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Quest Means Business
The Romney Plan; US Republicans Ponder Return to Gold Standard; Gold Standard Explained; Feasibility of Gold Standard Comeback; Gulf Coast Braces for Isaac; US Confidence Dip; Draghi Pulls Out of Fed Symposium; Movements in Europe; European Outlook; Spain's Bond Yields Fall; Lackluster Day for European Markets; Dollar Falling; Millennials: Relationships
Aired August 28, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HALA GORANI, CNN INTERNATIONAL CORRESPONDENT: All right. We'll have a lot more from Tampa a little bit later this evening, but for now, Nina, back to you in London.
NINA DOS SANTOS, HOST: Thanks so much. Hala Gorani there, live on the scene at the Republican National Convention. Well, the Republicans finally have the chance to set out their stool to the American people and also to a world audience. The main focus will, of course, be firmly fixed on jobs.
Mitt Romney says that he can add 12 million jobs in the first four years of a Romney presidency. That's an average of about 250,000 jobs every month per month for at least two years. And if it is the case that he could achieve that, it would actually represent one of the strongest growth rates when it comes to economic growth rates and job growth rates of any recent time.
Romney's economic team does think that he can actually add up to about 1 percent of GDP growth per year for the next decade to come, and he's also proposing widespread cuts here at the same time as adding this kind of growth, capping government spending to 20 percent of GDP. Right now, it stands about 24 percent of GDP.
Services like, for instance, Amtrak Railways will also be privatized as part of his plan, and President Barack Obama's health care plan would be repealed.
Now, tax policy has also been a notoriously controversial topic here. Now, Romney proposes a 20 percent tax cut across the board as well as a cut in corporate tax. Critics say that that will instead put a greater burden on America's poor.
And the Republicans would also cut regulation on Wall Street as well as cutting taxes, as well. They want to repeal the Dodd-Frank Act that was brought in by President Barack Obama specifically to tighten up the rules in the world's financial sector, particularly the US financial sector.
Now, there's one other intriguing option on the table that would have some pretty important implications for the US economy. The Republicans seem to also be considering setting up a commission to looking into restoring the so-called gold standard.
This is a monetary policy that hasn't been used for the best part of 40 years, and our very own golden boy Jim Boulden explains how this gold standard actually works.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: So, what exactly is the gold standard? Well, because gold is rare but easy to mint, carry, and trade, gold has been the preeminent currency for more than 2,000 years, a so-called hard currency.
But when it became impractical to make gold coins, governments minted other coins or paper currency, in theory, that could be exchanged for gold or silver kept by governments in vaults. The big advantage was stability. Governments couldn't print money to pay their debts.
Well, that lasted more or less until World War I. To pay for that war, Britain, Germany, and many other countries decided to print ever more paper money. Any link between the value of that paper money and the value of gold started to break, and that surely ended in Europe during the Great Depression.
Now, on the plus side, countries could then manipulate their own interest rates and the amount of money in circulation. But of course, printing ever more money led to crippling inflation throughout Europe.
Now, in the United States, on the other hand, it kept the gold standard until Richard Nixon, the president, decided to break that link in 1971. Until then, the US dollar was at a fixed price relative to gold, and anyone in theory could demand gold from the US in exchange for their currency.
But today, there are no countries currently using a gold standard.
Jim Boulden, CNN, London.
(END VIDEOTAPE)
DOS SANTOS: John Butler's the chief investment officer at the investment group Amphora. He's also the author of "The Golden Revolution: How to Prepare for the Coming Gold Standards." So as such, he's something of an expert on this field, and it's great to have him on QUEST MEANS BUSINESS.
John, first of all, you seem to think that this is inevitable. There's very few people out there who would stand by that view.
BUTLER: Inevitable is a strong word, but if you look at what's happening in places in its historical context, so many unprecedented things are happening, and if you begin to connect the dots and look at historical parallels, the inevitability of a return of some form of gold standard for international trade and balance of payments does appear inevitable.
DOS SANTOS: But we don't have enough gold to back up a currency like the greenback. It's obviously the world's default currency. If we were to implement a gold standard for the US dollar, some economists have said, well, that'll push the price of gold up to about $10,000 an ounce. That's four times what it is today.
BUTLER: But solves the problem of their not being enough gold. Gold may be finite by weight and volume. It's not finite by price. If the price rises sufficiently, then in fact it helps to rebalance economies. It helps to reliquify the financial system. And that's the problem we have, which is impeding a return to healthy economic growth.
DOS SANTOS: There could be some pretty huge implications, though, for the US dollar and also for other currencies around the world if the US did decide to sort of unilaterally go back to the gold standard. A lot of people, again, say this might be politicking, but it's not likely to happen.
BUTLER: Well, let's try to leave it -- leave the politics aside for a moment. What makes good politics may or may not make good economics.
What made the gold standard good economics throughout history was that it creates a level playing field for trade, where people who sell and people who consume are exchanging something which cannot be arbitrarily printed or otherwise devalued by some other authority, be it a central bank or anyone else. That creates confidence, and confidence is the basis of all economic progress.
DOS SANTOS: If it's such a good idea, then, why did President Nixon decided to give it up in the 70s? Why does no other country around the world actually peg their currencies to any kind of metal?
BUTLER: Well, we have to ask the question, what's in the interests of governments who have run up large debts, which they are struggling to service. Do they actually want to make themselves constrained in their ability to increase the debt even more in future, which is what a good standard effectively does?
Or do they still want the freedom of action to increase the debt as required to accomplish their political goals.
The fact is, governments need to finance themselves. They will always want lower interest rates, they will always want the money supply to increase. And therefore, they may have an aversion to gold.
But what happens when the rest of the world begins to say, wait a minute, we don't want to accept your diluted dollars in return for our oil or other resources. Then, you are in a bind, and you must go back to gold.
DOS SANTOS: And I grant you that one. That is one thing that a lot of economists have been speculating. China may well be waking up to when it comes so the US dollar that the largest holders of US Treasury bills, what would this do to treasuries?
BUTLER: Well, other factors equal, if gold is accepted in the international payment system as collateral, as a means to settle international trade the same way Treasuries are today, it will probably push up US interest rates, because you'll have competition, as it were, for the dollar reserve standard that pertains today.
But is that a good thing or a bad thing? It depends on your perspective. And from the perspective an exporter, like China, it's a good thing.
DOS SANTOS: We shall see. Ben Bernanke, in the meantime, has still branded this, quote, "an awful waste of resources" if it happens. John Butler, thanks so much for coming on the show today.
BUTLER: Thank you.
DOS SANTOS. HEADING TO Wall Street next. Investors are playing the waiting game a head of Ben Bernanke's big speech. We'll look at what could come out of that, and why his European counterparts will be turning up for the big event.
(COMMERCIAL BREAK)
DOS SANTOS: Welcome back to our viewers. You're watching QUEST MEANS BUSINESS, but let's just bring you up to date with what's going on vis-a- vis Hurricane Isaac. What you're seeing here is Lake Pontchartrain. This is a large inland body of water near New Orleans. It now appears to be in the direct path of the storm here.
Now, billions have been spent on flood control systems in New Orleans. Remember that this Hurricane Isaac could strike exactly seven years to the day of the fateful events that took place in that city when Hurricane Katrina struck New Orleans back in 2005.
And as I was just saying, the $4 billions have been spent to try and - - try and increase the levees there, fortify the levees and the dykes there, as well as a huge pumping system to get water out of the city. A lot of people are saying it's not the winds that are going to be the problem, but instead it will be the flooding.
Back to business news, now. US consumers increasingly worried about the economy these days. The confidence board's consumer confidence index fell to 60.6 in the month of August from 60.5 for the month of July, and that's actually the lowest level that we've seen since November.
Let's go over to Maribel Aber, who's standing by to tell us all at the New York Stock Exchange. Maribel, it's been a pretty lackluster week in terms of volumes, because a lot of people are still getting back from their vacations. But this is another shot of bad news.
MARIBEL ABER, CNNMONEY.COM CORRESPONDENT: Hi, Nina. This is, indeed, another shot of bad news. Again, we've been having some low volume, but in hearing this, what economists were expecting was that the reading would remain actually relatively flat, so the tumble that we're seeing was a big disappointment here to Wall Street.
The reading also shows, as you said earlier here, it's the most pessimism from Americans so far this year. And the main worry, Nina? It's the labor market. Consumers are especially worried about their prospects of finding a job.
And they're also concerned about the outlook for business conditions in the coming months. They pretty much go hand-in-hand, when companies won't hire unless their businesses are doing pretty well. Wall Street really watches this report closely, also, because confidence correlates with spending, and spending makes up 70 percent of US GDP.
But Nina, the good news is that despite the overall pessimism, a lot of Americans say they still pan on buying a home or taking vacation in the future, and it's those big purchases that are very good for the economy.
But the reading isn't having much bearing on stocks so much at the moment. We're still seeing them flatline a little bit here. The Dow's down just almost 10 points as, again, you were talking about earlier, Ben Bernanke's speech is coming up in Wyoming on Friday. Nina?
DOS SANTOS: OK, Maribel Aber there at the New York Stock Exchange. We'll of course look forward -- actually, before you go, let me just quickly ask you, Maribel about that Jackson Hole symposium. It seems as though the ECB chief, Mario Draghi, has stolen Ben Bernanke's thunder a little bit, because some of the important protagonists from Europe aren't going to be there.
ABER: Right. He was supposed to be there, but I'm seeing reports that he is not. He's skipping out, really, to focus on pressing issues at home. So, yes, stealing a bit of thunder I think is a good way of saying that, Nina.
DOS SANTOS: OK, great. Maribel Aber there at the New York Stock Exchange. Thanks so much for that little extra bit of information.
Now, the ECB president Mario Draghi, as I was just saying before, has backed out of the US Federal Reserve symposium in Jackson Hole, Wyoming. That was the key meeting that Maribel was just telling about before.
Now, Draghi was actually due to deliver a speech at this event, but he's now too busy with the problems at the eurozone, so instead of heading across the Atlantic, he's going to be staying firmly put in Frankfurt.
It seems as though Draghi's packed to-do list is now raising quite a bit of speculations that the ECB's bond-buying program that it has hinted at in the future could now be nearing completion. And while Draghi stays at home, everybody else, though, it seems, is on the move these days.
Let's take a look at our euro frequent fliers, starting out with representative of the troika, because these guys here that include the EU, the European Central Bank, also the International Monetary Fund are in Portugal, in Lisbon, the Portuguese capital, to check if that particular country is meeting its deficit targets.
If not, Portugal's bailout lenders might actually threaten to block the release of further funds, as they'd done repeatedly with countries like Greece. Now, data released just last week wasn't positive here, because what it did is it shows that Portugal was unlikely to meet its 4.5 percent deficit target this year without further austerity measures to come. Of course, they won't be popular, will they?
Also jet-setting today is this man, Herman Van Rompuy. He's the European Council president. He met with the Spanish prime minister, Mariano Rajoy, earlier in Madrid today.
And after a working lunch between the two, Van Rompuy said that both he and Mr. Rajoy decided that they have a joint responsibility to fix Spain's crisis. Van Rompuy said that Europe stands ready to act, also, on short notice to safeguard this country's financial stability.
In a sign of growing uncertainty about Spain's economy, consumers across this country still continue to withdraw record amounts of money from their bank accounts. In fact, they withdrew a record from those kind of accounts just for the month of July alone.
And add to that, again, the regional problems are bubbling to the surface, with the region of Catalonia announcing that it's taking around about $6 billion from a state liquidity facility. That, again, getting people worried about the eurozone's fourth-largest economy.
But what I want to show you is that they will get a chance to actually see eye-to-eye, or at least knock heads together if they can't see eye-to- eye, in October, because that is when we're going to be having a key meeting as heads of state and governments, and these members will be there, and hopefully, some say, they will take important decisions and action.
Thomas Mayer is the senior advisor to Deutsche Bank, also their former chief economist, and he told me that he's not surprised that Draghi is skipping the Jackson Hole symposium.
(BEGIN VIDEOTAPE)
THOMAS MAYER, SENIOR ADVISOR, DEUTSCHE BANK: Well, I think he has a lot to do. After all, he already pre-announced twice that they will come up with a big new scheme for the securities markets program, this is the bond purchase program.
He announced it in London, and he announced it at the ECB council meeting on August 6th. Now they have to deliver. And they have to still, I think, sort out quite a few details for that. So, they're busy.
DOS SANTOS: And what exactly do they have to deliver for economists like you? What would you like to see them put on the table, and also, crucially, when does it need to be done? Because we've had so many false dawns here.
MAYER: Yes, indeed. First of all, Draghi has promised us this time full transparency. It's not the SMP, where we did not know what exactly the ECB was up to and try to read into their appearance in the market. No, he has promised full transparency.
And I would also think it's anti-transparency, so before they go in. So, there was speculation whether they would announce yield levels, which they're going to defend, or would have secret yield levels. I think we're not going to see that.
This is too far for the Bundesbank. They would be too concerned that they would lose totally control of the money supply.
DOS SANTOS: That's what I wanted to come to. It is the ongoing and extremely widening rift, it seems --
MAYER: Yes.
DOS SANTOS: -- between the members of the Bundesbank and just the rest of the ECB, to be quite blunt.
MAYER: Yes.
DOS SANTOS: Even Mario Draghi himself, who is somebody who doesn't normally comment publicly about these kind of spats, has started to refer to it in public. How worried does that make you?
MAYER: Well, I think the Bundesbank right now is what I would call the loyal opposition. They're not fundamentalist, as some people in the market have said, fundamentalists. I don't think so. The Bundesbank wants to make sure that whatever they do, they're not going too far away from their original base, which is laid down in the master treaty.
So, this is why I was just saying the Bundesbank doesn't like yield ceilings. I think it's more like something a volume program, like the Bank of England does it. So, we have X billion, now.
DOS SANTOS: But his critics would say -- well, they may not like it, but they won't have a currency, a single currency left to defend if they don't allow Mario Draghi to do what needs to be done.
MAYER: Well, I would say the key to the solution of the euro crisis lies in the countries. The ECB can only assist, it can only buy some time, but the adjustment has to happen in the countries. And the Bundesbank wants to make sure that the ECB is no substitute for that adjustment. So, this is what the discussion is about.
DOS SANTOS: Well, that brings me to my next point. We of course got this great big heads of state and government summit that will take place in Luxemburg in October. Everybody's expecting us to be building up to that as the grand finale. Realistically, though, do you think we're going to see anything more concrete coming on the table that'll actually work?
MAYER: No, there will not be a grand finale. There will be -- they will trade with Greece, there will be further discussion. There is no grand finale. It happens in the countries. The countries need to adjust.
They need to get flexible to be able to operate in EU. We didn't do that when EU was launched. Now, they have to work. This is root canal work. This is not -- this is not the big one-off deliverance that --
DOS SANTOS: I think many people watching this show might well know that root canals are notoriously painful, aren't they?
MAYER: Yes, it is.
DOS SANTOS: And the results sometimes mixed. As a final question, let me ask you, if we've got the troika coming to these countries like Spain, we've also got the troika in places like Portugal, I mean, rather than Spain, also places like Greece. The problem is, is these countries are actually caught in this never-ending austerity spiral.
MAYER: Yes.
DOS SANTOS: Because however much the governments cut, it's never going to be enough to balance the books. Do you realistically envisage a eurozone exit for Greece by the end of this year?
MAYER: Greece, I think the probability of them going out is pretty high, yes.
DOS SANTOS: This year?
MAYER: This year, yes. I think it's pretty high. For the others, I'm more optimistic. But for them to grow, they need to be able to export. So, we have two conditions, I think, that need to be filled. One, the global economy must continue to expand. Second, I think the euro has to come down. Otherwise, we will not be able to turn their economies around.
DOS SANTOS: OK, so how much should the euro be devalued by? Because that's very interesting to hear somebody from Germany make that point.
MAYER: Yes. Well, how much? I don't really know. But we do know that the euro right now is just still above its purchasing power, so parity to the dollar would not at all be extraordinary, and it could help the south a lot.
(END VIDEOTAPE)
DOS SANTOS: That's a debate that's getting an awful lot more traction these days about a potential euro weakening that could be one of the solutions to the ongoing debt crisis.
Well, Spain's short-term borrowing costs eased at a bond auction today as hopes of ECB hope started to calm investors' nerves. The demand for Spanish bills was more than twice the supply that was on offer.
The yield on three-month bonds has more than halved from a similar auction that took place in July, but six-month bonds had actually dropped from 3.7 percent to just over 2 percent, as you can see. Those are the yields now.
When it comes to European shares, the stock market had a bit of a lackluster day on the markets after yesterday's rather good day. As you can see, the FTSE 100 basically flat coming back after a bank holiday, trading was pretty thin in terms of volumes for that market. But we saw the Frankfurt DAX down by about two thirds of one percent. Heavier losses for the CAC 40 over in Paris, as well.
Now, banking and mining shares were among some of the worst performers. Rio Tinto, which is listed on the FTSE 100, was down about 1.7 percent. Deutsche Bank on the Xetra DAX was down about 1.88 of 1 percent.
And the reason why we're showing the Helsinki index is because Nokia, which is listed in Helsinki, fell about 7.82 percent on the day, and that means that it wiped out most of the gains from Monday's rally after the Samsung and Apple court case.
It's time now for today's Currency Conundrum. According to the European Commission, what was the inspiration behind the euro symbol? Was it A, the Greek epsilon symbol? Was it B, a twist on the dollar sign? Or C, a rehash of the old European currency unit? We'll have the full answer later on in the show.
Speaking of currencies, the dollar's currently falling against most of the world's major currencies this session, despite that pledge from the Republican Party to perhaps bring back the gold standard for the greenback.
Right now, the dollar is currently down by around about half of one percent against the euro at just over $1.255. It's also down around about a quarter of one percent against the British pound, or sterling, and it's down by about a third of one percent against the Japanese yen, trading at 78.48. We'll be back after this.
(COMMERCIAL BREAK)
DOS SANTOS: Forget head versus heart. That's so last century. For our ambitious Millennials, a happy love life also fuels grand passion for success. This week, we ask Millennial David Lloyd, what's love got to do with it? To his surprise, apparently, everything.
(BEGIN VIDEOTAPE)
UNIDENTIFIED CORRESPONDENT (voice-over): They are young and confident, educated and ambitious. Born in the 1980s, they are the new generation entering the workforce, and their intent is to have it all. This week, the Millennials on work and love.
In a dark and murky tunnel, under the streets of London -- a group of interns are making themselves heard.
UNIDENTIFIED FEMALE: What sells?
UNIDENTIFIED GROUP: Retail!
UNIDENTIFIED FEMALE: What sells?
UNIDENTIFIED GROUP: Retail!
UNIDENTIFIED FEMALE: What sells?
UNIDENTIFIED GROUP: Retail!
UNIDENTIFIED CORRESPONDENT: Leading the festivities is our Millennial, David Lloyd.
DAVID LLOYD, MANAGING DIRECTOR, INTERN LATIN AMERICA: How was the Polish part from your residence?
UNIDENTIFIED CORRESPONDENT: He's here to say good-bye to his interns.
LLOYD: When are you guys flying?
UNIDENTIFIED CORRESPONDENT: Who have been in London for several weeks having interned for the London Olympics.
LLOYD: Who do I see? Russia against Lithuania in men's basketball.
UNIDENTIFIED CORRESPONDENT: This night out is one of very few for David. Since wining a $40,000 grant for his start-up, Intern Latin America, and moving to Santiago in Chile last year, David has focused entirely on his career.
LLOYD: I've got no interest in doing nothing, being lazy, achieving nothing would be very disappointing.
UNIDENTIFIED CORRESPONDENT: He's won international recognition.
UNIDENTIFIED MALE (through translator): The prize for Talent and Innovation, the prize goes to Intern Latin America.
UNIDENTIFIED CORRESPONDENT: And grown his business in the process.
LLOYD: Right now, we're debating between various countries: Brazil, Mexico, and the United States.
UNIDENTIFIED CORRESPONDENT: Not surprisingly, love wasn't always a priority.
UNIDENTIFIED FEMALE: What about love?
LLOYD: Nothing. Nothing yet. At this stage, it's quite hard to find the girl who is OK with a lifestyle where you're somewhere for three months, somewhere for three months, somewhere for three months, somewhere for three months, constantly moving, chained to a BlackBerry and very excited about being chained to the BlackBerry.
UNIDENTIFIED CORRESPONDENT: Today in London, David is a much more mature and disciplined Millennial because he's found love.
LLOYD: If all you do is work 15 hours a day seven days a week, then you lose complete perspective. Now, I'm actually seeing benefits.
UNIDENTIFIED CORRESPONDENT: Being in a relationship for five months has bought him a new perspective on life.
LLOYD: You have to realize this isn't a 9 to 5 job and you have to be incredibly understanding and flexible. And as long as that's taken as a given, then there's no problem.
UNIDENTIFIED CORRESPONDENT: Love won't distract him from his ambition or his grand business plans.
LLOYD: So, I think September, October, November should be when we look to open a new country --
UNIDENTIFIED CORRESPONDENT: If anything, it will make him a happier and more productive Millennial.
LLOYD: The constant balance -- balancing out personal life and professional life, it's not easy, but if you're very efficient, very disciplined, then obviously you can do it, and one probably makes the other better, to be honest.
UNIDENTIFIED CORRESPONDENT: Next week on the Millennials. Faking it to make it.
SAM BOMPAS, CO-FOUNDER, BOMPAS & PARR: The top one's perfect.
UNIDENTIFIED CORRESPONDENT: Sam and Harry employ some muscle to impress their clients. That's next week on The Millennials.
(END VIDEOTAPE)
DOS SANTOS: After the break, evacuation is no longer an option. Isaac is now a hurricane and it's on its way to the Gulf of Mexico. We'll bring you on update on where it's headed next.
(COMMERCIAL BREAK)
NINA DOS SANTOS, CNN HOST: Welcome back. I'm Nina dos Santos. These are the main news headlines this half hour.
(BEGIN VIDEO CLIP)
DOS SANTOS (voice-over): The U.S. Gulf Coast is bracing itself for Hurricane Isaac. This is a live picture of Lake Ponchartrain, Louisiana, a large inland body of water near the city of New Orleans, which now appears to be in the direct path of the storm.
Billions have been spent on flood protection systems in New Orleans since Hurricane Katrina struck back in 2005. And those systems could be put to the test in the coming hours.
Events are now underway at the Republican National Convention in Tampa, Florida, after a day's recess was called precisely because of Hurricane Isaac. Well, New Jersey governor, Chris Christie -- you can see there on the screen -- will be delivering the keynote address later today in an eagerly-watched event. And delegates will formally nominate Mitt Romney as their candidate for president.
French authorities have opened a murder inquiry into the death of Yasser Arafat. It comes after last month's discovery of a radioactive substance on some of the former Palestinian leader's belongings. Arafat died in 2004 at the age of 75 at a Paris military hospital.
Syria state television says that 12 people were killed and nearly 50 others wounded in a car bombing today near Damascus. Activists say that it happened during a funeral for two government loyalists in Jaramana. That's a mainly Christian town in Syria. An opposition group meanwhile says that 78 people have been killed this Tuesday nationwide, and that was after 157 were killed yesterday.
A possible strike looms for Lufthansa after last-ditch pay talks for a flight attendants' union broke down late on Monday. The union pledges to give very little notice before any industrial (ph) action is called. The dispute is just the latest for Germany's leading airline as it continues to grapple with rising costs and also tough competition.
(MUSIC PLAYING)
DOS SANTOS: More than 93 percent of the oil production in the Gulf of Mexico is currently offline, and U.S. officials say that they may now have to release strategic oil reserves to make up for the shortfall.
Brent crude is currently unchanged at a price of just over $112 a barrel and NYMEX is up around about 1 percent, as you can see there. Gasoline prices in the United States are also moving higher, especially in states that are being affected by Hurricane Isaac.
The destruction is set to continue for a few more days yet, the White House says that the option of using backup oil reserves is still an option that is valid and on the table.
Well, the more pressing matter for the White House right now is the storm preparations around the Gulf of Mexico with the hurricane due to hit Louisiana in just a matter of hours. We're seeing the mayor of New Orleans saying that already it's too late to evacuate people from the city, and flood defenses there are already in operation.
Also, the U.S. president, Barack Obama, has warned those in the path of the storm, now is not the time to be taking any chances.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I want to encourage all residents of the Gulf Coast to listen to your local officials and follow their directions, including if they tell you to evacuate. We're dealing with a big storm and there could be significant flooding and other damage across a large area.
Now is not the time to tempt fate. Now is not the time to dismiss official warnings. You need to take this seriously.
(END VIDEO CLIP)
DOS SANTOS: Jenny Harrison is at the CNN International Weather Center with all the latest on this storm, which is now being declared a hurricane.
So, Jenny, the situation seems to have progressed quite rapidly at the moment. Where exactly are we at?
JENNY HARRISON, CNN METEOROLOGIST: Well, as you said, just a few minutes earlier, actually -- and they're literally hours away from making landfall -- this is the storm. It's a very large storm system. Of course it has now become a hurricane status, just category 1, but even so, that means we've got winds at around 120 kph. Gusting stronger than that.
But it has already been making its presence known. Of course, the conditions deteriorating steadily across this particular portion of the Gulf Coast. But all this cloud you can see ahead of that, that continuing to be rain through much of the southeast and the mid-Atlantic.
But you mentioned the platforms, the oil in the Gulf of Mexico. Well, there are actually nearly 4,000 platforms just scattered all the way along with the coast, and of course well out into the Gulf of Mexico. The waves here with this hurricane force winds could get as high as 7 meters.
And in particular, looking at some very severe coastal setting as well and a visibility down to less than 1 kilometer. So not surprising, of course, that these rigs and these platforms have actually been evacuated or, at the very least, shut down.
This is the forecast track. So this is where it is heading as you can see pretty much directly right now for New Orleans. Now look at this, the movement. This is just change in one hour. The last hour it was moving to the northwest at about 17 kph, and how it has literally stopped moving, which is exactly what we said was going to happen, which is why it is making very, very slow progress to coming onshore.
This is the wind forecast level. So you're looking at the winds and, of course, this is the tropical storm force winds, reaching right the way from the center outwards. And then you can just see how slowly and how long it takes for it to come onshore. We're looking at landfall and this portion of Louisiana, between about 8:00 pm and 1:00 am local time, so 8:00 pm Tuesday, anytime as late as 1:00 am on Wednesday.
The warnings, of course, have been posted. There they are, storm surge, a huge concern with a storm like this. There's a few factors. First of all, storm surge is exactly what it sounds. It's a surge of water caused by the storm and of course the stronger the winds, the further we could have this water forced inland.
The size of the storm, the speed at which it's coming in and, of course, the general strength of the storm. This is the radar in the last few hours. Look at all this rain that's been working its way across the southeast.
We have, of course, got tornado watches in place as well. And then when it comes to really bad flooding along coastal areas, it really does look to Mississippi that could see the worst of it. It's from the eastern side of the eye, up to 4 meters in these areas. This is the rain coming in over the hours ahead.
And it's going to really hold together quite well as well as it comes onshore. Look at the rain that we're looking at to see, 530 millimeters likely in Gulfport, Mississippi; New Orleans, 270 millimeters.
And of course, Nina, I know you're going to be talking about this, but a lot of similarities between Katrina and Isaac, in particular the timing, just literally 12 hours' difference. The actual location when it makes landfall, very, very close.
There are a few differences, though, and that of course mainly is that Katrina was so much stronger and it did actually come onshore at a slightly different approach angle, Nina.
DOS SANTOS: OK. Jenny Harrison, thanks so much for the latest on that, and a very comprehensive report.
Now if Isaac does hit New Orleans on Wednesday, as Jenny was just saying, it will be striking bang on that seven-year anniversary of when Hurricane Katrina made landfall all those years ago. And back then, experts say that it wasn't the hurricane itself that did most of the damage.
It was, indeed, the flooding. That was when the water from that storm surge broke through the dikes, or levees, as they're called over there. Our very own Rob Marciano got the chance to take a look from a bird's eye view at the improvements that have been made in New Orleans since 2005.
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UNIDENTIFIED MALE: (Inaudible).
ROB MARCIANO, AMS METEOROLOGIST (voice-over): Shortly after taking off in a Coast Guard chopper, immediately in view is the biggest pumping station in the world, spanning across the Intracoastal Waterway, part of a $14 billion plan to protect New Orleans from hurricane floodwaters. Gates to keep the seawater from coming in and pumps to let the rainwater out.
There's another 73 pumping stations across five parishes, and some are able to move water at 150,000 gallons per second.
MARCIANO (from captions): On the ground, the floodgates, the pumps, impressive. But in the air, you really see the enormity of this project. The levees just seem to go on for miles and miles and miles. The question is, will it hold in the hurricane.
MARCIANO (voice-over): If this storm strengthens to, say, a category 2 storm tonight, will you still sleep well?
COL. ED FLEMING, U.S. ARMY CORPS OF ENGINEERS: You know, this is the best system that the Greater New Orleans area has ever seen.
MARCIANO (voice-over): Dug deeper, built stronger and standing higher than seven years ago, there are now 133 miles of levee wall around the city. New Orleans, the most exposed flank, is here on the eastern side. This sea wall, nearly 2 miles long, and according to the Army Corps of Engineers, this barrier to the sea is ready.
MARCIANO (from captions): What you're looking at here is a seawall, but not just any seawall. Those pylons go down 100 to 200 feet to the ground.
MARCIANO (voice-over): Sitting in this rescue aircraft reminds me that if the walls don't hold like in Katrina, the men providing this view from above may be the same guys potentially saving lives down below.
UNIDENTIFIED MALE (from captions): We train every day and we train how we fight and we fight how we train. And hopefully we won't have to use those skills, but in this case, we're ready and we have crews ready and available to be ready to respond.
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DOS SANTOS: Rob Marciano there reporting from New Orleans.
Now taking a move out of the emerging market's playbook, up next, why Unilever is adapting its marketing style in developing economies to suit the Eurozone crisis.
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DOS SANTOS (voice-over): It's time now for the answer to today's "Currency Conundrum." Earlier in the show, we asked you this question: according to the European Commission, what was the inspiration behind the euro symbol?
Now the answer is A, the Greek epsilon symbol. The commission says that it's the reference to -- a reference to the cradle of European civilization and the first letter in the word Europe. Of course, it is, isn't it?
Well, the commission says that the two parallel lines certify the stability of the euro. Of course, looking at the way things are now, well, maybe they should have used three or indeed a character perhaps from a different alphabet than the Greek one.
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DOS SANTOS: Well, in tough times, you need a strategy, don't you? Unilever is the company behind (inaudible) and also (inaudible), taking the wraps off smaller packaging for Europe's shrinking budgets. And it's a really big move. Let me show you why here at our series of screens.
So first of all, what Unilever has been saying is that, quote, "poverty is returning to Europe." That is the message from Unilever's European chief. His name is Jan Zijderveld, and he told the "Financial Times" Deutschland that, of course, Europe is facing poverty, so they have to adapt.
There's something of a stark declaration and also realization for one of the world's biggest consumer goods companies. So this firm is actually adapting their marketing strategies that it uses in developing countries for crisis-hit nations in Europe.
Take, for instance, Spain; in that country Unilever has started packaging smaller items, less expensive units of things like washing powder, good for only a few loads of laundry instead of the big bulk buy. And the idea is that the strategy will take away the strain on increasingly limited budgets these days.
In fact, revised figures show that Spain's economic growth just recently has been weaker over the past two years than previously thought. And then, of course, we've got Greece, don't we? In Greece, Unilever already offers mashed potatoes and mayonnaise in smaller, cheaper packages.
And in the meantime, the food and cosmetics giant has also decided to create at the same time a low-cost brand for staples, such as for instance tea and olive oil and all sorts of everyday items.
Now speaking of Unilever, recently CNN's Robyn Curnow got the chance to sit down with Frank Braeken. He's the executive vice president of Unilever in Africa and she asked him about adapting to spec markets, more the challenges of the African markets, for instance, could teach Unilever as a whole.
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FRANK BRAEKEN, EVP, UNILEVER: I am almost -- somewhat ashamed to admit that we are still very much in learning mode around what the differences are within Africa. For a long time, even we, as Unilever, with our long history, have been thinking about Africa as something monolithic, you know. If it works in one market, it works everywhere.
And in many ways, of course, South Africa has been the inspiration of many of the things that we adopt across the continent. So basically copy pasting makes us an advertisement. It is very clear and increasingly clear that there is really differences between the different countries.
So what we now increasingly do is we think much more in terms of subclusters, where you have East Africa, East Africa, where you have West Africa, where you have southern Africa. So it is more about how you define the brand next, how you bring it to the consumer, that we localize, that we make relevant for the local consumer.
ROBYN CURNOW, CNN HOST: And it's so important, particularly now, isn't it? There's so much competition.
BRAEKEN: Yes. Unfortunately, we -- many people have started to discover Africa. And that is a good thing for Africans, by the way, for the African consumer. It's probably the best things that happened to the African consumer. For us, that has meant that we had to drive up a gear in terms of innovation.
CURNOW: Would you say companies like yours have underestimated the African consumer?
BRAEKEN: Definitely. And it's funny you say that, because it's exactly the expression that I used. I like to say that African consumer has been underestimated, underserved and underserviced.
And underestimated, with that, indeed, what I mean is like we have looked at it a little bit generically, like they're Africans, you know, a little bit patronizing generically. Now we start to take the African consumer seriously.
CURNOW: And we're not just talking here about this emerging middle class. We're talking here about sometimes the poorest of the poor.
BRAEKEN: Absolutely.
CURNOW: An old granny, perhaps, who has a dollar to spare or a young single mother, who knows that she wants to spend a little bit extra on her children's products.
BRAEKEN: Absolutely.
CURNOW: It's the collective spending power that's so powerful, isn't it?
BRAEKEN: Absolutely. Now, the emerging middle class is only one part of the story. I think the real story is that we, through innovation, through organizational capability, we reach down. We go deeper. By having a product that is more affordable, you reach down. So, suddenly, you have more consumers in your catchment area. Right?
Organization capability, by building organizational distribution strength, we are now -- having doubled the number of stores we go to physically, up to over 400,000 stores. We have doubled it in the last two years, last 2-3 years. So certainly, your products can be found in more places in Africa.
So you expand your catchment area. That, to us, is the real story of our growth in Africa at this moment.
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DOS SANTOS: Up next, cutting through the political noise. We'll take a look at the latest technology getting U.S. voters to bigger picture and campaign (inaudible).
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DOS SANTOS: The U.S. election campaign is heating up and the airwaves are being filled with campaign ads. It's not always obvious, though, who's behind campaign ads like this, since this one -- that's why non-partisan, non-profit group The Sunlight Foundation has decided to create the Ad Hawk.
It's a smartphone app that uses the same kind of audio (inaudible) technology as music (inaudible) services like those (inaudible) or Sound Hound. To use it, all you need to do is record a snippet of the ad on your phone and then wait for a match. Ad Hawk will tell you who paid for it and give you the full background information on the candidate or political group that did so.
Tom Lee is the director of Sunlight Labs, part of The Sunlight Foundation and he joins us now live from Washington, D.C.
This is a very interesting application, Tom. First of all, how long did it take to develop it?
TOM LEE, DIRECTOR, SUNLIGHT LABS: Well, we've working on it for a couple of months now. And it's really been a bit of a sprint to make sure we could have it out in time for the election.
But the original idea came out of a community event in Philadelphia, where a team of volunteers worked on the prototype and released it in the spring. They brought it to us and then we've been working on it for the last couple of months.
DOS SANTOS: How popular has it been at the moment?
LEE: Well, I think it's early days, but we're really excited about the amount of use that we're seeing. We are seeing thousands and thousands of downloads and identifications and we're hopeful that this is going to prove not only useful way for people to learn about the ads themselves, but to help us collect information about the shape of spending on advertising this election season.
DOS SANTOS: Yes, the issues of super PACs, et cetera, has been such a big issue, a divisive one as well. I suppose critics, though, might say, isn't it obvious who pays for these adverts? Sometimes it is really obvious, isn't it?
LEE: Sometimes it is. And particularly when you're talking about the presidential campaigns. Often it's clear who's pay for what. But Todd Akin, who, of course, has been in the news recently, is actually a pretty good example of a situation where it isn't always obvious.
Some people think that he became the Republican candidate in this race in part because Senator McCaskill ran ads supposedly against him, but using a lot of language that actually was kind of flattering to him, talking about his pro-family agenda in scary tones and how he's the true conservative choice, which a lot of voters, of course, find appealing. So sometimes it isn't clear, exactly, what the motivations are behind this.
And in other cases, it's just very, very easy for these groups to set up their legal status and then disappear virtually overnight. We're able to do not only aggregation of the data that's available about these entities, but also original reporting. And we think we can provide a really good accounting of who's pulling the strings.
DOS SANTOS: But how effective is it and how accurate is it? Because obviously, as you were just highlighting before, many times there's many layers of people involved. And it is very opaque to try and get to the person who actually funded those adverts. And there's a lot of money on the table.
LEE: That's true. Exactly what information is available varies a lot, based on whether it's a presidential ad, whether it's a C-4 versus a super PAC paying for it. It -- the results you'll get back will vary.
We try to share absolutely everything that we've got on a particular entity. And we have thousands of ads in the system. But it is a struggle. There's a huge research effort that's involved just in getting to this level of coverage, collecting all of the different sources of online video and ingesting this stuff on a daily basis, and then having our reporters add what information is available.
So we're striving to provide as complete and accurate a picture as is possible, but there's no question that our job would be a lot easier if Congress or the courts or the Federal Election Commission showed some willingness to get more serious about disclosure.
DOS SANTOS: Well, that brings me to my next question. Why exactly are you doing this? I know that obviously you're non-partisan, not-for- profit. But what would you like to see done as a result of more transparency about who pays for what? Because that's effectively what you're bringing to people.
LEE: Right. I think the first goal here is to make sure that voters are aware of who's trying to influence their choice this fall. But more broadly, we hope that this will spur a conversation about what kinds of disclosures are made and what we expect from our campaigns and candidates when it comes to talking about who's giving them large amounts of money to get into office.
These patterns of influence are subtle. It's never, you know, a cartoon bag of cash with a dollar sign on it being handed over in a quid pro quo. But the patterns of influence are real and they have a negative effect on our system. So we want to share what information is available and hopefully draw attention to the overall problem.
DOS SANTOS: Well put in a very erudite manner. Thanks so much, Tom Lee there, joining us from Washington, D.C., from The Sunlight Foundation.
We'll have our final check on the markets in just a moment. (Inaudible) for that.
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DOS SANTOS: Welcome back. It's looking like a quiet day on Wall Street. Let's have a look at how the big board is faring at the moment. And as you can see, it's more or less the kind of picture that we saw this time yesterday.
And the Dow Jones industrial average poised to close basically flat. It's only down about 7 or 8 points at the moment or `round about 0.06 of 1 percent. There's a lot for people to digest later on in the week rather than the first portion of the week.
We have had some disappointing consumer confidence data coming out of the U.S., largely the index there falling to the kind of level that we've seen this time last year. So obviously not good. And then we've had disappointing economic data coming out of Spain as well with a lower-than- expected reading of its GDP.
Remember, add to that even the Eurozone's most resilient market, Germany, has seen its investor and consumer confidence falling to the lowest level since July this time last year.
And let's also have a look at how the European stock markets have been doing, and also the bond markets as well, because let me remind you that Spain's short-term borrowing cost did manage to ease a little bit at a bond auction today.
This is largely as people hope that the ECB will intervene eventually and those kind of hopes have calmed investors' nerves. As you can see there on this chart I'm showing you now, the demands for Spanish bills was more than twice the supply that was on offer earlier today.
The yield on the 3-month bonds actually halved from a similar auction in July. And when it comes to 6-month bonds, that again drops even more from 3.7 percent to just over 2 percent.
When it comes to the European stock markets, they're firmly shut now, banking and mining shares among the worst performers in the FTSE 100, coming back from a bank holiday, putting on no gains and no declines, either.
And that's it for this edition of QUEST MEANS BUSINESS. Thanks so much for joining me. I'm Nina dos Santos in London.
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DOS SANTOS (voice-over): These are the main headlines this hour.
The U.S. Gulf Coast is bracing for Hurricane Isaac. It's now a category 1 hurricane with winds of up to 75 miles per hour. This is a live picture of the Bay St. Louis, Mississippi, where the wind is already picking up strength at the moment. It also shows the so-called storm surge you can see arriving there.
You can just about see that -- the top of a dock which has been submerged there as you can see on that picture there. The U.S. president, Barack Obama, urged residents to take official warnings seriously.
Well, events are now underway at the Republican National Convention in Tampa, Florida, after a day's recess was called. The New Jersey governor, Chris Christie, will be delivering the keynote address later today and delegates will formally nominate Mitt Romney as their candidate for president.
French authorities have opened a murder inquiry into the death of Yasser Arafat. This comes after last month's discovery of a radioactive substance on some of the former Palestinian leader's belongings. Arafat died in 2004 at the age of 75 in Paris.
Syrian state TV says that 12 people were killed and nearly 50 wounded in a car bombing today in Damascus. Activists say that it all happened at a funeral for two government loyalists in a mainly Christian town near the capital. An opposition group says that 78 people have been killed nationwide this Tuesday alone.
That's a look at some of the main stories we're watching for you on CNN. "AMANPOUR" is next.
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