From jackson hole. At 8 30, we get u. S. Weekly initial jobless claims. Then july existing home sales. Attention is raised join us to set the stage is matthew boesler. Janet yellen says it she is going to talk about Financial Stability. What does that mean . Matt im looking forward to what she has to say on this topic. We got a wide range of views on Financial Stability in the latest minutes of the july fomc meeting. The Financial System is so much stronger now than it was in previous expansions. We shouldnt have to worry as much about the Financial Stability because the fed has been doing its job on a regulatory front. Theres one participant in the stressed raisingmade rates gradually would be the best way to strike a balance between maintaining Financial Stability and its inflation and employment goals. Its not clear yet what is the consensus about using Interest Rates to address Financial Stability concerns or not. David that is one of the questions if you take Interest Rates and Balance Sheets, which one goes more to the Financial Stability issue . Matt they would probably think about it in terms of the Interest Rate whereas the to bee sheet is supposed this thing that they did to bring down longerterm Interest Rates and intervene in credit markets during the depths of the crisis when they really needed to be intervened in. Its not clear the Balance Sheet has the big bearing on the way they see setting policy to address Financial Stability. Year, the newhis does the fed chair need to follow up . Do they want more twoway risk in this market while we are waiting for december . Matt its possible. Earlier this year, dudley came out and give that interview on 28 we on february still have plenty of time between now and december that we didnt necessarily have beethen. They may want to sit back and let the data play out between now and then. Jon this could be the fed chair s last visit to jackson hole as the financia fed chair. That a way she can do matt that will probably come out of the part of praising the fed for all its done since the crisis to make things better. They usually do include warnings about rolling that back. A lot of fed officials have said we can review this and roll it back a little bit. Its not there were that balance is in their minds at the moment. By for more, we are joined jim bianco and Nick Bennenbroek. Title, the theme of jackson hole this year is fostering a dynamic Global Economy. What can the fed do to foster a dynamic Global Economy . That is a good question. Not create financial instability. This has been a big topic for the fed ever since the financial crisis. They think part of the crisis was an unnecessary panic by Financial Markets over the Mortgage Market and housing that made a bad situation worse. If they want to foster stability in the Global Economy, the fed not more worry about creating instability in Financial Markets. Betweens balancing act loose financial conditions and the potential for financial instability, between that and ultimately soft inflation print after soft inflation print, how does the Federal Reserve balance those two things . Balancerike a bit of a in terms of Interest Rates in terms of saying you dont want to go too late because that might encourage bubbles or financial elevation but also you o earlyant to go to for the risk of causing the economy to stumble. Just the idea of getting underway in terms of producing the Balance Sheet as well. Even if janet yellen reminds the markets that we are going to keep on removing accommodation gradually, that might be enough to have some points on markets. David they have raised several times already. Conditions have loosened rather than tightened to what extent is trump helping them . The dollar is listening financial conditions to a large degree. Nick looking at the equity market, the dollar, to the extent that you would say that they are looking to see slightly less accommodative or slightly more restrictive financial conditions just as you get the economy doing ok, weve got a bit of inflation, they would like to see more restrictive to avoid the possibility of financial instability or some kind of public run. Jon president draghi also making an appearance. Speech could be on absolutely anything. Whensk you whether the speech first got scheduled, we were waiting for a hawkish mario draghi to come out in jackson hole and set us up for tapering. Is that risk diminished somewhat . Jim people have talked themselves into diminishing it. In 2014, draghi outlined the ecb Bond Buying Program. People are surmising that in 2017, he will use the same venue to outline how they will end the bond buying. That was a big theme a couple of weeks ago. I wouldnt be surprised if he does use this venue tomorrow to Say Something along those lines. Stop thew we would Bond Buying Program or heres the conditions we would use to continue to pull back on it. His speech might be more important than Janet Yellens speech tomorrow. Jon the account of the last meeting was pretty clear, they dont want to be boxed in. They want more breathing room to bring policy either way should they need to there was also an explicit reference to the fx channel and the risk of overshoot. Is the ecb going to say hold on . Jim i would gather more the market talking itself into it. The ecb had that problem earlier this year when they were talking about more hawkish and then they came out and said you misinterpreted us and the market rebounded the other way. The ecb always wants to say we will leave our options open, but the market will hear what it wants to hear. Bit on theng off a other he will Say Something. They could always interpret what he says in a more hawkish tone. David the last accounts explicitly address the question of the euro. Banks still have it within their power to talk their currencies up or down . I think it is lets see what they actually do. The ability to drive the currency lower or higher is fairly modest, especially for the likes of mr. Draghi or miss yellen. Not really jon what is the biggest problem for the ecb . Probably the fact that its moved 12 . As 160. En as high this is not particularly problematic. They dont like the fact that it has moved so fast. Its a bit divorced from reality. But probably will tighten, the currency has moved up a lot quicker than the actual Interest Rates. Sticking bennenbroek with us, alongside jim bianco. Coming up, more from jackson hole. An interview with nita melnikoff in 20 minutes. Rge from new york, you are watching bloomberg tv. David this is bloomberg. Be an already going to eventful september in washington, got even more complicated this week with President Trump saying he will shut down the government if he doesnt get the money for that wall along mexico. We have to close down our government. We are building that wall. Let me be very clear to democrats in congress who oppose a border wall and stand in the way of border security. You are putting all of americas safety at risk. I dont think anybody is interested in having a shutdown. While we work on doing what we actually said we would do much control our border. I dont think you have to choose between the two. David joining us from the white it soundsaret like President Trump has trouble with republicans, not just democrats. Thats exactly whats going on here. Test of wills between president and Republican Leadership in congress, between andbase and the trump base the coalition of republicans. Paul ryan and Mitch Mcconnell andtrying to pull together think goodness it has been a slow august. Thank goodness it has been a slow august. Ofres this budget deadline september 30 from others the whole debt ceiling issue theres the whole debt ceiling issue. Is deemed too dangerous and the attempt to separate it to determine when the debt ceiling stand up really happens its one thing to have a shortterm shutdown to and itsoint another to miss a debt payment. You have these issues, you have the implications on what it does for the prospect of passing tax reform, the implications on leadership what does paul ryan see in all of this for him . A leadership fight, of course. David talk about leadership within the white house. Who will be the quarterback for organizing all of this . Theres a few different options. President trump could be the quarterback. General kelly could be the quarterback, gary cohn and Steve Mnuchin could run the play. It wont work unless general kelly is able to maintain order and discipline inside the oval office. Then theres the question of steve bannon who is no longer inside the white house but back at the helm at breitbart. Symbolically, been in supporters and many in the freedom caucus, will they be pushing for this fight . Trumps threat sparking concern across the world yesterday. Stocks recalling their biggest. Ntraday decline in the week the s p 500 headed for its biggest monthly decline since before the u. S. Election. Still with us to discuss it, jim bianco and Nick Bennenbroek. How are you thinking about the end of september now . Drama . Litical jim the market doesnt seem to think its political risk. I think its more drama. Andpublican House Republican senate and republican president are not going to shut down the government and self detonate themselves. There will be a lot of theater around it, but at the end of the day, something will get done. There will be no default, no acrimony we saw in 2013. Jon a Republican House and Republican Senate and republican white house, yet we still discuss it, the prospect of this actually happening at the end of september. Jim i think its all political theater. They need to push it to the end. I dont expect a deal before september 30 anyway. That is the way washington works and it gives them attention and gets them the ability to frame the debate. I think the market is right not to worry about this right now. Theres nothing that says they will shut down the government and there will be a risk of default and interests wont get paid on october 1 and all the other problems that come with that. That is a very low probability right now. David what youve said makes good sense. Unfortunately, good sense and washington dont always come together. Look what happened with health care. They had six years to figure out how to repeal and replace obamacare. They had republicans in the house and senate and didnt get it done. Do you think you will get past this debt ceiling crisis . Nick i do. We do have the same or Party Controlling all three branches of government. The market has seen this move before in terms of the debt ceiling crisis and the debt ceiling debates. They are relatively comfortable that even if we go right up to the brink and to the 11th hour, we will be ok. Frontis a new activist from President Trump, but there is a limit to have any kind of contentious jon we also have republican versus republican. Markets, youor look at the positioning right now can extremely bearish on the dollar at the moment. Does it get harder and harder to build dollar over the next month . Nick the trend is for a weaker dollar over many years. A lot to do with whats happening in europe and places like canada, for example. Its important that theres not a lot of interest in having any kind of contentious over this zero chance of any debt default. Weve been through a partial Government Shutdown before. The market is relatively comfortable that it will end up ok. David jim bianco and Nick Bennenbroek both will be staying with us. Next week, i will have the chance to sit down with warren buffett. Hes in town because of the a very auctioning off expensive lunch. Live from new york, this is bloomberg. This is bloomberg daybreak. Tiffany reported samestore sales that dropped 2 last quarter. Ines missed estimates an every region, except japan. To drawhas been trying in younger shoppers by renovating stores and introducing new designs. China is accusing the u. S. Of sabotaging the International Trading system. The issue is the u. S. Investigation into chinas intellectual property practices. The Trump Administration says it will determine whether chinas actions in areas such as Technology Transfer are reasonable or david still with us, jim bianco and Nick Bennenbroek. Lets stay on this topic of china. How do we get ourselves in this situation where we have china lecturing us about the International Trading system . How did the u. S. Get on the wrong foot here . Jim that is a good question. I think it goes to our politics and that we are talking about putting up walls and reducing gives the chinese the moral imperative to make them look like they are the free traders of the world and we are less so the free traders of the world. It is the u. K. With brexit as well. David after the election come of was a lot of concern about trade wars, especially with respect to china. Is it possible we are being too complacent about the possibility of disruption in trade . Jim the market is making an assumption that for all of his worth, donald trump is a businessman and a businessman cannot see the idea that a trade war would be good for the american economy. Therefore, the market is assuming he will never let it get to that point. As we move forward from here, theres always that risk that it could get out of hand. I would like to agree with the market that its not a real worry right now. Jon there is a big debate over some of the economic policies or lack thereof the fact that china says the u. S. Could sabotage the International Trading system, for many people, is a joke. The idea that the chinese are lecturing anyone on free trade. This is something the u. S. Has to do, isnt it . That is putting pressure on the chinese to restrict their protectionist policies and actually open up the Market Access to Foreign Companies and rules that are implemented. Jim i agree. It is a joke that they are lecturing us and we are allowing them to not have to change their policies. It is a bit of a missed opportunity in that respect. He will have to see if we can grab the high ground on this argument and be able to then push this idea of more free trade that would help benefit the u. S. Economy and not let them t be so protectionist. Jon jim bianco and Nick Bennenbroek sticking with us. Of seized counterfeit goods at the border come from china. David china has been taking great liberties its not a secret. Jon strong words from the Chinese Ministry of commerce. Our interview with interview Esther George. You are watching bloomberg tv. Jon you are watching bloomberg daybreak. Two hours away from the cash open. Features are positive, up about. 25 on the dow and s p 500. A decent tone in europe as well. 5 on the ftse. Esther george has been calling for higher Interest Rates for years to head off inflation. Theres a problem theres not much inflation. Michael mckee is in jackson hole for the economic symposium. He asked Esther George whether she was wrong or premature. Esther i think about our mandate, which is price stability. Relative to an economy that is growing at 2 and is adding jobs come i think we are at a pretty good place and we still have very accommodative Monetary Policy. That tells me we should begin to gradually remove that accommodation. As long as the outlook supports we are moving in the right direction. I think we are. Mike that suggests you are in favor of another rate move this year. Esther that was my last forecast. Plotsime we put the dot together is a new opportunity to look at the data. I will be looking at the data as we get ready for the september meeting to see whether that still makes sense. I think there is still opportunity to do that. Mike by the end of the year, not necessarily in september. Esther i dont pick a meeting and i dont consider those rate paths a commitment. I think its a general sense of where rates should go. Mike to what extent is inflation a lagging indicator . Is the phillips curve broken or is nehru lower than it has been in the past . Esther im not sure that i will have a good answer for you there. Many people are studying that very issue. The things i look at when i look at inflation the price of goods has been falling. Maybe that is due to technology. Services, which is two thirds of the economy, you see those rates are staying at 2 and higher. In the context of the economy we have today, thats why i think you have to be careful getting too focused on the point estimates as opposed to the broader trends you see. Mike with inflation not rising, you had five months of disappointment in the cpi, Market Expectation