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Quest Means Business
Ebola Spreads in Spain; Ebola Fears Drag on European Airline Stocks; US Mulls Ebola Screening for Arrivals; Dow Down; Airstrikes on ISIS Near Kobani; Funding ISIS; Destroying the ISIS Money Pipeline; ECB Under Fire as Eurozone Struggles; European Markets Down; Samsung Warns 60 Percent Profit Drop
Aired October 07, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: From the moment trading began, the market was down. It remained down throughout the course of the session. A very steep
loss of 1.6 percent. Wall Street is worried about weakness, it's a bad economic news. The Dow more than 270 points lower on Tuesday, it's the 7th
of October.
Tonight, Spain investigates its first case of Ebola, and the World Health Organization warns there will be more.
The IMF warns an uneven recovery. Jean-Claude Trichet tells us Europe's paying the price for being at the epicenter of the crisis.
And the Nobel Prize winner for Physics tells me literally his light bulb moment.
I'm Richard Quest, I mean business.
Good evening. We begin tonight with the continuing saga of what's happening in Spain and Ebola, and the Spanish hospital workers who tonight
are demanding the resignation of the country's health minister the day after a Spanish assistant nurse became the first person to contract the
disease outside of West Africa.
And now, Spanish unions are claiming Spain's medical facilities were not up to the job of handling Ebola and the equipment they were provided
was substandard. It's all, they claim, as a result of years of austerity. One nurse's assistant said she's not surprised that the virus spread.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE (through translator): We were kind of expecting this because -- at least I was expecting it, because this is not a game to
be played in the way they've done it. It's a very worrying matter, and they have not handled it correctly.
(END VIDEO CLIP)
QUEST: Al Goodman's our correspondent in Madrid. A short time before we came on air, he talked to me from outside the hospital where the nurse
is being treated.
(BEGIN VIDEOTAPE)
AL GOODMAN, CNN MADRID BUREAU CHIEF: The circle has spread to more than 50 people now are under observation, including 30 from the medical
team here at the Carlos III Hospital where she worked on two other Ebola patients, Spanish missionaries who came back from Africa, died here. She
worked with the team on them, so those 30 people are under observation.
And she went into a different hospital a night ago, and those -- about another 20 people from there plus family members, her husband is in this
hospital now under observation as a potential -- another case, potentially, that's not confirmed in that case. And the health officials, Richard,
continue to say that all the protocols were followed correctly.
QUEST: Well hang on. This is starting to get rather worrying, because if all the protocols were followed and the WHO continually and
consistently tells us it's not that easy to catch if you take proper care, then you're left with this fundamental question, Al, how did she get it?
GOODMAN: OK, well, the -- some of the Spanish unions representing the health care workers have been very vocal in saying that they had been
warning the government that it wasn't taking enough precautions.
What's coming out this day in interviews and in the Spanish media is they're saying that the suits, the protective suits that the workers were
wearing, the gloves, these are not at quite the high standards that you see, for instance, in the United States, according to these unions and
these health care workers.
So, that may be one avenue for investigation, and there may be many others. But clearly, something went wrong and there is consternation both
clearly in the government and also among the workers and among the general population. Because this is the reference hospital to fight infectious
diseases. Richard?
QUEST: Al, is there a feeling tonight that the Spanish authorities have this under control, or at least know what they are doing?
GOODMAN: Well there's -- they've had just a little bit of good news in that in addition to the nurse's assistant who has the virus, three other
people, including her husband, were in this hospital under close observation. One of them, another nurse, part of the medial team, is now
going to get out because she has tested negative. So, that's a little bit of breathing room.
But I would say we're in a wait-and-see period to see whether this can be contained. That is clearly the government's intention, is to contain
this and try to get to the bottom of it.
(END VIDEOTAPE)
QUEST: If they're aiming to contain the effect in terms of patients, on the markets there was a very robust reaction. These are airline stocks
and how they closed on Tuesday.
You've got IAG, International Airlines Groups. That's, of course, British Airways, Iberia, Vueling and the like. They closed down nearly 7
percent. Ryanair is down 4 percent. Easy Jet off some 5 percent, and Air France/KLM down more than 4.5 percent.
Even though many of these airlines no longer fly to the region, the fear, of course, as indeed we saw in the United States last week with he
Dallas case, where the passenger was transported by United Airlines through Dulles, the feeling is, of course, that this may stop people from flying
and it will have a wider effect on the airline industry. So, airline stocks very heavily hit in Europe on Tuesday.
And the odds may be low, but there are certainly very strong calls for stricter screenings at airports, especially in the United States, where the
calls are getting louder. You'll remember the Dallas case, the patient went from Africa to Brussels onto Washington Dulles and then to Dallas-
Forth Worth. CNN's Rene Marsh, now, on some of the measures that are being considered at the airport.
(BEGIN VIDEOTAPE)
RENE MARSH, CNN AVIATION AND GOVERNMENT REGULATION CORRESPONDENT (voice-over): At Newark Airport, CDC quarantine officers surround a sick
passenger on United Flight 998 from Brussels. It was determined the passenger did not have Ebola. The scare coming as the calls get louder for
more aggressive screening for the deadly disease at US airports.
SEN. CHUCK SCHUMER (D), NEW YORK: These are reminders that the threat is out there.
MARSH: New York senator Chuck Schumer pushing for more aggressive screening of passengers arriving in the US from Ebola hot spots.
SCHUMER: Including a temperature check for travelers returning from Liberia, Guinea, Sierra Leone, and Nigeria, either directly or indirectly
through another airport.
MARSH: Passengers' temperatures are already taken when they leave West African countries, and they must fill out a detailed health
questionnaire. But Schumer says those procedures need to happen in the US, too.
SCHUMER: If you ask them a whole lot of specific questions, and CDC is very good at coming up with these questions and doing it, you may well
find answers that you wouldn't have found in a cursory type of questioning.
MARSH: There are only two non-stop flights to the US from countries most-impacted by Ebola, so most passengers connect through other countries
before stepping foot in the US.
STEWART VERDERY, MONUMENT POLICY GROUP: The problem is that when they get here, they're not coming from one of those countries, they're coming
through another gateway airport, and most times, they're coming from a flight where you may not know that they've been, maybe, in Liberia or other
countries.
MARSH: Some US lawmakers are calling for a halt on the flight to the United States from Ebola hot spots.
REP. PETE SESSIONS (R), TEXAS: What is correct is is that we treat this in the circumstance where we stop travel to the United States not just
from there, but also understanding that the African travel goes to Europe and other places.
MARSH: But the CDC director says those flights are crucial.
THOMAS FRIEDEN, DIRECTOR, CENTERS FOR DISEASE CONTROL: If we can't get assistance in, if we can't keep the airlines flying, it'll be harder to
stop the outbreaks there.
MARSH: Rene Marsh, CNN, Dulles International Airport.
(END VIDEOTAPE)
QUEST: Now, it was a pretty awful day on Wall Street. After heavy losses on Monday, well, the Dow fell more than 200 -- 272 points. This is
one of the worst days of the year. Investors are worried about the earnings season and the slowing growth prospects in Europe. Some dreadful
industrial production numbers out of Germany today.
And, of course, there were worries because of what the IMF said. So, in the course of this program, as we move on, you're going to hear from
Jean-Claude Trichet, the former president of the European Central Bank.
And in just about 20 minutes from now, we'll have Olivier Blanchard, who is the chief economist at the IMF, and he'll be talking to us about how
the IMF's latest economic outlook, which shows slowdown clouds on the horizon and makes really some rather worrying reason.
Staying with the question of money, if you get money, you get ISIS. Well, that's the theory. Air power may be pounding the organization. The
US Treasury's point man is intent on destroying the funding. A look at the money machine of ISIS next.
(COMMERCIAL BREAK)
QUEST: Turkey's president is warning that the Syrian city of Kobani is about to fall to ISIS, and that means the terrorist group would control
a large swathe of land that's desperately and worryingly, some believe, close to the Turkish border. US-led airstrikes are pounding the area.
They're destroying arms, ISIS vehicles, and anti-military aircraft artillery.
Kobani is dominated by the Kurds. They are outnumbered, outgunned, out-resourced, whatever way you want to put it, by ISIS. As Drew Griffin
now explains, while airstrikes may destroy some hot spots, air power alone may not be enough to stop another deadly ISIS weapon. And that, of course,
is its money.
(BEGIN VIDEOTAPE)
DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT (voice-over): This is the southern-most edge of Turkey. Just across those hills is the border
with Syria.
(EXPLOSION)
GRIFFIN: The area where extremist Islamic rebels known as ISIS are fighting to create an Islamic caliphate or Islamic state. It is also an
area in villages like this --
(EXPLOSION)
GRIFFIN: -- where can make money to finance its wars.
(EXPLOSION)
GRIFFIN: Small oil smuggling operations, some estimate adding up to millions of barrels in the last few months, have been uncovered. The oil
comes from refineries ISIS has taken inside Iraq and Syria. Up until just last week, it was easy to smuggle into this part of Turkey.
Why? Smuggled, cheap oil is a much-prized commodity here, and it doesn't matter who's selling it, even if it's your enemy.
GRIFFIN (on camera): Buy gas at any station just across the border here in Turkey and you'll see why it's so easy to overlook who is selling
what. Gas here in Hatay costs roughly $7.50 a gallon.
(GUNFIRE)
GRIFFIN (voice-over): US coalition forces just in the past week have destroyed, attacked, and bombed ISIS oil facilities precisely to cut off
the group's funding. But if you think just knocking out ISIS's oil will stop this radical Islamic army, you don't understand just how many ways
ISIS funds itself.
MATTHEW LEVITT, STEIN PROGRAM ON COUNTER-TERRORISM AND INTELLIGENCE, WASHINGTON INSTITUTE FOR NEAR EAST POLICY: We've described this as the
best-finance group we've ever seen.
GRIFFIN: Matthew Levitt is a student of terror financing, working previously for the US Treasury Department, the FBI, and now with the
Washington Institute for Near-East Policy. ISIS, he says, is different than any other traditional terrorist group and is funded like no other.
Yes, there is oil, yes there are charitable donations from wealthy sympathizers in countries including Qatar and Kuwait. But ISIS funds
itself mostly from within. Born among the crooks and thugs of Iraq, it is, at its roots, says Levitt, a criminal enterprise.
LEVITT: They were always primarily financed through domestic criminal activity within the borders of Iraq.
GRIFFIN (on camera): It's massive organized crime run amok with no cops.
LEVITT: Exactly.
GRIFFIN (voice-over): Want to do business in ISIS-controlled territory? You pay a tax. Want to move a truck down a highway? You pay a
toll. Villagers in ISIS territory pay for just about everything.
LEVITT: There are reports that people in Mosul who want to take money out of their own bank accounts need to make a "voluntary," not-so-voluntary
donation to the Islamic State, to ISIS.
MOUAZ MOUSTAFA, SYRIAN EMERGENCY TASK FORCE: They're taxing the people, that's a huge revenue.
GRIFFIN: Mouaz Moustafa is the executive director of the Syrian Emergency task force in Washington, DC. He says ISIS literally formed in
the void --
(EXPLOSION)
GRIFFIN: -- made by the pull-out of US troops and the retreating Iraqi army. That kind of self-financing mob, he says, can't be destroyed
from airstrikes. You need to take back the territory and restore order. Fighters willing to do that are frustrated that the US so far won't help
them.
(GUNFIRE)
(SHOUTING)
GRIFFIN (on camera): It's a White House decision.
MOUSTAFA: It is a White House decision, and it always has been. And I think the White House is slowly moving in the right direction. I can
tell you that the policy that the White House has right now, if it had this policy three years ago, there would have never been an ISIS. We probably
would have gotten rid of Assad.
GRIFFIN (voice-over): US-led coalition airstrikes have now begun targeting ISIS locations, attacking the oil facilities, and even grain
silos. But as long as ISIS controls any ground where civilians can be taxed, extorted, and robbed, ISIS will remain self-financing.
Drew Griffin, CNN.
(END VIDEOTAPE)
QUEST: Taxed, robbed, extorted, smuggled. Putting a stop to that form of financing is partly the job of my next guest. The US Treasury
Department has imposed sanctions on anyone sending financial aid to the terrorist group, and David Cohen is the undersecretary for terrorism and
financial intelligence at the Treasury. He joins me now from the White House.
Mr. Secretary, it is always good to have you on QUEST MEANS BUSINESS. Sir, thank you
DAVID COHEN, US DEPARTMENT OF TREASURY: Thank you, Richard. Good to be here.
QUEST: The difficulty here is many of the structures that governments have for money laundering designed for the banking system don't work in a
cash extortion mechanism like ISIS. You've got to think about it differently, don't you?
COHEN: Well, the fundraising activities of ISIS do present a real challenge, because as your piece leading into this points out, ISIS has
been funding itself through a variety of different mechanisms, including oil sales, including the extortion networks.
Also, one point that was not brought out in your piece, they've also been funding themselves through kidnapping for ransom --
QUEST: Right.
COHEN: -- and to some extent from external donations. Each of those different streams of funding present different problems, but we do have
mechanisms and tools to address ISIS's fundraising activities.
And equally importantly, to ensure that ISIS is not able to access the international financial system. Because one of the things that is critical
here is that we prevent ISIL from using its money outside of Iraq and Syria.
QUEST: But one of the commentators I was talking to suggest they don't really need to put the money into the system, because this is
classic. You get the millions in cash from your smuggling and from your oil, and you basically, like a champagne tree, you just float it out into
the wider economy. And that's their grip. How does government stop that?
COHEN: Well, look. A cash-based economy or cash-based financing for ISIL means that they will be able to operate within the territory where
they are currently operating. But it makes it more difficult for them to expand their reach.
And one of the things that we are very much focused on is ensuring that ISIL does not have easy access to the financial system, easy access to
the banks in Iraq, in the territories where they're currently operating.
QUEST: Right.
COHEN: But we're also focused on depriving ISIL of the ability to raise revenue. And that means, importantly, going after ISIL's ability to
sell the oil that it is currently stealing out of the ground in Iraq and in Syria.
QUEST: Do you have any number that you can give me tonight, Mr. Secretary, on how much you believe the assets, the resources, that ISIS,
ISIL has at its disposal?
COHEN: I don't have a precise figure to give you, Richard, but I think it's important to bear in mind that although ISIL is quite well-
funded, and there have been plenty of reports about estimating how much money it has in its coffers right now, it also has a significant burn rate.
It is currently trying to pacify and subjugate populations in a territory in Iraq and Syria that costs a fair amount of money --
QUEST: Right.
COHEN: -- on a day-in, day-out basis to accomplish. And so, the important question to focus on here is not just the funding for ISIL, but
also, importantly, what is ISIL's financial strength? And that really needs to take into account both sides of that equation.
QUEST: Mr. Secretary, thank you for joining us, sir. I appreciate it, as always. Thank you.
COHEN: Thank you, Richard.
QUEST: The undersecretary joining me from the White House.
There are worrying economic signs for the ECB. You'll hear from the former president, Jean-Claude Trichet, after the break.
(COMMERCIAL BREAK)
QUEST: Dreadful day on the markets. The US was down more than 1.6 percent, more than 270 points. And in Europe, the central bank, the ECB is
coming under fire for its attempt to perk up the eurozone economy, all on a day when it's looking in desperate need of some sort of help. Look at what
happened on Tuesday.
In Germany, where the industrial production numbers for Germany, output down 4 percent in August from a month earlier. That was far worse
than anybody had been expecting. And now, economists are actually worrying that the continent's largest economy is not only running out of steam, but
bearing in mind, there was a negative first quarter.
Could this be -- or an earlier quarter -- could this be a technical recession in Germany? It's still an "if," not a "when," or a possibility.
But they are now using the R word when it comes to Germany.
Germany's chief central banker doesn't want the ECB to put this right, at least not the way it's proposing. Jens Weidmann says he is concerned
about the ECB's plans to buy billions of dollars in private sector bonds, ABSs, asset-backed securities, and so-called cover bonds, possibly leading
to full government bonds in the future.
He told "The Wall Street Journal" the plan poses risks for national central banks and, of course, that risk ultimately is picked up by
taxpayers.
The Dutch central bank is pessimistic as well. ECB stimulus "may create bubbles," according to the Netherlands.
CNN's Jim Boulden spoke to the former ECB president, Jean-Claude Trichet and looking at the ECB options and now seeing the economic woes,
what's gone wrong?
(BEGIN VIDEOTAPE)
JEAN-CLAUDE TRICHET, FORMER PRESIDENT, EUROPEAN CENTRAL BANK: We have a mediocre growth, that's absolutely sure. And I attribute that to a
number of reasons. First of all, we probably have a growth potential which is insufficient because structural reforms would be of the essence to give
us more growth potential.
Second, we are still paying the price for having been the epicenter of the crisis when we had the sovereign risk crisis. So a number of countries
were bound to adjust, and this, of course, has a bearing in gold.
And third, one of the reasons is probably that in comparison with the United States of America, we do not have, of course, the windfall profit of
the shale gas, which in the comparison, is playing a role, I would say, perhaps for each of the next two -- for each of the years 14 and 15,
perhaps represents something that 0.8 percent, 0.9 percent.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: But of course, Germany didn't suffer that much from the economic crisis. It's the engine of
Europe, yet we just saw industrial output figures, terrible, terrible figures for Germany. So, if Germany can't get it right, who is going to
get it right?
TRICHET: I really think that it's a question of time. Because all fundamentals are there for Germany to have an activation of its domestic
demand, which would be much more visible. And of course, it would change the picture, both in the real economy and also at the level of inflation in
the euro area as a whole.
BOULDEN: Is there a chance for structural reform in France?
TRICHET: Well, what I have to underline is that at the moment I'm speaking, there is large consensus on the necessity to embark on structural
reforms. But of course, it has to be delivered. And that is what, I have to say, the French people expect. And it's also what the observers are
expecting.
It has started a little bit with some reforms in the domain of labor market. But it has to go on, and certainly, all the reforms associated
with the diminishing of public standings as the (inaudible) of GDP are also of extreme importance.
BOULDEN: Here in the UK, the managing director of John Lewis said basically that France was "hopeless and downbeat." Now, he later
apologized, but you understand that there's impression that France cannot get its house in order. What do you think about that?
TRICHET: Well, first of all, I heard myself during my first four years when I was president of the ECB that sick man of Europe was Germany,
Germany will not get -- never get out of its longueur, of its major difficulty. I have known myself a period where the UK was considered lost.
So, I don't trust those statements. And by the way, it was apologized.
What is true is that you have to do the job. You have to put your house in order. Our countries have long-standing existence, and they are
unchallengeable as regards their long-term, I would say, survival as a vibrant economy. But it is true that we have a lot of hard work to do.
(END VIDEOTAPE)
QUEST: And the evidence of that hard work, look at the numbers from the markets, the European stock markets. It was a dreadful day in New
York, that much we already know, but the FTSE down 1 percent, Xetra DAX, 1.3, hardly surprising, 1.3 percent after those German industrial numbers.
The Frankfurt -- the Paris CAC 40 off 1.8 percent. Not surprising, Francois Hollande and his spending cuts will be coming along. And you add
in the IMF report, the WEO, the World Economic Outlook -- we'll be talking to Olivier Blanchard in a couple of moments about that -- and you get an
idea of why the markets are so unhappy.
Samsung is warning its profits are dimming. They're likely to come in 60 percent lower than last year, largely because the company is losing
ground. The question is, where are they losing ground and how in this battle for the smartphone market? Samuel Burke is with us now. What did
they actually announce?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: They just changed their forecast, that things are going to be even worse than they thought and
analysts thought, and it's very simple what's happening. Samsung is losing out to low-cost carriers and to high-cost carriers. They're just left with
the middle.
High-cost, of course, being Apple, but low-cost is the real surprise. Xiaomi. Remember that name, because that's where they're losing in China.
And if you take a look at some of the charts that show you smartphone market share in China, all the sudden, out of nowhere, comes up Xiaomi.
And if you look here, 14 percent of market share, then Samsung --
QUEST: And that's how you spell Xiaomi, just in case you were concerned about it.
(LAUGHTER)
QUEST: So, Samsung comes in at 12 percent of that.
BURKE: But it's the change. Last year, you and I weren't even talking about Xiaomi. I couldn't even pronounce or spell Xiaomi for that
matter. And all of the sudden, out of nowhere, they're putting out these great phones. People say they're very high-quality, they look very similar
to Apple, at a fraction of the cost.
QUEST: So, Samsung has battled with Apple in the courts of patents.
BURKE: Yes.
QUEST: Is Samsung's hull beneath the water line, in that respect?
BURKE: Yes, they've been able to push through that. I don't think that's what's affecting them here. This is simply consumerism. People --
Xiaomi is very popular in China, and people are switching. This has less to do with the patents and more to do with loyalty switching.
QUEST: Loyalty switching. Samuel Burke, thank you very much, indeed.
The IMF says the green shoots of global growth are being overshadowed by some very nasty clouds. The clouds and the sunny spots with the IMF's
chief economist. That's after the news headlines.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network, the news will always
comes first. Spanish authorities are working to trace people who've come into contact with a nurse's assistant who has now contracted Ebola.
Officials are tracking 50 people who may have been exposed to the disease. The healthcare worker is the first person to contact Ebola outside of
Africa in the current outbreak.
U.S.-led aircraft have carried out new bombing raids on ISIS targets in Kobani. It's part of the effort to stop the militants from seizing the
key Syrian town which borders on Turkey. The Turkish President Recep Tayyip Erdogan says airstrikes alone aren't enough warning. Kobani is
about to fall.
Thousands of Kurds in Turkey are protesting against what they say is a lack of action from the government there to combat ISIS militants. As you
can see from these pictures, police had to use teargas and water cannons to disperse the crowds.
The Dow Jones Industrial average had a very poor day. Down 272 points. Behind the drop is the poor economic data from Germany where
industrial production suffered its biggest fall in more than five years in August. In a moment, we're going to hear from the IMF which today cut the
global forecast for the third time this year.
If you want two words to describe what's happening in global economics at the moment, these seem to be the best two at least according to the IMF
and our interpretation of the world economic outlook - weak and uneven which is describing the economic recovery as the IMF trimmed its growth
forecast for this year and next. The Fund's latest report, it talks about growing imbalances between accelerating growth in some parts of the world
and sluggish growth in other parts of the world.
Now, differing types - sluggish in others, faster in others - is not new. What's worrying of course is the difference between the sunspots and
the clouds and the direction for the future. First, the bright spots. The sun is shining in the United States. The IMF is projecting growth will
rise from 2.2 to 3 percent and above this year and next. The IMF says Spain, Canada, Mexico are all bright spots for economic growth. It's the
factors that are not so bright where you need to factor the storm clouds.
First of all, you've got the Eurozone which has persistently got weakness throughout its growth forecast. Nearly 40 percent of another
chance of a recession. Downgraded forecasts in Germany, France, Italy, the three largest economies. Then you have the question of Eurozone and
deflation. The E.U. says there's a 30 percent chance of deflation this year which will be a major issue in global economies. Throw in a touch of
emerging markets, and you have a lower projection of growth in Brazil and Russia. Disappointing output in Japan. And as the clouds come ever
further in, you have those geopolitical risks. Russia, Ukraine, ISIS, Syria - pick any one and any of it could destabilize an already extremely
fragile situation.
Let's talk to the IMF chief economist. It's Olivier Blanchard who joins me from Washington. Sir, the clouds are very real and they are
happening at a dangerous time as you've got a very divergent direction on monetary policy between the major economies.
OLIVIER BLANCHARD, CHIEF ECONOMIST, IMF: Yes. You've given a marvelous assessment. I couldn't have done better in summarizing what's
going on. It's clear that, as we said, the recovering is still going on. The revisions are actually quite small this time, but there are clearly
reasons to worry in what is happening in the Eurozone is particularly worrisome, you're completing right about that.
QUEST: What I found most disturbing in this year, in this lasted - it's not, as you say, sir, what the current situation is. It's the
downside risk is elevating.
BLANCHARD: Well, yes, I think it's both the future. I mean, what's becoming clearer is even when we all get out of the hole, which I hope we
will, potential growth is quite low. The world is not going to go at the rate as it used to before the crisis, and that's an issue for the long run.
But right now you're right. And I think the downside risk's over, geopolitical risks - I mean, at this stage we don't think that they matter
very much so far, but, you know, --
QUEST: Right.
BLANCHARD: -- anything can happen. Middle East began its - the news is rather good in the sense that the turmoil in the Middle East hasn't led
to an oil strike. Indeed it has that to reverse. But again, it could get worse, but in terms of the economic evolution, I mean clearly they're still
down and the Eurozone is probably the main source of risk at this point. You know, our baseline is still that things - that there should be positive
growth and things would slowly improve because we look at fundamentals and they are getting better. But as the numbers come in, we -
QUEST: Right.
BLANCHARD: -- we surely worry, --
QUEST: Right.
BLANCHARD: -- and the numbers you gave about trivialities (ph) is - are - indeed a bit worrisome.
QUEST: So do you think - one of the quotes that's doing the rounds today is this idea that we are unlikely to ever get back to at least in the
medium term, anything like the growth rates we had pre-Great Recession. If we do not get back to 3, 4 percent growth, even do an after 3 percent
growth in developed economies, that does not bode well for unemployment coming down - say for example in the Eurozone.
BLANCHARD: No, I think - I mean, again - there are two issues which is what is the potential growth and that assumes that unemployment goes
back to normal. And it's going to be lower than it was before the crisis but this by itself is not catastrophic in terms of unemployment. Then
there's this issue which, you know, has been called cyclical stagnation which is are we going to be able to generate enough demand to get there,
and decrease unemployment. And here I think we will, but it is not a sure thing and that's what we worry about.
QUEST: Structural reform in Europe still seems to be the number one long-term goal. The ECB can buy as many covered bonds as it likes, it can
stuff itself with the government bonds till its heart's content. But Olivier, as you've talked on this program, unless business changes, unless
Europe changes, it'll do no long-term good.
BLANCHARD: No, I mean, monetary policy is not the way to sustain growth forever. It's a way of getting growth going when it's not there,
it's helping demand. At this stage, demand is what has to be helped, so it's fine and it should be used. But it's not going to solve the
structural problems of Europe, it's not going to increase potential growth in Europe. For this you need structural reforms, and these have to come.
Given it takes so long to actually get them to actually have effects. You know, the sooner they are put in place, the better.
QUEST: Looking forward to seeing you, sir, as we come down to Washington for the annual meetings later this week. Thank you for joining
us.
BLANCHARD: See you then. `Bye.
QUEST: Thank you. And indeed the program "Quest Means Business" - we will be live at the IMF on Thursday and Friday as the annual meetings get
underway. Now, a thought for you as we move through our evening conversation on business economics, a basketball team has a lifestyle
brand. We're talking about the Brooklyn Nets, and my next guest says they represent a lifestyle brand, and he ought to know - he's the chief exec.
I'll see if - what it's all about - after the break.
(COMMERCIAL BREAK)
(GLOBE TROTTER-TYPE MUSIC PLAYER)
QUEST: Yay! Brooklyn's very own basketball team - the Nets -- started preseason late over the game against Tel Aviv's Maccabi Electra at
the Net's home court which is the Barclays Center. They wouldn't let me have a real basketball in here - too many lights they said. It's the start
to a very busy week for the Brooklyn b-ballers. They'll hop on a plane tomorrow, and once they've done that, they will wake up in China which is
an achievement. The Nets will play the Sacramento Kings in Shanghai on this Sunday. So they're going to that way out to the Pacific, coming in
over here. Then they'll head to Beijing for a pre-season rematch against the Kings next week. It's all part of an effort to get the team and the
brand front and center in the eyes of the Chinese audience and the public which is hungry for professional basketball, and Chinese companies who may
be looking for sponsorship footholds in the New York market.
Look, let's talk about this with the chief executive of the Brooklyn Nets who joins me now. Sir,
BRETT YORMARK, CEO, BROOKLYN NETS : Richard, how are you?
QUEST: Good to see you.
YORMARK: It's a pleasure. Thank you for having me.
QUEST: Do I get a job for that?
YORMARK: (LAUGHTER). That was well done. That was well done.
QUEST: Well done, well done. Why are you going to China other than money?
YORMARK: Well, it's not really about the economics. It's truly an opportunity for us to have a platform to extend our brand. We obviously
are in a global market like Brooklyn, we have a global owner and - the first - with Mikhail Prokhorov who is the principal owner of the Nets. And
we aspire to go wherever we can with the NBA and bring our product with us. So we have two games in China, and we're very excited about returning.
QUEST: But it's interesting that China is on the agenda because I - you know - on this program we're a business program here, and I just look
at the - yesterday China buys the Waldorf Astoria in New York. China buys this, China buys that, China buys the other. So clearly there is potential
- huge potential for you there.
YORMARK: Absolutely. Many of our games are televised in China, so we do have Chinese-based companies that are looking to advertise through the
Nets because obviously that branding is brought back to their country.
QUEST: Because let's face it, you've got it both. I mean, a New York, Brooklyn -
YORMARK: Absolutely.
QUEST: You've got it, you can capitalize in ways that few teams can, not only on the team's strength, but on your home city.
YORMARK: Absolutely. We can monetize -
QUEST: Ah, that's the word!
YORMARK: -- certainly monetize the opportunity of going to China and engaging with China-based companies that are - also aspire to come here to
the New York marketplace. And we look at ourselves as a great platform for them to connect with other businesses or product matter consumers here.
QUEST: The recent event in the industry which of course have led to some turmoil, in sporting generally overall. What needs to happen to put
sports on an ethical, on a financial, on a sound footing do you think in many ways in this country?
YORMARK: Well, I don't think there's a silver bullet, but I think -
QUEST: Ah, that's the point.
YORMARK: -- and I don't think there is, but I think when you look at the NBA right now, -
QUEST: Right.
YORMARK: -- there's never been a better time to be involved with the NBA than right now.
QUEST: Why'd you say that?
YORMARK: And I say that because our players are fan-friendly, our game is in a place that it's never been before. Yesterday obviously Adam
Silver, our commissioner, announced our new TV deal. Obviously it was a major increase from what was previously, you know, enjoyed by the teams in
the league, and I think it just shows that, you know, the league is prepared for incredible growth. Not just here domestically but also
internationally.
QUEST: And is there - coming out of the Raiders, coming out of the crisis, coming out of all the various issues, is there a feeling of
confidence, or is there still some feeling of uncertainty?
YORMARK: Well, I think there's incredible confidence. I think the season, as you said earlier, kicks off for us tonight --
QUEST: Yes.
YORMARK: -- with our first preseason game. It was incredible -
QUEST: Tel Aviv Maccabi.
YORMARK: Absolutely, absolutely. We're excited to have Maccabi Tel Aviv in our building tonight. But I think in general all the teams and the
fans have great anticipation for the upcoming season. There's new players and new cities. The league is under new leadership. It's the first full
season under Adam Silver. He's done an incredible job in his first ten months. We're very excited about the next couple of months and the
upcoming season.
QUEST: Thank you for joining us, sir.
YORMARK: Thank you.
QUEST: Do send us a picture from China.
YORMARK: I will.
QUEST: A suitable picture.
YORMARK: Absolutely.
QUEST: Thank you very much.
YORMARK: Thank you.
QUEST: Now, on a day like today when the stock markets are awash with red and oil is sinking, you might be looking for somewhere else to put your
money I'm sure Brooklyn is happy taking as much as you care to give them on a regular basis. Some investors are though turning away from tradition.
They're joining the crowd - the growing crowd - of crowd funders. You only have to look at this map from crowd funding sender to see just how many
projects there are, they're live and they're looking for investments right now. People making about 50,000 pledges each day around the world, and
it's growing fast. At the moment we label things like this as `alternative finance.' As U.K. investment fund manager Nicola Horlick explains, this
alternative finance is not so alternative and it's quickly moving mainstream.
(BEGIN VIDEOCLIP)
NICOLA HORLICK, CEO, MONEY&CO: There's an interesting disruption occurring right now across the globe in regards to access to finance.
Alternative finance or alt fi is changing the funding landscape. It's emerged as a solution to a globally-shared problem. For what most
countries now have in common, despite their differences, is a lack of options when it comes to accessing money.
Small business owners are also looking for new streams of finance and this is why I founded my own person-to-business lending platform. Money
and co (ph) connects people looking for a better rate of interest on their cash with businesses seeking finance. That's what person to business
lending is all about. Whether you're in Bangladesh or Belgium, people in businesses just can't access finance, and this is hurting not just people
but whole economies. Let me explain why.
Three in five Britons working in the private sector are employed by small and medium-sized businesses. In Tunisia, more than 98 percent of
private sector enterprises are SMEs. In the Asian region, SMEs contribute between 30 percent and 53 percent to GDP. Most people working for private
companies work for small companies, not large companies. And those companies need money to grow and to employ yet more people.
In the U.K. alone, the person to business lending sector has already generated over $2 and 1/2 billion in loans. But this is just the
beginning. In the next decade, means of alternative finance that had arisen in one corner of the globe, will have taken route to another.
Entrepreneurs will be able to dip into funds made available for their online platforms which may be headquartered on the other side of the globe.
This means they're actually crowdfunding, person-to-business sending and other forms of alt fi will no longer be alternative. They will become the
new norm. Crowdfunding is part of a trend that will change our global economic system for good.
(END VIDEOCLIP)
QUEST: Now, it's a blue invention that has its inventors feeling anything but. It's a Nobel Prize-winning innovation, and we're going to
show you when we turn on the light. (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: Now, you often think of the Nobel Prizes - whether it's medicine or physics or chemistry - even the artsy ones, you often think of
them as being a little bit remote to you and my daily life -- even though somehow you know it had a connection, but you're not quite sure how. Well,
on this, it's a case of let there be light - blue light to be exact.
Three scientists, two in Japan and one in California, have won the Nobel Prize for physics for helping create blue LED. These are the three -
Japan, Japan and California. So, what did they do? Well, red and green LEDs have been around since the 1960s - nothing new about that. It took
about 30 years longer to get blue, and I'm going to show you what happens. If you take the red to the green, you get the yellow. Now they've had that
as I say for about 30 years - long time. But it took forever to be able to create a blue because it's only when you get the blue and you move the blue
across that you get white. How does all this fit together? It makes all sorts of things possible.
Come over here. So, first of all - now, these are the old incandescent light bulbs, the sort that are now just about obsolete and
roughly turning illegal in various places. But this as a result of the blue is what you end up with when you get the LED lights. And what does it
enable you to do? Well, it enables you to do all sorts of fascinating things. So for example, you get these very clever panels that we use all
the time, they can get very bright - shield your eyes. But you get an idea of what you can actually do with them when you set your mind. For all
sizes - from the back lights on your cell phone screen to the billboards of Times Square, and the LED light you might have in your home such as this.
The Nobel Committee said the incandescence - that's these if I turn that off - get an idea? The incandescence are for the 20th century, the LEDs
are for the 21st century. They use a 5th less electricity as the incandescent and they can last 20 years. It makes them useful where
reliable electricity is hard to find.
Professor Shuji Nakamura who is the Nobel winner! Sir, congratulations. You join me from California. You must be delighted that
you've been awarded this prize.
PROFESSOR SHUJI NAKAMURA, 2014 NOBEL PRIZE IN PHYSICS: OK, thank you so much. Thank you.
QUEST: Was it a complete surprise when you were told you have won.
NAKAMURA: Oh, yes. This morning - early this morning - I got the phone call and I'm up at 2 a.m., and, yes, Nobel Committee called me and I
got the Nobel Prize. I was so surprised.
QUEST: Right.
NAKAMURA: Yes.
QUEST: Your discovery - blue LED that allows you to have white - how difficult was it? How challenging, how tough?
NAKAMURA: Oh, because people had started develop a brarities (ph) in 80s, using the different materials, you know. And back then (inaudible)
base materials in 80s -
QUEST: Right.
NAKAMURA: They spent a lot of time - for almost for 20 years to develop brarities (ph), but the model were totally wrong. So, in my case,
I selected different material called gallium nitrate base material -
QUEST: Right, there! Now, --
NAKAMURA: -- that is (inaudible). Yes.
QUEST: Right, so you selected that different material, but did you ever have any idea how big this would be? How many new devices? The LEDs
- white LED - would end up in every car, every home and it would be the future. Did you ever imagine that?
NAKAMURA: No. Where I started my research over a brarity (ph), I never expected the - these huge markets, and because I stayed in the
(inaudible) area and did research, almost a disparity and so lucky I could invent brarities (ph). So I never expected those huge markets.
QUEST: Thank you, sir, for joining us. It's an honor to have you on the program and congratulations. I very much appreciate it. It's not
every day on any program you have a former president, v.p., a secretary, undersecretary of treasury and a Nobel winner! But that's because it's
"Quest Means Business. We'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." Green, red and blue, it makes white. Incandescent turns into LED displays and overnight revolution takes
place. That's what it might seem like. But as you've just heard on this program from the man who's won - or part - one of those who's won - the
Nobel Prize for Physics, it's years of challenge, decades in fact, and even then, no real understanding of what this might mean for the future. Those
who won this for white LED didn't come into the business to make a fortune. They didn't intend to sell out to Google. It wasn't about making billions.
Why did they do it? They did it because they were curious, interested and they wanted to make a discover. And that is "Quest Means Business" for
tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL), I hope it's profitable. I'll be at the CNN
Center tomorrow.
END
