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Quest Means Business
Severe Weather Threats in US, UK; Severe Floods in England; Future of UK Economy; US House Votes to Raise Debt Ceiling; Winter Storm Hits Southeast US; US Stock Markets Dip; Dassault Immunity Lifted; Cyber Threats
Aired February 12, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAX FOSTER, HOST: An end to the rally. The Dow dips. We're at the end of the trading day on Wall Street. It's Wednesday the 12th of February.
An unparalleled natural crisis. Britain battles flood damage, transport disruption, and claims that it was ill-prepared.
(BEGIN VIDEO CLIP)
DAVID CAMERON, PRIME MINISTER OF BRITAIN: Money is no object. We'll spend what is necessary to help families, to help people, to help communities get through this very difficult time.
(END VIDEO CLIP)
FOSTER: In the US, an ice storm of historical proportions. Both sides of the Atlantic now in crisis management.
Also tonight, the rewards are great, the risks of getting caught are low. Cyber crime is flourishing.
I'm Max Foster, this is QUEST MEANS BUSINESS.
Hello to you. Severe weather ravages both sides of the Atlantic. In Europe, massive floods wreak havoc across parts of England, damaging nearly 6,000 homes. On dry land, a political storm is brewing over concerns the British government has been slow to respond to the rising water.
Meanwhile in the US, states in the Southeast are getting pummeled by a dangerous winter ice storm. More than 90,000 people are currently without power. As many as 3,000 flights have been canceled. A Homeland Security meeting on extreme weather is being held in Washington today.
(BEGIN VIDEO CLIP)
SEN. RON JOHNSON (R), WISCONSIN: In terms of how we prepare, are we being penny-wise and pound-foolish by not spending the money up front to mitigate, and is it over-reliance on federal help when these disasters hit? Everybody's expecting the federal government to come in and pay for things as opposed to actually mitigating these risks ahead of time.
(END VIDEO CLIP)
FOSTER: Well, we'll get the latest from the USA in just a moment. First, though, to the United Kingdom, where the National Weather Service, the Met Office, issued this warning earlier on. Hurricane-force winds battered the British Isles on what's been called Wild Wednesday.
In Ireland, thousands of homes and businesses are without power after a storm swept in from the Atlantic. Gusts of up to almost 180 kilometers an hour were recorded off the west coast.
In northwest England, flights, trains, and ferries were canceled, and some parts of the motorway network were closed. Britain is facing its wettest winter in more than two centuries. Flooding in parts of England are so severe, it could take weeks before water levels return to normal. One economist estimates that the lost output in the soaked areas could reduce UK GDP by up to 1 percent.
The fight against the floods has become a political issue as well. Critics say the British government should have responded faster, as water levels have gradually risen over the past few weeks.
David Cameron has pledged up to $60 million to help farmers whose fields were left underwater, and said more troops will be made available. Cameron says all necessary measures will be taken to address the flooding.
(BEGIN VIDEO CLIP)
CAMERON: I think it's clear that we are seeing more extreme weather events, and I suspect we'll go on seeing more extreme weather events, and we need to do everything we can to improve the resilience of our country.
Let me repeat again as I said yesterday, when it comes to this relief effort, money is no object. We'll spend what is necessary to help families, to help people, to help communities get through this very difficult time.
(END VIDEO CLIP)
FOSTER: Well, Jim Boulden has more from a flood zone near the River Thames.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: This is the idyllic village of Datchet, near Windsor Castle, but also near the River Thames. And that's why you see this amount of flooding, like you see in many villages up and down the Thames.
There has been more rain in the last month here in the UK than there has been since 1776, and so there's really nowhere for the water to go, except in some of these villages, in this case, inside of this hotel, this pub.
They have been attempting to pump the water out for days. They've stuck a second hose out of the window. This is a place you would see weddings taking place, but at the moment, there's very little business that can take place.
The shops on this side of town have been hit particularly hard. You can see this dry cleaner has been trying to get the water out. Have the sandbags worked at all?
UNIDENTIFIED MALE: No. They came all too late, I'm afraid.
BOULDEN: Yes.
UNIDENTIFIED MALE: And they weren't coordinated, and what we got arrived after the flood, so --
BOULDEN: Have you had serious damage, or is it just damage you think you can repair?
UNIDENTIFIED MALE: I think everything's repairable. We've got, obviously, the other shops here to worry about as well. It's a shame we couldn't have a coordinated line of bags put in before the water came in.
BOULDEN: It's not just some of the roads that have been closed and flooded. You see here the train tracks through Datchet have been closed. And I found these two gentlemen standing here.
UNIDENTIFIED MALE: I was supposed to be in Frankfurt all week, and then watching TV on Monday morning in Germany, I saw that there was my house going by. So, it was a case of trying to get the best possible flight out and see what we can save from what's left.
BOULDEN: One thing that's very clear here in Datchet is community spirit, something we've seen in other villages as well. This man has been taking people to the pharmacy using his boat, taking them across to dry land.
So, you're the local vicar, and you've been using the services of the man with the boat?
UNIDENTIFIED MALE: Well, actually, I think this is the first day I've actually done it, because up until now, I've been walking all the way around the side of the water, but I needed to get to some houses across there, yes.
BOULDEN: And what are people telling you when you go to their houses?
UNIDENTIFIED MALE: I think the main thing is that people are worried about what will happen. They're trying to make sure they can prepare as best as they can. A few houses have actually got flooded into the living area, but in a lot more, the water's lapping around the front doors, so they're naturally worried.
BOULDEN: This is a scene repeated many times here in the center of the village of Datchet: the military moving personnel through here. They built some ramparts over the weekend into Monday to try to keep the water from rising too high here.
To the great relief of residents, I'm sure, this pharmacy has remained open, despite the sandbags. It has remained dry, which is allowing people to come in and get the medicine they need.
UNIDENTIFIED FEMALE: It's been a bit of a struggle. Even the deliveries, even with the staff coming in, because the water's just about knee-high. So as long as we have our wellies, we're able to come in.
BOULDEN: And there's the man with his canoe who's been helping the pharmacy and those who need to get their medicine. I have to say that the water has receded during the day, but the wind has picked up and the rain has begun again. I imagine he and the emergency services and the military are going to remain quite busy in the next few days.
Jim Boulden, CNN, Datchet, England.
(END VIDEOTAPE)
FOSTER: Well, the Bank of England governor, Mark Carney, told ITV news that floods will affect the UK economy, at least in the short term. And whilst the weather forecast remains pretty grim, the bank's economic forecast actually is positively rosy.
The Bank sees growth of 3.4 percent this year, a much stronger number than its November forecast. Still, Carney warns that the recovery is fragile.
(BEGIN VIDEO CLIP)
MARK CARNEY, GOVERNOR, BANK OF ENGLAND: The recovery as yet is neither balanced nor sustainable. A few quarters of above-trend growth driven by household spending are a good start, but they aren't sufficient for sustained momentum.
(END VIDEO CLIP)
FOSTER: Well, David Bloom is head of global foreign exchange strategy at HSBC. He joins me now from New York. And these figures are pretty incredible from the UK, steaming ahead after an appalling couple of years.
DAVID BLOOM, HEAD OF GLOBAL FOREIGN EXCHANGE STRATEGY, HSBC: Yes. I think we were talking triple-dip recession last year, so it wasn't very hard to beat expectations. But I think now, expectations are quite elevated, and I think the market's going to be disappointed.
They don't really want to believe that Carney's not going to raise rates when he is, and so people are very happy at the moment buying sterling, something we don't agree with.
FOSTER: And he's got a pretty tough -- thing going on, hasn't he, really? Still wants to keep rates low. He's looking at unemployment, unemployment is coming down quite quickly. He's got a really tough juggling act, because he doesn't want to -- he doesn't want to stop this recovery, but he also doesn't want it to run away with him.
BLOOM: I think there's little fear of a recovery running away of anybody. I think there's still deflationary and disinflationary forces all around, and inflation will remain very much under control.
But I think it's based on the housing market, which is very -- doing very well in London in particular, some credit growth. But it's not the kind of productivity-led recovery that we want. And we've seen in the United States and the UK the unemployment rates drop, but both central banks saying, well, that's not really what we meant at all.
FOSTER: They're looking at raising interest rates. All the signals from the Bank of England are that rates will increase. The question is, when and by how much? What's your view on that?
BLOOM: Well, I think that's the feeling you get from the market, but that's actually not what the central bank is saying at all. They're saying that there's no rush to raise rates. We just heard Carney say how fragile the recovery really is. But there's the sense in the market that the UK may be one of the first of the big ones to pull the trigger.
I don't agree. I think the economy will peter out a bit in the second half and the UK's external balances are looking very poor. We're starting an economic recovery in the UK with a good stiff sort of 7 percent of GDP. If this was an emerging market, it would be seen as poisonous.
FOSTER: And some important news coming from the US as well. The House voting to raise the debt ceiling. It was pretty nail-biting stuff, but it's actually happened. And this is a big deal, isn't it? Because we're now looking --
BLOOM: Yes.
FOSTER: -- at this only becoming an issue again next year.
BLOOM: Thank goodness for that. It's about time we had some political sense being engendered in the market. This was something that they took us to the wire many times last year. In December we were talking about these kind of big fiscal and monetary events.
And I think they've seen sense, and I think that's very good for the dollar, very good for US policy, and we're bullish on the dollar. And this is the exact kind of news I want to see for my forecasts of the dollar rally to start really spreading its wings, particularly against sterling and the euro.
FOSTER: And it deals with this problem ahead of the midterms as well. So, is the focus on the debate now in terms of economic very much looking at politics and how the midterms play into this, as opposed to more sort of gridlock over this debt ceiling?
BLOOM: Yes. And that releases us into being able to look at the data. But the problem, obviously, with the data, I know you're shown the terrible floods we're seeing in the UK, but they're also, obviously, the January storms, people are rushing out of New York. As I came to the studio, we're expecting another big storm here, and that's weather affecting the data.
So, although we want to concentrate on the data, the data's not clean, so we're going to have to wait quite a few months to get a sense of what's really going on.
FOSTER: OK, David Bloom, thank you very much, indeed.
BLOOM: Thank you.
FOSTER: Meanwhile, the weather in the United States that Janet Yellen's Senate hearing on Thursday has been canceled. A winter storm is working its way up the East Coast, as we've just been hearing, and Jennifer Gray joins us now from Decatur in Georgia with the very latest on that. So, how bad is it?
JENNIFER GRAY, AMS METEOROLOGIST: Yes, well, we're in Decatur, which is just a couple of miles outside of downtown Atlanta, and we have seen the sleet, the freezing rain come down since 5:00 this morning. So for the past 12 hours, it has been coming down, expected to come down for another 12 hours.
And you can see, just a blanket of ice behind me. It looks beautiful to look at, but it is very slick, people are urged to stay off of the roads, the city has definitely done a better job at communicating that to the city. If you remember, just a few weeks ago, total gridlock here in Atlanta.
But what we're seeing -- and this is a good example -- I took this off of a tree, and you can see that layer of ice that's starting to accumulate on these branches, and it's just a couple of millimeters thick, but it only takes about a centimeter of ice or so to bring down these branches and power lines, and folks will start losing power.
And that's what's scary, when temperatures are below freezing, it can be very cold overnight, and that's what we're thinking is going to happen. We've already seen over 100,000 power outages in the area, and that number could grow as we go through the overnight hours.
So, it's going to be these power lines and these tree branches that everyone's going to be watching. The kids have been urged to stay away from the trees because they've been falling over town, and it is because of that ice. And we still could see several more centimeters of snow by the time tomorrow morning comes, Richard (sic)?
FOSTER: Yes, how much longer do you think -- or what are the forecasts on how much longer this is going to last? Because it's much worse than expected, and obviously people aren't able to go to work and go to their business premises in the same way as they normally can. So, it is affecting things.
GRAY: Yes, it's affecting things in a big way. People can't go to work, kids can't go to school, and this has happened the second time in just a couple of weeks, and so, this is really shutting the city down.
It's expected to last until tomorrow morning. Temperatures will get above freezing by tomorrow afternoon, and so that will help with some of the melting. But most of the melting will take place on Friday, and that's when we're really going to see those temperatures get above freezing.
But it's leaving Atlanta and it's going up the mid-Atlantic, and so DC, New York, Philly, this is all heading to the mid-Atlantic and the northeast tonight into tomorrow.
FOSTER: And we've already heard how it's affecting Janet Yellen's hearing, it's having a big impact. Thank you very much, indeed, for joining us, Jennifer Gray.
Well, coming up, he is one of the richest men in France and one of the biggest entrepreneurs. Now at the age of 88, Serge Dassault could be in for a damaging court battle.
(COMMERCIAL BREAK)
FOSTER: US stocks, a little change Wednesday. Alison Kosik is at the New York Stock Exchange. It was a bit of a holding pattern, I guess, today, Alison.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: That's kind of investors taking a breather after four days of gains, investors decided to take some profits off the table. The Dow dragged down today by a drop in shares of Procter & Gamble after P&G cut its earnings forecast.
So, not really a lot going on today. Light economic calendar, nothing really corporate-wise going on. The debt deal, though, that was in focus, and there was some excitement that progress is being made there, Max.
FOSTER: OK, Alison, thank you very much, indeed. Now, on this side of the Atlantic, the French Senate has stripped the industrialist Serge Dassault of his immunity from prosecution. It means he could face criminal charges for allege vote-buying.
Now, Serge Dassault is 88 years old. "Forbes" magazine lists him as the fourth-richest man in France and the 69th wealthiest in the world, in fact, with an estimated fortune of $18 billion.
Dassault, who's a French senator, is suspected of operating an extensive system of vote-buying, which influenced the outcome of three mayoral elections in a Paris suburb. Those were won by Dassault himself or by his successor.
There is no doubt about the billionaire's business credentials. He has a majority stake in Dassault Aviation, which makes business and military aircraft, while his Dassault Group also owns "Le Figaro" newspaper in France.
I've been speaking with CNN's senior international correspondent, Jim Bittermann, in Paris, and I started by asking him to elaborate on these allegations facing one of the most high-profile figures in France.
(BEGIN VIDEOTAPE)
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, basically, Max, these are allegations that he used money to pay off voters to get himself elected. There are some money-laundering investigations going on. There's the possibility that he may have allocated public housing on the basis of collecting votes, and this is the accusation that's made.
Now, a number of his assistants have said to the media, anyway -- they haven't necessarily said this to the judges -- but they've said to the media that they were responsible for handing out hundreds of thousands of euros to various associations who then worked for Mr. Dassault to get him elected.
And he did, indeed, win the election in 2008, but that election was then discounted because of all of these allegations, Max.
FOSTER: And he had some sort of immunity against these allegations in the past. What was that based on?
BITTERMANN: Well, that's based on being a senator, because one of the things that's curious about the French system is you can have various offices here. He was not only on the Conseil Regional down in Corbeil- Essonnes, but he was also the mayor of Corbeil-Essonnes, and he was in the senate. And as a senator, he had immunity, parliamentary immunity, for these kind of charges.
Now, this senate has voted for the third time now, and this time it did lift his immunity. He -- Dassault himself went into the senate to vote this morning saying that, in fact, he was asking the senators to lift his immunity so he could clear his name.
But the fact was, he was seeing, I think, that he was going to lose that vote anyway, so he decided to seize the moment and make it appear as if he was going to ask for the immunity to be lifted so he could clear his name, Max.
FOSTER: So, I assume we're going to see some very high-profile case now unfold?
BITTERMANN: Well, I think so. It's a little difficult to know exactly how this will unfold, because in France, there are these investigative judges, investigating judges who can look into allegations of crimes. They don't necessarily have to charge someone, and Mr. Dassault has not been charged as of yet.
But we will probably see him called into custody, where he'll be taken in, he could be held for a period of up to 48 hours while the judges question him.
He also can be subjected to meeting his accusers and arguing it out before the judges, basically having the people that are saying that he committed these crimes across the table from him in a room and the two going at each other, and the judges can then make a decision about whether or not he should be charged.
So, I think it definitely is going to be high-profile just because Mr. Dassault's past. The man has -- is one of the richest men in France, the fourth-richest man in France, and some say with a fortune above 13 billion euros. And as such, he's a very high-profile figure.
He's been in the news a lot. He owns "Le Figaro" newspaper, among other things, so he's very well-known here. And the fact that he might actually be hauled -- in jail even for a period of 48 hours is going to be something that's going to catch the imagination of a lot of the newspaper editors around here. And I'm sure we're going to see a lot about this in the papers in the next days that come, Max.
FOSTER: Stand by for that. Jim Bittermann in Paris. Coming up, hear what President Obama has to say on keeping the US free from cyber crime.
(COMMERCIAL BREAK)
FOSTER: Now, the president of the United States admits more needs to be done to enhance cyber security. Barack Obama says cyber threats pose one of the gravest national security dangers to the US. The administration and the private sector are working more closely together than ever to tighten security, we're told.
Our business correspondent, Samuel Burke, joins us from New York as tonight we look at the story from the side of the hacker. Samuel?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Well, Max, who better to tell us who these hackers are than Kevin Mitnick? For years, he was actually on the FBI's most-wanted list for hackers here in the United States.
And in the mid-90s, he actually spent five years in prison for hacking offensive. He was then released in the year 2000. And the picture that you're seeing there is actually when he appealed a court order that prevented him from even using computers once he was let out of prison.
Now, he's become an author and a computer security consultant, and now he's actually fending off the hackers like he used to be.
(BEGIN VIDEOTAPE)
(MUSIC -- "THE PINK PANTHER THEME" BY HENRY MANCINI)
BURKE (voice-over): Just like Pink Panther in the classic movie, hackers work best when they're lurking in the shadows, no matter where in the world they're operating.
KEVIN MITNICK, CEO, MITNICKSECURITY.COM: The hot spots abroad are Indonesia, China, Russia, the Ukraine, and a number of South American countries. That's usually where a lot of fraud takes place. And again, the reason is, it's difficult for law enforcement in those countries, because they're not up to speed, to investigate and prosecute these types of crimes.
BURKE: It's not just the lone hacker kid sitting in his bedroom stealing your money.
MITNICK: I think the more sophisticated the hacker is the people that we have to be concerned about. The ones that are doing it for criminal purposes are a little bit older, a little bit wiser, and a lot more organized.
BURKE: Choosing to use their computer skills for crime over a legitimate job is simple economics, Mitnick says.
MITNICK: Imagine if you're living in Russia or South America, like Venezuela or Colombia, and you're making $200, $250 a month and you're just getting by. Yet, if you commit computer crime, you can make thousands a day.
BURKE: Once they have your credit card numbers in hand, hackers have a variety of options to get cash.
MITNICK: What they can do is sell your credit card, they could use it online to purchase services. They can sometimes purchase gift certificates. It's very easy to go online and purchase $500 gift certificates and send it to somebody, and they could monetize it that way.
BURKE: The world has yet to invest the resources into fighting hackers the way it has other major crime rings, Mitnick says.
MITNICK: It's almost like computer crime is trumping drug trade, because in drug trade, there's such a high risk of being identified, caught, and prosecuted. But with computer crime, it's extremely difficult for investigators to track down who is behind it if they're sophisticated enough.
BURKE: Just like the elusive Pink Panther --
(MUSIC -- "THE PINK PANTHER THEME" BY HENRY MANCINI)
BURKE: -- always two steps ahead of the authorities.
(END VIDEOTAPE)
BURKE: And Max, it's not just that the authorities in these countries aren't going after the hackers in their countries, it's also that the United States can't go after them, because so often they don't have jurisdiction, so they're not getting -- they're not able to get their hands on these hackers, even when they know who they are when they're coming from these places, and many times, it is Eastern Europe.
FOSTER: Yes, they're still grappling with it, aren't they? Samuel, thank you very much, indeed. Now, when we come back, guidance from the governor. Mark Carney says his policy has been so successful that he's having to change it.
(COMMERCIAL BREAK)
FOSTER: Welcome back, I'm Max Foster. These are the main headlines. At least 23 people have been killed in an attack in northeast Nigeria, according to the governor of Borno state. Kashim Shettima has visited the village of Konduga and blamed the attack on the Islamist Boko Haram fighters.
A pro-government protester was killed on Wednesday in Caracas. It happened on the sidelines of an opposition demonstration. The head of Venezuela's national assembly says the dead person was a supporter of President Maduro's socialist administration.
Hurricane-force winds battered the British Isles on what's being called Wild Wednesday. In Ireland, thousands of homes and business are without power after a storm swept in from the Atlantic with gusts of almost 180 kilometers an hour. Floodwaters continue to rise in parts of England, with more rain on the way.
In the southern United States, it's snow and ice causing weather problems. A major winter storm is slamming the region. Many places are all but shut down because roads are so treacherous. Texas and Mississippi are reporting five storm-related deaths between them. More than 420,000 customers in the region have lost power.
Two hundred and fifty more Syrian civilians have been safely evacuated from the besieged city of Homs, according to a journalist on the ground. The World Food Program also delivered 190 food parcels to the old city. Fierce fighting has trapped civilians in Homs for 19 months now.
Amnesty International warns of the exodus of Muslims from the Central African Republic has reached historic proportions. It accuses international peacekeepers of failing to stop the ethnic cleansing of Muslims in the African nation.
Turning to our top story tonight. The Bank of England says U.K. interest rates are likely to remain low for some time to come. It's abandoning previous guidance which linked rates to unemployment. Now the governor Mark Carney, said the Central Bank will no longer focus on any one specific economic indicator when making decisions about interest rates. It said he'll look at a range of factors. The Bank had to scrap previous guidance which suggested that rates might rise when unemployment fell to 7 percent. That's because it's almost there. Carney says the forward guidance policy deserves some credit to help it to boost confidence.
(BEGIN VIDEOCLIP)
MARK CARNEY, GOVERNOR, BANK OF ENGLAND: Forward guidance is working. Expected interest rates have remained low even as the economy has recovered strongly. Uncertainty about interest rates has fallen. Most importantly, U.K. businesses have understood the message.
(END VIDEOCLIP)
FOSTER: Adam Posen was a member of the Monetary Policy Committee of the Bank of England from 2009 to 2012. He's now president of the Peterson Institute for International Economics. He joins me now live from Washington. Thank you for joining us. Has this gone well for Mark Carney or is this a confusion of his plan to give this forward guidance?
ADAM POSEN, FORMER MEMBER, BANK OF ENGLAND'S MONETARY POLICY COMMITTEE)I mean it's a confusion and ideally a dropping of his plan for forward guidance, but it doesn't really matter that much. The bad outcome would've been if they tried to stick with the forward guidance when it was being so contradicted by the economic conditions. That would've hurt their credibility. This is relatively minor and I give them credit for correcting a mistake.
FOSTER: So what's actually gone wrong in terms of his initial plan?
POSEN: Well, I think you had two things go wrong. First, inherently forward guidance is a statement that the Bank of England or the Federal Reserve or whoever is going to focus on a particular indicator -- whether it's number of months or number of people unemployed rather than look at the forecast of what they're committed to look at which is the inflation and other key variables. And that's not going to be credible. And they have to either pick what they're pursuing or pick the guidance, and the guidance is not as useful.
FOSTER: It was initially seen as growth -
(CROSS TALK)
POSEN: (Inaudible) played that unemployment's bad. Sorry -- unemployment's just a terrible indicator. I'm sorry -- go ahead.
FOSTER: Yes, and so now he's going to look at a wider range of indicators. He's talking about wages, productivity, spare capacity within the economy. But actually this initial plan was heralded here because it was giving some sort of security to investors in their decision-making. But they've not got that any longer now, have they because they had that unemployment as a very simple thing to understand?
POSEN: Well, I think there's still security in the sense that the forward guidance is intense, which the quote from Governor Carney you just had reflects, was not to have rates shoot up the second growth began to pick up in the U.K. And they've achieved that. There's no iron-clad guarantee nor should there be. The committee's allowed to change its mind as circumstances change. But I think that they've made a clear signal that they're learning towards not raising rates prematurely and that's as much reassurance as anybody can expect. I think both the MPC and the markets were fooling themselves if they thought some cheap talk out of the -- about unemployment is going to make a difference beyond that.
FOSTER: And your issue with the unemployment indicator is simply that it is a bigger story that that -- you can't just look at one economic indicator?
POSEN: You can -- in very normal times you can focus on inflation and that will cover most things although certainly not all. When times when the labor market's undergoing change and productivity is uncertain, then it's a really bad idea to look at unemployment. And then, because there's so many factors that go into it, there's how many people choose to work, there's benefit levels, there's questions of the wages versus productivity growth as we've seen in the U.S. and thankfully not in the U.K., there's questions of participation -- who's coming in and out of the workforce -- and you don't for sure what's the right target level of unemployment. You have to make a call, but staking your whole policy on it is pretty narrow and pretty un-robust, which is why they have to change it.
FOSTER: And yet he was the champion of this sort of forward guidance idea, wasn't he? It was seen as a great success in Canada. Do you think this in some way will shape the way other central banks will look at forward guidance as a good idea or a bad idea?
POSEN: I certainly hope so. I mean, I certainly hope that central banks get back to doing what they had been doing which was led by the Bank of England MPC saying, 'Here's the forecast, we're going to talk to the markets and the public like grownups, we're going to try to talk to you about what are some of the risks and what are some of the indicators, but we're not going to make it all about one simple number. Whether it's money supply in the 80s or unemployment today, making it about one simple number distorts and gives a false sense of precision that you don't have. So, and I think the stuff about the Bank of Canada, I think the forward guidance there -- its benefits were vastly exaggerated. In the end, we want a central bank committee that makes the right decision on when to tighten or not. And that's much more important than the communications. I'm afraid the Fed is still all caught up about communications and I will hope they get past that.
FOSTER: OK, Adam Posen, thank you very much indeed for joining us. Well investors here in London seem very unfazed about the news, and in the end the FTSE closed the day flat. The other major (forces) finished the day as slightly higher. No major change. From Russia with love -- Richard travels to Moscow next to find out how the service industry is warming up to the business traveler.
(COMMERCIAL BREAK)
FOSTER: Time for today's "Business Traveller" update and while thousands of flights fell victim to the weather in the United States today, last year was a good year for U.S. airports, at least in terms of getting passengers to their destinations on time. According to the numbers out of the U.S. Department of Transportation, the best performing major airport was Miami International -- 78 percent of flights from that airport were reported to have departed on time. At the other end of the scale, Baltimore/Washington Thurgood Marshall Airport -- only 57 percent of flights were reported to have left on time. In terms of on-time arrivals, Miami was top of the list again. It was followed by Atlanta's Hartsfield- Jackson International Airport. LAX International was next with New York's JFK International not far off that. And only two-thirds of flights arrived on time. The biggest cause for delay was planes arriving late -- 11 percent of flights in fact -- and carrier delays were the next biggest cause, whilst extreme weather counted for less than 1 percent of delays. May be a bit different this year.
Tonight, hotels across Russia meanwhile are looking after international visitors who are in the country for the Sochi Games. Hospitality officials say tourists will be enjoying better service, the kind you'd find in Europe and the United States. Richard went to Moscow to find out more.
(BEGIN VIDEOCLIP)
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: It's no secret, Russia has never been known for its service. There are a few smiles, little chit-chat, but almost no English. (Inaudible) dumplings.
Female: (Inaudible) this menu be discovered by putting Russian menu in Google translator so it says nothing in menu.
QUEST: Times are changing across Moscow and Petersburg. Better service is definitely on the menu.
ALEX SUKHAREVSKY, HEAD OF RETAIL, MCKINSEY & COMPANY: Hey, how are you?
QUEST: How are you?
SUKHAREVSKY: Good. Let's go back to the history. Because when you think about it, it's only 25 years old versus centuries that it evolved in the West, right? So if you think about it in this term, that's actually quite impressive.
QUEST: It's the growing wealth of the growing number of wall-traveled Russian people that's forcing change.
KIRILL MAKHARINSKY, PRESIDENT, OSTROVOK.RU: Even four years ago, things were different. So the first big trend is just this massive number of people who have no experience with a planned or a Communist state, right, so they expect to be treated like Europeans, they expect high standards. To go from practically zero to millions of people just in Moscow alone. In the regions if you go outside Moscow as we do, it's very, very hard to find a single place because we're working off a very low base. Add to that that Russians just fundamentally as people, you know -- Americans and British people find them to be more intimidating or less friendly.
QUEST: At the Russian Airline Aeroflot, the warm is genuine. These trainees are learning to compete with their international rivals. They must offer those picky customers the best. Ding, ding, ding.
Female: (Inaudible), Mr. Richard. Would you want a drink -- we have wine, vodka.
QUEST: Whoo hoo, a little early for the vodka. What is the difference between Soviet Aeroflot and today's Aeroflot?
NATALYA FRYKINA, HEAD OF CABIN CREW TRAINING, AEROFLOT: It two different companies, like sky and land -- in politeness, quality of service and food even. What about our training? Not with forks and knives. We started with a philosophy -- each client is a treasure. If you ask any person in our country where can they find good -- better service, they'd tell you it is Aeroflot. They can't find it anywhere else.
QUEST: Well, maybe in one or two other places. Thank you. This is Moscow's newest five-star luxury hotel It also has the most expensive suite in the city.
MORTEN ANDERSEN, GENERAL MANAGER, LOTTE HOTEL MOSCOW: Mr. Quest, hello, welcome to Moscow. (Inaudible).
QUEST: Well, yes -- this is -- well this is, isn't it?
ANDERSEN: (LAUGHTER).
QUEST: Show me around.
ANDERSEN: Indeed. This one main bedroom, bullet-proof glass all around.
QUEST: You can always tell bullet-proof glass.
ANDERSEN: Master bathroom -- actually no expense has been spared. Basins are covered in gold. You need to have a sauna.
QUEST: Here's the antechambers. Hope we aren't getting lost.
ANDERSEN: The main living room.
QUEST: Why does every presidential, royal top suite have a grand piano? I've never known anybody to ever play the thing. (PLAYS PIANO). Russians themselves are extremely hospitable one to one.
ANDERSEN: Yes.
QUEST: So, what is it, what happens, what goes wrong when suddenly you put them in a hotel?
ANDERSEN: Many times it's the first impression, but once you're past that hurdle, then Russians are incredibly efficient and warm-hearted. So, we are working very hard on the first impression. And that is one of our main -- it was one of our main challenges when we started. But we spent a lot of time and training -- some positions two months before they even see the guests.
QUEST: All right. What is the rack rate for this suite?
ANDERSEN: Approximately $20,000 U.S. dollars.
QUEST: (WHISPERS) -- Can I have a discount on the room?
ANDERSEN: For you, we can discuss a special discount actually. Off we go.
QUEST: (LOUNGES ON SOFA).
(END VIDEOCLIP)
FOSTER: Well for Winter Olympics fans visiting Russia, there's plenty for sale if you're looking for a unique memento from the Games. CNN's Ian Lee at the stores in Sochi to find out what exactly's on offer.
(BEGIN VIDEOCLIP)
IAN LEE, FREELANCE CORRESPONDENT: After an exhausting day of watching events, you'll need some retail therapy -- of course I mean souvenir shopping. Let's see what Sochi has to offer. Leopard, bear and even a rabbit hat -- the mascots of the Games at this store. A Sochi clock to keep track of your favorite events, or a Russian nesting doll tea set for breaks in between. Russia is known for their hats, and you have baseball caps, stocking caps and here, the shapka-ushanka -- the traditional hat. Or perhaps you want a commemorative coin that can double as an investment. Every sport is represented in silver and gold, even when Russia hosted in 1980. There's a lot of Olympic coins to choose from, but there's only one grand abbey of them all, and it's right over here. This 3-kilogram, about 6.6 pounds solid gold coin costs a little over $200,000.
The Games' iconic winter clothing is next on the agenda. Here, we find everything from a polo shirt to the most popular item -- mittens.
Male: I can use American. You see. And it's worth 24 30 cents between each others. And we sell everyday about 65,000 for each mittens.
LEE: If you want to be decked out from head to toe in official Olympic gear, you're going to have to come to this place, Bosco. But looking this good is going to cost you. This hat and jacket combination is about $1,700, so as we found here in Russia, if you want to show off your Olympic spirit, it isn't cheap. Ian Lee, CNN Sochi.
(END VIDEOCLIP)
FOSTER: That hat might be useful to Jenny Harrison at the moment in the midst of it all in Atlanta.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Well maybe so, Max, but I have to say it's moving fast, this system. I'll come on to that in just a moment, but let me start first of all with the conditions across in Europe in particular. Of course Ireland, the U.K., Northern France -- it really is the U.K. Now you can see in the last couple of seconds there, we've lost the signal. That has happened before, and the last time this happened, it was actually due to the really strong winds that literally were causing the problem. This is a big system, and one across the northwest. This is the one that's been coming through in the last 24 hours, causing those problems. And of course coming in with those hurricane-force winds. Look at the strength of these wind gusts, just absolutely staggering. Aberdare there in Wales -- 171 kilometers an hour. It's along the Llyn Peninsula, so it is in a fairly exposed area. But even so, Mumbles -- 154, Cork in Ireland -- 124 kilometers an hour, and we could well have a repeat of this as we head Friday into Saturday.
Right now, these are the current wind gusts being reported -- 81 a piece there in Belfast and Dublin, 78 in Manchester. And the winds -- they will begin to taper off but they're still going to stay in the 70s and 80s sort of category. And then this next system that comes in -- once again, we are going to see some very strong winds. Then let's talk about the rain and the flooding because, again, some new areas are now really submerged. Look at this -- this Worcester in central England. This is where the River Severn comes through this particular city. And of course pictures like this -- this is what it looks like in hundreds of homes across parts of England now with the flood waters that have become so widespread Here we are in Cookham, very close to London up in Berkshire I think this is, and you can see all of the sandbags that of course are being delivered to many parts of the country, particularly along the line of the Thames. The armed forces are there helping to actually put them in place to try and stop further flooding. But it just hasn't worked in so many areas. This is Datchet -- this is very close to Windsor -- again, along the banks of the Thames. There are currently 16 severe flood warnings in place for this particular region. And that of course is when they say there is a danger to life or a threat to life. But the floodwaters here have gone through into the town.
Some people are making the best of it. Look at this -- I mean you have to I guess try and make the best of these situations. So there's a couple here in the high street coming along in what is now a river in that very nice gondola. Not sure if he was singing to her if that was going on. You want to know perhaps why this has been happening, because we've had weeks and weeks of rain -- the most rain in over 240 years. Generally and typically this is what you have -- the groundwater -- this is what we call the water table, so this is as far up as the water normally is. Then you have the unsaturated ground, on top of that is some soil water. This is of course where you put your plants, crops, that sort of thing. With all the rain we've had, that unsaturated ground is now completely saturated, so as soon as any new rain comes down, it has no option but just to flood. There is just nowhere down below for that rain to go.
The next few days, again, continuing into Wednesday, Thursday, Friday, more of these flood warnings in place, more areas in red for the severe floods. Again, it's the southwest and around London. The last few hours the rain has been coming in, spreading in across France as well -- some very heavy rain there. But of course this has been the scenario -- system after system coming into the northwest. This is the next one -- Friday and Saturday again we're expecting some very stronger winds with that and not only that, as the rain comes in it is going to be rain and also snow -- very widespread and very heavy again. Now look at some of these totals in Dresden in the northwest of France -- over 50 millimeters, 44 an extra 35 or 58 in Cork.
Now to the U.S. -the disasters wreak again for traveling particularly in the Southeast and now spreading up the Eastern Seaboard. Over 3,000 cancellations so far. This is the storm system -- 14 centimeters of snow in Rainsville in Alabama, Augusta, Georgia have had hail come down the size of a centimeter, and it's this nasty, nasty mix -- the pink is the worrying stuff. This is the ice, this is the stuff that coats everything. Right now we've got (inaudible) temperatures just below freezing. Let's just quickly end on this -- Max, want to show you this. This is Tuesday night looking at Centennial Park just off the side of where we are at CNN Center. You can see the rain coming in, it changes over to snow and then that is how it ends. That is a thick layer of ice. That is what does the damage - - it brings down power lines, it coats the roads, because that is why it is so very crippling. And it will continue through Thursday, finally come to an end on Friday.
FOSTER: Yes, I know a lot of your colleagues have struggled to get in, haven't they? So it's pretty severe -
HARRISON: Well most of us -- most of us, Max have been camping out here at CNN, so it's been fun.
FOSTER: Yes, I haven't been over a few days due to flooding. It's all different reasons, isn't it?
HARRISON: Yes, absolutely on that.
FOSTER: Jenny, thank you very much indeed. Now next, a better-than- expected course for Norsk Hydro -- my interview with the CEO when we come back.
(COMMERCIAL BREAK)
FOSTER: Now, one of the world's largest producers of aluminum -- Norsk Hydro -- has reported better-than-expected earnings for the fourth quarter. Earlier I spoke to the firm's CEO -- Svein Richard Brandtzaeg and asked him now the company was dealing with the falling price of aluminum.
SVEIN RICHARD BRANDTZAEG, CEO, NORSK HYDRO: I think today you have to look at the whole in metal price. So it's the -- (inaudible), then on top of (inaudible), there is ingot premium, and today we had a record high ingot premium.
FOSTER: And explain ingot premium.
BRANDTZAEG: That is a premium which is very much related to the location of the metal, but what we have seen recently is that the ingot premium has raised to record high levels both in Europe and the U.S., because the physical market is tight.
FOSTER: And that's partly because the car industry is rebounding, so presumably they're buying more of the metal to (inaudible) cars.
BRANDTZAEG: Yes, the automotive sector is the driver for growth in aluminum. Like the cost, aluminum is a light metal so it fits very well into that business.
FOSTER: We've also had investment funds -- moving out of gold into aluminum.
BRANDTZAEG: Exactly -- this is regarded as a alternative as it's class beside all the (inaudible) classes. So there is a big inventory of aluminum where there are financial investors that have taken part and have ownership in aluminum that is thought accessible to the (inaudible) market.
FOSTER: So basically buying it to put their cash somewhere and storing it so you can't then sell it to the industry.
BRANDTZAEG: Exactly, and that is due to low interest rates and also a strong (inaudible) in the market. So they can look in a significant margin by doing this.
FOSTER: I'm still sort of baffled about why the price is falling -- or is that just a longer-term trend -- it's actually more recently it's going back up?
BRANDTZAEG: Yes, well it is the situation of aluminum, but there has been oversupply of aluminum for several years especially since the (pinus) crisis in 2008, 2008. But recently as we also see now in beginning of 2014, that there is a deficit in production due to curtailments but also due to the fact that there is a growing market.
(END VIDEOCLIP)
FOSTER: Aluminum the new gold it seems. Now, if you're a car fanatic, look away right now because the remarkable story of what happened to eight rare Corvettes is coming up after the break.
(COMMERCIAL BREAK)
FOSTER: A sinkhole that opened up into the National Corvette Museum in the U.S. swallowed eight vintage and rare Corvettes. This is what the area of the museum looked like before Wednesday morning. This is what it looks like now. The sinkhole is about 12 meters wide and up to nine meters deep. The museum director isn't able to estimate the total damage bill but says it will be substantial because a 1962 black Corvette and a 1993 (Zed R-1 Spider) are among the models that plunged through the hole -- they're a piece of history and they're very expensive.
Here's how the Dow ended the training day. It closed slightly low -- (Inaudible) big jump Procter & Gamble was a drag on the Dow, closing almost 2 percent down after lowering its outlook though some positive earnings limited the declines, but really it was a pretty quiet day. As Alison said, taking a breather. Investors in London seemed unfazed meanwhile from the news on the Bank of England earlier. The governor, Mark Carney, said the U.K. interest rates are likely to remain low for some time. He abandoned though (partially) previous guidance which linked rates to unemployment. The FTSE 100 closed the day flat, other major (forces) finished the day slightly higher though. That is "Quest Means Business," I'm Max Foster in London. Thank you for watching.
END
