federal reserve. host: how can they manipulate or change it? control overave short-term interest rates. long-term interest rates are controlled by the markets. what they can do is ultimately limit or change price stability. if they want to keep prices stable, they have to guard their own behavior. they do not want to go reckless and flood the markets with too much money, but at the same time, they do not want to be excessively in the other direction. they have to guard their own behavior. host: when you say they have control over short-term and long-term interest rates, give an exemplary of how they have or could manipulate the economy. guest: what they do is they controlled the creation of the dollar. at the end of the day, they have the day, they have to printing press, so they do not create physical dollars but they can airate money out of thin and that gives them to control. when they did quantitative easing, they brought treasury securities, mortgage-backed securities, and they would buy them fro

in a period of time determined by the federal reserve.he e.c.b., the next plan for qe, will it be like that, will it be this is how we get to zero or is it the case of this is us going from 60 to 40 and this is how long we'll do it for and revisit it x amount of time? martin: i think the latter option is how they are going to proceed. as things currently stand, the current program, they'll start running into technical difficulties in the first half of 2018 with respect to issue ownership, ownership of bonds relative to outstanding. i do think what they'll do is put up short-term goals they'll try and get to. there's some political risk again on the horizon starting with italy. which i do think the e.c.b. would still like to be engaged in a q.e. program as we approach -- in a qe program as we approach some sort of italian election in 2018. jonathan: martin haggerty sticking with us with ira yersy and matt toms. coming up, fed chair janet yellen has apparently made her final speech from jackson hole. we will get into that in just a moment.

jonathan: we talked of the federal reserve winding down q.e.nd the yield are lower now on 10-year treasury than running q.e. 80 billion a month. i asked, could we have the same situation, because pretty much every conversation around the e.c.b. is based around yield have to go high when they pull back, but could we have a similar situation in europe that ultimately we have here in the united states? ira: not so much when they taper or when taper is announced. we know once they announce taper, the markets will reprice and say they're not buying quite as many bonds and the markets will ask a secondary question and now that yield are somewhat higher, what's the path of inflation and growth? and if that's stable, maybe rates stabilize there, but if people say well, maybe this is a mistake, they're going to unwind too fast, that will wind up making longer term rates in particular coming down. you wind up seeing linkers, for example, wind up showing break evens coming in quite substantially in that area. jonathan: we spend a lot of time focusing on f

at their core, the federal reserve and occ are bank regulators. due to non-bank sifi designations they oversee a huge chunk of the insurance industry having sold insurance for 20 years and being well-versed in the business it is time to reconsider the designation process. the president agrees the executive order earlier this year, regulated on the state level, non-bank sifi are deviation from assistance that works well for 150 years. after stock and federal regulators i can donate lack understanding of differences in business models between banks and insurance companies, insurance firms simply do not have the same systemic risks but the any costs associated with the council designations have an outside impact. .. designations have an outsized impact on the economy at large. for example, life insurers are the largest investors in the u.s. the same bonds leverage growth. 14% of ira assets. many americans have entrusted life insurers with their savings. i'll ask mr. transpose the same systemic risk of the bank. >> well, i think that it would >> iiffi

combined, we got a picture of the federal reserve.t is this very quiet, contemplative place where it takes days to make decisions, if not months and years. know,ohn, though, as we from writing about him, i don't think even his very close friends and colleagues would call him calm or contemplative. he is a famous traitor, a metals trader. he has an obvious aggressiveness. talkan sachs executives about this -- tearing your face off. that is what they say. gary is an aggressive trader. there is a question now that he is a front runner for replacing yellen, and that is what trump decides to do, a question of whether he would be a fit. quiet marble halls of the eccles building in washington. do we have a sense that gary cohn wants the job, is he satisfied with the job he has, why would this be a good fit for him? the job requires a lot of engagement with literature, reading. .> it is immense prestige also, i don't think it's an exaggeration to say the white house in the last few months has been marked by something approaching probably chao

federal reserve chair janet yellen will be speaking at jackson hole.you walk and text at the same time, stamford , it is currently floating the idea of a $30 fine. the have the smartphone crosswalk that would be in october. there are no official statistics to show whether testing played a role. double news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. julia: let's get back to politics and when congress returns to washington. first, funding the government and raising the debt ceiling. joining us is michael brown, economist at wells fargo. great to have you on the show. you expect a continuing resolution, kick the can down the road. think there are so many legislative deadlines congress is facing. this short-term resolution, we -- it willbe likely allow martin for a larger funding deal. it is the big debate. the question is whether there will be some sort of border wall or border security enhancement funding. folks that it does require some democratic support in the u.s.

us federal reserve chair janet yellen speaks in the morning.to the stage in the afternoon. in the past, this meeting has been used to make big announcements — not this time, according to many market watchers. why? well, because even though the us and europe are stepping back from the stimulus measures introduced after the financial crisis, ms yellen and mr draghi have good reasons to keep their cards close to their chests. with janet yellen's future at the federal reserve uncertain, few expect her to make any ground—breaking statements. and even though mario draghi's speech is seen as perhaps more significant this time, he may choose to play it safe. the markets got excited after a recent speech he gave at another central bank conference in portugal, and he was forced to walk back his comments. 0n the economic front, watch out for the latest durable goods orders, that's due to be released from the commerce department. joining us is nandini ramakrishnan, global market strategist at jp morgan asset management. good to see you as always. plenty to

let's begin with you and talk about the federal reserve.t's a solid jobs report, but it doesn't it?e, priya: they are almost not trader independent, but the hike in december -- i does make it moves the needle. you are seeing signs of the labor market slack going away. there are signs of wage inflation picking up. all this week inflation data that we have had the last three or four months is hard to ignore it if wage inflation is picking up. this is one off prices, but wage inflation is picking up and real income is right. for the december hike, which was 35%, and the reason i'm not higher than 50% is because of financial remain remarkably easy, i think they might begin a hike in december. michael: i think they should hike. i would hike in september before i start tapering the balance sheet. our view has been the more that they taper the balance sheet, it's effectively a tightening of monetary policy whether they want you to believe that are not. the further that goes, it lowers the probability they will be able to hike. i think they should

it is an explicity cb&i confused federal reserve -- explicit ecb and a confused federal reserve.most officials were sticking with a forecast at higher inflation would eventually show up, but the debate on the resource models and whether standard data sources were telling them the whole story also showed convictions about their forecast frame. still with us, neil dutta of renaissance macro research. a confused fed. long minutes and no agreement on anything. we talked about how they were a victim of their own transparency. i imagine it is a debate they don't want playing out in public. neil: well, it is playing out in public. it is classic -- you put two economists in a room, your lucky to get six opinions. i think the reason this is so different -- difficult is because they don't have a very good explanation for why inflation is low. you know, you think about it -- you have a tightening labor market. you have less spare capacity in the broader economy. that should put upward pressure on prices. what is upsetting some of that is a lag of impact from the foreign exchange rate. we ar

top billing, of course goes to the host, us federal reserve chief janet yellen — so what will investorsg out for? well, for a start, any clue on the fed's next move on interest rates. it has increased the cost of borrowing three times since december. but new figures are raising questions about how strong the us economy really is. not to mention the huge political uncertainty that's bothering investors at the moment. then there's the small matter of this — the $4.5 trillion mountain of bonds the fed is sitting on. it printed money to buy up all that debt, and so support the financial system in the wake of the 2008 crisis. so what will it do with those bonds? sell them, presumably. but when? and what impact will that have on the markets? investors will also be listening closely to this man — european central bank president mario draghi. he's attending for the first time in three years. some think he may try to use his speech to talk down the value of the euro, which has been surging in recent days. professor alan auerbach from uc berkeley is one of the speakers at jackson hole. hejoins us

let's begin with you, priya, and talk about the federal reserve.s a solid jobs report, but it does not move, doesn't it? priya: they are almost not really data dependent, but for the hike in december, i think it does move the needle. i know the market didn't react as much, but you are seeing signs of the labor market slack going away. and most importantly, we saw signs of wage inflation picking up. all this weak inflation data that we have had the last three or four months, they can afford to ignore it if wage inflation is picking up. this is one off prices, but wage inflation is picking up and it allows real incomes to rise. the probability for a december hike, which was 35%, and the reason i'm not higher than 50% is i want to see how they deal with portfolio runoff. if financial conditions remain easy and they are remarkably easy right now, i think they might begin a hike in december. michael: i think they should hike. if i were them, i would hike in september before i start tapering the balance sheet. our view has been the more that they taper t

gary cohn could be within arms reach of the federal reserve.hy a former wall street banker might be exactly what this economy needs. gopro reports second-quarter earnings after the bell. cautious analysts are looking for very honest product pipeline. five months ago, renowned short seller carson block said the partisan divide mdc was so wide a debt default might be unavailable. so wide ain bc was debt default would be unavoidable. with us now from san francisco to explain is carson block, cio -- cioeln cofounder of and cofounder of muddy waters. how does your concern compare with today? carson block: actually i am more concerned than i was in march. if you told me in march when i wrote that piece that we would be here at the beginning of august and we wouldn't have yet raised the debt ceiling, i would have at least expected there would be a lot of conversation in congress about this and in d.c., and am most the opposite is true. we hear treasury secretary steven mnuchin try to eat the case for raising the debt ceiling, but it is being drowned o

it basically said the federal reserve has more work to do.tably, she will be stepping down at the end of her text -- her single term. if she had to write that speech again, whether the federal reserve has more work to do. michael: that was an important part of the discussion on jackson hole. if you believe there is just a fixed constant, the natural rate of unemployment, a fixed level of monthly additions to unemployment, then the federal --erve's and the business business i forget demand management cannot do anything about aggregate supply. if aggregate supply is flexible and you can pull in workers and induce firms to add more capital, then the federal reserve can have more long-lasting influences affecting both aggregate supply and demand. yellenospect, janet should not change many words in that speech, that in fact the record suggests that lower for longer was associated with more job gains than we would have gotten, otherwise. alix: we don't need someone to say what she really meant was. michael, the story on the equity are going toanies

so the federal reserve say we .re down 1.5%, europe is 1.3% japan is 0.5%. fed made it clear they will move ahead despite below target inflation. when it comes to the balance sheet unwind. that is part of the normalization process. mario draghi says we are watching inflation, we have to be patient. he is being stopped more, and governor kuroda is not going to move at all because inflation is so far from target. i wonder if the federal reserve continues on this path, if it is different from what everybody else is doing. alan blinderke to from jackson hole, he said he would not want to raise rates until inflation is clearly -- not just ending the decline, but actually starting to rise again. it is an interesting thing to watch. we will look at the september meeting with rob kaplan from the dallas fed, told us as well he is waiting to see if there should be a rate hike in december, he does not rule out an earlier rate hike. there is a possibility it could rise, but i think this is something that has been brewing for a while. mario draghi was surprising. kuroda

the federal reserve likes to talk about valuations, but they usually talk about stocks.uld they look at the credit market? >> i think they look at a variety of products, commercial real estate, auto loans, credit markets. and a lot of the speakers have alluded to the fact that they are easy right now with the tightening of credit spread. it is something on the top of their mind when it comes to tracking financial stability and this is something that we will be looking for in yellen's speech later this week when she speaks. that will be the centerpiece of her conversation. jonathan: we are going to get into that and a moment. ie wider issuance story, point out yes, the numbers are huge and they are making that'ses, but el toro ultimately what matters is what issuance. when you look at net issuance, are things more favorable toward credit? >> absolutely. the key point is if you are a central ink looking at valuations itself are meaningless. you really care about is the rate of credit growth in the economy. if the credit growth is high, that is something that should bother

on wednesday, the minutes from the last federal reserve policy meeting will be released. thursday, walmart reportings earnings and investors will be b looking to see if its investments are paying off and tha what to watch next week. >>> islamic state may have used ebay to channel money to an operative in the u.s. the man y receid the pams was an american citizen who was arresteded last ye accord tog a recently unsealeded fbi affidavit, the american citizen allegedly sold computer printers on ebay as a front to receive payments through paypag canceled a meeting to discuss diversity issues after individual employees were singled out online. questions submitted prior to the meeting had been published online along with the employee's names and several workers expressed views for their personal safety. as we reported this week, google fireded an engineer who posted a length in memo suggesting women are less cape ba wo in high-tech jobs. the ceo has come under fire for his hand and today, david brooks with "the new york times" called for his resignation. >>> in california's win

short-term, yes, the federal reserve and interest rates raising. it's going to keep evaluations under stock. >> let's get to your stock picks. last time you liked valuer o, you likeded it and you hold it. >> only up 3%. its dividend has grown by 17%. that happened just this year. individuald cash flow. typically at some point. most people recognize the fact outperforms andividend, that >> does valero have any exposure in gulf of mexico from hurricane harvey? >> they have huge exposu they've been through many hurric they've got vital services so will probably be shut down for a period of time. operations are spread around the country and they'll come back. we growing that dividend going forward. >> accenture next on the list. you like its new s. >> correct. sales growth has been consistent. it's been in the technology fin r companies that can benefit from all the things happening in with accenture, it's a consulting company. they provide services to businesses to get involved with the cloud. to digit and those services for them grew double digits th

the federal reserve likes to talk about valuations, but they usually talk about stocks.hould they look at what is happening in the credit market? >> i think they look across the spectrum on a variety of products. they look at commercial real estate, auto loans, what is happening in credit markets. a lot of the fed speakers have alluded to the fact that conditions are sure nearly right now with the tightening of credit spreads. that is something that is definitely on the top of their might when it comes to tracking financial stability. this is something that we will be looking for in yellen's speech later this week when she speaks at jackson hole. that is going to be the centerpiece of her conversation. jonathan: we will get into that in just a moment. for the wider issue in story, we spoke earlier and the numbers are huge and they're making a lot of headlines, but ultimately what matters is net issuance, what the money is being used for. what is really the big gross issuance number? when you look at net issuance, it is a little more favorable toward credit. krishna: abso

vonnie: say the federal reserve doesn't have any interest seeing asset prices decline, the federal reserveoes not have that and while people have been warning about various potential exuberances around the market, the fed will not not raise or cut back on tapering if they think they will bend asset prices. dennis: i think they absolutely will not do anything to tighten financial conditions. i think financial conditions are critical in supporting the economy, i think you are right they don't necessarily want asset prices to go up a lot and there's not necessarily the intent of the federal reserve was not to increase asset prices, but it's the only channel that seems to be impacting the economy. if you are only left with asset price increases and we have weak historical growth and consistently missing on the inflation mandate, can they let i set -- asset prices decline? vonnie: it is none of their concern, honestly. dennis: i agree with you on that, but i think they are in a box. the alternative is what if they were to say we don't want asset prices to increase significantly and we will tigh

what does it mean for the federal reserve's next rate hike and timing?t two retail woes with the company posting bigger losses than estimated. first, we are 30 minute into the trading day in the united states and julie hyman is here to keep an eye on all things geopolitical, earnings-related. julie: we are seeing and rebound after three days of selling that is part of the geopolitical concerns, which we will dig into throughout the day. all three major averages are bouncing back a little bit. the dow and s&p up 3/10 of 1% and the nasdaq up a third of 1%. going into the we can, we could see rocky nest, choppiness in the markets. we will be keeping and i out for that -- will be keeping an eye out for that. stockis one example, the climbed to a record and tumbled sharply yesterday along with the cap technologies. the stock is rising today, even after its main supplier reported earnings that missed analyst's normal -- latest estimates. smartphone shipments plateaued ahead of the next iphone, but apple behaving relatively well, even despite that. lossesretail

my next guest said it is unsustainable and argues significant reduction can be helped by the federal reserveowering interest rates significantly. for more, i want to bring in joel prakken. he joins me from st. louis. an interesting theory. you know, as -- is anyone taking it seriously that the fed would consider it part of its mandate? fed'srakken: with the jackson hole conference winding down and congress reconvening, a lot of attention on the short run policy, the fiscal speed bumps we will encounter toward the end of september and if the fed will take tightening, but a good time to remember our fiscal policy is on the long run, unsustainable track. if we continue down this path, we will undermine our standard of living. do in thented to study is asked what are the macro economic gains of putting fiscal policy on a sustainable path? since that could involve a long drag, and integral part of the cantion is whether the fed have enough monetary space, if you will, to offset that fiscal draft by keeping interest rates lower. vonnie: is it that politicizing the fed? and saying, let's put in pla

however, she talks about federal reserve bank regulations. they have tried to make things easier, particularly for smaller banks, and they have tried to modify the stress test to make them a little bit easier to take in accounts some of the bank concerns. she says the fed is sensitive to the effective regulation on banks, the costs they impose particularly for small banks, but in general, she says the regulatory regime the u.s. has has benefited the economy overall rather than harm it. vonnie: michael mckee, international economics and policy correspondent reporting and the kansasle city fed symposium.let's get a check on if and how markets are reacting with taylor riggs . taylor: higher a little bit so definitely reacting a little bit to those comments that we open higher earlier before the comments came out. it is a nice change given that yesterday was a pretty lackluster day. not a lot of movement. 1%.the up about 4/10 of s&p 500 highest of 5/10 of 1% . we just are the comments from janet yellen.waiting to hear from mario draghi later toda

is the administration and the federal reserve, are they at odds over regulatory reform? is that a problem right now? >> well, let me just comment on -- i had breakfast with the fed chair yellen this morning. we meet on a weekly basis as have previous treasury secretaries in the fed and we have a very constructive dialogue on a lot of issues including regulation and one of the areas we are focused on working on with the fed is fixing the volker rule. you've seen the treasury put out a report on what we believe are regulatory changes i would say 70% or 80% of them we can work with the regulators. we have a working group on we're going to use congressional support for. we believe in proper regulation. but we also believe we need to make sure that banks can lend, particularly community banks and regional banks >> so there aren't differences now between the federal reserve leadership as it is now and the treasury or the administration on regulate sorry reform >> again, i would say that we are working on a lot of things together with the fed and see many aspects of this the sa

we will talk about the future of the federal reserve.are about two hours away from the cash open. futures are unchanged after a decent week for the s&p 500. from new york, you're watching bloomberg tv. ♪ ♪ jonathan: from new york, this is "bloomberg daybreak." i am jonathan ferro. in london, on holiday, the ftse 100 is closed. 19 history groups on the stoxx 600 in negative territory. we talked just before the commercial break that we had a decent week of gains for the s&p 500, the biggest since the middle of july. futures are stable and unchanged .cross the board you bills and notes coming from the market -- the treasury onto the market today. the story in the fx market, dollar weakness, euro-dollar pushing higher. still very close to january 2015 highs. euro strength story on the back of jackson hole and dollar weakness. let's bring you up to speed on headlines outside the business world. taylor: houston has never seen a storm like this one, and it may get worse. tropical storm party continues to pound southeastern parts of texas. recor

the federal reserve trying the story. they will hike rates again this year.y be good news for the pboc. they are trying to keep policy where it is. kathleen hays has more. let's start with the idea we may get a rate hike. made it: the fed has clear they will start balance sheet normalization, letting the proceeds were loss. the rate hikes, a lot of people are holding out hope the economy picks up enough to push inflation up or stop it from falling. it is interesting because we have seen a rally in the government bond market, the 10 year bench mark -- benchmark is down. all -- a lot of people saying, it is mainly about the fed. that is an interesting point. let me pull up an interest-rate projection. as you may recall, faithful viewers of bloomberg television, the odds of a december hike are down to 29%. then 60%. two numbers that are falling short of targets, inflation, when you look at pce inflation and the core. this week we are getting inflation and jobs. thursday we get them pce. the headline number is supposed to come down 1/10 of 1%. 0.1% to 1.4%. it is

they would call fed point they say they would make it they would make faster payments for the federal reserve what are the advantages of something like the federal government adopting a crypto currency. yes so some of the big advantages would be you'd be able to send money anywhere you know almost instantaneously whereas today if you want to do in a c.-h. it takes you know three days if you want to do a bank wire you usually have to call up your bank you know sign a bunch of paperwork and you know maybe get there in a few hours or maybe the next day but if you know the government issued a crypto currency you can really do these transactions almost instantly and it also be beneficial for finance overall because you could kind of codify the money in smart contracts similar to the way people do on the theory whereas today you basically just have to rely on you know paper contracts but you were talking about the federal reserve i mean one of the most glacial economic entities so far industry real quick ten seconds do you think that they would go this route not in time not in the time in the next

hikes from the federal reserve's.continues to do a lot of heavy lifting in terms of easing. how difficult will it be for the ecb to step back and the fed to carry on hiking at the same time? >> you have had a synchronized global recovery which is economic activity now allowing for that kind of synchronized global interest rate accommodation withdrawal. i think we have to be careful and extrapolate that too much into equities at this point because credit is still widely available. also, think about a year to maybe two years ago, how many research reports were written about how the only reason the u.s. stock market has been going out is because of the expansion of balance sheets. that has not been expanding in the last couple of years. it is the same. you have had a little bit of a withdrawal coming. the market does not correlate to the fed balance sheet. as directly as it historically correlates to the direction of earnings which remains positive. jonathan: that is because the market was obsessed with concentrating on

it very interesting that he's made this comment because of course when he was chairman of the federal reserve there was exactly the same question posed to him in relation to the equity markets specifically to the nasdaq high tech bubble and in the late one nine hundred ninety s. he then said that it's very hard to anticipate a bubble in advance and who are we to second guess the views and wisdom of millions of investors who have come to make these investment decisions so i do find it rather interesting that now that he's retired he sees fit to put out some bubbles again to answer your question yes i mean i think we're closer to the end of the bubble market than the beginning that's all because we've had a thirty year virtually nonstop rise and yields the fall of two historically very very low levels but we had a similar situation in japan in the aftermath of the great financial crash in the one nine hundred eighty nine hundred ninety period and you know if you went ahead and shorted bonds in. response to that you know you've had a very hard time of it over the last it's been almost three deca

it's of statements lightly i think also if you look at his own tenure at the head of the federal reserve what he probably has in the back of his mind was we did have a bond market bubble in the european bond markets in the in the early one nine hundred ninety s. this is before we had the own and you still had individual national currencies and this was one of the first instances we had of hedge funds engaging in carry trades they took they took advantage of low rates leveraged up not to the same degree they do now and they bought bonds on a leverage basis in a lot of these european countries sweden norway france germany but the problem is that the trades got very crowded and they were not particularly easy to unwind because many of those bond markets such as sweden for example or the netherlands were not particularly liquid bond markets and so when the unwind finally did come as a result of margin calls long term rates spiked up very quickly and in those days none of the central banks monitored positions like hedge funds or took any notice of of leverage positions so i think they were ta

after tracking reserve wages for nearly two years for the first time the federal reserve has released information and where they stand in the united states reserve wages are the lowest wage of which a person is willing to work right now the average american is willing to take around fifty eight thousand dollars a year it's the lowest amount in more than two years so let's find out why joining me now is danielle de martino booth president of money strong and author of fed up and insiders taken by the federal reserve is bad for america look the wages have been tracked since early two thousand and fifteen we're seeing some surprising movement here if you take a look unemployment isn't looking too bad right now but over this period of time this measurement around two years people are appearing to take less money so what's changed. well i think your average man and working woman on the street is starting to see. the repossession man show up they're starting to see other people around them suffering household stress they're seeing stores closing left and right and you don't have to be a sta

especially the federal reserve. they're not pleased with the pace of wage growth given that we're in a tight labor market. here is what jason fuhrman had to say about it. >> the fed can't fully solve the problem. it means that we solve the problem with business tax reform, expand to trade and investments in infrastructure and scientific research. we need to do things that will get productivity moving faster, not think that just moving around interest rates is going to solve the problem that workers are facing in our economy. >> reporter: now one thing furman says would raise wages, there is no plan, just a grand outline, which furman says would not work. i'm going to throw it back to you. coming up in the 4:00 hour we're speaking with a member of the federal reserve board of governors, we're going to talk to him about the issue of wages and janet yellen speech earlier today in which she defended the policies of the federal reserve and made the economy not only stronger but safer. back to you. ashley: adam shapiro, t