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Speaker 1: This is Bloomberg Surveillance because a road that's opened up

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Speaker 1: now with the British decision to leave it could need

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Speaker 1: to be more prosperous rope. They'll have to navigate a

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Speaker 1: political crisis and they'll have to figure out who the

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Speaker 1: next prime minister might be, and that's not really clear.

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Speaker 1: I think we can think of it as essentially a

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Speaker 1: decreasing relationship with economic distance. Bloomberg Surveillance your link to

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Speaker 1: the world of economics, finance, and investment on Bloomberg Radio.

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Speaker 1: Good morning. It is seven am on Wall Street and

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Speaker 1: in Washington, d C. Where Tom Keene and I are

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Speaker 1: presenting a special edition of Surveillance, live from the capital

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Speaker 1: of the United States. Later in the program, Tom an

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Speaker 1: extended interview with former FED Chairman Alan Greenspan about Brexit

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Speaker 1: central banks in the American economy. Extraordinary good fortune to

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Speaker 1: speak to Chairman Greenspan. You and I know he's been

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Speaker 1: cautious for months. I would suggest it's even increased, as

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Speaker 1: you can understand when you look at the screen this morning,

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Speaker 1: Mike at seven am. You always go through the data.

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Speaker 1: Why don't you do that? And I'll jump in with

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Speaker 1: a few observations I'll just start with the fact equities

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Speaker 1: to tier it is. Uh. It is a down trend

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Speaker 1: since the UM volumes started to pick up as more

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Speaker 1: people in it to their trading discs. Although um and

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Speaker 1: we should notice nowon in London, so people have been

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Speaker 1: trading for a while. Uh, it has been more of

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Speaker 1: a grind lower, nothing like the plunge on Friday. Chancellor

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Speaker 1: of the Exchequer George Osborne out today saying, uh, the

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Speaker 1: government has a contingency place in plan to shore up

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Speaker 1: the US UK economy, not convincing people. The pound right

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Speaker 1: now at one thirty two, ten off its lows, but

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Speaker 1: below Friday, and we're on a one handle watch there.

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Speaker 1: I mean, the vectors are all in the wrong direction.

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Speaker 1: But as Mike says, without the enthusiasm and anks that

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Speaker 1: we saw on Friday, the foot Sea is down one

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Speaker 1: hundred and two points right now. The volume of European

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Speaker 1: shares changing hands almost three times that any day average

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Speaker 1: for British equities, more than uh three times as well

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Speaker 1: British banks, helping to put the European Bank Index on

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Speaker 1: course for its biggest two day drop on record. It

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Speaker 1: is now down by seven point two percent on the day,

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Speaker 1: and you were mentioning some of the European banks. Deutsche

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Speaker 1: Bank getting hammered again, down nine point four percent to

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Speaker 1: twelve euros, just just over twelve euros. Let's color that,

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Speaker 1: and it just breaking down to a new low twelve

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Speaker 1: point one nine on euros. Let's color the trend of

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Speaker 1: Deutsche Bank is a proxy for our global Wall Street audience,

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Speaker 1: particularly the American audience. In drive time, down we go

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Speaker 1: at five am. There was the McKey bounce, There was bounce,

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Speaker 1: and then it just didn't happen, and then another bounce.

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Speaker 1: Let me get my official Bloomberg surveillance cursor out here.

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Speaker 1: At about six eighteen am Wall Street Time Up we

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Speaker 1: go a little bit and Mike, as we go to

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Speaker 1: the opening of the show, it ain't happening for the

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Speaker 1: European banks. Well, let's set it up now for the

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Speaker 1: rest of the markets. The stock six hundred is down

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Speaker 1: by three percent right now, a little over nine points.

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Speaker 1: The decks in Germany is off a hundred and eighty

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Speaker 1: points one point nine percent. Here in the U S

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Speaker 1: SMP features are off by fourteen seven tenths. It's the

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Speaker 1: seven tenths decline for Dow futures there down one seventeen

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Speaker 1: and Nasdaki Mani futures are off thirty four points eight

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Speaker 1: tenths of eight percent. The Euro trading at one ten

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Speaker 1: sixteen right now is down nine tenths. It's been as

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Speaker 1: low as one oh nine eighty four. Will keep an

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Speaker 1: eye on that. The yen one oh one sixty four

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Speaker 1: is weaker still today, and that is in contrast to

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Speaker 1: the Nike, which is the one major stock market in

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Speaker 1: the world. It was up today by about two point

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Speaker 1: four percent, three hundred and fifty seven points ten ure

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Speaker 1: no yield in the United States one point four seven percent,

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Speaker 1: the five year one even and fifty seven basis points

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Speaker 1: for the two year note yield. In the United Kingdom,

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Speaker 1: the two year is going for fifteen basis points. In

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Speaker 1: the ten year note yield is at nine basis points.

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Speaker 1: It's broken tom below one on the day. So the

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Speaker 1: question is where do we go from here? Is this

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Speaker 1: a tipping point into a greater global slowdown and recession.

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Speaker 1: Sebastian Maloby is Senior Fellow for International Economics at the

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Speaker 1: Council on Foreign Relations. Sebastian, you are raising that question

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Speaker 1: of whether the whole euro Zone whether the whole EU

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Speaker 1: and what that means for the global economy, Yes, thank you.

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Speaker 1: My sense is really that for the UK economy is

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Speaker 1: the extreme uncertainty which has only gotten worth over the

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Speaker 1: weekend with term more than both political parties, not just

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Speaker 1: the ruling Conservative party. Um. That that uncertainty looks like

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Speaker 1: it's going to be deep and it's going to be prolonged.

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Speaker 1: And I can't see any other like here than this

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Speaker 1: is going to really kill corporate investment, which was already

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Speaker 1: done before the vote, and that's going to have knock

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Speaker 1: on consequence for the UK economy, and so I'm very

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Speaker 1: pessimistic about that. I think when it comes to the

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Speaker 1: Euro you've got a very determined central bank which has

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Speaker 1: passed the credibility test with Greece more than once and

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Speaker 1: held the system together. I think there's going to be

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Speaker 1: new stresses and new challenges for the central bank in

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Speaker 1: an environment where they used a lot of policy ammunition already. Um.

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Speaker 1: But I think you know, you have to look at

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Speaker 1: yet the Spanish vote, which the election there could have

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Speaker 1: been worth. It could have produced a bigger result left

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Speaker 1: wing neo Marxist um. So you need another political shock.

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Speaker 1: I think within the euro Zone for this to get

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Speaker 1: scary for the European Central Bank that that should reassure

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Speaker 1: you a little bit. The Spanish elections, it tells you

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Speaker 1: that it isn't a uniform knee jerk populist response to

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Speaker 1: what's going on. Right coming off the British bird, there

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Speaker 1: were as many as seven countries in the rest of

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Speaker 1: the European Union where somebody or other in politics was

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Speaker 1: demanding an immediate referendum to copy the British one. The

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Speaker 1: question is whether those demands and those pressures UM actually

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Speaker 1: produced results. I mean, will that be votes of this

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Speaker 1: sort and the one vote there was schedule, which was

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Speaker 1: the Spanish election. UM. Europe has sailed through relatively unscathed.

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Speaker 1: Sebastian Malby with us as we begin our coverage is

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Speaker 1: our Bloomberg surveillance from Washington, brought you by Investco. Investco's

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Speaker 1: high conviction factor based strategies could help investors focus on

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Speaker 1: a high quality, low volatility and more. Learn more and

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Speaker 1: investco dot com slash high Convictions. Sebastian Mailby with us

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Speaker 1: with his magnificent book on the head shown Business UH.

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Speaker 1: The idea of his work UH in terms of being

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Speaker 1: a finalist for the Pulitzer Prize twice, but far more importantly, Sebastia,

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Speaker 1: your father, Sir Christopher, as ambassador to Germany UH and

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Speaker 1: indeed ambassador to France, you have a continental UK perspective

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Speaker 1: as a child, which you've always brought forward in your work.

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Speaker 1: The diplomacy here is about dialogue. Well that dialogue, you know.

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Speaker 1: The flinty is the word we use right now. Are

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Speaker 1: we going to have a flinty dialogue that Sir Christopher

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Speaker 1: never saw? I think Sir Christopher, who is now eighty

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Speaker 1: years old almost held his birthday will be next week, UM,

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Speaker 1: is feeling a bit depressed that his life's work of

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Speaker 1: British diplomacy and integration where the rest of the world

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Speaker 1: hasn't been delta a very severe setback. UM. I think

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Speaker 1: that the problem right now is not whether it's flinty

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Speaker 1: or whatever. It's just that there's no not going to

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Speaker 1: be any dialogue initially because the interlocutors have no idea

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Speaker 1: what they're gonna say. The kind of disarray politically within

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Speaker 1: the Leaf camp in Britain is so deep that they

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Speaker 1: didn't know what they want do. They want to have

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Speaker 1: more migration on a points based system, which is what

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Speaker 1: bit of you know, open to the world side of

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Speaker 1: their movement wanted or do they want less migration? Do

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Speaker 1: they want you know, are they going to take the

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Speaker 1: budget savings from sending money to Brussels and spend it

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Speaker 1: on the national health service or are they going to

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Speaker 1: cut government? Right? But on this Monday morning, when there's

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Speaker 1: a Bloomberg headline that Ubrew will not resign, that gets

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Speaker 1: my attention explained to us. European federalism. This is not

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Speaker 1: Alexander Hamilton's is it. Yeah. I mean the paradox of

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Speaker 1: European federalism is that really nobody wants it anymore. Um

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Speaker 1: uh you know, I mean the political temperature in Europe

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Speaker 1: has gone against it completely. But there's still a kind

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Speaker 1: of technocratic logic that says, when you've got a single

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Speaker 1: currency for nineteen of the countries, um, they need to

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Speaker 1: integrate fiscally, they need to coordinate tax eave and spending

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Speaker 1: and bank paid out funds and so forth. And that

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Speaker 1: pushes the system towards deeper integration, even when politically it's toxic.

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Speaker 1: Can it be done or can you? I guess the question?

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Speaker 1: And this is a longer question. We've all got a

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Speaker 1: minute left here before we have to take a break.

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Speaker 1: We'll come back and explore this even more death, But um,

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Speaker 1: can the integration of Europe on a trade and business

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Speaker 1: basis continue as it is? Or do they have to

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Speaker 1: do something like go back to individual currencies so that

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Speaker 1: they don't have this physically important question. You can't go

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Speaker 1: forward and you can't go back. I mean, that's the

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Speaker 1: truth of it. Exiting the Euro once you've denominated every

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Speaker 1: single contract in your economy and euros is so catastrophically

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Speaker 1: painful that Greece looked at that and decided not to

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Speaker 1: do it. I did it twice, so I mean going

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Speaker 1: back out of the Euro is prohibitively painful, but going

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Speaker 1: forward into integration is not something people are ready to do.

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Speaker 1: So I mean we're stuck, and that is I mean,

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Speaker 1: I think that the upshot of that is a long

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Speaker 1: period of muddle and slow growth in sort of the

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Speaker 1: Japanization of the Ursine. Well, we'll come back with Sebastian Melboy.

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Speaker 1: I was gonna put a very blunt question to you, Sebastian,

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Speaker 1: which I'll hold until we come back. Tom Keene and

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Speaker 1: I are live in Washington, d C a special edition

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Speaker 1: of Bloomberg Surveillance today as we keep track of what

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Speaker 1: is happening in the United States and around the world

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Speaker 1: post brexit. Tom Peter dear Terris from our data team

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Speaker 1: has a fascinating bit of information here. The last time

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Speaker 1: the pound was at this level in the SMP was

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Speaker 1: one eight three. Well, that would be a bear market

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Speaker 1: if we got back to that. We have the vectors

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Speaker 1: in the wrong direction, folks. Not the panic that we've

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Speaker 1: seen is today futures negative thirteen to futures negative one

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Speaker 1: twelve from Washington, Bloomberg Surveillance. All right, let's check in

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Speaker 1: with Michael Bart now and get the latest world in

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Speaker 1: national headlines. Mike, Tom, thank you very much. British Prime

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Speaker 1: Minister David Cameron will addrest Parliament today. Last week's vote

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Speaker 1: for Britain to leave the European Union has left the

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Speaker 1: UK looking rudderless. The attempt by opposition Labor Party lawmakers

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Speaker 1: to throw their leader, Jeremy Corban out comes on the

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Speaker 1: heels of Prime Minister Cameron announcing he will step down

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Speaker 1: by October. A new round of flooding is possible in

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Speaker 1: West Virginia and the same area where at least twenty

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Speaker 1: five people died in the past week. More heavy rains

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Speaker 1: are forecast and that has prompted a flash flood of

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Speaker 1: watch for more than twenty counties. Firefighters advanced on the

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Speaker 1: wildfire in central California that has killed two people and

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Speaker 1: destroyed about two hundred homes. Find your officialsy The blaze

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Speaker 1: that has charted about sixty eight square miles is about contained.

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Speaker 1: Global news twenty four hours a day, powered by more

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Speaker 1: than twenty hundred journalists and analysts and more than a

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Speaker 1: hundred twenty countries and Michaelabar. This is Bloomberg. Mike, Tom

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Speaker 1: and Michael, thanks so much, Thank you so much for

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Speaker 1: your comments of our work over the weekend. Michael and

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Speaker 1: I really appreciate that we are in Washington later this

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Speaker 1: earning a conversation with Alan Greenspan. This is Bloomberg Surveillance.

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Speaker 1: At nine am this morning, the former FITE chairman will

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Speaker 1: join Tom and many from this Bloomberg special edition Washington,

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Speaker 1: d C. Live on Bloomberg Radio, worldwide global business news

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Speaker 1: twenty four hours a day, at Bloomberg dot com, the

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Speaker 1: brought to you by National Railty Providers of Satisfaction guaranteed

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Speaker 1: New York City realty investments. See them at n r

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Speaker 1: i A dot net. Mettronics says it'll buy Hardware International

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Speaker 1: of Framingham, Massachusetts for about one point one billion dollars.

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Speaker 1: Shares of European banks are trading lower this morning following

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Speaker 1: Thursday's historic vote for the UK to leave the European Union.

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Speaker 1: UK domestic banks are leading declines in the stock six

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Speaker 1: hundred as analysts on both sides of the Atlantic cut

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Speaker 1: earnings estimates for the biggest investment banks on the expectation

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Speaker 1: that security sales and major deals will be thwarted by

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Speaker 1: economic and political uncertainty and currency swings. Again. Stocks in

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Speaker 1: Europe are lower, with the DACKS in Germany down two percent,

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Speaker 1: CAP in Paris down one point nine percent, foot see

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Speaker 1: one down one point six percent. U stock index futures declining,

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Speaker 1: with SNP emny futures down fifteen points, DOW EMNY futures

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Speaker 1: down one D twenty six, and NAS documity futures down

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Speaker 1: about thirty seven ten year treasury of twenty six thirty seconds,

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Speaker 1: the yeld one point four six percent. Nimex screwed oil

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Speaker 1: down one percent or forty seven cents to forty seven nineteen.

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Speaker 1: A barrel comes gold up a ten percent or ten

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Speaker 1: dollar seventy cents to thirteen thirty three ten announced the

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Speaker 1: euro a dollar ten o four, the British pound a

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Speaker 1: dollar thirty two oh six, the yen one oh one

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Speaker 1: point six two. As a Bloomberg Business Flash, Tom and

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Speaker 1: Mike Karen, thanks so much. Michael McKee and Time Keenan

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Speaker 1: Washington will be speaking later today with Madeline Albright and

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Speaker 1: also with Alan Greenspan. Right now, Bastian Mallaby and the

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Speaker 1: spirit of his hugely awaited book of October the man

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Speaker 1: who knew the life and times of Alan Greenspan uh

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Speaker 1: and with agreement with his publisher, will not speak in

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Speaker 1: detail about the book. They're keeping that under wraps. I

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Speaker 1: guess we could ask a Sebastian who will play Alan

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Speaker 1: Greenspan in the movie, but let's keep that. Let's keep

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Speaker 1: away from that, Sebastian. Are central bankers today different? Have

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Speaker 1: they moved on to a new process that is removed

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Speaker 1: from the older bankers? Sorry, which I was trying to

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Speaker 1: say that that you maybe Utah could play Alan Greenspan

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Speaker 1: in the meat. I don't. I'm too tall and my

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Speaker 1: clarinet and my yes, that's true, that's true. I'm prescient

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Speaker 1: lee unintelligible, but I don't play clarinet like the German.

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Speaker 1: Are the bankers today, Sebastian, Are they a whole new

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Speaker 1: breed because of newsflow globalization of finance? Is it just

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Speaker 1: a whole new game? Well, I mean relative to back

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Speaker 1: when Alan Greenstein was starting out his public life in

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Speaker 1: the late sixties. Yes, absolutely. I mean, you know, he

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Speaker 1: became Nixon's advisor in the late sixties at a time

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Speaker 1: when the dollar was picked to gold, there were no

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Speaker 1: financial derivatives, banking was regulated, interest rates were capped, we

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Speaker 1: had regulation Q. And then during his public life of

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Speaker 1: four decades, you go right up to the eve of

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Speaker 1: the financial crash in two thousand and seven eight and so,

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Speaker 1: if you want to understand the making a modern finance,

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Speaker 1: and he's the guy who was at the center more

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Speaker 1: than anybody else. He for years and I covered him

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Speaker 1: for years, was insistent on the ability to use human

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Speaker 1: discretion in deciding what monetary policies should be. And even

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Speaker 1: physical reactions to downturns. Is that still a viable theory,

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Speaker 1: or there's a big move to try to push for

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Speaker 1: rules based policy making. Is green spans still the best

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Speaker 1: way too to make policy? Well, you know here, I'm

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Speaker 1: gonna push us back onto current events in order not

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Speaker 1: to bring down the theory of my publisher too much.

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Speaker 1: But I think that this question about discretion and central

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Speaker 1: banking maybe facing an interesting cast right now because you've

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Speaker 1: had this big market shark, because you've been reporting sterling

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Speaker 1: is down to you know, the lowest has been as

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Speaker 1: thad years. How the central bankers respond to that? And

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Speaker 1: my guess is that there's some overt um, you know,

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Speaker 1: a sort of lender of last resort liquidity provision trying

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Speaker 1: to stabilize all those banks whose shares have been falling today,

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Speaker 1: as you've been saying. So that's the thing that they're

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Speaker 1: kind of quite open about. There's also going to be

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Speaker 1: I think some exchange rate management, which they may not

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Speaker 1: be quite so open about because you created one way

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Speaker 1: bet for traders as you're obviously defending a level, so

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Speaker 1: there may be some covert decent of levels going on.

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Speaker 1: The Swiss Central Bank is the only one I'm aware

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Speaker 1: of that's been open and saying it's trying to prevent

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Speaker 1: the Swiss rank from appreciating too much. But when you

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Speaker 1: see the Japanese yen uh, you know, falling today as

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Speaker 1: opposed to rising, I mean I immediately imagine that you know,

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Speaker 1: that's the Bank of Japan acting. Well. You you end

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Speaker 1: up then with the fiscal authorities who are refusing to act.

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Speaker 1: So to take us back to Europe and the question

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Speaker 1: I wanted to ask you before the break, has the

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Speaker 1: Eurozone failed? I mean I think it's it's it's a

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Speaker 1: fail yet it's failed um and it's locked countries into

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Speaker 1: this rigid strait jacket where you know, Greece needs a

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Speaker 1: totally different interst rate structure than what Germany wants, and

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Speaker 1: Grease can't get out of it now. The problem is

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Speaker 1: that you know, getting out is even more painful, and

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Speaker 1: so I think Europe has to live in this straight jacket,

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Speaker 1: uncomfortable though it is, and I just don't see I

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Speaker 1: don't see an alternative to a painful, slow grind of

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Speaker 1: muddling through. This just going to be quite depressing. Sebastian.

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Speaker 1: I was in Mayfair the other day after the referendum.

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Speaker 1: Looking at non hedge fund people, you are the authority

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Speaker 1: on this, your wonderful book More Money than God is

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Speaker 1: a hedge fund game over. You know. I also with

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Speaker 1: with a bunch of very smart hedge fund people right

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Speaker 1: on the day before the vote, in the day of

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Speaker 1: the result, UM and everybody expected, especially when Sterling was

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Speaker 1: rising on the Thursday of the vote, that you know,

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Speaker 1: this is a done deal. We were going to vote

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Speaker 1: to stay in. And the shock the next morning was

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Speaker 1: quite probable. Of course, those smart people have got a

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Speaker 1: scenario for even stuff they don't expect, so I think

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Speaker 1: it was quite remarkable to see people, you know, I'm

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Speaker 1: at a conference. People were still you know, showing up

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Speaker 1: to the events. They were trading, but they kind of

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Speaker 1: had their strategy fixed assance. They didn't have to do

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Speaker 1: much more than just press the hit buttons, the sund button.

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Speaker 1: I get different opinions, you know, when I to my

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Speaker 1: friends in the industry as to whether the markets, whether

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Speaker 1: the whether the industry is um in some sort of

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Speaker 1: serious decline. I mean, I think, what's care is it

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Speaker 1: in a low interest rate environment where you know, returns

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Speaker 1: on most assets are going to be very low you're

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Speaker 1: doing pretty well if you're making six seven percent a year,

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Speaker 1: and yet that doesn't support the two and twenty traditional structure.

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Speaker 1: If you take two of the seven right off the bat,

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Speaker 1: and then you take the of the of the remainder

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Speaker 1: the hedge fund deal with the outside exact partner, that

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Speaker 1: has to be renegation. And I think that's why pressure

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Speaker 1: on the on the industry. I will be with the

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Speaker 1: Counsel of Foreign Relations, among other gifts again in his

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Speaker 1: book The Man Who Knew The Life and Times of

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Speaker 1: Alan Greenspan, Eagerly it waited for the Fall. Michael McKee

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Speaker 1: and Tom Keane, we are in Washington, a conversation later

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Speaker 1: with Alan Greenspan. Good at Morning, Littlebert Surveillance brought you

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