Return to Transcripts main page
Quest Means Business
The White House Takes A Victory Lap As The American Jobs Juggernaut Rolls On; Warren Buffett Is Finally Adding Some Amazon Shares To His Basket; India's Most Powerful Cyclone In 20 Years; Disney Shows Off New Star Wars Theme Park; U.K. Decides to Keep Penny Coins; President Trump Cites Having a Very Good Phone Call Conversation with Vladimir Putin. Aired: 3-4p ET
Aired May 03, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: An hour to go, the end of trading and the end of a week, and bearing in mind the down
days that we've seen, this is a roaring market. The Dow is up three quarters of a percent, 205, and it's been up throughout the whole course of
the session. Its broad based. You'll see this from here, because actually the Dow is the laggard in terms of the number. The S&P is up nearly one
and the NASDAQ having a splendid session up over 1 percent at the moment with 60 minutes to go.
This is the reasons why -- understanding the market. The White House -- oh, good grief -- that's kind of funny. The White House takes a victory
lap as the American jobs juggernaut rolls on. Warren Buffett is finally adding some Amazon shares to his basket, and Mickey Mouse has some new
neighbors. Disney restructure its magic kingdom. We need to buy a new bell. We're live in the world's financial capital, New York City. It is
Friday, it is May the 3rd. I'm Richard Quest, of course, I mean business.
Good evening jobs, jobs and more jobs. A blockbuster report from the U.S. Labor Department hands President Trump political and economic ammunition.
Stocks are rising and the Trump administration is pushing the Fed to lower rates once again.
The numbers -- the crucial numbers -- the U.S. economy added 263,000 jobs in April that crushed expectations. Unemployment fell to its lowest level
in half a century 3.6 percent. And crucially, wages rose to 3.2 compared to last year. It outstripped price increases, core inflation, the PCE by
the Fed level is about 1.6 percent. Add these numbers the last week's strong GDP report, and you have a picture of the U.S. economy absolutely
booming.
Economists have been warning that the President's policies would do damage. Speaking on CNN this morning, the Chairman of the White House Council of
Economic Advisers says the data proved the opposite over and over again.
(BEGIN VIDEO CLIP)
KEVIN HASSETT, CHAIRMAN, WHITE HOUSE COUNCIL OF ECONOMIC ADVISERS: The fact is that this this job report is one of the best things that I've ever
seen in all the history of labor economics. So to put it in perspective, the last time the unemployment rate was this low, we were about to land
down the moon for the first time. The last time the unemployment rate was this low for women, it was 1953.
So Larry Kudlow still had his baby teeth the last time the unemployment rate was this low for women. And so I think that this idea that we're
going to have a new normal with low growth of low job creation, it's I think, being disproven by the data. And again, last thought, I promise not
to filibuster. But if you go back and look what say the CBO thought job creation would be this year, just a couple of years ago. They're thinking
like maybe 50,000 to 60,000 a month.
So to have numbers this large, you know, this deep into recovery is really extraordinary.
(END VIDEO CLIP)
QUEST: You can't ignore the fact that these numbers are extraordinary, 3.6 percent as a rate of unemployment at a time when inflation is subdued.
Well, the President and his supporters are eager, and not surprisingly, to talk up these strong numbers.
The administration's economic policies certainly appear to be working. Stephen Moore dropped out of consideration to sit on the Board of the Fed.
He said Trumponomics has been vindicated. He said that in his letter, and that includes the helping of tax cuts, a mainstay of Republican economic
policies, but those cuts are working their way out of the system.
Now from tax cuts, add in deregulation -- large scale -- we've talked about it on this program, you and I many times, and the President has borrowed
from the left wing economics as well -- protectionism -- but he is doing it from the different side. Protectionism on trade, including tariffs, trade
wars and protectionist policies, it boosts manufacturing at home and you're seeing that on the trade numbers, as imports have fallen. Exports have yet
to be seen to grow by considerable amounts.
Join in our conversation, the call of debate here is who gets the credit for this? Tonight, we're asking who does deserve the most credit for the
strong U.S. economy? Donald Trump or the Fed? Remember 10 to 12 years of easy money, ultra easy money, obscenely easy money has led to a rising
stock market and investment also, of course, buybacks and the like. cnn.com/join and vote. The results will be on your screen.
[15:05:09] QUEST: Cristina Alesci is -- you and I have covered enough economic cycles between us.
CRISTINA ALESCI, CNN BUSINESS AND POLITICS CORRESPONDENT: Yes, we have.
QUEST: This is extraordinary. I mean, these numbers have to be taken with a gosh factor.
ALESCI: Yes, I think it was a gangbusters report, no doubt about it. And your point, to have this kind of growth at this point in the cycle is
wonderful. I think it's important to note that, from a headline perspective, yes, the number of jobs added was great. The unemployment
rate is amazing. Wages are growing.
But if you actually peel back a few things, you start to look at, okay, you know, wage growth 3.2 percent, year-over-year is good. But shouldn't it be
stronger at this point in the cycle? It's okay, for now, because prices haven't increased as much. So we had 1.9 percent increase in prices versus
that 3.2 percent increase in wage growth.
That means that people will feel more confident and we should see better consumer spending. But that didn't necessarily come up in the GDP numbers.
QUEST: Okay, but that's 3.2 percent, I mean, nice if it were higher, but for so long, it has been lower,
ALESCI: Right.
QUEST: So from the Feds' point of view, this is picking up.
ALESCI: Yes, I think from the Feds' point of view this -- they don't want to screw this up. So that supports the case that they're doing the right
thing that they're not cutting rates and there doesn't seem to be an economic case to do so.
QUEST: None whatsoever. I mean, when Mike Pence says today, the Fed should be cutting rates. I mean, I don't know what economics book he has
been reading.
ALESCI: Trump's economic book.
QUEST: Good answer. Look, the old argument with unemployment numbers has been that whether or not -- not so much for the headline numbers, but are
people leaving or are people joining the work force? What are we seeing at the moment?
ALESCI: Well, that's why we saw the unemployment rate take down because the labor force participation dropped a little bit. And that's concerning
because that means that people are discouraged, perhaps and leaving the labor market, not being counted at all. That's not a trend we want to see
continue to go lower.
QUEST: So that fall in the headline unemployment came about not because more people were getting jobs, but partly because those who were looking
for jobs became discouraged. Therefore the participation rate, which is the other half of that coin.
ALESCI: Exactly. Yes. So that's a little concerning. But I don't want to take away from the fact that this is a strong jobs report, like I don't
want to be accused of like, trying to find the negative in this jobs report. But I mean, those are the facts.
QUEST: Finally, one swallow does not a summer make, but we've had revisions, and we're getting a picture now of the average and the average
is doing what?
ALESCI: The average is about for the month, it's about slightly under 200,000, which is amazing. I mean, it's just amazing. To me what that
says, is there still people on the sidelines that we never thought would come into the labor market, and now they're coming in. That's why we have
such a surprise here, right? Because there's a lot -- there are a lot more people who want jobs.
That said, the fact that -- I spoke to a couple of economists who said the fact that we haven't seen the wage increases that we'd like to see at this
point in the cycle is probably because of artificial intelligence and automation. And there's no mechanism for the Fed to fix that, right?
We're going to have to talk about job training and workforce development and all of these things. Those are not tools that are going to come out of
the Fed.
QUEST: No, but they're also big issues that do not -- do not lend themselves easily court to a quadrennial election system.
ALESCI: No. We're not going to have that debate. We're going to have the debate over whether or not Trump gets credit for, you know, 3.6 percent
unemployment. We'll have that debate.
QUEST: All right, I hope you are having a good weekend.
ALESCI: Thank you so much.
QUEST: I am. Hopefully you will, too.
QUEST: I've been looking at the following one. Thank you. We just talked about what Mike Pence said on the question of whether or not the U.S. Fed
should lower rates. Traditional economics says no. But the U.S. Vice President, absolutely.
(BEGIN VIDEO CLIP)
MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: This might be a time for us to consider about lowering interest rates. But look, we just don't see
any inflation in this economy.
(END VIDEO CLIP)
QUEST: Randall Kroszner, Governor of the Federal Reserve from '06 through '09, now a Professor of University of Chicago's Business School, is the
Vice President, right? When you've got inflation -- CPE Inflation is 1.6 to 1.9 under the Fed target, then could they lower rates?
RANDALL KROSZNER, FORMER GOVERNOR OF THE FEDERAL RESERVE: I would say given the strength of the labor market, I'd be very wary of cutting rates
at this point. I want to see if inflation continued to move down and that's exactly what the Fed is waiting for and precisely what you focused
on before, Richard is I think the right thing.
[15:10:10] KROSZNER: Rather than focusing on just the particular month number, look at the average and it's been about 200,000 jobs created per
month since the beginning of the year -- that is surprisingly strong. And that is a pretty strong labor market that we have.
QUEST: Before we get into the politics just stick straight with the economics, the number of 3.6 percent on the headline, unemployment rate,
was that because more people got jobs or was it because they left the workforce? They stopped looking?
KROSZNER: So there was a little bit of both, but there were some people who were not looking as much as they had been before. And so we certainly
would like to see more people in the labor force and more people getting jobs, because that will lead to more economic growth. But we've also been
seeing productivity growth go up over the last month quarter and that's something that's helpful overall, for overall economic growth, and also
should translate into higher wage growth down the line.
QUEST: The reality is though that at 3.6 percent, when you would do your economics 101, you were told five percent or 6 percent was full employment.
If you had been told 3.6 percent with interest rates at two and a quarter to five and unemployment at 1.7, you would have said this is Nirvana.
KROSZNER: Yes, and clearly the world has changed. I mean, this is certainly very good. But it seems that we can sustain lower unemployment
rates without generating inflation. It seems that we can have lower interest rates and not generate inflation that we have from before.
But as you were saying before, Richard, there are a lot of forces outside of the Fed, that are driving some of these things. And they're bigger
forces about supply and demand for savings that are changing the underlying forces for interest rates not just the Fed.
QUEST: So, fiscal policy is obviously bearing in mind, what we're seeing with deficit, deficits are going to rise quite considerably over the next
few years. Does monetary policy -- I know the Fed says short term, it is patient. But reality, they shouldn't be patient. They should still be in
some form of tightening mode.
KROSZNER: Well, given that there is very little inflation and very low inflation expectations, I understand why the Fed has sort of pivoted to
patience. And I think that's going to persist for a while because we're still seeing a strong labor market, we're seeing reasonable wage growth,
not screaming wage growth. And we're seeing very little sign of inflation. So that's kind of what they're waiting for to see where this is going to
translate into inflation pressure, which it hasn't.
QUEST: Right, but Randall, the hawks always say, by the time inflation arrives, it's too late to do anything about it. Now, we have seen good
growth. But this is the first time we've really seen a strong successive periods of quarters of three to three percent plus growth for some time.
So are you worried that there will be inflationary pressures? That inflation is not anchored at these lower levels?
KROSZNER: So I think that's why it's very important that the Fed be patient rather than be cutting right now because there is a chance for
that. This is sort of somewhat uncharted territory to have the unemployment rate where it is, have inflation where it is, have interest
rates where they are.
And so I think being patient, but being vigilant and looking for signs of inflation is important, but also being vigilant and looking for signs for
inflation declining. Other countries have had recently good job markets, but declining inflation. We don't want that either.
QUEST: Well, 59 percent of our wise and decent viewers say the Federal Reserve gets the credit, 41 percent say Donald Trump gets the credit.
We'll leave that judgment to our dear viewers. Thank you, sir. Have a good weekend.
KROSZNER: Thank you.
QUEST: Now, as we move on, we're not done from jobs so far this year, especially when the numbers are strong. Later in the program, we're going
to delve even deeper into the numbers. Adam Posen will be with us.
Still the market has been positive. Have a look at that. Hopefully, the bell is now working. Yes, that's better. It's been as much as 227, giving
back a bit as we go into the last hour. Broad based, Caterpillar is the biggest gainer so far. Now not exactly famous for the love of stocks,
Warren Buffett's Berkshire Hathaway is buying into Amazon. The billionaire investor says he should have done it sooner. The exact amount of stock will
be disclosed in a filing to the SEC later this month.
And look at Berkshire Hathaway and compare it to the broader market. They've got the S&P 500, it's lagged, 8.6 versus 32 percent for Amazon and
20 odd or so for the S&P.
[15:15:07] QUEST: Matt Egan is with me. Matt, why should -- I mean, why is Warren Buffett doing this now?
MATT EGAN, CNN BUSINESS LEAD WRITER: So you know what, for years, Warren Buffett has resisted the temptation to buy Amazon and for years, he has
regretted it. And now what happened is one of his top lieutenants has taken care of that problem for him.
Buffett told CNBC today that Berkshire has been buying shares of Amazon. As you mentioned, we don't know how much, we'll find out in a few weeks
when Berkshire puts out his SEC filings. But what's really interesting is these purchases were not made by Buffett. They were made by one of
Berkshire Hathaway's investment managers, it was either Todd Combs or Ted Weschler. They each manage about $13 billion for Berkshire.
Now, as you mentioned, you know, it's no secret that Buffett is not a fan of buying expensive tech stocks. He's a value investor. He would
preferred to plow his money into the likes of Bank of America or General Motors, shares that he thinks are undervalued, that are cheap.
But he has admitted that Berkshire really missed out on Amazon. Amazon shares have been up 2,400 percent over the past decade. It's just been
incredible growth. And you know, these purchases come at a difficult time for Berkshire.
Berkshire stock is only up about 7 percent this year. It's badly trailing the rest of the market and a lot of his favorite stocks are just not doing
very well right now. So Richard, in some ways, buying Amazon might not be the worst strategy at this point.
QUEST: Well, except -- I mean, I agree with you. I'm just looking at the numbers here on my screen. Amazon is up 3 percent today in the market, but
it's still up over. It's a trading of $19.61 and with an all-time high of $20.50. So it's within its range.
But actually, Warren Buffett says you buy the stocks of the companies you use -- Coca-Cola, Ford Motor Company and all of those. If that policy
holds true, then Amazon is exactly the right stock to buy.
EGAN: You're right. It makes you wonder why they didn't do this sooner. Because it's something that we all use all the time. It's also you know --
it's just become such a mainstay for so many people around the world and so you wonder why they didn't do this sooner.
But you know, what's interesting is this strategy of buying things that you do use. Right now, in Berkshire's latest holdings, you know, they are
having trouble with some of those companies.
I mean, he owns Coca Cola, which is near the bottom of the pack in the Dow. Wells Fargo, which is really badly trailing its big bank peers. They're
still looking for a CEO, and then there's Kraft Heinz, which has lost a quarter of its value this year. It's just been -- it's been a disaster.
So we'll have to see if Amazon helps turn things around for Berkshire.
QUEST: Good to see you, sir. Have a lovely weekend. Thank you.
EGAN: You too.
QUEST: As we continue. Up next, India's most powerful cyclone turned in 20 years. It is carving a deadly path towards Calcutta, what to expect in
the next few hours. I (COMMERCIAL BREAK)
QUEST: Look at the pictures. They are dramatic and they are deadly and dangerous what's going on. At least seven people are dead and nearly a
million people have had to flee. A brutal cyclone is hammering many parts of eastern India as the most powerful storms hit the region in two decades.
Ivan Cabrera is tracking the path from the World Weather Center. So has this storm or this cyclone now past its most dangerous moment.
IVAN CABRERA, CNN METEOROLOGIST: So the most dangerous part of it, Richard, is the storm surge, right, so that threat has diminished
significantly because the storm is inland and you're absolutely right.
Let me take you back to 1999. That was the last time we had a storm of this intensity hit eastern India and that was an unnamed cyclone. It
didn't need a name, it was a Category 5. Fani is a category 4 and of course that is already inland.
I'll show you exactly where it is. The joint Typhoon Warning Center is responsible for putting out advisories. They have written their final
advisory and that does not mean by any stretch that the thread is over. I think we're just transitioning into a new threat. So not the storm surge,
not the wind, but the torrential amounts of rain coming up over the next several days and it is going to be a lot and we're talking not only the
floods threat, but also the potential for mudslides as well.
There goes to storm. It continues to head to the northeast. Now Richard, what I will say is that some of these storms tend to stall out sometimes.
This one will not do that. So despite the fact that it will be providing us with very heavy rainfall in the next few days, it could be much worse if
it were to stall out. It's not going to do that.
And as I mentioned, it will be a high flood and high mudslide because of the terrain spread over the next few days. As far as how much rainfall,
I'll leave you with that, my goodness, anywhere from 100 to 150 to 200 millimeters of rainfall. It remains to be seen the scope of the damage
here. We'll a good picture on the next couple of days.
QUEST: Ivan, thank you. Now storms of this scale pose a huge logistical challenge. You have to deliver relief at its most critical moments in some
of the most difficult areas.
We saw in the aftermath of Cyclone Idai which hit Mozambique and Malawi and Zimbabwe in March. The World Bank announced it is ramping up emergency
support to those countries providing a total of $700 million.
With me is Richard Blewitt, the head of delegation to the United Nations of the International Red Cross and Red Crescent Societies. Good to see you,
sir.
RICHARD BLEWITT, HEAD OF DELEGATION TO THE UNITED NATIONS OF THE INTERNATIONAL RED CROSS AND RED CRESCENT SOCIETIES: Thank you.
QUEST: You were in India 20 years ago, when that other one hit, weren't you?
BLEWITT: I was I mean, 10,000 people died that time, I think many lessons were learned. And to the great credit of the Indian government, they have
organized with civil society, with the Red Cross Society, mass evacuation of a million people.
Bangladesh has evacuated 2.1 million people from where the storm is likely as a head, that level of preparedness and community understanding of risk
so that people are prepared to move is critical to save lives.
QUEST: India does have the wherewithal and the -- I mean, just not the resource in terms of -- but it has the fundamental infrastructure of relief
with a large military that can cope.
BLEWITT: I mean, I think for that first phase of immediate response, or, you know, with the local communities, with national societies like the
Indian Red Cross, and the Bangladesh Red Cross, and that's true, and they've done well.
I mean, to organize a movement of a million people and make 20 million people aware about what was the threat to them, even if they weren't moved.
I mean, that's an enormous challenge to do that well and to mitigate the loss of life.
QUEST: So what's next? Where will the Red Cross Society has been helping next?
BLEWITT: Well I mean, the cyclone is going to go up towards Calcutta and so the geography and then into Bangladesh. We hope it doesn't go to Cox's
Bazar where there are a very large number of refugees from Myanmar. But the consequence of Bangladesh, for the Bangladesh community to be ready is
very critical.
We provide food. We provide water. Obviously, clean water is very critical because you get storm surge that affects all of the wells.
QUEST: Right. If we look at that map again, and then you can talk us through exactly the areas that you're most concerned on. So you've got
indeed down to the western side. But then as the map comes up, and over the top where that black area is of storm, and Bangladesh, is that the bit
that you're most concerned about?
BLEWITT: Yes, we're very concerned about, I mean, the place where to hit first, I mean, Odisha is a very poor state in India. The consequence of
moving people is one thing, but actually they've got to go home. And actually when they go home, what's happened to their crops? What's
happened to their livelihoods? How to get them back on their feet? How to make sure they can have basic access to healthcare? Those are very
important issues for us.
[15:25:13] QUEST: The world will rally as it as it always does. What's the one thing that they will need most? Money to buy things or things from
the disaster relief areas or both?
BLEWITT: I think the most important thing is to understand -- I mean, India will respond generously itself and corporate India. So there will be
a large response in India, some international solidarity, I'm sure will help, like the Red Cross through its network may provide some resources.
It's just about resources. The most important message is preparedness and making sure that you can mitigate these disasters. We believe in the Red
Cross Red Crescent that we have now a global climate crisis. These cyclones are getting more frequent and they're getting more intense, and as
sea level rises for these very low lying areas, a lot of -- millions and millions of people live at risk. And we need to address those basic
fundamental challenges in the future.
QUEST: It's funny, we we're just talking about on a different subject, the job numbers and factoring in the artificial intelligence aspect, which of
course, is the most difficult part to do. And what you're saying, of course, is this climate change issue, factoring that in is the biggest and
most difficult part to do.
BLEWITT: Yes, but --
QUEST: Nobody wants to tackle that bit.
BLEWITT: Well, that's true. But I think at the same -- you know, some countries are tackling climate change, 140 member states of the UN
highlighted the problem of climate change. So it is a priority. But I think it's also -- it's got to go down to the community level to make sure
people are made safe and feel safe and are protected from future hazards.
QUEST: Good to see you, sir.
BLEWITT: Thank you very much.
QUEST: Thank you very much indeed. Thank you. As we continue, the lowest unemployment rate in 50 years, I didn't think I'd ever say that on
television. Why some say it's still not enough, but what would the policies be? And the question of inflation is always there, or maybe not,
as we continue.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. We're going to take you to the galaxy's edge with a tour of
Disney's brand new Star Wars Park in California. And no Brexit for pennies.
[15:30:10]
The British government changed its mind on counting the copper coins. As you and I continue tonight, this is CNN and here the facts always come
first.
President Donald Trump says he had a very good phone conversation with Vladimir Putin today. He says the Russian president is not looking at all
to get involved in Venezuela, contradicting what the Secretary of State Mike Pompeo had said only days ago.
One topic that did not come up, Russian interference in the U.S. election. The World Health Organization officials now say Ebola would have killed
1,000 people in Congo as of today. It's the second worst outbreak on record. Health workers are been targeted by rebels.
Doctors say an experimental vaccine has stopped the further spread of the disease. New research says the risk of passing on HIV can be completely
eliminated with anti-viral drug treatment. An encouraging boost, the prospects of ending the AIDS pandemic.
A landmark study suggests that if those who have HIV knew their status and had access to effective therapy, no new cases would occur. Now, we do need
to understand this phenomenon that is the current U.S. jobs miracle machine, and arguably what's happening because the blockbuster report --
and remember, this report is always pages long from this.
It goes on and on and on with tables and tables and tables. And yes, that's interesting. Well, it shows unemployment at its lowest point in 50
years, 3. 6 percent. It's one number out of the 39 page report showing changed details up and down with tables and tables of statistics.
But behind these numbers and all of this, we've boiled it down to the important things that you need to know. Firstly, the total size of the
U.S. labor force, 162,470,000 people. That other people who are available for jobs. And then you've got the unemployment rate. This is 3.6 percent,
the 50-year low.
It is the number of people actively looking for jobs. But of course in any economy, you have the underemployment rate, the U6. Now, this includes
part-time workers, those who want full time jobs. This is at its lowest rate in 19 years. In terms of the total participation, you end up with a
total participation of 62.8 percent.
This is the labor force compared to the population age over 16. It's a combination of this versus the total population. And it will broadly fall
as boomers retire. If all of this gives you the picture, and it's very good, let me tell you, with the exception maybe of this being low, this is
encouraging, this is excellent.
But this number at 3.2 percent, wage growth is getting higher, employers are boosting pay to attract workers in light tight labor markets. And that
number, by the way, 3.2 percent, that is the number that -- of course the Fed watches because if this gets too high, this gets too low, inflation
starts to rise. The (INAUDIBLE).
None of it is good enough for Neel Kashkari; he is the president of the Minneapolis Fed, he says "we are not at maximum employment" yet. Adam
Posen is with me, the president for Peterson Institute for International Economics.
Forgive professor, forgive my rather rudimentary explanation of the economic numbers, but they do look extremely good. Would you agree?
ADAM POSEN, PRESIDENT, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: Yes, they are, Richard and you boiled it down nicely. The one thing that I
think is missing there from your boiling it down is that, this rate of job creation in the U.S. basically hasn't changed from the initial recovery
from the crisis starting in 2010.
So, if you were to plot the number of people in unemployment, it's just basically a straight upwards line for the last nine years. That doesn't
take anything away from how wonderful it is now. But just to say that it's not Obama, it's not Trump, it's just the U.S. economy keeps clicking on.
QUEST: Oh, now, sir, surely the policies that they are -- the policies that both presidents have introduced along with the Fed of course have
allowed that to continue and weak -- I mean, it's a moot point, we would never know if they hadn't done certain things if that 200,000 wouldn't have
continued like that, it could have blipped?
[15:35:00] POSEN: No, you're absolutely right. We don't know the counter-factual and there's no question that both presidents did things to
keep the economy stimulated and the Fed has done the best it can to keep the economy --
QUEST: Right --
POSEN: And to even heal. The -- sorry --
QUEST: Well, why 3 points, 6 percent. Why are we not -- unemployment, why are we not seeing inflation yet? Bearing in mind wage is now starting to
come up to 3.2 percent --
POSEN: Right --
QUEST: And I mean, you were always on the dovish side at times. Why do you think we're not seeing higher inflation?
POSEN: There's two points, Richard, in why I think we're not seeing higher inflation. One is as you said, there is more people still able to come
into the workforce. As Neel Kashkari said, and you quoted him, there are - - we're not yet at full employment.
I would argue we're probably getting pretty close, but I would also argue that you can always stretch it a bit more if you run a hot economy. We've
seen that in Japan, we've that in Germany, they've gotten down to unemployment rates that they haven't seen for decades either.
There's a general global ability to put in more workers, have more slack. But the second point that's really important, Richard, is that the rise in
wage inflation doesn't necessarily lead directly to a rise in general inflation. We've seen over the last 15 years, plus or minus, the share of
the economy going to -- profits going up, and the share of the economy going to wages going down.
And it's possible for wages to come up without necessarily going --
QUEST: Right --
POSEN: Into general prices as long as they claw back some of that profits. And the Fed Vice Chair Richard Clarida has in several speeches pointed this
out. Now, it may not be as good for equities if you have unemployment -- excuse me, employment continuing to go up, labor share going up and profit
rate going down.
But for the economy as a whole, it means you can continue to have wage growth without necessarily --
QUEST: Right --
POSEN: Having overall inflation.
QUEST: Final question, sir. If on this scenario when Mike Pence says -- and Donald Trump says interest rates, monetary policy should be loosened,
lowering rates, what would you say?
POSEN: I was saying to a friend this morning, I never thought I'd see the day when I would be out-dovish on the Fed by a Republican White House, but
I have them. I don't think that they need to do that. We're seeing unemployment continue to come down, we're seeing wages go up, there's no
reason to think that the Fed is doing anything wrong by just letting the economy run right now.
QUEST: Lovely to have you sir, always grateful that you give us time on QUEST MEANS BUSINESS, thank you --
POSEN: Thank you for having me, sir.
QUEST: Thank you. The Chinese millionaire who paid $6.5 million to get his daughter into Stanford University says it was a strictly personal
matter. The pharmaceutical boss who's seen here with President Trump published a statement on the company's website, says there are no links
between the business and his daughter's education.
Douglas Belkin is the higher education reporter at the "Wall Street Journal" and joins me now. I suppose -- I mean, that's very interesting
that he says it's his personal business and not the company's business. But it doesn't beg -- but it still begs the question, what he thought he
was doing, paying $6.5 million.
DOUGLAS BELKIN, HIGHER EDUCATION REPORTER, THE WALL STREET JOURNAL: Yes, it makes it seem a little bit curious as to where he thought the money was
going. But what he's saying is he thought this was how it worked in America, his wife came out and said she didn't believe she was doing
anything wrong. That this was just giving a donation and getting what she hoped for in return.
QUEST: Do you buy it? I mean, this idea that they didn't know it was going to stoke, they didn't know where the money was going to end up, they
thought it was going to the school as a donation?
BELKIN: No, it's ludicrous. These are very sophisticated people. I think the rules are different in China, around a lot of this stuff. But these
aren't provincial folks who don't understand how things work in the United States. So it begs gratuity to think that they were duped.
QUEST: And this notion of, well, it was my money, anyway, it's not the company's money. It's almost like he's trying to placate a regulator, you
know, the SEC type that might sort of want to question whether there had been shenanigans in the corporate accounts?
BELKIN: Well, I think you know, from his perspective, this might go there, so he's got to play defense on that. You know, they've not been charged.
There's not a criminal issue on their end right now, this is -- this is -- he's probably more concerned about securities than criminal charges.
QUEST: If we accept that there will always be bad actors, the corrupt and the criminal in any environment, any business, any environment. But the
issue with these people buying into schools in such a way is whether it's systemic.
[15:40:00] Do you believe there was a systemic issue going on here?
BELKIN: So what's happened in the United States is that the amount of advantages that folks here have gotten in order to get their kids into
school has just been creeping up, creeping up, creeping up. This extended how far things went.
I think it's pretty clear that this is going on much more broadly than we know now. There's going to be more indictments, everybody seems agreed on
that. Just below this, the level just below this in terms of other sorts of shenanigans that are going on, and admissions, I think that's incredibly
wide, yes, it's incredibly broad.
QUEST: Is it -- it's been inevitable. I mean, when I hear how much some of my colleagues are having to pay and how much debt -- for example, I
was interested today to read in this morning's "New York Times", you have seen the survey, the number of students or in university who are going to
bed hungry, who are having hunger naps or sleep naps, rather -- I mean, it's an expensive business going to college in the United States.
BELKIN: It's expensive and it's risky. Now, remember, four out of ten kids who start college don't graduate. So they end up without -- with debt
often times and no degree. And those are the kids who are really at risk in this whole process. This -- the singer admission scandal looks at the
very top, you know, quarter of 1 percent of the country and it stresses their under.
But much more broadly, the debt, $1.5 trillion now in student debt in this country, it's taking center stage in the 2020 presidential race.
QUEST: Quick question, do you think Elizabeth Warren's proposal to cut student debt is a bomb burner for her campaign?
BELKIN: On the -- on the left, right now, I think this is a central issue and it's going to generate some momentum. It's -- you know, if she makes
it to the general election, there's going to be a much sharper critique from the right, and I don't how it will play in the primary. But in the
primary, I think it will play to her strengths, absolutely.
QUEST: Good to see you, sir, thank you, we appreciate it, taking time on a busy day, much appreciated. Now, regular viewers of this network -- now
I have a particular view on currency.
(BEGIN VIDEO CLIP)
QUEST: What's this?
UNIDENTIFIED MALE: It was just a penny.
QUEST: Just a penny? Just a penny? It all begins with the humble penny.
(END VIDEO CLIP)
QUEST: The humble penny has been given a reprieve in Britain at least for now. My next guest wants the penny dead. We'll have a penny for his
thoughts after the break.
[15:45:00] (COMMERCIAL BREAK)
QUEST: If you're a child of the 1960s in Britain, you may remember this government film about decimalization, because it changed the way we spent
our money.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: The new decimal money will be with us on D-day, decimal day the 15th of February, 1971. The three copper coins will be introduced
on D-day. The two new pence, the new penny, and the new half penny.
(END VIDEO CLIP)
QUEST: Now, the half penny, which I remember and, yes, I also remember D- day, decimal day. While that was consigned to history in 1984, the one penny and two penny coins live on and will continue to do so after a change
of heart by the U.K. finance minister.
Philip Hammond said people still rely on cash, and the public should choose how to spend their money. The penny will remain. While scrapping the
penny, there's been an ongoing debate on both sides of the Atlantic. I've got loads of pennies, pennies from heaven.
Philip Diehl is the President of the U.S. Money Reserve, a former director of the U.S. Mint. You believe that the penny's time has been and gone.
PHILIP DIEHL, PRESIDENT, U.S. MONEY RESERVE: Yes, that's right, I do. And in fact when I was director of the Mint 25 years ago, I thought that and
advocated for the elimination of the penny. And reality, it should have been eliminated 35 years ago or so.
QUEST: Practically, may be, yes, but what about the argument that, if you get rid of the penny, then the -- in the U.S., it would be -- the next move
would have to be five cents and in the U.K., it would obviously have to be 2 cents or wherever else it might be. The penny is the smallest
denomination.
DIEHL: Yes, that's right. And there's a couple of ways of dealing with that. One is, you could enact rules for rounding up or down based on what
the total was. And there's been research that shows that the net effect of doing that is zero. Another possibility is simply to eliminate the penny
all together and denominate everything in 5 cents.
QUEST: And then take a -- I mean, but why? So, what is so wrong with the humble penny?
DIEHL: Well, there's probably three or four reasons. One is that it costs almost twice as much to make the penny as it's worth. The second is, it's
not useful. Nobody really uses it in commerce. First of all, only about a third of all transactions are conducted in cash.
Pennies, when people receive them, they often throw them away, they put them in penny jars. And so, they just don't find it a useful --
QUEST: Right --
DIEHL: Coin. And that's been -- that's been confirmed in several polls that show that 80 percent of Americans are ready to be done with the penny.
That it is a hassle and a charge -- largely useless.
QUEST: But it still lives on, sir. Psychologically --
DIEHL: Yes --
QUEST: We like it. It clutters up my sock drawer, no doubt. But it's a - - I can't end up feeling it's a battle you're going to lose.
DIEHL: Well, we haven't -- no one has won this for 35 years. So if I were a betting man, I'd agree with you. But the whole -- all rationality of
favors, eliminating the penny. There are interests that are interested in -- that want to keep the penny, for example, the company that makes the
blanks by which the U.S. Mint makes coins is a big company, headquartered in Tennessee.
And they are a friend of the penny and are willing to spend money in Washington D.C. to preserve it. Ironically and also, and maybe surprising
to know that the Illinois, the congressional delegation isn't enthusiastic about eliminating the penny because of course Abraham Lincoln is featured
on the penny, although he's also featured on the $5 bill.
So it's not like he would disappear --
QUEST: All right --
DIEHL: From American currency.
QUEST: Good to see you, sir, have a lovely weekend, thank you for talking to us about it tonight.
DIEHL: Thank you very much.
QUEST: It's a trip to a galaxy far away in a moment. Disney's new "Star Wars" land is about to touch down, and I promise you this, it will cost you
a good few pennies to go and see that.
[15:50:00] (COMMERCIAL BREAK)
QUEST: The magic kingdom. Disney's magic kingdom is getting smaller in some ways and bigger in others. It's reportedly selling a batch of sports
networks for Sinclair Broadcast for more than 10 billion. That might pay down some of the debt of course for what it bought from the Fox Networks.
Disney has to give up the assets as part of its takeover of 21st Century Fox and will make good money in the process. Though Disney, don't worry
has got something else coming down the line. Disney is opening "Star Wars: Galaxy's Edge" in Disneyland, California, at the end of the month in Disney
Land, California, not World in Florida.
It says it will be the biggest theme park expansion ever. For those who don't know, tomorrow is "Star Wars" day, it may also be known as May the
4th be with you. CNN's Frank Pallotta traveled to Disney's new land ahead of the celebration and got a tour from the man who designed it.
(BEGIN VIDEOTAPE)
FRANK PALLOTTA, CNN MEDIA REPORTER (on camera): Where are we?
SCOTT TROWBRIDGE, PORTFOLIO CREATIVE EXECUTIVE, WALT DISNEY IMAGINEERING: Well, right now, we are in the heart of the space port at Black Spiral
Outpost which is kind of the center of this thriving, bustling remote trading port on the Planet Batuu. Welcome to Batuu.
So it's the home of the smugglers and the bounty hunters and the rogue adventurous looking to crew up for some adventure into wild space. And of
course, it's the stepping off point for our "Star Wars" story.
PALLOTTA: And that's interesting, you say our "Star Wars" story, because my "Star Wars" story has always been Tatooine, Luke Skywalker's home, and
instead just landed, never heard of. Why didn't you just make it something that everyone for the last 42 years has known of.
TROWBRIDGE: Everybody knows what happened on Tatooine, everybody knows what happened on Hoth, right? We know those stories and we know Luke and
Leia's story. But we also know that we're not in those stories, right? So what we really wanted to create with "Star Wars: Galaxy's Edge" is an
opportunity for you to feel like you can play an active role in "Star Wars", not just a spectator.
UNIDENTIFIED MALE: Today, I am offering the opportunity of a lifetime. I need flight crews to transport this valuable merchandise and close the
galaxy.
PALLOTTA: What would happen to me in the rest of this land when I leave the ride, if say I failed --
TROWBRIDGE: Yes --
PALLOTTA: The smuggler's run. Well, you know, Hondo might not be so happy with you. And you might actually end up coming back, owing more money than
when you started. You know, you might decide to look to the bar and the bartender might lean over and say, hey, word on the street is Hondo is not
too happy with you, I'd watch out if I were you because I think your name is on the list of local bounty hunter.
[15:55:00] Because for those guests who want to play "Star Wars" with us, we have ways. Right, using their own personal technology, your cellphone
and to play Disney Parks out, the magic band plays into that, it's an invitation to play. I've heard that this is the most immersive --
TROWBRIDGE: Yes --
PALLOTTA: Land that Disney has ever done. Explain to me what that means.
TROWBRIDGE: Well, I think when we say immersive, I think that means it is big, it has scale, it doesn't just reveal itself all too in one view. We
don't build it for you to just see everything on your first visit because we want you to come back.
PALLOTTA: And why do you think that's important?
TROWBRIDGE: That depth of storytelling makes things real. We want the experience to feel deep. We want the place to feel deep so that your
relationship with it can also have that kind of depth.
PALLOTTA: And that bleeds into the whole story of "Star Wars" itself.
TROWBRIDGE: We have one view of what a "Star Wars" story is. With the events that happened here in Black (INAUDIBLE) are true in the world of
"Star Wars". They're not isolated from the rest of "Star Wars" storytelling.
PALLOTTA: How is this place going to tell the "Star Wars" story for the next 20, 30, 50 years?
TROWBRIDGE: What we can do now is make this a launching point for untold number of new "Star Wars" stories. There will never been an end to the
number of "Star Wars" stories that we can tell.
(END VIDEOTAPE)
QUEST: You can take that to the bank. Look at this, 203 on the Dow, three-quarters of 1 percent. But the real story at the moment is only
here. The Nasdaq is on track for a record close if it holds those gains for the next three minutes or so.
The Dow is up, the S&P is up, the Nasdaq is up and we will have a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. I could talk about the jobs number or the Fed or anything else, but, I am going to -- oh, Lord, hang on a second.
Just a penny! Yes, the idea of the penny losing it, I've never been in favor of this idea that somehow the humble penny should be abandoned just
because we don't use it that much.
There's a symbolic value, a psychological value to still having a penny in your pocket. Even if because it becomes the smallest increment, 99 cents
for sale, 1 pound 99, a euro 99, it doesn't matter, I just like the idea of having pennies in my pocket. Just a penny!
And that is QUEST MEANS BUSINESS for tonight. I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is profitable!
(BELL RINGING)
Yes! Records, records, records! The bell is ringing, the day is done.
END
