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QUEST MEANS BUSINESS

Peter Navarro Explaining Why President Trump Is Fixated On The Fed And A Lower Dollar; Economic Protests Are Rocking The Middle East, From Lebanon To Egypt To Iraq; Explosive Text Messages Detail Trump Pressure On Ukraine; U.S. Economy Adds 136,000 Jobs in September; Text Messages Detail Trump Administration's Pressure on Ukraine; Prince Harry Sues Tabloids for Alleged Phone Hacking. Aired 3-4p ET

Aired October 4, 2019 - 15:00   ET

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


[15:00:13]

RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: Sixty minutes ago before that close of play on Wall Street and a very strong day right

the way through. From the moment the markets opened right going through, we're nearly at the best points of the day. All sorts of undercurrents

going on as to the reasons why.

The markets are feeling ebullient as they end the week. And this is part of the reason why.

There have been all sorts of economic worries over the course of the week. Well, there's Peter Navarro on the White House lawn waiting to explain why

President Trump is fixated on the Fed and a lower dollar. We'll talk about it in a moment.

Economic protests are rocking the Middle East, from Lebanon to Egypt to Iraq. We will be live in Baghdad. This time, it is all about the economy.

And Christine Lagarde's legacy, how she will bring her fix the roof mantra to the European Central Bank.

We're live in the world's financial capital, New York City. What a lovely day. How different from yesterday. It is Friday, it is October the 4th.

I am Richard Quest, and of course, I mean business.

Good evening, it was a solid U.S. jobs report, and it has steadied the markets, but it caps such a tumultuous week full of flashing economic

warning signs and rampant volatility.

So now, investors in the market are hoping their negative headlines might push the Fed to cut interest rates once again. Well, today's numbers leave

you a bit of a mixed message -- 136,000 jobs added in September, less than expected, less than the consensus. But the unemployment rate is down to

3.5 percent, the lowest in 50 years.

However, wages are not growing. They were unchanged. The average hourly wage rate and negative data has inflamed fears of U.S. slow down.

Let's remind ourselves how the week has gotten, the bigger picture. On Tuesday, we saw the clearest sign yet, manufacturing has been slammed by

the trade war with China. The sector is in contraction, and it hasn't been this sluggish since the Great Recession.

On Thursday, data showed U.S. services sector, jobs in banks, restaurants, hotels and the like, also slowed to the lowest level in three years. Even

though the unemployment rates are strong, job growth is clearly slowing.

And this week, President Trump blamed the Fed for the weak numbers.

"As I predicted Jay Powell and the Federal Reserve have allowed the dollar to get so strong, especially relative to all other currencies that our

manufacturers are being negatively affected. Fed rate too high. They are their own worst enemies. They don't have a clue. Pathetic."

Which I think is somewhat strong language about the good burgers at the Federal Reserve. Economists says the President's own trade policies are

causing these warning signs to flash.

So let's go straight away to the White House, his foremost advocate for U.S. tariffs on China and the trade policy. It's Peter Navarro, who is at

the White House.

Peter, good to see you on this Friday. Thank you, sir, as always for giving us time.

PETER NAVARRO, DIRECTOR, WHITE HOUSE OFFICE OF TRADE: Good evening to you, sir, across the pond.

QUEST: Good evening. Now let's begin, this trade number. I'll grant you the number is good. The economy is strong. And the U.S. economy is by far

and away the best performing at the moment. But there are warning signs within this trade number that the administration needs to take care of.

And it's not just the fact that unemployment is down at three and a half percent. Do you accept that?

NAVARRO: No, no. Let's look first at the numbers today. I think one of the reasons why the market was so bullish today is if you parse through the

numbers, you start with the top line 136,000 new jobs. But we also had, Richard 45,000 jobs upward revisions over the last two months.

And if you work that in with the wage data and the productivity data, what that does is allow you to forecast a GDP growth rate in the range of two

and a half to three percent, which is robust. I mean that is bullish.

The manufacturing issue. I looked at the ISO Manufacturing Index, it is one of my favorites. It's definitely below 50, but there's a new kid on

the block. It is this PMI that Markit does, it is spelled with an I-T and that one's above 50. And the difference between those two indicators,

Richard is the old one, the ISM basically is export dependent whereas as the Markit one is more domestic manufacturing.

QUEST: Right.

[15:05:01]

NAVARRO: I think this is a great number. I can see why the markets excited about a two and a half to three percent growth rate, but the Fed --

QUEST: But --

NAVARRO: We'll talk about the Fed.

QUEST: So let me come to that. On to on a difficult position here because you've just told me how great everything is. You've told me how we can

extrapolate growth numbers which are acceptable.

Well, I'm sorry, Peter, but you can't have your cake -- you can't have Fed cake and eat it.

NAVARRO: See that place behind me, the White House, what we do here at the White House, what the President does is great, right? We're not satisfied

for good or very good, and the problem with the Federal Reserve policy is that it's inflated the dollar.

First, it started inflating -- overvaluing the dollar by raising rates too far and too fast. That was a Jay Powell thing. We call him the

caterpillar killer around here. Caterpillar Tractor trying to sell their exports, right.

And now what's happening in the chess game of Central Banks, the European Center Central Bank has really outmaneuvered Jay Powell because it's been

lowering faster than we are. So you get these big spreads between the U.S. and Europe, you get a carry trade going. And we see in the data that our

exports are being heavily hit.

The straw man is this trade tension stuff. The reality is, it's the overvalued dollar Jay Powell, the caterpillar killer.

QUEST: All right, so let's accept that we wish to abandon the old rubric that a strong dollars in the best interest of the United States. That's

the last --

NAVARRO: We love a strong dollar. It's an overvalued dollar. If we had a strong dollar prior to Jay Powell raising rates too far too fast and that

basically put our strong dollar -- it's not good for exports.

QUEST: But hang on, Peter. I mean, let's look at the dollar. Let's look at the President and the dollar. In 2017, the President said that the

dollar -- routinely said the dollar was getting too strong. That was in 2017.

A year later, and the President reverses course. In 2018, he said he wants the dollar to get stronger and stronger. Have a listen. Back with you in

a minute.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I'll tell you where I stand, which ultimately is very important. Number one, I don't like

talking about it, because frankly, nobody should be talking about it. It should be what it is. It should also be based on the strength of the

country.

We are doing so well. Our country is becoming so economically strong again and strong in other ways, too, by the way, that the dollar is going to get

stronger and stronger. And ultimately, I want to see a strong dollar.

(BEGIN VIDEO CLIP)

QUEST: That was last August.

NAVARRO: I agree with it.

QUEST: Hang on.

NAVARRO: I totally agree with that statement, Richard. We want a strong dollar. But we want a strong dollar because of the strength of our

economy, not because the Federal Reserve raised rates too far too fast. And the European Central Bank outflanked Jay Powell by lowering their rates

faster than where we are in ours now.

QUEST: But --

NAVARRO: You believe it. You take my point here.

QUEST: I do.

NAVARRO: The higher the dollar goes, the lower our exports go, do we agree on that?

QUEST: The technical factors are unimpeachable, if I can use that word --

NAVARRO: No, you can't. That's your process -- foul.

QUEST: But you know what I mean.

NAVARRO: Yes, I know what you mean.

QUEST: But the reality, Peter, is that you are asking to use interest rates as a mechanism for shifting the exchange rate. That's a classic,

classic beggar thy neighbor policy.

NAVARRO: I'm asking Jay Powell not to do that. He did it to begin with and like inadvertently, I suppose, he didn't know what he was doing.

Look, if you don't think Europe has been engaged in that kind of competitive evaluation at the European Central Bank, you know, I've got a

bridge to sell you out there in New York.

QUEST: But the difference, of course, though, is the reason. I sound like I'm doing your job you here.

NAVARRO: Thank you.

QUEST: But the reason -- the reason that dollar is strong is because your trade policies have created a safe haven environment - that investment is

flowing into this country.

NAVARRO: And that's the consistent part with the clip you played from my President. Right? We are strong here with our economy. That's why the

market is up today. But we don't want to have a dollar on steroids.

So a part of that certainly is investments coming here and pushing up the dollar because people want to be here. But listen, part of it is the carry

trade and part of it is that big spread.

I mean, look, if you're a speculator, you can make a buck on a 200 basis point spread between our rates and Europe's. You're going to do that.

What does that do? It wreaks havoc with the dollar. It's the caterpillar killer.

QUEST: All right, go on.

NAVARRO: So here is what I would ask, Richard. It's like, I listened to financial shows all day long. And all they talked about is trade tensions.

There's no -- there doesn't seem to be any recognition that the more fundamental problem is this imbalance in the exchange rates and I don't

understand how sophisticated people -- you get it, but most of these people in the finance networks, they don't even think about it.

[15:10:15]

QUEST: You surely -- if you do lower the exchange rate, the -- if you lower the interest rate for the specific purpose of weakening the dollar to

aid exporters. That is a beggar thy neighbor policy.

NAVARRO: And I agree with that.

QUEST: And arguably, that's not what the Europeans did. If I look at the Euro --

NAVARRO: No, no, no, let's be clear, like you had -- well, I think you had 39 countries around the world trading their interest rates in that kind of

competitive devaluation competition.

Here's all I'm asking for. It's a chess game, Richard. It's like when the Fed sees the European Central Bank make a move, say lower interest rates,

they've got make the decision whether to match that move or not.

If they don't match the move, that means our exports are going down and the gross going down. Our prices will go down, too. That's the benefit.

But in that chess game over the last year and a half, Jay Powell has been playing checkers in the chess world, and that's the problem.

QUEST: Last chance for trade on China. Before we say goodbye to you for the weekend, where would you say you're at the moment. There are more

talks to be taking place. The whole thing has now got enmeshed in the question of whether there was a quid pro quo. We don't need to go into

that discussion of phone calls there. I'm just interested in your view on whether or not we are more or less likely on a trade deal.

NAVARRO: I think we'll have a good week next week. The deputy level negotiators are coming in from China on Monday and Tuesday. And then the

big show begins on Thursday and Friday with Ambassador Robert Lighthizer sitting across from Liu He.

As I have said many times, we like to negotiate behind closed doors. So let's see what happens. Either we're going to get a great deal or not,

according to the President.

QUEST: And we'll talk to you again, Peter, as always.

NAVARRO: Have a great weekend.

QUEST: It's good to have you with us. Thank you, sir. Appreciate your time tonight from the White House.

Investors are expecting the Fed to cut rate. Peter is not wrong on that, and it does follow today's jobs report.

Investors are holding out for a rate cut and if you look at the way the Dow has moved today, that's very much the way. It is still on track for the

worst week since the start of August.

Lindsey Piegza is the Chief Economist at Stifel, the financial services firm. She joins me from Minneapolis, Minnesota. Before we get to the

numbers, I assume you were listening and you could hear Peter Navarro. They're doing a full throated defense of an idea that there have been

competitive devaluations around the world, which may well have been, but does the U.S. need to join in? What did you think of what he said?

LINDSEY PIEGZA, CHIEF ECONOMIST, STIFEL: Well, I did see some merit in terms of a short term policy, in terms of driving down the dollar and

helping support exporters while we work through these negotiations.

But I didn't necessarily understand the long term pathway that he was presenting for the economy. Of course, as Americans, we don't want to see

a further erosion of the dollars that we're earning, the dollars that are in our pocket that we need to buy goods and services.

And so I do think that a continued long-term plan to devalue the dollar would do a net disservice to growing the economy back to prosperity.

QUEST: Okay. But the reality is that if we look at today's numbers, it would seem to be there's no justification on today's numbers for cutting

interest rates further.

I mean if your mandate is full employment and price stability, there's an element of both at the moment.

PIEGZA: Well, I don't know about that. I think prices at this point have been well below the Feds' two percent objective. And in fact, we've heard

from Chairman Powell recently today, excuse me, as recently as today talk about the fact that prices are still stubbornly below that two percent

objective and they have been persistently falling short of that long run objective for the better part of the past decade, to be fair.

We've had short-term stints above two percent. But inflation really has been well underperforming, and from a full employment standpoint, I don't

know if you could really argue that the civilian unemployment calculation is fully capturing the jobless rate in this country.

If in fact, we were to three and a half percent unemployment rate, and the minimal amount of slack that that implies in the labor market, we would

have easily been talking about three and a half, four, maybe four and a half percent sustained wage gains on an annual basis. It's only recently

did we peak up above three percent, and now we're back down below three percent as of today.

QUEST: Right. But hang on a second. In your answer then, you're questioning the numbers.

PIEGZA: Absolutely.

QUEST: You're casting doubt on the three and a half percent as it is, but that would be seen to be borne out by the fact that the growth is slowing.

Effectively, everybody who wants a job or who could get a job has got one in this economy. And yet, inflation does hover around 1.6 to 1.8 percent

stubbornly below. What do you think -- what do you think lowering another half quarter, half, three quarter of a percent will do?

[15:15:24]

PIEGZA: Well, I don't necessarily think that it will do a whole lot, other than reinstate confidence. Confidence tends to be a leading indicator in

terms of what businesses, what individuals are doing in terms of their spending, they're investing, their hiring patterns.

So the fact that the Fed steps in and says we're here, we're ready to stabilize the economy does help stabilize confidence, which don't undermine

how important that is in terms of a multiplier effect and realized growth.

But you're right, 25 basis points, we're talking about starting from already historically very low rates. And this is one of the concerns

actually, that if the Fed does, in fact, see that recession lurking around the corner, what can they do to stabilize?

If you look back to the Great Recession, we were talking about cutting 400 to 500 basis points, the same amount we saw cutting going into the 2001

recession.

This time around, we had half that ammunition in the arsenal. So the Fed could lower interest rates, even arguably, down to the zero lower bound in

the coming months. But then they're going to have to rely on some nontraditional metrics, presumably growing the balance sheet to help

stabilize the economy.

So the Fed is in a very difficult predicament at this point. But going back to your comments about to the unemployment rate, you're talking about

everyone who necessarily is looking for a job. And I think there's -- that is the difference that I'm talking about.

You're talking about millions of Americans that are sitting on the sideline, not actively participating in the labor force, and when we add

them back in, all of a sudden the labor market unemployment rate is closer to seven percent. That paints a much different picture.

QUEST: Lindsey, good to have you, as always. We'll talk more about it. Good economic discussion on a Friday evening on a bullish market. Thank

you, ma'am.

Now remarkable see being played out across parts of the Middle East. They're all linked by one thing -- the economy. It's an issue that's

becoming a matter of life and death for some families. We will be in Baghdad after the break.

(COMMERCIAL BREAK)

QUEST: The lower unemployment numbers are not helping President Trump in the eyes of House Democrats. Two Democratic leaders have released a trove

of text messages between U.S. diplomats and Ukraine on Thursday exposing that military aid was tied to Ukraine's commitment to opening a Biden

investigation for President Trump.

This is we learned that Mr. Trump also discussed Joe Biden with Chinese President Xi in a June phone call.

[15:20:10]

QUEST: And then that call he also told President Xi he would remain quiet on the Hong Kong protests as trade talks progress, and Donald Trump says he

is sending a letter to the U.S. House Speaker Nancy Pelosi regarding the Democrats' demands for White House documents.

President Trump insist his conversations with foreign leaders are appropriate and he is focused on corruption, not politics.

(BEGIN VIDEO CLIP)

TRUMP: This doesn't pertain to anything but corruption. And that has to do with me. I don't care about politics. I don't care about anything.

But I do care about corruption.

(BEGIN VIDEO CLIP)

QUEST: Lauren Fox is with me from Capitol Hill. Lauren, I don't recall President Trump being so concerned with Joe and Hunter Biden's business in

Ukraine, until Biden big became a front runner in the election, in the potential election.

LAUREN FOX, CNN POLITICS U.S. CONGRESSIONAL REPORTER: Well, Democrats are certainly arguing that President Trump was targeting his political rivals,

and that was part of what was the holdup with that Ukrainian military aid.

But what I will tell you is that behind closed doors, what we know right now is that Michael Atkinson, the I.C. I.G. is meeting with members trying

to lay out exactly how he corroborated what was in that complaint, that whistleblower complaint that in part, allege that money had been tied to

the President's actions related to Ukraine and that he wanted to get more information about his political rivals.

So certainly, that's what Democrats are arguing. Republicans, meanwhile, say that that is not what the President was doing, that there was no quid

pro quo. And that, of course, is what President Trump is using to defend himself as well -- Richard.

QUEST: And the role of the I.G. and all of this, is there an honest broker that we will be able to turn to who comes up and says, well, actually, it

was all it wasn't?

FOX: Well, Michael Atkinson is seen as a nonpartisan third party here. Somebody who looks at facts, takes them in. The fact that he has come up

to Capitol Hill, this is now his third time in a matter of weeks, I think is significant. It tells you that members want to hear what he has to say

- that they trust his view on this.

But he briefed last week the Senate Intelligence Committee, the week before he had briefed the House Intelligence Committee. Now, he is back before

the House Intelligence Committee.

What's changed, of course, this time with House Intel is the fact that they have the complaint, and it has been released publicly so they can talk a

little more about how he worked to corroborate it.

But Democrats say, you know, this is a very trustworthy person - that it's not worth investigating the investigators here. This is someone they can

trust.

QUEST: And finally, those texts, I had a look at them online. I mean, until the last one, where he suggests taking it offline and discussing it

privately, there does seem to be a tacit understanding of what was going on.

FOX: Well, that's right, and it's not just about Ukrainian military aid, Richard. I think what was striking about this was that the Ukrainians

wanted to have a meeting in D.C. at the White House. They wanted to have some kind of public viewing where everyone could see the President and the

new Ukrainian President together. That that was very important to them.

And that the administration, Rudy Giuliani, in particular, wanted to ensure that they put out some kind of public statement arguing that they were

going to investigate corruption in their country, and also investigate how the 2016 election meddling unfolded.

So all of that was part of what was discussed in terms of whether or not there was a quid pro quo, and I think a lot of Democrats are arguing those

text messages are pretty revealing in terms of a potential quid pro quo.

Again, Republicans arguing that's not the case.

QUEST: Lauren, have a good weekend. Thank you. Now, from Beirut to Baghdad, economic protests are gripping parts of the Arab world at the

moment. These are some of the scenes from Iraq where human rights groups say at least 40 people have been killed in violent demonstrations.

But despite its oil and agricultural potential, Iraq is struggling with high levels of corruption. According to Transparency International, it

means daily power cuts and problems with getting clean water. Corruption is a major issue in Egypt, too. Their government reports, a third of the

country is classified as poor, and the Egyptian pound has fallen dramatically.

And Lebanon has one of the highest debt to GDP ratios in the world. The government recently declared a state of economic emergency. Arwa Damon is

in Baghdad with more.

This is a classic tale of economic mismanagement at large, where the people are finally had enough. But I do wonder, since some of these governments

in power came about because, quote, "people had had enough," whether or not anything changes.

[15:20:03]

ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Again, Richard, look, this is one of those situations, especially if we're going to be talking

about Iraq where this has been a problem that has been ongoing for decades.

One has to recognize what each of these individual countries in the region have been through. When it comes to Iraq, you had the sanctions in 1991

that crippled the economy, then you have the U.S.-led invasion in 2003. The violence that followed afterwards. The sectarian bloodletting, the

wars against ISIS.

And in all of this, people have been demanding from the government an improvement of basic services, an end to corruption and for the government

to provide, especially the youth, employment opportunities.

Now that the situation security wise to a certain degree has calmed down, people no longer are allowing the government to make excuses for their

basic incompetence.

A lot of those being accused of corruption are within the government in and of themselves. People have been taking to the streets. They have been

trying to make their voices heard. The government has in turn imposed a curfew in Baghdad, some of the other provinces have as well.

We've been seeing and hearing about small groups of people trying to get out, trying to get to the streets.

Right now, the government is acknowledging the people's grievances, but they're out at a point, Richard, where they don't want to hear words, they

don't want to hear promises. The government is saying it's going to form a committee, but people's patience is finished.

QUEST: Do they realize, as well, though, that any form of economic reform will be painful as well?

DAMON: It wouldn't be tough to answer that question, Richard. Because what people see especially here is sort of the black and white of it. They

know that their country has enormous oil wealth. We just spoke with the spokesperson for the Ministry of Oil, who was saying that you Iraq makes

around six to seven billion dollars a month in oil revenue.

So they know that the money is out there. What they don't understand is why that money is not being spent to better the population's quality of

life and give them a life of dignity.

The ins and outs of actual economic reform are probably not something that people here are very closely aligned to. But at the same time, if they

were to actually see the government take action versus the empty words that they've been hearing for years, one would assume and hope and think that

they would be able to at least understand that.

QUEST: We'll talk more about this in the weeks ahead. It's fascinating area that needs further exploration. Thank you for bringing it to us

tonight.

On QUEST MEANS Business, Christine Lagarde is preparing to take over the ECB next month. She looks at her experiences at the IMF. and the how she

will take those, translate them and what she'll do in Europe.

Our Lagarde interview continues in a moment.

(COMMERCIAL BREAK)

[15:30:00]

RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. Christine Lagarde

tells me what she finds frustrating about Europe's decision-making process. And when swiping left or right isn't enough, Tinder wants you to choose

your own adventure.

The CEO of Tinder on this program. Before we continue, you and I, this is CNN, and here are the facts always come first. The U.S. economy added

136,000 jobs in September, that number missed estimates as did wage growth. Despite the pace of hiring slowing considerably since last year. American

unemployment is now at 3.5 percent, which is a 50-year low.

President Trump on Friday insisted there was no quid pro quo in his dealings with Ukraine. It follows the public release of text messages that

purport to show American diplomats discussing pressure on Ukraine to investigate Trump's political rival Joe Biden. Donald Trump claims he

doesn't know those involved in the messaging.

Prince Harry is suing the owners of the "Sun" and the "Daily Mirror" tabloids for allegedly hacking his phone. A Buckingham Palace spokesperson

confirmed that claims have been filed regarding the illegal interception of voicemail messages. It follows the Duchess of Sussex that sued "The Mail"

on Sunday, claiming it illegally published a private letter that she sent to her father.

A 14-year-old boy in Hong Kong remains in critical condition after being shot by a police officer on Friday evening's protests. Officials say the

officer was under attack by an angry mob and fired in self-defense. Clashes escalated after the leader Carrie Lam invoked colonial era

emergency powers.

Christine Lagarde says she finds the slow pace of decision-making in Europe frustrating. She's been an advocate for strengthening economic

fundamentals in good times, something that Europe seemingly has largely failed to do. Now of course, Christine Lagarde is preparing to take over

as president of the European Central Bank.

To understand how she'll take the ECB forward, we must first go back to 2011 when Christine Lagarde took over the helm of the IMF. At the time,

the institution was in crisis. Speaking to me at IMF headquarters, she told me what she found.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE, OUTGOING MANAGING DIRECTOR, IMF: I found staff very keen to adopt a vision to move forward, to turn a page and to be of service

again. And that was a fantastic support for me to launch the effort of opening the doors, opening the windows, putting a more clarity, more focus

and changing the narrative of the IMF.

QUEST: It had been badly damaged in the sense of a loss of morale here. Those morale was poor.

LAGARDE: Don't forget, Richard, that for three years, they had been on the battlefield, day in-day-out because the financial crisis had been a major

development around the world. But a major event for the IMF. They all had to get on board. They had to develop programs to put in place, support

packages, to get financing from the international community.

So, there was an element of fatigue about, you know, having done that for the last three years. And then of course, there was the crisis of

management because my predecessor Dominique Strauss-Kahn had his, you know, personal issues that created chaos in this institution for a short period

of time luckily.

But it was, it was difficult at that time. Yes.

[15:35:00]

QUEST: And you, you arrived here and you immediately face and fall into the debt crisis in Europe, the sovereign debt crisis from Europe. Now, you

know all the participants on the other side, so, it's not like you're a stranger. But you're coming at it from a very different angle from the

IMF, aren't you?

LAGARDE: Right, and I changed side of the table from being minister of finance, faced with the financial crisis and then the sovereign debt crisis

in Europe and moved to the other side which was head of the IMF and possibly having to help some of those countries which we eventually did.

You know, from Portugal to Cyprus to Ireland to Greece, Latvia and a few others, we had to rescue those countries.

QUEST: Did you ever fear, seriously fear the euro would collapse?

LAGARDE: Yes, I feared -- I think I wasn't the only one. But I feared that the euro would collapse at a time and during a night actually when we

were scrambling to put enough funding together in order to rescue the euro area and the euro as a currency. It was before I was head of the IMF. It

was just shortly before that.

And I'll never forget that night. It was a night when we were working hard, having more differences than in common, and where we could see the

clock tick, and we knew that the Australian market was opening, and then it was -- well, it was then the Tokyo market and then Hong Kong and the clock

was ticking and we couldn't find agreement.

And it was very shortly before the European markets opened, that eventually we found what then became the European stability mechanism with $500

billion at the time -- euros, sorry.

QUEST: When you get to the Greece crisis, of course, your perception of the role is very different, particularly in Greece. Does that hurt?

LAGARDE: It was a difficult relationship, and it's one where I started as a finance minister and moved to the other side of the creditors as head of

the IMF. And it was difficult because there was little ownership in Greece of what was to be done. It's a time when I think we all had a serious fear

that the Eurozone could actually implode.

Because if Greece had left the Eurozone, then there was a huge, big question mark as to the solidity of that monetary zone and the Eurozone.

QUEST: Did you ever get angry or frustrated that the Eurozone was built so badly. During that time, it became clear, they had built a house with

leaking roofs, poor planning and dodgy foundations.

LAGARDE: I think you're going over the top here, Richard, because it's a house which is a unique construction. Never ever in the world and in the

history of the world have 19 countries decided to put together their currencies' sovereignty together and develop fiscal common-base banking

union and all the rest of it.

So, it's an unbelievable experiment which is still ongoing. I'll tell you what has made me some times angry and frustrated. It's the speed at which

decisions are made to strengthen that construction and to reinforce the foundations. Because eventually, the Europeans will get there. But it

will be, you know, taken an excruciating amount of time and delay and divergence before they eventually get to what is needed.

And I can see right from the get-go, what is needed? And I'm sure that others do. But between the political tension and the restrictions and the

issue at home and the domestic policies, it takes a lot of effort and time. Which of course, the markets are looking with interest because in the

meantime, it weakens, it strengthens, but somebody makes money along the way.

(END VIDEO CLIP)

QUEST: We also spoke to Christine Lagarde about tariffs, President Trump's impeachment and how she'll deal with dissent at the European Central Bank.

If you missed any of it, of course, on last night's program, catch up on our Facebook page, facebook.com-slash-questcnn, and you can see the whole

interview in detail.

Now, some news to bring you that's happened just in the last few moments. EU member states say the U.K.'s Brexit proposals do not, I'll repeat that,

do not provide a basis for concluding an agreement. That's according to European Commission's spokesperson. The spokesperson said that they will

meet again on Monday to give the U.K. an opportunity to present its proposals perhaps in more detail.

And when we return, from swipe right to swipe night, Tinder gets into spooky seasons, it's an apocalyptic in-app game that could help you find

the one.

[15:40:00]

(COMMERCIAL BREAK)

QUEST: Tinder is jumping on the choose-your-own adventure train. The dating app is to launch Swipe Night. All right, bear with me with this.

It's an interactive apocalyptic game and it's this weekend across the United States. I spoke to the chief executive of Tinder earlier, and Elie

Seidman says the company's swiping -- I beg your pardon over here, Elie says its swiping right on Gen Z users who form the other half of the base

of it.

Now, but Tinder is not worried about Facebook in any way whatsoever. And who is also getting into the dating game. I know, the app is taking steps

to protect users in countries for example where same-sex relationships are illegal. Now, whichever way you look at it, I fully accept late 50s,

suits, rather tedious, enjoys economic data and probably not exactly Tinder's target demographic for Swipe Night.

Still, I do want to know how does swipe right actually work?

(BEGIN VIDEO CLIP)

ELIE SEIDMAN, CHIEF EXECUTIVE OFFICER, TINDER: Swipe Night is an interactive adventure within Tinder, it's going to run for the four Sundays

in October from 6:00 p.m. to midnight in the U.S. local time. And for our members, you come into the app and you basically go down a story. And then

the story you use our iconic swipe, left swipe, right swipe to make decisions that advance the story.

And based on the decisions you make, you unlock potential matches on Tinder, and then we hope that the story itself and having participated in

this story with everybody else gives you things to talk about icebreakers with the rest of the community.

QUEST: How far has Tinder come on from being a pick-up app to a meeting app, do you think? A one-night stand to, you know, I remember going to San

Francisco and doing stories on Tinder, a good six years ago where it still raised a chuckle when you mentioned Tinder. That seems to have gone. The

sort of a Gen Z millennially acceptance about it.

SEIDMAN: Yes, I think if you look at Gen Z, it's very clear that they're choosing -- and it's a conscious choice to stay single for much longer.

The demographics are quite clear on this. And they're also very diverse in what they're looking for from connections and relationships.

So, while seven years ago we started on a U.S. college campus, since then, a lot of things have happened. Tinder has become a default. It's no

longer the exception. It's the norm for our members especially once in Gen Z, when you turn 18, joining Tinder is a rite of passage.

QUEST: And what about when Facebook comes along with its dating app?

SEIDMAN: You know, it's interesting, I think the very question itself comes from the context of really about a decade ago where there really was

for people in Gen X or older millennials only want social network. And it was viewed at the time there's going to be one social network to rule them

all. Winner takes all as they said.

Fast forward, 10 years, it's clearly now being the case. And if you look at our Gen Z members, they've grown up and lived in a world where for the

entirety of their experience in the digital social universe, they've used multiple communities, each with its own special purpose. And so Tinder

very clearly is an iconic youth brand and it's a very clearly --

QUEST: Right --

SEIDMAN: The pre-eminent place to meet new people online to connect with them. It's really not something they consider in comparison to a place, a

community that is for grandparents and parents to share pictures of their kids and grandkids with very close friends.

[15:45:00]

QUEST: I'm very impressed at the way in which Tinder has managed to respond to a variety of different issues. For instance, the new way in

which for those areas, for LGBTQ people that are where it is, not approved or it's illegal, your status or your gender, your preference will not be

shown. So, you're making efforts to be relevant in that sense.

SEIDMAN: Yes, I mean, if you look at -- if you look at our members, unfortunately some of our members are traveling to or going to countries

where their LGBTQ status is not acceptable, and it makes it for a dangerous environment.

And safety really for Tinder broadly both for the LGBTQ community and for the entire community is extraordinarily important to us. It's really the

first thing that we take -- that we focus on and take incredibly seriously. And so traveler alert was a natural outpouring of that.

(END VIDEO CLIP)

QUEST: Right, I'll get it one day. Chilly warning from the head of the FBI. Find out why this man is urging Facebook to drop a plan for end-to-

end encryption. I'll be speaking to a security expert in just a moment. And Prince Harry is suing the owners of two tabloids for allegedly hacking

his phone. Details in a moment.

(COMMERCIAL BREAK)

QUEST: Claims involving the illegal interception of voicemail messages. Buckingham Palace has confirmed to CNN the action by the Duke of Sussex,

the publisher of the tabloid newspaper, "The Sun" acknowledges the legal claim. News of the suspected hack came a short while ago. Anna Stewart

joins me.

Now, are these -- Anna, I'm reading somewhere that these may be historic allegations in the sense of hacking the phone messages back in the 2000s or

are they knew?

ANNA STEWART, CNN REPORTER: Well, this is the huge question, we simply don't know the answer. But everyone seems to know of course, is this part

of phone hacking 2005-2006? Or is this something new? It would be extraordinary if it was new, given the ramifications of what happened after

the phone-hacking scandal that engulfed three newspapers, some journalists went to jail, there were criminal charges, huge lawsuits and of course it

left some inquiry.

But also which that it might be extraordinary if this is historical and it dates back to 2005 and 2006, and Prince Harry is only deciding to file

court claims now.

[15:50:00]

QUEST: And related to that, I mean, they've -- most recently, they've filed -- they paid compensation, the various newspapers. So, it begs --

but it also comes on the same week that the Duchess of Sussex has sued over the publication of that letter that she sent to her father. And the Duke

himself wrote a very telling piece on their website, on their official website in which he excoriates the press, what's going on here?

STEWART: It feels like it's the opening scenes when you battle between the royals and the British tabloids to be honest because we -- as you said, the

Duchess of Sussex announced that she's suing the "Daily Mail", that is for allegations that they published a private letter to her father. Then

you're right, Prince Harry, while he was in Africa published a statement that was extraordinary actually, very emotional --

QUEST: Yes --

STEWART: Really a tirade against the British press, and apparently that was written by himself and unedited. So, that was of his own. Back and

now this, so, it does feels like the three are linked, but we do need to wait to get more information from the palace before we start linking them

all together. But the big question, is this new or is this old?

QUEST: And you'll come back and tell us when you find out. Thank you, Anna Stewart. The head of the FBI says he's incredibly concerned about

Facebook's plan to encrypt all its messaging end-to-end. The U.S. is joining Britain, Australia and asking the company to abandon the project.

The FBI Director Christopher Wray explained why?

(BEGIN VIDEO CLIP)

CHRISTOPHER WRAY, DIRECTOR, FBI: Facebook would transform from the main provider of child exploitation tips, to a dream come true for predators and

child pornographers. A platform that allows them to find and connect with kids and like-minded criminals with little fear of consequences.

(END VIDEO CLIP)

QUEST: Garrett Graff is with me, the executive director of the Aspen Institute Cyber Security Program, he joins me from Burlington, Vermont. Do

you think the authorities have only themselves to complain, Garrett, in the sense of they have so abused their right to look at things, particularly in

the United States, which we discovered in the recent scandals, that it's natural that people are going to say, we want encryption?

GARRETT GRAFF, EXECUTIVE DIRECTOR, CYBERSECURITY PROGRAM, ASPEN INSTITUTE: Yes, I mean, this is a long-running issue that dates back to the Edward

Snowden allegations and even before then, that have seen the tech companies speed up their use of end-to-end encryption in part in response to the U.S.

spying efforts around the world.

And that this is an issue that has really seen a fundamental breakdown of the trust between law enforcement and Silicon Valley.

QUEST: Is it -- is it such a big deal encryption? I mean, I know WhatsApp always tells us that they encrypt end-to-end. If you encrypt end-to-end,

does it really make it that much more difficult for law enforcement?

GRAFF: It really does. End-to-end encryption in effect, if you do not have access to one of the physical devices on either end of that. It is

unbreakable. And that is something that apps like WhatsApp or signal are increasingly relying upon to circumvent government authorities both in the

United States and in the west as well as in more repressive regimes around the world. And that --

QUEST: Yes --

GRAFF: Really is Facebook's argument underlying this, is that while they might be willing to work cooperatively with law enforcement in the United

States or the U.K. or Australia, that many other countries in which they operate do not have the same fundamental protections of rule of law and

independent judiciary oversight that would guarantee protections for dissidents, human right activists and journalists and the rest of the more

authoritarian regimes.

QUEST: So, since people want end-to-end encryption, it's likely that the EU, the director general -- the director of the FBI is going to be unlucky

in his requests. What else could be a fed-up(ph) instead?

GRAFF: Well, this has been part of the FBI's push and the Justice Department's push here in the United States is to try to think creatively

with these technology companies about what possibly could -- what alternatives could exist?

I mean, one of the things you hear the FBI suggest is that the idea that, you know, there are multiple groups, the tech companies, law enforcement --

QUEST: Well --

GRAFF: And independent third party that could hold encryption keys to try to ensure --

QUEST: All right --

GRAFF: And complicate --

QUEST: But --

GRAFF: Efforts to hack into one of these accounts.

QUEST: I suppose that, you know, most people would say, look, the fear is that they start snooping and if the person is buying a few recreational

drugs for a weekend rave, that's one thing versus going out and -- you know, the very serious matter of human trafficking or child prostitution or

the like. How do you get people to say OK, we accept that there will be some encryption, but also you accept you're not going to snoop.

[15:55:00]

GRAFF: Yes, and that in some ways is the challenge in a lot of this technology. That when you talk to the tech activists or the tech

companies, what they say is, you know, look, yes, there could be back doors that could be available to U.S. law enforcement, western law enforcement,

but that those same vulnerabilities --

QUEST: Right --

GRAFF: That would then be available to countries like China to use against their own citizens --

QUEST: Good point --

GRAFF: Or, you know, open to North Korea or Iranian or Russian hackers to try to exploit against U.S. citizens or western --

QUEST: Garrett --

GRAFF: Citizens.

QUEST: Garrett, good to have you sir, we'll talk more about this, thank you, I appreciate your time. Last few minutes of trade on Wall Street,

literally, the Dow is up and we are I do believe, yes, look at that, we're at the best of the session. It's gone up like a rocket in the last few

minutes or so. We're up 384 points, a gain of 1.5 percent, it's a rate cut that's doing it, the mixed jobs report has boosted the market.

It's perverse, everybody believes things are getting worse, therefore, the market goes up and tech is doing the best of all. If you take a look at

the triple stock, you will see how things are going for the Nasdaq as well. We'll update all that for you in a profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment. Amongst many of the rubrics of this administration has abandoned, it's the idea that you don't talk about the

dollar. This administration wants a lower dollar at the moment, it did want a higher dollar a few years ago, but now a low dollar is in demand.

The problem is they're partially right that a range of competitive devaluations has now begun with more than two or three dozen countries, all

lowering rates for competitive advantage.

However, the United States doesn't really need to do that because it doesn't need lower rates to actually bring down the dollar. The dollar is

going to remain strong because the U.S. economy remains the strongest country of the advanced economies and also and perhaps as importantly, it's

doing really well.

So, when you put all that together, you understand why it's a difficult call to ask for a lower interest rate just for a lower dollar. Probably

best to go back to the old days. You don't comment on the dollar.

And that's QUEST MEANS BUSINESS for tonight, I'm Richard Quest in New York, whatever you're up to in the hours ahead, I hope it's profitable. Look at

that! What a day, what a day, best of the day almost, it's up.

(BELL RINGING)

END