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Quest Means Business
E.U. Proposes Ban On Russian Coal Imports; Lithuania Ceases All Russian Gas Imports; Zelenskyy Describes Horrors To U.N. Security Council; U.S., E.U., G7 Working On New Russia Sanctions; Binance CEO Says Crypto Markets Police Themselves; IAG CEO On Rebranding; Deutsche Bank First Big Bank To Forecast U.S. Recession. Aired 3-4p ET
Aired April 05, 2022 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN BUSINESS ANCHOR: There is an hour to go of trading on Wall Street, and their stocks are falling, and the reason is clear today. A
key Fed official is warning of a more aggressive tightening on the way. You`ll see the effect that it had on the market. We were up in the morning,
and then the comments come out, and now we are just about at the lows of the day.
And frankly, having seen what happened yesterday, and then the day before, these sharp moves in the last 20 minutes or 10 minutes even, who knows what
will happen today. We`ll bring you that because tell you what does happen.
The markets and the main events that we are following: Europe plans to stop using Russian coal, as it unveils new sanctions in response to the horrors
Lithuania is the first E.U. country to declare independence from Russian energy. The Lithuanian President live with me on this program.
A major warning from Wall Street. Deutsche Bank is forecasting the U.S. economy heading for a recession. You`ll hear from the author of the report
on this program.
We are live in New York as always, it is Tuesday. It is April 5th. I`m Richard Quest and I mean business.
Good evening. We begin tonight as Europe starts to take aim at Russian energy. There is a possible ban on coal, which aims to make Moscow pay for
its alleged war crimes. The bloc`s Finance Ministers are in Luxembourg, where they`re discussing stiffer sanctions. They`re responding to the
horrific images that we`ve seen in Bucha, which has given the meeting a fresh new urgency.
The European Commission President Ursula von der Leyen, said there is more work to be done on the new sanctions.
(BEGIN VIDEO CLIP)
URSULA VON DER LEYEN, EUROPEAN COMMISSION PRESIDENT: The four packages of sanctions have hit hard and limited the Kremlin`s political and economic
options. We`re seeing tangible results. But clearly, in view of events, we need to increase our pressure further.
So today, we are proposing to take our sanctions a step further. We will make them broader and sharper, so that they cut even deeper into the
(END VIDEO CLIP)
QUEST: The year you does not seem ready to ban oil and gas yet. It is talking about banning Russian coal. It remains divided on wider sanctions
for good reason in their view. Germany says cutting off gas is not possible. It imports more Russian gas than any one other country in Europe,
Italy and France on next. And the French President does indeed want such a widespread ban.
Nic Robertson is in Brussels. Nic, if genocide in Europe can only get them to muster a ban on coal, which is worth just a couple of billion, what do
you make of that?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes, $4.3 billion a year is what that is worth -- what is being taken out of the Russian
economy essentially. Compare that to the amount that the European Union has spent on Russian energy since the war began. That is gas, oil, and coal,
the figures are much bigger. So 41 days of war, so far, the total is over $21 billion in 41 days.
So you understand that $4.3 billion over the space of a year is a rather small amount, and it is because despite the fact the European Union has
committed itself by the end of the year to cutting back two-thirds of its gas supplies from Russia or cutting back its gas supplies from Russia by
two-thirds, kit just cannot do without that those raw energy materials.
That is why we are not seeing the European Union going further on that. They have it in other ways. We`ve seen a lot of Russian diplomats being
thrown out of their consulates and embassies in E.U. nations today. We are seeing that the E.U. as well is going to target high tech goods flowing
into Russia particularly chips and quantum computers was another thing that was listed. They are going to make it harder for Russia to do business in
Europe, make it harder for trucks to get in to Russia and to come out of Russia. They are going to make it harder for Russian vessels and Russian
operated vessels to use European ports.
In fact, they plan to make that part of it impossible.
But as you rightly say, Europe despite getting hard and terrible evidence of these war crimes, they`ve gone as far as I can go on this fifth round,
QUEST: What`s it going to take? We`re going to be talking in a second to Lithuania`s President, and he is always going to want the country -- the
first European country to wean itself off Russian gas, but what is it going to take Nic Robertson, to get Germany to basically say, we will suffer that
economic pain necessary.
ROBERTSON: There is already a huge amount of groundswell of moral outrage and of support for Ukraine from the public across all European Union
countries. Anyone, and perhaps not many people have the sort of 450 million that live in the European Union will have tuned in to watch President
Zelenskyy and his address at the U.N. today.
But if they had done that, and they had seen the two-minute video clip that he played showing the atrocities, they would have been outraged. But as you
and I both know, the international community is only beginning to get a first peek at what Russia has done, that sense of outrageous going to grow,
where more and much larger and more heinous crimes to be recorded, and to be seen by populations across Europe, you can only expect that groundswell
of feeling that more needs to be done to stop President Putin. That is the sort of thing that is going to take to speed it up.
But the flip side of that is the pain that you put on European citizens. If you turn off their gas and they are in their houses that are cold, and they
can`t go to work, because their factories can`t function because there is no energy supplies to, you know, turn the turbines or whatever it is in the
factory, there is going to be, you know, political upheaval across Europe.
It`s a balance. It`s an absolutely horrific and terrible balance, and I`m closing my eyes, because I`ve seen that video and it is absolutely
terrible. And the moral outrage is only going to grow, but there is only so much these European leaders say that they can do at the moment -- Richard.
QUEST: Nic Robertson, who is standing outside the Commission Building tonight in Brussels. Thank you, sir.
Now, talking of the countries that have managed to do it, Lithuania is the first E.U. country to completely wean itself off Russian gas, admittedly
small, but the country is located on Russia`s doorstep. It spent the last decade reducing its need for Russian energy. And in 2014, you will recall
after Russia annexed Crimea, Lithuania built an LNG terminal on the Baltic Coast to import gas from other countries.
It linked into Europe`s electric grid through Poland, and it increased its use of renewables. All of which has made it energy independent of Russia.
Lithuania`s President is Gitanas Nauseda, he joins me now from Vilnius.
Mr. President, it is good to see you, sir. This is exactly what you feared back in 2014 was going to happen that the dependence upon Russia would put
Europe in an impossible position.
GITANAS NAUSEDA, LITHUANIAN PRESIDENT: You know, since regaining of our independence, we have quite a long history of relations, economic and
social relations with Russia and if we are talking about the energy sector, this was a story of blackmailing and pressure.
So this was the reason why we decided very early to implement very important infrastructure projects in my country, and I would like to
mention also oil terminal, which was built in 1999.
It allowed us to import crude oil through the Baltic Sea, and you mentioned LNG terminal, which was built in 2014 with the symbolic name
"Independence." Actually, this is a cornerstone of our independence from the natural gas from Russia. So this is the reason why we have decided to
stop to buy Russian oil and Russian gas and we would like that other countries of European Union would follow our example or other countries of
the Nordic region, Latvia and Estonia followed our example, immediately.
QUEST: So if we take Germany, France, Czech Republic -- all those other countries, the Netherlands, that are very large net importers, and say that
they can`t do it immediately. Well, Mr. President, this genocide that`s been going on in Europe, if they can`t stop it now, if they can`t stop
imports now, what do you say?
NAUSEDA: You know, it is very complicated to see what is happening right now in Ukraine, and we should ask ourselves, how we can dare to look to the
eyes of Ukrainians seeing what is happening there.
This tragedy in different cities of Ukraine, killed people in the streets, women, children. So we have to do what we can in order to stop this
violence, to stop these atrocities of Putin`s war and we made our contribution to these efforts, and I think our colleagues could do the
Netherlands, Germany, other countries, I understand the situation is slightly different, but this is a price we have to pay right now just to be
solider with the nation of Ukrainians. And we started just very early because Lithuania understood that we didn`t have any illusions regarding
Russia. We understood that this is a long term threat to European Union, to the democracy. And now the countries, other countries of Western Europe
should realize that we have to deal with very dangerous adversary and we have to do all the measures, to implement all the measures which will lead
to the energy independence.
QUEST: So what do you make, on Sunday night of Viktor Orban, Prime Minister of Hungary, celebrating his fourth election win and calling
Volodymyr Zelenskyy, President Zelenskyy opposition? What do you make of it?
NAUSEDA: It`s a pity to hear such sentences, such statements made by the President Orban because Ukraine is suffering and we have to throw all the
entity to this nation to help with all means, and really, it is difficult to understand such kind of statements, the Baltic countries Poland, and
other countries of the region, understand very well, what is going on in Ukraine, and I hope that the rest of the world has an opportunity to see
what is happening there.
And this is the reason why we have to do all in our hands in order to assist them, and to avoid such kind of statements.
QUEST: Do you think that the longer this war goes on, the more difficult it will be to keep the E.U. members -- to keep the unity amongst the
members. If you`ve already got people like Orban saying that Zelenskyy is an opponent, and you`ve got some countries now saying, yes, we`ll take
immigrants or migrants or refugees, but not too many, we`re overwhelmed -- that unity is going to become frayed.
NAUSEDA: You mentioned that this is sometimes quite complicated, to find this unity because we are talking about 27 members of European Union, and
of course, we have different attitude, different perceptions regarding pressure. But I think the war crimes committed in Ukraine are so evident
and so horrific, that normal people just will realize that we have to be decisive. We have to be united, and we cannot just save some measures for
Because the most terrible things are happening right now and we have to put all the efforts, all the measures in order to isolate Russia, from the
financial markets, from the global markets, from different cultural, and sports organizations and just achieve that it is just absolutely needed to
achieve this immediate impact, economic impact on the Russian economy.
I think we already succeeded to have this impact, but of course it takes time. And meanwhile, we have to assist Ukraine with full means -- military
means, financial aid, humanitarian aid -- so those are the measures we could implement in the short term.
QUEST: Mr. President, I`m grateful that you have given me time in your busy schedule, sir. Thank you. The President of Lithuania joining me this
Ukraine`s President made a powerful appeal to the U.N. Security Council. He questioned whether they`re up to the task of their charter, in a moment.
QUEST: It was a powerful speech from President Zelenskyy at the United Nations today, when he laid out some of the horrors being inflicted on
Ukrainian civilians by Russian soldiers. And just remember, I will be talking about all of this with a prominent Kremlin critic and former world
chess champion, Garry Kasparov, to get his reaction.
I must though first of all discuss the events of the day to put it in perspective. The President of Ukraine says the world has yet to see the
awful extent of what`s happening in his country.
President Zelenskyy said to the U.N. Security Council, Russian troops were committing the worst war crimes since the Second World War. It was an
emotional address. He described the murder of civilians in Bucha as only one example of their atrocities.
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, UKRAINIAN PRESIDENT (through translator): Where is the security that -- the Security Council needs to guarantee, it`s not
there, although there is a Security Council and so where is the peace? Where are those guarantees that the United Nation needs to guarantee?
It is obvious that the key institution of the world which must ensure the coercion of any aggressive to peace simply cannot work effectively. Now,
the world can see that the Russian -- what Russian military did in Bucha while keeping the city under their occupation, but the world has yet to see
what they have done in other occupied cities and regions of our country.
(END VIDEO CLIP)
QUEST: Ivan Watson is in Zaporizhzhia in Southeast Ukraine, he joins me now.
This question, Ivan, of -- President Zelenskyy said what the Russians have done in other parts of the country only now really learning what those
other parts of the country, the situation -- Mariupol, we still know of course is under siege, and the Russians are focusing their energies on the
East for an all-out assault there. What are you hearing?
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Right, well, since the Russians withdrew from -- largely withdrew from the areas north of
Kyiv, the fighting has continued in the East and in the South.
So, the Ukrainian Military Governor of Kharkiv, that`s Ukraine second largest city, he has described more than 50 long range strikes on that city
in just a 24-hour period that killed at least six civilians.
We have images from another Ukrainian town in the east near the Donbas region of Kramatorsk of a school that was hit this week. Then there was an
incident in the southern town of Mykolaiv where you had a Doctors without Borders, Medecins Sans Frontieres team that witnessed a strike on Monday.
What the eyewitness has said was an apparent Russian cluster bomb attack, as that Medecins Sans Frontieres team was visiting an oncology hospital in
Mykolaiv, which is a Ukrainian controlled city, which is also next to a pediatric hospital.
The MSF team say they saw at least one body after the attack, and several people wounded that the windows of the MSF team, their own vehicles`
windows were blown in by that strike. And that fits a much broader, terribly disturbing pattern, Richard, where the United Nations has counted,
let me get this number correct, at least 85 attacks on healthcare facilities in Ukraine recorded since Russia`s invasion on February 24th. So
this is part of a much bigger pattern.
The Russian government denies that it is attacking institutions like hospitals. In fact, the Russian Ambassador to the United Nations Security
Council, was quoted saying, "We came to you, to Ukraine, not to conquer lands, we came to bring the long awaited peace to the blood soaked land of
Donbas." Well, let`s ask some of the 100,000-plus estimated civilians still stranded in the Port City of Mariupol which has been under Russian siege
for a month now.
The International Committee of the Red Cross has been trying to send teams from Zaporizhzhia, where I am now, day after day to Mariupol to try to
begin to deliver humanitarian aid, to try to facilitate the evacuation of civilians, and that team was detained by the Russian military on Sunday and
released some 24 hours later. They are not being allowed in to try to help the stranded civilians there even as the Russian military continues to
shell and bomb from the sky that city -- Richard.
QUEST: Ivan, if the attention, if the Russian Army`s attention is going to be -- has shifted from Kyiv and the northern parts and it is now on the
East. I mean, it doesn`t bear thinking about what they are planning to do, by way of military adventure in Donbas and Luhansk to try and get it and to
see if it is going to be independent.
WATSON: No, and it is terribly worrying. I mean, this town of Zaporizhzhia is just a couple hours` drive on a good day before this invasion from some
of the cities that are now occupied by the Russian military that are being pummeled by the Russian military, and while I see civilians, I see families
walking around with their children, with their pets, trying to run their businesses, despite the curfews here, the blackouts the air raid sirens,
you can`t help but worry terribly for communities like this, it is a city of hundreds of millions of people.
Could it be targeted? If this announced Russian focus on the East of Ukraine, does in fact come to fruition? Will they target places like
Zaporizhzhia, certainly, smaller communities in the surrounding countryside are hit, some of them on a daily basis by Russian long range artillery.
QUEST: Ivan Watson in Zaporizhzhia, thank you sir.
Garry Kasparov is with me. The Russian dissident and the great -- the Chess Grandmaster.
Garry, good to see you. You`ve said already that Russia should be thrown back into the Stone Age for the atrocities In Ukraine. What do you do now?
What is the correct response in your view now we are having the evidence of the genocide and war crimes in Bucha?
GARRY KASPAROV, CHAIRMAN, HUMAN RIGHTS FOUNDATION: It`s the same advice I`ve been giving over the last six weeks: We have to make Ukraine win. We
have to offer them all the assistance that they need to win this war. There is no other way to stop Putin`s aggression and there is no other way to
liberate Russia from the fascist regime and make sure that Russia will eventually, hopefully, return to the family of civilized nations.
And to win, Ukrainian`s weapons, Ukrainian`s Intelligence, and also it`s very important to send a signal to Russian elites, that as long as Putin
stays in power, the sanctions will not be lifted. President Biden made a very strong statement today, but I want it to be accompanied by
confirmation from the State Department or the agencies and European allies, sanctions will not be lifted, as long as Russia is occupying Ukraine an
inch of bigger territory and will not be lifted before Russia pays full reparations for Ukraine and war criminals will be tried by International
QUEST: What about this rather unseemly decision by Europe not to sanction or ban Russian oil -- the Germans, the Netherlands, the French, although
the French want them banned, the Italians -- they will take large amounts of Russian oil, and there is no consensus on sanctioning it.
KASPAROV: Look, the opinion of Western countries on importing Russian oil depends on their geography, obviously, Eastern European nations, they
demand it because they are just on the front line. France is also ready to join because they rely on nuclear energy and they don`t need Russian gas so
Germany, thanks to Gorbachev and Angela Merkel totally depends 50 percent, I think of German energy depends on Russian gas, that`s a result of these
two -- almost two decades of this policy. Italy also is very much, you know, just involved in in gas business with Russians.
But every day, you know, we are sending back to Putin, at least, you know, $650 million, up to $1 billion, it depends on the crisis. So that`s how he
funds the war, and I`m appalled to hear German politicians say: Oh, we don`t want to freeze. You guys, you know, for 20 years, you have been
funding Putin and helping him to build military machine that is killing Ukrainians now.
So maybe you can tolerate you know, just some sort of inconveniences, because otherwise, you know, you will be funding Putin`s criminal army that
is keeps killing Ukrainians.
QUEST: Earlier in the program, the Lithuanian President told me that, you know, that they saw the writing on the wall and became energy independent.
He just -- he basically said that pretty much you`re agreeing with it that Europe needs to step up, but how do you avoid getting into a military
conflict with Russia?
KASPAROV: Look, you know, if Putin wants a conflict, he`ll get a conflict, so that`s why I don`t think we should now think about how we are avoiding
it because that leads us to the policy of concessions, of appeasement, and that is in my view, increases chance of the confrontation.
Because Putin like every dictator, he has an animal instinct. He smells blood and he smells weakness, and then he attacks. I`m not telling you that
the chances of Putin pushing this red button, whether it is a nuclear or chemical or anything -- any button connected to a WMD, they are feeling to
do now, this chance does exist. The question is what can we do to minimize the risk?
And my only -- the only answer is to send a signal to his Generals and Admirals, cronies that if they do it, there will be a response because
trying to avoid it and say: Oh, we will not do it because we want to avoid it that encourages Putin to use a bluff time and again.
QUEST: It`s a bad analogy, but you`ll know what I mean. Do you see yourself a bit like Churchill before the Second World War, while
everybody`s running around like Chamberlain and trying to look for peace?
KASPAROV: Look, it took much longer, you know, for my dire predictions to materialize. I wish it would never materialize. But right now, I think we
should just recognize that every day, we delay our decisive response to Putin. The price goes up.
The same sanctions eight years ago, maybe even eight months ago could have saved tens of thousands of lives. But now, it`s not enough. Now we need
more. We need a full embargo of oil and gas, and also, we need to demonstrate that NATO is resolute. We are ready to call Putin`s bluff,
because at the end of the day, it`s not Putin who execute these orders. It is his Generals, Admiral, his pilots and I bet you, Russian Army is not for
kamikaze. Nobody is willing to die for Putin`s geopolitical ambitions.
QUEST: Garry Kasparov, it is always good to see you, sir. I am grateful. Thank you.
It is QUEST MEANS BUSINESS tonight, an interview, we will be talking to the Chief Executive of Binance more who tells me crypto volatility means
actually the market is working. He will explain after the break.
(JOINED IN PROGRESS)
GARRY KASPAROV, CHAIRMAN, HUMAN RIGHTS FOUNDATION: And I bet you, Russian army (INAUDIBLE). Nobody is willing to die for Putin`s geopolitical
QUEST: Garry Kasparov, it is always good to see you, sir, I`m grateful. Thank you.
And it`s QUEST MEANS BUSINESS tonight. In an interview, we`ll be talking to chief executive of Binance, more, who tells me crypto volatility means
actually the market is working. We`ll explain after the break.
QUEST: Good evening. I`m Richard Quest, we have a lot more QUEST MEANS BUSINESS.
The SEC is proposing new regulations on cryptocurrency exchanges. The chief executive of the world`s largest exchange, he says crypto can take care of
And Deutsche Bank is first major Wall Street bank to predict a U.S. recession. The author of the report that says that coming up as well.
It`s all only after the news headlines because, this is CNN and, here, the news comes first.
QUEST (voice-over): Eleven European countries have expelled Russian diplomats on Tuesday over the Ukrainian invasion and concerns about spying.
Italy, Spain and Denmark amongst the latest countries acting on this. Slovenia told Russia to cut embassy staff from 41 people to eight.
Elon Musk is to join the board of Twitter. He`s now the largest individual shareholder after buying nearly 10 percent of the company. Twitter`s CEO
says Musk will bring great value, with good influences (INAUDIBLE) over the platform, whose policies he has criticized.
Tiger Woods announced today that he will likely play in the Masters golf tournament. Competition begins on Thursday. It will mark his comeback after
the car crash last year that left him severely injured. In 2019, Woods made a comeback win at the Masters after several back surgeries.
QUEST: The head of the Securities and Exchange Commission says crypto should be treated like any other exchange. It`s a matter of investors
safety, he says. U.S. economist Nouriel Rubini might agree. He told me last September, the rise of crypto has resulted in highly overleveraged
(BEGIN VIDEO CLIP)
NOURIEL RUBINI, U.S. ECONOMIST: We`re getting closer to the point in which actually a shock to crypto assets may lead to a systemic effect because now
it`s not just retail investors or a bunch of whales in there but institutions are also entering, doing this business. And once you have --
that`s why you have almost correction of 30 percent overnight, because there`s so much leverage in this particular industry.
And it`s (INAUDIBLE) exchanges. We`re offering you 100 times leverage to repaying (ph) investors. That`s criminal (ph) behavior.
(END VIDEO CLIP)
QUEST: Now the head of the world`s largest cryptocurrency exchange Binance disagrees. Here`s what he has to say on the question of regulatory reform.
CHANGPENG ZHAO, CEO, BINANCE: I also don`t agree with that. I think, basically, the free market, on the leverage part, the free market takes
care of itself.
When you have -- so crypto is very open. People can use any exchange they want to use globally. Some of the exchanges offer high leverage for futures
products but only a small number of people use the futures products.
And of the people who use futures products, when they want to use high leverage, they`re only allowed a very small amount. That`s kind of
consistent across the industry.
And also, even if the industry is overleveraged, when the market corrects, there will be liquidations, et cetera. And people learn; whereas in
traditional industries, you have government bailing out large, failing businesses that are mismanaged. That only makes the problem bigger into the
future. So basically, you`re kicking the can down the road.
QUEST: The reason why, of course, is because jobs are at stake, there is traditional financial arrangements at stake and, therefore, they have to do
that. I guess what they`re trying to avoid is crypto becoming so big that they have to do it for crypto.
ZHAO: I think so far, crypto has grown and it has grown over cycles and it has -- the markets have taken care of itself. When, I -- obviously,
personally have a different view on the bailout.
When you bail them out right now, you`re actually removing jobs for people, who can work for a well-organized company. If you allow the, you know, the
bigger banks to fail, there may be some people who lose jobs in the short term but there will be a much more efficient bank or organization that will
take its place right away.
QUEST: I know this is a somewhat academic question but it fascinates me at one level because, having covered business for so long, is crypto a
You know all the central bankers say it`s not and they will rabbit off the traditional attributes of a currency and say that crypto has none of those
things, it is not a currency.
Do you believe it is a currency or an asset class?
ZHAO: I believe it`s a new asset class. Some cryptocurrencies can be used as a currency, have similarities to traditional currencies.
One of the difficulties people have is people typically want to classify something new into something old that they know about. So when internet
first started, people asked, is internet a radio, is internet a TV, is internet a magazine?
But there`s internet TV, internet radio, internet magazine, internet social media, which doesn`t exist in the traditional media world. So it is a brand
Cryptocurrency, there`s cryptocurrencies, there`s crypto commodities, crypto assets, crypto other things, crypto utility tokens, there`s NFTs,
there`s many other things. So it`s a whole new technology platform that has so many new asset classes.
QUEST: You`re an entrepreneur. You had come up with this fantastic platform, becomes the biggest in the world. Your volumes and your dollar
amounts are just staggering.
But do you now recognize that you`ve moved into sort of the area of public policy and that somebody like yourself now has to deal with these bigger
ZHAO: Absolutely. So we do recognize that. And I think it`s a challenge and also it`s a privilege. So entrepreneurs are not just tech legal. So
entrepreneurs solve problems. So entrepreneurs, our job is to provide utility, provide tools that people want to use.
And how we make that tools -- and that includes making those tools compliant, that includes helping to shape policies for new industries, to
the extent we can. So we are working with regulators all around the world. We want to learn about what they think, how they view.
ZHAO: Different regulators in different countries have very different views on how to regulate different industries. And we also want to educate
them on how a large scale like us operate a scale, a global (INAUDIBLE) --
QUEST: Let me ask you, final question. I covered the stock market crash of late 1989, I covered the dotcom boom and bust, I did the Great Recession
and of course everything in between.
Why is this different?
Why is it not going to take us all down in a fiery basket?
ZHAO: I don`t think it`s that much different.
But if you look at the internet, you know, some of the wealthiest people and some of the largest companies today are all internet companies. You
look at Amazon, Tesla, Google, Facebook, you know, Cisco in 2001, they suffered a crash. Amazon crashed 98 percent. So bitcoin, we all experienced
a few cycles already.
So almost looking back, almost every four years, there`s a cycle. And bitcoin has -- different prices have gone up and crashed, 50 percent, 80
percent, gone up again beyond that and done that a few times already.
If you look at internet stocks today, they`re doing that, too. You know, especially if you look at Chinese tech stocks. So I think volatility is
just part of the market. And then there`s innovation, there`s adoption, a number of people using the technology, which will continue to grow. So yes,
that`s my view.
QUEST: Strong views indeed. We`ll watch more.
Another strong view: Deutsche Bank is warning that the Fed`s fight against inflation is likely to tip the U.S. economy into recession. It`s a
forecast, not a prediction. But it`s the first major Wall Street bank to basically say, no longer a soft landing.
QUEST: I`m back. It`s QUEST MEANS BUSINESS.
Chief executive of IAG, chairing, amongst others, British Airways and Iberia, was showing me that airlines are in the midst of the post pandemic
transformation and Luis Gallego says the crisis was a wake-up call for his company. And he laid out the group`s incoming plans.
LUIS GALLEGO, CEO, INTERNATIONAL AIRLINES GROUP: During the crisis, what we knew is that the -- we need to be different and more efficient after the
GALLEGO: Because we didn`t know what was going to happen with the customer, what is going to change, the business traffic. And because of all
that uncertainty, we knew that we needed to transform the group.
And we outstanding (ph) in the operating airlines but we`re also changing the center, the activities that we do at group level. I think we have
centers of excellence that we want to be excellent in all of them. And we are in that process of transformation.
QUEST: How close do you think you are to getting all the airlines to be effective again, as they were?
GALLEGO: I think all of the airlines will come back to profitability. We are now following very carefully the situation in Ukraine, because of the
fuel price (ph) but it is true that we have hedged our position around 60 percent. So even with the high in part of (ph) the fuel, we are going to be
profitable this year.
QUEST: Once the efficiency has been done and all of that side, what do you want the airline to look like, the group?
Do you feel the need to have another airline?
I know you spent a lot of money now improving the quality of BA.
What are your other priorities?
GALLEGO: I think the stability (ph) of the group always has been to have (INAUDIBLE) in North Atlantic. For that we have British Airways, we have
Aer Lingus (ph). And also we have Iberia. They are flying to North Atlantic. South Atlantic, mainly, Iberia. I think Iberia in this crisis,
they have captured market share because they were main competitors for (INAUDIBLE) and (INAUDIBLE).
They had a difficult situation in (INAUDIBLE) Lebanon. You know that we are also in the middle of the operation with Europa (ph). It`s something that
gambling (ph) for the Madrid hub that I think is very important for us.
And then we have Vueling (ph) in Barcelona, that it works not only in the domestic market in Spain but also they are flying in Europe.
But the motto of the group is always (INAUDIBLE) to try to control the industry. (INAUDIBLE). And I think we are going to have opportunities in
the future. It`s true that the situation after COVID is difficult for everybody, because, for us, first of all, we have a huge amount of debt.
But we see that there are opportunities that are interesting to bring forward the strategy of the group. We will (INAUDIBLE).
QUEST: We`re starting to get some vision of all of these, Deutsche Lufthansa is going after ITA in Italy. I imagine you looked and decided to
run in the opposite direction.
However, where are you looking?
Give me a feeling.
GALLEGO: You know I think that this group always have analyzed opportunities and for example, we analyzed Iberia (ph) in the past and we
decided not to go ahead (ph). We tried to do -- doing business with Latin. We didn`t have the approval from the (INAUDIBLE) authorities.
Then we moved to Europa. Europa is a deal that we needed to change and now we have articulated (ph) in a different way. Our objective is again to try
to have the company with us.
On in parallel, I think we are having a strategic analysis of the group and the strength, the weaknesses, that we have.
Where do we want to be in the next 10 years?
QUEST: Luis Gallego of IAG.
In a moment, Deutsche Bank is the first major bank to predict a U.S. recession. The author of that report on the program, next on QUEST MEANS
QUEST: Less than 10 minutes to go and there you have it, down for the Nasdaq. The Dow is off at 1 percent. All the major indices going lower. The
Fed governor said the federal bank will need to take decisive action to control inflation. In her speech, she said it will mean consistently
raising rates and rapidly shrinking the Fed`s balance sheet.
Aligned with this, Deutsche Bank is warning restrictive monetary policy will trigger a U.S. recession, the first such warning from a major Wall
Street bank. The author of the report, Matthew Luzzetti, he`s the chief U.S. economist, joins me now.
All right, you caught our attention when you said we no longer see the Fed achieving a soft landing. And you`re looking, admittedly, some way out at
the end of 2023 but you`re now saying a recession is likely.
MATTHEW LUZZETTI, CHIEF U.S. ECONOMIST, DEUTSCHE BANK: Yes, thanks so much for having me. I think certainly talking about a recession after the job
report we got on Friday, which was strong, seeing the economy add over 400,000 jobs, we`ve been adding 600,000 jobs on average over the past
months, the unemployment rate falling to 3.6 percent.
So in that context, talking about a recession seems a bit surprising. But really, I think it`s about the imbalances that have built in the economy,
the fact that inflation is at 40-year highs, the labor market and the unemployment rate had fallen to 3.6 percent and job openings are at record
And this is feeding through into very persistent inflation pressures, I think, is the stories that the Fed will have to respond, as Governor
Granger mentioned, moving into restrictive territory. And achieving a soft landing is never easy but it`s even more difficult in the current
environment, given the imbalances I just noted.
QUEST: Right, Matthew, if this follows through as you say, half a percentage point, rises at the next meetings et cetera, et cetera, this
would be a classic central bank-led recession.
Slow down, because they`ve allowed it to get so fast in the first place. This is straight out of the textbooks.
LUZZETTI: It is. Getting the economy back down to their targets when it is well above target on inflation (ph) and well beyond maximum employment, the
Fed taking away the punch bowl tends to be the thing that triggers a recession or a downturn.
So we titled our piece, "This time is not different from Fed policy (INAUDIBLE)."
I think the thing that is different is how far away we are from those targets, four-year high on inflation. We think the unemployment rate is
basically 2 percentage points or more below (INAUDIBLE). That`s the level that doesn`t lead to inflation.
So really I think the key here is how far away we are from the Fed targets and the fact that, in order to bring demand down, in order to avoid a great
inflation and what Paul Volcker had to go through several decades ago, the Fed needs to tighten monetary policy more aggressively over the next year.
So (INAUDIBLE) we do think is a downturn but not until the end of 2023 or so.
QUEST: Right but what`s also interesting, what does this mean for asset classes?
If -- and we`re a long way off. But what does it mean?
Because clearly the market today, and I mean literally today, is pricing in what you`ve said, obviously through also what Lael Brainard was saying,
that pricing in slower growth, lower earnings?
LUZZETTI: They are and that makes sense. So what the Fed has told us is that they want to tighten financial conditions, they need labor market
demand to decline, they need overall demand to decline in order to bring things into better balance.
And so financial conditions should tighten as a result of that. That should mean yields are higher, as we saw today, across the yield curve. Risk
assets, certainly, (INAUDIBLE) that we see some room for some corrections in risk assets.
LUZZETTI: But on the other side of that, I would note that we`re talking about an economy that`s resilient in the near term, recession is toward the
back half of next year. And you typically don`t see them responding until you get much closer to that downturn.
And so that correction and finance traditions (ph) in risk assets may still be some ways away.
QUEST: Essentially, what you`re saying is the Fed is going to stomp on the brakes.
LUZZETTI: I think the Fed needs to stomp on the brakes, given what we`ve seen, given inflation pressures, given the broadening that we`ve seen, the
internet has factored into rents and given where the labor market momentum is.
If we don`t, we risk this becoming more entrenched, leading into inflation expectations and having to move more aggressively later down the road.
QUEST: I bet your email account and your phone was buzzing today after you came out with this, with people saying, well, somebody`s finally done it.
Somebody`s finally called the first, the first call for the recession.
Sir, I`m grateful you took time out to speak to us on QUEST MEANS BUSINESS. Thank you.
We will take a "Profitable Moment," such as it is with the market as it is, after the break.
QUEST: Tonight`s "Profitable Moment," so the rabbit is out of the whatever it is. It looks like there is going to be a recession in the United States,
at least according to Deutsche Bank, who you`ve just heard.
Now we`ve been saying something along these lines for some time here on QUEST MEANS BUSINESS. I chose to call it as stagflation, low growth with
high inflation. But now, as Lael Brainard says, that they`re going to raise rates faster, that`s me interpreting it but essentially what she said.
And you`ve got Deutsche Bank and everybody else saying rates are going up faster, the balance sheet will be reduced more quickly, then there is only
one interpretation, that the economy will slow to the point where it will tip into recession.
I don`t care whether it`s a technical recession of two quarters of negative GDP; I`ve said that before. No, it will feel the same, because you`ll have
slow growth and the wage demands will be low. And inflation will still be high and it will feel like a recession.
But, frankly, to be honest, we have far more important things to worry about at the moment. We talked about that tonight on the program as well.
Ukraine must come first and dealing with that and whatever atrocities there comes beyond maybe a recession for the moment.
And that`s QUEST MEANS BUSINESS for tonight, I`m Richard Quest in New York. Whatever you`re up to in the hours ahead, I hope it`s profitable.