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Quest Means Business
French Finance Minister Takes on Bonus Culture; World Bank Prez Calls for G-20 Rebalance; Egyptian Trade Minister Sees Green Light for Growth
Aired September 24, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: A yardstick for change, France's finance minister tells me the bonus culture must go.
The G-20 needs rebalancing before it tips over, so says the president of the World Bank on this program.
And decoupled and growing, Egypt's trade minister says full steam ahead.
The G-20 is in Pittsburgh. I'm Richard Quest in London, and I mean business.
Good evening. Tonight, the U.S. city of Pittsburgh is getting ready to play host to leaders of the G-20 nations, the Pittsburgh summit. Circumstances were rather different the last time the 20 got together in London. Since that meeting in April, growth has returned to all of the major economies, albeit that growth is tepid at best. Over the next 60 minutes, we'll bring you the French finance minister, Christine Lagarde; the president of the World Bank, Robert Zoellick; and Egypt's trade minister, Rasheed Mohamed Rasheed.
We need to go to Pittsburgh. That is where the ministers are meeting, along with the heads of government, in some cases, heads of state. Maggie Lake is in Pittsburgh. She joins me now.
Maggie, this summit in some ways hasn't the urgency of London or Washington earlier, but it still has significance. And I need you to tell me what it is.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: It certainly does, Richard. It has significance because now that they're sort of figured out a way to stem the crisis, they've got a very fragile recovery taking place in some areas. They need to figure out how to make it sustainable, how to make it last. That's a big issue to tackle. It means changing some things that are very core and structural to economies, trying to find consensus on that when you've got all of these different people with a different agenda.
Let's start with the backdrop though. You are right, it is a much calmer sort of environment all around. And in fact, I'm just going to step down and have Jeremy (ph), our camera man, take a look down. We do have the security that you would expect to see. There are some Coast Guard boats up and down the river. You see the Ninth Street bridge behind me. Beyond that, though, the business of Pittsburgh is going on as usual. There is a stadium and there's actually a baseball game taking place, which you'll notice there is not an awful lot of activity.
This town is really in lockdown here in the center by the convention center. There is a huge amount of security. They did a huge amount of preparation. And it seems to be paying off. There is a field down below that's quite hard for you to see, where it's actually sanctioned for protesters to be. The thing is, there aren't any there. In fact, there have been very few protesters here so far all along, which has the G-20 officials who organized this absolutely thrilled. It means the leaders and the delegates that are arriving now almost hourly will be able to get into town and get down to the business of trying to iron out some of these really important issues -- Richard.
QUEST: All right. Now let's take them -- we know Angela Merkel said before she left for Pittsburgh that she did not want the amorphous or errant discussion of global imbalances to overshadow the necessary questions of reform of the financial structures, banking reform. We know that President Obama wants imbalances on the agenda. So within this, what's going to be the number one agenda issue?
LAKE: Well, this is what they're going to spend the bulk of Friday and perhaps, you know, behind closed doors starting tonight, talking about discussing arm-twisting, negotiating. Everyone is going to want a little mention of their issue in that draft communique, aren't they? An acknowledgment that they're going to start to tackle this stuff. As you said, the U.S. is going to push very hard to address these issues of very large surpluses, particularly China, of course, and Germany, who rely heavily on exports. The U.S. wants to start to see that change, at the same time vowing to bring down our budget deficit.
But it's going to be very hard to get that in there. Those countries don't want to go there, they want to talk about bonuses for bankers, you know, stricter regulations on banking. The U.S. not very keen right now to go down that road.
QUEST: So is it going to default to the lowest common denominator, bankers bonuses get bashed over the head once again?
LAKE: Yes, and I'm not even sure they're going to find common ground on this issue, Richard. You know -- as you know, the Europeans very much wanted a cap, they want something definitive on this. Again, the U.S. not very keen on that idea. They're talking about capital requirements. There's -- it's an area where they have the best hope of coming to terms with something. But it's more likely to involve language on tying compensation to longer term rewards rather than sort of taking short-term risk. But they've got a long way to go over a short period of time if they're going to come out looking like they've been at least able to come to an agreement.
QUEST: Maggie, many thanks. Maggie Lake, who is in Pittsburgh. Well, quick -- quick question for Maggie, let's have a trivia quiz. Name of the river behind you?
LAKE: Allegheny. And, Richard, one more, 600 bridges in Pittsburgh. I'm told, the most of any city. Although I don't know if that's true or not.
QUEST: And the name of the bridge behind you?
LAKE: Ninth Street Bridge.
(LAUGHTER)
QUEST: Fine, we'll catch you out tomorrow. Maggie Lake -- I know, tomorrow night, tomorrow night we'll ask her to name all 600 bridges.
Some of the most strident calls for financial clampdown are coming from France. President Sarkozy insistent on stamping out extravagant bonuses for bankers and traders, even threatened to walk out if the G-20 doesn't agree to curb excesses. Earlier, I spoke to the French finance minister, Christine Lagarde, and asked her if sorting out executive compensation, is that France's number one goal today?
(BEGIN VIDEOTAPE)
CHRISTINE LAGARDE, FRENCH FINANCE MINISTER: It is one of the various goals we have. Let me just put that in perspective. We want our economies to be out of the crisis. We might be out of a recession because, in France, we have had positive growth the second quarter, we might have it the third quarter, as well. We're still in a crisis because the economy is not creating jobs and because the financial sector is not yet disciplined in the way it should.
So we need to achieve various things at that G-20 meeting. We need to make sure that all countries are properly represented, number one, so that it forms the proper ring of 20 leaders that are going to coordinate, and that's point two, recovery toward sustainable growth that creates jobs, that's really key.
And to -- to actually regulate the financial sector we need to do quite a few things. But the compensation is a yardstick of our determination to change the culture. And that's the reason we find it so critical, because, clearly, there have been masses of excess, of abuse. And that has to stop.
QUEST: When you say that -- I mean what -- what I gain from what you've just said there is that by saying yardstick, it is a symbolic gesture, to some extent, because financially, it's not a huge amount of money in the totality. But if you're saying that sends the message, if compensation is capped, that it won't be business as usual.
LAGARDE: Absolutely. And it's a very strong message. It's symbolical on the one hand. But on the other hand, as we all know, we are driven by incentives. And if the incentives offered to traders, for instance, have to do with short-term gains, we don't care about the future, we don't care about losses, somebody else will pick up the mess, that is not the good message, which is why we need no guarantees, deferred compensation, claw back and a system that is actually aligned with a reasonable risk-taking policy.
QUEST: What about the question of financial regulatory reform? In the last 24 hours, both the U.S. has given more details and the E.U. has given details. But, clearly, within Europe, some countries, like the U.K., stand to lose more because their financial sectors are greater. Do you fear this could be a breaking point within the 20?
LAGARDE: No, clearly not, because those who were strong in the past have to really make the best out -- out of this new discipline and new regulatory system that aligns with public interest. And if the U.K. financial system has been strong and creative, then that strength and creativity has to continue to prosper within the boundaries of discipline, reason, and measure. And that's clearly possible.
(END VIDEOTAPE)
QUEST: And that is the French finance minister, Christine Lagarde.
European stock markets took a sharp tumble this session, fresh worries emerged about the strength of the recovery. There was U.S. data on home sales. And that caused a scare. Sales of previously-owned homes fell 2.7 percent compared to the previous month. So U.S. data had an effect on European bourses. These are the closing numbers. In London, 3i tumbled, one of the largest -- was the largest tumble in the market, 3 percent. It warned it hasn't seen the value of its own holdings rise as quickly as the broader market inward (ph) investment. Airways, BA, down more than 4 percent. That was a straightforward cut of ratings on its share by a bank.
To the Xetra DAX, also lost ground. Germany's Ifo business index rose less that forecast, at least it's rising. You can see the numbers, the CAC 40, Zurich SMI, they were also lower.
The Dow Jones Industrials, back to (INAUDIBLE) the U.S. markets. And the Dow is off 70 points, three-quarters of a percent, 9,678. The reason for that very much of course is, just as I said, those home sales fell 2.7 percent, previously-owned home sales. Home market crucial to the economy. If that number is not recovering, then this number doesn't go much further very fast.
OK. You're up to date. This is the way the markets are trading. The news headlines now. Another busy day. And Fionnuala is at the CNN news desk.
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Thanks, indeed, Richard.
Well, on day two of the U.N. General Assembly in New York, the Israel prime minister, Benjamin Netanyahu, lashes out at the world body for giving the Iranian president, Mahmoud Ahmadinejad, a platform.
(BEGIN VIDEO CLIP)
BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: A mere six decades after the Holocaust, you give legitimacy to a man who denies the murder of 6 million Jews while promising to wipe out the state of Israel, the state of the Jews? What a disgrace. What a mockery of the Charter of the United Nations.
(END VIDEO CLIP)
SWEENEY: Five nuclear nations have adopted a resolution calling for tighter controls on nuclear materials so they don't fall into the wrong hands. U.S. President Barack Obama chaired the U.N. Security Council meeting and calls the resolution a major step forward. The resolution is non-binding, but Mr. Obama says a future without nuclear weapons is achievable.
A major breakthrough in a battle against a deadly epidemic. Thai and U.S. researchers say people who have received an experimental HIV vaccine are 31 percent less likely to become infected compared to those on a placebo. More than 16,000 men and women in Thailand took part in the three-year study. The trials were carried out by the U.S. Army and the Thai Ministry of Public Health.
More revelations from a U.S. terrorism investigation. Prosecutors say one of the suspects, Najibullah Zazi, plotted for more than a year to detonate homemade bombs inside the U.S. Zazi was arrested in Colorado last week. He will be transferred to New York where he is being charged with conspiracy to use weapons of mass destruction. Meanwhile, an imam in New York also arrested in the investigation is being released on $1.5 million bond.
Don't forget to tune into "WORLD ONE" tonight at 8:30 London time. Meet the women risking it all to escape a life of violence. We have an "In Focus" report from Atia Abawi in Afghanistan. That's "WORLD ONE" in about an hour and 20 minutes from now.
Back to you, Richard, in the studio.
QUEST: We thank you for that, Fionnuala Sweeney.
Now, as we move on, France may have emerged from recession in the second quarter, Christine Lagarde is still forecasting a hirer rate of unemployment. There were numbers just out in Paris today on unemployment. We'll have the details for in just a moment. This is QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Welcome back.
New unemployment numbers have come out in France. They showed a rise in unemployment, but that rise is slowing down. Even so, Christine Lagarde says she expects unemployment will continue to rise, and that's a serious situation.
(BEGIN VIDEOTAPE)
LAGARDE: Unemployment is not at 10 percent, it is at 9.1 percent. Number two, the unemployment numbers that will come out today are certainly not as, you know, threatening or concerning at -- as they are meant to be portrayed at the moment. I think we need to wait until the numbers actually come out. They're not that bad. Every additional unemployed person is bad, because it's a sad story because it puts a family in difficult financial conditions. But I would not want people to assume that the numbers coming out tonight are going to just be worse, not the case.
Number three, I think that we just all need to really focus on this particular point. Employment, employment, employment, and disciplining the financial system. Those to me are the two conditions that will lead me to say we are out of the crisis. If our economies begin to create jobs again and if the financial system is properly regulated.
(END VIDEOTAPE)
QUEST: Now in fairness to the minister, it's worth pointing out we did that interview with her this afternoon before those numbers were released -- these unemployment numbers were released in Paris. But obviously Minister Lagarde knew what the numbers were. And that is what she was responding to, my question would unemployment hit 10 percent.
Our senior international correspondent, bring him in, is Jim Bittermann. He is live for us now in Paris. Christine Lagarde walking this very difficult area between recognizing unemployment will rise, but at the same time putting forward it's not as bad as it could be.
JIM BITTERMANN, CNN INTERNATIONAL SENIOR CORRESPONDENT: Absolutely right, Richard. In fact, she has -- she is right. I mean, the fact is that the numbers that came out this afternoon have shown that the rise in unemployment one month was 18,000 over the previous month, about 18,100 over the previous month. That is a rate of increase that is slowing down. If you look back to January, February, March, in January it was 90,000, in February, nearly 80,000, and in March, 63,000. So the rate of growth and the number -- the unemployment numbers is slowing down. So she is right about that.
One of the things that she didn't mention, I don't think, in your interview, is that by the end of the year there is a projection that the unemployment percentage here could be up to 9.7 percent and by next year could go well into the 10 percentile group, more than 10 percent unemployed in France.
QUEST: Jim, is unemployment and that side of the recession, is that the key issue now in France?
BITTERMANN: Well, it's certainly the measure that the opponents of the government are using. They throw out the unemployment statistics and say, look, you're not doing enough on unemployment. One of the things that the government can point to is that there was a little tiny glimmer of hope for them in the statistics today in the sense that some of the -- the unemployment among youth -- among young people actually declined somewhat over the last month. And that's the result of some of the government programs that have been instituted.
Nonetheless, the thing is the unemployment is going to be something that is going to be brought to the streets -- to the street level. That's what touches people most. They look around, they see some of their compatriots who are unemployed. The other thing that's beginning to happen now with those big -- that big leap in unemployment that occurred last January, now coming along about now, September or October, the unemployment benefits -- the very lush unemployment benefits here in France compared to other countries in the Western world, those lush unemployment benefits are going to start to run out.
And there is going to be a big reduction in the amount of pay and amount of unemployment benefits that unemployed are going to receive. So that could have a more drastic effect on what happens in the street.
QUEST: Jim in Paris, many thanks, Jim, for putting that into perspective. Talk to you again on unemployment.
When we come back, let's turn our attention, this time it will Egypt. It is a country that has got economic growth, 5 percent, that would be good anywhere else, by Egyptian standards, of course, they would like to get it back to 8 percent. When come back, that's the trade minister, he's on the program.
(COMMERCIAL BREAK)
QUEST: Shares in Egypt climbing this week to their highest levels since the last days of September of '08. Investors were optimistic, pretty much mirrored by the government, says the country is putting the economic slowdown behind it. Look at the numbers. GDP growth is accelerating to 5 percent or more this year -- in this year. So 5 percent. The economy has been bowling along at a heady 7 percent until the global recession. So we went from 7 down to 4.7. But now back to 5 in the latest annual figures.
The main structures of the Egyptian economy, tourism, trade, inward investment, all went up into a slump. Entirely predictably, the Suez Canal, of course, exports were down by as much as 14 percent to over $25 billion. In that scenario, it's impressive that Egyptian growth has recovered back up again. The shock was mainly external because Egyptian banks didn't have to prop up banks, though Egyptian banks weren't exposed to toxic assets. The country now is faring much better.
Now obviously the Egyptian trade minister, Rasheed Mohamed Rasheed, is going to put a brave face on the numbers, but when he suggested, as you'll hear now, that Egypt had decoupled, well, that was worth taking on board.
(BEGIN VIDEOTAPE)
RASHEED MOHAMED RASHEED, EGYPTIAN TRADE MINISTER: Well, we definitely are in a place better than what we expected. You rightly said the banking system was intact, we did not have any problems, toxic assets, toxic loans, or any of the international problems. But we were expecting a bigger drop in Suez Canal and the tourism and the export in foreign direct investment. We did have the drop in all of these. But the numbers are much better than what we expected. Today we are growing at 4.7 percent compared to 7-plus percent before the crisis. We were expecting lower growth. And we are hoping to get to 5 percent in the next fiscal year.
QUEST: That, of course, is also coming on the back of a certain degree of fiscal stimulus, a certain degree of borrowing, which cannot be maintained indefinitely.
RASHEED: No, but we were not in any way exaggerating all of this. We have maintained our fiscal discipline. We had a fiscal deficit of 6.3 percent, lower than what we anticipated. And despite the stimulus package, we are going to remain below 7 percent.
QUEST: Why do you think -- and one thing we are seeing, not just in Egypt, but in other countries, why do you think economies are performing perhaps better than we had expected, even though we're still being told it will be a long, hard slog recovery?
RASHEED: I think decoupling is happening, despite everybody else...
QUEST: Ah!
RASHEED: Decoupling was a theory, but I think the numbers today confirm that there is a decoupling.
QUEST: Who is decoupling from whom?
RASHEED: I think it is clear that some of the emerging markets, who have been adamant and clear about the reform program, they are decoupling from the United States and the West. And that is including China, India, Egypt is definitely one of these economies where since we started reform in 2004, we have created a momentum that is keeping us moving forward.
QUEST: You have -- that's a -- I mean, that's an interesting theory, or do you think it's in practice?
RASHEED: Well, this is all of the numbers confirming it. Today we are growing at 4.7 percent, compare that to Europe and the United States, and the potential of continuous growth, that is also confirmed that there is definitely decoupling happening here.
QUEST: But then your markets -- your exports markets for your agricultural goods, your tourism markets, your Suez Canal markets, they are all the countries that you're coupled with.
RASHEED: Yes, but that's true. I mean, I mentioned to you that we have seen a drop in all of these areas, but despite that, local consumption, the local activities, the investment and infrastructure, the local demand have made up for all of those losses. And I expect us to continue, because despite of those losses, we have already increased 4.7 percent. So I expect us to continue positively.
QUEST: What's the one thing you want to hear from Pittsburgh, where, of course, your own finance minister is taking part in the negotiations and the discussions? But as a trade minister, what's the one thing you want to hear from Pittsburgh?
RASHEED: Well, my hope is this view -- of domestic views and of domestic feelings coming will not actually disintegrate the global unity again versus the crisis. So my hope what we will get out of Pittsburgh, that the world will continue its reform, especially on the financial sector. We need to see that reform continuing. But unfortunately there are a lot of signs today that this is starting to disintegrate here.
QUEST: The traffic lights, I think I probably know what color you may go for after the tone of our interview, but I won't be presumptuous, Minister. Red obviously is deep in recession, and the things that -- well, you can guess. Green, things are moving forward. Which light is it for Egypt?
RASHEED: Egypt is moving forward. It's greening.
(END VIDEOTAPE)
QUEST: All right. We're making it flash for the minister there. First green of the program, you might be surprised what else you're going to see before the end of the show.
She has tackled the bonus culture. She has tackled the G-20 agenda. When come back in a moment, Christine Lagarde says France cannot accept a camp housing illegal immigrants at Sangatte. It's further part of our discussion (INAUDIBLE).
Also, the World Bank president, Robert Zoellick, is telling world leaders, you must not forget the poorest. This is QUEST MEANS BUSINESS, good evening.
(COMMERCIAL BREAK)
QUEST: Welcome back. I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN. Glad that you're with us. Christine Lagarde, the French finance minister, is on her way to Pittsburgh as part of the G-20 summit taking place there. We've already heard from the minister on the question of bankers' bonuses, which she wants at the top of the agenda. Now in the second part of our interview, the other issue, rebalancing the global economy. It's a wonderful theory. Now the crisis is easing, is the balancing argument going to get kicked into the long grass?
(BEGIN VIDEOTAPE)
LAGARDE: Rebalance has to take place, otherwise we'll go from crisis to crisis, because clearly this crisis is also a major adjustment in the world. If you look at Brazil, if you look at China, if you look at India, those emerging countries are growing. Their growth is positive and is fairly strong. And it's pulling the rest of us through that current period of recession. And it is an adjustment in and of itself. So we need to accompany that. We need to coordinate so that, you know, additional growth comes out of those countries while we are adjusting ourselves.
QUEST: These scenes that we saw around Sangatte, as the French authorities dealt with the informal immigration camp that was there, do you -- obviously you would regret the scenes of destruction, but do you regret the way in which that matter was handled?
LAGARDE: We cannot work on the basis that illegal immigration is fine and we let areas where illegal immigrants camp in just the worst possible condition prosper. This issue needs to be addressed, needs to be tackled. It's a question of either hosting those people properly because they want to apply for asylum (ph) in France, because they want to be part of the society, or else then, you know, clearly it cannot be the realm of illegal immigration, illegal traffic of people, because, you know, that is really what is happening.
A lot of people are taking advantage of that channel to -- and that place to extract money out of those people. It just cannot continue like that.
QUEST: Let's just take that thought one stage further, Minister. Because you will know, of course, that European economies require and demand a level of immigration simply to function, whether it's in the farming sector or in jobs that others won't do. So it is that balancing act, isn't it, between the necessary requirements of an economy versus the legality of immigration.
LAGARDE: You're absolutely right. There has to be a flow of people, just as there is a flow of goods and a flow of capital. But it has to be conducted properly and in agreement with the governments of the countries from which those people are. And that's exactly what the French immigration policy is about -- reach out to other governments, find out what their requirements are, because we cannot just pull all the talents and all the qualified people out of those countries, because it will simply make them less capable of -- of, you know, making the best of possible restored growth.
It has to be contractually agreed, it has to be government to government and immigration has to be conducted legally and not illegally.
QUEST: Finally, let us just talk once more G20 and just wrap it up.
When you head home and when President Sarkozy heads home, what will make you happy?
LAGARDE: That we have reached agreement, that the ring of 20 becomes the legitimate body to actually coordinate economic policy, monetary policy, fiscal policies, that emerging countries and the least developed countries have a seat at the table and that we have actually agreed to regulate the financial sector, to enforce regulation, not for the sake of regulation, but simply because the financial industry is of a special nature, enjoys the franchise of governmental guarantees, in many ways, and has had to draw on taxpayers' money and, therefore, should be under some sort of constraint going forward.
Otherwise, we'll just repeat what's happened in the last 12 months.
QUEST: And I plead your forgiveness, because you've enticed me, Madam Minister, by suggesting that the G20 becomes the legitimate body.
Does it become the legitimate body at the expense of the G8?
LAGARDE: It's clearly more efficient and it will present much better the strength and diversity of our world, yes.
(END VIDEOTAPE)
QUEST: Christine Lagarde on the G20, on the immigration issue and on rebalancing the global economy. And the minister now on her way, of course, to Pittsburgh -- or will be -- for the G20 summit.
As we continue our coverage of this, the G20 should be a turning point for the fall (ph) -- not my words, those of Robert Zoellick, the president of World Bank, who's urging politicians to focus on responsible globalization. Now, Mr. Zoellick wants them to set up crisis response facility. He wants more help for vulnerable countries.
I put it to him that in the middle of a crisis, the difficulty is putting all these wonderful principles into practice.
(BEGIN VIDEOTAPE)
ROBERT ZOELLICK, PRESIDENT, WORLD BANK: We, at the World Bank, did about $59 billion worth of activity for the developing world. That's private sector. That's trying to support, you know, some of the governments with their funding.
So you have institutions like the World Bank Group and the regional development banks that are set up for this. We also need to have a hand off to the private sector so we're trying to play a role helping to connect some of the financing from sovereign funds and pension funds to -- to these -- to these markets.
So there's the opportunity there, both for the short and the -- and the medium and the long-term.
I really don't think that's the issue. I think the real key question is getting the developed countries, while they're busy looking at some of the financial, regulatory and bonuses issues and their own scraps between one another, to make sure that we use these mechanisms effectively.
So, for example, you know, we've had a good capital base. We're one of the few financial institutions not really, you know, hit hard by the financial crisis because we ran things well. But over time, we may need a little bit more financial capital to be able to play this role.
QUEST: So navel-gazing by the developed world cannot, then, come at the expense of the developing world.
ZOELLICK: That's one way to say it. And part of it is just, you know, old patterns and preoccupations have to change. You're in a different environment here. It's going to be true in trade, too. You know, the old trading patterns are changing.
So, look, you know, 10 years ago, when you had the East Asian crisis, people would just say, oh, if China holds the currency peg, that will be enough. Today you can't open up a business paper without looking to see well, how is China's growth doing?
Well, over time, that will be China, that will be India, it will be countries in Latin America, Southeast Asia. That's actually good for the global system, so we're not just relying on the United States or -- or a couple other countries to drive global growth.
QUEST: Talking about the rebalancing -- because rebalancing is on President Obama's agenda, it's on the European Union's agenda, it's on everyone's agenda, which makes me suspicious and worried, because it's such a macroeconomic concept -- macro potential rebalancing of economies. It never -- it's one of those things that's very difficult to actually do.
ZOELLICK: And therefore?
QUEST: Well, and therefore it never gets done. It ends up just being a talking shop.
ZOELLICK: Yes.
QUEST: It gets kicked into the long grab.
ZOELLICK: Yes.
QUEST: And what's worse, Mr. President, you end up with a commission looking into it that reports in five years' time.
ZOELLICK: Yes. No, that's why, with all these things, you have to try to capture people's self-interests. And that's why I've been trying to talk about the point that if you give additional financing support for the developing countries, they'll use it. They'll help buy capital goods and other things for the developed countries. The developing countries -- you see this in China -- realize that they can't totally rely on selling to the U.S. market in the future. And so to make a rebalancing work, it's not just words in a communique or sanctions or sort of IMF protocols, you have to try to recognize how do mutual interests fit together.
And in this case, the mutual interests for non-inflationary growth, trying to take care of low carbon development, that you can map out and that's what I hope they'll spend some more time doing, along with avoiding the -- the destructive steps of things like protectionism.
QUEST: Our traffic lights are in the studio and they await your judgment. And we know growth is back so I suspect you're not going to go for a red on the traffic light.
Which light would you like, amber or green?
Or red?
ZOELLICK: I'm going to take a flashing -- I'm going to take a flashing -- flashing green, but you're going to have to watch out in 2010. And that's why some of the actions now are going to be important, because you don't want people to be complacent with this recovery.
(END VIDEOTAPE)
QUEST: The president of the World Bank, Robert Zoellick. And I can tell you, since we have been doing QUEST MEANS BUSINESS, since the beginning of the year, this is a first, tonight's program -- two greens, both from the Egyptian trade minister and the president of the World Bank - - both electing to go for a green flashing. It tells us something of what's happening to economic growth.
When we come back in just a moment, forget your greens, ambers and reds, what about gold?
The price is high. There are people finding it in the ground and making money.
What about speculators?
(COMMERCIAL BREAK)
QUEST: Gold is over $1,000 an ounce -- well, it has been this week. It's stepped back just a tad. In fact, gold is very much in the news this Thursday.
Take, for example, these five kilograms of gold that date back to the seventh century. They were discovered in the U.K. It's the largest haul of Anglo-Saxon treasure -- 1,500 pieces of gold and silver pieces. It could be worth up to over a million dollars. It's now been ruled to be treasure, so whoever -- the gentleman who found it did so with a metal detector in a farmer's field. Apparently he wished to find gold, found it and it is the largest find of its kind.
All of this takes place in a week when September the 25th (INAUDIBLE) marks one of the most infamous dates in the history of the financial markets. And once again, in 1869, it concerned gold.
It came to be known on Wall Street as Black Friday. It was, this time, plunging gold prices that triggered a financial panic.
A hundred and forty years later, Adrian Finighan -- who claims he doesn't remember it when it happened, we're not so sure -- but it's a cautionary tale for those seduced by the glitter of gold.
(BEGIN VIDEOTAPE)
ADRIAN FINIGHAN, CNN CORRESPONDENT: When Ulysses S. Grant assumed the presidency, in March 1869, the U.S. economy was in a powerless state. The civil war had been funded largely through credit -- by issuing demand notes or greenbacks, the first paper currency of the U.S. which, of course, today we know as the dollar.
After the war, people believed that the government would buy back the greenbacks with surplus gold. A group of speculators headed by James Fisk and James Fisk and Jay Gold thought that they could profit from this by cornering the gold market. They bought large quantities of gold, driving up the price. They also recruited an inside man in the Treasury to tip them off about when the government planned to sell its gold.
When the speculators began to hoard gold on September 20, 1869, the price rose even further. By September 24, it was $30 higher than when Grant came to office. When the president discovered what was happening, he ordered the federal government to sell $4 million worth of its gold. When it hit the market, the price plummeted within minutes.
Investors scrambled to sell their holdings. Stocks nose-dived. Several brokerages went bankrupt. The panic and chaos of Black Friday, as it came to be known, disrupted the U.S. economy for months.
Fisk and Gold managed to escape legal punishment.
Adrian Finighan, CNN, London.
(END VIDEOTAPE)
QUEST: Gold of ancient times, gold of recent history. And on this grim anniversary for gold, the precious metal selling off sharply. It was trading at less than $1,000 an ounce. It was just off but perhaps it has been over $1,000. The rallies -- the price is up more than 40 percent since the worst of the financial crisis. It was in fourfold in the last 10 years.
This is all to talk about with Rozanna Wozniak, who joins me now, the investment research manager at the World Gold Council.
Well, I think, clearly, you're not going to tell me that gold is not a good investment.
ROZANNA WOZNIAK, WORLD GOLD COUNCIL: Of course not.
QUEST: The question to be asked is, firstly, why gold over $1,000 an ounce now?
We're coming out of recession. There's not the same need for safe haven.
WOZNIAK: It's not just about economic uncertainty. It's about currency uncertainty. It's about inflation uncertainty. It's about people looking for -- continuing to look for safety and security and diversification. We have gone through a period where most assets went the same way at the same time -- down. You have very few assets that held their own through that crisis and gold did.
QUEST: But what are they buying?
Are you buying -- are people buying gold shares in com -- in mining companies, which are -- have also done reasonable?
Are they buying little gold coins that you can buy from the treasury mints?
WOZNIAK: Interestingly enough, investors aren't looking for structured exposure, paper exposure. They're actually looking for the safety and security of physical gold -- bars, coins and exchange traded funds, which are fully backed by physical gold.
QUEST: So, basically, it's an ETF that's backed is basically a mutual (INAUDIBLE) thing where the main asset is the gold bar itself?
WOZNIAK: Fully backed. That's all allocated gold bars.
QUEST: Now, when you buy from one of those sources, you're buying gold that is basically -- you know the value and the purity of, because it comes, effectively, from bullion...
WOZNIAK: Sure.
QUEST: ... as opposed to buying a nice pair of gold earrings.
WOZNIAK: Although when you buy a nice pair of gold earrings, the consumer...
QUEST: Are they real gold?
WOZNIAK: Yes. A consumer...
QUEST: Are they really?
WOZNIAK: A consumer should know the caratage. That's actually very important, because of the purity.
QUEST: OK. I'm a skeptic. All right, let me put my -- the cards on the table here. I'm a skeptic when it comes to this business of gold. I've seen it down at $600, I've seen it up to $1,000, I've seen it up $400. This is a commodity that can collapse in value when things get better.
WOZNIAK: It's not just a commodity. It's actually a commodity and it's also a monetary asset. And this is the reason why the Indian community, the Asian community and Middle Eastern have been buying gold for thousands of years and investing it. It's a store of wealth, a protector of wealth. It gives them peace of mind and security. The same reason why central banks also have it in their portfolios.
QUEST: And a -- and in more than one central bank, which is they haven't sold it as a...
(CROSSTALK)
WOZNIAK: Sure.
QUEST: You can't deny that.
WOZNIAK: It's true.
QUEST: Thank you very much, indeed, for coming in.
WOZNIAK: You're welcome.
QUEST: We appreciate it very much.
And come back again, please. We'll talk more about gold.
Are you sure they're real?
No, of course they're real earrings. Of course they are.
All right, Guillermo is at the World Weather Center. And all that glitters is not gold. Red sky at night, shepherd's delight, red sky in the morning, shepherd's hut on fire.
GUILLERMO ARDUINO, CNN METEOROLOGIST: And looking fine. Looking fine in many parts. I have some problems in the south, though. But I'll tell you that Britain, and especially England, looking OK. To the north, we see the rain. The winds are subsiding all over, even though it's still a little bit breezy. But we're not expecting problems.
Look at this beautiful graphic. And I'm not talking about the aesthetics of it, I'm talking about the forecast -- 20, 21 degrees, London, the next three days looking fine. The weekend is going to be terrific -- some clouds, that's about it.
The problems are in here. We don't have problems in Spain, especially toward the central parts. We don't have problems in Portugal. We have some issues in Turkey and in Italy.
Before I talk about Italy, let's show our viewers a little bit of a sampling of what's going on there in the border with Georgia. So it's in the extreme eastern parts of the country. And we have big time issues. The weather is improving a little bit.
Let's come back here so you see at the very edge of the screen -- I'm going to get you a better map in a second. But you see some clouds but some -- how -- how things are fizzling out over there, not in the south. Watch out if you're watching from Sardinia and also from other parts of Italy. Not from Germany, where we are enjoying, in general, nice conditions -- some clouds and that's about it. Oktoberfest going on in Munich. So Marienplatz at its best right now.
But the problem is here, especially in Calabria, into Sardinia, into Sichilia (ph), weather with some more heavy rain. It's going to be better tomorrow, though. So the remainder of tonight is going to be bad. We're seeing significant rainfall.
The pattern, though is to remain bad in general until Saturday -- Friday, Saturday. But it's getting a little bit -- a bit later better. The action is not that intense right now.
And, as we move to the north, Scandinavia, it's already cooler and also we see some more clouds moving into Norway. But, again, London 20; Madrid still warm at 28 and very dry; and 27 in Bucharest. So these areas are going to have the chance of some more thunderstorms in the evening because of daytime heating. The heat is still there.
You stay with us.
Richard is back after a break.
(COMMERCIAL BREAK)
QUEST: When they said that the next G-20 was going to be in the United States, we all expected New York, Chicago, possibly Los Angeles, maybe somewhere in the South.
How do you choose a venue for the G-20?
In the case of Pittsburgh, it was hand-picked by Barack Obama. People are calling Pittsburgh a textbook example of how a city dominated by an industry -- the steel industry -- that's in decline reinvents itself.
Mayor Luke Ravenstahl is the mayor of Pittsburgh. Before you wonder, he's in his late 20s. You'll see why when you see the interview.
I asked him earlier if he was surprised when the city was selected.
(BEGIN VIDEOTAPE)
LUKE RAVENSTAHL, MAYOR OF PITTSBURGH: We certainly were -- were very pleased and -- and honored that the president chose Pittsburgh and yes, a little bit surprised that -- that he picked our city. Historically, when you see events of this size, you usually hear New York City, Los Angeles, Chicago, Washington, DC. And I think it shows that the Pittsburgh story is real, that this is an international city, it's a diverse city, it's one that is on the move. And the president himself recognized the wonderful things that are happening here in the city of Pittsburgh. And we're honored that he chose us and we look forward to hosting the world today and tomorrow.
QUEST: As a city that has faced economic decline and had to come back with a resurgence plan, when you meet world leaders, what will be the one thing that you will tell them that they should bear in mind in reformatting and restructuring?
RAVENSTAHL: I think to look at the Pittsburgh story is to realize that in order to survive, in order to grow, you need to diversify. In the city of Pittsburgh, in the late '70s and early '80s, we were a predominantly steel town that relied on that industry alone. We still do have steel today, not to that magnitude, but we also have high tech, biotech, health care, higher education, life sciences, financial services.
And because of that diversification, our unemployment rate here in the city of Pittsburgh is 2 percent below the national average.
So if there was one message that I would communicate to the world leaders and those that are in positions to make decisions, it is to diversify. It's to make sure that you have a spectrum of opportunities. And if you do that, it will allow you to -- to be successful, like Pittsburgh has been.
QUEST: Yes, but also, perhaps, the moral of Pittsburgh is to -- to put your balance sheet in order, isn't it -- to sort of sort out the finances, as well?
And, you know, maybe there, diversification has not been as successful as it might have been.
RAVENSTAHL: Very true. The -- the bottom line is dollars and cents, as you mentioned. And we have some great corporate partners here in Pittsburgh that have stepped up to the plate. But one thing that's unique about Pittsburgh is a public-private partnership. It's not government alone doing it. It's not the corporate community alone. It's not the non- profit community alone. Nine times out of 10, you see us all working together.
We started that when the steel industry declined in the '80s. We continue that today and that's why we've been so successful.
QUEST: And what would you hope that they will sample by way of food delicacy before they leave Pittsburgh and head home?
What's the one thing you're going to insist that they try?
RAVENSTAHL: The -- in terms of -- in terms of food, it's the trademark Primanti Brothers sandwich, which is a unique Pittsburgh tradition. In terms of culture and -- and experience, we would encourage them to check out the view from Mount Washington, this beautiful downtown skyline that I'm standing in today is one of the greatest views in America. This is a great city. It's a clean city. It's a green city. And it open -- it's going to open a lot of people's eyes during this G20 summit, because a lot of people across the world have an image of Pittsburgh that may be negative, that may be that it's an older town or a dirty town.
That's not the case. We encourage people to visit here. And, of course, we'll have the opportunity to have many visitors in the next couple of days.
(END VIDEOTAPE)
QUEST: And that is the sited that he -- the mayor is talking about -- the view from Mount Washington over Pittsburgh.
Hmmm. Now, if you're curious about that Pittsburgh sandwich, or, more importantly, what's in it, look no further than Maggie Lake, who shot this story for a back story. We stumbled across the pictures despite the size of the Pittsburgh sandwich, and Maggie Lake seemed to enjoy it.
(BEGIN VIDEOTAPE)
MAGGIE LAKE, CNN CORRESPONDENT: This is why we need someone who's been here.
UNIDENTIFIED MALE: This is so big.
LAKE: I'm trying to jam the whole thing in my mouth...
UNIDENTIFIED MALE: You've got smash it.
LAKE: It's all about the smashing. Now, just...
UNIDENTIFIED MALE: French fries and what -- what did we get?
Ham?
LAKE: Ham, cheese, French fries.
UNIDENTIFIED MALE: My God, this is such an amazing...
LAKE: Cole slaw and I put hot sauce on mine.
UNIDENTIFIED MALE: Oh, nice.
LAKE: On the recommendation of the people at the counter.
UNIDENTIFIED MALE: This is -- oh my god. Oh my god.
LAKE: It's very good.
UNIDENTIFIED MALE: It's like heaven in your mouth.
(END VIDEOTAPE)
QUEST: Somehow I can't see President Medvedev and President Sarkozy getting to get through that.
That story tomorrow night. You can see Maggie Lake and how she got on with that sandwich. That story Monday through Friday, 22:00, 23:00 in Berlin.
When we come back in a moment, finally, a Profitable Moment.
(COMMERCIAL BREAK)
QUEST: Finally, tonight's Profitable Moment.
The French finance minister didn't leave room for doubt. She told us tonight capping bonuses in the financial world is a symbolic gesture -- a yardstick. It sends a message -- change needs to take place. It will force banks to reconsider the concept of risks that they want to take on their books.
In other words, Mrs. Lagarde says it will bring discipline, reason and measure to the financial world. And it's hard not to agree with such an argument. The G20 will not be the dramatic event of Washington or London. The crisis has subsided. We're no longer falling into the abyss. That gives leaders all the more reason to take stock, move forward, agree on proposals for reform.
The G20 has proved to you and me it can do what's necessary when it has to. Now it needs to prove to us all that it won't fall apart because things are getting better.
And that's QUEST MEANS BUSINESS for this evening.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I do hope it's profitable.
Christiane is next, after the headlines from the I Desk.
END
