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QUEST MEANS BUSINESS
Showdown in the U.S. Congress; Trading Tension; Default Fallout; Shell Profits Soar; Snail Farming in Nigeria
Aired July 28, 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":
"Very grave, very real risk" -- the warning from America's top bankers on default and downgrade.
Vote now or risk a veto -- John Boehner's plan heads for the House floor.
And safe growing and top rated -- why we can no longer hold these truths to be self-evident.
I'm Richard Quest.
I mean business. I mean business.
Tonight, a showdown in Congress days before the debt ceiling deadline. One plan can't win in the House, the other won't get past the Senate. As high noon approaches, we still don't have a deal to save the U.S. from a possible default and downgrade. Downgrade
The Republican leader in the House, John Boehner, is lobbying hard. Privately, he said he doesn't have enough votes yet.
He spoke a short time ago.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: The bill is not perfect. I've never said it was perfect. Nobody in my caucus believes it's perfect. But what this bill reflects is a sincere, honest effort to end this crisis in a bipartisan way, to send it to the Senate, where it can receive action.
(END VIDEO CLIP)
QUEST: Now, we'll be in Washington in just a moment to find the latest on that.
First, though, here is the letter: "Dear Mr. President and Members of Congress..."
It's a stern letter from the bank manager, that is, the chief execs of America's top financial institutions. And the letter, which you can see here, warns: "The failure to reach a deal could have very grave consequences, would be very grave," it says. "A default or a downgrade would be a tremendous blow to business and investor confidence."
What's interesting about this letter are the signatories -- Goldman Sachs' Lloyd Blankfein, Lloyd Blankfein, JPMorgan's Jamie Dimon and Robert Nichols, the president and chief exec of the Financial Services Forum, a co-signer of the letter.
And Mr. Nichols joins me now from Washington.
I've read many letters, but this one doesn't pull its punches -- "very grave, very fragile, very real risk."
But come on, Mr. Nichols, the president and members of Congress know this.
ROBERT NICHOLS, PRESIDENT AND CEO, FINANCIAL SERVICES FORUM: Well, Richard, we're here at the very final stages. Wrath eleventh hour of this debate. And, obviously, we've been having meetings and communicating these important messages with -- with the Congress and with the White House for the -- the last several weeks and months. But we felt it was critically important here at the eleventh hour to communicate this directly...
NICHOLS: The stakes -- the stakes are very high and we think there would be negative economic and market -- market implications associated with not getting this done.
QUEST: So what's -- what could happen?
I've heard everything from nothing, because it will be a selective default or a minor downgrade, to financial Armageddon.
What do you believe?
NICHOLS: Well, here's -- obviously, no one knows precisely what will happen because we've never been in this situation before, and we certainly don't want to roll the dice to find out, because we think all of the risks are the down -- are to the downside.
But we have -- we can do so -- we can estimate and project some things.
Let's say there's not a default, but let's say there's just a downgrade. It's been projected, Richard, that even if we -- we're downgraded from AAA to AA, that would raise borrowing costs about 100 basis points. And that 100 points -- 100 point rise in basis points would equate to the loss of about .8 percent GDP, which our economists all along the ideological spectrum...
QUEST: All right...
NICHOLS: -- have estimated would equate to the destruction of one million jobs. So even in -- even just in a downgrade, that could have significant...
NICHOLS: -- economic impact on our growth -- on our jobs and growth in a U.S. economy that is already in a state of fragility.
QUEST: Let me put the politicians' point of view. They would say, and I'm sure you've heard the argument, they are fighting the big picture. They are fighting the fundamental direction of the U.S. government for decades to come and that's a fight that has to necessarily go to the edge.
NICHOLS: Well, I'll tell you, that's a great -- a great question. I'm glad you asked it. And that's why our letter put equal weight behind the need to put our nation on a sound and prudent fiscal path going forward. So as important as it is to raise the debt ceiling at this time, our letter was very balanced and made the critical point that we applaud the efforts to get our fiscal position in the...
QUEST: All right...
NICHOLS: -- in the right direction, because obviously our debt to GDP ratio is -- is -- is -- is very scary right now and we need to -- that -- that ratio to go the other way.
And so we put equal weight on the need to get our...
QUEST: All right.
NICHOLS: -- long-term unfunded liabilities in order.
QUEST: Forgive the impudence of this next question, but do you think many of your members who signed this letter have much credibility?
If they hadn't made such a hash of the way they run their banks and driven us into the Great Recession of 2008, so much of the extra spending wouldn't have been necessary and you could -- you know where this argument is going -- we wouldn't be here in the first place.
NICHOLS: Right. Well, obviously, there were a lot of causes for the fiscal crisis that took place. And I will absolutely agree that they were both, there were obviously regulatory failures. There were the trade imbalances. There were, of course, some financial institutions didn't control risk management properly. I certainly would say that they were a whole host of reasons and behaviors and failures that led to the fiscal crisis. So I will stipulate that.
That said, these folks are looked to in terms of for advice and counsel, at least insight...
NICHOLS: -- into the financial markets, despite the fact that the industry, obviously, in some corners in Washington, is not held in the highest regard, still, in terms of...
QUEST: All right...
NICHOLS: -- the potential market and economic impact, these leaders are -- are viewed as -- as folks who can provide a perspective that we thought it was an important voice, it was important to lend their voice at this moment in time.
QUEST: And you don't think "very grave, very fragile and very real risk" is hyperbole?
NICHOLS: We -- we don't. We real -- we really don't. Obviously, there's all this -- there's a lot of -- I just got back from Europe. There's a lot of fragility in Europe right now. And you see what's happening in Greece.
QUEST: All right.
NICHOLS: So the last thing we need is another of the -- of the world's largest economies doing something that could potentially send the global economy backward...
QUEST: All right...
NICHOLS: -- from an economic standpoint. And that -- that's something we don't want to see happen. That's why we sent the letter communicating the urgent need to get it done this week. Again, to attend to both things...
QUEST: All right...
NICHOLS: -- we wanted to put us on a direction of fiscal sustainability and to lift the debt ceiling.
QUEST: Mr. Nichols, much appreciate you coming in.
I feel you and I are going to talk more about this when I'm in Washington on Monday and Tuesday of next week. I'll be coming in your direction.
Many thanks for joining us.
The debate is underway -- or planning to get underway.
Kate Bolduan joins me now from Capitol Hill.
Well, I heard Eric Cantor throwing down the challenge. I heard John Boehner. He hasn't got the votes yet, we believe -- what a stalemate, Kate.
And time is running out.
KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Time is running out. And I think that's such -- it's a huge factor in this whole debate.
But what's happening right now in the House is all eyes are on the House right now, is that John Boehner and other Republican leaders, they're working to get the votes, to secure the support to get this bill, his bill, to pass the House. They're going to continue with a couple hours of debate now and then they'll move for a final vote.
And while they were asked -- they've been asked over -- a lot over the past day if they have the votes, what I'm hearing this morning is that they're cautiously optimistic that they will get there. But Boehner did say in a meeting with his Republicans this morning, according to a Republican in the room, that he said, "We're not there yet, but today will be the day we get this bill passed."
So I still think it might -- it's going to be a close vote and definitely something to watch, especially as Democrats have really put forth an effort to get a unanimous front in -- of opposition against this.
So we'll really have to be watching closely as the votes...
QUEST: All right...
BOLDUAN: -- fall this evening -- Richard.
QUEST: Kate, I'm just interrupting you, because it's academic.
QUEST: It's not going to pass the Senate. It's not going to get signed by the president. And the other plan isn't on the table yet to be voted anywhere.
So what difference does it make, forgive me?
BOLDUAN: Well, no. No -- no apologies needed. I think that's absolutely right. What we're seeing right now is House Republicans having their say, if you will. They want to have this vote because they want to say that they have done something.
But you are absolutely right, the reality is that this -- the top Democrat in the Senate says they will -- they -- it will not have the support. Senate Democrats have already come out with -- with a letter saying that they do not support the bill, it will not be supported.
So you are absolutely right, this is kind of a procedural motion that he's going to be going through. But it's not going to be the end game.
And the question is at what point do both sides blink and decide that it's now time to compromise?
It does not seem, even this close to the deadline, that -- that we've reached that minute or moment yet, because they're going to have to come to the table and compromise on something, be it modifying House Speaker John Boehner's bill or modifying Senator Harry Reid's bill, they're going to have to modify or do something that's going to reach a compromise that they can get enough votes in the House and the Senate...
QUEST: All right...
BOLDUAN: -- to pass.
QUEST: Kate, see you on Monday when I'm in Washington, as we enter the final stages of this.
BOLDUAN: All right.
QUEST: Many thanks.
Kate Bolduan joining us from Washington.
Behind all of this is the question of bonds, default and downgrade.
U.S. bonds have been considered a safe investment pretty much since knee high to a grasshopper. At the moment, up next, we'll look at why thinking like that and what happens to credit swap -- default swaps.
QUEST: Hot and sweaty -- that's Washington. And I'm not just talking about the summer sun and humidity, as we wait for the debate to begin.
Traders in the U.S. are doing business in the shadow of that uncertainty, as the economy are globally. And as they wait for the Congress to resolve the crisis of the debt ceiling.
Join me over in the library and you will see me here.
The stock market, surprisingly enough, the market is eking out very small gains. The NASDAQ is up. The S&P is up. The Dow is up.
And it's a very small bounce back following a sharp drop yesterday. But one would be very foolish if you took -- and foolhardy -- if you took that as a being a fundamental affirmation of what's happening in the process or the markets at the moment.
Look at this. Now, U.S. yields on certain bonds, on 10-Year, are now actually higher than the UK's, just by a couple of basis points. And the last time this happened was about three years ago.
But it does show a premium now being built into U.S. yields and U.S. bonds on the basis of a potential downgrade or default.
U.K. gilts are now perhaps seen as more of a safe haven.
Both, it has to be said, still down at 3 percent, 2.98. So it's still on very low levels.
But the VIX Index of volatility, this has spiked. Just look at this. This volatility we had here during the early part of the month. And then you get this tremendous spike in volatility, which, of course, is what is of grave concern.
Now, as you move on, you can see that taking all the markets, if you look at the credit default swaps, this is the 10-Year CDS. It's now just marginally down, two basis points from yesterday. But it shows -- but the cost of insuring 5-year debt is up.
Now, the CDSes, the credit default swaps, these are a crucial and interesting barometer of what is likely to happen and what the market thinks about them.
Do you remember those CDSes?
This is the insurance policies that people takeout on another person defaulting. A U.S. default could play havoc with it.
Joining us now, David Green, general counsel at the International Swaps & Derivatives Association, the ISDA, the trade association...
DAVID GREEN, INTERNATIONAL SWAPS & DERIVATIVES ASSOCIATION: That's correct.
QUEST: And you have put out an exceptionally good frequently asked questions, FAQ, on, basically, U.S. sovereign debt.
QUEST: The actual CDS market, even though the U.S. debt market is huge, the credit default swap market is not that big, is it?
GREEN: It's very small compared to the debt, a very small D. It's about $4.9 billion net -- net exposure, which is very small.
QUEST: Right. But it's significant.
Tell me why.
GREEN: Well, it's significant as a kind of a barometer as the way markets are seeing the debt. It's not going to be -- it's not moving the market here and it didn't in -- in Greece either, but it's a barometer. So it's been quite busy, as you said -- as you said just now. So the 5-Year, I think, ticked up a little bit today. So there's been a lot of activity in it, so people are buying a bit more protection.
But it's something at about 60 -- 62 or something for the 5-Year. And that compares to something like 1,700 for Greece, 900 for Portugal, 300 for Italy and Spain. So it's still, the market doesn't seem to be expecting a default, the CDS market doesn't.
QUEST: No. But the fact that the single biggest and most important and liquid bond market in the world is getting any degree of volatility must raise eyebrows.
GREEN: Oh, it certainly has been. People have been foc -- have been focusing on it. But the interesting thing is unlike Greece, which spiked up massively...
GREEN: -- the U.S. doesn't seem -- it's ticking up, but it's not going up violently. So it does seem that people don't think there's going to be -- there's going to be a default.
But certainly, until a couple of weeks or when the debt ceiling discussion started, no one was asking us about U.S. CDS. This is the first time we've ever been asked about it. And the market is -- is small.
QUEST: That's fascinating, isn't it?
QUEST: It's the first time that the U.S. CDS market -- first of all, most people take out a U.S. CDS (INAUDIBLE), because, let's face it, the chance of default is so remote.
GREEN: I think people like to be -- they like to be hedged...
GREEN: I think, you know, even if the default is...
QUEST: So now let's talk about default, because your organization is one of those that actually will determine the -- whether or not the CDS kicks in on the basis (INAUDIBLE)...
GREEN: That's correct. Yes.
QUEST: What would you be looking for?
What are you looking for?
GREEN: What we're looking for in this case, we have a committee, a determinations committee, that makes the decision. And what they would be looking for is a failure to make a payment on the bonds...
GREEN: -- when they were due, after any grace period. And in this -- in the case of the U.S. Treasury, there is no grace period in the bonds. But what are -- what are the CDS documents, though, is they build one in.
QUEST: OK. So you're -- a default would call -- would trigger the CDSes and whatever other ramifications.
What about a downgrade?
GREEN: No, a downgrade doesn't trigger CDS.
QUEST: So a downgrade may raise U.S. borrowing costs, but for the purposes of CDS and insurances, you -- you're (INAUDIBLE)...
GREEN: That's right. Nothing happens.
QUEST: Finally, did you ever think, when you came into this business, that you and I or anybody would sit here and be talking about U.S. potential default?
GREEN: No, I didn't. No. It was always regarded it as risk-free. And I suppose it generally still is. But, no I didn't.
QUEST: Many thanks, indeed, for joining us.
GREEN: Thank you.
QUEST: Now, the U.S. debt ceiling impasse is overshadowing some pretty impressive company earnings. Royal Dutch Shell says net profit was up 97 percent -- 97 percent, to $8.6 billion, one of the best quarters the company has ever had. It was higher fuel prices that clearly moved that.
Shell's chief executive officer told me that profits will rise even further when its new ventures in Qatar and Canada move into full production.
PAUL VOSER, CEO, ROYAL DUTCH SHELL: In the quarters to come, when we ramp up these projects, we will actually deliver the cash flow growth which we have promised, which is really an 80 percent higher cash flow in 2012 compared to 2009.
So these projects will really deliver that growth now.
VOSER: And also our production will grow.
QUEST: So where are your priorities, because you set out and the company has -- and your predecessors set out a strategy which, to a large extent, has been worked through -- LNG new fields, specific focus. And that is now all in train.
But you have the job, sir, of taking that strategy to the next level. And I'd like you to try and explain to me what the next level is.
VOSER: The next level, which we are now going into and have been working is actually the next set of projects. One, for example, an industry first, floating LNG in Australia. So we will have great growth in Australia.
We are working on growth in the United States and in -- in Canada. We are working in growth in -- in the Middle East, like in countries like Iraq. We will have growth in China, where we are going for gas exploration, etc.
QUEST: Let's take Deepwater Horizon and the deep water drilling problems of BP. They -- there were many systemic issues that came from that that can be learned industry-wide.
Do you think the industry has put its house in order yet?
VOSER: Yes, I think so. Actually, our industry is a very learning industry. It picks up these things very well. It's shared and there's actually then developing industry solutions or helping the regulators to increase the standards.
QUEST: The chief executive of Shell talking to me earlier.
Europe's major indices, a mixed session. Most banking shares rebounded from Wednesday's losses. But just look at that -- two up, two down. I mean that's truly mixed.
Deutsche up 1.2. Lloyd's up 4 percent -- falling mining and metal shares.
You've got to put this into context. And the context is worries of economic growth, whether it's in the United States or in the UK. And, of course, what's happening with Greece. And those are the factors.
Aslan Mital (ph) down 1.6. Milan's Midtel (ph) gained -- bearing in mind the Mid has suffered quite sharply in the previous session.
In just a moment, Q&A -- there's only one word that matters -- default. Tonight, Quest versus Velshi -- is default ever justifiable, after the break.
ALI VELSHI, CNN ANCHOR: Quest means business and so do i.
We are here together in the CNN Newsroom around the world -- hello, Richard.
QUEST: Good day to you, Ali.
We are talking business travel innovation. Nothing is off limits, truly, today, because we're talking about governments defaulting on loans.
VELSHI: Nothing is off limits, including debt limits, Richard. It's been the talk of Washington for weeks. But it's not just an issue here in the United States, it's here -- it's an issue around the world.
So here is our question -- does it ever make sense for a country to default on its debt -- Richard, I'll let you go first. You've got 60 seconds.
QUEST: Unfortunately, the answer is most definitely yes. Sometimes defaulting on debt, it's the only way out for countries. Over the past 200 years, there have been dozens of defaults. Among the most recent, Russia in 1998, Argentina in 2001. Both had massive defaults. Mexico in '82 narrowly avoided the same defeat in 1994.
Because behind defaults, bad economic policies. Default is evidence of an economy in crisis, stretched to the breaking point, when no one will lend money, bills can't be paid.
It is default that forces a change in policies, default that ultimately allows countries to recover.
So factor it into the United States and ask yourself, is the United States running economic policies which are no longer sustainable?
Is there a plan to get out of the mess?
The U.S. may be a handful of countries that have never defaulted, but such a situation has reached so messy a moment that maybe default is the only answer.
VELSHI: Wow! Wow!
All right, Richard, my turn. I've got a minute now.
It's about responsibility. If you have borrowed money, Richard, you have to pay it back. That is as true for you and me as it is for companies and countries. Now, occasionally, as you have mentioned, there is no other choice but default, just like individuals sometimes have to declare personal bankruptcy. Sometimes countries simply can't pay what they owe.
Let me take one example that you cited. In 2001, Argentina defaulted on $100 billion in debt, oh, if we only had $100 billion to worry about. The immediate pain was severe. Argentina's economy recovered.
VELSHI: It's grown more than 8 percent a year since 2003.
VELSHI: But, Richard, circumstances matter and default, as you say, is an absolute last resort. Now, thanks to the fact that it's part of the Eurozone, Greece isn't out of options yet -- at least not yet. And now, here in the United States, wow, it's just irresponsible that the default you speak of is even a possibility.
The United States can afford to pay its debt. It can increase its borrowing. The fight here is over whether we want to. And with the full faith and credit of the U.S. government on the line, Richard, it is not and should not be an option.
QUEST: Oh. All right.
VELSHI: Well, at least we agree.
QUEST: Now let's hear the voice to actually put us to a real test of mettle for default.
UNIDENTIFIED MALE: Good day, gentlemen.
Let's hop right into it.
We'll see what an easy one, OK?
According to the Treasury Department, which individual country holds the most U.S. debt?
It is, A, China; B, united Kingdom?
UNIDENTIFIED MALE: That is correct. China holds...
QUEST: Oh, we both knew that.
UNIDENTIFIED MALE: -- 7.5 percent...
QUEST: We both knew that.
UNIDENTIFIED MALE: -- of the U.S. debt.
Oh, well, next time you'll ding in quicker.
How about that?
Question number two, which of the central banks of these G20 countries have the highest interest rate?
Is it, A, Brazil; B, Russia, C, Indonesia, or D, Argentina?
QUEST: I'm going with Brazil.
UNIDENTIFIED MALE: That is correct. Brazil is at the top of the list, with between 12.25 and 12.5 percent.
On to question three. According to the Women's Tennis Association, which player owns the record for the most double faults in one match?
Is it, A, Maria Sharapova; B, Venus Williams; C, Anna Kournikova; or, D, Billie Jean King?
VELSHI: Oh, boy -- Richard, you go first.
QUEST: All right. I'm going to go first with C.
UNIDENTIFIED MALE: That is correct.
VELSHI: That's what I was going to say.
UNIDENTIFIED MALE: Kournikova had 31...
VELSHI: I just didn't want to be wrong.
UNIDENTIFIED MALE: -- in one match in 1999 and still won.
QUEST: A pleasure.
VELSHI: You are the luckiest guy I have ever met in life.
QUEST: I've got a -- that's -- what can I say?
What can I say?
All right, that does it for this week.
Remember, we are here each week, Thursday, on QUEST MEANS BUSINESS, 18:00 GMT.
VELSHI: And in the CNN NEWSROOM, 2:00 p.m. Eastern.
Keep the topics coming on our blog, CNN.com/qmb and CNN.com/ali.
Tell us each week what you want the two of us to talk about.
See you next weekend, Richard.
QUEST: Victory is sweet.
I had absolutely no idea what that third answer was. It was pure luck.
Slow and steady wins the race. When it comes to recoveries, of course, slow and steady can be disastrous. The U.S. economy simply cannot get going. And that has widespread ramifications, after the break.
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
Norwegian police have now ended their search for more victims of the Utoya Island massacre. Sixty-eight people were killed there. Eight died the same day during the Oslo bombing. Norwegian police will now interview the confessed killer, Anders Behring Breivik, on Friday.
British lawmakers want to ask News International's chairman, James Murdoch, more questions about the British phone hacking scandal. The private session will reportedly take place on Friday morning in London. Mr. Murdoch and his father, Rupert Murdoch, have already testified. At least two former "News of the World" executives have challenged that testimony from the younger Mr. Murdoch, saying he knew more than he let on.
Meanwhile, the board of British broadcaster, BSkyB, gave James Murdoch their unanimous support for him to stay in his role as chairman.
The woman who says the former IMF chief, Dominique Strauss-Kahn, sexually assaulted her has been speaking to the media. She thanked her supporters and said it's been a very stressful time for her family. Prosecutors are still trying to decide whether to pursue the case. Her lawyer says, in any event, she's prepared to file a civil lawsuit.
And so to the big news of the hour, the day, possibly the week and the year -- U.S. lawmakers are due to vote on a bill that would raise the debt ceiling. Now, the vote will took place a few hours from now. Unfortunately, the majority leader, John Boehner, is still trying to round up enough votes to support the measure. The White House says Democrats in the Senate will vote it down if it does manage to get through the U.S. House.
(BEGIN VIDEO CLIP)
JAY CARNEY, WHITE HOUSE PRESS SECRETARY: The Senate will reject the Boehner bill. But the -- as it's been made clear by not just Democrats, by a number of Republicans who reject the Boehner bill in the Senate.
UNIDENTIFIED MALE: (INAUDIBLE).
CARNEY: They reject it, OK. So -- so there is no question that the bill is a political act that has no life beyond its -- its current existence in the House.
(END VIDEO CLIP)
QUEST: Everything that's taking place has to be seen in the greater picture of the U.S. economy. And we're likely to see further evidence tomorrow that that economy is in slow motion. Friday's growth data is likely to show a second straight disappointing quarter. And that, of course, puts the whole picture into better perspective.
John Defterios is with me, because, John, at the end of the day, both sides claiming that they are fighting for the soul of America.
JOHN DEFTERIOS, HOST, "MARKETPLACE MIDDLE EAST": Yeah, it's very, very interesting right now, Richard. They're talking about 10 year packages and they're making some very long assumptions here. In the trillion dollar package that's being put forward, there's a lot of horse trading going on. And they have to make assumptions on growth that could very well be out of date. Slower growth, of course, means lower tax revenues and a higher deficit, and, of course, higher debt.
We're already seeing a delaying upswing out of this recession. This is what we're talking about here. We have a chart showing the recessions of '81, '82, 2001, 1990 -- 1991 and then the current one we're coming out of 2007, 2009.
Now, look at this. The diamond reflects how long it took to get out of the recession -- two, three. So we're looking at a period of nine months, roughly six months, 15 months. Look how long it takes, if you look at the red line here, how deep the recession is, 18 months to come out of it. And then a fairly flat line coming out.
Look at the gap here. This is adding to the debt as we go along. And it also looks like the pace of growth will continue to be slow as we go forward.
The 1980s and '90s, it's worth looking back, the U.S. averaged more than 3 percent growth, 3.1 percent in the 1980s. In the 1990s, 3.3 percent. As we talked about last night, that's when we actually moved into a budget surplus, at the end of the 1990s. Look at the NADIs (ph) -- average growth of just 1.7 percent. Again, your tax revenues go down when you have such slow growth. And there's a very strong belief right now that the current decade may be closer to the last one, the NADIs (ph). During the first decade of this millennium, that growth, again, was just 1.7 percent.
There's some alarming numbers. And a couple of reasons why this could be a very challenging trop (ph) out of this debt debacle we're in. The time people are out of work is almost 40 weeks. That's more than nine months. That is the worst since recordkeeping began in 1948.
Here's another eye-catching figure. Household debt is at a record $8 trillion, made worse by falling house prices.
What do the ABCs of debt and joblessness mean for America's AAA rating?
Mr. Jim Rogers says we can no longer take that standard, the gold standard rating, for granted.
JIM ROGERS, CHAIRMAN, ROGERS HOLDINGS: In the real world, it has moved. Anybody who knows about economics knows that the U.S. is no longer a AAA credit. Yes, Moody's and Standard & Poor's doesn't seem to know that. But Moody's and Standard & Poor's said that Fannie Mae was a AAA credit until they went bankrupt, the day it went bankrupt. Don't pay any attention to them. They've very rarely been right about anything.
(END VIDEO CLIP)
DEFTERIOS: Quite a strong statement by Jim Rogers. Interesting.
The two packages put forward, it's worth noting. One was short by $500 billion, the other one by $850 billion. And it points to that slower growth.
QUEST: All these figures, John, show what's happening in the U.S. economy. Let's put this into the perspective of what the American people think about it.
The American people are feeling the recession. There are thousands -- if not millions -- of examples. This week, we are truly giving you the vox populi, the voice of the American people.
Joanna Uhl is one of them, a schoolteacher from Arizona, working for the same district for 35 years, forced into retirement and now looking for full-time work.
Joanna joins us now via Skype from Phoenix.
First things first, Joanna.
When you see -- and I'm not looking for a political judgment here, but when you see what's happening in Washington, as an ordinary American, what do you feel?
JOANNA UHL, TEACHER: I feel that the decisions are -- there's a lot of bickering about which way it should go, which -- which party should represent the -- the ideal answer to the economy. And -- but I see it -- I see it in -- locally, also, where people are worse. And, for instance, myself.
QUEST: Right. Let's -- let's just...
UHL: I am...
QUEST: Let's talk about -- you -- you are out of work, a lifelong work in -- in education and a victim of recession and the failure, perhaps, of the American economy to pick up steam.
Is that a fair judgment?
UHL: Yes, I would say. I -- I thought jobs were readily available. And so I had to go out and -- and actually look for one after 35 years of employment.
QUEST: Joanna, if -- if this crisis isn't resolved and the U.S. either defaults or gets a downgrade, does that affect you, do you think, and your friends and your family and -- and the way you view what's happening in your country, do you think?
UHL: Yes. I -- I always dreamed of retirement and I would have enough money. But I -- I have the -- three kids going to college. And I - - I can't live on the retirement any longer so.
QUEST: All right. So a final question, because I think -- I just need an idea here.
Are you unique in the sense of others in Arizona?
Are there other people that you know of, a growing number or a dwindling number, that are in a similar situation?
UHL: Yes. I -- I know many people who -- who are looking for jobs, who have been let go. Jobs are not easy to come by.
QUEST: Joanna, many thanks, indeed, for joining us from Arizona.
And tomorrow night on this program, more views from the heartland of America about what people think of the crisis so far.
We'll have a world weather report.
That's after the break.
QUEST: Now, one of the largest cities in the world, Seoul in South Korea, has been hit with an historic amount of rainfall.
Pedram is at the World Weather Center this evening -- good evening.
PEDRAM JAVAHERI, CNN METEOROLOGIST: Good evening, Richard.
Yes, the rainfall there has been on the order of several hundred millimeters now in just a few hours and then reaching in excess of 500 millimeters in a matter of two days.
I just want to show you what it's looked like in Seoul as far as the numbers. In a 48 hours accumulation, how about that, over a half a meter of rainfall in just two days.
Now, for months of -- the months of June all the way through July, the average rainfall about 528 millimeters. So that's a two month total in a two day periods. And you can see how they've done for the month of June through July, 2011. Ninety percent of the annual rainfall has happened and fallen in the last couple of months across portions of South Korea.
And, again, that two day rainfall total, the kind of damage it causes, freeway damage. You get all this water that accumulates on the road. The roads have closed. Businesses have shut down.
And that's now, the rainfall they've seen. And, Richard, to put it in perspective, you talk about London, for example, the rainfall they've seen is comparable to what London sees in an entire year in two days. Just since Wednesday on into Thursday, that's how much rainfall they have picked up. London gets about 600 millimeters. They have picked up a little over 525 millimeters.
And right now, the forecast looks to improve. We have dry conditions behind this feature. The moisture begins to lift and we do have a front that really produced all this rainfall. But it's actually shifted a little to the north and it's going to remain that way for at least the next day or so.
And we think some time around Saturday afternoon into Sunday, more thunderstorms possible, especially for Sunday. But definitely nothing like what they have dealt with across portions of South Korea and in Seoul the last few days.
And the forecast, again, you can see a drying trend there, with thunderstorms returning come Sunday afternoon -- Richard.
QUEST: Many thanks, Pedram, at the World Weather Center, for that.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
We will continue, of course, to monitor very closely what happens with the debt debate, default potential and downgrade probability or possibility.
Whatever you're up to in the hours ahead, I do hope it's profitable.
"MARKETPLACE AFRICA" is next.
ROBYN CURNOW, HOST: I'm Robyn Curnow here by Street Side Market in inner city Johannesburg.
Now, what is not being hawked on these pavements are snails, a delicacy, of course, in many cuisines across the world.
But in Nigeria, as more and more people have acquired the taste snail farming has grown in popularity, as Christian Purefoy now reports.
CHRISTIAN PUREFOY, CNN CORRESPONDENT (voice-over): A snail's hard shell is not enough to protect them from Nigerians. Meet Ismail Abdulazzez, a snail farmer. And in Nigeria, his business is anything but slow, because in the local cuisine, these animals are a delicacy and one that he's now starting to export abroad.
(on camera): How big can these guys grow?
ISMAIL ABDULAZZEZ, SNAIL FARMER: They can -- these guys, three years, two years.
PUREFOY: To that?
PUREFOY: Two years?
PUREFOY: And -- and that market is -- it's in Nigeria, obviously.
ABDULAZZEZ: Both Bucali (ph) and Estenado (ph).
PUREFOY: So who -- who, externally, who are you exporting these -- these snails to?
ABDULAZZEZ: (INAUDIBLE), the U.K., Norway, some other European contracts.
PUREFOY (voice-over): Abdulazzez has just sold his latest stock to local restaurants and hotels. But some small scale farming, he believes, is a perfect startup business to help lift young entrepreneurs out of poverty. So far, he says he's taught over 1,000 people and says that they could earn over $15,000 each over two years.
ABDULAZZEZ: To get something like this, you spent about 25 lira. Assuming you are working with about 10,000 snails at a time, are you getting...
ABDULAZZEZ: -- so you...
PUREFOY: So 25 now. And so how much will that sell for?
ABDULAZZEZ: This can sell for $250.
PUREFOY: For the (INAUDIBLE)?
ABDULAZZEZ: Depending on the sizes.
PUREFOY: So that's like...
PUREFOY: -- a 10 times profit?
PUREFOY (voice-over): Fried with tomato and chili, they're cooked until crunchy. And the cost for this dish can be up to $30.
UNIDENTIFIED MALE: Spicy, it's the best meal. Corn chips taste very good. (INAUDIBLE).
PUREFOY (on camera): Yes. Well, you see, for you, it's OK, because you eat (INAUDIBLE) snails all day. But I have never tasted -- I've never tasted snails before. So let -- let's -- OK, and let's give it a go. Yes. (INAUDIBLE). And the sauce is delicious.
(voice-over): They may be an acquired taste. But for Ismail, he can't breed them fast enough.
Christian Purefoy, CNN, Lagos, Nigeria.
(END VIDEO TAPE)
CURNOW: And coming up next, cultivating growth in areas of conflict - - how one organization is trying to strengthen economies in some of Africa's most vulnerable places.
(BEGIN VIDEO CLIP)
THIERRY TANOH, INTERNATIONAL FINANCE CORPORATION: On the one hand, it's a difficult situation because you -- you're starting from scratch. On the other hand, it's a terrific opportunities, because, first, you have an opportunity not to make the mistakes that all the other countries have done in building their administrations, in setting up their private sectors, in using their natural resources.
So I think tremendous opportunity.
(END VIDEO CLIP)
CURNOW: Helping to develop emerging market economies is difficult at the best of time, even more so in conflict affected areas. But it's a challenge that the International Finance Corporation, which is part of the World Bank, is taking on.
Our guest on FaceTime this week is Thierry Tanoh.
He's a vice president at the IFC. And we chatted about how to stimulate economies, particularly that of his native Ivory Coast.
CURNOW: You seem very passionate about going into conflict areas quite soon after the end of violence or some sort of political instability and trying to quickly prop up the private sector, in particular.
How important is that in sort of post-conflict environments?
THIERRY TANOH, INTERNATIONAL FINANCE CORPORATION: Well, I -- I think, you know, when you look at countries in conflict and they're -- they are moving in a post-conflict area, that the probability for them to go back into conflict, if no substantial economy and social progress have made, is quite high.
CURNOW: So there's a cycle of violence, essentially.
TANOH: Exactly. Well, you have a lot of people that have not been doing things, who have been at war for years and years. And you need to bring back these people to society, to a certain extent. And...
CURNOW: And jobs do that.
TANOH: Exactly. Job growth, economic growth. And, therefore, it is quite important to move very fast at the end of the conflict to support carrying newly elected government.
You know, we'll have to understand that sometimes, if you look at the amount of money which is spent in order to bring a country from conflict into Democratic area with the election, a lot of money is being spent. And you can start to see, you know, donors fell sometimes that they've played a role with the election and then they can move on.
On the contrary, this is where you need to continue to support, because the -- the first two years post-conflict are, I think, the most critical ones.
So we at IFC would make the -- the decision to move extremely fast after -- after the conflict.
CURNOW: How exactly?
Give me an example of how you go in to -- to a case like Abidjan and start working.
TANOH: Oh, the situation is -- is -- is a difficult one. And you can assume that the economy has been in a difficult state for the past almost 10 years. I think the schooling system, the social system has been highly affected. Then post-elections, we have had almost five months of where the economy was totally stopped.
The banking sector has been shut down. Then it has been nationalized with people, you know, forcing themself into banks.
And so, you know, it's a little bit of a chaotic situation. And security is also affecting operations.
So it's one of the toughest cases. We -- we -- we are experiencing (INAUDIBLE) in my country, but we -- the challenge for us is really to really quickly move in and try to support the private sector, which, again, is going forward.
CURNOW: How do you do that?
TANOH: Well, the first thing we're going to do, for example, when security will -- would allow us, I think, to move into the country, is really to work with the banking sector first. I think they will need first priority to recapitalize and see if there's a way for us to provide resources, IFC, for example, but also other (INAUDIBLE) financial institutions working along with us. I think working together is going to be critical, because I think the support would have to be massive.
CURNOW: Ivory Coast is one example of -- of a model that you try and fix. Southern Sudan is an entirely different kettle of fish, isn't it?
TANOH: On the one hand, it's a difficult situation, because you're -- you're starting from scratch. On the other hand, it's a terrific opportunity, because first, you have an opportunity not to make the mistakes that all the other countries have done in building their administrations, in setting up their private sectors, in using their natural resources.
So I think tremendous opportunity. South Sudan, you know, there's almost no capacity at all, whether it's in the private sector or it's in the public sector. So I think in South Sudan, you probably would look at an approach that would consist, first, in really setting up capacity at the governing level. And I think, you know, an institution like IBRD, the International Bank for Reconstruction and Development, our sister, and the World Bank Group, would have a key role to play there. But I'm sure, also, other countries and multilateral will support this.
And there's also capacity to be video at the private sector. You know, bringing the informal sector into the formal sector; getting people to understand accounting -- accounting rules and -- and really trying to get them to learn how to present a business, a business case; to get a bankable project. I mean the -- the list is quite long. I'm quite excited.
CURNOW: You look quite excited, yes.
TANOH: Well, because I think it's...
CURNOW: I can see you're (INAUDIBLE)...
TANOH: -- it's a tremendous opportunity. As I said, it's a huge challenge. But in terms of an opportunity, I mean people that are going to work on this country, it's going to be quite interesting.
If you do a government that is committed, for example, also, to good governance, then I think, you know, the sky is the limit for a country like -- like Sudan.
So, yes, I am -- I'm quite excited.
(END VIDEO TAPE)
CURNOW: Thierry Tanoh there of the International Finance Corporation.
Let us know what you thought of the interview and your viewpoints on that issue on our Facebook page.
Now, let's check what's trending this week.
CURNOW (voice-over): Britain has thrown its support behind the proposed Africa Free Trade Area, which would integrate three existing trade blocs and encompass 26 countries. British Prime Minister David Cameron spoke about its potential on a trade visit to Pretoria, South Africa, earlier this week.
(BEGIN VIDEO CLIP)
DAVID CAMERON, BRITAIN PRIME MINISTER: An African free trade area could increase GDP across Africa by as much as $62 billion U.S. a year. That is $20 billion more than the world gives to Sub-Saharan Africa in aid. We had a good discussion today about how we can build on the Tripartite Agreement. And I've said that Britain will support this, investing in projects to build the key trade corridors and simplify and speed up border crossings.
(END VIDEO CLIP)
CURNOW: In other trending news, South Africa is considering the formation of a state-owned pharmaceutical company. The ruling African National Congress says it would help provide drugs for HIV-AIDS patients in South Africa, which is one over the heaviest case loads in the world.
South Africa currently consumes 25 percent of the world's anti- retroviral drugs.
(END VIDEO TAPE)
CURNOW: If you want to watch any of our stories or interviews again, please do go to our Web site, which is CNN.com/marketplaceafrica. Links to our Twitter and Facebook pages are also there.
But for me, that's all for this week.