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Quest Means Business
U.S. Debt Standoff; Economic Growth Barely Inches Ahead
Aired July 29, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: At a standstill: The president of the United States blames politics for the debt standoff.
Is the damage already done? U.S. growth barely inches ahead.
The airlines are moving, though, and tonight two chief execs tell me how they are winning the battle against fuel prices.
I'm Richard Quest. I mean business.
Good evening.
Tonight, a plan to raise the debt ceiling is back on the table in the U.S. House of Representatives. And U.S. lawmakers could vote on the Republican leader's plan within hours. It comes as President Obama said that we are almost out of time. He's not wrong. There are four days to go to the debt ceiling deadline, admittedly, self-imposed in some cases. Mr. Obama says lawmakers must compromise or risk loosing America's precious gold-plated reputation.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If we don't come to an agreement we could loose our country's AAA credit rating. Not because we didn't have the capacity to pay our bills, we do. But because we didn't have a AAA political system to match our AAA credit rating.
And make no mistake, for those who say they oppose tax increases on anyone, a lower credit rating would result potentially in a tax increase on everyone in the form of higher interest rates on their mortgages, their car loans, their credit cards.
(END VIDEO CLIP)
QUEST: Preparations are being made for what might happen. Wall Street dealers met officials from the Fed and the Treasury to discuss the outcome, or potential. They also said America's self-imposed borrowing limit should be raised for as long as possible to end the economic cloud of uncertainty over the country.
The Republican leader of the House, John Boehner, said privately that he woke up happy this morning. What did he mean by that? Brianna Keilar joins me now from the White House.
He woke up happy? The president was very grim in his comments. Where is the balance of power standing at the moment?
BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Well, right now, from where I stand at the White House, Richard, it is very much a waiting game. The ball is very much in the court of Congress and especially in the House of Representatives. They just opened up for a debate on what is called the rules, so this is sort of the topic of this debt ceiling raise plan, the Boehner plan. And they are just now starting to debate it after a vote was delayed last night. And that was very much a very big move.
The thing is, though, when we heard White House Press Secretary Jay Carney reiterate this today in his briefing, and we heard the president reiterate this in his comments this morning. They see the Boehner plan as dead on arrival. And right now, the White House, the president looking very much towards the Senate to come up with some sort of compromise. But, Richard, the bottom line is, we are a little more than four days out, from this deadline, when-the way the White House puts it-we are at risk of default. The U.S. is at risk of default and still there is no clear path yet, to how this ends, Richard.
QUEST: OK, I mean, I am not as familiar with the parliamentary niceties of Congress, and maybe we are going into some very heavy water, here, Brianna. But is it possible to get a deal? Even if they all signed off on it now, but can it be rushed through in time by Tuesday?
KEILAR: You know, it is amazing, because I covered Congress before the White House, how much they allow work to kind of expand to fit the time that they are allotted. So, yes, there is time to move something through, Richard. But right now what you are seeing is kind of a lot of posturing. And we see Congress do this vote in the House that, ultimately, will not pass the Senate. So, you say what is the point? Well, it is sort of about making a statement, the Senate does this as well. Yes, it is possible. And we are told, from sources, that there are discussions going on, behind the scenes. The White House says they are confident that Congress will increase the debt ceiling, but at this point, people, the markets, getting mighty nervous because the clock is really ticking.
QUEST: Right.
KEILAR: And there are not guarantees, even though Democrats and Republicans say they understand the necessity of doing this
QUEST: Brianna, thank you for your insights. Good to have you, at least from both sides, of Pennsylvania Avenue, and putting it into perspective. Brianna Keilar, joining us from Washington.
And later in the program we will be having the views from the Republican view, from Grover Norquist, who has been campaigning against tax rises for a quarter of a century, and is the voice of conservative activism in the United States. Many people say he is perhaps the person who is driving the argument in this debate.
And this surely good reason for a urgent action. Economic growth in the U.S. has slowed to a crawl. Just-well, 1.3 percent in Q2, year on year, according to government figures out today on an annualized basis. Now, today we learned that the U.S. economy has much further to climb than we first thought. Because, look at what you saw, this was 2.3. This is basically the inventory build up, once again, after the very deep recession.
So you do get a normal inventory build up but it is teetering out. It is literally drifting off into the yonder. It is the worst (UNINTELLIGIBLE) since the Great Depression, and it was deeper than originally thought. America sank to a trough of decline at 2008, and when the economy, in total, shrank nearly 9 percent in the last quarter of that year, and 6.7 in 2009.
The stock market is on course for its worst week in a year. Allan Chernoff is at the New York Stock Exchange.
Earnings are good. Politics is bad. The deficit debate is dreadful. So what is the market focusing on?
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Precisely, Richard. Well, for the moment the market has eased up its immediate concerns. Right now, the Dow is off only 0.25 of 1 percent. But for the week we are off 4 percent, almost 4 percent on the Dow Jones industrial average. There certainly has been mounting frustration here. Analysts have used the following adjectives to describe Congress, just in some of the phone calls I've had today: inept, misguided, chaotic, paralyzed-those are the polite words.
It is not just a question of whether Washington is going to pay its bills. The fear is that this gridlock further damages the economy. Analysts are warning it will likely force corporations to cut their spending, and any hiring plans, if they had them. And especially, companies reliant on major government contracts. So Richard, that graphic you just showed? People here are worried that it is going to show declines going forward. That we go back perhaps even to a double dip recession.
QUEST: All right. We already-we know that banks met the Fed and the Treasury today and we also know that in the next day or so, maybe even as early as tonight, basically the Fed and Treasury have to come out with guidance, as to what their individual roles will be.
CHERNOFF: Yes, and the word is, that they are going to pay their Treasury bills, pay the investors first. They would be first in line. That is what has been reported. That is what is widely anticipated on Wall Street. Nonetheless, in the government bond market-which is a massive, massive market-that is how the U.S. government borrows money. There has been a move out of those very short-term bills, one-month, three-month bills, people are moving into the longer term paper, 10-years, 30-years. No concern that Washington will pay those back, but the very short-term paper, the paper that is due next week. Investors have been moving out and as a result the yields, which move inversely to price, the yields have been rising. Bottom line, that means that the United States government, U.S. taxpayers, have to pay more to borrow the money they are going to need going forward. It is going to cost U.S. taxpayers.
QUEST: Allan Chernoff making sense of the U.S. bond market. And, Allan, no doubt, will be doing good work over the weekend, as I suspect we all will, as this continues. Allan, at the stock exchange.
After the break, ash clouds, striking staff, sky high oil prices, aviation is one of the most difficult industries. A couple of companies have reason to be cheerful.
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We'll be talking to two chief execs after the break.
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QUEST: The pilots of the Air France jet that crashed in June 2009 failed to deal with repeated stall warnings, according to the latest inquest in the disaster. All 228 people on board were killed and the report suggests the pilots may have lacked the proper training to deal with warnings and the circumstances of high altitude stalls. The head of France's investigative body says that even if questions are being raised, no fingers of blame are being pointed.
(BEGIN VIDEO CLIP)
JEAN PAUL TROADEC, DIRECTOR, BEA: We are in a safety investigation. The purpose of the safety investigation is to make safety recommendations in order to improve aviation safety. We are not at all focused on the question of blame. We don't-it is not part of our vocabulary. It is a technical investigation.
(END VIDEO CLIP)
QUEST: Now the report makes 10 safety recommendations as a result of the investigation. A final report, of course, is still too be produced. But these are basically it (ph). First of all, there needs to be improve training. There needs to be-put bluntly, the pilots need to learn about how to handle aircrafts at high altitude, and fly them manually rather than using the autopilot, auto thrusts, and all the various other things that are on board.
There needs to be clearer definition of the relief captain's role, improved task sharing, and improved flight recorder data. There also suggesting, perhaps, visual documentation of the entire rest of the instrument panel. As I was saying, the relief captain needs to-the roles of the captain and the first officer, and the co-pilots, all need to be better defined, particularly during those crucial hours of a rest break.
What happened on 447 seems to be a lack of coordination, a lack of not necessarily authority, but in the crucial moments, the CRM, crew resource management, of the cockpit, was not at its best, which is perhaps an understatement.
And finally, of course, they need to be able to locate the flight data recorders quicker after a crash. One suggestion, one suggestion is that the emergency locator is triggered during the emergency and transmits the data from the flight data recorder back to the headquarters. So that in the event of extremist, we don't end up with a situation like we had with 447, where you are desperately hoping to find the FDR.
Meanwhile, the EADS, which is the parent company of the A330 manufacturer, Airbus; the EADS reported some strong results. Sales of its A320 NEO, new engine option planes, help boost revenues quite sharply, by the first half. The future climate is uncertain. I was joined by Louis Gallois. And I asked him if the crisis in the U.S. had him worried.
(BEGIN VIDEOTAPE)
LOUIS GALLOIS, CEO, EADS: We are following what is happening in the U.S. with concern because we feel that if there is no agreement of the, or if the agreement is not accepted by the markets, it could have a strong impact on the dollar value, and perhaps (INAUDIBLE) the way the American economy is financed. In Europe, you know, the problems, we have problems of sovereign debt with the Greek problem, but with the risk of spreading out in other countries. And certainly the main question for everybody is to find the right, the right decision taken by the right leaders
The agreement in Europe, one week ago, was encouraging, it shows that people were decided to work together to find solutions. But we have to confirm that in the future. And in separation of momentum, we have to organize.
I see that emerging countries do not feel concerned by that. It is fantastic, when you are traveling in emerging countries, they are absolutely not aware of that there is a crisis in Europe, or a crisis in the United States. They feel as if they don't care about it. It is very impressive.
QUEST: As you look at the NEO and the challenges that presents, producing a very large number of planes, at a greater rate than you are the moment, can you do it?
GALLOIS: That is a good question, and we consider that we are able to do it. But when we are looking at our production rate, and theoretically, we could try to increase it. And Airbus is looking at the possibility to increase from 42 A32 or (INAUDIBLE) to 44, but to take a decision we need to be sure the supply chain is following us.
And the main-the main challenge for us is not our assembly line, is not our internal production, the main challenges come from the supply chain. Because we have partly the same supply chain as Boeing, which is doing exactly the same as us, increasing production.
QUEST: Are you-is there a risk-just a risk that you might be biting off a bit more than would be wise? You have got the 350 XWB, which is moving rapidly forward. You have now got the NEO, which is going to take quite a bit of engineering effort. So, as the chief, are you basically going to make sure that people don't get lost n the middle?
GALLOIS: We have launched the A320 NEO after a very careful and thorough study of our engineering resources, to be sure exactly that we were able to manage the same time, the A350, the A (INAUDIBLE) and the NEO. And we are very confident that we have the capacity to manage these programs altogether. And I have to say that the NEO is not extremely consuming for-regarding the engineering resources, compared to the two others.
(END VIDEOTAPE)
QUEST: Louis Gallois, the chief exec at EADS.
More proof there is room for optimism in the aviation industry. International Airlines Group, the company formed by the Iberia merger with British Airways, posted a $56 million pre-tax profit in the first half of 2011. That is after a whopping great bit loss, more $600 million the same time last year. Earlier I spoke to the chief executive of IAG, Willie Walsh. The may be making money, but as I pointed out-only just.
(BEGIN VIDEOTAPE)
WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: The reality of it is, you know, we are just back in the black. It is nice to be back in profit, but the level of profitability is nowhere near the levels that we need to justify the future investment that we are making.
QUEST: I mean, the margins are just long distance.
WALSH: Yes. Yes, that is true. And clearly the industry needs to do much more. Because we have got to have an industry that starts returning its cost of capital, making an excess over its cost of capital, and the industry hasn't done that. Now, what is very difficult at the moment is adjusting to a very high oil price. I think over time the industry will adjust to $120 oil, but it does take time to see that progress being made.
QUEST: Because as I look at your numbers, that was the starting point. You managed to-as one might expect from you, you are driving the costs of non-oil costs down, but you are just hamstrung here by oil prices over 30 percent higher.
WALSH: Yes, and that is the story of the half, and that is the story of the quarter. If you look at the last three months alone our fuel bill went up by 32 percent, 303 million euro increase over the same period last year. So it is very difficult for us to do anything. In the short term you can hedge, but the hedges unwind. In fact, if it wasn't for our hedging that 303 would have been 480 million euro. So the reality of it is fuel costs will represent a huge challenge to the industry in the short to medium term.
QUEST: Your major markets, the U.K. to the U.S., Europe and Latin America, of course, Iberia, affected very heavily by the downturn in the Spanish economy. You are affected, British Airways is affected, by what is happening in the U.K. economy, with austerity. And the U.S. affected by the shenanigans we are seeing, of course, with the debt crisis.
WALSH: Yes, but it is interesting. I think when we look at it we see some thing even more unusual than that. I think there is a bit of a disconnect established between what is happening in London and what is happening the rest of the U.K. And even through the worst of the downturn, the trans-Atlantic demands between London and the U.S., were strong. It actually outperformed the rest of our markets.
And that was a point I kept making to people. So, if you remember we launched that service from London City to JFK in September of 2009. People thought we were mad to do it. But we were seeing underlying demand improve in that trans-Atlantic market.
QUEST: There is buried on page six.
WALSH: We don't bury things. It is clear for everybody to see.
QUEST: Well, actually I don't know why you haven't trumpeted it on page one. Premium traffic increased substantially.
WALSH: Yes
QUEST: Hallelujah!
WALSH: Over 31, there is 31.5 percent increase in premium traffic in the quarter. What we are seeing at the moment is that demand for the long- haul premium product remains strong. And there is a lot of business being done around the world. But the general back drop is one of uncertainty.
QUEST: I can never finish an interview with you at the moment without asking, have you got your eye on the next candidate for IAG's purchase?
WALSH: Well, we always have our eyes open to opportunities. I've said to you before that I believe the current market environment will be a market that will be conducive to further consolidation. It is no secret we are going to look at what the Portuguese government decides to do in relation to TAP. We are not active at the moment, but we would be foolish, you know, at least not to look at that situation when they government there finally decides what it intends to do.
But we are not talking to anybody. We are not looking at anybody, but you know, we always make clear that the combination of British Airways and Iberia was the start, not the end.
(END VIDEOTAPE)
QUEST: Willie Walsh, on the deals that he hopes, maybe, to make.
Even now as default looms, U.S. Republicans are adamant. They won't agree to tax raises. Next, we will meet the man who has been key in cementing that policy, anti-tax, anti-spending, the activist Grover Norquist, live on QUEST MEANS BUSINESS.
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(COMMERCIAL BREAK)
QUEST: This is the U.S. taxpayer protection pledge. Almost every House and Senate Republican has put their name to it, vowing to oppose any effort to raise individual or corporate income tax. It is not the House speaker, or indeed a presidential candidate who is behind the pledge. It is the man named Grover Norquist; the driving force in Republican policy and president of Americans for Tax Reform. Mr. Norquist joins us now from Washington.
And we are grateful, sir, what I know are busy times for you this weekend.
Look, I don't expect you to suddenly turn around and say you've changed the policies or views of, you know, a quarter of a century. But let me ask you, are you prepared, and do you-would you be prepared to see debt default or downgrade, rather than raise taxes or-or-or, some form of revenue raises?
GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM: Well, President Obama knows that a majority of the House of Representatives, and 41 senators were elected promising never to raise taxes. It is actually President Obama who has threatened to go to default if he is not given a tax increase by Congress. That is not going to happen. I hope the president doesn't carry forward on his threat.
QUEST: But let me-I'm talking about your views, Sir. If it came to, if push came to shove; you know, edge of the cliff, whatever, whatever simile you want to use, or whatever metaphor you want to use-would you rather see default than tax raises? A yes or a no, will do.
NORQUIST: Well, that is not going to be an option. Taxes are not going to be raised. The president knows it. That has been true ever since the last election. So the president can scream and have a hissy fit if he wants, but he have more money. He has got to cut spending. That is what he doesn't want to do.
QUEST: Doesn't cutting spending also have a very depressing effect on the economy? I know the argument that says raising taxes takes money out of the economy. But if you cut spending, as Robert Rubin says in his "FT" article, yesterday, that also slows down the economy.
NORQUIST: That is the position of Left-wing Democrats in the United States. It is Keynesian economics. Idea that the government takes a dollar and spends it we have more money. That strikes me as foolish on the face of it. The only thing that creates economic growth is the creation of wealth, not the transfer of it through the state.
QUEST: If you accept, and I think maybe you would, that the richer section of society, not only in the U.S., but elsewhere, has gained in recent years, more than the poorer section. Is it fair to inflict spending cuts on those most in need, rather than minor tax raises on those who have gained the most?
NORQUIST: Of course, the United States government, nor the British government, is Robin Hood. In the United States the average American earns $60,000 a year, if you count pay, benefits, and pensions. State and local government workers make $80,000, $20,000 more. Federal government workers make $120,000.
QUEST: Right.
NORQUIST: The government transfers money from taxpayers to much better paid government workers.
QUEST: But when I say to you, that those spending cuts will hit the poorest, disproportionately, to a small rise in taxes, you would rather go down that road?
NORQUIST: Well, I disagree with your premise. I think the first casualties of big government and high taxes, and stupid economic policy, and unemployment, are low income people who are by definition low-income, because they don't have jobs yet, or they don't have a job that they used to have.
Obama's policies have dropped jobs in the United States by 1.5 million people. That is a lot of poverty his policies have created.
QUEST: You can hardly say, though, that the United States, at the moment, with its ginormous deficit, is a high taxed country. If you look at the percentage GDP of tax revenues, it is almost at a record low, certainly lower than Ronald Reagan's time in the 1980s.
NORQUIST: Taxes are low because of the unemployment, and because the economy is poor. Spending is at 25 percent of the GDP for the federal government, which is significantly higher than the last 30-year average of 20 percent. Obama has skyrocketed spending. The only reduction in taxes have come from the unemployment created by all of this big government spending nonsense, and the stimulus package.
QUEST: I'm looking at the Taxpayer Protection Pledge, here. Pledging that you will oppose and veto any and all efforts to increase taxes.
Sir, isn't dogma the enemy of good government and governance? And when you take very much defined strict positions like that, you are basically boxing yourself in?
NORQUIST: The whole purpose of the American Constitution is to box in the government. Government is not allowed to touch-
QUEST: Sir, isn't dogma the enemy of good government and governance?
And when you take very much defined strict positions like that, you're basically boxing yourself in?
NORQUIST: The whole purpose of the American constitution is to box in the government. The government is not allowed to tell you what church to go to, what books to read. People who take the pledge are saying, you know, another thing, if you elect me to be president or congressman or senator, I'm not going to raise taxes. When I see a problem, I'm going to reduce spending and reform government, not raise taxes.
QUEST: One final question, sir.
What do you say to those people who say you're part of the problem?
NORQUIST: Well -- well, I'm certainly part of stopping tax increases and for the spenders in Washington, DC, that's a problem for them. But it's the right thing for America.
QUEST: Mr. Norquist, I'm very grateful on what I know is an extremely busy time for you.
Thank you for coming in...
NORQUIST: Thank you.
QUEST: -- and for talking to us tonight.
We very much appreciate it.
Good to see you on the program.
Thank you, sir.
When we come back, what happens next with the U.S. debt crisis?
QUEST MEANS BUSINESS live tonight.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
Thousands of people turned out for the funeral of the Libyan rebels' top military commander. The death of Abdel Fatah Younis is shrouded in mystery. He was killed after the National Transitional Council summoned him to Benghazi from the front.
Norway has begun to bury victims of the July the 22nd attacks. Friends said farewell to the 18 -year-old Bano al-Rashid at a joint Muslim- Christian ceremony held near Oslo. The death toll is now 77. Meanwhile, police have questioned the suspect today.
Lawmakers in the House of Representatives are debating a bill that would end the U.S. debt crisis if passed. President Obama is you're going the parties to compromise. He says America's AAA credit rating is at a risk because it lacks a AAA political system. Obviously, all sides in the political process have to pass the House legislation.
This week, we've been finding out how the debt ceiling crisis and the flagging U.S. economy are affecting real people across America. We've spoken to the west, we've spoken to the east.
Carol Mihal is a retired market researcher from Westchester, Ohio.
It doesn't get much more middle America than that. She voted for John Boehner in -- since 1990. And she says now she's thoroughly upset with the Republican Party.
And she joins us now.
Carol -- good day to, Carol.
Thank you for spending time talking to us.
I read your views. You said, basically, you're fed up.
CAROL MIHAL: I am, Richard. I think I represent what most of America is at this moment, fed up.
QUEST: Fed up with who, the president, the Congress, the situation, a plague on all their houses?
MIHAL: I think all of it. I think that the Congress, at this point, view the word compromise as dirty. Maybe they should the word negotiate. They -- they don't feel they're going to lose so much. But I believe, as I said in my memo, I told John to go there and fight not just for me, not for Ohio, but for all the people. And we're not getting a square deal at this moment.
QUEST: So, Carol, look, when you're with your family and you go to the store, when you're having your hair done or -- or whatever it is you do on a -- on the weekend, at the market, tell me, what are people saying to you and what are you saying to them about the state of America?
MIHAL: People are sick. I mean it's obvious, when I'm in the store - - and being a market researcher, I observe. I observe the types of products that are being bought. People are now eating rice and pasta more than they're eating meat. Their -- I mean their lifestyles are changed. People are upset. People are afraid to say something for fear that they're going to be shouted down by someone and it -- it's just -- it's not the way we want to look at this.
QUEST: Right.
MIHAL: I -- I mean I said to John's office, that I want them to vote on a bill that's going to go beyond December. We cannot do this to the American people.
QUEST: If -- if America were to default -- and we admit, that's still a long way off, it would be a technical default, of course America can afford to pay its bills -- or if there was a downgrade from AAA to AA, would that have a psychological effect on people like you, America is no longer the great country?
MIHAL: Absolutely. As I -- as I've said previously, in September of 2008, we were en route to a vacation. And we're listening to the news of the stock market bailout for Wall Street. We saw, my husband and I, our retirement funds go down 30 percent, in a matter of five hours. We lost 30 percent.
If that happens again, we are losing a lot of our retirement. We've worked hard to build it so we're not a burden on the state, our friends or anything like that. And yet we're seeing it be depleted, not because we're using it...
QUEST: Right.
MIHAL: -- but because of the situation.
QUEST: Carol, you're certainly in the Midwest and you're certainly in a position where we can get the true view of what's happening in America.
And I thank you, ma'am, for joining us this evening and giving us some perspective.
Carol Mihal joining us from Ohio.
When it comes to going to the polls, Spain will be heading four months early for a vote. The prime minister, Jose Luis Zapatero, has called elections for the 20th of November. He says he won't be a candidate and says the foundation for economic recovery is in place. His successor will have to follow it through.
Moody's has put a Spain AA2 rating on review for a possible downgrade due to contagion risks that helped push yields -- yields to 6.15 percent.
Now, you'll be aware, of course, Spain did manage to sell bonds earlier in the week. But at 6 percent now for 10 years, I think it was that they were selling, then, of course, it becomes unsustainable. We saw that with Greece. We saw it with Portugal.
Spain's main stock index -- the index all showing a loss for the week as a whole. Banking shares were the worst performers. You can see Madrid did actually go down again, London was down. Bank stocks were off. Lloyd's down 3.6. And the Xetra Dax was off and the Paris CAC Courant off the most of all.
We'll have an update on the weather and a Profitable Moment after the break.
Thank you.
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QUEST: Heavy rainfall soaked -- flood parts of Berlin on Friday.
Pedram is at the World Weather Center with the weekend forecast.
PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, Richard. You know, the rainfall there across portions of Berlin some of the heaviest they've seen so far this month. In fact, the city itself there picking up about a half a month's worth of rainfall for the month of July, all associated with a storm system that was parked across portions of the Adriatic. You can kind of see the wrap around moisture as it wraps around over eastern portions of Germany and right there. Berlin getting the brunt of it with the heaviest rainfall.
And this is what it looked like this afternoon across the downtown streets, the roads flooding. We get up to about 30 or so millimeters of rainfall that accumulated in a short time period. And even Rostock there, sitting in the northeastern coast right along the Baltic Sea out there, picking up over 80 millimeters. And if you recall, this is the town back in April where we had an 80 car pileup because of a dust storm in Germany. That's the same town, because of the drought there, we have seen the concerns in. Now they're picking up rainfall that is about what they get in a month's period across that portion of the world.
The storm system begins to push east, so if your travel plans are taking you across Warsaw, Kiev, maybe Minsk then you're going to see very heavy rainfall possible early this evening on into the early morning hours of Saturday. And then slightly cooler temperatures filtering in toward portions of Moscow, where they've actually had temperatures above 30 degrees for eight constructive days. It got up to 34 today.
And look at this -- voila. Cooling effects here as the air begins to cool off. We have sunny skies on Saturday in Moscow and temperatures coming back down to the upper 20s, still above average, Richard, but at least a cooling trend for portions of Moscow in the next couple of days.
QUEST: Many thanks, Pedram, at the World Weather Center, showing us the rain over Europe.
JAVAHERI: Yes.
QUEST: While lawmakers in the United States have been debating, business leaders are preparing for the real world impact of what they would do next. All week, you've been hearing from some top CEOs on this issue.
Here's a short snapshot of the CEOs' views.
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BILL MCDERMOTT, CEO, SAP: Confidence is a free stimulus. And when the government does -- doesn't come together and get things done for its constituents, confidence suffers. So we need to raise the debt limit. It's not a choice. It needs to happen. And compromise has to take place in Washington, DC. And I'm confident that cooler heads will prevail and a deal will be cut.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
BOB GREIFELD, CEO, NASDAQ: We have been carefully diversifying all our businesses in the last several years. It gave us the protection to allow us to continue to perform in difficult times. So I think our reference point is probably valid for many other businesses. And we've been forewarned that we're going into difficult times. Certainly, we have to manage our expenses and we have to make sure that we have revenue streams that are resilient.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
MOHAMED EL-ERIAN, CEO, PIMCO: The U.S. system and the global system are constructed and they operate on the assumption of a AAA in the middle, at its core. And no one knows for sure what happens if that AAA becomes a AA. So there's an element of uncertainty. And, therefore, one has to be humbled and recognize that we -- we don't quite know. We know that U.S. interest rates will go up. We know that the dollar will suffer. We know that growth will go down and unemployment will go higher. But we don't know the consequences for a system that is built on the assumption that the U.S. safeguards at AAA.
(END VIDEO CLIP)
QUEST: With those thoughts in mind, tonight's Profitable Moment.
There comes a point when the ingredients of crisis are mixed and all that has to happen is the cake needs to bake. We saw that in 2008, the subprime failures, Lehman's collapse and the seizing up of the credit markets. Eventually, inevitably, there was a recession.
You can't have massive dislocation in the financial world and not have recessions.
So in this crisis, we will soon start to see the effects -- consumers will stop spending. You've already heard that tonight. Interest rates will start rising. You've heard that tonight. New employees won't be hired. You've heard that tonight.
Before long, what little growth there is evaporates.
Oh, we're not there yet. It's dangerously close to the point where it won't matter. Unless lawmakers start generating confidence rather than despair, another recession could well take hold in the United States.
It's put simply as this -- the ingredients are being mixed at this very moment. So now let's just hope the cake doesn't bake.
We'll have more coverage, of course, over the weekend of what's happening in Washington. And I'll be in Washington for Monday's program. I hope you'll join me.
That's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I do hope it's profitable.
Mai next.
(COMMERCIAL BREAK)
ROBYN CURNOW, HOST: You're watching MARKETPLACE AFRICA.
I'm Robyn Curnow.
Now, turn on the radio here in South Africa and you'll eventually hear all of the country's 11 official languages. Radio is the most popular form of media. More than 30 million people tune in each week. Now, the business of radio is also booming in Nigeria, as Christian Purefoy notes.
(BEGIN VIDEO TAPE)
(MUSIC)
CHRISTIAN PUREFOY, CNN CORRESPONDENT (voice-over): From the small studio of Lagos's most popular radio station, DJ Onu is talking to over 1.8 million people. The radio business in Lagos is good.
(MUSIC)
PUREFOY (on-camera): People just want to make their views heard?
STEVE ONU, RADIO HOST: Yes, people want to talk. People want to talk. If we look at it, it's like we see more than 100 calls if I decide to start to pick calls.
PUREFOY: And they just want to express themselves?
ONU: They just want to say something, even when there is nothing important to say. They just want to -- they just want to be heard on the radio. Oh, Mama Jakuta (ph), you know, I'm in the radio this morning. OK, you've got me for radio.
UNIDENTIFIED MALE: Listening to the radio is releasing the -- the -- the tension in the body holdup, you know?
UNIDENTIFIED MALE: Because of the joke and the (INAUDIBLE) criticisms of, you know...
(CROSSTALK)
PUREFOY: Lagotians like to talk.
ONU: Yes, Lagotians will love to talk.
PUREFOY: About anything?
ONU: About anything.
PUREFOY: So how many text messages do you get a day?
ONU: Three thousand.
PUREFOY: Text messages?
ONU: Yes.
PUREFOY: How many calls?
ONU: I don't know, about -- I try not to pick up the calls, because it's too much.
UNIDENTIFIED MALE: 93 here. This is Michael Simpson.
PUREFOY (voice-over): There are 28 radio stations and four-and-a-half million radio listeners in Lagos, according to one research company. Wazobia was set up only four years ago and already has an estimated 30 percent of the market, which means a bigger audience for the advertisers.
(on camera): Lagos radio stations are allowed to broadcast about nine minutes of advertising per hour. Wazobia charges about $100 per minute, so they're earning about $900 per hour. But it's not just adverts. There are also charge programs, sponsorships, event coverage and live appearances. And the live appearance in there for an hour will set you back about $2,000.
(voice-over): The station says business is strong and they'd love to be able the pack in more commercials.
(MUSIC)
PUREFOY: It's a business model not based so much on what they talk about...
UNIDENTIFIED MALE: (INAUDIBLE) they are (INAUDIBLE). (AUDIO CLIP)
PUREFOY: -- but how they talk about it.
ONU: We try very hard to break it out so they will understand.
PUREFOY: So how would you translate that headline, "I Want Advisers Who Don't Need My Advice, Mr. President?"
ONU: Well, Mr. President, he president (INAUDIBLE) say he want (INAUDIBLE) advice staff (INAUDIBLE).
PUREFOY: The secret of Wazobia's success is that it speaks a language everyone in Lagos understands -- a local interpretation of English known as Pidgin English.
(on camera): And why Pidgin?
ONU: Yes, because that is the best medium to contact to customer.
PUREFOY: Because everyone speaks it?
ONU: Yes. Everybody speaks Pidgin.
PUREFOY (voice-over): And for owner Amin Moussalli, the market is still growing.
AMIN MOUSSALLI, GROUP MANAGING DIRECTOR, WAZOBIA: People are coming from rural areas to the urban areas. They are making more money. You know, I can say radio, the slogan for new radio is me and my radio. I mean a radio can go with you anywhere.
ONU: And when they leave the city for ego and (INAUDIBLE) to take over.
PUREFOY: Lagos radio is talking a language every business understands -- money.
UNIDENTIFIED MALE: Hey. Oh, say.
PUREFOY: Christian Purefoy, CNN, Lagos, Nigeria.
(END VIDEO TAPE)
CURNOW: Well, coming up next, thinking creatively -- what lessons can be learned from African entrepreneurship and innovation?
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CURNOW: Walking or driving around the streets of Johannesburg, just like anywhere here on the continent, you'll be struck by innovation. Take the mobile phone, for example. It's been a game-changer for many people on the continent. Cell phone technology is providing vital services such as mobile banking or health care information.
But the resourcefulness goes beyond just mobile technology.
Our guest on FaceTime this week is Dayo Olopade.
She's a Nigerian-American journalist.
She's writing a book.
And she believes that advanced economies might learn a thing or two from Africa's innovative spirit.
(BEGIN VIDEOTAPE)
DAYO OLOPADE, JOURNALIST: There are ways of doing more with less that are very, very organic to the African ecosystem. And I think in general, in 21st century, there's a very important recognition that we need to all do more with less.
And where better to look than the place that has been doing this for centuries?
And so I think the tradition of creativity and resilience, working around obstacles, whether it's your government or whether it's just the electricity supply, has given Africans, everywhere I'm traveling, a real sense of innovation that is very necessary, I think, to what's next.
CURNOW: So what you're saying is that African innovation can teach the rest of the world something?
OLOPADE: That's right. The tools to help Africa are really -- lie within the -- the region. And that's really not necessarily aid flows, but human capital. And, you know, with the continent approaching a billion people, all of whom have something to say. It's a very young place. I think that something like 60 percent of the population is under 35. And so in the next decades, we're going to see this generation really take advantage of what is both global technology and global ideas and what they're already working with on the ground -- and there are so many examples that I -- I see all over the place...
CURNOW: OK. Go on.
What are some of the examples?
OLOPADE: Well, for one, I think technology is very different. The way people use things is very different than in more advanced economies. I'm -- I like to call it the difference between a fat economy and a lean economy. In a fat economy, a bicycle is just a bicycle, a cell phone is just a cell phone. In a lean economy, I've seen men in Kenya who are making phone chargers using their bicycles, where it's a double -- it's double use.
When electricity goes out and you have a cell phone that, you know, is out of -- out of -- out of juice, you can then plug your cell phone into a bike and pedal away and also charge your phone.
And so it's about sort of recombination, recycling, innovative use of existing objects. I actually just heard about something here in South Africa which was a woman who created a washing machine using a vuvuzela, where she poked holes in it and it, you know, and it was something that could be used as a washing machine.
CURNOW: What is somebody reading this book, when it is published, sitting in Idaho, someone even sitting in London, going to take from a vuvuzela washing machine?
OLOPADE: Well, I think what it is, is a sense of individual responsibility and a sense of entrepreneurship are endemic to Africa. I don't think you can walk along the streets of Lagos or you could walk along the streets of Accra or walk along the streets of Johannesburg without finding somebody who's got two jobs. They've got, you know, the thing that they're doing and they've got their side hustle.
And I think the ability for people to find opportunity where there is none is something very important in terms of the way 21st century will move forward. I mean people who...
CURNOW: And particularly, I suppose, with unemployment in the States at such -- such levels.
OLOPADE: That's right. That's right. And I think entrepreneurship, people might call themselves entrepreneurs. But what they're doing is quite entrepreneurial. And I think to try and systematize and say, OK, this is an African principle, the principle of resilience, the principle of individual agency, the principle of figuring things out in the face of adversity is something very necessary globally, as we confront an uncertain century.
CURNOW: On one level, perhaps, you're talking about a self-help book, how can you help yourself by learning from somebody who's undergoing more hardship somewhere else.
What are the lessons that a big multinational would take from -- from your thesis, essentially?
OLOPADE: Well, I think there's a sense for outside investors or for anyone who's trying to work in Africa that things are difficult, things are disorganized. I actually thought...
CURNOW: Which they are. I mean this...
OLOPADE: (INAUDIBLE).
CURNOW: Don't underestimate that.
OLOPADE: Right. I think they're differently organized, though. For example, I was in Nairobi. For taking directions, it's not, you know, come to one, two, three Main Street. It's, you know, look for Tuskie's (ph) Roundabout, go to the petrol station, look for the yellow building and then take a left.
Now, that doesn't mean the building isn't there, it just means the way people find the building is different.
So I think for companies looking to play in Africa, they have to understand the local realities.
CURNOW: Clearly, you're an afro optimist?
OLOPADE: Yes. I think everything that is happening or is about to happen in Africa is extremely exciting. I think there are lessons to be learned from the way that people treat reality as something to build on. I think there is a certain optimism sort of natural to living in a place -- and obviously everywhere is different -- where there are barriers, where there are confrontations, where there are conflicts, where life can be difficult.
But I think that this is -- I mean, not to be trite, but this is just building character. I think people who have had to figure out, you know, ways to get by in a country -- in a government that won't serve them or with roads that are bad or, as I said, electricity that's inconstant, they are finding ways around it. And if, again, you can make it work in Africa, I think you can make it work anywhere.
(END VIDEO TAPE)
CURNOW: So what are your favorite examples of African innovation?
Send us an e-mail or contact me on Twitter.
But for now, let's see what's trending this week.
(BEGIN VIDEOTAPE)
CURNOW (voice-over): A South African fishing company hooks an historic deal with retail giant, Walmart. Ocean Fresh will begin selling its wild cake fillets in 500 U.S. stores starting October, making a new line of fish for Walmart. Ocean Fresh owner Lamer (ph) says the deal could potential double Ocean Fresh revenues in the United States and create jobs in South Africa. Ocean Fresh is one of the first South African the supply seafood to Walmart's U.S. operations.
And the newest nation in Africa, South Sudan, is looking for investors on the continent. The country is hoping to boost its economy by focusing on tourism. Recently, a delegation from South Sudan visited Zimbabwe, promoting South Sudan's wealth of mineral resources, national parks and game reserves. Delegation leaders said they had offers in Kenya and Uganda and invited investments.
(END VIDEO TAPE)
CURNOW: Well, that's next week, of course, with more stories from the streets of Johannesburg and across the continent.
I'm Robyn Curnow.
Thanks for watching.
END
