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Obama Speaks at His First Clinton Campaign Event; Obama: I Am Ready to Pass the Baton to Clinton; FBI Not Recommending Charges Against Clinton; Theresa May Ahead After First Round of Voting; Bank of England: EU Exit Risks Crystallizing; Bank of England Tries to Spur Lending; British Pound Hits New 31-year Low Against the Dollar; Brexit Fallout Hits U.S. Stocks. Aired 4-5p ET

Aired July 5, 2016 - 16:00:00   ET


[16:00:00] BARACK OBAMA, U.S. PRESIDENT: I'm here to tell you that the truth is nobody fully understands the challenges of the job of president

until you've actually sat at that desk. Everybody's got an opinion. But nobody actually knows the job until you're sitting behind the desk.

Everybody can tweet. But nobody actually knows what it takes to do the job until you sit behind the desk.

I mean, Sasha tweets. But she doesn't think that she thereby should be setting behind the desk. So you can't fully understand what it means to

make life and death decisions until you've done it. That's the truth. But I can tell you this. Hillary Clinton has been tested. She has seen up

close what's involved in making those decisions. She has participated in the meetings in which those decisions have been made. She's seen the

consequences of things working well and things not working well. And there has never been any man or woman more qualified for this office than Hillary

Clinton. Ever. And that's the truth. That's the truth.

So the bottom line is, I know Hillary can do the job. And that's why I am so proud in North Carolina to endorse Hillary Clinton as the next president

of the United States.

Now, I recognize to some degree I'm preaching to the choir. I know I probably don't need to tell anybody here why we need Hillary's steadiness

and her levelheadedness and her brilliance and her temperament right now. Right now. Because we've been through some tumultuous times in this new

century. And we continue to face all kinds of challenges and change in the years ahead. And this November, in this election, you are going to have a

very clear choice to make. Between two fundamentally different visions of where America should go. And this isn't even really a choice between left

and right or Democrat or Republican. This is a choice between whether we are going to cling to some imaginary past or whether we're going to reach

for the future.

This is about whether we have an America that works for everybody or just a few people. And Hillary is not somebody who fears the future. She

believes that it is ours to shape. The same way it's always been. Hillary understands that we make our own destiny as long as we're together, as long

as we think of ourselves not as just a collection of individuals or a collection of interest groups or a collection of states, but as a United

States of America. She knows that.

She knows that when it comes to our economy. Because she knows our economy works best not when it only benefits a few at the top, but when everybody's

got a fair shot at success. As Hillary mentioned, look, when I came into office, things were not in very good shape, you will recall. We were

losing 800,000 jobs a month. Pursuing, by the way, the same proposals that the Republicans are still peddling. And over the past six years, our

businesses have created more than 14 million new jobs. We cut the unemployment rate in half. Manufacturing jobs have grown for the first

time since another president Clinton was in office.

[16:05:00] By the way, and by the way, because they're always talking about us being these spend thrift Democrats, I just want to point out, we cut our

deficit by nearly 75 percent. They didn't. They did not. Wages for families are finally starting to rise again. But we've got so much more

work to do. Because in the 21st century, we're not going to -- we're not going to help families. We're not going to create jobs. Just by

pretending that we can turn back the clock and women are going to somehow not be in the workforce anymore. And, you know, people of color suddenly

are not going to be competing and wanting a better future for their kids. We're not going to suddenly ignore all the progress that's been made over

the last 30 years. We're not going to build walls around America or put technology back in a box. We're not going to reverse hard-won rights for

women or minorities or Americans with disabilities to fully participate in the workforce. We're not going to do that.

If we're going to give working families, all families, a chance to succeed, we've got to make sure they can afford childcare. And they've got sick

leave and paid leave. And we've got to make sure women get equal pay for equal work. And we should make it easier, not harder, for our workers to

organize for better wages and working conditions. And we shouldn't eliminate the minimum wage. We should raise it high enough so if you work

full-time, you don't live in poverty.

Each of these policies, the policies Hillary mentioned, would help working families feel more secure in today's economy. She's actually got a plan.

It's actually paid for. You can actually look at it. Now, the fact that we haven't gotten all these ideas done, it's not the fault of immigrants or

unions or some liberal socialist scheme. It's very simple. Republicans in Congress and Republican governors have been blocking these ideas for the

last eight years. It's that simple.

I just want to be clear. Not everybody votes on the economy. I understand. There are other issues. But if your concern is who is going

to look out for working families? If you're voting your pocketbook, if you're asking who's actually going to stand up for the guy on the

construction site or the guy in the factory or the woman who's cleaning a motel room or somebody who's really working hard, the working family? if

that's your concern, this isn't even a choice. Because the other side has nothing to offer you. The other side's got nothing to offer you.

I'm going a little off-script here, but I just want to repeat this. If your concern is working people, then this is not a choice. I don't care

whether you're white, black, Hispanic, Native American, polka dot, male, female. I don't care if what you care is who is going to be fighting for

ordinary folks who are fighting for a better life for themselves and their children, then I don't know how you vote for the guy who is against the

minimum wage. Against unions, against making sure that everybody gets a fair shot, against legislation for equal pay, against sick leave and family

leave, against all the things working families care about.

[16:10:00] So if you're voting for the other team, it's not because of the economy. You've got to be clear about that. Even the Republicans on the

other side don't really know what the guy is talking about. They really don't. They really don't. You ask them, they're all like, I don't know.

Then they kind of duck the other way. Am I joking? No. So you can choose a path that divides us with harsh rhetoric and pits working people against

each other, all the while pushing policies that will just help folks at the top do even better. But that's not helping working families, or we can

transform our politics so they're responsive to working families, so that all people of all races and all backgrounds get a higher wage. And all

folks get quality health care and a decent retirement. And all children in this country get a better education that lets them dream bigger than their

circumstances. That's what Hillary Clinton believes.

Now to me that in and of itself would be enough to make the choice. But we've got some other choice. You can go the path that denies climate

change is real. Or you can choose a path where American jobs and businesses lead the world to combat it. Over the last seven years, we have

doubled renewable energy in this country.

Remember when we were all concerned about our dependence on foreign oil? Well, let me tell you, we've cut the amount of oil we buy from other

countries in half. Remember when the other team was promising they were going to get gas prices down in like ten years? We did it. We did it. So

we've been able to shape an energy policy that's good for families, good for your pocketbook, and with Secretary Clinton's help, America ultimately

led nearly 200 other nations to an agreement to save this planet for future generations.

Maybe you don't care about this. Maybe you think 99 percent of scientists are wrong. Or you can -- you're welcome. But the point is, we're not done

with this. Where we go from here is up to you. You can vote with the climate deniers who want to tear up the agreements we've crafted and doom

our kids a more dangerous world, or you can vote to keep putting people back to work, building a cleaner energy future for us. That's what's at

stake in this election. That's one of the reasons I'm supporting Hillary Clinton for president.

You know, Hillary mentioned how we operate on the world stage. Now, let me just say, I know the other guy talks about making America great again.

America's really great. And just the other day, somebody was writing about, wow, when you look at the surveys in the world, turns out that when

Obama came into office, the world didn't think we were that great. But now they think we're the greatest. They think we're the strongest. They think

we're the best positioned. We were in a hole before I came into office. But right now, the rest of the world things we're pretty darn great. And

by the way, you can look that up. That's a fact. That's not like just something I just made up and tweeted.

So, you know, there are actually like surveys done. They poll people so you actually know what people think. You don't just assert it. And it

turns out that's what they think. You can look it up. Part of the reason for that is because we had an outstanding Secretary of State.

[16:15:06] Part of the reason is that Hillary understood and continues to understand that just a bunch of tough talk doesn't replace the hard work of

diplomacy. A bunch of phony bluster doesn't keep us safe. And she understands we can't retreat from a world that needs American leadership.

That's why she offers a smarter approach that uses every element of American power to protect our people and to protect our allies. She is and

will be a stateswoman who makes us proud around the world. She'll deploy diplomacy whenever possible but she also knows what it takes to be a

commander-in-chief. And I know she will never hesitate to use force when it's necessary to protect us. And she'll know how to mobilize the world

around the causes that we believe in, that we know are right, and make sure other countries pull their own weight. That's strength. That's

leadership. And that's why Hillary Clinton has to be the next president of the United States of America.

I am with her. I'm with her. You know, part of the reason why we are here is because we all share the belief that this country only lives up to its

potential when every single one of us gets a chance to succeed. Black, white, Latino, Asian, Native American, young, old, rich, poor, Turkish

American, gay, straight, male, female. All of us matter. All of us share the same creed. All of us pledge allegiance to the same flag. That

doesn't mean we have to agree on everything. We all have different ideas and beliefs. And that's part of what makes America great.

But I agree with Hillary that our democracy works best when there are basic bonds of trust between us. When we recognize that every voice matters.

And the people who disagree with us most strongly love our country just as much as we do. You never heard Hillary Clinton demonize other people. You

haven't heard her not be willing to engage in folks even when they disagree with her. You ask about folks in the Senate who were on the other side,

they liked working with her. Even though some of them had done everything they could to tear her down. When she was first lady, she still worked

with them. And that brand of leadership is how we're going to get things done. That's how we can protect more of our kids from gun violence.

After Newtown. After Newtown, the other side blocked any new gun safety reforms. After Orlando, they blocked any new gun safety reforms. They're

not listening to 90 percent of the American people. Democrats and Republicans who support background checks and making sure somebody who is

on a no-fly list can't actually go out and purchase an automatic rifle. Hillary knows how to build coalitions.

And she knows we can take smart steps that protect both our rights and our kids. So they can go to the movies or to church or to a nightclub or to

school. And if you believe that too, then there's no choice here. You've got to vote for Hillary Clinton.

Her brand of leadership can fix a broken immigration system so that it lives up to our tradition as a nation of laws and a nation of immigrants.

Unless you're a Native American, somebody brought you here. Somebody came here. You came from someplace else, now. So I just want to be clear about

that. And not everybody had their papers straight when they came.

I'm just saying. And, you know, there are millions of striving young people whose lives hang in the balance. And they want to give something

back to this country that they love. They want to serve in our military. They want to go to college. They want to be doctors. They want to cure

diseases. And for years the Republicans who run this Congress, they talk a good game about immigration reform and then they don't do anything. And

now they've picked a nominee whose only plan is to build a higher wall. That's not a plan.

[16:20:15] No, no, no. Hold on a second. I was waiting for this opportunity. Don't boo. Vote. Don't boo. Vote. Booing doesn't help.

You need to vote. But if you care about a smart immigration policy that controls our borders and makes sure that it's lawful, but also gives

everybody opportunity, this is your candidate. You've got to vote in this election. You know what, if you don't think your vote matters --

RICHARD QUEST, CNN ANCHOR: Well, as you can see there, we seem to have lost the signal from Charlotte, North Carolina, of President Obama giving

what can only be described as vintage Obama political -- if we get the picture back, we'll return to the President and to Hillary Clinton. And

John Avlon is CNN's political analyst and editor-in-chief at "The Daily Beast." He joins us from Washington. You don't see that every day. I

mean, this was full throated, full-throttle. Let's pause there to listen to the cheers, John, stay there. Let's listen to the cheers. I beg your

pardon. This is when they arrived. So the president is still speaking. John Avalon, full throated, absolutely no equivocation. What did you make

of it? Don't boo, vote.

JOHN AVLON, EDITOR-IN-CHIEF, THE DAILY BEAST: Richard, you can tell he's been saving this up for a while. This was a liberated President Obama

getting to take the wood to Donald Trump. Clearly he's been wanting to for months but waiting for Hillary Clinton to lock up the Democratic nomination

before he wades into general election mode. And he was making a case, point by point, really loose, having fun with campaigning again, and really

just making a full-throated argument not only for Hillary Clinton and particularly focused on middle class families, but against Donald Trump.

And he was having a good time taking the fight to Trump today.

QUEST: I didn't actually hear him or Hillary, you correct me if I'm wrong, please, ever mention Trump by name. Talked about the other team, the man

on the other side. We're going to go back to hear the finish of the president. Stay with me, John.

OBAMA: You've got to apply steady judgment. Even when things don't go your way. You've got to make the tough calls, even when they're not

popular. And even when they won't pay off right away or increase or increase your poll numbers. You've got to be able to handle criticism

without taking it personally. You've got to brush it off and get the job done. That's some of what I've learned while serving as your president.

That's some of what Hillary's learned as a Senator and as a Secretary of State. And that's why I'm voting for Hillary Clinton to be the next

president of the United States.

So let me -- you know, I know I've gone on too long. This is what happens is -- haven't campaigned in a while, you start just enjoying it too much.

So let me just simplify this. And let me be blunt. I want to be blunt. Can I be blunt? Let me be blunt. You know, Hillary has got her share of

critics. That's what happens when you're somebody who is actually in the arena. That's what happens when you've fought for what you believe in.

That's what happens when you dedicate yourselves to public service over the course of a lifetime. And what sets Hillary apart from so many others is,

she never stopped caring. She never stopped trying.

You know, we're a young country. So we like new things. And I benefitted from that culture, let's face it. When I came on the scene in `08,

everybody said, oh, he's new. They don't say that now, because I'm not. But sometimes we take somebody who's been in the trenches and fought the

good fight and been steady for granted.

[16:25:03] Sometimes we act as if never having done something and not knowing what you're doing is a virtue. We don't do that, by the way, for

airline pilots. We don't do that for surgeons. But somehow we think president of the United States, let's just give it, I don't know, who's

that guy, come on.

And so as a consequence, you know, that means that sometimes Hillary doesn't get the credit she deserves. But the fact is Hillary is steady and

Hillary is true. And she's been in politics for the same reason I am. Because we can improve other people's lives by doing this work. And we

don't care about the slings and arrows that are thrown at us. Because we know that's how real change and real progress happens and that we if we're

willing to work hard, can finish, can bring about changes that make life better for some kid out there, some senior out there, somebody who is

unemployed out there. And it may take more than a year. And sometimes it takes more than a term. And sometimes it takes more than one presidency or

even one generation. And yet that's old fashioned. I think she'll fess up to that.

But we want people to believe that their government can work. And that their president cares. And that every child should have the same chance

that this country gave us, because we weren't born with a silver spoon. And we know that behind all the division and sometimes angry rhetoric of

this election year and all the petty bickering and the point scoring and the punditry, the ordinary American -- Americans are good. And they are

generous. And they're hardworking. And they've got an awful lot of common sense. And we share a certain set of common values and hopes and dreams.

That's why I ran in 2008. And I believe in those values and those ideals more than ever. And I believe in you the American people more than ever.

And I am more optimistic about our future than ever.

That's why my faith, my faith is stronger about the simple American ideal as old as our founding, that people who love our country can change it for

the better. I have seen it happen. I have run my last campaign. And I couldn't be prouder of the things we've done together. But I'm ready to

pass the baton. And I know that Hillary Clinton is going to take it. And I know she can run that race, the race to create good jobs and better

schools and safer streets and a safer world. That's why I'm fired up. And that's why I'm ready to go. And that's why I'm with her. And that's why I

need you to work just as hard to make sure that Hillary Rodham Clinton is the next president of the United States of America. God bless you, North

Carolina. God bless you. God bless you, United States of America.

QUEST: And ready to pass the baton, Hillary can do the job, a speech that was quite extraordinary. The first time we've seen President Obama

campaigning for Hillary Clinton. In many ways a president, John Avlon, a President Obama that we haven't really seen this side of the last election,

when he was campaigning for himself. This was absolutely vintage campaigning by a man who is a renowned expert at campaigning.

AVLON: That's exactly right. Look, Richard, he was loose, he was having fun. You can tell he's stored up these arguments for months and he was

delighted prosecuting the point. Two main points he kept hitting in the speech over and over, one, to act as a character reference for Hillary

Clinton, saying they've campaigned against each other, we worked together, and behind the scenes, that she was good and true and solid as Secretary of

State. That's an important point, because still there are a lot of doubts around Hillary Clinton, for as long as she's been in the public eye, she

has those trust issues, the president tried to address that.

And then that constant contrast with Donald Trump. You're right to say he didn't invoke Trump's name but consistently, of course, he took the wood to

Donald Trump by contrasting his policies and the impulses of folks to support him.

[16:30:01] Saying, you know, the new guy doesn't necessarily the person you want to fly the plane. Saying the policies, he's putting forward will hurt

working people in North Carolina where they are campaigning and elsewhere. Mostly this was a president relaxed and having fun campaigning for Hillary

Clinton for the first time in this campaign. All those arguments he'd been storing up in private, they came flowing out in public in a long speech.

And this was just an unusual experience to see a president this loose and this fiery and that's what we saw today.

QUEST: And the message also, again and again, distinguishing it from what they called the other team and the other side. This continual reminder of

the working family, working people, clear choice, ready for the future. And this is something that has to be part of her strongest argument against

Donald Trump.

AVLON: Absolutely. And look, where they're campaigning is important too, North Carolina. President Obama won it the first time, lost it narrowly to

Mitt Romney the second time. It is a key swing state. If Trump can peel this off, he can stay alive. If Hillary Clinton can really move this to

the Democratic column, it's a going to a good day on election day for Hillary Clinton. But to win North Carolina, you need to go beyond the base

of the Democratic party and really win over those middle class voters who feel they've been squeezed for decades and make the point that Donald Trump

may be tapping into your anger, your frustration, but Democrats are offering policies.

They not have worked as quickly as you'd like, but they're moving things in the right direction. It's a head versus heart argument. That's hard to

win sometimes in American politics. But where they went today in the first day of their campaign targeting the middleclass and talking about economic

recovery as opposed to divisive rhetoric. That is going to be key for Hillary Clinton throughout the course of this campaign. She's got to win

moderates and the middle class to win. That's how you win American elections and that's going to be the heart of her campaign going forward.

QUEST: John, thank you for staying with us for that and giving us the interpretation afterwards, we appreciate it, thank you.

All of this comes after the FBI said today it will not recommend criminal charges be filed against Hillary Clinton. Needless to say, there was no

reference to it in the speeches that you just heard, at least none that we were able to see. But it was all of course the allegations over her use of

a private e-mail account during her time as U.S. Secretary of State. The announcement has major implications for the race for the White House.

The final decision ultimately rests with the U.S. Justice Department. The director of the FBI's said its recommendation is based totally on facts of

the investigation.


JAMES COMEY, FBI DIRECTOR: Opinions are irrelevant. And they are all uninformed by insight into our investigation because we did our

investigation the right way. Only facts mattered. And the FBI found them here in an entirely apolitical and professional way.


QUEST: And of course the U.S. Attorney General has already said that she will accept the recommendations of the FBI. Now, CNN's contributor Ana

Navarro is in Washington. We've a lot to get through there, Ana. First of all, let's deal with the FBI and what they said. And then we'll talk about

President Obama's speech. I understand but that's the way it is in the sense of the FBI has now spoken.

ANA NAVARRO, CNN CONTRIBUTOR: I think you're absolutely right. Look, right now the United States of America is a very polarized society. Some

people live in a red world, some people live in a blue world. A small amount of people who live in the real world. If you're a Democratic base

person, what you heard today was, let's celebrate, she's off the hook. She did nothing wrong. If you are a Republican-based person what you heard

today is, she got off, she got away with a breach of national security. Other people would have gotten the full extent of the law. She was not

treated like a regular citizen. She was above the law. You've got a very small percentage who are actually the ones that are probably going to

decide this election, and I think that's the thing to watch. How will it play out with those people in the middle who can lean one way or another?

QUEST: And we're going to hear, I suspect, from Republicans again and again that sound bite of the FBI director describing Hillary Clinton as

excessively careless with classified material, which of course follows up with another line, do you want a president who is excessively careless with

classified material. So although he didn't prosecute, he certainly gave Republicans ammunition.

NAVARRO: Oh, absolutely. Look, you know, FBI Director Comey did not indict her directly, but he certainly indicted her implicitly.

[16:35:04] He certainly indicted her with words and excoriated her. He was very scolding of the way that this was handled. And you are absolutely

right. It would be campaigning 101. You use that line over and over and over again. Because it also strikes at Hillary Clinton's soft underbelly,

which is the trustworthiness issue. We have been seeing again and again that the American people have an issue trusting her. And this does not


QUEST: Ok, now let's go to the tour de force. There is a big gun to be brought out in the battle in that sense. They brought it out with Barack

Obama today. I mean, even a Republican has to admit this was a tour de force from the U.S. President that will be ringing in people's ears.

NAVARRO: Oh, I can tell you, even this Republican admits that whether you like Barack Obama or you don't, whether you support Barack Obama or you

don't. Whether you voted for Barack Obama or you don't. It is impossible not to admit that Barack Obama is pretty damn good at this campaigning

stuff. You saw it in full display today. I think, you know, he hit his groove. He's had it within him. And he's a guy who knows how to do this.

And he brings an energy level and an ability to gauge and connect with his audience that frankly Hillary Clinton lacks. So he brings a very important

component to this race, because Hillary Clinton needs that Obama coalition to come out strong and in force. And you know, campaigner in chief Obama,

having him by her side is going to be a very important part of that strategy.

QUEST: Ana, good of you to give it a nice balanced view in terms of that, the Republican view, with a strong appreciation for what we've seen this


NAVARRO: You know, Richard, I love good campaigning. I don't care who's doing it. And Barack Obama knows how to do it.

QUEST: We appreciate it. We'll have you again. Thank you very much, Ana Navarro, joining us from Washington.

From the race for the White House to the perhaps more modest race for a little house in London. Otherwise known as 10 Downing Street. There were

five this morning. This afternoon there were four. Tonight there are three. The contest to replace David Cameron as the conservative leader and

therefore the U.K. prime minister tightened. First to go was Liam Fox. He was eliminated after the first round of voting because he came last.

Then two hours later, Stephen Crabb, he voluntarily dropped out and threw his support behind the frontrunner, the Home Secretary, Theresa May. Robin

Oakley is CNN's political contributor. So we now end up with Mrs. May, who was a remainer but is now a Brexiteer by light. We end up with Michael

Gove and Andrea Leadsome who are strong Brexiteers. And one of them will be pushed out at the next round.

ROBIN OAKLEY, CNN POLITICAL CONTRIBUTOR: Indeed, the question will be settled as far as the MPs are concerned this week. Because when there are

only two, it goes out to 150,000 party members.

QUEST: And they vote next when?

OAKLEY: They vote on Thursday.

QUEST: So tomorrow night -- Is it likely that Michael Gove will stay the course?

OAKLEY: Yes, he's been talking tonight. He is making it quite clear, he's staying in the battle. And interestingly, he was saying the ideal battle

in terms of the two going out to the party activists would be one Brexiteer and one remainer. He also put the emphasis, two people of experience. In

other words, he's now gunning for Andrea Leadsome, his colleague in the leave campaign.

QUEST: Remind me of the numbers. Leadsome was 66.

OAKLEY: Leadsome was 66, Gove was 48.

QUEST: Where does Gove pick up extra votes from?

OAKLEY: We have seen Liam Fox go out. Liam Fox himself has pledged his support for Theresa May. But he doesn't necessarily carry all 16 of his

votes with him. Same with Stephen Crabb. You know, I think in Crabb's case, most of those we can be sure will go to Theresa May. The Liam Fox,

16, you can't be so certain. What Michael Gove is hoping, he says, look, I've only been in this campaign for two or three days, I haven't had a team

together fighting for me, I can do it now. Remember, it goes to the activists. And activists, three times we've seen people lead this campaign

and then it's been turned over.

QUEST: Robin Oakley, Thank you. Thursday will want to know who's the next, and then there were two. Thank you very much indeed.

This is QUEST MEANS BUSINESS, as you can imagine a very busy day. All the news on the business and economic front after the break.


[16:42:04] QUEST: So to our economic news. Tonight, Mark Carney, the governor of the Bank of England, tries to cushion the blow from Brexit as

the pound sank to a 31-year low. The bank and central bankers told banks they can dip into their cash buffers as part of the effort to keep the

banks' lending as the risks to the British economy come home to roost.


MARK CARNEY, GOVERNOR, BANK OF ENGLAND: At its meeting in March the FPC judge that, and I quote, the risks around the referendum were the most

significant near term domestic risk to financial stability. Some of those risks have begun to crystallize.


QUEST: The first part of governor Carney's plan is that the bankers cut the amount of money commercial banks are required to keep on hand. The

hope is that the banks will leverage that money, because obviously there is a multiple of capital to what they can lend out, and therefore it becomes

several hundred million if not billions of dollars, pounds that they can use to stimulate the economy. I spoke to Sir John Gieve, who served as the

Bank of England's Deputy Governor of Financial Stability. I suggested that the measure that was announced today will only work if borrowers are

looking for money.


JOHN GIEVE, FMR. DEPUTY GOVERNOR, BANK OF ENGLAND: Well, that's of course what the banks would say about the post crisis period. They kept saying

we're offering the money and nobody wants it. Actually Mark Carney noticed that and said, yeah, no, this will affect the supply, we're supplying the

stuff, but will there be demand. I think that is so he could do something about the supply. Very difficult to do much about the demand.

QUEST: And on that point, what he's really saying is, I'm doing all I can, it's up to other people to play their role. Is that a fair comment?

GIEVE: Yes, I think he is. He's come out straight away. He said he recognizes it's a shock. We're going to change our tools, after all, they

only introduced this kind of cyclical capital in March. He's reversed engines on that. So he's been very active. But I think it is true that he

can't put to naught, the impact of leaving Europe. I mean, naturally that's going to cause people to cut investment. It's going to cause people

to cut back on spending. And we've just got to live with it.

QUEST: I don't want to denigrate economists and the science of economics. But we really don't know how bad or how uncertain or the medium, short to

medium term effect, do we? We can only make the best guess.

GIEVE: At this point of course we're guessing. Of course were guessing. There's been some signs in the run-up to the referendum that people were

holding back on investment. The uncertainty was having an effect on investment. You saw some construction figures which suggested that.

[16:45:01] Subsequent, of course we've only had a few days, we haven't got any hard data. We've seen a couple of commercial property funds closing

because they can't sell quickly enough to pay off the investors. That's not a good sign for the commercial property markets. There have been some

straws in the wind. It won't be until November/December that we get some hard figures into this.

QUEST: What I need to understand from you, because obviously, I'm sure when you were at the bank, there was work being done on variety of

scenarios. As you now look at it today, sir, is it falling out as you had expected?

GIEVE: Yes. I think the trouble with -- once before in my lifetime we've had a slap in the face for the whole political establishment, the way of

doing policy and so on, and that was in `79 when Mrs. Thatcher was elected. But at least she came to power with a government and a sense of

direction. Obviously, the problem with the referendum is we've had the rebuff, the slap in the face, but we've got no one there to tell us where

to go next. So we've got a real period of uncertainty.

QUEST: In that uncertainty, the pound at 1.30, 1.31, 1.32. Some people are suggesting it goes down is low as the low 1.20s. I realize that it's a

mugs game to actually sort of say which way does it go. But how serious is the largest falling sterling in the post Bretton Wood era.

GIEVE: Well, it was the largest fall in one day. But actually this fall hasn't been as big, I think, as the fall in 2008 after the Lehman's crises,

which was spread out a bit. So I think we've had the shock, the immediate impact. We've yet to see where this will settle over a period of months as

people start coming to terms with will there be a recession? Or will it just be slow growth? Will there be a deal? Or is a deal off the cards?

You know, those --

QUEST: Is it a crisis?

GIEVE: This is the beginning of a process. It hasn't been a financial crisis. It's been a big event. But it's a long-lasting two, three, four

if we leave the single market, 10-year process which will unfold slowly. And which will continue to have an impact over that period.


QUEST: Paul Donovan is a global economist at UBS. Paul, good to see you, sir. Listening to Sir John Gieve then, he doesn't talk about a crisis. He

just talks about -- he continually bangs well on this question of uncertainty. Do you think having heard what the bank did today. I mean,

the tinkering at the moment, at least capital, you might get another couple hundred billion out of lending or whatever, but they're still tinkering.

PAUL DONOVAN, GLOBAL ECONOMIST, UBS: Yes, I mean ultimately this is a fairly big event that's going on. I mean, we've got to disentangle over 40

years' worth of legislation et cetera, et cetera. There's a limit to what even economists can do to redress the balance. And the Bank of England is

doing by and large what it can. But they can't -- you know, they don't control trade. They don't control education flows. They don't control

funding. There is a limit to what they can do.

QUEST: Right, but if we've got the bank reducing buffers, lowering interest rates, as they almost certainly will, or most certainly restarting

QE. And you've got the Chancellor basically abandoning his fiscal surplus promise. We're looking for a larger deficit, a worsening economy. Are you

expecting a recession?

DONOVAN: No, I think a full-blown recession is probably going too far. I think we want to be careful about being panicked into this. What have we

got? We've got certainly a hiatus on investment. You've got higher inflation coming through because of the weakness of sterling. Which is

going to dent consumer confidence. And you've got uncertainty, which is again going to dent consumer confidence and consumer spending. But at the

end of the day were talking about here about the absence of positives. We're not at this stage pushing out right into negatives.

QUEST: But it could very easily turn into a self-fulfilling prophecy.

DONOVAN: Well if journalists like you keep talking about it --

QUEST: I could see that in your eyes. But as I was saying that. But the reality is --

DONOVAN: It is a more fragile economy today than it was two weeks ago. There's is no question about that.

QUEST: Where the consumer slowing spending, although the consumer isn't as much a part of the economy as in the U.S., but if the consumer withdraws or

pulls back, then -- I'm trying not to give you grist to your mill, Mr. Donovan.

DONOVAN: I would suggest that what we have got is over the next 18 months, during a period of uncertainty about negotiations. During a period where

food and fuel prices, which consumers are extraordinarily sensitive to, are likely to be going up. Yes, we've got a lot lower growth and we could end

up with negative growth. Though I don't think we'll go that far.

[16:50:04] QUEST: Sterling at 1.30, or whatever it is, and probably going a bit lower, if people like your views fall through. That imports

inflation, but inflation from currency devaluation you can see it. It's not structural until it becomes, of course, structural when it feeds into

the wage demands.

DONOVAN: So I don't think it's necessarily going to be that second round of inflation. I'm actually more worried about the negative growth effects,

which are ultimately deflationary from this. Because actually import prices don't react to currency moves in the way that they used to. You

tend to find that most crises react very, very slowly to currency. Limited pass, it's called. The exception is commodities, food and fuel. Now why

does that matter? That matters because most people are hypersensitive to food and fuel prices, that's the problem.

QUEST: And whilst companies can play with the profit margins and eat the differential in the price, in the increase of inflation on their imported

materials, people really can't do too much with fuel and food.

DONOVAN: No, you notice it. It's a high frequency purchase. You remember it. Most people are unfortunately are not trained economists who look at

things properly. They very narrowly focused on day-to-day, so it damages the sentiment. That's the problem.

QUEST: I'm giving you a freebie here. I'm giving you a freebie on the political side of it. I mean, economics versus politics in this.

DONOVAN: It's the return of political economics. I'm a political economist. I've been waiting for this moment for 20 years. But this I

think is a reminder that politics is back as a driver of markets. And markets are not good at dealing with politics. They just don't do this

well. So we've got additional uncertainty in the financial markets. I think the economics of the policy of this is wrapped up. This is a

reaction to the fact that a group of people in society were left behind by this recovery.

QUEST: And we will say thank you, sir.

DONOVAN: Thank you very much.

QUEST: Thank you very much indeed. QUEST MEANS BUSINESS we'll be back with more after the break.


QUEST: The Bank of England's moves boosted shares in London, whilst in Europe the major indices all fell sharply. Have a look and a listen. A

steep fall in oil prices pushed down shares of the energy companies. Italian bank, Monte dei Paschi fell 19 percent to an all-time low. How

ironic, look at this, three big indexes in Europe are down and London is up. There was a report that suggested the Italian government could pump

money into the bank.

In New York, the Dow snapped its winning streak after the long weekend. That

S an interesting Dow Jones, because it opens lower and it stays there for the whole session, just coming off the lows towards the end.

[16:55:03] As for our QUEST MEANS BUSINESS" newsletter, it arrives in your mailbox after the closing bell, and after the New York closing bell,

there's no major market trading equities anywhere in the world at the moment. It's the perfect time for you to think calmly, coolly, and read Profitable Moment after the break.


QUEST: Tonight's Profitable Moment. This is the last QUEST MEANS BUSINESS from London on this assignment around Brexit. And I promise I'm not going

to bash on about Brexit at nauseam form the next two years or however long it goes on as the Lisbon Article 50 process goes and takes its place.

However, it is worth just remembering that the United Kingdom. as I point out in tonight's QUEST MEANS BUSINESS newsletter, is fighting on all

fronts. On the economic front, there is the slowdown. On the financial front, there will be easing of monetary policy to prevent a financial

crisis. On the political front, there's the question of the leadership challenges in both the ruling party Tory Party and the opposition Labour

Party. And on the diplomatic front the EU 27 are baying for Article 50 to be invoked. Rarely could a country have found itself in such a desperate

situation with no plan or obvious way out. That's what's going to happen in the months ahead.

That's QUEST MEANS BUSINESS for tonight. I Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see

you back in New York.