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QUEST MEANS BUSINESS
Stock Market Up; Interview With Maxine Waters
Aired August 11, 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, CNN ANCHOR, QUEST MEANS BUSINESS: Hold onto your hats. The market route has turned into a rally.
No rest for the raters. Tonight we speak to the congresswoman who wants S&P called to account.
And there is a new kind of striker in Spanish football. Why a pay dispute may delay the new season.
I'm Richard Quest and I mean business.
Tonight investors are charging back into the market.
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The Dow is recovering much of its lost ground, making its second big comeback of the week. Look at the numbers as they stand. The Dow is now up 3.26 percent. Investors are clutching at the positives. There was some very upbeat news from Cisco. There was a drop in weekly jobless claims. And although great concerns about Europe remain the situation is volatile. But even so you have got the Dow up 3.25 percent, the S&P up 3.5 percent, and in Europe we have 3 percent on the FTSE and the Paris CAC currant up 2 percent.
One bit of late news, just to bring you what is happening, there are supposedly rumors of talks taking place in Europe, by securities regulators on whether there should be ban on short-selling of bank stocks. That was a rumor in the Paris market. And that was one of the reasons why Paris did go up so sharply, because the bank stocks regained many of their losses. Well, apparently that call is taking place.
Go to the U.K. market and the U.K. Finance Minister George Osborne said the turmoil vindicates his austerity program. He described the U.K. as a safe haven in the sovereign debt storm. The Bank of England has lowered its growth forecast for the U.K., but the chancellor is undaunted, saying, Britain is ahead of the curve, while other countries remain politically paralyzed.
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GEORGE OSBORNE, FINANCE MINISTER, BRITAIN: Those who spent the whole of the last year telling us to follow the American example, with yet more fiscal stimulus, need to answer this simple question: Why has the U.S. economy grown more slowly than the U.K. economy so far this year? More spending now, paid for by more government borrowing and higher debt, would lead directly to rising interest rates and falling international confidence that would kill off the recovery and not support it.
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QUEST: The point there from George Osborne. I discussed the question of stimulus and tax rises and austerity with Christina Romer. Now, she is the former chairwoman of President Obama's advisory council. I also-I put it to her a little while about George Osborne's point in the United States, but we needed to really start with the bigger picture. Did Ms. Romer think we were heading on-the United States was heading for a second recession?
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CHRISTINA ROMER, FMR. CHAIR, U.S. COUNCIL OF ECONOMIC ADVISERS: I think the most likely thing at this point is that we continue to grow slowly. I think, you know, one of the things, though, that happens, the slower growth gets, the bigger the chance that it could slip into negative territory. Right now I don't see that happening. I think one of the things I find very important is to explain to people, there is not that much difference between anemic growth and falling output. Both are pretty wretched and both are problems that we need to be solving.
QUEST: Right, now, if we accept that monetary policy just about tapped out. QE2, yeah, QE3, wouldn't make that much difference. So in that sense where is the momentum going to come from to prime the pump?
ROMER: Well, I actually, I think, I disagree. I don't think monetary policy is tapped out. I think the actions that the Federal Reserve took on Tuesday were actually very important. I think to commit to keeping the federal funds rate low for another two years is a pretty bold move. And it is something that can have an appreciable impact on longer-term interest rates, probably more of an impact than another, you know, QE3. So, I think that was important. And I think the Fed will continue to be thinking about other actions that they could be taking. But in terms of where do we get other sources of growth? I think, you know, we are unfortunately still in the world where consumers and firms are hesitant to be spending.
ROMER: And quite frankly, I think the government needs to be taking some more action. So here in the United States, were I still advising the president, I'd be saying, come out with something bold. Come out with a big tax cut for firms that are willing to actually hire workers. And the way that you make that fiscally responsible is to say, you know that super committee that you've just created? Well, let's have them do $3 trillion of deficit reduction over the next decade, not one or $1, or $1.5.
ROMER: So pair short-term support for the economy with more long-term deficit reduction.
QUEST: And when it comes to the core question of raising taxes, obviously, no one is going to raise taxes in the short-term, although, some in Europe have done so, to cut the deficit. Do you believe and that the Republicans who have basically closed their minds off to raising taxes, are principled or dangerous?
ROMER: I think they are dangerous. I think more fundamentally they are wrong. I think if you look at certainly the U.S. fiscal situation, you know, we have such a large, long-run deficit problem that we're in fact going to need to do everything. We're going to need to trim our entitlement programs. We are going to absolutely to cut discretionary spending. But we are going to have to raise revenues. And there is just, I think, no way to balance the books if you don't use all of the tools that you have.
The other thing is the evidence is really not there that tax increases have big incentive effects, especially if you do them in a smart way. If you cut tax loopholes, you cut deductions, you can raise a significant amount of revenue and actually use some of it to lower marginal tax rates. So you can improve incentives at the same time that you raise revenues.
QUEST: George Osborne, the British chancellor, who you will be familiar with. George Osborne said today in the House of Commons, he basically said that those how had advised the U.K. to do more stimulus, like the Americans-and he mentioned the Americans by name-must now regretting that advice, because the U.K. is growing faster, than the U.S. What would you say to those people who say, now is the time to start your austerity, because all you are doing Ms. Romer, is putting off the inevitable?
ROMER: I'd say you are wrong and all the economic evidence confirms that you are wrong. You know, the empirical studies that are done the best, absolutely conclude that fiscal austerity is very hard for growth and raises unemployment in the short run. And that that is the lesson from history. That is the lesson from country after country. And I'd actually say if you look at the U.K. what you have seen is, as it moved to fiscal austerity, it actually had a significant negative impact on growth, and that it is part of why the U.K. economy is not doing as well as it was, or as it could be.
QUEST: Would you urge those countries, like the U.K., to now adopt their own part, and their own form of stimulus?
ROMER: What I would urge is very much this two prong strategy that I'm talking about. You know, I believe fiscal stimulus absolutely works. I think it is helpful to the economy in the short run. But even I wouldn't say, just go on a spending spree, or go on a tax cutting spree. It has got to be paired with sensible long-term deficit reduction. Things like, you know, raising your retirement age, or tying in-or you know, raising in our country the eligibility age for Medicare. There are very sensible things that you can do that deal with your long-run budget problem, but that don't have an immediate contractionary effect on the economy.
That is a much better way to go, than to immediately cut spending, or immediately raise taxes, in an economy like the U.K., like the United States, like most of the countries in Europe that are still having a terrible growth problem. That, you know, terrible growth, when you add onto that fiscal austerity, turns into negative growth.
QUEST: Standard interview there with Christine Romer, who was President Obama's chief of Economic Council.
Next week, Nicolas Sarkozy and Angela Merkel will be talking about how to get the members of the EU currency block working together and more effectively. French bank shares gained little ground following Wednesday's route. All the concern was centered on rumors that France would lose its AAA rating, denied by the agencies. What happened on Wednesday makes the case for action all the more pressing.
Joining me now from CNN Paris is Phillippe Waechter, the chief economist at Nexus (ph) Asset Management. He joins me now.
Philippe, well, what a roller coaster of a ride it is quite extraordinary. Do you think that France is out of the woods now? Is now a way from the bond markets firing gun?
Excuse me, I can't hear you correctly.
QUEST: Hello, Phillippe, can you hear me?
We're having some problems there with Phillippe, managing hear me.
Well, yes, now I can hear correctly.
QUEST: You can hear me now, sir?
No. We are definitely having some problems there, which we will try to sort out in the short time, in a few moments.
Standard & Poor's is facing heavy criticism for its downgrade of U.S. debt. Next, we'll talk to a lawmaker calling for both Congress and the SEC to look into what has been happening with S&P.
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QUEST: Markets in the United States are storming back from Wednesday's losses; the situation, of course, volatile. Alison is at the New York Stock Exchange.
Alison Kosik, what-you're killing me. What's going on here?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: This is a good thing. You know what, this rally is sticking and we are more than half way finished with the trading day. You know this is a big rebound from the market, you know, being oversold at this point. So, you have got traders and investors scooping up bargains. And you have also got a positive economic number coming out with those jobless claim numbers. Showing that they fell below that crucial 400,000 level. We got some strong corporate earnings from Cisco Systems. That is lifting the tech sector, lifting the tech heavy Nasdaq more than 4 percent right now. But I'll tell you what, Richard, sentiment here on Wall Street has clearly changed. I'm sensing less nervousness.
KOSIK: Especially now that concerns about France are easing, Richard.
QUEST: OK, Alison, you are not going to try and tell me, surely, that a minor piece of news on jobs justifies a 3 percent rise in the Dow, or a 4 percent rise in the Nasdaq. This is just-it is market madness in the summer. Summer market madness.
KOSIK: You know what, I think what you are saying is maybe that was the catalyst, or even the bigger catalyst was France. You know, the officials came out from French banks, at these press conferences, disputing the rumor about the country being the next shoe to drop, loosing its AAA rating. This giving a lot of relief to the markets.
You know what, also, you are seeing investors testing those levels. You know, they are trying to really find a new floor for the market; and even going higher, with stocks going higher. They are doing this. They are trying to figure out, you know, what? What is the fair value for these stocks, in this slowing economy? So that is also what you are seeing play out here on Wall Street, Richard.
QUEST: OK, it is too early-I mean, it may be late for this session, but-oh, now we are up 400 points. If I am not mistaken we must be nearly at the tops of the session?
KOSIK: We are. We actually are at the session highs right now, yes.
QUEST: All right. Alison Kosik, joining me from New York. Alison, don't do any damage. There is still an hour and 45-
KOSIK: No damage.
QUEST: No damage. Don't touch anything.
KOSIK: A few hours to go.
QUEST: Absolutely, two hours. Never mind what can happen in two hours, what can happen in two minutes?
Standard & Poor's downgrade of U.S. debt certainly had a big impact on the global market. It has been widely criticized as an unwarranted act, from an unqualified body.
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LAWRENCE SUMMERS, FMR. U.S. TREASURY SECRETARY: Look, S&P's track record has been terrible. And as we have seen this weekend, its arithmetic is worse. So there is nothing good to say about what they have done.
STEVE FORBES, CHAIRMAN, FORBES MEDIA: I think in a narrow sense it is a political move. And I think it is really-and it is going to sound strange for me to say it-an outrageous move. The government can pay its debts. It is legally obligated to do so. It has the wherewithal to do it. In a larger sense, about the economy, I think the U.S. economy isn't in a perilous state. This recovery has been the worst from a severe recession since the Great Depression. But I'm surprised S&P would play politics.
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QUEST: Now, Representative Maxine Waters is calling for a House hearing and an SEC investigation into the implications of the S&P downgrade. She wants to know if the ratings agency leaked its intentions, before issuing the downgrade. And Congresswoman Waters joins me now, live, from CNN Los Angeles.
As I read what you say in your letter to the SEC, Congresswoman. You say, you believe the reports raise certain questions into whether violations took place. What fundamentally do you think might have gone wrong here?
REP. MAXINE WATERS, (D) CALIFORNIA: Well, first of all, let me just say that, you know, the S&P and other rating agencies, that were responsible for the sub-prime meltdown are suspect. We cannot expect that their analysis is any better now than it was when they rated all those bad mortgages as AAA. So we have to look very closely at what they do. And then we find that they have made a couple of trillion-dollar mistake in their calculations. Besides that, you know, they are owned by McGraw-Hill. The president of McGraw-Hill sits on the Business Roundtable.
WATERS: McGraw-Hill lobbies the Congress of the United States. There is somewhat of an implied conflict of interest there. And the other thing is, I understand there were meetings with the big banks that may have been a tip off-
QUEST: Right, but-
WATERS: -about what they were going to do before they did it, and that is illegal.
QUEST: But, but, John McCain, Senator McCain said, after the downgrade, on the Sunday shows, he said, does anyone believe that S&P is actually wrong in its fundamental assessment of the strength of the U.S. economy? Never mind the downgrade per se, but what it said it said about political paralysis, and what it said about long-term deficit, surely, you'd go a long with that?
WATERS: Well, the fact of the matter is the analysis that they do is meant to be very technical. They are trying to determine whether or not the United States is in a position to honor its debts and do it in a timely fashion. But all of this discussion about they didn't like the debate, a lot of politics appear to come into play. And they have rules about how they are supposed to make these assessments. As a matter of fact, you know, their licenses can be revoked by the SEC. It seems to me that they have maybe violated some of the rules of the SEC-
QUEST: Whoa. All right.
WATERS: That allows them to be a credible rating agency.
QUEST: So, now that is fighting talk, Congresswoman. Are you suggesting you would be happy for their licenses to be revoked if they are found to be in violation?
WATERS: Oh, absolutely, if they are in violation, do you understand, this big decision that they made has worldwide implications. We can't have people playing politics. We can't have conflict of interest. We can't have people going and tipping off big banks prior to making a public disclosure.
QUEST: All right.
WATERS: As a matter of fact, the law is very clear. You cannot make a disclosure to any individuals, or groups, it must be public for the first time, when it is announced.
WATERS: So, I would be happy to have them revoked, absolutely.
QUEST: Final question on a different matter. Super committee names? We have the super committee, are you super pleased, or is it a super waste of time?
WATERS: Well, let me just say this: The names are fine. These individuals are fine, but I don't like the super committee idea. We were all elected to represent our constituencies. We were not elected to go and give over our power to any 12 members of the Congress of the United States. We should be going through the regular order of business. It should be transparent. We should be holding hearings. And we should be doing business in a way that the public understands what is going on. I don't like the fact we can't amend the bill once they put it out. And I sure don't like the fact that if we do nothing and not take up the bill, that automatically 1.2 in cuts across the board will be triggered. This process does not honor the kind of representation that I think people expect from us.
QUEST: Congresswoman, great to have you on the program. Come back again. We love having you on the program. Many thanks, indeed.
Good to see her, from Los Angeles, feisty discussion there on matters of debt, and S&P, and the super committee. That super committee, you'll remember, that is the one that has been set up to decide on where the cuts should come.
Now, we'll continue after the break, on this question of S&P and the ratings agency. Are they calling it as they see it, or are they calling a bad game? The ratings agencies is the subject, tonight, for Ali Velshi and myself.
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QUEST: QUEST MEANS BUSINESS and so does my friend, Ali. We're here together in the CNN NEWSROOM, and around the world.
Good day to you, Ali.
ALI VELSHI, CNN BUSINESS CORRESPONDENT: And to you, Richard. We are here as always to talk business, travel, innovation, nothing is off limits, Richard.
QUEST: And proving that point, today we are going to talk about downgrades and credit agencies. With Standard & Poor's dropping the ratings for the U.S. to AA plus. It got people talking abut the usefulness of these agencies and credit raters.
VELSHI: So, here is the question this week: Are credit rating agencies a threat to your wealth? Richard, I'll let you go first. You've got 60 seconds.
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QUEST: Yes. It is a very simple question with a simple answer. The major rating agencies have done a terrible job of catching financial crisis and often made bad situations worse. For instance, the agencies missed the undercurrents that lead to the crisis of '08. It gave high ratings to mortgage backed bonds, which spectacularly blew up. The congressional committee blasted the agencies for sloppy work and for conflict of interests.
Perhaps to redeem their reputation S&P decided to downgrade the U.S., when everyone, everyone, agrees there is no real risk of default, to inability to pay. S&P probably deserve much of the criticism. Their timing stank, right after the debt crisis. To downgrade it was like shouting, fire, in a crowded theater. S&P may stand on their principles, their actions made a bad situation worse. We can't get rid of them. We need them to do their job better.
VELSHI: Interesting way of looking at it, Richard. Let me have a go at this.
Despite these losses triggered by the downgrade, Standard & Poor's is not the danger, no ratings agency actually is. As you will agree, Richard, the real threat is what S&P is pointing out. America's government appears broken and tone deaf. While both parties in Washington have spent the week since the downgrade blaming each other and S&P, very few have stepped up, taken notice of the grade, and set out on the road to improvement.
The part of the S&P downgrade being conveniently being ignored in Washington, Richard, is where they discuss how Washington is less stable, less effective, and less predictable. And that is the real danger to your wealth.
The deal struck to raise the debt ceiling didn't cut in the right places. It raised no taxes, because lawmakers simply agree, Richard. And this super committee we have now, tasked with finding another $1.5 trillion in either cuts or tax increases is likely doomed to the same fate. You can question S&P and the agencies, but in the end it is all done-all it has done is announce that the emperor has no clothes.
And the whole world sees that America is naked, Richard.
QUEST: And that is enough to thought of Ali talking about nakedness to put me off any dinner this evening.
The Voice joins me now, and Ali, to the question time.
UNIDENTIFIED MALE: Let's jump right in, gentlemen.
Question No. 1: According to S&P's credit rating system, which of these countries is a better investment for foreign investors? Is it A., India; B., Italy; C., South Korea; or, D., Brazil?
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UNIDENTIFIED MALE: Richard?
QUEST: I'm going with Brazil.
UNIDENTIFIED MALE: Incorrect. Ali?
VELSHI: India. India.
UNIDENTIFIED MALE: Incorrect yet again. The correct answer is Italy. It gets an A-plus rating, and even though they are in their own financial trouble, they rank highest on the list.
On to question No. 2: A country's wealth can be measured as GDP per capita. Using that formula which of these countries does the World Bank rank as the wealthiest? Is it A., Canada; B., Singapore; C., Germany; or, D., Japan?
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QUEST: I'd say Singapore.
UNIDENTIFIED MALE: Incorrect.
Care to give it a shot, Ali?
UNIDENTIFIED MALE: Incorrect again. The correct answer is Canada.
QUEST: Ha, Ali!
UNIDENTIFIED MALE: Canada's GDP per capita is $46,000, just behind the U.S., but well behind the U.K. That's pretty embarrassing, Mr. Velshi, your home country.
VELSHI: I hope you have extra space in your flat, Richard, because I'll never be able to go home.
UNIDENTIFIED MALE: Let's see if one of you can win this week.
All of this credit rating news has sparked talk about the bond market. Let's talk Bond, shall we? According to boxofficemojo.com, which of these James Bond movies made the most money adjusted for inflation? Is it A., "Quantum of Solace"; B., "Diamonds Are Forever"; C., "Thunder Ball"'; or, D., "Goldfinger"?
VELSHI: OK, hold on, hold on, Richard. Don't answer. Because he- it's a trick question, he said adjusted for inflation. Remember, the extra number of screens that it opens on is not an inflation adjustment, so it's got to be one of the newer ones.
"Quantum of Solace."
UNIDENTIFIED MALE: That is incorrect, Ali.
Give it a shot, Richard?
QUEST: Yeah, of course. It's going to be "Goldfinger".
UNIDENTIFIED MALE: Incorrect again. The correct answer is actually "Thunder Ball". It made nearly $600 million, and "Goldfinger" was No. 2. It just goes to show you can't beat a classic Sean Connery as James Bond.
VELSHI: There you go. All right, Voice.
QUEST: We didn't get any of them.
VELSHI: Yeah. We didn't get anything right and we'll be rooming together. That's really what I've taken away from this week.
QUEST: That will do it for this week. Remember, we're here each week, Thursdays, on QUEST MEANS BUSINESS, 1800 G.
VELSHI: And at CNN in the NEWSROOM at 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 to talk about.
Richard, see you next week, buddy.
QUEST: See you next week. Have a good one.
That is just downright humiliating that we didn't get-neither of us got one right. I think that is the first or second time that has happened on "Q&A". And I know at home, you are going, what sort of jerks are they? They don't know the answers to this.
All right. Every sector has felt the pain this week. One in particular has learned some lessons the hard way. As banks work out where to go next, we'll hear from the chief exec of Africa's biggest lender.
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news, it always, always comes first.
There's a major rally underway on Wall Street. The Dow is making triple digit gains. Look at that -- up 416 points again, at 3.88 percent. There was heart to be reached (ph) fight better than expected jobless claims numbers a positive outlook from Cisco Systems that helped investors snap up beaten down stocks.
Back-to-back blasts in Peshawar in Pakistan. The first one targeted a truck full of police officers. It killed five of them and a child.
Then a teenage girl turned suicide bomber threw a grenade at the police checkpoint and detonated her explosive vest, killing a passerby. Police say the casualty account from that attack is low because her vest may have malfunctioned.
Estonian officials say the suspect in a brief hostage taking in the capital was also killed by the police. No one else was injured in the incident at the Defense Ministry building in Tallinn. The Defense Ministry denied reports that the gunman was a former soldier. A spokesman said he was a lawyer who belonged to a left-wing party.
Police in the United Kingdom are raiding dozens of homes, trying to track down those responsible for days of riots and looting. British newspapers are painting a surprise portrait of the rioters. They say many of them are suburbanites with respectable jobs or in good schools.
Now, the economic situation in Europe -- if there has been one place that has generated attention on the continent in the last 48 hours, it is France and the plight of the French market, the French banks and the French economy.
Joining me now, now from CNN Paris is Philippe Waechter, the chief economist at Natixis Global Asset Management.
Philippe, hopefully, you can now hear me and we can get to grips with whether or not French banks are secure and why the market thinks they are not.
PHILIPPE WAECHTER, CHIEF ECONOMIST, NATIXIS GLOBAL ASSET MANAGEMENT: Well, in fact, when you look at the market, when you look at the rumor of yesterday, we had, in France, a very strong rumor on the downgrading of French -- French public debt and how these banks are -- have a lot -- a large amount of French bonds in their account. It we are the -- it made them fragile. And that's what we saw yesterday and that's what we saw this morning, too. You know, it's the large part of rumor. We had an article in (INAUDIBLE) in England last week and -- on Societe Generale.
So you know, it's a very strange situation...
WAECHTER: -- because we cannot expect -- when you look at long-term interest rates in France, you cannot expect that investors are waiting for a downgrade of France. That's not the case.
QUEST: All right. Philippe, let's talk about the -- the coming together, the fiscal union that is now so much more talked about.
Do you believe that -- that President Sarkozy and Angela Merkel are not going to move much faster to try and move to a fiscal union of the Eurozone?
WAECHTER: Well, I think it's the -- the only solution for Europe. You know, we had a very strong currency union. And now we need a polit -- a more political union. And this more political union is coming through a fiscal reunion from Germany to Italy to Spain, France (INAUDIBLE).
And it's very important. We need a kind of a superior way to manage the European situation. We do not have to depend only on each country, but we -- we need something that could manage, cooperate things...
WAECHTER: -- between countries.
That's what we need now to -- to avoid another crisis.
QUEST: If we take the European crisis from Spain and from Italy and what we've seen in the last 48 hours, are we over the worst of it, do you think?
Or is that just simply to dangerous to speculate about?
WAECHTER: Well, that's what the ECB did. And so I -- I think on this point, the ECB did a very nice job. They bought a lot of bonds from Italy and Spain. And in that case, interest rates fold really -- really in Italy and (INAUDIBLE).
That was a very positive thing.
But anyway, it's not the solution -- a long-term solution for the European situation. They need to -- to -- we need to have a more strong -- a stronger institution that could manage the whole thing behind or close to the European Central Bank. We need to institute a power at the top of the European situation, the European Central Bank, and something that could manage fiscal policy. And in that case, we could have a solution for a long-term issue in the -- in Europe.
QUEST: Philippe, many thanks for joining us.
Philippe Waechter joining us from Paris.
With the market so volatile, banks across Europe have been forced to cut jobs and costs. South Africa's Standard Bank did exactly that last year. And today it reported a 12 percent rise in first half profits.
The chief exec, Jacko Maree, joins me now from Joburg.
Mr. Maree, you're well out of the latest turmoil because of, obviously, geographical and your investment portfolio profile. So to that extent, you're sitting pretty.
But -- there's always a but -- if -- if the other countries go down, you can't stand in the way, can you?
You're going to get hit, as well.
JACKO MAREE, CEO, STANDARD BANK: Oh, of course, yes. And I -- I think we saw it in the last crisis, that Standard Bank wasn't hit despite, you know, a pretty broad geographic footprint. We weren't hit in the crisis, but we suffered the consequences that came with the general slowdown and across many of our markets.
So I was a much delayed and muted effect. So of course, if we have another crisis and we have a double-dip, then that must filter through to many of the African countries and the markets that we link with, China, Brazil and so forth, which are important to us.
But one would like to think that we are somewhat isolated.
QUEST: You -- you've got investments and you've got cooperations with the biggest banks in China.
As you concerned with what you see with the tightening going on, both the official tightening levels and the liquidity requirements now, that China is slowing down?
MAREE: Well, I think -- I think it is. But everything in life is relative. And I think most countries would -- would really kill for Chinese growth rates. So I think it is a -- everything is relative in life. But certainly our experience with ICBC, the biggest bank in China and in the world, who's our partner, you know, they -- they are still very supportive. We've just done a deal with them where they have taken over a big shareholding of ours in Argentina.
And so -- so I think they are still very much in expansion mode, certainly as a banking sector.
QUEST: And if we look at your -- the home -- your own country, if we look at South Africa, the -- there are still some very real concerns, aren't there, on -- on the government debt side, on the jobs question, on the poverty question and on the economic growth question. Gold at $1,800 an ounce will not be the savior, if you like, for South Africa's economy.
MAREE: No. I -- of course, I think most of the factors you mention are correct. The government debt situation in South Africa is -- is really extremely strong. So I think that is not a concern at all.
But, clearly, poverty, inequality and high unemployment rates that could, you know, lead to social issues clearly are things that we are, you know, engaging and debating furiously in this country. They're featured in the press every day.
So, South Africa certainly has a lot of its own issues, but financially, has been incredibly well managed over many years now and continues to be.
QUEST: Jacko Maree from Johannesburg.
We thank you, sir, for joining me and talking to me tonight from Standard Bank.
In a country where jobs are hard to find, they've got the job every boy dreams of.
So is footballers threatening to hang up their boots, even temporarily?
QUEST: You know Europe's financial crisis is serious when footballers start feeling the pinch. Players in Spain's top two divisions are threatening to delay the start of the season by going on strike. They say owners won't guarantee them or get their wages.
Don Riddell explains the situation from the CNN Center.
This sounds a bit like rich boys being spoiled, but I suspect it's not.
DON RIDDELL, CNN SPORTS CORRESPONDENT: Well, not quite. I can see why some people would think that, Richard. You know, Spain boasts, arguably, the best football league in the world, La Liga it's full of fabulous teams and superb players, including some of the biggest stars in the world.
They're not claiming that they want more money. They're simply -- they're simply saying they want to be paid what they are owed -- and, Richard, I can tell you that some 300 players are saying that they are owed money by their clubs. Twenty-two clubs in Spain claim that in the last couple of years, they've been so financially stricken that they've had to invoke bankruptcy or receivership proceedings.
So there's a bit of a crisis here in Spanish football. Now, the top players, like Cristiano Ronaldo and Lionel Messi could end up going on strike in just nine day's time. They are supporting their fellow players, who have yet to be paid.
So quite a -- quite a bad situation in Spain.
As you know, Richard, the situation in Spain isn't great anyway, with 21 percent unemployment and 43 percent unemployment rate among young people. Of course, these people will be hoping that they can take their mind off things by watching La Liga kick off again in nine day's time. But perhaps it won't. Perhaps we'll have a strike in the first two weeks.
QUEST: What does the club say?
I mean, you know, if they've got a contractual obligation to pay the players, then they've got to pay them.
RIDDELL: Well, absolutely. And to be honest, they are a little bit bemused, Richard. They've come out today and said, look, you know, we've been negotiating in good faith with the players and, in fact, we agreed to set up a guarantee fund on August the 3rd. So, as I say, they are a little bit bemused by today's developments.
But clearly, the players and their representatives don't quite buy it.
QUEST: I don't suppose you know how much they get paid, those footballers (ph)?
But I suspect it's -- well, now, let's pick a number out there...
QUEST: -- multiply it by 10.
RIDDELL: Yes. Yes. An awful lot more than you and I, I know that for sure.
QUEST: Well, yes. There's an answer to that.
We'll leave it there.
Don Riddell, many thanks, indeed.
The weather forecast -- the rain in Spain was mainly in Britain today.
Guillermo is at the World Weather Center.
GUILLERMO ARDUINO, CNN METEOROLOGIST: But I see -- I see, Richard, that is getting much better, though in the Midlands...
ARDUINO: -- and Scotland, it's much better. England is not that bad. The Midlands here, in the mid-portions, is where we see some -- some storms spreading, but it's easing up a little bit.
Now, the numbers are quite significant, too, especially in 24 hours. You see 56 millimeters in Scotland. It's over half of the average of what we see in August. So in one instance, in 48 hours, because we have this highway here, the jet stream and the low pressure centers sit there and actually travel across the northern sections and bring that significant rain. It stays nice in the south and we will see some more rain, especially in Schleswig-Holstein in the northern parts of Germany and into Denmark, too. But I don't -- I don't want to miss this spot here that yesterday we were talking about, especially near Istanbul and Romania and the Bosporus. We're going to see some severe storms. So if you are going there, plan ahead.
The Mediterranean beautiful, from the Balearics into Corsica, Sardinia, Italy, except for the Aegean Sea , of course.
London getting better. Amsterdam, Dublin, no more delays. Yesterday, we were talking about Copenhagen and Amsterdam with windy conditions. Things are getting a little bit better. And in Italy, even in Berlin, things are much better in the forecast.
In the new -- in the next two days, Germany is not going to be beautiful, especially in the Norman -- the northern sections.
Do you see, though, that we have some snow, especially in that one in the alps of course. But in -- I'm trying to remember the name -- Garmisch- Partenkirchen, in Southern Germany, in the alps, we saw some snow in the dead of summer, OK?
Now, no snow at all in Spain. Madrid at 27. We have no change there, like two months with no rain at all. Twenty in London. Twenty-two in Paris. Rome can -- quite warm.
And now that Richard left New York, it's the second day of beautiful conditions. We see some rain offshore, but it continues to be very nice, all the Northeast and into Canada, too. I mean this is the time to go to New York.
Have a nice day.
QUEST: Do you know, I noticed this morning as I was walking to work that one or two of the leaves have started to turn. But we're still some way off fall in the Northern Hemisphere, aren't we?
ARDUINO: Yes, we are far away from it, but yes, it's (INAUDIBLE)...
QUEST: I just thought I'd mention it.
QUEST: I just thought I'd mention it.
ARDUINO: All right.
QUEST: I saw leaves on the ground.
There we are.
Fine. There we are. I'll take a picture of it tomorrow. We can discuss it.
ARDUINO: Yes, save one and send it over.
QUEST: All right.
All right, I can.
All right, Guillermo at the World Weather Center.
There's nothing like a bit of appreciation to make your day, unless you happen to be in Switzerland. Next, the effect of investor unease centering on two supposed safe havens -- the Swiss franc and (INAUDIBLE).
QUEST: OK, President Obama is giving a political speech on the economy at the moment in the United States, in Michigan. So far, he doesn't seem to have said much that we haven't heard before. He's referring to the fact that taxes may have to go up and it's all come, he said, on the back of ordinary workers who've borne the brunt so far.
If he says something new or different, we'll come back to you.
What we've seen in stock markets as investors ponder how low markets can go. And all the uncertainty over European and U.S. debt has left for safe investments.
Join me in the library -- maybe it should be the gold vault, in the vault. The Swiss franc, look at the Swiss franc. Today, the Swiss franc got clobbered against the dollar, down 4.7 percent. Now, that was a (INAUDIBLE). But that was good news for the Swiss. The Swiss Central Bank vice president said they've looked at whether there should be a temporary peg for the franc to the euro or the dollar to help prevent the appreciation. But it seems to have unwound just very slightly today against the U.S. dollar and against the euro.
The euro gained marginally, up to 142.19. I mean, .5 of 1 percent, .6 of a percent is a -- is a sizeable movement on a one day. But once again, it is all this volatility. In fact, EADS, the aircraft manufacturer, is now asking to be guaranteed in euros. The chief financial officer wants to minimize the exchange related losses.
But as the CEO did say on this program a couple of weeks ago, that's only of limited effects. And they're actually wanting European suppliers to shift out of U.S. dollars.
Gold -- it actually was down, down $63 an ounce. We have touched over $1,800 today. But -- or yesterday. But frankly, gold has never closed at over $1,800.
So it's come off its tops for today and that's largely because we have seen this very strong rally on Wall Street at the moment.
But when you think about all that glitters being gold, there's no better place to experience the adrenaline than the trading floor of the New York Mercantile Exchange. Even as NYMEX announced new measures to reduce volatility and gold and even gold -- even as gold pulled back from that $1,800.
Felicia Taylor was on the floor at the exchange.
FELICIA TAYLOR, CNN CORRESPONDENT: Here we are at the NYMEX, where the gold market is hot and we've been trading higher up past $1,800. Right now, we're seeing gold trading at about $1,787. Activity is beginning to pick up and you can see it happening right now.
This is the opening bell in the NYMEX pit. Here you go.
ANTHONY NEGLIA, TOWER TRADING: This is where the action is. This is where the game is right now. The game is in gold.
UNIDENTIFIED MALE: (INAUDIBLE) goes for it.
It's 41 now.
UNIDENTIFIED MALE: Hey, over there. It's (INAUDIBLE).
TAYLOR: That was the open?
NEGLIA: I can't smile. It's a little hectic right now, OK?
We just pretty much on change.
TAYLOR: Do you think that there are still enough buyers out there to bid up the gold market?
NEGLIA: Absolutely. Absolutely. I'm looking for $1,800 or better by some time tomorrow.
TAYLOR: As you well know, there's been tremendous volatility in the gold markets.
So what the CME Group did last night was raise the margins by about 22 percent. Now, in dollar terms, that's about $1,000 per contract. So it's not that much when you think about it in dollar terms.
NEGLIA: The margin requirement that was told to us last night is having no effect. But I don't really feel that the strong loans (ph) are going to be affected by this margin.
TAYLOR: What you're seeing behind me is what they call open outside (ph). This is the way that most trading took place for many, many years, until, you know, digital systems came into -- into the marketplace and where computers really took over.
But what you're seeing behind me is where actually eye to eye combat has to take place. There has to be a buyer and a seller on both ends of the transaction in order for it to take place.
And literally people are writing things down on paper to confirm the trade.
You're watching people going like this and like this. This is a sell, this is a buy.
TAYLOR: We just had the S&A market open at 9:30. We've got 30 seconds in.
Are you seeing major buyers coming back into the marketplace?
You told me earlier that we saw some central banks buying for the last couple of months.
What are you seeing today?
NEGLIA: Well, right now, we're not seeing any of that. There is a lot of residual sell-off now with the equity market opened up, when the equity market calms down, there is going to be a little selling pressure in the gold.
But selling pressure in the gold means what, Felicia, $1,700, $1,725?
UNIDENTIFIED MALE: That upped since. Double the ticket.
TAYLOR: How does it feel to be one of the hottest markets there is?
NEGLIA: Well, I'm enjoying it very much, OK?
Like I said, I've been doing this for 28 years. This is the most excitement we've had in a long, long time. And as long as it doesn't cost me any money, I'll keep doing it.
(END VIDEO TAPE)
TAYLOR: So look, we talked about the margin requirements that were elevated as of yesterday. And, frankly, though, compared to other metals, it's still quite small. Most margin requirements are between 5 and 10 percent. Gold right now is at 4 percent. Silver, at the moment, is at 6 percent. Corn, which is obviously another softer commodity, which they referred to, is at 7 percent.
TAYLOR: -- gold is still pretty cheap. And he's looking for December contracts at possibly $2,000.
QUEST: What -- whenever you see a Comex market in full flood, it is a frightening and exciting time.
Were you tempted to get stuck in there?
TAYLOR: Oh, I have to tell you, when I was 15 years old, I was a -- a runner for -- at the Chicago Board of Trade. It is so exciting and exhilarating. You absolutely want to be in the middle of it. You have no idea the exhilaration of the people that are in the pits trading these currencies or commodities or whatever it may be. It is fantastic.
It's -- it's nothing like what you see at the New York Stock Exchange, which is controlled trading, because it's mostly capitalized.
So you bet, I wanted to be right in the thick of it.
QUEST: Is your nail varnish gold?
QUEST: Oh, well. I'll tell you, it was -- it was the way the light...
TAYLOR: I put silver on today for a change.
QUEST: It was the way the light was catching it. It's glinting back. Gold.
QUEST: Felicia, thanks...
TAYLOR: Yes. I'm paining my fingers in gold.
QUEST: Felicia Taylor joining us from New York.
We thank you for that.
It's all about gold.
The markets are -- oh, hang on. The bell is gone. The bell has gone funny tonight.
Look at that, up 406 points, a gain of 3.5 percent, nearly (INAUDIBLE). We're over 11000. And European stocks also rallied sharply. Banking shares rebounded. And the financial services of Zurich were up. UBS, Banco Popular de Milano is up more than 10 percent. Barclay's was up 8.6 percent.
I swear from where I'm sitting, Felicia Taylor's nail varnish looked gold. That's my excuse and I'm sticking to it.
I'll have a Profitable Moment after the break.
QUEST: President Obama is speaking in Michigan at the moment. It's a major political/economic address. So far we've heard what he's had to say and we've heard it before. But obviously, he's now saying it in this scenario where this super committee has been named and the stock market is exceptionally volatile at the moment.
So tonight's Profitable Moment.
QUEST: Excuse me.
The United States and the United Kingdom have plenty in common. They always have had. Right now, though, they are two economies that are separated by a common language of economics.
The U.K. chancellor, George Osborne, is speaking the language of austerity. He still firmly says cuts are the way forward. Adding to a swollen deficit with more spending will not work, he believes.
Now, that's the way he put it to parliament today, when he was in an emergency debate at Westminster.
So far, so good. The Americans say otherwise. Stimulus has been the word on their lips. Christina Romer told me on this program that history would prove her right.
Today, the markets have burned around and Mr. Osborne has the dubious pleasure of saying, I told you so. His country's AAA rating is intact.
The British public has felt the pain of the consequences. The American cousins are feeling the same. Their austerity hasn't even started yet.
There are no winners. It's not a zero-sum game. The markets are open and trading at the moment. The Dow Jones Industrials, it is up more than 400 points. And that tells us all we need to know about tonight.
Because that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
"WORLD ONE," that's next.