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QUEST MEANS BUSINESS

OPEC Fails to Come to Agreement; Fed to End QE2

Aired June 8, 2011 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: From collusion to collision, OPEC fails to agree on oil.

The Fed calls an end to QE2 and admits the economy is not out of the woods.

Putting the brakes on Bahrain.

I'm Richard Quest. I mean business.

Good evening.

Tonight OPEC is in disarray and members of the oil cartel cannot agree on what to do with supply. In the last few minutes we have heard that the White House believes oil supply is not meeting world demand.

OPEC quarterly meeting in Vienna broke up in acrimony. The Saudi minister called it one of the worst meetings we've ever had. Ali Al-Naimi also signaled Saudi Arabia would act alone to boost oil production even if other countries disagree.

Now it is not enough to reassure traders. Look at the numbers and oil prices have been rising, heading higher in London and New York. Brent crude is now close to $120 a barrel. NYMEX breaking through a $100 a barrel. All of which isn't surprising when you hear OPEC bosses talking like this.

(DESK BELL CHIMES)

(BEGIN VIDEO CLIP)

ABDALLA SALEM EL-BADRI, SECRETARY GENERAL, OPEC: The uncertainty of the non-OPEC supply is also a question. The uncertainty is the world growth, GDP growth, it is-that was a real-there was a debate about this point because of the inflation, because of the unemployment, because of the sovereign debt, because of the manufacturing declining, so there is a lot of uncertainty, you know, to make the decision very difficult to take.

(END VIDEO CLIP)

QUEST: We'll be talking to John Defterios in just one second, who is at he OPEC meeting in Vienna. Before we do, the factors that are affecting oil prices, which you can see very clearly over here.

The four most important things to be done are quite simply this: Let's look at the oil price and the way in which-or the factors.

The first, of course, has been the BRICS. Price has been rising because the BRICS countries have been growing very sharply. The BRICS are nearly 25 percent of the global economy. And crucially they are the bit that is really rolling ahead.

Now, if we talked about the sluggish growth, then you can also see the other side. The USA and Europe, worries on growth. There is also dollar volatility which is also affecting prices. But the single biggest area and the single biggest concern has to be Mideast unrest; the worries of supply from Libya, Iraq, and Saudi Arabia.

And you really only need to look no further than this graph to show exactly what is happening. First of all, you have the Arab unrest at the beginning of the year. That sends the price back towards $100 a barrel. Then it continues and you see President Mubarak of Egypt resigns. We are now just over $100 a barrel. If that wasn't enough, the price continues even more. And you end up with the 2011 high, attacks on Libyan oil fields. That really sends the numbers into the stratosphere.

So, when nothing really happened after that the market comes down, and then starts to go back up again. This is what happened at today's OPEC meeting. There were countries that were in favor of increasing production, Saudi Arabia, UEA, Kuwait, and Qatar. Arguably those that might have been on the friendly side to Western economies. But those that are against-if I get that out of the way-and you see those that are against, Libya, Algeria, Angola, Ecuador, Venezuela, Iraq and Iran.

John Defterios is in Vienna.

John, you heard that synopsis. The acrimony and the irony of it all. Does it really come down to those countries that like the West and those countries that don't?

JOHN DEFTERIOS, CNN FINANCIAL CORRESPONDENT: That is a very good point, Richard. In fact, the market was looking for some clarity today and OPEC walked away and gave them a very muddled message. And I think the interventions by the International Energy Agency, the White House today, and also the U.S. central bank governor, Mr. Bernanke, saying that in fact this was a challenge and the U.S. economy is starting to show signs of weakness, didn't help the proceedings here, particularly for the Gulf States. They didn't want to be seen bending to the West too much, while they have one of the countries in their region, right at war, that is an oil producer. And that is Libya. Libya was around the table today, so it did complicate matters.

And let's go back to your point as you came to the discussions with me, two distinct camps. You have the hawks, who want to maintain $100 oil. And you have the doves, who are willing to put more oil on the market. Saudi Arabia, the UAE and Kuwait were trying to persuade the rest to come their way. Afterwards the OPEC secretary general tried to put a brave face at the press conference right after the meeting broke. Let's take a listen.

(BEGIN VIDEO CLIP)

ABDALLA SALEM EL-BADRI, SECRETARY GENERAL, OPEC: The substance of about two and a half or three days of a five-year average. We have enough supply in the market. There is no shortage whatsoever, even though the absence of one country, but as of today we are not in crisis.

DEFTERIOS (on camera): Are you a little bit disappointed then, though, that you could not reach a consensus to put a quota that is more realistic with market demand right now, and actual production of OPEC at 26.3 million barrels a day, sir?

EL-BADRI: Well, I'm not really disappointed, because I was minister and I attended many of the meetings that sometimes reach a decision, sometimes we won't reach a decision. And I am sure OPEC, if it is in crisis will take a decision.

(END VIDEO CLIP)

DEFTERIOS: A little bit of spin taking place there, Richard. If there is a crisis we'll come back and meet within three months. The Iranians, I understand from one of the delegates, suggested that they could have the meeting in Iran if necessary.

A big debate about second half demand, and many in that hawk camp don't think that the second half demand is going to be that strong.

QUEST: John, let me interrupt you, though. The White House said, according to Jay Carney, the White House press secretary. "We believe that we are in a situation where supply does not meet demand."

Now that is in direct contradiction to what OPEC says when they believe there is sufficient supply versus demand?

DEFTERIOS: Well, if you look at the OPEC secretary's numbers that they put forward for the meeting today. They would not agree with the White House. They talk about this 55-day running supply which is normal. What is not normal, Richard, is that there is a 15 to 20 percent premium that the secretary general talked to me about right after the meeting broke today. And that is what is priced in here.

QUEST: OK.

DEFTERIOS: The Middle East unrest and that continuing throughout not only 2011, perhaps going into 2012.

QUEST: OK, finally, on this graph here we see the price at $100 and change, 117. What do you believe they are prepared to accept as a price before pain, before OPEC would really move into high gear and do something about it?

DEFTERIOS: OK, let's rewind to the second half of 2008, when it hit $147 a barrel and we had demand destruction in the second half of 2008. That is what Saudi Arabia and the UAE and Kuwait are worried about right now.

And there is also another thing here, another element. They don't want to be seen as too greedy. At this price, Richard, of $100 to $115 a barrel OPEC is going to make better than $1 trillion for the first time on export revenues. The record was in 2008 at $990 billion. So they are very aware of that. But the hawks won out today. It was Iran and Venezuela's day at the end of it.

QUEST: John Defterios is in Vienna for us tonight. Many thanks, John. Get back safe.

Oil stocks fell sharply in early trading in Europe, anticipating a boost in oil production that didn't happen. They recovered the news in Vienna but couldn't stop the falls across the board. The big three all finished down. The FTSE fairing worst of all, off nearly 1 percent. Dragged down by commodities and mining stocks. Rangold (ph) and Tofugasto (ph) among the biggest losers in London.

If you look at the U.S. markets.

(DESK BELL CHIMES)

Just barely changed, but the significance of course, is 12,000, that sort of level is looking dodgy. And if you think about the falls that we've seen, 500 points off the Dow in the last few weeks. Weak 10 sessions or so, when you start realize that the correction that we talked about on this program, you and I, seems to have taken place. Or at least, might still be underway.

There is troubling headwinds and there is a loss of momentum in the United States. The Fed Chairman Ben Bernanke is not a man for turning at the moment. The U.S. economy next.

(COMMERCIAL BREAK)

QUEST: The U.S. economy may be facing significant headwinds and frustration along with reduced momentum. The Fed Chairman Ben Bernanke says notwithstanding that there is no need to change course. And that means no change in the policy of QE, once second round of $600 billion runs out at the end of this month. There will be no sign of any more, and equally, no indication the Fed is about to start pulling back on extraordinary measures.

Bernanke said, we still need "accommodative" monetary policies while keeping an eye on inflation, accommodative. But of course, he has to see that in the scenario of the "slower growth" that has been expected. Household pressures are under pressure from significant "headwinds". That seems to be the phrase. And the jobs market remains, and this perhaps is the big issue for the Fed, the Fed chairman, "far from normal."

(BEGIN VIDEO CLIP)

BEN BERNANKE, CHAIRMAN, U.S. FEDERAL RESERVE: U.S. economic growth, so far this year looks to be somewhat slower than expected. Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and under-employed workers.

(END VIDEO CLIP)

QUEST: Now, you've seen the numbers, disappointment is-

(DESK BELL CHIMES)

Well, look at that! Down now another 30 points. Disappointment is all over the Dow Jones at the moment. Richard Fisher is the president of the Dallas Fed. He told Felicia Taylor he thinks Bernanke is right to stick to course.

(BEGIN VIDEOTAPE)

RICHARD FISHER, PRESIDENT DALLAS FEDERAL RESERVE: I personally would not support a third round of accommodation here. And it is pretty clear we're done accommodating. We'll be finished in June. Then the pace at which we tighten will depend on how the economy proceeds.

FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: So, a recent article by a fellow journalists suggested that, you know, the government, the Congress in this country isn't doing what they should be doing. So the only group left is the Federal Reserve. And it is up to them to make-

FISHER: I love that, but it is like we are wizards and we can solve everything. We're just the central bank and if we do it then they won't. They need to pull their socks up and get their act together, and realize that we are, as President Bush would say, and this is not a central bank term, this is 41. We are in deep doo-doo in this country. So they are going to have to help us shovel it out.

TAYLOR: But one of the things that doesn't seem to be changing very quickly, also, is this psychological shift amongst many Americans out there. That, oh my God, if there is one little thing that seems to show again a negative prospect down the road, there are going to rein it all in, one more time.

FISHER: Yes.

TAYLOR: How do you change that psychological shift?

FISHER: I think for your viewers you are too much of a pessimist about Americans. We are a can-do nation. We get things done. We have been through a very difficult jolt. We are picking up our economy. It is a slow process. It was paralyzed and now it is back to life. And then seeing a glimmer of demand out there in the global economy and we'll sell into it and we'll sell into it very effectively. But it is going to take time. And we're just going to have to be patient.

There are ways to make it worse. And the way to make it worse is to increase the regulatory burden, disincent people even more, increase the tax burden, spend money improperly. And very importantly we can make it much worse by the misconduct of monetary policy.

TAYLOR: So are we then counting on demand from outside of this country, particularly from China and other emerging markets to help stimulate this economy, because God knows-it-

FISHER: That's a great question.

TAYLOR: It is not coming from our consumer. Because there is no wage growth, and we still can't find jobs.

FISHER: That is a very good question.

We don't care where the demand comes from. What we care is that we are able to produce enough to meet that demand. And in producing the goods and services to meet that demand we create more jobs for American people.

TAYLOR: Here we are coming to the end of QE2. And the question on everybody's mind is what will that end bring to the marketplace?

FISHER: You know, I have no way-I made my living in the equity markets for almost three decades. And I have no way of forecasting equity markets. Markets correct, they don't run to the sky. And they also plummet to zero. It is a manic depressive medium. And I'm not manic depressive enough to forecast what is likely to happen in the stock markets.

(END VIDEOTAPE)

QUEST: Diane Swonk is the chief economist at Mesirow Financial. Diane joins me now from her office in Chicago.

Good to see you, as always and thank you for taking time in your busy day.

So, QE2 comes to an end. QE3 is just about written off. And the headwinds are still there. Is there anything that can be done? Or is this just, time will tell?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: You know there are some things that can be done. First of all we know some of the weakness is transitory related to the production disruptions out of Japan. And we had a lot of inclement weather that did show up as slowing consumer spending in "The Beige Book" report by the Federal Reserve today during the second quarter. So those things, you know, it is over 90 degrees here in Chicago. We are getting a record high today. So those things are clearly correcting. Some of that is going to come off in the summer.

But I think the glimmer of hope is really in what can the government do at this stage of the game? QE3 is not on the table. But having actual austerity plan, a deficit reduction plan for the next 10 to 15 years, that the bond market can grab a hold of. That is a reasonable plan that can be phased in. That would create some certainty. And as Richard Fisher pointed out the regulatory situation getting more certainty there; there is a lot of uncertainty about how much regulation is coming out and being determined by the Frank-Dodd Act and that needs to be cleared up as well.

QUEST: But doesn't the governor have a very good point, which is-and I take my share of blame along with every other journalist and maybe you do too. In the sense of the public expected something faster, quicker, they expected something more immediate. They forgot. We didn't tell them that the patient had undergone leukemia, cancer, brain tumor surgery, with a dose of gangrene all thrown in at the same time.

SWONK: Absolutely. And that is a reality that we are dealing with. And you know, it is not just that the public is just being impatient. And I do sympathize with Richard's remarks on that-Richard Fisher's remarks on that, and yours as well. But I think the reality is, you know, Ben Bernanke pointed out the millions of people that have been long-term unemployed. That are running out of their unemployment insurance. We don't have safety nets. And the safety nets that we do have are being cut back. Welfare is being cut back in many states, the length of time that you can be on it. And that is very difficult.

Our economy is structured, our safety nets are structured for rapid recoveries. Now we have not had a rapid recovery in a very long time. And off of such a severe recession that makes it very difficult.

QUEST: Deficit reduction, even a credible deficit reduction package or project is impossible at the moment. I have just come back, only yesterday, from New York, and frankly, the atmosphere is so febrile. There is so much venom in the air as the political season gets underway. Is the best you can hope for is just to tread water?

SWONK: You know, I do think, actually, I'm going to Washington next week on this issue and I was in Washington talking to the gang of five, now they were the gang of six, you know the bi-partisan commission working for Biden. And you do get more hope from them.

Now, they're not dealing with this sort of, you know, game of chicken with the debt ceiling, which I think is absolutely ridiculous. I mean, would you call you mortgage banker and say, oh, by the way, I may or may not pay my mortgage in August, but I'd like a home equity line of credit right now. No, you wouldn't. And clearly markets aren't buying it that they would actually fail to raise the debt ceiling.

But I do think you could make-we are moving on some longer term plans. The question is when can we they come into play? And all this politicking, as you saw it, with regard to the debt ceiling is really muddling the playing field. And certainly the 2012 election cycle is not going to help at all. Everyone is dug in. Moody's threatened to downgrade our rating, you know, in terms of not lifting the debt ceiling, if that were to occur. Actually both political parties saw that as reason to dig in rather than talk to each other, and it was meant to stimulate discussion.

So there is a lot of frustration out there. I have hope over the medium term, but you are absolutely right. I will point out one other sort of measure of hope, though. The high equity markets that we had, we had a record number-not a record, we had the highest of IPOs recently, since 2000. Those IPOs mainly in the social network companies, whether they are justified or not, whether they are a bubble or not-

QUEST: Oh.

SWONK: They tend to generate jobs.

QUEST: Welcome to the-

SWONK: And that is where the jobs come from.

QUEST: Welcome to the bubble world.

SWONK: I know, you are worried about the bubbles. Me, too.

QUEST: The bubbles, the bubbles.

SWONK: I know. I know, some of them, we do worry about that, but they do tend to generate jobs. And frankly, we'll take anything we can get at this point in time. Even if it is another bubble, we'll take it. And you know, there are certainly somewhat precarious. But I do have hope on that point.

QUEST: OK.

SWONK: And I do have hope on the manufacturing sector.

QUEST: We'll talk more about it in the weeks ahead. Lovely to have you on the program. Keep cool in those wonderful 90 degree temperatures.

Diane Swonk joining us from Chicago.

First it was off, then it was back on, now it is just getting embarrassing. Bernie Ecclestone says the Bahrain Grand Prix probably won't happen after all. The question we are considering: How on earth does such a decision get made? And then reversed? And then made? And then reverse? You get the idea. Back in a moment.

(COMMERCIAL BREAK)

QUEST: It has been on and off for months. Now Bernie Ecclestone says the rescheduled Bahrain Grand Prix will likely not be going ahead this year. It all happened just days after the sports governing body said the race was back on again. Now why should there be such indecision? The F1 bosses say a U-turn is likely because the teams aren't on board.

So for those of us who make decisions on a daily basis, and many of you make really important ones, I asked World Sports' Don Riddell how on earth such a fiasco, on-off, decision making not, was ever allowed to happen?

(BEGIN VIDEOTAPE)

DON RIDDELL, CNN SPORTS CORRESPONDENT: It is quite incredible, isn't it? That the rules could have been overlooked or misinterpreted in such a monumental and spectacular way, but that does seem to be what has happened. This vote was taken last Friday. The World Motor Sport Council, by the FAA, it was a unanimous decision, which is fine. But the teams weren't consulted. They were represented indirectly. And as I understand it this completely goes against Article 66 of the FIA sporting code that says once a championship is underway you cannot basically fiddle with the terms of this championship without everybody's agreement. So this means that you don't necessarily have to have all 12 teams in agreement to got to Bahrain, you only need one of them to say I don't want to go, and that means it is not going to happen.

QUEST: It is not even a case of one of them saying, there is a strength of feeling amongst the teams. But whether for commercial, moral, logistic reasons, they don't want to go. Or at least they are not willing to sign on yet.

RIDDELL: Absolutely right. And you say yet, I'm not entirely sure they will. I mean, they are a couple of teams who, in the bigger picture might actually want to go to Bahrain. McLaren (ph), for example, they are part owned by Bahrain. Ferrari have very big business interests (UNINTELLIGIBLE). So, as kind of bigger entities these teams they perhaps would quite like the opportunity to go and race in Bahrain. But, you know, on a sort of more working man's level within the team I don't think there is that much appetite. And there certainly isn't within the other teams either.

As you say, logistical reasons, they don't want the season to be extended all the way to December. The drivers are very concerned about safety. And then of course, you have the moral argument.

QUEST: So, in this environment did the FIA just think that the teams would roll over and play dead?

RIDDELL: Well, I don't honestly know what they were thinking. And perhaps, that is the answer here. That they weren't thinking and they hadn't look at the system and the vote in the way it needs to be handled in order to sort of get from A to B.

QUEST: So tonight, within the Formula One fraternity and family is there a feeling of crisis about what has happened here?

RIDDELL: I'm not entirely sure there is because in my understanding in the way that this vote has been taken it can simply just be ignored.

(LAUGHTER)

So, is there really a crisis? I mean, there are still an awful lot to be resolved. You know, Bahrain isn't officially and formally off at this point, but it does look as though that is going to be the case. We would therefore assume that Delhi, the inaugural India Grand Prix will be put back to October 30th. From the outside, it perhaps does look as though the sport is in crisis, but perhaps from the inside it is not that big a deal.

QUEST: And finally, it seems to me, that with perhaps the exception of Bahrain-which might end up being embarrassed if it is taken off again, this a decision that has just about offended, hurt, insulted, or generally annoyed everybody.

RIDDELL: I think you are right. And Bahrain, I think they will be very disappointed and upset if they are taken off for a second time. They were cacahoot (ph) last Friday when they thought this was back on. They pre-empted the FIA and everybody else with their press releases and their statements. They were absolutely thrilled to bits. Now they're off.

Incidentally, they should be the first race of the 2012 season. That provisional calendar was released last week. I spoke to Max Modine (ph), the former head of the FIA the other day, he said, even that race could be in jeopardy as well.

(END VIDEOTAPE)

QUEST: Don Riddell on the F1 fiasco.

Now, the U.S. presidential politics tops the talk tonight on "PIERS MORGAN TONIGHT". The Republican field for the 2012 election is getting bigger. So they will be considering the various candidates that will be facing Barack Obama. 30 minutes from now, after QUEST MEANS BUSINESS. It is all part of a rather good week, which includes the former chairman and chief exec of GE, Jack Welch and Sarah Ferguson, duchess of York.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And on this network, the news always comes first.

Moammar Gadhafi's fighters are hitting the city of Misrata hard again in the south, west and the east. And they're using tanks, rocket launchers and heavy artillery. Medical sources say at least 13 rebels have been killed. Misrata is now an enclave for the rebels in Western Libya.

Misrata is now an enclave for the rebels in Western Libya.

Residents of Northern Syria are fleeing by the hundreds toward the Turkish border. They're terrified that a brutal assault by Syrian troops is coming soon. Britain and France are pushing for a U.N. Security Council resolution that would condemn Syrian authorities for their violent crackdown on dissidents.

OPEC ministers in Vienna have been debating whether to boost oil production but have not been able to reach an agreement. Saudi Arabia's oil minister called it one of the worst meetings the cartel has ever had. And that's caused oil prices to trade higher in London and New York.

It's now looking very likely that the Bahrain Grand Prix may be canceled again. The Formula 1 boss, Bernie Eccleston, says it's not on due to the civil unrest in Bahrain and opposition from F1 teams. The race was originally scheduled for March and postponed. Formula 1's governing body had announced Friday the race would take place in late October, instead. But the teams said they were not in favor of that.

The so-called Arab spring could pose a threat to growth and that's the main conclusion of the World Bank's new Global Economic Prospects Report, which says revolution and unrest have disrupted economic activity across almost every country in the region.

Now, the bank is predicting that global growth will fall from 3.8 percent last year to 3.2 percent this year before recovering next. They warned even this forecast is overlay optimistic if political uncertainty in oil producing countries causes prices to rise.

We are very fortunate. Tonight, Andrew Burns is manager of the World Bank's Global Prospects Group.

Andrew is with me now from Washington.

And I mean, appropriately enough, you join me on a day when OPEC failed to agree, oil prices start to rise again and anything that could be regarded as good seems to be wiped off the table.

ANDREW BURNS, WORLD BANK GLOBAL PROSPECTS GROUP: Well, I think that's a -- a strong way of looking at it, Richard. I think that we're -- we're looking at a situation that, obviously, remains very uncertain in the Middle East and North Africa and poses risks for the global economy.

But as you mentioned at the outset, really, we're looking at a situation for developing economies that's pretty strong. We've got growth in those economies is going to be about 6.3 percent this year, 6.2 percent in 2012-2013. That's very strong growth and it's something we're seeing throughout...

QUEST: Right.

BURNS: -- the developing world.

QUEST: And you quite rightly and very diplomatically chide me for, you know, from the seat where I'm sitting in the heart of sort of Western Europe or developed economies, we do tend to see that.

But if you accept that, at the moment, China, India, the BRICS, they do -- they cannot be the engines that the United States and Europe are in terms of global growth. We still need those developed economies on board, don't we?

BURNS: Well, we certainly need all engines pumping. But you've got to recognize, when developing countries are growing, as they are, at 6 percent, versus the 2.5, 3 percent growth rates that we expect in high income countries, that that's twice as fast, that it means as a contribution to world growth, developing countries are actually almost half of total growth worldwide.

QUEST: But...

BURNS: So, yes, it would be great if we had the U.S. and Europe running at the -- at their greatest strengths. But the reality is, the world still does particularly well...

QUEST: OK...

BURNS: -- even with those engines in trouble.

QUEST: So how worried are you that if you look at the Middle East unrest and the inability for a coalition to get a resolution in Libya and we've still not got a -- a satisfactory regime or administration in -- in Egypt and Tunisia and so on and so forth, that that instability does transmit further volatility elsewhere.

BURNS: Well, the real concern for us, as concerns the Middle East and North Africa, obviously, there's a very real human dimension in the countries that are directly involved. I think we're -- we're looking at the unfolding of what is likely to be a -- a very real human tragedy in Libya. You mentioned earlier the situation in Syria.

All of these are very worrisome developments.

From an economic perspective, the real impact is through the oil channels. What we've observed so far has been relatively limited. We were able to -- the global economy was able to deal with the removal of Libyan supply from the market.

But what we've analyzed in the report is the risk that if there's a further disruption...

QUEST: OK...

BURNS: -- that causes oil prices to rise a lot more, then we could look at a significant decline in global growth.

QUEST: And a difficult question for you here, but I'll throw it anyway.

How -- if we look at the warning by Moody's and we see -- and the other rating agencies, on the U.S. debt ceiling, whether a technical default ever happens or not, we can speculate.

But how worrying is the game of chicken being played within Washington at the moment, do you think?

BURNS: Well, I -- I think that the situation about high debt in the deve -- the high income world is obviously very worrisome for us. It's something that has been there for a considerable amount of time. It's really, in some sense, an aging related problem. So these are pressures that have been building up for a very long time.

Countries clearly have to come to grips with that. That's something that is occurring increasingly in -- in Europe, and that's a positive sign. It's something that, I think, in -- in the United States, they have lagged a little bit in coming to terms with it. And we'll have to struggle with that over the next few -- few months and few years.

QUEST: So to -- to conclude -- and I'm looking at your report -- are we -- are we doomed -- and I -- and I know I'm being slightly more apocalyptic than -- than you are.

But are we doomed to this bipolar world, with emerging markets at 6, 7 percent and major developed markets at 3 sub par 2 percent for the foreseeable?

BURNS: Well, you know, I -- I -- I think that the prognosis that you present is probably right. I'm not sure I would use the same adjectives. I'm not sure we're doomed to that kind of world. It's actually a pretty positive world. You have to recognize that the vast majority of the world's population is in that other part of the world.

QUEST: All right...

BURNS: They're enjoying very strong growth. They're making strong inroads into global poverty and that's a very positive thing.

Is that a negative for people living in high income countries?

No. That's where the growth is coming. That's where the new markets are. And that's where the exports of the future are going to.

And what we're seeing is a gradual reorientation of world growth in that direction. And, ultimately, there's going to be positive.

High income countries...

QUEST: All right.

BURNS: -- have to get past the -- the effects of the fiscal cri -- the financial crisis. And that's what they're working through now.

QUEST: We'll talk more about it.

Andrew, great to have you on the program.

Thank you so much.

Come back anytime and we can chat on the question of economics.

BURNS: My pleasure, Richard.

QUEST: -- of economics.

Great.

Andrew Burns from the World Bank's Global Prospects Group, joining me.

Applicants for the top job at the IMF, well, I mean I thought I had some air miles. But, my word. Christine Lagarde and her candidate opposition are making the rounds. Ms. Lagarde is the French finance minister and is now in China meeting with Beijing's fines -- some foreign ministers. Countries like Brazil, China and Indiana are looking for more influence in the fund. Christine Lagarde traveled to India and came away without a guarantee that Delhi would support her candidature. Lagarde and officials there did agree on some things.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE, FRENCH FINANCE MINISTER: We also agree on the fact that the nationality, region of origin should not either prejudice or privilege a particular candidate. And they've all indicated to me that the selection, in their view, should be based on the credentials, the expertise and the leadership of the candidate for the job.

(END VIDEO CLIP)

QUEST: Lagarde's main rival is the head of Mexico's central bank, also on the road. Agustin Carstens plans stops in India, China and in Japan.

Frankly, I think they should give the job to whichever one of the candidates mornings to do all that travel, not fall asleep and not get affected by jet lag.

Parts of Eastern Europe are baking in summer-like heat. And out west, it's a difficult story altogether.

Pedram is at the World Weather Center.

And one of our guests this afternoon already saying 90 degrees Fahrenheit in Chicago. I was in New York yesterday, where it was delightfully warm. But I suspect that's only seen through the prism of the tourist.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, but it certainly is going to get warmer across portions of -- of the Midwestern and Eastern United States, as well. But, you know, portions of Europe also are dealing with those summer-like temperatures, as Richard was just telling you.

But take a look at this contrast, because a little circulation there across portions of Northwest Europe. That's a storm system that is going to be as slow to move as one we've seen in quite a long time. So scattered showers across the U.K., across Ireland.

That's going to be the name of the game for at least a few days, parts of the afternoon hours, perhaps some heavier showers in the forecast the next couple of days. But that's the cool temperatures. Even out toward portions of, say, Denmark on into Northern Germany, some storms left in place.

But the temperatures are the story. Thirteen degrees in London, 17 in Paris, a little farther south, you expect it to be warmer. But go out east, Warsaw, 23. Current hour temperatures at Stockholm and Copenhagen sitting in the 20s. Oslo even coming in close to 20 degrees.

And would you believe this, Finland gets up to 30 degrees Celsius this afternoon in areas around, say, Minsk in Belarus, getting up to 29. Helsinki in Finland records a 27 and even Oslo, a high temperature of 23 degrees. And take a look at this. The average temperature this time of year, 19 degrees. Should be in the mid and upper '20s for a few days. It's certainly going to be knocking on record-like temperatures as we approach the work. And even in Kiev, taking a 23 for your average, temperatures as warm as 30.

And take a look at this, cooling back down to about 27 degrees. Thunderstorms on tap for the weekend. But travel plans, again, should be OK.

Some showers around Amsterdam, Dublin not going to cause too much of a problem. Copenhagen, yes, some morning showers and low fog there. The clouds are going to cause some slowdowns a little bit on the runway. And around Vienna, a similar sort of a story.

But the big story as far as the travel delay issues across portions of Argentina -- you can see some of the tape there closing off the engines as the ash pushes its way toward Barloche, just east of where the volcano has been erupting.

And, again, that's the concern. You don't want to get that into the engine.

And I just want to share with you very fascinating data here coming in, showing you the volcanic ash, the sulfur dioxide in the atmosphere. That's in yellow right here. There's a volcano, South America. There's the Atlantic Ocean and eventually Africa. And follow this as it takes you from Monday on into Tuesday. These are storm systems here with some clouds associated. And draw that into the clouds and eventually it takes it across toward portions of Africa. And, again, traveling over 8,000 kilometers. And fortunately, this is a medium type scale of a volcano eruption. If these were on a larger scale, certainly, it could cause a -- global implications as far as temperatures are concerned around the world.

But again, you can see how far this traveled and the concern right now is some delays are certainly going to be a possibility over portions of South America -- Richard.

QUEST: Fascinating. And that picture is quite -- quite extraordinary.

Many thanks, Pedram.

JAVAHERI: Yes.

QUEST: At the World Weather Center.

Some of Hollywood's big stars were out in force this week at the MTV movie aware -- awards. Now, watched and recognized around the world, MTV wasn't always the international brand that we see today.

When we return, we will look at the man who broke the mold of music television.

(COMMERCIAL BREAK)

QUEST: In business, there are those who hold with the status quo and those who break the mold. As the man who transformed MTV from a handful of regional channels into more than 160 channels worldwide, Bill Roedy certainly falls into the latter.

This is his book, "What Makes Business Rock: Building the World's Largest Global Networks."

If you join me in the library, I'll show you what I'm talking about.

In 1981, MTV launched and gained momentum after Michael Jackson's 1983 "Billie Jean," which was one of the first videos by a black artist to be aired.

Fast forward a few years to 1991 and MTV becomes Europe's first non- Soviet channel to be broadcast 24 hours a day in Russia. Powerful stuff that shows music speaks the language of politics.

A couple of years later and it's "Beavis and Butthead," the controversial carts -- cartoon series. But it is extremely funny and sets the tone.

Bill Roedy left MTV earlier this year, but he's given us a few insights into how he broke the mold of music television.

(BEGIN VIDEOTAPE)

BILL ROEDY, FORMER CHAIRMAN & CEO, MTV NETWORKS: The power of music is -- it elicits an emotional response that's probably stronger than anything, particularly the younger people. The vision was MTV in every household in the world. I developed a mantra, which was aggressive, creative, relentless distribution, which meant if there wasn't a cable plan, then we worked very hard to get a direct to home satellite.

I think the secret to our success has been respecting and reflecting local cultures. And we were local before local was cool. We have a call to prayer in Indonesia and Pakistan five times a day. We'll interpret Ramadan in a very youthful way.

It's no longer about one country. You know, it used to be, when I started 23 years ago, you could develop a very successful business with one country, particularly if it was the United States, because it's so big, and one product.

No longer. No longer. You have to be global and you have to have many products, product innovation.

The MTV Networks consistent of about 20 different brands, including, very importantly, Nickelodeon and -- and Comedy. And I think the overriding challenge is to completely reinvent ourselves, themselves now, as I'm not with the company.

You learn from your mistakes. In fact, one of the things that I always wanted to ingrain in the culture is take risk. And, obviously, when you take risks, you're going to make mistakes. And it's OK. It's OK to make mistakes.

Well, it's a balance of what I have always said, which is breaking the rules and then also never accepting no for an answer.

You're always going to encounter a no, almost every day.

So over here, we have some more Churchill stuff.

MTV here, oh, I suppose, would be Winston Churchill never accepting no for an answer. But he gave one of the shortest and most effective speeches ever when he said never, never, never, never quit.

I always thought he could have gone a little stronger. He could have a use a -- a few more nevers, you know, but -- but he pretty much epitomized, you know, what -- what -- you know, what I really believe in.

The music has been such a passion for me. The stories are endless. Singing karaoke with Bono and Sir Bob Geldof, you know, just great innocent fun with celebrities. And then, also, meeting this array of business leaders and heads of state giving a speech, talking about bringing business together to help fight HIV/AIDS.

I happened to be in East Berlin when the wall came down. So it became very sign -- symbolizing for us as breaking down barriers. And also, as our business was new, we were doing something that was very reflective of change.

(END VIDEO TAPE)

QUEST: A man I've interviewed many times, Bill Roedy on breaking the mold.

When you use the Internet, they are a fact of life -- hackers have struck it big this year. We'll explain that with the arrival of the cloud, you need to have an umbrella for the days when it rains.

(COMMERCIAL BREAK)

QUEST: All this week here, we're taking you inside the cloud. It's about bypassing the hard drives of our computers and letting ourselves and our companies store data online. Trusting in your information being safe online isn't always easy. Just ask someone on the Sony PlayStation network.

Well, before we talk about how we can remain safe and whether it is perhaps just inevitable that the cloud is risky, Felicia Taylor looks at keeping the cloud secure.

(BEGIN VIDEOTAPE)

FELICIA TAYLOR, CNN CORRESPONDENT: When it comes to all the information in the cloud, you can kind of think of it like jewels being kept in a safe deposit box. All that information, whether it's documents, blogs, photos, is literally being kept inside.

But then, of course, the question is, is how is it being protected.

PATRICK HARDING, CHIEF TECHNOLOGY OFFICER, PING IDENTITY: Things like encryption. Things like firewalls. Things like penetration testing. They're all well understood security capabilities to ensure data be -- can be, you know, kept safe and kept protected.

TAYLOR: Is the cloud impenetrable?

To tell you the truth, there are no guarantees.

HARDING: From a consumer's standpoint, I think the -- the biggest threat really is phishing.

TAYLOR: Phishing is when attackers send you a message that appears that it's from somebody that you already know, but of course, it really isn't. It's just a trick to try to get you to send information on the Internet.

(voice-over): The world of cloud computing is vast and the rules change from one region of the globe to the next. So location is key.

HARDING: Different countries have different regulations around how data needs to be protected and how data needs to be kept private. In the U.S., those regulations aren't as strict as what you might find in Europe.

TAYLOR: Just like you wouldn't want to accidentally flip a switch and cut out all the lights, cloud service providers have to make sure that there's no service disruption. That's exactly what happened to Amazon in the United States back in late April. Amazon says it was a cascading technical glitch that was caused during an upgrade to its own service.

HARDING: I think the Amazon outage was actually a good thing for cloud computing. It highlighted to people that the cloud isn't magic. You still have to do all the best practices around understanding what happens when failures happen.

TAYLOR: Experts say cloud computing is fundamentally safe, but a custom's best defense is a good offense. So do your homework. Research the cloud provider and don't let yourself fall victim to questionable e- mails that could possibly be phishing attacks. Felicia Taylor, CNN, New York.

(END VIDEO TAPE)

QUEST: Eddy Willems is an online security expert from G Data Software.

Eddy joins me now from Brussels.

Good evening to you.

The...

EDDY WILLEMS, SECURITY EXPERT: Good evening.

QUEST: Let's start with the fundamental -- I'm not trying to be a Luddite or hold back the tide or anything like that. I accept that cloud computing is the way of the future. But surely you must also accept the risks are still there and haven't been ironed out yet.

WILLEMS: Yes, definitely. Let me explain. Definitely, the -- the cloud will make us -- our life much easier, I suppose. But the problem is, of course, the model -- the security itself, you have to trust -- and that's one of the most problematic things -- you have to trust the companies which are in the cloud. And that's possibly one of the most important things...

QUEST: Right.

WILLEMS: -- which you should ask yourself.

QUEST: You see that trust isn't just that somebody will have security or hack or -- or they've got firewalls. That's -- that's fine. I mean that's criminality. But I'm talking about the trust that they'll perform, that the material and source data will be available when you need it, that the network won't go down.

I mean there's a -- you know, as well as crooks and villains, there's lots of shysters, as well, in it.

WILLEMS: Indeed. And that's exactly the same what is happening at this moment, because we are using, already, the cloud, because the cloud is something like an extension of the Internet. And we have, already, a lot of savvy criminals already looking through our data, trying to get our passwords and sell them on the underground market and for a lot of money. And -- and that's already been the case.

So how it will be changing is, of course, still something you have to be...

QUEST: All right...

WILLEMS: -- very careful for.

QUEST: So, if I'm -- I'm an ordinary consumer, I'm not a business, and I've got my music in the cloud, I've got my documents in the cloud, I'm using this cloud, that cloud, multiple clouds, I've got a veritable cumulus nimbus of clouds doing my work.

What's the single most important advice you can give me for using the cloud?

WILLEMS: Well, the most important advice is that you have a very good password. I think passwords are the -- the main thing. If you have a password which is very predictable, you will have a problem, because then you can get it and you can try to be that specific people and that specific guy.

So you have to have a good password. That's the main -- good advice, at least.

QUEST: A good password. I'd tell you my password, but then it would all be over but the shouting.

Andy, many thanks, indeed, for joining us.

One of the most, perhaps, obvious thoughts of getting a good password. But it's when you've got to have numbers and letters and all the other things in it, that's when it gets difficult.

A Profitable Moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

Today, the OPEC family looked more dysfunctional than usual. The Saudi minister said it was one of the worst meetings they'd ever had. OPEC was unable to agree on production boosts and the White House today said that wasn't good enough.

Quite often, OPEC meetings is like watching paint dry. Well, today, the world was looking for direction. Ask early -- any airline chief executive about the rising price of oil and what's that doing to the bottom line. Oil prices are too important for recovery to be bickering. Recovery is too precarious for their shenanigans. At times like these, differences of opinion are to be expected. Indecision is simply not an option.

And that is QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

Whatever you're up to in the hours ahead,

I do hope it's profitable.

"PIERS MORGAN TONIGHT" is after the news headlines.

END