yellen's decision. chair yellen is not in jackson hole. an extended conversation with james bullard of the st. louis fed. this is bloomberg "surveillance," live from new york. i am tom keene. joining the is not a twin. -- joining the is vonnie twin. national bowtie day. i went british today. vonnie: very candy cane. we look at economics. i do not need any more about ties. let's begin a serious friday with our top headlines. vonnie: another day, another rally in china. chinese stocks rose for a second day. areulation authorities propping up markets before a world war ii victory parade next week. the u.s. rally may not last. s&p futures indicate u.s. stocks will open lower today.. the s&p 500 is coming off its biggest two-day rally since 2009. oil heading for its biggest weekly game since april. wti up around $43 a barrel. yesterday after reports the u.s. economy grew faster than expected in the second quarter. puerto rico being drenched by tropical storm erika. the storm is moving west after flooding the island of dominica. 4 people were ki

carney and yellen are linked at the hip? jon: they are.oking to normalize but the data is not there. forow danny will do that you. you look at these broadcast, look at the gdp forecast, that has been raised. the 2015 forecast or gdp raised that isversus 2.5%, decent gdp growth into next year. the question will be asked -- why are you normalizing that process earlier? 8-1.'eapon -- more dovish. the first action at the bank of england, the lender of last resort was near our civil war, 1866. mr. carney provides a most dovish statement. what is the drama at the bank of england, is it business as usual or something different in the air? >> something different in the air. what is happening today completely unprecedented. we know what they have done before, release is rate decision, the two weeks later we get the minutes with the inflation report somewhere in between. today, they have released, all three pieces of that data at the same time. overwhelming the markets with this information that came out just a few minutes ago. we are likely to see

but janet yellen, our fed chair, she is skipping this year's gathering. there is group of protesters. they are called, fed up. they are attending second time. they're a liberal coalition made up of community activist groups who want the fed to hold off on raising interest rates at next month's polly meeting. stay tunedded to fox business throughout the day for live coverage of the summit. tune in for federal reserve bank minneapolis president, kocherlakota. how do you say the name? >> kocherlakota. >> thank you. he is in jackson hole. >> i don't know. here is the point, the point is basically bill dudley came out and said september rate hike is less compelling but would like to see a hike by end of the year. you know the fed is very much considering raising rates. see how global markets are faring. after our u.s. rally yesterday, two great days, almost 1000 points, asian markets closed mostly higher. shanghai, kospi, they are up almost 4, 5% and adds to the prior day's gains. >> european stocks opened higher. but now they're down. the cac in paris is down

retail sales report, news janet yellen can use. as oil crashes, american oil producers to medically cut costs. -- dramatically cut costs. good morning, this is "bloomberg surveillance." i am tom keene with brendan greeley and the surprise -- you never know, greece, positive gdp. summer'sa lot of the chaos is not included in those numbers. two looking at two things, vigorous denials, china denying managing currency. dilma rousseff denying she is considering stepping down as president of brazil. both of them are protesting too much. contemplating -- what mr. biden will do within his future. brendan: he is having conversations. tom: we're going to have a conversation on top headlines. here's brendan greeley. brendan: china is stepping up its verbal support for the yuan stemming the currency's worst fall into decades. the central bank held a rare press briefing today. officials said there's a reason for the depreciation to persist. plus the bank said it will take action when there is excessive volatility. concerns a good cause instabil

what will be the market reaction with janet yellen and stanley fischer finally raise rates?on the language, and what the forward current concerns are i'm looking at. i'm looking at the bloomberg page here that has the forward concerns. it is assumed to be 1.5%. if we get there in 2017, there should be no market reaction whatsoever because it is priced into the forward curve. all is says is that basically investors next expect funds to be at 1.5% two years from now. tom: are you managing for total return and fighting to keep principal? how are you managing day-to-day given the back-and-forth that we see? >> at the moment, rem managing risk off. the dominant flavor of what i am doing. for over half a century to my investors have been using finance capitalism which has always provided a near guaranteed return. the central bank bailing them out is the dynamic movement of capitalism. now when interest rates so low we have to question whether a positive carry produces positive returns going forward. a few cents -- if you sendense a deflationary world, it is a rather negative for e

critically, what matters in today's report for chair yellen. he has been dead on on the resiliency of the american economic experience -- of the american economic experiment. what matters this morning? >> there are three things that matter most. the unemployment rate, the payrolls, and what happens to average hourly earnings. thatdoes janet yellen put front and center, the so-called wage growth? or is it a secondary issue for the fed? maury: what is more important is what happens to core inflation. it gives gradually in the second quarter -- it didn't gradually in the second quarter. have lowtives are to unemployment and some objective in core inflation. tom: i'm going back to the core headline. there isn't any. brendan: what information coming out of the labor department would change your assumptions bout janet yellen? say hours -- let's say average hourly earnings are flat again. i do not think they will be, but if they were -- keep in mind that these are the july data. we are going to have august data before the september meeting. these data

nothing like the transparency that started under ben bernanke and has now been transferred to janet yellen. >> ben bernanke was more communicative. i would say you would know under timing and the things much better.

liz ann, people fearing what janet yellen will do come september. given the panicked selloff that we saw yesterday, do you think this basically leaves janet and company, on hold for interest rates? >> more likely than before. i want to go back, if you would let me for a second to the china situation. i'm not a apologist for china. i deal in facts and this tag line, they constantly devalue by trump, since their stated devaluation which, really i think was more for the purpose of having their currency become a member of the imf special drawing rights, the currency has devalued by few percentage points, but that is after the currency appreciated against the dollar for years to tune of 30%. trish: how many years, not that many years, liz ann. historically they good keeping their currency lower than ours. >> it is pegged to ours in a range. range of renminbi to the dollar is 25 to 30%. they needed to correct that i'm not apologist for china but i think purpose was not specifically to hurt the united states. trish: they're trying to help themselves of cou

janet yellen will not be there.anley fish will shed some light on the timing of the next rate increase. next great increase, -- next rate increase, september, what will make you change that? is it stanley fischer? is it weak data out of the u.s.? james: that is what bill dudley said yesterday. the case for a september rate hike is less compelling. this deflation out of china and emerging markets. the fed will want to assess where we are in terms of market and the data. in my mind, while a rate hike is possible in september, markets will have to be in a better position. the fed will have to be confident that what has happened in the last few weeks is not going to cause the inflation numbers in the u.s. to come in lower than they thought. the hurdle has gone up significantly. sous: our markets just inextricably linked to soft and easy money? the s&p rallied 1% as soon as dudley took the heat out of september. s&p went up. in asset markets survive rising interest rate world or are we also addicted to 0%? james: we can

yellen wouldink prefer to see it on the head.he mark was running around like crazy, saying hang on, you signal -- it came down to bernanke he explaining we watched the data. i don't think it's their, particularly with the global backdrop. francine: china concerns or the turmoil we saw will weigh on her mind. how do you traded? anthony: i think the dollar euro is going to parity. whether that is in the next three months or six months. that said, the fed is first in line to hike prices, whenever that is. you don't want to stand in the way of a rising dollar. as we have seen, it is the strong as currency in the world. francine: there is definite parity in the next six months. theony: definitely, given contrasting stances and monetary policy. francine: where d.c. sterling? yesterday, we had a neutral super thursday. it's very clear he is worried about the rising pound. anthony: i am worried about a falling pound. on u.k. economy is dependent capital inflow. ,e have a break in referendum whether it happens next year or the year after

given janet yellen's record -- is janet yellen one of his friends? tom: jonathan ferro, thank you so much. we do see this new dollar strength tied to the fed, but much more it is about real economic effects. sir martin sorrell travels the world as the ceo, the founder of wpp. he lives the reality of ever weaker currency. it is sort of like marco polo. martin: the english explorer -- i cannot think of one. brendan: john smith. tom: john cabot was way underrated. what is the impact of the stronger dollar and these weaker currencies, country to country? martin: companies were reporting in u.s. dollars or u.k. sterling. part of disney's reporting worthy issues due to currency. most of the major multinationals are under heavy pressure. to come back to the interest rate increases -- from what i see, things are tightening. if you look at the forecast for worldwide gdp this year, the inflation component is put down quite sharply. earlier in the year we were looking for 5, 5.5 nominal. tom: is it a global recession? martin: it is not a global recession, it is

janet yellen or mark carney?le the market is pricing in a hike before the bank of england makes it's move david miles suggested the u.k. could pull the trigger first it follows a number of not so subtle hints that a rate hike is coming. >> trading just shy of a four week high against the u.s. dollars. the strong pound causing havoc for british exporters and in the u.s. janet yellen looks on course to hike rates in september if there's no ugly surprises in the data. >> in fact wednesday's nonmanufacturing pmi reached the highest level in a decade slashing expectations. it prompted them to increase the payroll's estimate to 225,000 while jp morgan refirms to 240,000. i don't think it's about who goes first. symbolically that's a little important but isn't it more important to see who raises by how much over the next couple of years? i don't think the market pays attention to that. what we don't want to see is another greenspan, 14 hikes in a row in the course of two years. >> that's more important over the medium t

fed chairman stanley fischer has the ear of janet yellen like nobody else coming up in a few minutes. a new season brings a new look. a chance to try something different. this summer, challenge your preconceptions and experience a cadillac for yourself. ♪ the 2015 cadillac srx. lease this from around $339 per month, or purchase with 0% apr financing. no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great. >>> the rally in crude behind yesterday's market gains, adding to gains again this morning. oil briefly breaking through $45 a barrel. let's get to jackie deangelis with more. >> it's a remarkable rally on the back of what we saw yesterday, that more than 10% move. interesting because when i came in this morning

janet yellen has criticized her predecessors for going too late and to gradually once they started, sois important for them to be forward-looking. we talk about downside risk to inflation from the dollar and -- coren inflation is inflation is accelerated. it has been argued this year. alix: what disrupts your thesis? >> if the real economy starts to slow, that would worry me. politically, we are looking at what is going on later this year, will there be spanish elections, the economy there has been doing well. governmentt friendly could come in, that would worry me. the china story right now, that is the market. alix: thank you very much. joe: we will be right back. ♪ oe: "what'd you miss?" alix: do not miss this, the chinese central bank is unlikely to lower by 50 basis points. joe: another thing you do not want to miss, next thursday we get m three money supply in europe. this has been going up nicely. credit is it going and feeding into inflation. alix: good stuff, big week, big day. joe: that is all, thank you for joe: that is all, thank you for watching ♪ ♪ ♪ get excited for the 1

janet yellen will not be at jackson hole. when you have a fellow flight as they continues to pick up steam, you have business owners and operators become so rattled it can become an economic slowdown in the united states. it can become a recession as people are afraid and unwilling to make commitments and continue hiring. >> a big issue is how do people like anthony respond to the markets. if the selling bill thomas golf, you can hurt household sentiment. if people commented that this is a buying opportunity. maria: maybe. when is the buying opportunity, anthony? everybody continues to say we are in the middle of this. we have not had a pki. >> okay, in six to 12 months this is a time to way he had because what we know is that reverse very quickly. if john's right about the economic data and wages better than expect it, earnings are better than expected. we haven't put the federal reserve on the table but if the fed raises rates, that's a the bottom for the current market. if they don't raise rates then it just signifies they

we will not hear from janet yellen but we will hear from stanley fischer. the head ofin global fx strategy at bnp paribas. >> said watching is hard enough. if those going to make it easier i would say watch janet yellen, stan and -- stanley fischer and william dudley. did william close the door on september? >> i think that seems to be the case. the greek crisis is the catalyst so from our perspective we think that even before the malaysian equity market was off the table we think the fed is data watching. unemployment is doing exactly what they wanted to do with falling and looking positive but what they need is more confidence on growth so from that perspective they are data watching like you and i. >> traditionally the fed places less emphasis on markets than we would. having said that, there is no way they're going to start lift off. legend giantfund making some weight talking about qe4 the last couple of days. >> ido you think about it? think it is highly unlikely with the on a planet rate already through the roof. it is really not on the cards. think

what is the message to janet yellen?on: the fed has been consistent and said it is going to be data dependent. .anet yellen is a steady hand she's been chairwoman, she has been involved in central banking for a long time. to use the term your reporter used in china, i don't think she's going to be freaked out by what happened. i think she will see this as a welcome development. vonnie: she will do a little relieved, i would imagine. i want to point out in "the wall street journal," this was the fed's stock price correction and the stock market collapse is the inevitable result of the fed's policies, namely quantitative easing, that produced abnormally low interest rates. much of the miss pricing will likely unwind in the months ahead. the moves this morning really feldstein ishat saying, we've become a central bank dependent world. government policies -- there is fiscal, monetary, regulatory and trade. on a car, one of the wheels is overinflated. another will, regulatory policy, you are down to the axle. is in aral bank

melissa: stock market volatility is putting the pressure on janet yellen and the federal reserve. is a september rate hike off the table? the debate, charlie gasparino sass, not so fast. it is too early for any talk of delay. but harry dent, author of the great crash ahead, very optimistic title there, says a rate hike this year is not happening. charlie gasparino, make your case. >> well, you know, i'm not exactly saying it is not happening. i'm saying it should happen. i will tell you this. once again this is market addicted to heroin of cheap money. think about how absurd it is. we're all sitting here talking about buying stocks, doing this, i hear all the great analysts get involved in the market, look for this stock, that stock. only thing telling them to do this as opposed to what they said yesterday the fact that bill dudley came out said, maybe we shouldn't raise rates this year. think about, we're not even talking about raising rates to 1% on fed funds. we're talking about 25, possible basis-point move on fed funds rate. shows you this is sick, as i said it before, perver

here is what is pushing against stanley fischer and janet yellen.land bl so why won't they blink? see aboutard to inflation turning the corner. it is a big story driving inflation. we need to see other service categories contribute to a greater degree. we are not seeing it just yet. as the unemployment rate reince towards i percent and potentially through that by year end, that will start to turn the tide. days of critical is 18 september 17? >> i do not know if there's u.s. data that matters. also what is going to be very relevant is the post parade china data. once they stop manipulating the financial markets and supporting stocks, what happens in the financial markets? what habits the economic data? they are pursuing a blue skies policy. they are shutting down power plants, steve mills -- steel meals, and order have blue skies during the parade. it is causing huge supply chains disruptions. it is for all these close trading partners with china. vonnie: the a direct impact in the month or two of inflation -- summitaw this around the in the olympic

right-hand yellen's man still efficient -- stanley fischer is expecting inflation.er billions of dollars, who should pay for the high cost of drug treatment? matt: good monday morning. i am matt miller. pimm: i am pimm fox. we are 90 minutes into the trading day in new york. a little bit of a rally, the s&p hunt -- 500 higher than 1%.

is janet yellen gaining at 1.99? not at this point.e looking at the growth path of the united states. if we continue to grow faster than potential and add jobs, watch september 4, the august jobs report. they will say eventually this will raise inflation, therefore we have the justification to move. brendan: what mike is talking about is the consequence of communication from the fed and data dependent. it puts us all in the seat of trying to be in their heads as they look at last week's communication and this week's data. this from theis way we look at the fed 10, 15 years ago? brendan, it is strikingly reminiscent on when we used to fix on the weekly money supply and try to impute in the minds of the fed were thinking. i want to raise i think a more significant question. the fed's fixation on inflation targeting is ignoring the risks of financial instability. there is a trade-off between stability and inflation targeting. repeatedly, the fed has opted to target the and place. repeatedly we have had bubbles in equity and property, and

now the conversation has turned to -- what is janet yellen going to do and the federal reserve goingey take into account what happened in china and the reaction of global markets? is that on their radar when they decide when or if to raise interest rates? >> yes, it's a on the radar because china is a major trading partner. i can tighten financial conditions. i think the market reaction you saw, the immediate massive selloff, that was the world pricing in a ring new recession driven by china. i think that was off the mark. i don't think china will drag the world and another recession. when i said macro fundamentals and china are weakening but they are not weakening where it looks like there will be a hard landing. government still has many tools in their tool bucket and will implement these. they will not create a recovery or rebound but they will be able to stabilize growth. it might be slightly below their growth target but there will be more stability and china will not be the cause for that type of crisis. mark: there have also been concerns expressed about the slowdown in the ch

liz: i don't know if you just heard the chinese are trying to blame janet yellen for their problems? we find that interesting here on the floor of the new york stock exchange. what do you think? >> reporter: well, i haven't heard that. i was just listening to you talk about it, but, you know, obviously when things are not going well, people point fingers -- [laughter] and the blame game getting really ginned up -- [laughter] so, yeah. liz: yeah. i think that's absolutely right. in fact, i think some of our traders and our strategists were saying, really? donald trump trying to blame china for all of our woes, it rings a little hollow considering when you look at the flows in the exports versus the imports. we have other issues. china may scare our markets here and there, but at the moment there is a consensus that china is not necessarily at the heart of all of our woes here in the united states. thank you, peter barnes. interrupt us if you get anything more. 26 minutes before the closing bell rings. we have now lost 350 points of gains here today plus. we are now up 62 points for th

. >> how did janet yellen look at a day like this. you were looking at other indicators including low interest rates creating a stronger housing market. does the fed look at the market and look at what is happening in china and think, hmm, not a good time to raise rates? >> that's probably what they're thinking. we look at top line pieces that are easy to understand. there are a lot of very complicated little pieces of data that most people can't figure out that the fed looks at to determine trend. they're also wondering when does this end, but yes, at this moment if janet yellen had to make a decision about interest rates going up this year, the answer is probably no. but again this could change by the end of the stay, the end of the week, the month, we could be back and no one will remember that this conversation happened. >> i spoke to an economist this morning who said that it's like a drug, this cheap money, we're seeing it with the fed in quantitative using. we're going to see it with what the chinese government does to prop up

what does this mean for janet yellen? fisher would say we are only looking at the united states is a public official. he has got to say this. but this has washington revocations. michael: there are political ramifications. for the fed, the question is what does it mean for chinese growth? that is one of the big downside risks. tom: will they import -- will they export deflation to us? i guess, they could say will they take us to less inflation? michael: it is a risk. i would argue you seeing a lot of global this inflationary forces and china will only exacerbate that. brandon: we are going to hear from commerce the next month about this. are we also going to hear about small factory owners? is this going to have a long-term effect on production in the u.s.? michael: it is hard to say because a lot of the reshoring, which has been small, has been for reasons independent of the currency. i think it remains to be seen, but politically it is going to be a challenge. julie: something else i was looking at this morning is what

i never talked to janet yellen in my life. liz: if he did, what would he say?arren buffett, berkshire hathaway chairman and ceo saying yesterday on our program saying he believes the fed will probably raise rates sooner than he would have. we have conflicting statements out. a fed governors, what does the street think? joining me now two street stars, fred cannon, james bianco, bianco research president in chicago. gentlemen, you two are the boys of september. not the boys of summer, but the boys of september. you both feel it will be september rate hike. why, fred? >> the market is ready for fed to raise rates. the fed doesn't like to disappoint market. there is technical issue with the fed. they have to test overnight repo rate. there is no fed funds rate anymore that trades. they have a lot of mechanisms. they want to try those. it is a good time to do it. liz: james, you think it is september possibly as well, correct? >> i do. that is what fed made it clear they want to do although you could argue the data is a little mixed. that is what mr. buffett was tr

what does mark connie see that janet yellen doesn't? >> they are two different economies in two different places. i would not say they are looking at the exact same thing. they have different economies yellen must move slowly to normalize rates. you mentioned the two-year isasury yield at .73 which half a percent for one year and 1% for the second year. put those together and you earn 1.5% and divided by two and you .075 but rates will go up slowly. 50 basis points in the next year, 100 basis points a year after that. these are slow rate increases. i would argue that anybody that thinks that apple is not going to bring out the iphone seven if interest rates are 1% is not looking at the real world. it will not change the course of the economy if we go from zero to 1%. that business the kind of rate that will slow this economy down now. erik: one of the reasons could happen is apple brings out new products but they are priced the same way, just that much more powerful with each successive generation. if we are going to see inflationary pr

janet yellen and other officials are concerned about low inflation.ed, a improving job market is bringing them closer. manus: bloombergs economic editor is taking a closer look. mike come it is about inflation now. when fed officials met three weeks ago, most judged the conditions for policy firming had not yet benefit -- had not been achieved. they noted conditions were approaching that point. what was missing? confidence. prices would continue to move up. some members continue to see down risks to inflation for the possibility of further dollar depreciation. in addition, several noted labor markets have not pushed up wages and prices. they agreed to continue to monitor inflation of element closely, with members indicating they would need to see more evidence of economic growth was sufficiently strong for them to feel confident. was three weeks ago, before the latest plunge and oil. pushed theluation dollar yet higher. these destiny economy had made significant progress and they felt conditions for a rate or they having been met would be met shortly.

dollar nextnger janet yellen and mark carney's world more public located.the next -- the trump style -- get rid of the tax. and martin sorrell on the speed of the change in his media world. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene. me, brendan greeley. olivia sterns pulled the short straw. olivia: they called me. tom: now we will take a look at our top headlines. olivia: president obama is taking his bid for the iran nuclear deal to the american people today. in a speech at american university in washington. jewish leaders are still afraid that iran can build atomic weapons, but the president how speech is unlikely to change benjamin

the data dependent fed has new data that has traders increasing their bet that janet yellen will wait. bloomberging, this is " surveillance." , monday, august 24. michael mckee is with us. i saw him in the elevator all packed for jackson hole. michael: the only thing we need to fear is fear itself. we don't know what is driving this route. do people come back and buy on the dip as they have done throughout this bull market? thedan: we thought conversation at jackson hole would be how to create inflation and the conversation looks like how to avoid disasters. michael: the fed is getting easier today. we will go now to top headlines. the market selloff went global and it began in china where stocks fell the most since 2007. it fell more than 8%. there are growing concerns at the chinese economic slowdown is getting worse. at the opencks sell as the dax dropped more than 2%. futures indicate that u.s. stocks will be lower at the open and ended last week down the most in almost four years. oil is down again today as well. went low $45 per barrel for the first time in more than six years.

that is exactly what janet yellen actually wants to happen. 4%, justear note, 2.2 under 3% on the 30 year. some shorter horizon inflation numbers have also firmed as well. pimm: commodities. reboundingis which is held by what we saw in china. imports of oil have declined in record numbers. ? it is a bounce for the commodities overall. thetop headlines making news this hour. herlet: clinton unveiled college aid plan in a town called just over an hour ago. reducing the cost of a four-year public school education. she was to cut student loan interest rates. betty: warren buffett is making in one of his biggest gambles ever read he has agreed to buy precision castparts, which makes precision instruments for the aerospace industries. tot represents a 21% premium the closing price on friday. reserve the federal vice chairman says that low inflation will not persist with the nation at near full-time employment. part of the inflation is temporary, has to do with the decline in the price of oil, and the rise of more materials these are things which will stabilize at some point. to be as low a

. >> do you think that jeanette -- janet yellen, head of the fed, was a bigging occupy barack obama,onomy. >> it wasn't just her. is was ben bernanke. >> did she succumb to political infelonies? did the federal reserve say we'll finance this -- >> i think the fed -- i don't then it's that direct. they know they can recharge. the economy has never been that strong. following the financial collapse. president obama probably at the margin -- more than at the margins -- made it worse by installing obamacare, raising tacks and regulations in the face of those head winds there was one game in town, the fed, and called printing money. they knew it and janet yellen was hit first pick, it was larry summer. >> we're stuck in a corner because if the federal reserve raises interest rates, surely that race problem. it i doesn't raid interest rates it keeps the party going aing longer but the end point is worse. >> bubbles need to be flattened out. stock market shouldn't be trade agent 18,000. >> should janet yellen sad up and make a statement and say we'll change our policy and interest rates whe

looking at what janet yellen is staring at now, will the fed raise rates?they have guts to do it? dan, i will go to you first. >> i think they put it off until december time frame but realistically depends what happens and data dependent out of china. i don't think they want to destablize the u.s. markets and that in fact could happen and i think it is coming next year. melissa: lance, taking a big risk. we talked about this earlier. moving to a position where feels like fed doesn't have any ammunition. i suppose they could invent something new to do way they did last time but we've seen zero rates all this time. we haven't seen tremendous growth. we're watching china slow down. they have painted themselves into a corner. what do they do if things really go off the rails? >> that is the real problem here. that is again interesting about the conversation about raising rates. why do we raise rates? we raise rates to fend off strong economic growth to increase inflation pressures in the economy, right? we want to maintain price stability. we don't have any inf

should yellen raise rates depends on what day you ask.w, sam, you were talking about the difference between literal and figurative. this is a literal combat ship and i don't mean the opposite of a figurative combat ship. it means a ship that sales close to shore, the next one built for the u.s. navy is going to be called the uss oakland. >> that is literally confusing. >> the spells on that. >> the literol is part of the not very deep part of the ocean near the shore. >> you always see just something new. >>> our neighbors are sinking fast. the san joaquin valley is sinking up to an inch 1/2 each month. you can see the canal in the central valley, it sunk so far had a now the bridge touches the water. nasa says farmers are depleting groundwater reserves and that's what's causing the sinking. as the drought drag on farmers are forced to use even more groundwater and at a deeper level which is accelerating that process. >> pretty soon we will have long lost cities, disappearing cities in california. i don't know how much treasure you will f

a new survey suggests a vast majority of economists expect janet yellen to raise interest rate before the end of the year. believe themists fed will raise rates but only 37% believe it will happen us in a september. to an economics professor at dartmouth college and former policymaker of the bank of england. understand that you may be at a turning point but you often don't know that you are. where the rate rises off the table and maybe the next move is actually loosening. that movement is coming closer by the hour. mark: matt miller mentioned that the survey took place before today's global market selloff. the interest rate will eventually top out at 3%. say the fed is about to make a dangerous mistake. he warns that raising interest rate would be a serious error that threatens the major objectives. price stability and financial stability. that is a look at the stories this hour. bloomberg market day continues in just a moment. ♪ matt: take a look at what would look pretty bad if you hadn't seen the markets earlier this morning. down 103 points. so it has come back. the dow jones indu

is janet yellen quirky and witty e-mailing mark carney? i don't know.krainians pick up on the subtlety of the language. not to suggest there is a single hacker in ukraine. tom: inflation or labor center? quincy: it is very much labor center. tom: do you agree? olivia: i do not want to take an opinion. i'm picking him up on the bigger story. how do we get to 2% inflation? quincy: it is good for the u.s. it is good for the consumer. ultimately, it does help the u.s. economy. it.s face when we look at what is done well with lower oil prices, the restaurant index has done extremely well. it is not as if it does not matter. one thing we do forget. 1998 with russia. defaulting on the ruble denominated debt. oil that spring traded at $12 a barrel. what changed was china. suddenly china comes in. wto. oil prices start to skyrocket. is this abnormal? we have to get rid of this idea that china for now is not going to be the epicenter of demand. we have to look at economies differently now. tom: that goes too many of the notes saying china is following rather than

tom: what tools does janet yellen have left?el: they can do florida guidance on in monetary base from a monitor's perspective. you mentioned paul krugman. his insight in the 1990's was that if base injections on the zero lower bound or temporary they can be viewed as permanent. tom: i agree. she cannot do it. michael: there is no consensus on the fed either. and certainly congress. tom: this is great. we are doing some serious geometry here on what the choice is. michael, that was fabulous. there is the banner headline today -- "michael darda agrees with paul krugman." brendan: the imf and japan's labor shortage. the numbers are extraordinary. not enough construction workers in tokyo. that is coming up next. it is our single best chart. this is "bloomberg surveillance ." good morning. ♪ tom: good morning everyone. let's go to the single best chart with brendan greeley. brendan: the imf released a look at japan's labor shortage. it has cost the country to percent of gdp per year. you have to see how bad it is to believe it, and i

watch out for any clues about what janet yellen will do at the next meeting.e pulse." keep it here on bloomberg tv. stay tuned for the "surveillance" team. they are up next live from new york. you can follow all of us on twitter. i'm at flacqua. manus is at manus cranny. have a great day, everyone. ♪ announcer: this is "bloomberg surveillance." tom: good morning, everyone. "bloomberg surveillance." vietnam devalues there to currency -- vietnam devalues the currency. roman sachsen morgan stanley doubt the fed will -- goldman sachs and morgan stanley doubt the fed will act. we discuss in minutes. someamerican consumers -- shop and some do not. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. it is wednesday, august 19. i'm tom keene. joining me, brendan greeley and vonnie quinn. brendan: they are making the case in front of the bundestag. we will talk with hans nichols in a second. angela merkel will not talk. we think she will put it on wolfgang schauble. we are not worried about whether this passes. the g

who is going to be surprised if janet yellen raises rates in september?aren't we seeing the pre-tantrum rate hike tantrum right now? which is more important to anastasia:rkets? the fed, oil, commodity prices -- they are hitting different pockets of emerging markets. but because freight balance has deteriorated in some of the latin american countries, they are more susceptible to the freight -- to the fed rate increases. two key differences between now and 2013 r-value and positioning. by virtue of depreciation of the currencies we are seeing, we are not looking at the overvalued effectivethe real exchange rate like we were in 2013. then there is positioning. fund flows have not gone into emerging markets. where is the bet now on emerging markets? who is making that that -- who is making that bet? anastasia: china is the place to go. if the housing market now supports the chinese economy, that is a far better thing than the state supporting the market. china is our favorite position there. differentials play a huge role. anastasia: it will play a role. we

does that mean it should push janet yellen toward an increase? >> they look better.ot quite good in the housing market. certainly better than where we have been. demand in the united states, if you look at the mastic demand in the u.s., it is growing in a private sector of three percent annual rate. consumer spending and housing both look ok. worried than more the general consensus. mainly because the weakness in the global economy hits the factory sector and manufacturing is where the cyclical impulse for the broader economy comes from. if manufacturing slows in a major way, the economy will wallow. we are holding onto a september rate hike mainly because it will not get any easier for them. we are looking for third-quarter gdp growth to be just 1.6%. if they are saying, well, we december, itath in will not be any easier for them. it may be better for them to just rip the band-aid off and get on with it. matt: markets seem to be signaling a readiness to punish the fed for any move. you make good points about the u.s. economy, maury. maybe janet yellen already should

do that --e cannot what will be the market reaction when janet yellen and stanley fischer raise ratesforward curve presumes -- >> we like that. , give itn punch it up the active forward curve for all countries, but in the u.s. in two years the fed rate has been assumed to be 1.5%. so if we get there in 2017, there should be no market reaction because it is priced in. that is, gated -- complicated, but investors expect to be at 1.5% two years from now. anything less is positive for the bond market. >> are you managing for total return? how is bill gross managing day to day given the back-and-forth that we see? risk off, thatg is the dominant flavor of what i am doing. for half a century investors have been looking at financial based capitalism, that is usually around guaranteed return. by the central bank bailing them out or through the dynamic movement of capitalism. now with interest rates low, we have to question whether a positive carry produces positive return going forward. sense deflation, among much of the globe with currencies, you have a germanic decline -- dramatic decline.

a 1000think -- granted point move in the dow is enough and ability to make janet yellen hold off?o be made today, the decision would be no, especially given that the rate hike looking at fed fund futures is only around 20%. it would be a surprise to markets and it last thing markets need. over time, markets can heal as they often do in the economy might look through this. it's a bit of a goal to make a comparison and use historical data but 1998 is an example of this talk market with the dow falling in the second half of 1998. but the economy flu well. this is in real terms. while the economy does not have that sort of juice, it cannot provide the same gains in the stock market did then. likely to be some continued expansion and moderate growth as the fed puts it, enough to push prices back up. for the equity market, which has been under arming, it could snap act at some point. -- which has been underperforming, they could snap back at some point. olivia: clearly, tony crescenzi is seeing long-term value in a credit market. we will be right back. ♪ good afternoon and welcome to th

since yellen took over the fed in terrell part of 2014. now moving on to the dollar, the dollar index you can see up by nearly again half a percent. it's up 92% of the time. this is just during the yellen chairman fed chair and the gold story, dollar, gold, they kind of relate to each other. positive 25% of the time. just one out of every four instances. negative most of the time. again, sara, interesting trades here at least in recent history during the yellen fed era. back over to you, sara. >> we'll see what happens later this afternoon, dom. thanks. >>> the dow is down 100 points almost a full percent as we await the fed minutes. the s&p down right now less than a full percent. still down 18. nasdaq taking a hit heading for its worst month of the year. joining us to discuss all of this, chief investment strategist at russell investment. let's start with you on energy. i know it's not your favorite sector but with 85% of energy companies and bear market territory can you at least be looking for bargains or is there more pain there? >> i

the world speaks to janet yellen through the markets.easier to opine on the sidelines. you had a chance to sit down with alan greenspan earlier today. what did you learn from him? tom: he is concerned about productivity. the headline was his comment on the bond bubble. i would emphasize how chairman greenspan is taken aback by the lack of efficiency in the american economy and the core idea of where is the weight growth for too much of america -- wage growth for too much of america. erik: one thing that caught my attention was the pending bond market bubble. was greenspan talking about the treasury market bond market and in its entirety? to what degree is it a matter of interest rates and bond prices? how much of that was due to technical concerns like liquidity? tom: the answer is both. i would go less liquidity and more the real economy effect. i heard tracy mentioned the idea of the energy market, debt market. clearly, alan greenspan is looking at the full faith and credit on market. you have got to look at all of the fixed income mar

michael: the fed and yellen has been clear, they can call a press conference at any meeting. they have tended to do important things only around press conference meetings, but they can call an ad hoc press conference. i don't think that should be too big of a hurdle to make in october. surprised that mr. dudley did not place a lot of emphasis on equity markets for his change of heart? michael: i don't think they want to reinforce the idea that there is a yellen put, or a greenspan put, and they are responding to markets. i think they are trying to say, there are some worrisome international developments, related to china, and that is causing them to reassess the growth outlook. i don't think they want to convey the idea that this is simply, equities are down 10%, we have to change policy. that is definitely not the message they want to send. at first, it seemed the consensus would move in september, now it seems closer to the end of the year, maybe december. but that is the time of the year when the quiddity usually dries up. is that something that folks are taking into consi

you put those three together and you get 1.9%, although low janet yellen's 2.5% target.astation peak november and is trending down. was 5.3% in july, but it was also 5.2% in june. that is not moving in the right direction. matt: 5.3% maybe the real rate of unemployment. jim: that is a myth, a unicorn. people talk about it, but there is no empirical evidence for. 5.3% is not that strong. if it were, it would be showing up in real wages. that is one thing showing up on her desk, but number one is real wages. real wages are flat. you are saying if they could get a raise. can they? it is not showing up in the data. we are not seeing it in the real wages. job creation the last november. it looks about three quarters will have 1.9% growth. expectsllen says she 2.5% growth, 5% unemployment, and 2% inflation. she is not near any of those. more importantly, mark, we are moving in the wrong direction. mark: we want you to stay with us because we are getting breaking news right now. matt: we are getting breaking on on asphalt the -- baxalta. --y talked to buy job maker talks to buy

janet yellen. it is because of the fed.l dudley saying it is less compelling for the fed to raise in september and what do you know? that is where we see recovery in the market. the market is overly dependent on federal reserve, central bank policy. >> we are certainly, we are certainly dependent on the fed did there is little doubt lower rates. evaluations but think about what happened this week. it's not only dudly, you had them in europe where people are more worried about exposure to china, the fed helped, but you also saw some economic re massive fall i just don't of in oil, we've seen a recovery, a sterile recovery the best upside we've seen in oil since 1986. but nonetheless oil has recently gotten hammered and there's fear that some of these latin-american countries that are dependent on things like commodity including oil drilling, they're going to struggle economically if they struggle so much of this economy downturn. what does it do to their ability to pay debt and the overall worldwide reproduction repercussion

ultimately, what yellen really wants to do is normalize interest rates.g to lift off in september, i think she will demonstrate to the u.s. investors and investors around the world that she has enough confidence that the economy continue -- can continue to grow despite what's going on in the rest of the world for us to tolerate a small increase in rates. we don't think it's the start of a steady rise in rates. we think it will be low and gradual over the course of the next couple of years. despite what fed futures are saying which have indicated a much lower probability in september, we think what is really driving her is getting to a point where rates are normalized so that will make you slowdown --conomic so that when we do get a real economic slowdown, she has some to offsethe quiver that. think --onder what you obviously, it is short-term thinking whether the fed goes in september or december. it doesn't really matter. where should longer-term investors be putting their money? where should they be looking to get in? believe, and our firm has been of t

>> i am not a next bird janet yellen's inner thinking.t imagine that any fed chairman would not be concerned by the action we saw in the stock market in recent days. it was a wrenching experience. it is the kind of thing, that even if it is not on their agenda or their philosophy, a realistic person would take note of that. this was quite an event that we saw in the stock market over the recent days. alix: that was robert shiller and gary kaminsky speaking with erik schatzker. at theto take a look markets right now because we are seeing a significant deterioration into the close. if you take a look at the s&p, it is now well-off of the highs of the session and now of only by nine points. trading very closely to the neutral territory. joining me to discuss is my coanchor joe weisenthal. i am's growing lutheran -- scrolling through the headlines trying to figure out what .appened around 1:30 p.m. joe: it is a really pathetic market. we came in this morning with high expectations, and at one point it looks like we would recoup all of yesterd

it is still saying nonetheless, there is no hurry for janet yellen to pull the trigger. know, anything to get rid of some of this uncertainty. >> andrew stevens this morning. a lot of the brokerage notes noting the u.s. economy is growing. will the fed be ready to raise rates? andrew, thank you. >>> so china's economy and financial situation is a cause of panic. another contributor is oil prices. they are bouncing back, but below $40 for the first time since 2009. that's because supply continues to boom while slowing growth in asia and elsewhere hits demand. i want to bring in john victor in abu dhabi. we have seen the bounceback in oil prices. where do you think oil prices are held right now? >> reporter: a slight comeback on oil prices. with the exception of china and japan, this will provide some relief to the oil market. alison, the downward pressure will continue. this will provide relief at the gas pump in the united states. it will cause panic in oklahoma and texas and south dakota. we basically were spoiled by chinese demand with 9% to 10% growth sucking in all o