdaq, down about 2/10 of 1%. the s&p 500, totally unchanged. federal reserve minutes as well. later on in the week, some bank earnings as well. bank of america, investors are too up to mystic on rate cuts, not pessimistic enough on

recession. moving the market over the last month or so, it basically means you got a big rally at the front end of the curve from north of 5% to south of 4%. right now, 3.98. tom: let's stop the show and petition the brilliance you just said. isn't an interest rate and monetary analysis, or is it just blunt instrument of economic slowdown? that is what mr. hartman is talking about. forget the fed mumbo-jumbo. just on a gdp basis, we are not going to be there which channels what we are hearing from the imf. >> i will people returning to the conclusion, the consensus view after last month. the view is that we are turning to a disinflation rebuffs and that was captured in the bond market. the two-year coast south of four, has a look at 3.60 last week on the back of a week of weak data. and then payrolls gives you a

lift again on the front end of the curve, a bit of an upside surprise. you can take a different view if you want. the federal reserve is certainly taking a different view on things. they can hold for the rest of this year. tom: again, it goes to the inflation report. i want to make clear we are in washington but we will continue with our global economic finance and investment coverage here around international relations. someone who does that each and every day in the beltway with rock creek group is the managing director at rock creek. really managing money, listening to institutions. we are going to play some margin capital. you dovetail. it is actually like your beloved georgetown. use dovetailed economics right into finance and investment as well. are you petrified about an imf call of global recession? >> the imf came out in october but we've also seen some contrary opinions out there. then you look at the equity

markets, the disconnect between equity markets and bond markets both telling you extremely different angst, and i think it is a little puzzling. whether or not the imf is right in terms of global gdp. tom:tom: so where are we on the equity market? are we all cash, or can you participate in the equity markets given your caution? alifia: last year, cash was one of the best trades out there. probably the best trade of a lot of institutional investor portfolios. we are pretty cautious on equities. that being said, if you have a long-term portfolio, you can't be out of the equity markets. 20% rally in the nasdaq? jonathan: so the bond markets basically saying rate cut and the equity market to some extent as contained this idea that rate cuts are good because the nasdaq would do well, growth would outperform, tech would deliver.

are you on board with that on the tech side of things? alifia: the tech could have been a little bit of a dead cat bounce. we seen a lot of investors overselling last year, those who want to be in the tech stocks longer-term. active management is biased toward growth. most of these big money managers are in some of these large growth stocks. lots of layouts, lots of massive cuts. you could argue that they are not a terrible position for the rest of the year. another one on the private sector in tech. jonathan: they talk about the year of efficiency, stock has done tremendously well year to date. tesla, some difficulties over the last week or so, but still up about 40% or so. within the tech which is a massive monster universe, do you think is vulnerable? alifia: definitely you have the larger tech which is not as vulnerable as the smaller

companies that are really going to be very much prone to consumer demand and economic recession. if we get an economic recession we are going to see the majority of smaller tech companies really struggle to survive. tom: the soul and the heritage of rock creek group is what i would call a global hydrocarbon template overall. full day in opec-plus with the surprise 10 days ago as well, how hydrocarbon affects your equity belief. alifia: not necessarily specifically on the equity side, but it affects our portfolio longer-term. we definitely are positioned longer-term to benefit from climate adaptation, climate transition, renewable energy. all of those themes, mostly on the private side but a little on the public side. some of those companies had their best years ever last year. a little bit more recently. longer-term, that is where you want to be if you just look at the jury in terms of the time horizon. that is where companies are

going and the business model is going to have to change. tom: unfair question, does big oil have a future? alifia: i think big oil will always have a future but that depends on what you define as big oil, that might change. jonathan: what do you define as big oil? alifia: in 5, 10 years, big oil might have a large percentage coming from hydrocarbon, renewable energy sources. it will have to have renewable energy sources to diversify its business. jonathan: last year, we saw a bit of a spread emerge between u.s. trends, massive outperformance in the equity market. in the european players. the european players still have a decent year but relative to somebody you underperformed, do you think that is because the u.s. names were a purer play on fossil fuels? alifia: there were also some macro headwinds. you look at all of the tengion in terms of europe, the effects in the russia-ukraine war, that is probably a little bit more of a macro headwinds potentially for some of those big european

oil plays versus the u.s.. jonathan: the reason i asked that question, is i'm wondering from your perspective which of the oil majors are better position for the transition you are expecting? where do you think some of these names need to be in the future? alifia: some of the european players were far ahead in terms of that. it is undeniable if you look at what europe has done and all of the investment they have made at some of the u.s. players are probably behind and starting to really catch up, because they know where the future is headed. tom: how do you process the tension and bipartisan tension in the united states of america and china right now? is there a strategy for investment given this friction? alifia: it is a topic that comes up with all institutional investors. china has been a major part of asset allocation. thinking about china over the last 10 years. i think that has are the shifted and there is a lot more negative caution on china and it doesn't need to be as big of a play in the portfolio. there are places like india over

the next five years that will take that role. 00 jonathan: they change, tom. tom: we can go another 30 minutes year. good morning. want to expand on that for apple, please? >> i think apple already knows. jonathan: they are very subtle about what they do. tim cook with the previous administration was just never in the firing line, managed to avoid all of the heat and fire, everything. never in the firing line. in this administration he still looks really -- tom: i think it still goes back to the wonderful mr. jobs. i'm not going to mince words here. part of it was because this was a syrian immigrant who founded this incredibly successful, once in a lifetime company and the answer is they have always had a distance reticent from the news flow. jonathan: mark urban of bloomberg broke that fantastic story in the last week or so about how china, how apple is

trying to pull back from china, but in a diplomatic way so they don't trigger anger in china. what do you make of that possibility to do these things in a way that other companies do struggle to? alifia: you also have to redefine pullback. no one is leaving china, they can't. if you are apple, you have to be there. but i do think the incremental investments are going to be all over. tom: is india an analog to china or is it its own beast? alifia: it is its own beast if they can get out of its own way. they have a lot of political challenges. jonathan: tom, on text, on energy, the equity market, all of the above. tom: this is what rock creek invented. the whole crew, they just rafted around a geopolitical discussion. that is what people listen to. that is why you've got to synthesize. take lisa's kids, they are on the couch between the robinhood meme thing.

you've got to synthesize analysis into what do you do with amc and gamestop? jonathan: the big development still is the words of the menu mccrone and china. and what he has put between the united states and europe. whether you think that is the lone view of a man trying to make some news on the international stage because he's got problems at home, i wouldn't go that far. i think he truly meant what he said about the relationship with china that he would like to see that europe might have. tom: i've been remiss not to bring this up and you've been great about bringing it up and i 100% agree, there is a frenchness here to what he is saying that harkens back to the golf ages ago. you are not going to fly your jets over any country. jonathan: the criticism that he has received over the last weekend i think is really -- tom: yeah. jonathan: this is the kind of thing that the europeans used to say about russia and they have ended up with a bunch of stranded assets and the misplaced energy trade.

leadership after leadership across the european union has built up. angela merkel in germany was warned about this repeatedly for more than a decade, and what have we experienced because of that? where those words might come back to haunt the french leader is on the very topic of europe itself. because at the same time, you can't say we won't just follow the u.s. into a crisis that does not belong to us when you are also expecting the u.s. to follow you in europe for a crisis that many people in this country are arguing does not belong to the united states. it belongs firmly in europe's backyard. tom: he is fighting for his political life. my amateur take is on the domestic front, he is more than challenged. that is not just about being two years to the retirement age. they are going from 50 to 52. jonathan: i thought it with the 60's and higher. could you imagine if we could retire at 50? tom: no i could not, that was so long ago that i cannot imagine that.

thank you for bringing that up. jonathan: my generation is just never going to retire. but thank you. the cofounder and ceo. we will talk a little bit more about china and focus on the economy as well. just a sneak peek of the market for you, equity futures turning lower in the next 30 minutes or so, i would say the next hour. equity futures down on the s&p. yields just about unchanged on the 10 year yield in the market. the euro is stronger, the dollar weaker. from washington, this is bloomberg. >> keeping you up-to-date with news from around the world with the first word, i'm lisa mateo. president biden will head to ireland today for a long-awaited return to his ancestral home. his first stop is belfast, northern ireland where he will meet with rishi sunak. he will then travel to the republic of ireland to market 20 that anniversary of the good

friday agreement and celebrate the recent brexit deal. senate democrats want an investigation into undisclosed luxury trips that the precor justice clarence thomas accepted from a wealthy republican. they've asked chief justice john roberts to conduct a poll. the senate judiciary committee, controlled by democrats, will soon hold a hearing on the ethical standards. in china, the government plans to require a security review of chet gpt-like bots. providers of the services must ensure that content is accurate and neither discriminates nor endangers security. that casts uncertainty over the bots unveiled by china's largest tech companies. a setback for moderna. the company says a final study of its first experimental flu shot hasn't accumulated and updated to determine how well it works. now, they will start a study of an updated version. a flu shot is crucial to the company's future. covid vaccine sales are expected

to drop off. and apple ceo tim cook is headed to india next week where he will open the company's first stores. that underscores apple's ambitions for the country as a growth market and a manufacturing base. sales of iphones and in have reached an all-time high. meanwhile, annual export of iphones assembled in india have reached aliens of dollars. "bloomberg serveillance: early edition" -- 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. this is "bloomberg."

♪ >> we still have that 5.5-5.75, so that is a 25 basis point hike in may, another in june, another in july. again, it comes down to this timing issue. you need credits contract, and that is what slows the economy

and brings down inflation. jonathan: it is a feature, not a bug. looking from rates to get close to 6% over the federal reserve. 5.50 to 5.70 five, still the call from the team. welcome to the program, here is a fly through the equity market for you. futures turning lower. the last 40 minutes or so, down not even 1/10 of 1%, 0.04%. elsewhere we go, but the 10 basically unchanged. a two year yield comes in, a single basis point, just short of 4%. getting closer to that handle this morning. backing away from the move lower we have seen and yields a bit earlier on this morning. just want to finish up with the euro just north of 1.09. plus, we have portends tens of 1%. we've repeated it over and over

this morning, cpi coming up tomorrow, and then onto the bank earnings through the week. tom: the split on cpi tomorrow between the core and the headline, it has been there before. it is not a new idea, but may be more predominant idea. you may get a good headline. even the people away from citigroup are saying you will get a citigroup-like core. jonathan: and that should keep the fed in the game on may 3. that is the view. look how quickly things have changed. this has gone a few weeks away. tom: three more times. this is a treat. if you are at the international, lean forward and listen to leland miller, cofounder and chief executive officer of china beige book out of the washington uva combine. leland miller joins us of china. i'm going to get to the chase, you are right about consumption. they are not 70% of gdp.

what is consumption in china, a lot less, right? >> it is a much smaller share than these pies that they like to print. consumption is structurally weak in china because they don't incentivize consumption. the state represses households and private firms, so consumption has a very hard time ever getting a pickup. they have ramped down investment but incentivizing consumption has been a very difficult path. tom: how do you respond to world banking, particularly imf five-year global gdp, shockingly subpar? they will say yeah, india and china have a buoyancy and everything else is weak. and you are modeling out a china that is less than buoyant, right? > 2023, we are going to go into better economic numbers in the coming months, no question. but the most dominant model for china going forward is one of significant structural slowdown. and this is something in which -- the party has given up on the

high levels of growth. it is not focused on prioritizing growth at all costs. it wants to strengthen the decor, it wants to taper down the debt level. at this point, the entire focus is how do you get china through the next economic model into something more sustainable? this is much, much slower growth going forward. jonathan: what levels of growth that we need to get used to, three? leland: possibly down to one. jonathan: in china? leland: this will be a reflection over the coming years, a reflection of what global conditions are, etc. but there are numbers that they can announce and numbers they can't announce. if they fall for cliff and they don't have covid as an excuse, everybody will panic. but the amount of growth now that they have diminished the role of the property sector in driving growth, there is no replacement growth track. consumption is not going to pick up the slack. much slower levels of growth in order to get the number enough rick to be politically palatable.

but you're not stimulating like you used to in the big stimulus sense. jonathan: high unemployment in a place like the united states, a democracy, is a threat to the political future of the individual in the white house. in china, it is an existential threat to the communist party, the whole system. what kind of levels of unemployment, what does the rest of the economy look like as you transition to maybe even down to 1% gdp growth? leland: demographics are enormous headwind for china but in the long-term, they are very sedentary. fewer people in the workforce, you are going to have less of a problem with employment. it is going to help ease the trend. in the short term, the fact that china has all these working population headwinds, it is going to help the transition if they do it right. but it means the long-term picture is going to be extremely challenging. tom: if somebody walks in behind the red doors into the leadership offices and says we are modeling 3% national chinese

gdp, in america, somebody goes fiscal space, get to work. did they have fiscal space? do they have a normal mechanism of stimulus? leland: they do, but they are very concerned about overusing it. if you look at the last 3, 4, 5 years, there has been much less reliance on stimulating it to weakness. the entire playbook has changed because the party says we want to be in power, definitely. and we don't know when too much debt is going to be too much debt. they don't care, they are going to do their spending and get out. china says we have to have a long-term, sustainable solution to how we spend. we don't know where on the road we are at, so they are pivoting all the economic policymaking. tom: what is the distinctive feature of your micro research right now? china plane for electricity receipts? just as one example.

what is the micro data now that our audience needs to know. leland: credit. you look at the pmi, gdp growth. everyone is talking about how much china is growing, but the best lens through china is always credit. we saw the first quarter which was the biggest single one-off drop in credit cost that we've seen in the history of china beige book. over a decade of data, points dropping through the floor. and they drop aware? retail. services, private forms, all of the place that china wants. so we have been very cautious in saying that the government is providing the economy for several years now. there's policy support going to the economy right now. it's one reason we are much more bullish on quarter two. jonathan: we suggested china has control of destiny, any sign that they've lost control in the direction of the economy? leland: no, i think they are maintaining control in the direction of the economy, that

depends on the understanding of where the economy is growing. anywhere near the old growth levels are no longer possible. they could be possible in the short term and it would have long-term consequences. they are going through much, much slower growth going forward. a noncommercial area like china, they could plug up the holes to make sure the ship does not sink but that means you are dealing with much slower growth over time as you are chasing that. jonathan: it is almost the wrong question. what would you look to? electricity? where can i get reliable data on what is actually happening in the economy? which is why we used to look at electricity usage, because people didn't believe they could trust gdp figures. leland: look, there's not that many good sources of data right now. bloomberg, of course. tom: of course, continue. leland: the problem here is that when they are all these macro

indicators that are used as proxies for the economy -- tom: very quickly, we change the dialogue chinese, only saying it is fragile domestically. do you buy it? leland: he is undergoing enormous challenges but that doesn't mean that xi is weak to the point he is going to lose control. if you associate that with where china is going, china's international image, you have many more challenges than just being the leader of the country. you now represent china on the international stage. jonathan: emmanuel macron's visit over the weekend, what was your response to the visit? leland: it is the french being french. i don't think there are many people right now impressed by what a beautiful, strategic stroke this was. they are just chasing after the idea that the u.s. and china are great, but france is important. i think we can look at the international stage. tom: on the radio you are not going to see this. on tv, we don't want miller:

it's the french being french. we will never get anybody french on the show again. jonathan: leland, china beige book international. thoughts on that? tom: it is just brilliant. this is why we invented "surveillance." this is what we want, really knowledgeable people, always opinionated, always different opinions. in on china, you talk about the code word, a fragmentation. a fragmentation between china and america is tangible. jonathan: the conversations continued out here in washington, d.c. we will catch up with -- of wealth management. the equity market, we are just about negative, just from washington. this is "bloomberg."

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>> from a macro economic perspective, there is a very clear indication the labor market is tight stop >> there are mixed messages, but if the fed wants to go they can

go 25. >> we have never seen this much tightening without a recession. >> it will be may be a deeper recession than people give it credit for. >> this is bloomberg surveillance with tom, jonathan ferro, and lisa abramowicz. jonathan: live from washington, d.c., good morning. for our audience worldwide, this is "bloomberg surveillance" on tv and radio. futures just turning negative in the last 45 minutes on the s&p 500. things just warming up in washington. things will get busier as the week grows older. michael: -- tom: tomorrow, even at the imf and the world bank, they will parse united states inflation. it is that important on an international basis. with a vengeance we get going after the world economic outlook

presentation tomorrow into thursday and friday. much more to do with the shocking caution the imf has. jonathan: and the attention will turn towards the financial systems. we talk about the bank earnings and reflect on the shock we have seen. tom: this is a different imf world bank beating and it has not -- a different imf world bank meeting and has to do naughtily with the tension here but the swiss franc that was challenged. that is sort of unspoken. jonathan: 12 months ago we were talking about hiking into high inflation. central banks needing to do more. 12 months are we running the risk of hiking into a crisis? whether it is the ecb or the federal reserve after doing a lot in a small amount of time. zero 10 north of 4%. john williams talked about this at the nyu. he mentioned he does not think

the banking fallout is in any way connected to the speed at which they raised interest rates. tom: i do not think it was the case that the pace of rate increases was behind the issues at the two banks in march. i think it was well understood there were idiosyncratic issues with those institutions. the distinction is may it does not narrow and idiosyncratic, but there other larger issues than just worrying about the isl m function. -- the islm function. jonathan: some, including citigroup making the point they believe any spillover is likely going to be contained and limited. others think the credit crunch has started. where you come out on that will shape your view on how far you think the federal reserve can

go. if you are in the former camp, you think rates can go to 5.50 or 5.75. others think the last type of this cycle has already been delivered. that is why we see such a spread on the streets. tom: i would think politically they will move away from financial analysis, and far more to a pure gdp analysis of 3% moving under 2%. if you get under 1% u.s. gdp dialogue present or estimates into the future, that is when you have to change your dialogue. jonathan: joining us is alicia levine from bny mellon wealth management. wonderful to catch up with you. we miss you. she is up in new york. i want to start with a line from bank of america. michael hartnett says investors

are too optimistic on rate cuts and not pessimistic enough on recession. alicia: the equity market is in that betwixt and between place of incorporating both the chance of a mild recession and a soft landing. if you think about where the earning spread could be in either of these scenarios, on the recession side you are down to about $190 a share for s&p earnings and on the soft landing you are at about 230. right now the market is trading at the midway point and can go either way. the market is agnostic about the recession and the market is not pricing in a recession, but neither is it pricing in a soft landing. it is pricing in a wait and see what happens. the bond market is pricing in a notable recession. it is all shouting recession. the equity market is not pricing it in at all.

the thought that the fed will cut three times i the end of the year, which is the pricing of the curb, presupposes a notable slow down that the fed is forced to cut. tom: it was before your time, but you have the courage to go back in history and look at the world according to garp. what is garp and how you drag it out of the agent past to present choice to what to do with the equity markets? alicia: as advisors and investors, we do not have the choice of avoiding the equity market. garp is growth at a reasonable price and what that means is we do not want to be sector specific but we want to be in companies that have growth rates on the revenue line and can maintain their margins and therefore bring earnings to the bottom line. you can find those companies

throughout all 11 sectors. that is how we are focused our investment theme right now. the risk of being out of the market is you miss the rallies, which ultimately grow out of this. nobody has a crystal ball. while it looks like we are headed towards a recession, if we are not, not to be the equity market would be a mistake. tom: yesterday adam with us from columbia and he made it clear nominal gdp is not just analysis. do we get a sprite late gdp that deceives the garp strategy? alicia: it does not because nominal gdp feeds into earnings. we do not talk about earning separate from inflation. this is how the market is priced. that is why is not always the case inflation is bad for the equity market because it does

get filtered through earnings which are nominal. in the end, less focus on the revenue line, which would be flattered by inflation, and on the margins, whether or not the costs are coming lower as inflation moves lower. if that happens, you are set up for an equity market that can really rally. it is all about what happens during earnings season. jonathan: let's talk about earnings. what are you expecting to hear from some of the major players in the financial sector? alicia: the big question will be on the outlook and on funding going forward and the impact of any regulation. in the end of the large banks in medium-sized banks have weathered the first quarter very well. higher rates did flatter some of the earnings. the question is what does the new world look like when the

fdic and the fed have guaranteed some deposits from the banks that have failed. what does that mean going forward on regulations and how does that impact earnings? that is the big question. most investors have become experts on bank balance sheets. it is a joke but true. i think the issues are well known. there are no secrets. it is not shrouded in mystery. the issue is what happens with regulations going forward and that is unknown. jonathan: can you make a conclusion it would be a less profitable world for these banks? alicia: i would expand that to the entire s&p. earnings estimates have barely budged in the last five weeks since silicon valley bank. that does not pass the reality test. overall earnings have to move lower because the pressure will

move lower. there are certain sectors in some of the cyclical sectors that have already had their bear market and the bringing down of earnings estimates quarter after quarter and i think those interestingly -- they have signal inventories were too high or of cut estimate some quarters in a row they are starting from a different place. jonathan: are you talking about retailers? alicia: i am not talking about retailers. some of the semis are interesting -- they rally because they were down 50% to 70% last year on lower guidance and slowdowns that were projected. they have had their bear market, they have had their correction. going forward it is an interesting place. jonathan: love catching up with you.

alicia levine of bny mellon. here in washington, d.c., i want to pick up on economic data earlier this morning. a small business survey closely followed in the united states, 9% of owners who borrow frequently said financing was harder to get compared to three months earlier. that number the most since december 2012 according to that survey from the national federation of independent business. tom: this is the micro data, it is all coming out. what is so important, is this a trend or is this a one-off? i do not see anybody guesstimating it is a one-off. it is a trend in place. you wonder where that trend will be three studies from now. jonathan: and what degree is that a substitute for more rate hikes from the federal reserve? tom: i strongly take that point. he and jerome powell, we did not

guesstimate we would have a super restriction from banking dynamics. that is the surprise we have had. jonathan: are usually step away from the studio in about 20 minutes. i have to say i'll be glued to the tv and the radio as well, because coming up at 8:45 eastern time, about 30 minutes, tom keene one on one with john bolton, the former national security advisor. i am looking forward to hearing you talk with him a little bit later. tom: incredibly important interview and well-timed with the silence in washington over intelligent leakage. jonathan: from the nation's capital, this is bloomberg. lisa m.: with the first word, i am lisa mateo. the pentagon says lead to documents that detail u.s. spying on other countries is a risk to security. the papers include an assessment of weakness in ukraine's

military. the pentagon is discussing damage assessment and the justice department is trying to find out who leaked the documents. in north korea kim jong-un has called for what were described as practical and offensive for capabilities as pyongyang cut off communication links with south korea. north korea has tested new weapons and systems to deliver nuclear strikes against the u.s., south korea, and japan. in england the state run health service is bracing for its most destructive strike yet. tens of thousands of junior doctors walked off the job for 96 hours. they are joining other public-sector workers who were demanding bigger pay hikes. the founder of theranos has been ordered to report to prison this month. a judge in california rejected elizabeth holmes request to remain free on bail washy appeals or conviction. she was sentenced more than 11

years in prison for deceiving investors. billionaires tyler and cameron winklevoss are using their own money to support their crypto exchange. the twins of maid $100 million loan to gemini. the firm is facing numerous setbacks during a year-long market downturn. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> when you think about the dynamics over the last six to 12 months, complete shift in psychology, inflation still stoppard. i think that will keep rates above pre-pandemic levels for a long time. 2019 levels not anytime soon. many years. jonathan: that is the call from mike schumacher at wells fargo pushing back against the imf you that once we have dealt with inflation rates could go back to pre-pandemic levels. that will be a key feature of the conversation in washington as we approach the imf meetings. i am happy to say lisa will return tomorrow. looking forward to catching up. she has been working tremendously hard on this. she will be launching a newsletter later on this

morning. you can sign up at bloomberg.com/newsletters. bramo's daily musings. tom: the working title three months ago was toxic brew. jonathan: than the dalian zaidi. -- then the daily anxiety. tom: we will see this on twitter. jonathan: it begins today and lisa will be back on the program tomorrow morning. we'll be covering the imf world bank meetings. tom: right now on the bond report, ian lincoln joins us. i was getting a brief this morning from my senior executive qantas, and want to save you have to look at the screen on the bloomberg. you look at it all day.

what is the indication for one month, two months, three months, six month yield. ian: what we see is the most high-yielding aspect of the treasury market is at the front end of the curve and what rates are responding to our two things. first we have a monetary policy maker in the form of the fed who is willing to get us to terminal and hold terminal for an extended period and that will impact the three month bill and the six month bill. perhaps more importantly there is a fair amount of uncertainty at the moment as it relates to the debt ceiling and the potential for dislocations in certain bills if they fall into the window for the treasury market risks missing a payment. tom: i look at the three month as compared to 10 year yield. the three month 10 year spread. i'm not allowed to do standard deviation studies in washington, it is un-american.

if i did the inversion of that curve is 4, 5, six, dare i say seven standard deviations, massively inverted. what does that say? ian: historically the fed has looked at the three month bill versus the tenure curve as an indication of the probability of recession within the next 12 months. at the moment it suggests we are at a high probability of recession in the year ahead. what is more fascinating is market participants are very interested in attempting to extract the severity of the inversion and map that against how large of a recession we might or might not the. that is one of the key uncertainties, if no other reason than because embedded in this is the idea the fed will be effective in containing inflation expectations going forward and that should compress breakevens. that is one of the key reasons the curve is so inverted. jonathan: when the curve is

inverted like this, it does that impede maturity transformation? does that prevent banks from lending to the economy in a way they traditionally would? in nature -- ian: in a traditional environment a steep yield curve is the best case scenario for banks because they can borrow at comparatively robust -- low rates and land at high rates. today we are in a unique environment where financial assets more broadly are responding to a drop in rates. as we see risk assets do well, stocks in particular, when realized yields declined or forward expectation for policy rates shift lower. we are in an environment where the traditional might not hold. we are in the mode of bad news being good for risk assets, which does complicate the fed outlook for the next several months.

jonathan: if we take the whole curve out to the 10 year, let's cut off bills and say the 2-year note out, what we have seen there is able steepener. the reese deepening of the curve , taking away some of that inversion because we are pricing in a lot of rate cuts. i wonder in your mind whether that move has gone too far too quickly based on what we expect from the federal reserve later this year. ian: i think the outcome between now and the end of the year is particularly binary. we will either end the year with effective fed funds at 5.1% as the fed has already suggested, or things will go bad enough that the fed will need to cut 150 or 200 basis points to offset any slowdowns in the real economy or increase in the unemployment rate. tom: there is such respect for the persistence and quality of your work.

i want you to speak to the younger turks of fixed income who are getting used to an environment we knew decades ago. what is the number one pro tip you have for people who went from negative real yields, negative rates, out to where we were, harkening back to another time? what is your number one pro tip? ian: it is a great question and i appreciate the kind words. if i could impart one piece of wisdom it would be that u.s. rates are impossible to model in the traditional way because what impacts the overall risk free is constantly changing, whether it ends up being a traditional impacts such as inflation, or geopolitical concerns, or political concerns in washington as it relates to the debt ceiling. the primary influence is always moving and stay connected with what is going on and make sure

you are dynamic and you're thinking about how to predict rates moving forward. jonathan: what you said 60 seconds ago was amazing, that this is binary, that this will mean the fed will have to cut between 100 to 150 basis points. neil dutta said the same thing. he said there is no in between and the banking crisis. they will not cut worked price did enough cuts even with this move. when you say that to clients, that must drive them nuts. you can say we might end up at five, on the other hand we might end up 150 basis points lower. what did they say back to you? ian: this year we see regardless of what the fed ends up doing, 10 year yields end the year at 3%. one of two things occur, things go bad enough in the real economy that the fed is forced to cut, or the fit is successful in reestablishing price

stability, which further compresses breakevens. all else being equal, for the same real rates of breakevens are declining you can get nominal 10 year yields to trade with a two handle, and that message has been remarkably well received. jonathan: that is amazing. ian lyngen out of new york. what i call. it goes bad and they have to cut and the tenure goes to three, or it goes well and they get the disinflationary trends they want and the 10 year has to go down to three or two. tom: when we invented this, if you are not part of global wall street, bottle that. you just heard from our guy. his wisdom for those younger. the binary thing you were talking about. he sums with a yield outcome that no one on the planet believes except kristalina georgieva. jonathan: i throw in bob michele

of jp morgan asset management. we are only 40 basis points on the 10 year yield. tom: i take your point of 40 basis points. people are not modeling it. they are out of toxic brew, price down, yield up. this could be in the newsletter. jonathan: i look forward to that. in the next hour, matt hornbach of morgan stanley, emily roland, tony rodriguez. we will advance this conversation forward. from washington, this is bloomberg. ♪ like a lot of businesses did. i heard about the payroll tax refund, it allowed us to keep the amount of people that we needed and the people that have been here taking care of us. see if your business may qualify. go to getrefunds.com.

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tom: bloomberg surveillance, good morning on radio and television from our studios in washington. four days of coverage of international economics, still focusing on the markets and the inflation report tomorrow. the data is simple, there is a churn on the market. we come back ever so slightly, maybe possibly equities, bonds, currencies and commoditieswaiting for the inflation report tomorrow. american oil $80 per barrel. i had a panel friday centered

around the outlook for what an appropriate growth rate is. we advance that conversation is with the chief economist market strategist. it's such a rich discussion right now in the polarity of this around this guy want to stay away from the arcane. is the guesstimate of an appropriate run rate for in economy of higher or lower post-pandemic? you say we will see it subdued in a surprisingly slower economy. how do we get there? >> i think you can ask the question to whether the underlying fundamental drivers on the supply side of the economy have picked up dramatically and if we look at the trends in nonfarm productivity, it doesn't look like there's been much of a pickup. the numbers are actually quite a bit weaker than the average of the last business cycle.

in terms of working age population growth and demographics, those things don't just change on a dime. it doesn't look like there is some kind of big structural shift. what defines this business cycle and differentiates it from the last is the explosive average growth rate of nominal spending, in the double digits on average. we think that willan end that the fed has tighten policy so abruptly we have this backdrop of a contraction in money and credit. looking forward, these nominal gdp figures i think will end up sinking below the average of the trend of the last business cycle and with that inflation, will come down a lot as well. tom: let me get the market call out of the way. what does the 10 year yield doing that environment? many people of shocked us with a 3.0 or 2% handle on the 10 year

yield. do you suggest we fall below 3%? >> i think we could. i think it was on this show last september where we came at an announced a view across the treasury curve and that turned out to be early. the call is working. by the end of the year, 3% on the 10 year is very much doable. that's in the context of the u.s. economy likely falling into a recession. with recession, you get lower inflation, a lower e librium interest rate and fed rate cuts. tom: one of your great mentors is the late great jude winenski. we were shocked a couple of days ago of a shocking five year, 3% global gdp.

does america participate in that order -- or can there be american exceptionalism where we do better? >> we could do better if productivity growth picks up. as we just discussed, not a lot of evidence of that at the moment. perhaps some things could be done on the supply side to try to boost innovation and efficiency. it's really hard to see a dramatic shift a foot. perhaps some innovation comes along that really boosts the capacity side of the economy. the numbers we were seeing in the last business cycle are probably fairly close to what we would look for in a steady equilibrium if productivity growth is 1.5 percent and labor force growth will be the same and 2% real but with a 2% inflation target over time, growth around 4% annually. that's the most reasonable. we can talk about up flyers --

outliers but in terms of a base case scenario, i think that's what we are looking at. the current rate levels i think makes sense in the context but in a recession scenario, you end up going lower. unfortunately, that's probably where we are headed. tom: within the continuum of 4, 5, 6 and seven economist, from out from it 2% guidance much higher, want to focus on the former vice chairman of the federal reserve system richard clarida of columbia laid out as a former fed official and ability to get back to above 2%. institutionally, how will the fed react if we get aclarida above 2% trend rate and policy? >> if it's coming from the supply side, coming from efficiency gains, productivity

gains, that's completely consistent with the fed hitting its inflation target over time. the positive supply-side shock will lift real growth rates and lower inflation rates. if that's what we're talking about, that's consistent with the fed's goals. if we are talking about demand-side stimulus, that's a different story. that's under the fed's control and they have to to bring nominal spending down in order to control inflation and get back to target. if we are going to get a faster trend growth rate because of enhanced efficiency, for sure that's the gift that keeps on giving. we will see if we can do that. tom: 12 months forward, nominal gdp and real gdp, our market economists would like to know what you think. where is nominal 12 months out and inflation-adjusted? >> i think we will tumble pretty

hard moving into midyear and late 2023. if we look at some of the leading barometers of nominal spending, i mentioned we have a contraction in the banking system. so in just two weeks, we saw a commercial bank credit collapsed by more than $300 billion. commercial bank deposits are down almost $1 trillion over one year. and you've got the fed that has its policy rate above every note and bond yield across the treasury yield curve. that is not a configuration that should lead us into thinking there will be some kind of perfect soft landing or no landing scenario. i think the landing could be quite a bit hard. in that context, you could have nominal gdp fall below zero temporarily. that is a recession scenario which won't be permanent. eventually, the fed will have to adjust but i'm afraid they are

being dragged along by lagging indicators in the business cycle. service sector inflation is in the index of lagging economic indicators and payroll growth is critical but it's a coincident indicator. the forward-looking data is pointing down at the moment. we just got the nfib data for march. if you look at small business credit conditions and ability of loans, you do not see this outside of recessions. tom: let's go to university of wisconsin textbooks which tell me that given thedarda scenario, you will get stabilizers to come in. do we have the fiscal space and other attributes that can stabilize the economy given your cautious view? >> i don't think there is any

scope whatsoever for demand-side fiscal stimulus. that makes absolutely no sense when the fed has policy rates up close to 5%. there is tremendous scope for the fed to reduce the policy rate if that is appropriate and that is required. obviously, there are other things the fed can do like ease monetary policy and boost aggregate demand when the time comes. they still want to be sure that inflation is moving lower in assisting fashion so that is not on the table just yet. let's see where we are in a few quarters. in terms of fiscal policy and maneuvering from the demand side i think that's out of the passion. what fiscal policy should be focused on is the supply-side. the previous discussion we had about trying to enhance incentives for growth and economic efficiency but demand-side and fiscal stimulus, game over. tom: i knew i was going to get

this answer but i wanted to get you riled up. how big a mistake is a rate rise may 3? i will not fault the fed if they are data-dependent and have to wait for obvious data. is it a mistake to see a may 3 rate increase? >> i think it is. i think the last time was an error on the part of the fed and data dependency is fine as long as you are not dependent on the wrong data. if you are looking in the rearview mirror, you will be igniting boom and bust cycles. i'm afraid were moving into the bus part of the cycle. the march data has been much softer than what we saw in january and parts of february. that's telling us that the economy is slowing down. in the background, we have this banking crisis that's ongoing with a contraction in money and credit. to have the fed adding on and

continuing to push short-term interest rates up and push the curve into deeper inversion, i think that sets us up for potentially a deeper downturn than would otherwise be the case. tom: is it a general statement that phillips curve analysis -- for those of you not part of global wall street, this is basic economics from 1953 when george soros was atlse, is the continuing -- the continuum of inflation dynamics a did study? >> i think so. it obviously got the fed into a lot of trouble earlier in the business cycle when it just assumed we could rapidly reapproach the previous levels of the unemployment rate with no inflation. it was certainly a big failure in this business cycle and past cycles. i monitorsm is back on the

ascent. you might've seen that on bloomberg today. the shocks we've been dealing with were foreshadowed by a huge explosion of money supply figures which have now turned down. i think we need to re-educate policy makers into a more monetarist fashion and more forward-looking and i think that would help alleviate these boom and bust cycles. it will not work as an intellectual policy apparatus. tom: michael darr deck, thank you so much, he is often times right into the market. it is our washington conversation of the day. coming up, the former national security advisor john bolton on all the digital intelligence leaking out across the world. this is bloomberg surveillance from washington. ♪ lisa: keeping you up-to-date

with news from around the world with the first words -- president biden will go to ireland today for a long-awaited return to his ancestral home. his first stop is belfast where he will meet with the u.k. prime minister. he will then travel to the republic of ireland to mark the 25th anniversary of the good friday agreement and celebrate the recent brexit deal. in china, the government plans require a security review of chat gpt bots. they must ensure content is accurate and discriminates nor endangers security. that cast uncertainty over ai bots unveiled by china's largest tech companies. russia will expand the penalties for draft evaders. that is aimed at fixing the problems exposed in last year's mobilization of 300,000 reservists to fight in ukraine. under the new plan, draft evaders would be banned from leaving the country, getting drivers licenses, buying and

selling property and taking loans. a setback for moderna, a final stage study of its first experimental flu shot has not accumulated enough data to determine how well it works. now, it will start a study of an updated version. a flu shot is crucial to the company's future and the covid vaccine sales are expected to drop off. global news, powered by more than 2400 journalists in more than 127 countries. this is bloomberg. ♪

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>> the president has been briefed. he was first briefed late last week when we all got word that there were some documents out there. we don't know who's behind this. we don't know what the motive is. at this point, do you believe the leak is contained or are there more documents that haven't been released?

we truly don't know. tom: one of my favorite people, white house national security spokesman john kirby. he has legit military experience in the united states navy, talking there about recent military intelligence leaks. we have to do an audible with john bolton, the former national security advisor to president trump, ambassador to the united nations under george w. bush. for those on radio, bolton appears today with arm in sling, no doubt one of the people going after bolton. what is you do to the other guy? >> it was pretty grim. tom: i'm sure it was bolton drama. i want to begin with a wall street journal reporter jailed in russia. you have been inflammatory and

said throw the bums out and you want the ambassador of russia to be removed from the soil of the united states of america. discuss that. >> this is obviously an entirely political decision by the kremlin. they are taking this reporter hostage and accusing him of espionage but we know that's not true because it's been a long time since reviews reporters for that purpose in order to protect them from this kind of thing. clearly, the russians want to exchange the reporter for something but we don't know what yet. instead of pleading with them to let this hostage go and he is a hostage, i think we've got to declare the russian ambassador purse on a nonprofit. we need to go to our nato allies and ask them to do the same because it could have happened to anyone of their journalists. a strong response is the only thing the russians understand. if we don't start now, gersh

kovitz could be in jail a long time. tom: we have an intelligence leak. this is not matt damon and he will play the part of you in another movie. it's not paper under park benches, this is the euro world being affected by digital technology, digital media. do we need to radically change our intelligence distribution because of new technology? >> i think there is a lot we can do to safeguard classified material better. based on what we know publicly, the presumption at this moment is this is some kind of leak out of the pentagon or other u.s. sources and we don't know whether we are at the end or not. there could be more but i would also caution that we not draw too many conclusions, that this

could be an influence operation by somebody and we don't know who. once you get into the world of counterintelligence, it makes a hall of mirrors look easy. it's very complicated and depending how sophisticated the actor might be, it can wrench your mind. we've seen some anomalies on what's being reported. just this morning and south korea, the government there said the information that looked to be leaked about their consideration of selling artillery shells to ukraine was false. we don't know whether that's disinformation as well but while i don't have any basis on which to contest, what seems to be the case is that this is a u.s. leak in a huge u.s. problem. i think we need to be very careful before we jump to too many conclusions. tom: this is a general question

for the american public. in your experience, how removed is the intelligence communities process in day to day grind from the way it's perceived by hollywood? is hollywood accurate or are they just off the mark on a movie by movie basis? >> the hollywood movies are very exciting and some of that does occur but we collect huge amounts of intelligence for what we call national technical means being electronic and other forms of surveillance. frankly, we need more human intelligence collection than we have. we need a greater clandestine operations capability than we have. puritans and the foreign policy establishment have looked down on clandestine operations for a long time. we are in a dangerous world and we could use a lot more. i think if americans knew what

our intelligence collection capabilities were would be very proud of what we are able to do. tom: i want to move to the bipartisan thrust of washington against china. should we be cautious because there is a fixed bipartisan nature to our anger over china? do we overreact? >> i don't think we have overactive -- overreacted yet. there certainly an unusual character in the bipartisan concern of the nature of china but the under lying threat is there. the challenges across the board, not just political or military although it's very much in those sectors but it's economic as well. decades of stealing international property and discriminating against foreign investors and traders and manipulating the international financial system, there is a lot

going on for a long time. we are just beginning to appreciate and catch up to this. the bipartisan concern here is warranted. tom: you've talk to the former admiral about a specific rim build and i know the united states has a new dialogue with the philippines among others. do you suggest we need to re-build out our military in the pacific rim, not just for taiwan but also for the south china sea? >> i think we need to rebuild it across the board. i think the next american president needs defense budget increases in the range of what ronald reagan did during his presidency, maybe more. i think that implies even greater cuts to domestic spending to get our deficit down. we've been asleep at the switch for a long time here. that's going back to the end of the cold war and people said it was the end of history. we had a piece dividend and we have to put that behind us.

we face a wide range of threats. get a map out that has the pacific ocean in the middle and it's a long way away and we probably need 50 more naval war vessels in our fleet just to deal with the pacific, let alone increases for the rest of the world. tom: what's so important here is those of us of a certain vintage remember our intelligence mis -estimates of the soviet union. do you have a confidence in error intelligence of china or do we make the same miss guiding that we did with the soviet union? do we know what we are talking about with beijing? >> we've got pretty good estimates on key areas and some is visible already. like their cyber operations, the military buildup that they've undertaken an answer access area denial weapons to push his back

from the western shores of the pacific, anti-satellite weapons capability to blind our eyes in the sky in time of crisis or conflict. that evidence is out there as is the evidence of things like weaponizing what otherwise looked like commercial companies , they are not telik medications firms, they are arms of the chinese state, trying to take control of fifth generation telecommunications. tom: john bolton, thank you for joining surveillance this morning. he has worked with the national security council as well, always controversial. this has been a superb first day in washington for us and lisa abramowicz joins us again tomorrow. we are thrilled to bring this to you as a kickoff to these spring meetings which lisa is working on which is a bloomberg surveillance newsletter. it's a work in process and lisa is making it up as she goes with our editorial team so look for

surveillance, the newsletter. we continue forward and coming up in the coming days, we will speak much more on these spring meetings of the international monetary fund and the world bank, front and center is the shocking call of economic slowdown for the imf over five years. we will wrap that into everything forward of the market data and that starts tomorrow at 8:30 a.m. with the inflation report. we will look at that front and center tomorrow. 10:30 a.m. today, the chief economist for the international monetary fund, look for that coming up. from washington all this week, this is bloomberg surveillance. ♪ listening more than talking, and a personalized plan

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jonathan: live from washington dc, good morning. countdown to the open starts now. >> everything you need to get set for the start of u.s. trading, this is bloomberg the open with jonathan ferro. jonathan: live from washington, coming up, one top fed official shakes of criticism of hiking too fast. banking stress looks to be contained as the imf says rates could head back to pre-pandemic levels. let us get straight to the conversation with matthew a