Mario draghi said the bank may increase his stimulus. He says theyre still a risk of deflation in the euro area. That sent italian and spanish bond yields falling. Now at a record low. One of the most eloquent speakers of his time, at democrat made the case for the parties liberal wing. Former new york governor mario cuomo died yesterday, he was 82. He served as three terms as governor. His speech propelled him into the national spotlight. He was considered elected president ial candidate in 1988 and again in 1992. Each time, he refused to run. He bowed out as a plane was waiting to take them to New Hampshire into the primary in 1992. He died of Heart Failure just hours after his son andrew was warning for a second time as governor. Search teams still having our time fighting wreckage from the airasia jet. They will use sonar and ping or locators as a look for the flight recorders. So far, 16 bodies have been recovered. There are 10 foot waves and winds up to 40 knots and the search area. Saying no thanks to the french government. He has refused to accept the highest decoration from france saying the government should focus on reviving Economic Growth instead of handing out awards. Pikettys advocates regressive taxes to reduce income inequality. The stage is set for the College Football playoff finalist. Stunning upset at the sugar bowl. Ohio beats alabama 4235. At the rose bowl, oregon Heisman Trophy winner accounted for 400 yards and three touchdowns as the ducks pounded Florida State 5920. Florida state turned over the ball five times in the second half. Mark your calendars. Those are your top headlines. Lets get a day to check. Lets get a data check. We did not close at a record high for s p 500, but it does look like we have turned around from the weakness we saw in the last trading day of 2014. Some selling and the 10 year treasury, yields moving higher. Most economists and traders expect yields to continue moving higher through 2015. The euro is weaker versus the dollar, falling below 1. 21. The lowest since 2010. Mario draghi making comments hinting at full skill quantitative easing. Were keeping an eye on oil prices. They hover at fouryear lows. Lets talk with william lee, head of economics for north American Economics at citigroup and also covers Global Economy as well. Hes our guest host for the hour along with Pulitzer Prizewinning journalist and author of several blocks. When its europe, everyone is focused on the new year. Weve seen the girl move on anticipation of global qe, bonds and italy and spain come down. So much anticipation when anything happens. Will it have much impact . Europe is facing serious headwinds. As much as theyre going to benefit from the drop in oil prices, it is adding the deflation problem you mention earlier. Mario draghi has got to do something. Everyone is anticipating quantitative easing is going to somehow work. It will work through the exchange rate. Were anticipating once quantitative easing kicks in the euro will start to depreciate quickly and probably get to parity around 2016. That is the degree of depreciation we need in order to raise the price level in europe and try to kick some growth up. The bank of japan at a justin was at the end of last your at the end of last year. Dropping all caps of language throughout. The most widely anticipated easing. The problems of europe are structural. All that quantitative easing will do is buy some time. The key is for other super mario brothers like in italy, to put in Structural Reforms. The trouble is, the political difficulties is causing europe not to be able to pull together the needed coalition and policies needed to address the structural problems. In the interview over the weekend with mario draghi, basically saying this is what is going to happen, speaking to a german audience, he preamble to everything with structural reform, structural reform structural reform. We can say we know that instead happen. Politically, it is been very difficult in europe for five years. How do you turn a good economic idea into something that is possible to voters who clearly dont want it . Whenever a country tries to implicate Structural Reforms, we know it has to shift from one sector to another. That means unemployment. The trouble is, we cannot get that in europe right now. In germany back in the 1990s, the huge depreciation of the Deutsche Mark allows it to happen and that helped get the Structural Reforms in place. We heard so much about greece having no contagion impact on the rest of the region. As any notion that drug use comments are to hedge against a potential contagion . The contagion from greece comes from the fear of some kind of austerity fatigue. When people know you have to squeeze the spending and away that allows them to be sustainable over longterm, that means the politicians in one place, supply in the aid to say we dont want to support greece worse of people with increase will have to suffer the reform say, we were promised benefits and we are not getting them. You have this tension were you have righteousness on both sides of the argument. Isms like a game of chicken which country is going to start shoretel reform it is almost like a game of chicken, saying which country is going to start reform short shirley structurally. You need five to 10 years of time and that is what mario draghi is trying to buy them. Will she wait for 10 years . She is chancellor for life. Maybe if she wins, there will be a renegotiation and possibly Angela Merkel will be forced country by country just sort of slack in her possession with austerity. I want to turn to the u. S. Everyone has his or her own theory about why were levitating above everybody else. What is yours . Markets work. We did not have a lot of the headwinds holding us back. We have a Financial System that came back and play right after the financial crisis. The u. K. Is another example of a country where the Financial Systems came back and we were able to get growth into the u. K. That is the difference between a rigid Financial System and a marketbased Financial System. With what is going on in countries such as china and russia and now looking at deflation potential in europe is there any kind of risk that the issues in these other countries good derail the growth in the u. S. . No. The contagion risk, as first the Financial Markets are concerned, are severe. We had zero rates for a long time. That means a lot of distortions in the market for a long time. Can we now have a Financial Market able to sustain itself without the steroids from using Monetary Policy in the u. S. . I want to followup. We have been talking about structural reform necessary in japan and europe, which are point the u. S. Does not need structural the practice no, no, no. The u. S. Is less needed a Structural Reforms because theyre able to shift. You right in your research there are not enough animal spirits to get investment up. Sheryl, you cover funding for earlystage companies, especially new media and social enterprise. What is the level of experience when it comes to the kind of funding . Theres a lot of funding now in venture capital. The problem is theres too much in some cases. Too much going to a few companies of the valuations are sky high. Too little going to other areas where it might take longer gestation, where the returns are going to be maybe patient are further out. It is kind of a five located industry. Is that all money going to consumer related copies as opposed to things that take a longer time to see a payoff . What i think Consumer Industries are easier for Angel Investors to see an outcome. Like buber. It is such an inyourface company. Look at the valuations. That is sort of absurd in many ways. If you look at some of the more Important Industries where we do need innovation and privacy, for instance, we just saw what happened with sony. The biggest hacking event weve seen in this country. We have not even begun to think about what happens with our mobile devices. Hacking our mobile devices. Were going to talk about innovation in the second. It has been brutal for oil, even more brutal for alternative energy. Gordon johnson joins us to talk about this. This is bloomberg surveillance. Good morning. Coming up keep alexander will be joining us on Market Makers. Lots to talk about with mr. Alexander for the year 2015. This is bloomberg surveillance. On new years eve, uber ran to seven times normal fare. But for all of its faults and missteps, is at the most important innovation of standard. Everything her described as the uber of x. Sheryl wudunn is with us. Senior managing director he of done so much. You have said education is right for disruption. What does that mean . Partly because the education in this country right now so pathetic, that there really is a lot that can be done. There are now many evidencebased strategies that have been shown to be effective, to lift kids out of not just poverty theyre facing, but just poverty in general. Education is the key, but we are not implemented them. With a problem which means you have to teach how to teach. That is not how teaching works at least at the primary level, in this country. The evidencebased strategy just examines basically what works and what is effective in the classroom and what is effective in education. They really do work. Starting early really works. How do you take those ideas and actually implement them all over the country . That is the challenge. For instance, the perry preschool preschool do had stored, had really preschool to head start, when it rolled out, it was not as effective. It was effective when they went back and examined what happened with headstart. They found, well, maybe in the first two or three years after kids were in headstart, they did not do well. But after 20 years, it was very effective. You were talking about the vie i for kaisha and of the venture market. So much cash flow to some and not to others. Is this venture capitalists knocking ticky and up . Most people want to go with the winners. If they see one company is doing well, they will just pile on which then also depreciates the kind of potential appreciation you might be a bully get with the valuations go up and up. In terms of the bifurcation, it is hard to convince people at a very early stage to go in with you. There are a lot of companies that may have great ideas, may need a little help in execution. They dont get that help because theyre not getting the funding and a strategic advice that goes with it. We might be missing out on potential winners. There is definitely that risk. Certain areas like education, education technology, they are not as hot as other areas. Is education investing considered a safe haven or more of a risktaking venture . I would not say risktaking but more difficult because the returns have not been as spectacular as those in consumer technology, for instance. What gets disrupted and what doesnt . I wish i knew. I think it is difficult. It really is hard to know of the earlystage what is going to be disruptive. Something, oh, my goodness nest , who would have known that would been potentially disruptive . But is it really . Other structural factors within the Health Industry preventing this kind of disrupted. And health, theres a lot of areas that could be disruptive. Health is highly regulated industry. If you go through certain areas like medical devices might be more easy, but for instance, theres a company that is trying to change the way we repair our bones. It sounds fascinating. Theyre using stem cells to repair the bone. Great breakthroughs in science. However, the road is still hugely challenging. It could be five to 10 years away before we even see the first person actually benefit from it because of the regulation. You mention the Structural Reforms in the west. You talked about why it is for the u. S. It is so hard to do it. Measuring the outcomes of these capex and human services, it is very, very hard to say, what is the highest rate of return for the dollar in any particular field. Is that because the timeline is stretched out into decades . Can you measure the returns . If i get a better education, can i get a better job . It is hard to measure. You run into Political Agency problem. Who is going to spend money now that will help a politician 20 years from now . That is a real problem when it comes to education. Probably, the largest return on society could be education. Because no one person gets. Who is going to appropriate the sending funding. What of the most effective ways is to coach soontobe mothers. So many kids at the local syndrome. They wont ever the brain will ever be able to recover. It is fascinating how much this discussion keeps coming back to politics. We have the inability to spend money on education. This is bloomberg surveillance. The streaming on your phone, and apple tv. First gone bloomberg. This is bloomberg surveillance. Im scarlet fu. Its time for the morning mustread. Mine is from a columnist at bloomberg views. Hes reflecting on the stampede in shanghai that injured people. He called it anxiety resulting in tragedy. Its what is certain is when asked to what an accident is long overdue in a city that takes particular often reckless pride coming staging large spectacles which draw big crowds that underscore the worthiness of the expense. These are increasingly happening. One of the critical parts of china strategy is to switch over from the industrial bassist urbanized. As population growth slows, we have to make things more urban. As you urbanized, per capita things rise accidentally. Exponentially. You have to have infrastructure to handle that. Last week, we reported that the biggest equity mix that had the biggest rise last year with a shanghai composite. You dont get that kind of Growth Without problems. Those events are twinned. The problem with china is that it does thing in extremes. It doesnt have a measured approach. Crowd control, they know how to react in extremes with guns. They havent mastered the art of crowd control in moderate situations, in measured situations. We saw that a hong kong. They are learning, but it have a long way to go. Whenever there is a big gigantic crowd that is swelling up, and you are caught in the middle you fear for what is going to happen next. They are used to that. They have so many people, they have to let it go. There is not a way to do this on the daily basis. There are millions of people in the streets. The question is, when something happens, they are not yet good at matching that in doing it an effective way. Between shanghai and beijing in beijing would they ever let this many people gather together in one sitting . They are conscious of Something Like that. Dont like people gathering at all. They fear it could turn into a protest like situation. To be fair, we have been examining this as a consequence of the way china does things. There was a stampede at a Music Festival in germany four years ago. Ground controllers hard to do. Whether are you developing or not. Do you think they will make changes . Will they make beijing model in the future . I think they are trying to. What is the way . Do we have a method that is doing crowd control. Not everyone does. We will continue this conversation on china, and check out the countrys surging credit growth. Thats next on bloomberg surveillance. This is bloomberg surveillance. Im scarlet fu. Lets get to the top headlines this morning. South koreas government says any talks between leaders of the divided north and south must be without preconditions. And it is open to a candid discussion. The comments come a day after the north Korean Leader raised up opposition raised the possibility of a summit. Casinos enjoy their worst year ever. A 44 billion dollars, falling more than 30 in the month of december. Thats according to the cows macaus government. Amazon. Com shares dropped with a 22 in 2014 as the company saw its worst year since 2008. It all translated to a 7. 4 billion loss for the founder. But dont feel bad for him he will be clipping coupons anytime soon. His shares are still worth more than 26 billion. Those are your top headlines. Its time for the single best chart. We started with something on china. It shows an explosion of credit in the country. Credit goes to tom warlick. The line here tracks outstanding corporate and Household Debt as a percent of gdp. Starting in 2009, you can see credit took off. It has been a source of china during the global recession. The question is how china delivers to be concession transition towards a consumer driven economy. This credit we dont know about. That line goes up, and it doesnt account for the local government. Theres all kinds of shadow credit we can accurately measure. Thats one of chinas greatest vulnerabilities. We worry about the stable enterprise is unstable governments. Standard stable governments have to deleverage, the federal government would take over some of that debt. As a real averages, what are the governments going to do . They still have access to funding come other going to do infrastructure or something worthwhile . After the financial crisis, the German Government bailed out all of its state banks. They were very cozy with state industry. They existed to help local industry. This problem in china is that which was a real problem for germany on an incomparable scale. Exactly. There is no market system to allocate these resources. The state and local governments have a real tension with the federal government. They want projects that are highprofile, big cities railroad stations, even if they had ghost towns, they would want big construction. Their social reform. Thats not very visible, but they highest priority for the federal government. We see that tension developing. Billy is previously with the imf. Our other guest host is th