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Quest Means Business
Markets Down on U.S. Consumer Woes; Robert Reich Takes Global Economic Temperature; 'JobQuest' Resumes
Aired September 29, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN INTERNATIONAL ANCHOR: The customer is always right, as American consumer confidence drops, Wall Street follows suit.
One year on from the biggest ever fall on the Dow, former U.S. Labor Secretary Robert Reich joins us live with his take of where we are now.
And your quest for work. We're back with our job-seekers. And now it's getting really tough.
I'm Max Foster in for Richard Quest, and this is QUEST MEANS BUSINESS.
Hello to you. Market-watchers agree, we've moved out of the panic phase. Investors no longer fear the financial system is on the brink of collapse. Volatility is easing. On Wall Street right now, the Dow is marking time not far short of 10,000. Investors skittish today after some unwelcome data on the economy.
But no longer running for the exits each time that danger threatens. Things were very different one year ago, the markets sinking nearly 778 points after the U.S. House of Representatives rejected the first draft of a plan to spend $700 billion bailing out the banks.
Now this time last year Maggie Lake was in the hot seat in New York, keeping us up-to-date on that chaotic day in the markets.
(BEGIN VIDEO CLIP)
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: It's absolutely stunning, Charles. And I can tell you obviously a great deal of investors and analysts and market participants extremely disappointed that politicians in Washington, lawmakers were not able to put partisan politics aside and actually get something done.
And you heard the Republicans just that it is indeed that sort of party fighting that blew this thing up at the end. We saw very dramatic action in the markets as it was becoming apparent on the board as we were watching the vote live taking place that they were not going to get the votes to pass.
Remember, everyone was nervous, but the feeling was that in the end nobody liked it. But they were going to get this thing through. And when it seemed that they were going to fail, you saw the markets just absolutely tank.
(END VIDEO CLIP)
FOSTER: Maggie Lake there summing up one of Wall Street's very blackest days. Let's bring Maggie in now. She's live in New York.
Does it seem like a long time ago now, Maggie?
LAKE: It does. And then again, Max, it seems like just yesterday. You know, I have to say, you know, we've both covered a lot of crises, that was the closest we came to absolute panic in terms of selling that I have seen.
And I remember looking back on that now, how careful I was about the words that I was choosing. And it's interesting because for me that was really a turning point. There had been a lot of things happening, you know, we had been reporting Lehman Brothers, Bear Stearns.
But I think that was the moment when world leaders got a little bit of a peek about what could happen. A lot of people talk about it as being the edge of an abyss. We sort of got a peek over that when that market was falling like that and a feeling that was in -- and the conversations going on behind closed doors.
And I think it was at that moment that Congress took notice, that world leaders took notice and listened to what financial experts had been calling on the phone and telling them. And that was massive intervention was needed very quickly before the whole system really ground to a halt.
And I remember having sort of a pit in my stomach that day, thinking, oh boy, here we go, we are really in uncharted territory now -- Max.
FOSTER: OK. Maggie, thank you so much for that.
Well, from Wall Street to Capitol Hill in Washington, what happened on the markets a year ago was a shock and a fright to many, not just Maggie. Economist Robert Reich, the former U.S. secretary of labor, gave his thoughts immediately after the markets tanked.
For him, the explanation for the panic came down to old-fashioned supply and demand.
(BEGIN VIDEO CLIP)
ROBERT REICH, PROFESSOR OF PUBLIC POLICY, U.C. BERKELEY: A big part of the problem has to do with the demand side. Consumers in the United States and elsewhere around the world are simply not having enough money, enough purchasing power to buy all of the goods and services that they are producing as employees.
And one of the underlying problems that is not getting nearly enough attention, is that as wealth and income gets more and more concentrated in fewer and fewer hands, the middle class just simply doesn't have the buying power it had when wealth and income was not as concentrated.
(END VIDEO CLIP)
FOSTER: Well, we seem to be still feeling the repercussions of that day. A new survey this Tuesday shows confidence amongst U.S. consumers unexpectedly fell in September. The closely watched consumer confidence index slipped nearly 1.5 points to 53.1.
Let's get more from Robert Reich now. He is professor of public policy at the University of California at Berkeley, and the author of "Supercapitalism." He joins me live from California.
Thank you so much for joining me. I asked Maggie the question, I'll ask you as well. Does it seem like a long time ago, a year ago, that day of panic, wasn't it?
REICH: Well, the panic is over, it does seem a long time ago with regard to the panic, Max. But the underlying problem of consumers being unwilling to go to the shops, not having enough money, finding that they can no longer borrow, is still very much with us.
FOSTER: Yes, absolutely. And in terms of what has changed since then, how would you sum things up? Because a lot of people look at the market, saying, it's not a real rally, the rally that we've had since then, it's not underpinned properly. Is that a view that you agree with or are you more positive?
REICH: Well, I completely agree with it. I think that the -- there is a rally going on more or less in the stock market. I think that's mainly because the stimulus package in the United States and elsewhere are beginning to take hold.
And also some inventories have to be replaced, major companies are getting down to the point that they know they have to replace inventories if they're going to be able to be ready for any kind of recovery, consumers to some extent are replacing major durables, but this is not the stuff of which a real recovery is made.
And unfortunately, I hate to be the skunk at the party, but I don't think the rally is going to last much longer because the fundamentals simply aren't there.
FOSTER: Are you saying that the rally is purely being driven by government money, not consumer cash?
REICH: Exactly. Consumers have pulled back, consumers can no longer go into debt. In fact, consumers are beginning to save, at least in the United States, for the first time in about 15 years.
But what we're seeing is that government has stepped into the breach, providing a lot of demand for the system through the stimulus package, through the TARP program, bailing out banks, GM, and so forth.
But there is not a long-term sustainable demand. In fact, government is on the brink in the United States and Europe and elsewhere of pulling back, of finding an exit strategy.
Well, all of this means that the fundamentals are still askew. And until we fix the aggregate demand in the system, make sure that consumers have enough money to buy, make sure that the global imbalances are overcome, we're not going to see a sustainable recovery.
FOSTER: One thing will obviously help in terms of consumer confidence is the jobs market recovering. We've got some jobs figures coming out on Friday. Can we look ahead to some positive news there or beyond?
REICH: Well, I wish I could be very positive there as well. Unemployment in the United States is running now about 9.7 percent officially, but we also know that that official statistic, bad as it is, does not include all of the people who are working part-time who would rather be working full-time, nor does it include all of the record numbers of people who are too discouraged even to look for work, and the record number of people who are unemployed for more than six months here in the United States.
If you add of that together, approximately out of six Americans who would like to have a full-time job does not have. Is either unemployed or underemployed.
Now in this kind of atmosphere, Max, we just, again, don't have the circumstances in which consumers are likely to go back to the malls and provide a major, for example, Christmas buying season over the next two- and-a-half months.
FOSTER: Give us some hope though. When will the jobs market recover?
REICH: Well, I would love to give you some hope. I mean, if this recession is like a typical recession, it starts with a jobless recovery, because most companies are reluctant to hire until they know that there are actually going to be customers out there.
But this is not a typical recession. This is a great recession. This is an unusually deep recession. So I would imagine unless we have a bigger stimulus package almost immediately coming from not only the United States by elsewhere, and that's not likely to happen, I imagine that we're going to see double-digit unemployment in the United States next year, in 2010, 10 percent unemployment officially, which means probably closer to 18 percent unofficial unemployment.
And again, that means that this recovery is going to be very slow. By 2011, yes, we will be in a recovery. By 2012, my betting would be that things get back to looking fairly normal. But that's a long way away.
FOSTER: OK. Robert Reich, thank you so much for joining us, from California. Interesting stuff there.
And we'll be coming back to the employment market throughout the hour on QUEST MEANS BUSINESS. We'll check with our jobseekers on "JobQuest," and it's a simple case of A to B, Atlanta to Beirut, and that's just in a few minutes here.
Now while jobs remain on everyone's mind, let's also keep an eye on the stock markets. Outside the U.S., here in Europe, stocks paused for breath after -- largely after strong gains on Monday. London's FTSE, France's CAC, and Germany's DAX all ended the session down slightly, as you can see.
Moving on to Asia, the Nikkei in Tokyo headed higher after the yen weakened a little against the dollar. The Hang Seng in Hong Kong gained more than 2 percent. And markets in South Korea and Australia also did pretty well, as you can see.
Let's get you up-to-date with the headlines, Fionnuala is in the news room -- Fionnuala.
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Max, Tropical Storm Ketsana is claiming more victims as it moves through Southeast Asia. The storm slamming into central Vietnam after picking up strength over the South China Sea. Media reports say at least 23 people have been killed in floods and landslides, 200,000 were forced to move to higher ground. The storm dumped up to 50 centimeters of rain as it made landfall south of Danang.
Afghan civilians continue to pay a heavy price in an eight-year war. At least 30 were killed when a bus hit a roadside bomb in Kandahar. Many women and children were among the dead. Nearly 40 people were wounded. A provincial official says the bus hit the explosive when it tried to pass a NATO bomb-clearing team.
Afghanistan tops the agenda at the United Nations. The Security Council meeting for a briefing on the secretary-general's report on Afghanistan. In his report, Ban Ki-moon cites violence as the largest single threat facing Afghanistan. He also touches on election fraud, terrorism, narcotics, and widespread government corruption.
Lawyers for Roman Polanski have filed a motion in court asking that the film director be released from Swiss custody. It's seen as the first step in the director's battle to keep from being extradited to the United States. There Polanski faces charges connected with his 1977 conviction for having unlawful intercourse with a 13-year-old girl.
Those are the headlines. Be sure to join me for more on all of those stories on "WORLD ONE." That's at 8:30 p.m. London time, in the meantime, back to you, Max, in the studio.
FOSTER: Fionnuala, thank you for that.
Now we return to the difficulties of the labor market after the break.
(BEGIN VIDEO CLIP)
RAJA KANAFANI, JOB SEEKER: I have been officially out of a job for about two-and-a-half months. Freelance jobs here and there, not even worth mentioning. Just enough to get me by day-to-day. I've exhausted all of my savings.
(END VIDEO CLIP)
FOSTER: Our jobseekers bring us up-to-date with how they're coping in their battle to get back into work. You're watching QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
FOSTER: QUEST MEANS BUSINESS is putting you on the front line of the battle for jobs. In "JobQuest," we bring you the struggles of people trying to get back into employment. We're just days from the U.S. government's monthly jobs report. So let's check in now with job hunters Raja Kanafani in Beirut, and Les Young who is in Atlanta.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Last week on "JobQuest."
KANAFANI: I have been officially out of a job for about two-and-half months, freelance jobs here and there, not even worth mentioning, just enough to get me by day-to-day. I have exhausted all of my savings. I owe the banks, the banks wake me up every morning.
LES YOUNG, JOB SEEKER: I lost my house. I was evicted. I had to come live with my fiancee. I'm on the verge of losing my car to repossession.
I've been without work now about eight-and-a-half months. And the hardest part is when the bills come, and someone is calling on the phone and asking for something that I don't have, and I'm trying to stay positive but these calls are constantly coming at me, they just keep asking for the same thing, for something that I don't have, that's the hardest part.
Every one of these is either a collection notice or some sort of -- some sort of notice about payment that is due, payment that is past due, loan payment on a car, the gas bills, banking, insurance, they call and call and call, I finally had to have my phone number changed for that reason, because of so many calls that I couldn't get any focus, any concentration on anything that I was trying to do in the way of finding work.
Because in the insurance industry, it's closely related with finance. And because of that, you cannot have those types of collections on your credit report. It's something that I'm trying to find out how we can deal with it, but it's just something that's happening and I can't give up, so I've got to continue to try to do something.
Right now I'm going to go right on down the bottom of Hill Boulevard (ph), make a right turn on to Warren (ph). And here is where I used to live, right here, 598 Warren.
What we're looking at here is a property that I bought two years ago in 2007. It was valued at about $309,000 at the time. I had it appraised at $325,000. Great starter home for me. And I just was unable to maintain it due to the economy.
It's difficult to look at it as it is, because I had a lot of attachment to it. I put a lot of money out for it, I poured a lot of money into it.
KANAFANI: Getting by is really tough in Beirut. Day-to-day expenses are quite high, whether for gas, you know, telecommunication, transportation, it's not cheap in Beirut. Everyone knows that.
The agency I was working for was based out of Abu Dhabi. And we had major plans and we were waiting for the elections. And after the elections, things were quite calm and relatively cool again as far as business is concerned, advertising.
They shut down the Beirut office because they simply couldn't afford it. And I was left without a job.
UNIDENTIFIED MALE: Why do you want to stay here?
KANAFANI: For the weather, for the lifestyle. It's a beautiful country if you can afford to live here. It's Beirut, man. We lived in Beirut all of our lives. We love Beirut, it's our city and it's just better at home to be around friends and family and good food, good weather. I'd rather find a job in Beirut and stay here.
Strictly English, yes, that's fine, to proofread and edit, you mean? (INAUDIBLE). Cheers, bye.
That was someone I met in a cafe and apparently I had given her my card and she wants to hire me for a freelance job editing and rewriting some text. So that's nice.
(END VIDEOTAPE)
FOSTER: Well, we'll update you on how our job seekers are doing in the weeks ahead. They might be interested to hear about some of the ways the job market is changing, though. Joining me now is Xenios Thrasyvoulou. He has founder and CEO of peopleperhour.com. That's a company that helps match up freelance workers with opportunities online.
And we've brought you in, didn't we, because actually this market for freelancers is pretty buoyant right now. I guess that's pretty obvious because people don't want to take on full-time staff because that's a big risk, right?
XENIOS THRASYVOULOU, FOUNDER & CEO, PEOPLEPERHOUR.COM: Yes, absolutely, I think there is a number of things happening, one of which is the fact that companies, even the ones that are recovering from the recession, are still reluctant to go down the route of engaging longer-term contracts and hiring full-time.
So basically given that they have more work or if they have more work, and that's what we're seeing, an alternative route, which is working very well, is to hire people on shorter-term contracts. And that's what peopleperhour.com is all about.
FOSTER: And does that mean that your supply is better now? People have been made redundant, haven't they, some very good people have been made redundant. So does that mean that you're managing to get enough freelancers to satisfy that demand?
THRASYVOULOU: Yes. We are indeed. However, it's not just an effect or a byproduct of recession as such, has certainly been accelerated by the recession. But I think what we're seeing is that people who perhaps weren't too happy in their employment have taken that leap using technology, which is now a lot more widespread, like the Internet, to set themselves up in business.
And it's here to stay. They're not going back. It's something that is actually going to stay with us, we feel, after recession. These people are a lot more happier being self-employed than being in employment.
FOSTER: And you're a good barometer, really, aren't you, of what is going on in the economy, because you're spotting early on which industries are recovering faster because they're taking on freelancers before they take on the full-time staff.
So where do you see the growth industries coming up? Because -- which are the first to recover?
THRASYVOULOU: Well, interesting, what we've seen is that IT and Web in general has been a sector that has been quite strong throughout the recession as well and is one of the first to sort of grow faster as well in this early period of recovery.
And I think that's a very good sign that companies had to perhaps reinvent themselves during the recession, realizing that more now than ever they can't afford to not be online, and they were investing in enhancing their Web presence and investing in distributing their products and their services line.
FOSTER: OK. Well, thank you very much for joining us, Xenios Thrasyvoulou, thank you very much. Interesting stuff.
THRASYVOULOU: Thank you.
FOSTER: Now, British Airways is defying the aviation gloom, meanwhile, it has launched a brand new all business class flight to New York's JFK from London City Airport (INAUDIBLE). The airline is hoping to mop up passengers from London's financial district that would otherwise have to trek all the way across the city to Heathrow.
The flight is using the prestigious BA001 flight number, which had previously been used only by Concorde. And passengers are able to use mobiles and surf the net once on board as well.
But with some tickets costing more than $6,000, is it worth it, especially right now? Well, our own Richard Quest is on the flight and we can speak to him right now.
What do reckon of all of this, Richard?
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Well, first of all (INAUDIBLE) how clearly you can hear me, because we are at 35,000 feet in the air. We are (INAUDIBLE) and we've got about another two or three hours' worth of flying to go.
It's a small little Airbus (INAUDIBLE) on board, there is only 32 (INAUDIBLE). Since we have taken off, Max, (INAUDIBLE) it has been almost obscene the number of BlackBerrys, telephones, textings that have been taking place. But (INAUDIBLE).
FOSTER: And, Richard, we're losing you a bit, so the technology isn't all the way there yet, but fair enough. Pictures so far up. Just tell us the interesting sort of customs angle to this, because you're actually going via Ireland, right? And that's going to speed up the process, in theory?
QUEST: (INAUDIBLE) we do lose the signal intermittently (INAUDIBLE). What we have done is we have stopped in Shannon in Ireland (INAUDIBLE) pre- U.S. clearance (INAUDIBLE) customs and we will arrive in the United States at the domestic (INAUDIBLE) Airways says the refueling time that that takes is made up by the less check-in and by the fact that we (INAUDIBLE) horrendous queues at Kennedy (INAUDIBLE).
Is it swings (ph) and roundabouts (ph)? I'll let you know when I get to Kennedy. But at the moment (INAUDIBLE) and I'm ready to arrive.
FOSTER: Richard, thank you so much for joining us from that flight between London and New York. Obviously we lose the line a bit, but it's pretty incredible that you can get a line at all, I guess.
Last week, it still had an air exclusivity, meanwhile, now it seems like anyone can get their hands on an iPhone. Be a few of them on Richard's flight. Two more companies say they're getting a slice of the Apple pie. Details coming up.
(COMMERCIAL BREAK)
FOSTER: Now, from the U.K. to China, operators are lining up to sell the iPhone. In Britain it was exclusive to the phone network O2 until this week. And in China, it hasn't been marketed at all until now. And what is good news for new retailers could be even better news for consumers. CNN's Jim Boulden joins me with more.
It's a popular product, Jim.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: It certainly is, Max. But here in the U.K. you could only get an iPhone through O2. And so there wasn't any competition, but today Vodafone, the world's largest mobile operator, says it will soon next year also be able to sell the iPhone -- only here in the U.K, though, Vodafone does sell the iPhone in 12 other countries.
They're joining Orange, the mobile network of France Telecom, who yesterday announced that by Christmas time, it will too be selling the iPhone here in the U.K. And that means O2 will have competition for Christmas. And that is seen as something from analysts who are saying that there could be a cut in prices between O2, a bit of a price war, and Orange as well.
Now why does this matter to you, who, if you don't live in the U.K.? Well, so far in -- the iPhone in the U.S. and Germany is sold through exclusive network, and so maybe, just maybe, you will see competition come to Germany and the U.S.
Now as Max said, the iPhone will also start to be sold in China. Now China Unicom says by the end of this week it will start to sell the iPhone, starting prices though more than $700.
Now the other operators in China, one is talking about having an Android phone, that's, of course, the Google operating system, another one of the China operators says they're going to -- in talks with RIMM about BlackBerry.
So this very important market is now getting closer to having very high-end top phones -- Max.
FOSTER: It looks nice, I can see that. I haven't got one, but why is it so popular beyond that? Because it must be a great product if people keep buying it. I don't want to advertise it, but why is it so popular?
BOULDEN: Well, I don't have one either, so you and I can both be honest about that, can't we? Look, you know, Apple said earlier this week, they have already sold 2 billion apps, 2 billion applications have been downloaded for the iPhones. People seem to love this idea that they can take these little applets, put them on the phone, and use them for however they want.
And of course, little companies are selling these little apps, and they say there is now 85,000 different ones available. And so that seems to be what is differentiating the iPhone from other phones, is all of these little applications that give people the ability to do very, very specific things.
FOSTER: And what the content suppliers are excited about is that they can actually charge through this as well. So it's a solid business, the applications business, right?
BOULDEN: Yes, and we're seeing media companies now starting to sell little apps as well and trying to recoup costs for things that are free on the Web. But they're trying not to make these things free on phones.
FOSTER: OK. Jim, thank you so much for that.
You're watching QUEST MEANS BUSINESS with me, Max Foster. Still ahead, supporting Chicago's Olympic bid, but should the Obamas be concentrating on matters closer to home?
As the president prepares to join his wife in lobbying the International Olympic Committee, we speak to one of his closest friends and advisers.
(COMMERCIAL BREAK)
FOSTER: Welcome back.
I'm Max Foster in for Richard Quest and this is QUEST MEANS BUSINESS here on CNN.
We're going to bring you a developing story. We're getting reports of quite a severe looking earthquake off the Samoan Islands.
Guillermo is monitoring this for us from the Weather Center.
What can you tell us on this?
GUILLERMO ARDUINO, CNN METEOROLOGIST: As soon as we see that there is a significant earthquake, like a 7.9, in this case, in the Samoan Islands, we'll look to see if there is any tsunami warning issued. And because of the sheer magnitude of it -- and here on the map we show you where the epicenter was. There is, in fact, a tsunami warning issued.
There's no actual report of the tsunami yet, but the Tsunami Warning Center is saying we go ahead, we'll issue it. Of course, the immediate islands next to the epicenter, as you see, Samoa here both -- Samoa and American Samoa -- should follow what authorities are saying because of their proximity to it.
Of course, as soon as we can confirm if it's been canceled or not or if there's any witness account from the area, we'll let you lone -- know. 7.9 is the degree of this severe earthquake that happened not so -- minutes ago -- 7.9, again. It's next to Samoa and American Samoa. We'll let you know the latest -- that's whenever we get it.
FOSTER: OK, Guillermo.
Thank you so much for that. Information coming in all the time on that.
Now, it's been a back and forth session on Wall Street so far. That's nothing to compare with what happened one year ago, as we were reporting earlier. On September the 29th, 2008, the Dow Industrial Average suffered its biggest points loss ever.
Susan Lisovicz joins us now with a look at Tuesday's market action.
Is there a sense of what happened a year ago today?
SUSAN LISOVICZ, CNN CORRESPONDENT: Well, I think that no one in this building where I sit presently will forget what happened a year ago. But it -- it seems like almost an eternity ago. No one would say we're out of the woods yet, but yet it is so different, thankfully, different in that, Max, there is -- the panic is gone, the sense that the sky is falling, you know, when were we going to hit rock bottom.
I think that most people agree that we -- we've gotten through the worst of it. It's just a long slog ahead.
So what we're seeing currently, with less than 90 minutes to go in the session, is stocks are pulling back slightly. Certainly nothing like we saw a year ago. A modest pull back following the best gains in over a month on Monday. Investors reacting today to a disappointing report on consumer confidence. That index showed an unexpected drop this month after a gain in the prior few months. And basically it shows that consumers are still apprehensive about the health of the jobs market and what consumers - - how consumers feel is often a -- a direct link to what they do. And this is of concern in the few months leading up to the holiday season.
The housing market continues to show improvement, though. That was the other major report today. Home prices in America's 20 largest cities rose 1.6 percent in July. That's the third consecutive monthly increase, an encouraging trend. But the S&P/Case-Shiller Home Price Index is still down more than 13 percent from the year ago and prices remain at 2003 levels.
Stock prices also off the levels from a year ago despite that stomach churning drop a year ago. The Dow right now is down a third of a percent. Look at the level -- 9756. It closed a year ago under 10400.
So it just shows how much ground we still have to make up.
The NASDAQ, meanwhile, is off a 1/4 percent.
The broader S&P 500 is flat -- Max.
FOSTER: Susan, thank you so much.
Stay there, because we're going to come back to you in a moment.
But the -- the world or the stock markets have, of course, come a long way since Wall Street's dark day a year ago. But here's what some of the leading economic minds of our time were saying as those events unfolded on this day last September.
(BEGIN VIDEO CLIP)
NIALL FERGUSON: The scary scenario is that this is Great Depression Two, the sequel. We -- we didn't, most of us, see that first movie, but we've certainly read about it. 1929-32 was the biggest financial crisis of modern history. It saw tens of thousands of banks fail in the United States, a dramatic contraction of the money supply and a dramatic increase in unemployment, which went up to 25 percent of the workforce in the United States.
The nightmare scenario is that we could go through that again.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
JOSEPH STIGLITZ: This is a manmade crisis. I jokingly say it's a crisis with a "Made in USA" label on it.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
JAMES WOLFENSOHN: This is a systemic breakdown, a breakdown not just in the U.S. markets, but in the global markets. And the reason for that is that all these financial centers are linked today. And if you have the strongest of them, in the United States, faltering, then everything falters after that.
(END VIDEO CLIP)
FOSTER: Well, just about every economist, analyst, editorial writer and politician has since weighed in with their own thoughts on those worrying times.
Let's get the real story (INAUDIBLE) with Susan Lisovicz.
She joins us again live from New York.
I guess we can analyze this as much as we like, but, actually, we can -- it's going to take a few years before we can fully put this into context, right?
LISOVICZ: Yes, because we're not out of the woods yet. That's certainly a big reason why. And I think that, also, you know, I think that there's still a -- a whole lot of emotion packed in there. And let's face it, when you have a financial crisis, there's a lot of emotion in there.
The stock market tends to move a whole lot faster on the down side than it does on the up side. And we saw things last year, Max, that we just had never seen before. And even though I think intellectually, you can say, well, this is different from the aftermath of the Great Depression because deposits are insured and because there's Social Security and because there are things like Medicare and Medicaid. But there were so many other things that made this spread like wildfire.
And that is how the financial markets are linked and how trading and communications can -- can be transmitted instantly.
So I think that, for me, as a journalist, it was a very scary time, because it was a -- a confluence of anger, fear, ignorance all at once. And I just remember for months, Max, that I -- you know, as journalists, we try to put a lot of energy into our stories. And I remember deliberately downplaying it because I felt that the -- just the very words I was saying had so much -- so much impact, whether it was the stock market dropping 800 points -- or nearly 800 points, or AIG being seized by the government or Lehman Brothers failing -- an institution that had been around since the Civil War.
So I remember just trying to keep my voice steady and calm, because that was -- that was a hot commodity then. It -- people were really, really fearful. And I'm happy to say it seems like that part has passed -- and hopefully for good.
FOSTER: Yes, it certainly feels better.
Susan, thank you so much for that.
And thanks for your coverage over the last year.
Now, staying with the U.S. and America's first lady, Michelle Obama, says she'll take no prisoners as she heads to Denmark to lobby for Chicago's 2016 Olympic bid. Her husband joins her in Copenhagen on Wednesday. It will be the first time a U.S. president has fronted a pitch to the International Olympic Committee in person.
Mr. Obama initially said he would stay at home to concentrate on health care reform and his change of mind has prompted some criticism. The IOC will announce the host city for the 2016 Games on Friday.
Now, senior White House adviser, Valerie Jarrett, who is from Chicago, will also be in Copenhagen.
She told me that President Obama was very keen to show personal support for the bid.
(BEGIN VIDEOTAPE)
VALERIE JARRETT, SENIOR ADVISER TO PRESIDENT OBAMA: I think that he recognizes that hosting the Olympic and Paralympic Games here in the United States is terrific -- terrific for our country. So, yes, I think he would still be very interested, as long as he felt as good about the city as he does about Chicago.
FOSTER: And what will be the overriding message from his -- his pitch when he gets there?
JARRETT: Well, you know, this is a competition. And since we are actively involved in the competition, I'm not going to actually tell you what our strategy is. But I think both the president and the first lady will speak from their familiarity with Chicago. The first lady's pitch is very personal in nature. I think that it will touch the hearts of the IOC members. And having President Obama there, really, a world known president who is very interested in opening up the United States and welcoming people to our shores.
I think he's the perfect person to go, as we enter into this home stretch and, hopefully, earn the confidence of the IOC and they'll choose Chicago.
FOSTER: The commercial side of the Olympics these days is huge, of course. And that is one of the U.S.' big advantages. It's got access to those very big companies, those very big sponsors.
But I just want to give you a quote from the Brazilian president saying: "I believe the Olympic Games are not only a privilege for rich countries."
What's your response to that?
JARRETT: I think that the Olympic movement is about everybody, no matter where you're from, no matter what station in life, no matter what country, no matter what religion, no matter what race, being able to come to a place that is welcoming and where the athletes can compete on a level playing field. And I think that's what Chicago provides.
FOSTER: There's been some tension, I understand, between the U.S. Olympic Committee and the IOC, generally, over some financial matters. I understand the federal government won't offer financial guarantees for the Olympics.
Is that correct?
And do you think you may have scuttled your chance with that?
JARRETT: You know, I'm not aware -- I'm, frankly, not aware of any tension. I think we have a great relationship with the IOC. President Obama had a chance to speak directly with President Rogge about a couple of weeks ago. So I think maybe that's overplayed.
We are confident that on the merits, we're going to be able to compete. And as we go into this home stretch, we're not going to leave any stone unturned. The first lady and I will be traveling tomorrow evening, arriving in Copenhagen on Wednesday. We're going to hit the ground running, meeting with as many members of the IOC as we can. We have Oprah Winfrey, a world icon, going with us. Chicago is home for Oprah, as well, and she loves the city and she's totally behind our bid.
So we think we have a great presentation and we're looking forward to earning the -- the vote and the confidence of the IOC.
FOSTER: The president always a busy man, of course, but particularly busy at the moment. The economy is in a terrible state in the U.S. and around the world. It's probably the worst time to be able to justify the huge cost of an Olympics, isn't it?
JARRETT: Well, actually, we think that the Olympics is -- will be a money maker. We're not -- we're not worried at all. All the Olympic and Paralympic Games that have been hosted in the United States have turned a profit, which inures to the benefit of -- of the Olympics.
And so we're confident that we can manage this process in a way that - - that does not end up costing the taxpayers.
(END VIDEO TAPE)
FOSTER: Valerie Jarrett there at the White House.
Now, he's a burly Scotch. He's ready to come out fighting. No, I'm not talking about the next heavyweight champ. It's the British prime minister. Gordon Brown promises to get tough in his latest keynote speech.
Details ahead.
(COMMERCIAL BREAK)
FOSTER: Worrying developments from the Samoan Islands. Reports of an earthquake and now even a tsunami.
Guillermo is at the Weather Center.
Can you confirm that tsunami warning?
ARDUINO: Yes, first of all, Max, what I want to say is that the tsunami warning is issued because of the severity of the earthquake, in this case, 7.9, though, I must say, that the director of the Pacific Tsunami Warning Center in Hawaii -- that's where it's located -- McCreery, was contacted by CNN. And he said that preliminary data -- and, of course, this will be confirmed as the time passes -- suggests that a three meter tsunami, measured from crest to trough, was generated in American Samoa.
Let's put some geographical context. The epicenter of this 7.9 was not that deep -- 35 kilometers. It was not extremely shallow. The shallow were the worst the damage is, because the wave that was generated would be greater.
At the same time, 35 kilometers deep, it's too close to American Samoa and to Samoa. You see, these compound of islands, two different countries -- American Samoa and Samoa. Of course, these are American governed.
But it is so close to it, a three meter tsunami could be a bad thing. Of course, we will confirm that. But so now we need to know, because you have to understand that a wave travels at a jet speed -- 800 kilometers per hour. So -- and the deeper the ocean is, the more imperceptible it is.
Now, when it hits shallower waters or when it hits the coast, that energy grows in the form of a wave. And that is what may cause the floods and the damage and everything else that you saw in 2004 -- that everybody saw.
So, again, we are evaluating what's going on very close to American Samoa and Samoa. We had a 7.9 earthquake that generated a tsunami and we got preliminary data informing that it's a three meter tsunami. We will see what happens. We will see what happens after that, because, fortunately, beyond these islands, we do not have so much territory. So it gives us -- it gives us some time to see what's going on -- Max.
FOSTER: Guillermo, you referred back to 2004...
ARDUINO: Yes.
FOSTER: ...and that's immediately what a lot of people will be thinking about right now. But we have to bear in mind, I guess, that we've got a lot better at being alerted to these things since then, so we do get the information in earlier...
ARDUINO: Yes.
FOSTER: ...at an earlier stage. So we don't want to read too much into this right now.
ARDUINO: No.
FOSTER: But we need to keep on talking about it, right?
ARDUINO: But we have to make a distinction between the Pacific and the Indian Ocean. The Pacific is very well organized. It's strictly monitored. There are many countries that have formed this association with the United States, Canada, Japan, Korea, Chile, Peru -- many countries -- Australia. And they have many more tsunameters that are devices that are at the bottom of the ocean and they get information where there's a -- an imbalance of pressure or an earthquake.
While in the Indian Ocean, in 2004, we didn't have any tsunameter. Now we have two or three. So the information is more precise in this case. And since the moment that the earthquake happened until the moment they get the information relayed from the tsunameter, it's less than a minute, because it has to go from the bottom of the ocean to the -- the surface of the ocean, where there's a buoy that relates that information to a satellite and down to Hawaii. That process takes one minute and they are on top of things.
So I wouldn't be surprised if in minutes we get more specific information. But what we have gotten so far, it's pretty evident that something is going on. We will see how severe it is -- Max.
FOSTER: Yes, and let's just look over your shoulder there, Guillermo. The epicenter does look frighteningly close to the islands there.
Is that a -- is that an accurate reading of that map you've got there...
ARDUINO: Yes.
FOSTER: ...or a...
ARDUINO: Yes, this is a Google Earth application. And, actually, the -- we will see if we can calculate -- Kevin, our senior producer, is doing it right now, calculating from the epicenter to here. Let's see, 131.77 or 108 miles from the epicenter to Upolu in Samoa and the city of Apia.
So 178 does it say now?
Yes. And to American Samoa, 198. So 200 kilometers. Imagine, if it travels at 800 kilometers per hour, this would be...
(SPEAKING IN SPANISH)
ARDUINO: I'm counting up in Spanish. It would be a quarter of an hour -- 15 minutes. So you need 15 minutes from the epicenter to -- for the wave to arrive to these locales. So now we need to know when the information comes and what happened and we'll let you know.
It's -- it -- we do not want to exaggerate or overestimate what's going on. But at the same time, I wouldn't like to downplay the content of this story, Max, because it may be pretty severe.
FOSTER: OK. We're going to keep on -- across this, Guillermo.
We'll let you get back to your systems there.
ARDUINO: Thank you.
FOSTER: And come back as soon as you hear anything more.
We've also got all of our correspondents and news teams chasing this story for you, as well.
You're watching QUEST MEANS BUSINESS.
We'll be back in just a moment.
(COMMERCIAL BREAK)
FOSTER: We're keeping across that news from Samoa for you.
But in the meantime, we're going to carry on with the business news, because London is coming to a triumphant end to its Fashion Week, despite the economic blues.
CNN's John Defterios caught up with one designer who says the slowdown is certainly not cramping his style.
(BEGIN VIDEOTAPE)
JOHN DEFTERIOS, CNN CORRESPONDENT (voice-over): In a trendy but gritty loft in East London, a small but dedicated team of designers and seamstresses toil away. They put in long days to finish more than 70 pieces for London Fashion Week. The look is bold, the style influenced by ancient Byzantium, all under the brand of this 29-year-old designer, Khalid Al Qasimi.
KHALID AL QASIMI, DESIGNER: You can see the -- where the Byzantium comes in with the designs and, you know, the stars and the colors. But I think as a shade and as a (INAUDIBLE), it's completely current and it's completely contemporary. And a lot of people are saying it's very Michael Jackson.
DEFTERIOS: And very edgy, especially taking into account the designer's background. The Qasimi name may be relatively new to the runways of London, but it is synonymous with Sharjah, the conservative emirate neighboring Dubai. Khalid's father, Sheikh Sultan bin Muhammad Al Qasimi, is the ruler of Sharjah. His cousin, Sheikha Lubna Al Qasimi, is a long serving member of the UAE cabinet.
(on camera): Shiekha Khalid has been living in and around London for the better part of 20 years, first as a primary school student, then studying architecture. Despite some family resistance, the pull of fashion was so strong, he could not ignore it.
(voice-over): So Qasimi is determined to be the design world's bridge between the Middle East and the West, utilizing his culture and his education to do so.
QASIMI: This is a very European, a very London collection. And it has a Qasimi twist in it and it has elements of the Mideast within it. So it's kind of -- kind of merging both worlds together.
DEFTERIOS: Fashion critics at the show can see how Qasimi is evolving into a commercial brand.
STEPHEN MAHONEY, FASHION CRITIC: When I say commercial, it means the people from Abu Dhabi to Delhi to New York to Paris to London can buy into that story.
DEFTERIOS (on camera): And you think he's got there this time around?
MAHONEY: Today is the best step so far.
DEFTERIOS (voice-over): While he builds traction for the brand in Europe, Qasimi has benefited from private sales to Middle East clients, who are naturally drawn to the name and his exclusivity.
John Defterios, CNN, London.
(END VIDEO TAPE)
FOSTER: We're going to bring you the market news from Wall Street after this short break. They don't seem to be able to decide where they're going in the market today.
(COMMERCIAL BREAK)
FOSTER: All right, you're watching CNN.
We need to take you back to the Weather Center.
Guillermo has more on this earthquake and possible tsunami off the Samoan Islands.
ARDUINO: Yes, Max, there has been a tsunami issuance in here because of the severity of the earthquake. This is the map. This is representing the epicenter of the earthquake. We're talking about 7.9. The proximity of Samoa and American Samoa is such, we're talking about like 200 kilometers from the epicenter to here that within 15 minutes -- and according to what the job -- the Tsunami Warning Center was saying -- there was a three meter tsunami generated. So we're talking about 200 kilometers, roughly, from the epicenter to Samoa and the same into American Samoa.
And McCreery, the director of the Pacific Tsunami Warning Center, is confirming that they are evaluating something in the vicinity of a three meter tsunami generated because of the earthquake.
Now, it is very severe, 7.9. I'm going to give you a little bit of geographical context, as well. We have the Kalivati Islands close by, Wallis, Futuna. Of course we have the Cook Islands there close by and the Solomon and Tuvalu Islands, as well.
So there are many areas that are populated and full of tourists. So stay with CNN. We're going to get you the latest as soon as we hear more - - Max.
FOSTER: Thanks, Guillermo.
We're also going to get you the latest market news before we go. U.S. stocks have been drifting along in negative territory for most of this session. An unexpected drop in U.S. consumer confidence has set the downbeat tone. So any thoughts of breaking above that 10000 points mark can be put on hold for now.
Here in Europe, stocks have paused for a breath after notching up some strong gains on Monday. London's FTSE, France's CAC and Germany's DAX all ended the session down a touch, as you can see.
That is QUEST MEANS BUSINESS.
Thank you for watching.
Richard will be back here tomorrow.
Christiane Amanpour is up next, after the headlines from the I Desk.
END
