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Trump Shakes Up fed, Hails Tax Overhaul; Carney Raises U.K. Rates for First Time; Apple Earnings Beat Wall Street Expectations; Janet Yellen Pays Tribute to Jerome Powell; Varoufakis Warns Trump Not to Mess with China. Aired 4-5p ET

Aired November 2, 2017 - 16:00   ET


[16:00:00] RICHARD QUEST, CNN HOST: Closing bell ringing on Wall Street. Dow Jones Industrials is at an all-time high. Only records on the Dow.

Lots of reasons why the market is up. Big day for Philips to be ringing the closing bell. And, a sort of -- oh, yes, go on. He saved it right at

the end, with that firm gavel. Trading is over. It's Thursday. It's November the 2nd.

Tonight, a new tax plan, a new Fed chair, and new market records. Donald Trump's making head way as he remakes the U.S. economy.

Mark Carney in London makes the move investors have waited 10 years to see it happen. And Wall Street likes what it sees from Apple which has just

released its earnings. We'll have the Apple's earnings as we move through the course of the program. I'm Richard Quest, live in the world's

financial capital, New York City, where I mean business.

Good evening. What a busy day, two major milestones for Donald Trump's plan to kick the U.S. economy into overdrive. The president has named a

new chair for the U.S. Federal Reserve and this has been released. The Republicans have unveiled their plan to overhaul America's tax system.

Yes, this is exactly the number of pages, more than 400 pages for a bill to provide for the budget resolution and tax. It's called the Tax Cut and

Jobs Act. Now we'll start with this document. It has been a long and much awaited anticipated plan.

Think about it. The United States has not touched the tax system since Ronald Reagan was president. At least not in any meaningful sense. More

than 400 pages, so this is the one we're going to focus on tonight. This is the one that promises to have perhaps the most immediate effect. Global

corporations and probably for you and wherever you may be watching.

It's page 186, corporate taxes. This part, business tax reform. Really, it's right at the top. It is in section 3001 subsection B paragraph 1,

except as otherwise provided the amount of the tax imposed by section A, 20 percent. Now that slashes the U.S. tax rate almost by half, and it bring

it to 35 percent, brings it in line with other most major economies.

Take a look and you'll see, Canada, 26 1/2. The U.S. is 40 percent but really an effective tax rate of about 35. And don't forget many of them

don't pay that anyway, 28 percent, Ireland. Ireland is one we come to last. Europe average, Africa, Asia, average. By making that move down to

20 percent the U.S. becomes more competitive except for argument's sake with Ireland. And we all know the problems Ireland has with the European


Republicans say the lower rate will lure companies back to American shores. The president welcomed the move by the iPhone chip-maker, Broadcom, which

is relocating its legal headquarters from Singapore to Delaware. Now speaking to CNN, the House Speaker, Paul Ryan, said the U.S. tax plan will

make America more competitive. On the other side, the Democrat Senator, Elizabeth Warren said it was an insult to hard working Americans.


REP. PAUL RYAN (R), SPEAKER OF THE U.S. HOUSE OF REPRESENTATIVES: We are almost dead last in competitiveness in the industrialized world with our

tax code. We're putting ourselves in the front of the pack with our tax code with this. By getting tax code down and leveling the playing field

for businesses so we really don't penalize American businesses competing in the global economy. We are going to get more take-home pay. We're going

to get faster economic growth, more jobs. This all leads to higher standard of living and bigger paychecks. That's the purpose of doing this.



SEN. ELIZABETH WARREN (D), MASSACHUSETTS: This is the point in America when corporations are making record profits. They have cash, they have

plenty of money. If they wanted to make investments here in America, in jobs here in America, they could do it. The idea that if we just give them

a couple of trillion more of taxpayer money that somehow, they are going to make everybody else rich.

[16:05:00] It is an insult to hard working middle class families. That argument is so wrong.


QUEST: Diane Swonk is in Chicago and joins me now. Let us not get into the weeds of this, let us think about the general, the big picture here.

Does this reform package make sense to you?

DIANE SWONK, FOUNDER, DS ECONOMICS: I guess in a word, no. I do favor reform. This package falls well short of reform because it still is a 1.5

trillion price tag at least. And I think that's very important. Because if I was going to spend 1.5 trillion I would spend it on something that

would absolutely boost U.S. productivity. Absolutely boost the job prospects out there, and that would be something like infrastructure. This

doesn't cut it.

QUEST: So, where does this 1.5 trillion come from? Where are they losing it? Is it from the corporate tax cut or is it by the simplification of the

tax bounds from 7 to 4?

SWONK: It's actually mostly from the corporate side. And that's what bothers me about it, is that the trade-offs within it. The idea was to

reform it and eliminate some things on the corporate side to bring the rate down. The actual effective rate is very low. It's actually below the 20

percent. But to get rid of some of the gaming of the system. We have this crazy system, we want it more simple and to get the efficiencies, not add

complexity into the side, on the individual side. And in fact, you're going to have gaming going on in the individual side too. There's some

people if you take a standard deduction and now some people who won't take a standard deduction because of the changes in the tax code. All of that

gaming is not necessarily efficient for the U.S. economy.

QUEST: It makes sense to cut the corporate tax rate, like everybody else. Yes, I understand that most companies are using sleight of hand to keep the

effective tax rate is under 20 percent. But surely it makes sense to get the headline rate down to 20 percent and have this new tax rate of 5

percent on profits from overseas.

SWONK: I absolutely agree with that. I think we should have corporate tax reform. What I see in this plan so far and. you know, who knows what is

going to become. Is it all the weight of the tread offs of reform are going on the individual side and not on the corporate side. That's what

the problem with it is. Is that the bulk of the costs are coming on the corporate side in terms of the deficit. And if it actually does push up

the deficit, that's going to be problems for us down the road when, you know, a burden that we have to pay off. That many young people today will

be paying off.

QUEST: Now I've just rushed to the desk to get the list. So, the subtitle D, we won't get into great deal, don't worry. Simplification in the form

of ductions. Itemized reductions, repeal, mortgage interest, $.5 million business. Repeal of certain taxes, reduction for personal casualty and, of

course, the deduction that most people in expensive states love, like New York and California, the ability to deduct state and city taxes from your

federal income. Gone.

SWONK: One of the interesting issues on there, the medical deductions being excluded, student loan interest no longer being deductible. The

500,000 I'm all for limiting actually the amount that we deduct on our mortgages in this country. Because we overconsume housing. The way it's

set up is if you have a million dollars mortgage you can keep it and continue to deduct it, you're grandfathered in. That means you have no

incentive to sell that house ever. Until you paid it down to 500,000. And I think that's where the problems are, is that they haven't thought out the

second order reaction function to this. And looking at those kind of second order reaction functions, to me, is not very thoughtful. And really

is trying to put some burden onto individuals when we have a lot of corporations gaming. We should clean the whole system up. Nobody's

willing to make the kinds of trade-offs necessary to do that.

QUEST: You're a brave woman wanting to clean the whole system up. Good luck trying to do that. Lovely to see you.

SWONK: I know. A bit of a high goal I have.

QUEST: Thank you. Wonderful, Diane Swonk, joining us from Chicago.

Now let's from fiscal policy to monetary policy. As we predicted last night, and indeed Jerome Powell's nominated by the president to be the next

chair of the Federal Reserve. The move goes against precedent. He's passed over the chance to re-nominate Janet Yellen for a second term.

[16:10:00] She is after all, the first woman to ever hold the job. At the White House, Powell and the president both stressed the Fed's independence.


JEROME POWELL, NOMINEE FOR U.S. FEDERAL RESERVE CHAIR: Inside the Federal Reserve we understand that monetary decisions matter for American family

and communities. I strongly share that sense of mission and I am committed to making decisions with objectivity based on available evidence in the

long-standing tradition of monetary policy independence.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I have nominated Jay to be our next federal chairman. It's so important because he will provide

exactly that type of leadership. He's strong. He's committed. He's smart. And if he is confirmed by the Senate, Jay will put is considerable

talents and experience to work leading our nation's independence central bank.


QUEST: A new Fed chair potentially over time, a different set of policies. CNN's Clare Sebastian looks at Jerome Powell.


CLARE SEBASTIAN, CNNMONEY CORRESPONDENT (voice-over): Jerome or Jay Powell offers one thing, above all as Fed chair, continuity with his predecessor.

JANET YELLEN, U.S. FEDERAL RESERVE CHAIR: The ongoing strength of the economy will warrant gradual increases in the federal funds rate.

POWELL: Several factors suggest the pace of rate increases should be gradual.

C Over 5 1/2 years, in more than 40 monetary policy meetings, Powell has never once voted against consensus on interest rates.

UNIDENTIFIED FEMALE: The Fed has a very careful strategy that it's laid out of gradually normalizing rates. I think Jay Powell will definitely

continue that strategy.

SEBASTIAN: Yet this continuity chair does stands out in other ways. He doesn't have a PhD in economics breaking a three-decade tradition at the


POWELL: We are promoting financial stability --

SEBASTIAN: And if confirmed he'll be the first former banker investment to chair the Fed having spent eight years at private equity firm the Carlyle


UNIDENTIFIED FEMALE: He is a practitioner. He is somebody that has been in markets and understands the imperfections and the benefits and is not an

academic in that sense. So, in that area, I think he brings a depth of expertise that's going to be quite useful.

SEBASTIAN: President Donald Trump wants to gut post-crisis banking regulations.

TRUMP: We're going to do a very major haircut on Dodd/Frank.

SEBASTIAN: And Powell may slightly more open to this than Janet Yellen.

YELLEN: Many of the appropriate reforms are embodied in Dodd/Frank.

POWELL: It's importance for us to look for ways to reduce necessary burden.

UNIDENTIFIED FEMALE: I think there are some nuances in their approaches there. But I don't think it's a dramatic change or that he's a

deregulator. I think he's about getting the mix right.

SEBASTIAN: Powell has dipped in and out of public life throughout his career in the early '90s serving as undersecretary for the treasury under

George H. W. Bush. His last job before joining the Fed in 2012 was at Bipartisan Policy Center, a think tank.

UNIDENTIFIED MALE: Jay is really driven by evidence. He is not someone who has a hard-ideological edge that tries to have facts fit his

conclusions. He takes exactly the opposite approach.

SEBASTIAN: Evidence and experience, two critical assets when running the Fed.


SEBASTIAN: A smooth transition for the Federal Reserve. But of course, Janet Yellen hasn't left yet. She still has two meetings, Richard, until

her time ends on February the 3rd. The idea is that Jerome Powell will be confirmed by the Senate before then.

QUEST: All right. So, later in the program we're going to be talking about Yellen's record, which is stellar. I suppose there is still a

bitterness that the first woman to run the Fed didn't get reappointed. When as you say in your piece, the norm is that you do get it.

SEBASTIAN: Absolutely. The norm is that you get reappointed. Ben Bernanke was reappointed by a different president than the one that

appointed him in the first place. If you remember, Richard, Greenspan was at the helm of the Fed for 19 years and Volcker before him another eight

years. There is a huge precedent in this. There' very likely to be nothing out of the ordinary the ordinary in the way that Jerome Powell

continues to conduct monetary policy, possibly a view nuances when it comes to regulation. The precedent of Trump putting his mark on the Fed in this

way has certainly created some waves.

QUEST: You have got your work cut out for you for the next four or five years as you monitor the Fed for changes under Jerome Powell. Good to see

you, thank you very much indeed.

Talking about the Fed, let's see what happened to the markets. Join me at the trading posts. And you see the Dow Jones Industrials, the only one of

the major markets which closed at a record high. So, for the Dow, we now have 55 high so far, this year. The Nasdaq was lower, the S&P no record,

and there were no records in Europe to be seen either.

[16:15:00] As we continue after the break. They say a week's a long time in politics, a decade feels like forever in economics. The Bank of England

broke its 10-year rates record and raised rates. We'll tell you why and how after the break. QUEST MEANS BUSINESS.


QUEST: Can you remember what you were doing 10 years ago. Well, Rihanna with her song, "Umbrella" was number one on July 5, 2007. That's the last

time that U.K. interest rates rose. In other words, the tightening cycle, albeit very small, very minor, the tightening cycle in Britain has begun.

So, the U.K.'s rate roller coaster began right before their credit crunch. Maybe not so much a roller coaster, more a down. 2007 the credit crunch

begins and Lehman's -- you see the little steps down. At 2008 the Lehman bankruptcy.

The global financial crisis saw rates cut repeatedly all the way down to record lows the end of eight into nine. For seven years there was no

movement. Rates stayed at half a percentage point and Mark Carney replaced Mervin King as governor, of the Bank of England. And then there was the

Brexit vote. Which, of course, the referendum went in favor of Brexit and there was worries about the economy. So, immediately Carney and the MPC

flooded the system with money and once again they took rates down two a quarter of a percentage point. In other words, post Brexit they were

actually lower than they had been throughout the whole of the financial crisis. Now rates have inched back up again to where they were all those

years. The governor says it's time to not so much raise rates, more ease off the gas.


MARK CARNEY, GOVERNOR, BANK OF ENGLAND: With unemployment at a 42-year low, inflation running above target and growth just above its new lower

speed limit. The time has come to ease our foot a little off the accelerator. That will help bring inflation back toward its 2 percent

target, while still supporting jobs and growth.


QUEST: Gerald Lyons joins me from London, chief economist, economic strategist at Netwealth Investments. You know, Jared, I feel sort of a

little guilty making such a fuss about a quarter point rate hike to just half a percentage point, which is still incredibly unbelievably low to

those of us of a certain age. But it is significant nonetheless.

GERALD LYONS, CHIEF ECONOMIC STRATEGIST AT NETWEALTH INVESTMENTS: Yes. It is significant clearly, when interest rates I move up for the first time in

a decade, it's saying something. On the positive side it's reflecting the strength and key parts of the economy. The labor market is doing really


[16:20:00] On the other side it's reflecting some of the governor's concerns. The fact that inflation is above target. But I think the key

message today, was that even though rates have increased, the governor and Bank of England are not going to increase interest rates aggressively.

It's very much a case of gradual -- more like the U.S. Fed but even slower maybe than the rate at which the Americans save raised re in recent years.

QUEST: But there's a difference between the Fed's situation and the Bank of England.

They are on opposite sides of the inflation target. Although they have the same challenges. In the sense that the Fed's raising rates when it's

undershooting. So, can it get to 2 percent. The BOE by a quarter point, is that going to make any difference when rates are at 3 percent?

LYONS: The key thing about inflation, is that inflation looks set to peak in the fourth quarter of this year. Basically, the weakness of the pound

over the last year, plus higher oil prices has led to higher inflation. Inflation looks likely to be trending down next year. So, the big push

back today will have been that if inflation is about to peek and the economy, according to the governor of the Bank of England, it is going to

be slow. Why does he increase interest rates? He was having to justify that today. But you're right, the inflation picture is slightly different.

But if we look 6 to 12 months ahead, the likelihood is that inflation -- which is currently 3 percent now -- will be trending down 2, 2.5 percent

towards the 2 percent target.

QUEST: And in any event, there are always those items that fall out of the index after 12 months that rebalance it back.

[16:25:02] How much of today's move do you think is really -- oh yes, there's an inflation element to it. But it's about a wish to start this

process of normalizing rates, getting people used to the idea, even though in today's MPC statement and the FOMC statement and the governor have made

it clear rates will go back to nothing like previous high levels.

LYONS: That's right. The way I tend to tell it, is that if we look globally the three S's dominated monetary policy after the financial

crisis. Monetary policy globally was synchronized, it was sizable, and it was successful. Rates were cut elsewhere. Now we have three different

type of S's. It's scale, sequencing and shocks. Basically, the scale of rate hikes here in the U.K. will be gradual. The sequencing is higher

rates first, then stopping the printing of money and avoiding shocks.

Therefore, everything that the governor and Bank of England does here -- like in America with the Fed -- has to be telegraphed to the markets

because over 8 to 9 years here in the U.K., financial markets and the economy have become very used to low interest rates. We need to avoid any

shocks. It's a case of moving rates up very gradually bit by bit and hopefully not for some time after today's increase.

QUEST: Good to see you, sir. Thank you, really kind of you to come in --

LYONS: Pleasure.

QUEST: -- this late in the evening.

The rate rise was a boost for the market. The FTSE closed up nearly 1 percent, not a record. Remember, the gains of the Dax -- 1.8 percent

yesterday, some of that was shaved off from the record close yesterday so no gains there.

Apple's share price rallying after-hours. The company beat Wall Street expectations for the fourth quarter. Net profits of nearly $11 billion.

We need to understand what was behind them. Lance Ulanoff is the editor- at-large at Mashable. You have the advantage of me of having seen the results and got to grips with them. Tell me what was in them that you

particularly want to draw to my attention?

LANCE ULANOFF, EDITOR-AT-LARGE, MASHABLE: 46 million iPhone sold, iPads sales growing again.


ULANOFF: Maybe because of 10.5 iPad Pro. You know, I think maybe some kind of penetration on the business side. It's really a great business

device with the pen, with a keyboard. That may be having. Tim cook just said there was 75 percent year-over-year growth for the wearables. And

it's making as much as a Fortune 400 company. They still don't give us --

QUEST: He's giving you a global picture about wearables. But he hasn't said "The Watch."

ULANOFF: He doesn't give us, how many of these are sold. I'm actually wearing the Apple watch, which now has cellular service and we're waiting

to see how well does that sell. Because, you know, it's a device you don't need to have the phone with? You can make calls, you can stream music.

Theoretically that's going to be an attractive device for people, but we don't know.

QUEST: I'm just looking down at the screen. The market had been just pretty much unchanged give or take, three-quarters of a percent throughout

the course of the day. And Apple stock aftermarket hours, it's up 3 percent. The market is in a stock -- if I, was to show you the Apple share

price stock it's basically just done this for the last year, maybe a bit of that but not much.

ULANOFF: There's some excitement right now. We had the iPhone 8 Plus this fall. But then iPhone 10, this device that's launching tomorrow that is

exciting people in a way they haven't been excited about Apple products in maybe a while. Because it's truly innovative and also is the future of

these phones. I don't have a home button. There's no home button on this device, 5.8-inch screen, gesture control, really beautiful design. But

what's interesting to me is the fact they still sold a lot of iPhone before this guy came out and Tim Cook just said he expects this quarter -- the

upcoming quarter with the holiday season to be their biggest quarter ever, and that's important. Because that might mean they have the supply to meet

the demand.

QUEST: Right. Because the X and other ones, there have been problems about, haven't they, the expensive ones?

ULANOFF: Well, right. By the way, we should call it the iPhone 10 even though it has an X. It is in fact, the iPhoto 10. 10th anniversary.

QUEST: That for the X.

ULANOFF: Apple's never said a single word about those supply issues. It's been all chatter on the other side, people watching, different sources.

QUEST: Really expensive one.

ULANOFF: $1,000 that's to start, 64 gigabytes. And you know what's funny? I think people are still going to buy it. They're still going to buy it

because it's an Apple product, it's cachet, they love carrying around something where someone goes, oh, I can tell that's the new iPhone 10.

That's pretty hot. It's a fact. It just happens

QUEST: Thank you very much.

The U.S. Department of Justice could be death for AT&T's pursuit of Time Warner, parent company of this network. Report say it could file a lawsuit

to prevent the merger. It stands at a mammoth $85 billion. Time Warner, parent company of CNN, my boss, the stock was down.


QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment, when Janet Yellen pays tribute to her likely successor at

the Fed. I'll be speaking to one of Chair Yellen's closest friend. And I'll joined live in the studio by Greece's former finance ministers, Yanis


Before that, this is CNN and on this network, the facts always come first.

Sources are telling CNN that President Trump's son-in-law and advisor, Jared Kushner, has turned over documents to the special counsel. They says

Robert investigation Mueller's is interested in Kushner as part of the Russian meddling probe. They're asking witnesses about Kushner's role in

firing of the FBI director, James Comey.

Meanwhile, the White House says, the president is considering putting North Korea back on the list of state sponsors of terror. It was removed in 2008

by President George W. Bush. It comes as South Korea's spy agency's warning another nuclear test could be imminent.

Spanish prosecutors are seeking a Europewide arrest warrant for the ousted Catalan leader, Carles Puigdemont. Puigdemont has failed to appear at a

Madrid court on Thursday. He's believed to be in Brussels. The court ordered eight members of the deposed Catalan government detained over the

region's independence bid.

Ang San Suu Kyi visit is Myanmar's Visiting conflict ridden rocking state on Thursday for the first time since the Rohingya mass exodus. The

countries de facto leader face global criticism her handling of the crisis. Seeing more than .5 million of Muslim ethnic minority flee to Bangladesh.

Actor Kevin Spacey is seeking unspecified treatment after he was accused of sexual assault. The allegation comes from another actor who says Spacey

assaulted him in 1986. The alleged victim was a minor at the time. And on Wednesday, a British man has accused Spacey of sexual conduct stemming from

an alleged incident in 2010.

The U.S. Department of Justice could block one of the biggest mergers in media history. Shares in Time Warner, parent company of CNN fell nearly 4

percent after a report said the U.S. government may file a lawsuit to derail the purchase of Time Warner by AT&T. The telecom giant agreed to

pay 85 billion for Time Warner last year. Critics say it will create a too powerful a company with a monopoly of content and distribution.

Brian Stelter, good to see you, Brian.


QUEST: Brian, we are talking about our bosses and our company. We'll put that to one side. Is that true? Is the Department of Justice looking at

litigating the merger?

STELTER: There is a chance that they will sue to block the deal. This has been a review taken very long time, Richard. It's been over a year since

the deal was announced. And all the other countries where AT&T had to gain approval have already signed off. It is only the United States that is

still reviewing the deal. And that's partly because of the Trump administration. It was a while before the new antitrust chief was in

charge. But now that person at the Justice Department, who is in charge of reviewing this is finally in place. They are reviewing the deal, that

department is reviewing the deal, apparently has some concern.

QUEST: About what? Do we know which area is causing them concern?

STELTER: That we don't. Now the argument from AT&T and Time Warner has been -- because this is a vertical integration, meaning a wireless phone

company with a content entertainment company, that there isn't a lot of consolidation. There isn't a lot of overlap, customers are not hurt by the

combination of the two. That's the argument from the companies. In the past we've not seen a vertical merger get imped like this by the Justice

Department. If the indeed the government does sue to block the deal it would be a first.

QUEST: Now QUEST MEANS BUSINESS viewers are men and women of the world and will be well aware of the disagreement by the U.S. president concerning

this network, CNN. Do we think, or is there a view that this is politics?


QUEST: That was a quick answer. Either to get rid of CNN or to put the boot into us or -- what's the word on the street about?

STELTER: There's a view that president Trump wants to punish Time Warner and AT&T because of CNN's role in the deal. CNN is one piece in this deal.

Of course, HBO and Warner Brothers are also a very, very big parts of Time Warner. But because of the role of CNN and president Trump's dislike for

this network there is a view in Washington that maybe Trump, and Jeff Sessions, the head of the Justice Department, are going to try to interfere

in the deal to publish CNN.

Now course, there would be denials about that. That would be highly usual. The White House I don't think whatever would ever admit to that. But on

the campaign trail now President Trump said that he would block this deal. So, that's why there's curiosity about the possibility.

QUEST: Obviously, the threat of litigation it is designed to force the hand of a negotiation for a price that's acceptable to the Justice

Department. In any other case it would be divestiture, competing, overlapping, could be restrictions on trade. We saw it in all sorts of

mergers. Is there the possibility the price for this deal is the dissepiment of CNN?

STELTER: There has been talk about that a number of months ago. The spin- off CNN. That maybe AT&T would find a buyer. Certainly, CBS and other companies would be interested in buying CNN. AT&T has repeatedly said they

are not interested in doing that. They want CNN part as a part of this merger. So, there's been a lack of interest from AT&T and that

possibility. But you have to wonder what the government's goal here is. In a normal merger they're looking at conditions you described, anti-

competitive sorts of issues. Maybe that's all that's going on at the Justice Department. We don't really have a lot of visibility into the

deal. Most importantly here, analysts I talked to today said they believe this deal will eventually will go through. They believed today's news is a

leak by the Justice Department in the ongoing negotiation.

QUEST: Good to see you, sir. Thank you.

STELTER: Good to see you too.

QUEST: As we continue tonight on QUEST MEANS BUSINESS, President Trump once accuse the Fed of doing political things. Today he paid tribute to

its chair, Janet Yellen saying she had done an excellent job. We'll explore the apparent turnaround with one of chair Yellen's friends with

whom she used to have Chinese food for lunch. What did the chair order off the Chinese menu?


QUEST: Janet Yellen was the first woman ever to serve as the Fed chair so far. So far so good. She's currently the only woman leading a major

central bank in the world. There are 10 central banks led by women but nothing of the scale and size, obviously, of the Fed. So, chair Yellen was

different instead of chairman Bernanke. Chair Yellen has immense influence over U.S. markets an global economy. Yet 70 percent of Americans have

never heard of her according to one poll. Throughout her tether she's kept investments calm and markets rising. Today, it appeared she did one over

one of her initial critics, the president.


TRUMP: I also want to thank the current chair, Fed chair, Janet Yellen, a wonderful woman who has done a terrific job. We have been working together

for ten months. And she is absolutely a spectacular person. Janet, thank you very much. We appreciate it.


QUEST: So much of a spectacular person that she wasn't reappointed. James Wilcox is professor of economics and finance at the Haas School of Business

at the University of California. A close friend of chair Yellen. They enjoyed the occasional Chinese meal together. A little earlier he told me

she could have served a second term if the president had wanted it.



would warrant another term if that's what the president had wanted. But you can also understand why any president likes to choose his own


QUEST: If we look at her record both before she became chair and as chair, what was it about her policies that stand out to you? What was it she did

as chair of the Fed and head of the FOMC, what was it she did you found outstanding?

WILCOX: I think that she kept interest rates low for a long time. I think that's exactly what the economy needed. She was part of, of course, the

Fed while chairman Bernanke was in charge. And think the quantitative easing policies that were instituted were enormous help to the economy, not

only the United States but frankly to the rest o4the world. And so, she was part and parcel of that policy. That was a bold big set of moves that

they took, and I think it benefitted all of us.

QUEST: The decisions she's had to take I her term as chair, from the whole tapering question and then going from tapering to starting to raise rates

and then the rebalancing the balance sheets. These are issues that have never, if you like, been faced in anger, have they? They've never actually

had to be tried in reality?

WILCOX: Well, the biggest boldest move was to engage in the quantitative easing and to enlarge balance the sheet to begin with. That was the brave

thing to do. The easing off from that is by comparison, a much easier task. It can be done much more gradually and having already enlarged the

balance sheet, shrinking it is a much easier task.

[16:45:00] QUEST: Do you think that Jay Powell, Jerome Powell -- worked with chair Yellen, for the last five years -- do you see continuity and

even if there is continuity, where do you see potential divergence?

WILCOX: I think at first, there it is likely to be policies that virtually indistinguishable. He's very likely to want to follow very steadily the

steady course that the Fed has already really laid out. But no two Fed Chairman are exactly the same. So, I think you can imagine that things

will be in some dimensions tighter. And there's going to be some dimensions that policies will be made lighter.

QUEST: Finally, professor, so, the Chinese food we've all heard about that you and Janet Yellen used to enjoy at lunch, is that true or is it


WILCOX: It is very true. And it's a very fun educational chapter in my life.

QUEST: What did she used to like to order, do you remember?

WILCOX: Sichuan shrimp with pot stickers.

QUEST: Did she use chopsticks?

WILCOX: Yes. Not as well as I did.

QUEST: Good answer. Thank you very much. Good to see you, professor.

WILCOX: Thank you, Richard.

QUEST: On President Trump's forthcoming trip to China he will be traveling with the CEO of Goldman Sachs, Lloyd Blankfein. The White House says

economic cooperation is one of the key trip's messages. My next guest warns the president not to mess about with China because he is playing with


Yanis Varoufakis, Former Finance Minister of Greece, the author of "Adults in the Room, My Battle with Europe's Deep Establishment."

We will come to the book in just one second, why do you warn playing with China, being tough with China is playing with fire?

YANIS VAROUFAKIS, FORMER FINANCE MINISTER, GREECE: In 2008, two things prevented the great recession from becoming a great depression. One was

the central banks printing a lot of money and the other was China pumping up the credit bubble immensely.

Intentionally, in order to rebalance global capitalism. In 2014, you will recall the deflationary bouts in the West were again prevented by China

prepared to do the same thing. At a time when Mr. Trump is about to boost the federal budget deficit, which is already very large through his tax

cuts and whatever expenditure plans he has. And therefore U.S. treasuries will start going up in yields while the Fed is climbing down from its huge

balance sheet mountain. To antagonize the owners of a large chunk of treasuries and to create circumstances of great uncertainty in China is the

wrong thing to do.

QUEST: The wrong thing to do with China, turn to Brexit, would your advice to Britain be your better off out? If you can't get a good deal, leave


VAROUFAKIS: No. I can never be accused of being a lackey of Brussels, but my line has always been Brexit is a disaster, avoid it. But of course, we

are democrats we have to respect the verdict of the British people.

QUEST: you don't want Brexit but if you're going to have Brexit, get on with it in the commission and the 27 are going to set out to do as much

harm as they can to you in that process.

VAROUFAKIS: That is correct, that is what I have been saying. I have been saying that Britain faces two options. One is the hard Brexit just get out

which is not my recommendation. But it's better than the silly negotiations about negotiations that will never take place.

Alternatively, this is my recommendation, end this discussion about the phony negotiations, in file instead an application a Norway style agreement

for a period of five years, after the two-year post article 53 period is over. In order to do one thing that is actually in the spirit of Brexit,

to restore sovereignty in the House of Commons.

The only way to restore sovereignty in the House of Commons is to give them a period of five years at least during which to discuss amongst themselves

what kind of arrangements they want which in the U.K. and the EU. So, a Norway style agreement respects Brexit because Britain is out, creates a

certainty that business and citizens need, and allows the House of Commons to have this discussion. And of course. Ms. Merkel to pass on the baton

to the next chancellor.

QUEST: You come to this with huge experience of dealing with the EU, your book talks

about --

VAROUFAKIS: Large but short.

QUEST: Large but short and painful and bitter.

VAROUFAKIS: Extremely painful.

QUEST: Wolfgang Schauble who I saw at the IMF in Washington, I asked him about Greece. I asked him, do you ever go home at night and worry about

what people increase think about you Germany?

[16:50:00] He said I understand it was especially difficult for public opinion in Greece, it is quite understandable, but it is always difficult

to accept reforms. I can understand it, but I was convinced it was in the best interest of Greece.

VAROUFAKIS: Except there were no reforms. Important not to confuse butchery

for surgery, cutting the lowest of pensions by 50 percent, slashing public investment, this is not reform.

Reform means fixing for instance the pension system.

QUEST: Did you go head-to-head with him in meetings?


QUEST: Where it got to the point you were shouting at each other?

VAROUFAKIS: No, never. I have nothing but respect for Wolfgang. He knows that. He is somebody I've been following for decades. I read everything

that he ever wrote, and we had very good conversation but of course we went head-to-head for the very simple reason he has a position antithetical to


In the end I must say this to you, we found ourselves in his office sometime in June 2015 equally dejected, because even though we disagreed,

we agreed about one thing, that what was about to take place, a third bailout, a third credit card for bankrupt Greece was the wrong thing to do

by the Greeks and by the Germans. Both of us rejected. That is the tragedy in the book.

QUEST: In the whole incident, episode that to some extent continues today, who do you blame most? All right, I am being simplistic. You're very

educated academic man. And I am bringing it down to the most basis of things, who do you blame most for the way in which the EU, EC, Euro group

or whatever you want to call it handle the affairs on that side?

VAROUFAKIS: Fundamentally, I blame the way in which Europe tried to replace the fallen Breton Woods system with a gold exchange standard like

the euro.

QUEST: Which people?

VAROUFAKIS: Well, you can start with Helmut Schmidt, and go all the way to today, but if you want me to put my finger on one person, it must be Angela

Merkel. The reason being that she is a sensible woman, a stupendous politician, a very smart person, hard worker.

And she was the only politician with the power to make a difference, to move Europe towards a federal model in order to complete the monetary union

with political union. She failed in that task and she will go down in history as a smart politician who failed to use her power for good.

QUEST: One promise you have to make when I'm next in Greece, we will go and see what's happening in the real Greece, you can show me to Greece that

you have always promised to show me.

VAROUFAKIS: I will always be willing to do this, if you ever were to come.

QUEST: It is not a question of if, it is only when.

VAROUFAKIS: Let's do it.

QUEST: As we continue tonight and QUEST MEANS BUSINESS, customer service might you think of a call center and tedious phone queues. The future

involves no phones and no humans. I will talk to the chief executive of one company that is putting

artificial intelligence into the heart of business.


QUEST: Extremely tough day on Wall Street for LivePerson. You may not have heard of the company, there is a good chance you have spoken to one of

their chat bots. The company uses artificial announce to help with customer service. Its clients include Virgin Atlantic, Vodafone, Microsoft

and IBM. Yet shares in the company tumbled more than 17 percent during trading after it cut its earnings out and reported a loss in the third


Robert Locascio is the CEO of Live Person, he joins me now. Good to see you, sir. Should I commiserate at 17 percent? It's never nice to see your

share price cream like that is?

ROBERT LOCASCIO, CEO, LIVEPERSON: No, we are up 50% for the year and we had one of our best quarters, we beat our guidance numbers, we up their

ranges for the year.

QUEST: Why were they so mean to you today?

LOCASCIO: I don't know. I have been doing this for 16 years running a public company, and I really thought that I would wake up today with like

at our all-time high. And so, it is what it is. No idea.

QUEST: Is it difficult to run a company and not take notice when the market beats you up? We know obviously volatility is much heavier, the

market is much more cruel when you miss or if you don't miss. It is a lot harder.

LOCASCIO: We didn't miss.

QUEST: Right. But you weren't good enough.

LOCASCIO: We were good enough. I beat all the numbers.

QUEST: Not good enough!

LOCASCIO: The bottom line is I've been doing this 20 years, 16 years as a public company CEO. I took the company public in the middle of the dotcom,

everything was going on. I have always taken a long-term view. Stocks up, stocks down, I don't look at it, I really look at where is our future, and

we have an amazing future.

QUEST: Your product is love it or hate it, isn't it, in that sense? The AI, the idea of taking away from live person, the option more of the name

when it's not live.

LOCASCIO: But it is live. We deliver both a live human agent as well as a bot. We're transforming the biggest problem in your life, which is,

calling an 800 number. When someone tells you, call up and when you have to change your service and you're on hold, we rid the world of that and

that's what we're doing.

QUEST: On the wider issue of AI, people tell me it's going be the biggest change in employment since the industrial revolution, as computers, as

artificial intelligence, whatever you want to call it, takes over and takes more and more jobs. Do you buy this?

LOCASCIO: There will be automation in jobs. We see it -- we work in the contact center space and jobs in the contact center space will be

automated. But new jobs will be created. We had the industrial revolution and from there new jobs are created.

QUEST: There is an interim period of pain as that transfer takes place. Is it your view we're ready for that?

LOCASCIO: What we see is the people, the agents will actually manage the bots. That's the difference.

QUEST: You don't need as many, you need four agents to manage goodness knows how many bots, rather than goodness knows how many agents.

LOCASCIO: potentially, but what we see today is that it's not that, the bots need training, the bots are not ready. They need agents to script and

work with them to manage them. So that is the opportunity. The call center agent world has been going down for years.

The cost of the job, they are offshore, but this gives a whole new life I think to an industry that has been under pressure for years. If you're out

there in a contact center, now you can manage a bot, help scale a business and eventually something will happen. You're right.

But today there is a lot of opportunity out there. But AI will change our world. We can't stop it. You and I want, we want automation in our life,

we have automation in our life in many ways, so we're going to have automation and the weight up into his businesses. And that is what this is


QUEST: Really good to have you in even with 17 percent down, but good 50 percent for the year.

LOCASCIO: 50 percent for the year.

QUEST: As we continue tonight, a Profitable Moment after the break.


QUEST: Tonight's Profitable Moment. We talk so much and hear so much about how little perhaps is being done by the new U.S. president and

administration, today, we have a real-life example how Donald Trump is changing the United States and potentially changing the economy.

I say that, whether you think it's for good or for bad. Two things, first of all, he appoints a new Federal Reserve chairman, Jerome Powell that

takes over for Janet Yellen next year and second is this 400-page document which is the tax plan, that will, if passed, even if it's largely passed or

mostly passed, will be a sea change, the first full tax reform package.

So, the truth of the matter is, yes, Donald Trump already making major changes to the U.S. economy. Don't forget the regulatory changes. Rules

and regulations swept away since this administration came forward. Again, I'm not making a political comment here for good or bad, I'm simply stating

a fact. The reality is Donald Trump in major ways. What we've seen on the Dow, which rose to record, the market seems to like it. That's QUEST MEANS

BUSINESS tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. We'll do it again tomorrow.