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Quest Means Business
World Economic Outlook. Aired 4-5p ET
Aired January 22, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[BELLS RINGING]
[16:00:00]
RICHARD QUEST, HOST: The closing bell is ringing on Wall Street. It is Friday. Another very strong gain for the Dow Jones Industrials up more than
200 points. Hit the gavel and bring everything to a close on Friday. It's the 22nd of January.
(MUSIC PLAYING)
QUEST: Tonight, it's good to be green. The market rallies sharply. Sell-off in oil, what sell off. There's a 10% surge in prices. And Argentina's
President tells me it's time to rejoin the global economy.
I'm Richard Quest for the last time this year live from the World Economic Forum with friends where of course we all mean business.
(MUSIC PLAYING)
QUEST: Good evening. Tonight stock markets are riding the wave of Central Bank stimulus and the very prospect and hope that there will be more to
come. It all ends a very volatile, difficult, turbulent indigestion creating week.
(BEGIN VIDEO CLIP)
QUEST: Look at how the market just closed. It was over 200 points, 210 points. The market is now back over 16,000 for the first time this week.
The major indexes are up for the week. It's the first weekly gain of the year. And predicating all of this, oil prices were up sharply.
Oil is both the West Texas and the Brent Blend bench mark, that's not easy to say on a Friday in minus 12, is back over $30 a barrel.
(END VIDEO CLIP)
QUEST: Nothing moves the markets like a change in Central Bank policy. No decision was as scrutinized and analyzed as the Fed's decision to raise
rates in December.
In Davos, the ECB's President had nothing but praise for chair, Janet Yellen.
(BEGIN VIDEO CLIP)
MARIO DRAGHI, EUROPEAN CENTRAL BANK PRESIDENT: The decision the Fed took was appropriate, given the position of the U.S. economy, the recovery cycle
and it was perfectly communicated and flawlessly executed.
(END VIDEO CLIP)
QUEST: Now Central Bank policies are diverging.
(BEGIN VIDEO CLIP)
QUEST: The U.S. reached the top of the stimulus mountain and is now coming down the other side. Concerns that volatility may slow rate rises as a
result. Europe started less than a year ago hints maybe starting to move faster in March.
The Nikkei rallied on Friday in hopes of more stimulus as early as next week. The Bank of Japan is under pressure do more.
(END VIDEO CLIP)
QUEST: The Japanese economy's struggling for growth and inflammation is stuck close to zero. The Prime Minister, Abe, has three arrows of policy as
they're known. And so far the arrows may have been fired, but they seemed to have failed to reach their targets.
(BEGIN VIDEO CLIP)
QUEST: The arrows are monetary stimulus, increase spending and structural reform.
(END VIDEO CLIP)
QUEST: Now we know the monetary stimulus bit has been done. The increased spending is on its way. It's the structural reform that everybody seems to
have forgotten about. I spoke early with Japan's Central Bank Governor, and asked him why the policies don't seem to be working.
(BEGIN VIDEO CLIP)
HANUHIKA KURODA, GOVERNOR, BANK OF JAPAN: I think basically those three arrows are working because the Japanese economy is recovering moderately 1
to 1.5% a year GDP growth. The economy as a whole has been improving, but because of sharply declined oil prices, (inaudible) inflation it's still
around zero like in U.S. or in Europe. But if you calculate the inflation rate excluding energy items, then inflation trend is 1% plus. So I think
generally speaking policies have been working. You can increase more growth.
QUEST: Grow, that's it - that's it. I mean, you've got (inaudible) you may be on the way to your inflammation target though I doubt that you are, but
you may be on your way to your inflammation target, but 11 and .5% growth is not a good enough reason to have a brass band outside.
KURODA: Yes, the government intends to raise medium income growth potential to 2%. And the government is certainly making great effort to implement
those growth (inaudible), but it takes time. It takes time.
[16:05:08]
QUEST: How long would you like? Look, I take your point on board. And on a bigger philosophical question, Mario Draghi has introduced -- says he'll do
more, the Feds raising rates. Do you now think the era of the central banker coming to the rescue is over?
KURODA: I mean, what does it mean coming to rescue? I mean when the (demon) crisis erupted affecting the global financial market and global economy,
certainly central banks including Federal Reserve, ECB as well as the Bank of Japan made great effort to ease the tension in the financial market and
also tried to provide growth momentum to the economy. The crisis situation is certainly over. The global economy is recovering moderately, but not so
fast as we have hoped for.
QUEST: But you need faster growth.
KURODA: Yes.
QUEST: To improve a middle class and the reality is -- let's face it, you don't have that much more room as a central banker to do anything. People
are saying the central bankers are out of ammunition. Do you believe that?
KURODA: I don't believe. Because as far as the Bank of Japan is concerned, we have a lot of policy majors. If necessary we can further ease the
monetary conditions, we can expand and strengthen the so called QQE, quantitative and qualitative monetary easing. So we have a lot of measures
to strengthen our monetary policy. U.S. is quite okay.
Japanese?
QUEST: Japanese.
KURODA: Japanese economy.
QUEST: Are you very worried or are you not worried?
KURODA: Maybe Japan like this. Not so much worried about as far as the Japanese economy is concerned, but the global economic situation is still
somewhat uncertain.
(END VIDEO CLIP)
QUEST: Getting to grips with the wall of worry and we'll have more of that in a moment.
In a world full of uncertainty you're going to hear from more of the world's foremost leaders of economics and business on "Quest Means
Business" tonight. You'd expect nothing less.
(BEGIN VIDEO CLIP)
QUEST: In a moment we're going to be speaking to Italy's Finance Minister Pier Carlo Padoan, and then the British Chancellor of the Exchequer,
George Osborn is with us. You're going to hear from Argentina's new President Mauricio, Macri, who vows to bring his country back to the world
stage. And you'll hear the Secretary General of NATO, Jens Stoltenberg, about stopping terror and tyranny across the world.
(END VIDEO CLIP)
QUEST: Italian officials are scrambling to reassure investors about the health of the country's banks. Italian lenders are sitting on more than
$200 billion worth of bad loans and that pushed banking stocks into free fall in the first week of the year. Pier Carlo Padoan, insists the banking
sector is not weak. The Italian Finance Minister joins me now.
PIER CARLO PADOAN, ITALIAN FINANCE MINISTER: Good evening.
QUEST: Good evening. Are you concerned about your banks and the level of nonperforming loans or the level of debt that they're holding within them?
PADOAN: I'm fully aware of the fact that the banks have to get rid of NPLs, in due time they will do that. I'm not worried, fundamentals remain strong.
QUEST: If the fundamentals remain strong, and what is your preferred vehicle for getting rid of the NPLs? Is it a good bad bank, is it some
version thereof.
PADOAN: It's a number of measures, including some we have already introduced in the system which facilitate and accelerate procedures to get
rid of bad debt. And also measures to provide public sector guarantee to facilitate the kick-off of exchanges.
QUEST: Mario Draghi said yesterday that he -- it may be time to rethink some of the measures and he thinks maybe even as early as March. Do you
agree?
PADOAN: I will not comment on monetary policies as usual, but I can comment on the impact. First of all we need time - we need to give time to the E.U
version of QE. And second governments have to do their homework, including my own, to introduce structural reform so that this mission monetary policy
is more effective.
QUEST: You see time and again now what I'm hearing is people saying the central bankers have done their bit. They're not quite tapped out but
they're pretty nearly exhausted and now it's up to pardon the phrase, you sir, the politicians.
PADOAN: Well, we have already started to do the job. The government has been in power for two years and we have introduced major reforms and we
continue to do so. This week the government has approved a major public sector reform and next week we will have a banking sector reform approved.
[16:10:06]
QUEST: When you look at the issues facing you at the moment your Prime Minister has been extremely vocal but highly critical on the migrant issue
and the ability of Europe and the European Union to handle this crisis. Yesterday on this program the Prime Minister of the Netherlands said
there's about six to eight weeks before it all starts up again. There's no time left really, now is there?
PADOAN: This is exactly the point. We need quickly a European response, not a sum of individual countries responses.
QUEST: Can you do it?
PADOAN: We have do it otherwise there is a structural risk that Europe cannot stand the integration process.
QUEST: Come and join me at the worry wall since we put all the worries here. Minister, you can choose which color pen you would like. See how
generous we are today.
PADOAN: I'll use red.
QUEST: Excellent. A red pen. Worry. Are you very worried? Not at all worried? Or somewhere in the middle?
PADOAN: About what?
QUEST: Whatever you like, sir. You can define it.
PADOAN: Right, so this is where Italy is. I'm not worried, I'm very confident that -
QUEST: No, I think you mean over here, that's not worried.
PADOAN: Oh, I'm sorry.
QUEST: It's all right, you can do it again.
PADOAN: I thought ten was the best mark so just get rid of this, OK?
QUEST: Oy, oy, oy. (Inaudible) Minister, good to see you, sir. Keep warm.
PADOAN: My pleasure. Good night.
QUEST: Thank you very much, indeed. That's looking quite nice. We'll explain what all this means later, if we can ever work it out.
In Europe the major indexes they all rose.
(BEGIN VIDEO CLIP)
QUEST: All company shares were sharply higher and the prices rallied. Mining shares were higher as well.
(END VIDEO CLIP)
QUEST: It's the end of another day on Wall Street and that means another triple digit swing for the Dow.
(BEGIN VIDEO CLIP)
QUEST: The market finished the session 211 points up as oil prices vaulted above the $30 a barrel. Just look at the so called, the VIX Index. The
(inaudible) Vix is up 25% since the beginning of the year. And just look, over the week, Friday, Wednesday, Thursday, and Friday, all triple digits.
Four of the last five. All of this week, some of the biggest names on Wall Street have told me they're not concerned about this new distressing
volatility.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
BRIAN MOYNHAN, CEO BANK OF AMERICA: This has been very unusual the last few weeks, but it's also very unusual that the rate structure stayed this long
- this low for so long. I mean the Fed fund rates been many years, it's never been like this before. So that creates an unknowingness of what
happens next.
GARY COHN, PRESIDENT GOLDMAN SACHS: We all know in tough situations in the extremes of bull markets and bear markets everything correlates to one.
We're in one of those situations where everything is correlating to one, everything is going down or everything is going up together. And you see
it. Interest rates, equity markets and oil markets are moving together. They should not be coupled. You're right, when oil goes down, it's really
good for the consumer, it's good for the economy.
JAMES GORMAN, CEO MORGAN STANLEY: The short-term markets can be irrational, animal spirits take over. So the question is not are we due for some form
of correction? We probably were, were we due for this kind of violence in this short period? This is has been the worst market opening in January in
history.
HOWARD LUTNICK, CEO CANTOR FITZGERALD: The fundamentals of the U.S. 2% economy are getting better. You are going to see the stock market there's
no capitulation, no-one's diving in, this isn't the bottom. It's going to just creep lower for the first half of the year and then the second half of
the year, cheap oil is going to have us come roaring back and next year we're going to be where we are today.
(END VIDEO CLIP)
QUEST: You don't hear those sort of voices on the program all the time all in one go.
Argentina's new President is moving at a frantic pace to remake his country's economy.
(BEGIN VIDEO CLIP)
QUEST: President Mauricio Macri is meeting other world leaders in Davos and we're going to talk to him about the changes that he has introduced in a
moment.
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(END VIDEO CLIP)
(COMMERCIAL BREAK)
[16:15:34]
QUEST: It is cool, but it's not as cold as it has been over the last few days. Argentina's new President tells me he's ready for his country to take
its place in the global landscape.
(BEGIN VIDEO CLIP)
QUEST: Since literally dancing his way into the Presidency, Mauricio Macri has made sweeping changes to Argentina's economy. He loves dancing. The
President eliminated currency controls which devalued the Paso by some 30%. He ended taxes on most agricultural exports. He also changed the Central
Bank Governor.
(END VIDEO CLIP)
QUEST: President Macri is here at Davos after Argentina shuns the forum for more than a dozen years and I asked him to lay out his goals, his
priorities for Argentina.
(BEGIN VIDEO CLIP)
MAURICIO MACRI, ARGENTINAN PRESIDENT: I commit Richard to three things. (Inaudible) in Argentina, defeat drug trafficking and improve the quality
of our democratic system. I have 30% of our population under the poverty level. So that means I have to move fast. Time counts for all those
citizens who are demanding solutions. So I need to go back to the world, I need to say here we are. We want to be recognized. I say an open, worthy
country with clear rules, stable and equal for everybody. We know that help poverty we have to create jobs and create jobs means that you need the
investments and for investments you need to create confidence.
QUEST: Can you do this at the same time as the rest of the world is slowing down?
MACRI: That's right. I only -- I have been only named to run my country. I can't run the world. So I do my best and I still think that Argentina has
lost so much time and has lost so much energy that now we'll use this moment to replace. We are ready to take our place in the global landscape.
We can increase our capacities. We can increase our production. So before we reach the level in which we have to deal with all these worldwide
problems you had mentioned, there's a lot of room to improve. A lot.
QUEST: In your list of priorities, how important is it to reach a deal with the bond holders?
MACRI: It's part of this process. It's important. That's why I send my team right away in the first month of my government to Europe to say here we
are, we want to reach a settlement in your courts, a fair agreement. And they have been postponing. Now they have postponed the meeting for the
first of February. But we are ready. Now things have changed. In the past the previous government didn't want to arrive at an agreement and the bond
holders, yes. Now we want, and they are delaying.
QUEST: I guess my question then, you're attending these meetings, you're holding your talks in good faith unlike the previous government which
wanted nothing do with them.
MACRI: Exactly. We're in good faith, we want to cancel all the conflicts of the past.
QUEST: I have to obviously talk about what the British call the Falklands, which you call the Malvinas. Are you going to be able to pardon the phrase
do a deal there with David Cameron?
MACRI: What we should be doing is start to talk. That was my proposal with Prime Minister Cameron. Let's start talking. Let's talk about everything,
commerce, culture, whatever it is. At the same time start talking about the items.
QUEST: It sounds wonderful to have a talk about these things until you try and do it. Now you and I are men of a concern age that remember the actual
conflict. So, how do you get over that side of it?
MACRI: We've learned that in this 21th century we don't have to let ideological differences, historical differences to stand in the way of the
best solution. We have to sit down and try to recreate more relations, more exchange and that will help this main claim that we want to keep
(inaudible), that we are not under any circumstances, conditions to resigning, but we should start recreating a good relation.
[16:20:19]
QUEST: Putting it all together for me and you had great reception. You are a hero. You are a star in the international business community and people
are loving the fact you're bringing Argentina back into the fold.
MACRI: You know what, they never saw me dancing and singing. If not, watch more.
QUEST: Unfortunately - unfortunately I have on the night you got in.
MACRI: No [laughing].
QUEST: I saw the video.
MACRI: I'm a great dancer - great dancer.
(BEGIN VIDEO CLIP)
QUEST: With your dancing and your skills on your feet you've got a great well of support. The IMF love you, the U.S. love you, everybody loves you,
what you're doing, but you're a man in a hurry, aren't you?
MACRI: My people - many of my citizens are in the hurry for solutions to get a better job and I want to fulfill their expectations and that's why
I'm rushing. That's why I'm here even with a broken rib with the personal doctor to keep my pain under control because I couldn't avoid to be here
because here was important place in which I can express this moment - this moment of Argentina.
(END VIDEO CLIP)
QUEST: And, in case you're wondering, the President has a broken rib. He was painting with his 4-year-old daughter and the chair collapsed.
It's one of the great disrupters of the travel market.
(BEGIN VIDEO CLIP)
QUEST: I speak to one of the co-founders of AirBNB about how the fourth and industrial revolution is playing out.
It's "Quest Means Business" and we're in Davos.
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: We've been talking all this week about the theme at Davos, the fourth industrial revolution. AirBNB is the poster child for disrupters, if
you think about it the company now has more than 2 million properties, 300 at least in Davos. I spoke to the co-founder and chief technology officer
Nathan Blecharczyk about where the firm is going next.
(BEGIN VIDEO CLIP)
NATHAN BLECHARCZYK, CO-FOUNDER AIRBNB: Well we continue to grow very quickly, but of course we're looking at ways to improve the product. One
big focus over the past year has been business travel. Today 10% of AirBNB travellers are using it for business and we're doing a bunch of things to
improve the experience specifically for business travellers.
A second thing is vacation rentals. This is an industry that's been around for a while but it's often hard to access and book this inventory. I'm
talking about really upscale properties in destinations like Tahoe, Mexico.
QUEST: Davos.
BLECHARCZYK: Or Davos, yes. We have 300 properties here in Davos. So we really are improving our inventory around vacation rentals.
QUEST: When you have the Mayor of Paris who stood where you are yesterday and the Mayor says that you know she loves the idea of AirBNB and she loves
what it's doing in terms of generating more tourism, but she's looking forward to working with you on closer regulation, or better regulation.
BLECHARCZYK: Well France passed the regulation about a year ago that is really favorable to home sharing and recognizes the benefits of home
sharing. And subsequently home sharing has flourished there and is having a great impact there. Actually last year $2.7 billion impact on the French
economy. One third of that was travellers spending money on AirBNB properties, and that money going straight to ordinary people. The other two
thirds were spent shopping, eating in neighborhoods that wouldn't normally see the benefit of tourism.
QUEST: Over to the wall sir - over to the wall. First of all, you get your choice of color.
BLECHARCZYK: OK.
QUEST: What color would you like?
BLECHARCZYK: I'm going to go with green.
QUEST: That's fine. Now are you very worried about how 2016's going or you're not worried at all or I'm going to try and bias you here are you
going to go politically safe.
BLECHARCZYK: Well I am an optimist in general, I'm an entrepreneur and I think a lot of things are possible. We've gotten off to a rocky start, but
I things have the potential to improve from here. So I'm going to go on the more bullish side, so I'll go put myself right in here.
QUEST: Excellent. The theme of this year's - the theme of this year's Davos is mastering the fourth industrial revolution. What's your advice to the
people here because you are the fourth industrial revolution, you are the spinning Jenny of the Victorian Era now into the 21th Century. What's your
advice.
BLECHARCZYK: Well, I think a lot of people are concerned about different things and those are real issues. And those issues are the obvious issues.
I think what's less obvious are what are the opportunities. So I think a big opportunity of getting people together and the reason I'm here is to
talk about the opportunities, the sharing economy and more broadly this fourth industrial revolution that's occurring.
QUEST: How does it play out the fourth industrial revolution? How does it play out do you think?
BLECHARCZYK: Well, I think ultimately it will create a lot of new opportunities. In the case of home sharing, look we're democratizing
travel. We're allowing anybody in the world to participate in the global economy of travel. I think that's game changing. You know, that doesn't
happen overnight, despite the fast growth, but long term this is an opportunity that is relevant to most everybody.
(END VIDEO CLIP)
QUEST: It wouldn't be Davos if we weren't joined by Maurice Levy, the Chief Executive Officer and CEO. Good to see you, Maurice. Wonderful.
MAURICE LEVY, CEO PUBLICIS GROUPE: Good to see you, always a pleasure to be here. Thank you.
QUEST: Now, listening to AirBNB, listening to the disrupting economy, listening to this fourth industrial revolution, how prepared are you for
it?
LEVY: We have done a lot of things to be prepared and we transformed our organization and we put everything upside down as early as the end of last
year. So we are up and running for going to the next revolution. We have more than 50% of our business, which is coming from digital. We have a full
set of services to help our clients transforming their business and we have changed and transformed the way we are organized. So we believe that we
have taken it through steps. I'm not sure we have taken all the necessary steps, but a few ones and I think that you would see the results quite
soon.
QUEST: And as the chief executive, how much of this do you see as being your responsibility to lead? This is so significant for the future of
public lists and for your company that you have to have your hand firmly involved.
LEVY: You are necessarily firmly involved, even if you delegate some responsibility to new teams and to a new generation, which is what I'm
doing.
QUEST: Are you worried about the effects, employment, unemployment, social skills, all these sort of things that could be -- there's going to be an
effect with this revolution and we don't know what it's going to be some say.
LEVY: There will be an effect and there will be positive and negative. There will be destruction of jobs and new jobs, which will be created. And
there will be a new economy which is the sharing economy that government do not know how to handle.
QUEST: Absolutely. Certainly in France.
LEVY: Anywhere. Not only in France, they have done a few things, but anywhere in the world don't know how to handle it. They don't know how to
capture the revenues, how to get the taxes paid. They have no idea how to commence rate what's happening. And By the way we had the very interesting
session this morning where it has been calculated that this new economy by 2025 will represent 100 trillion new revenues.
QUEST: Come to the wall with me, the wall of worry. Choose your coloring.
LEVY: I prefer the wall of - the wall of hopes.
QUEST: Well it's not, it's the worry wall so what color ink would you like?
LEVY: I will go for blue.
QUEST: Everybody's going for blue. What is it with blue?
LEVY: It's because true blue.
QUEST: Right, this is I'm very worried, this is I'm not worried at all.
LEVY: And as I am optimistic, I will go there - here. That's me.
QUEST: Thank you very much. Good to see, (inaudible).
LEVY: Thank you.
QUEST: Thank you, sir.
LEVY: Thank you for having me. Always a pleasure.
QUEST: Now that's what you call a mark on the wall. We will try and interpret this, these hieroglyphics, before the end of the program.
Oil is making something of a comeback. The price of a barrel is on the rise. Where it goes from here and why it rose today coming up.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment when the new chief executive of Cisco believes we can fix the
greatest problems in the world. And shaken, not stirred - George Osborne tells me there's a cocktail of
risks for the global economy. Before that, this is CNN and on this network the news always comes first. At least 42 people have drowned after two boats carrying migrants capsized
near the Greek Island of Farmakonissi. Many of those who died were children.
A search and rescue operation's underway. There's up to 100 people believed to still be unaccounted for.
A huge blizzard has begun to hit the East Coast of the United States and a state of emergency has been declared in four states.
Women in El Salvador have been advised not to get pregnant for the next two years to avoid the Zika virus. The mosquito-borne virus has been linked to
microcephaly which causes birth defects and has been blamed for babies being born with abnormally small heads.
The group that runs the Oscars has announced new measures to improve its diversity. The Academy of Motion Picture Arts and Sciences says it will
double the number of women and minority members and change the rules of lifetime voting.
It comes following calls to boycott the Awards after main acting categories featured an entirely white shortlist of nominations for the second year in
a row. [16:35:00] The price of oil rallied , it topped $32 a barrel. A wild 2016 for oil, starting the year at $37, slipping as low as $27 which is a 12-
year low. CNN's Emerging Markets editor John Defterios is obsessed by the price of
oil.
(LAUGHTER)
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: It's one thing I covered this week. Think about it - Monday, Tuesday, Wednesday plunges, bringing down
equity markets around the world. Thursday, Friday a gain of nearly 25 percent in two days.
You can kind of attribute it to short covering, but I think it was helped along by the world's largest oil company being Saudi Aramco.
We convened at panel as you know. He said that this price fall below $30 a barrel was irrational - didn't think this was the right price -
QUEST: So you think this rise that we're seeing today - 9 percent on the two benchmarks - do you think we can pay it partly (ph) on Aramco?
DEFTERIOS: Indeed, he said he thought the dissolve (ph) is irrational and said that the marginal price is well above $30 a barrel.
But at the same time, -- kind of having it both ways - he said he can live with the low price for a much, much longer indicating that the low-cost
producer at $2 to $4 a barrel is certainly not going to be cutting production, specially not alone.
QUEST: So is it your view and those that you speak to that when we tested 27, that could appear and is likely to be in the low point of the cycle?
DEFTERIOS: Well, it's very interesting you say that because I think we might have found the trough (ph) here at Davos 2016.
We polled the panel that we put together for last night, the new energy equation. One non-OPEC producer being the President of Azerbaijan, the
chairman of Saudi Aramco, representatives from Russia and China. But let's listen to Azerbaijan and Saudi Aramco. The president of Azerbaijan said he thought it was very psychological, starting to weigh
down on Azerbaijan because they budgeted last year for $90, brought it to $50 and then thought they were covered.
Let's take a listen.
(BEGIN VIDEOCLIP)
ILHAM ALIYEV, AZERBAIJAN PRESIDENT: Well, it's difficult to expect the price going lower, but having this situation and today you will not be
surprised if it happens. Of course we were not prepared for that.
KHALID AL-FALIH, CHAIRMAN, SAUDI ARAMCO: The price itself is irrational if you ask me because prices are supposed to be set by the marginal baron, the
margin baron at certainly way higher than $30 a barrel. We have the most resilient capacity within producers to take whatever the market serves us. If prices continue to be low, we will be able to
withstand it for a long, long time. Obviously we don't hope for that, but we have prepared for it. We have the
lowest cost production in the planet by a big margin.
(END VIDEOCLIP)
QUEST: It's a big panel. The big panel that you had there, John, the point still remains that this fall in price was a supply-driven movement,
and supply, albeit - you know, is still very high with some coming out of the U.S.
DEFTERIOS: Yes, it still coming out of the U.S. about a half a million barrels so far. There's a thought that they were going to see another half
a million, if not more in 2016. In fact, the rig count was reported today. Richard, it was down nine of the last 10 weeks. But the shale producers are very resilient.
So if you see a price recovery to $50, --
QUEST: Exactly.
DEFTERIOS: -- a shift (ph) comes back on to the market.
QUEST: Right.
DEFTERIOS: So it keeps the pressure. Now, why they're feeling a little bit happier these days - there's been $400 billion dollars of deep water
contracts cancelled. And that means by 2017, the major, more expensive projects will be wiped out and most of the panel thought we could -
QUEST: All right.
DEFTERIOS: -- be above $50 for 2017.
QUEST: Join me at the Worry Wall.
DEFTERIOS: OK.
QUEST: You're not - just scoot over that.
DEFTERIOS: I don't need to grab a pen.
QUEST: No you don't, you've been on here already, haven't you?
DEFTERIOS: Well I had circled this, right? There it is. Oil. I'm still very embarrassed --
(CROSS TALK)
QUEST: What do you make of this? Doesn't it show a certain - (HOLLERS)?
DEFTERIOS: Well I think as Maurice Levy or some of the bankers like Goldman Sachs, Bank of America as you spoke earlier.
They all marked in between two and four. They're kind of thinking there's not great risk for this year, but there really has to be optimistic,
Richard. They have to play this and think they can make money on the upside.
There's some potholes out there and if you want to talk about the Middle East which - we'll save for another time --
QUEST: No, no. What did I just say, what are you doing?
DEFTERIOS: -- that's what the risk is. (LAUGHTER).
QUEST: Obsessed by oil. Obsessed.
DEFTERIOS: (LAUGHTER). Always a pleasure.
(BEGIN VIDEOCLIP)
QUEST: John Defterios. Now we need to look at the results or the effects and what actually happened in Davos on this Friday.
While Canada struggles with falling oil prices, its new prime minister spoke on one of the biggest panels of the day here in Davos.
Justin Trudeau took part in a discussion about the gender gap along with Melinda Gates and Facebook's chief operating Sheryl Sandberg.
Mr. Trudeau who appointed a gender balance cabinet said men should not be afraid to use the term "feminist."
Also in Davos, Iraq's prime minister said plummeting oil prices could hamper the fight against ISIS. He explained that Iraq depends on oil
revenues to finance the war. [16:40:07] And the U.S. Secretary of State John Kerry says sanctions
against Russia could be lifted within the next few months. They were imposed nearly two years ago after Russia's military action in Ukraine.
Staying with Russia, the Secretary General of NATO says he wants to have a dialogue with the country over its military actions.
Jens Stoltenberg told me Russia's aggression is one issue facing NATO and that includes the ongoing battle against terrorism.
(BEGIN VIDEOCLIP)
JENS STOLTENBERG, NORTH ATLANTIC TREATY ORGANISATION, NATO, SECRETARY GENERAL: NATO is together with NATO allies really playing a key role in
the fight against terror and terrorism. It's a long-term effort - it will take time -- but our biggest operation
ever in Afghanistan was about preventing Afghanistan once again becoming a safe haven for international terrorists after the 9/11 attacks against the
United States. All its allies (ph) are part of the solution fighting ISIL in Iraq and Syria and NATO is present in Turkey. NATO allied (ph) the border of the
conflicts in Iraq and Syria, and we provide support for building local capacity.
QUEST: Let's talk about the Russia threat at the moment. Russia's announced an increase in military forces - new brigades - which it says is
a result of NATO's more aggressive stance, NATO's more proactive stance on the Eastern borders.
STOLTENBERG: What you have seen over a long period of - over many years - is that Russia has invested heavily in defense (inaudible) and a
substantial military buildup in Russia. We have seen more aggressive pattern of exercises in Russia, but most
importantly we have seen Russia which is willing to use military force against neighbors.
We saw it in Georgia, we have seen it in Ukraine, and NATO is responding to that. And everything we do is proportionate and within our international
obligation. Let's talk about the way in which Russia and NATO and NATO members are
probing each other. Planes flying close to each other, submarines going into territorial waters.
Are these accidents waiting to happen?
STOLTENBERG: One of the reasons why we would like to have dialogue with Russia is to prevent and avoid these kind of incidents/accidents.
Because we have to have transparency, we have to have predictability to avoid incidents and accidents from happen and if they happen, they will
avoid a spiral out of control and create a really dangerous situation.
QUEST: One of the core issues today is that of inequality, it is that of a disaffective (ph) population feeling that half the world doesn't care.
Sixty-two richest own as much as the rest of half the population. Even as a military man, a former domestic politician, but as a military man, can
you see there is an economic component to global security?
STOLTENBERG: It is in at least two ways. Inequality is a root for instability and instability can cause wars and military conflicts.
At the same time, economic prosperity, economic growth is important for creating the economic fundamental revenues for financing, for instance,
military budgets in NATO-allied countries. So we need economic prosperity to, in a way, address the root cause of so
many conflicts all around the world.
(END VIDEOCLIP)
QUEST: Fascinating. We don't always and often hear the secretary general of NATO talking on the economic effects of security.
Britain's finance minister is warning of a dangerous cocktail in the financial markets.
George Osborne says it's not all bad news. You'll hear the chancellor next.
(COMMERCIAL BREAK)
[16:45:31] QUEST: A dangerous cocktail is rocking the global financial markets. Those are the words of Britain's finance minister, the Chancellor
of the Exchequer about recent market turmoil. The Chancellor George Osborne says when you step back from the volatility, you'll see positive signs. I asked George Osborne what it meant for
growing the British economy.
(BEGIN VIDEOCLIP)
GEORGE OSBORNE, UNITED KINGDOM CHANCELLOR OF THE EXCHEQUER: Well we've definitely had a difficult start to the year when it comes to global
markets. But I think the important thing is to hold to the course that different
countries have set out or at least the United Kingdom. We've got a plan, it involves putting our public finances into order, it
involves doing other things like making ourselves a more entrepreneurial economy, and we're absolutely going to hold to that course.
QUEST: Can you hold to your forecast and your numbers from last year bearing in mind the changing in conditions. Can you maintain - can you
keep that deficit reduction on course?
OSBORNE: Well, we set out our deficit plan. When it comes to the forecasts, they're done independently in the U.K.
But the IMF forecasts this week did downgrade the global economy but did not downgrade the U.K.
So the U.K.'s been one of the brighter spots. And, you know, I would say take a step back from this dangerous cocktail you've got at the beginning
of the year in the financial markets and ask yourself what's going on. China is trying to transition to a consumption-led economy, that's a good thing. Oil is cheaper, that's largely a good thing for most countries.
And you see even on our continent here in Europe, some activity in the Eurozone and the European Central Bank - behaving like central banks do
around the world when they need to support their economies.
QUEST: Except the view is now that central banks have done as much as they can, despite what the ECB said yesterday. The view is they've done enough
and it is time for governments to do more. Would you agree with that in terms of Europe?
OSBORNE: Well, I certainly think governments needs to do more to reform while their economies take the difficult decisions to improve free trade,
make sure markets are more competitive and so on. I don't think that the answer to all of life's problems is for governments to go out and borrow a load more money, frankly.
And that's always the solution presented by the same cast of characters, whether the economy is doing well or badly - it's borrowed more.
And I'm not sure that's what the world needs at the moment.
(END VIDEOCLIP)
QUEST: George Osborne. Now we have some news in to CNN. We are hearing of a possible school shooting in Saskatchewan in Canada.
According to multiple reports there, the La Loche Community School has posted this message on Facebook. It says, "There is currently an emergency
occurring at the Dene buildings and we are asking the public to stay away while the matter is resolved by the Royal Canadian Mounted Police."
Now this at La Loche - I beg your pardon - not La Roche, La Loche. We'll bring you more details as we get them.
This is "Quest Means Business" in Davos.
(COMMERCIAL BREAK)
[16:50:06] QUEST: Welcome back to Davos. Now look around our set here at the World Economic Forum. Just look how many people there are.
There are cameramen, there are producers, there's more producers, there's engineers - an entire potpourri of people, all helping to make the program
from the World Economic Forum. But according to the Forum, five million jobs are at risk because of the new fourth industrial revolution.
How many of the people here will survive that revolution? Chuck Robbins is Cisco's chief exec. He told me his customers' relationship with technology
has dramatically changed and there are possibilities.
(BEGIN VIDEOCLIP)
CHUCK ROBBINS, CHIEF EXECUTIVE OFFICER, CISCO: Well, Richard, you know, we live in this world that we've gotten used to - everything is dynamic. We
have geopolitical challenges that we face, we have economic transitions, we have significant technology transitions going on and frankly our customer
expectations and what they want to see from us are changing every day. So, you know, we're used to things rapidly changing. And from our
perspective, we moved from customers looking at technology as a cost center to technology being at the core of their business strategy going forward.
So they don't just think about spending money on tech when things are good around growth.
They look at technology about how does it enable productivity, how does it enable my ability to interface with my customers more effectively.
So it's more broad scale now.
(END VIDEOCLIP)
OSBORNE: Yes.
QUEST: -- is this a cliche? I mean, Klaus, has he hit something or is it just sort of a - it sounds good?
OSBORNE: Well we believe he's said something because we've been talking about it for eight years. So -
QUEST: How do we master it then?
OSBORNE: Well, how you master it is you have to think about the benefit to your business or your country or your city of these new insights that you
can gain from connecting absolutely everything. And it's going to not only change business, but, Richard, we're going to have the ability in my opinion to begin to solve some of the greatest
problems in the world. Through sensors and information and data and the ability to move at a pace
that we've never been able to.
QUEST: So there are in this room, there's you as chief executive, there's me as a presenter, we've got a cameraman, an editor, we've got a director,
we've got producers, we've got other colleagues, -- which one of us is out of a job as a result of the fourth industrial revolution?
Which one of us gets replaced?
OSBORNE: Well hopefully it's not you or I.
(LAUGHTER)
QUEST: That's a given. That's a given. But my point is -
OSBORNE: Yes.
QUEST: -- we don't know.
OSBORNE: So let me - the social implications. I personally believe this is a net job creator, however, what we're doing and I think that all of
technology and the industries need to do is to assess this issue. We've launched - we educate a million students a year right now. We just launched initiatives in France, Germany, Italy, U.K., India to actually add
another million and two million students. So we're out actively trying to help countries and companies think about reskilling their labor, driving new skills into the marketplace and I think
that's our obligation if we want to achieve the real benefit that's possible from this technology.
I'm over here.
QUEST: Why?
OSBORNE: Because I think that we've been dealing with dynamics in the world for the last few years and we have to stay focused on what's possible
as we talk about this next wave of digitization. And I think that the world is becoming more resilient and I think that we have a way of working through these issues much more rapidly than we have
in the past and I think in this case we'll do the same.
(END VIDEOCLIP)
QUEST: So there we have it with the Worry Wall. What is the consensus? Mainly 'round here - three to four people don't seem to be too worried.
But if you look at the wall overall, the Wall of Worry tells us that people are frankly quite undecided about what and where we're going.
(END VIDEOCLIP)
(BEGIN VIDEOCLIP)
QUEST: Join me at the Worry Wall. I have a Worry Wall - come -
UNIDENTIFIED MALE: OK.
QUEST: -- join me over here. Come and join me, gentlemen. Here is the line, this is 10. You're really worried?
KLAUS SCHWAB, FOUNDER, WORLD ECONOMIC FORUM: I'm really worried. Because we have the secongues (ph) of so many challenges at the same time.
But the year 2016 -
QUEST: 2016.
HOWARD LUTNICK, CHIEF EXECUTIVE OFFICER, CANTOR FITZGERALD: I'm not worried.
ANGEL GURRIAIS, SECRETARY-GENERAL, OECD: I'll do the green, that's the color of hope. I would say right down the middle.
HANS VESTBERG, CHIEF EXECUTIVE OFFICER, ERICSSON: This is sort of my emotional - that's a heart, that's pretty low and it's really where I want
it to be, --
QUEST: And the mind.
VESTBERG: -- and here's where my mind, I'm probably more here.
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: I'm sort of a third into the - like here - because I think that, you know, we
have 30 percent risk of having a really difficult situation when the downside risks all materialize at the same time.
[16:55:07] QUEST: How concerned are you?
WILL.I.AM: (Inaudible) (LAUGHTER). Yes I'm concerned on, as it relates to education, like if you take the investment that big companies are doing
around artificial intelligence and machine learning and then you see governments and their investment on goop learning, it's like totally
lopsided.
(END VIDEOCLIP)
QUEST: The Wall of Worry - Claire Sebastian's idea. A "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Breaking news in to CNN and we're now getting more details of this possible school shooting at Saskatchewan in Canada according to multiple
reports now and there may even be casualties and some deaths. Now, the Royal Canadian Mounted Police and emergency personnel, they are
responding to a shooting. It's at the La Loche Community School in the northern part of the province.
According to a post by the Saskatchewan Premier Brad Wall on his Facebook page, he says, "Words cannot express my shock and sorrow at the horrific
events today in La Loche. My thoughts and prayers are with the victims and their families. Thank you to the police and emergency personnel providing
all necessary crisis support." We don't know at the moment the size, the scale, we don't know the casualties or indeed if there are fatalities.
As the hours move forward, we will get more details but there is a serious shooting incident at a school in Canada and we'll bring you more details as
we get them. This is CNN.
END
