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QUEST MEANS BUSINESS
U.K. Economy Stuck in Reverse; Dollar in Decline
Aired November 25, 2009 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ADRIAN FINIGHAN, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: The sick man of Europe, the U.K. economy is stuck in reverse.
Dollar in decline, the greenback slumps to a new low.
And a world of debt, Dubai asks creditors if it can take a payment holiday.
Hello, I'm Adrian Finighan, in for Richard Quest. And tonight, I mean business.
Good evening. Well, if you look at London's Oxford Street, just around the corner from our office here, you would never be able to tell that the U.K. is still mired in recession. Shoppers are out in force buying their gifts ahead of the holiday season.
Tonight, on QUEST MEANS BUSINESS we take a look at the U.K.'s economy and ask why it is still the sick man of Europe? Britain, today, got confirmation that it is lagging far behind other countries when it comes to the economy. New figures from the National Statistics Office said that the U.K. economy shrank by naught 0.3 percent in the third quarter. Now that is marginally better than last month's reading of naught 0.4 percent, but nonetheless, it shows Britain remains in recession.
In fact, it is the sixth quarter of contraction in a row, for the U.K. and that is in stark contrast to other leading economies around the world. France, German, Japan, and even the battered United States, have all begun to expand again.
Well, let's get more on what lies behind the U.K.'s continued slump. We are joined now by David Blanchflower. Now, David, was formerly on the Bank of England's monetary policy committee. He joins us now live from Dartmouth College, in the United States, where he is a professor of economics.
David, thanks for being with us. So what do you make of this revised GDP figure?
DAVID BLANCHFLOWER, ECONOMICS PROFESSOR, DARTMOUTH: Sure.
FINIGHAN: Why is the U.K. so mired in recession, in spite of rising confidence here?
BLANCHFLOWER: Well, I think we benefited a lot by having a big financial sector in the good times, and then a financial shock came along and we were really exposed to that kind of shock. So we were hit hard by that. We also had a really big run up in house prices, much bigger than everywhere else. So that was part of it. But the other thing was, I guess, that the monetary authorities did not act soon enough. Until August 2008 the Bank of England was still saying there is going to be no recession.
And then, finally, other countries like Germany and the United States and France actually had a bigger fiscal response than the U.K. did. So, I have said a bit, a little too little, too late. If we had acted sooner it would not have been quite so bad. But we have been faced by a very bad shock and six quarters of negative growth is terrible.
FINIGHAN: So, you are highly critical of policymakers for not reducing rates, in particular, fast enough, ahead of this crisis. Are we at least now on the right track, policy-wise?
BLANCHFLOWER: Well, we are on the right track in the sense that monetary policy is now very loose. We have been doing quantitative easing. But all the talk now is about returning and removing - removing the stimulus and going back to normal, if you like. Everybody wants to do business as normal. VAT is going to be put back on in January, which I've said I don't think is a good idea.
And people are talking about stopping quantitative easing, reversing it, doing public spending cuts. Well, that seems to me to be a dangerous thing to do. We are still in the depths of a recession. We have avoided going to a depression. But we could still go there. So, it seems to me that this is -these are things that you have a plan for once you are out of recession. But we are deeply mired inside that recession and it is too early to start tightening. It will make matters a lot worse.
FINIGHAN: All right. So, what is your prescription then, to return the economy back to health. Where do you start on asset bubbles? Of course, if you keep on adding stimulus packages to the economy, with so much money pumped into the economy, not just in the U.K., but globally, surely there is danger of inflation, hyper-inflation?
BLANCHFLOWER: Well, I don't think there is a danger of hyper- inflation. The issue that we have had for a long time is actually been the economy has been deflationary, prices are falling, especially if you take into account falling house prices. So, a great deal of the task that - bankers, for example, have had, is to actually to try and create some inflation. And the difficulty is they haven't been able to do that. So down the road, we'll have a bit more inflation. That will be OK.
And if inflation really starts -which I don't think it will anytime soon - we know exactly what to do. We can reverse quantitative easing, we can raise interest rates. But I think certainly the British economy would actually benefit from having more stimulus, more expansion, and maybe three or four, five years of inflation of around 5 percent. That will help to get rid of the negative equity. It will stimulate the economy. So, I'm actually not of the view that hyper-inflation is the problem. It is deflation that is the problem at the moment. We are trying desperately to create some inflation.
FINIGHAN: David, I get the feeling from what you are saying, from what I've read, the articles that you've written, despite being a part of it, you are no fan of the policymaking committee. You said, recently in one article I read, that it is perhaps time to get rid of the Monetary Policy Committee and let the governor and the chancellor of the exchequer make the decisions on monetary policy. Why would that be better, do you think, for deciding fiscal policy here in the U.K.
BLANCHFLOWER: Well, I think firstly we -- the Bank of England and the Monetary Policy Committee, I've said on a number of occasions, too little, too late. They should have been cutting rates much earlier in 2008. And I think if the treasury, or the chancellor had actually been doing that, they would have been cutting by the spring of '08 as the U.K. went into recession. I mean, let's look back. The U.K. went into recession April 2008, and the Bank of England didn't notice. Well, it was their job to notice. So that seems the first thing.
And now what they've done is they have dithered around and not made it clear to the markets what they were trying to do. They have started to do concentrated (ph) easing, then stopped, and made very confusing signals. And they've actually ended up with Mervyn King voting in a minority. So, my view now is that Mervyn King has got it, we need to keep the stimulus going. And if the others aren't on board, well, maybe we should think about doing it in some alternative way. It is not clear to the markets. The markets are confused about what this MPC is doing.
FINIGHAN: David, while I've got you here, I can't resist asking you a question about something which is making big news on this side of the Atlantic today. The chancellor of the exchequer has been standing up in parliament and defending the Bank of England's secret loans, 61 billion pounds to RBS and HBOS, in the autumn of last year. What do you think about that? Was the Bank of England right to keep that quiet at the time?
BLANCHFLOWER: Well, I remember being in the Bank of England in September, October, November 2008. And this was really terrible times. There were banks in trouble all over the place. And the job of the central bank, and the treasury, if you like, was to calm nerves. You can't allow these banks to fail. And so their job was to make sure that they would survive.
I mean, imagine if a year ago, the bank had stood up and said, oh, this bank is in trouble. We've just lent it 30 billion. Well, that would be very bad for the markets. It would be bad for the banks, themselves. So, it was sensible to intervene, and sensible to keep quiet about it. That is what central bankers have done for 500 years. I mean, that is the role of the banker, to calm the system, make sure everything continues.
So, I think they were completely right to do that. What else could they have done? It would have destabilized the markets, might well have pushed the British economy over a cliff. So, it was completely the right thing to do.
FINIGHAN: David, really appreciate you coming on and sharing your thoughts with us. Please, come back and talk to us again soon, on QUEST MEANS BUSINESS. Many thanks, indeed. David Blanchflower, former member of the Bank of England, Monetary Policy Committee.
Well, looking at the GDP, is rather like taking the nation's economic pulse. It is a measure of the total economic activity in a region, based on internationally agreed standards. Now the rules do allow for a degree of flexibility, because of course not all economies are the same. However, some would say that GDP is not an accurate measure, or indeed, even the best way of gauging the health of an economy.
Now, here in the U.K., the first estimate on GDP that we get is published some three and a half weeks after the end of a quarter. It is based on output. The total value of goods and services created.
Then, eight weeks after the end of the quarter we get the second, revised estimate. That is what we got, that David and I were talking about today. It is a better measure, because it is based upon output and income. The total amount generated by the production of goods and services into the economy. It takes into account not only income earned by companies but also of employees and the self-employed. Then we get a third and final estimate of GDP that is published some 12 weeks after the end of the quarter. And it is based on income, output, and expenditure. The cost of finished goods and services in the economy.
So, now you know all about GDP.
And there was one bright note in the U.K. today, though, the markets had a pretty positive day. In fact, as you can see here, all the major European markets ended the day higher. Mining shares were the standout winners on the FTSE 100 today. The Compass Group, the world's biggest catering company, gained some 6 percent in London. Thanks to strong earnings on the Xetra DAX. Volkswagen was the worst performer, down about 3 percent today. That came as a disappointing revenue figures were released for Porsche. VW, of course, in the process of buying a 50 percent stake in Porsche.
On the other side of the Atlantic, investors are welcoming a bigger- than-expected drop in U.S. weekly jobless claims. Claims fell to 466,000, that is more than a 13-month low. And stocks are also climbing on the back of a jump in new home sales and in consumer spending. The Dow Jones up, very slightly at the moment, by 11 points.
Now, busy start to the show. Let's get you up to date with what else is making news around the world. Fionnuala Sweeney joins us, live from the London newsroom.
FIONNUALA SWEENEY, CNN INT'L. NEWS ANCHOR: Hello, Adrian.
Wednesday was a national day of mourning across the Philippines, as 11 more bodies were found in the south of the country, bringing the total to Monday's massacre to 57.
Authorities linked the killings to a political clan war. The wife of the man running against the local governor was one of the victims of the clan of the outgoing governor, Ampatuan, is suspected of having a role in the massacre. A spokesman for the president telling CNN that arrests are less than 24-hours away.
Pakistan has formerly charged seven men for their alleged roles in plotting last year's terror attacks in Mumbai, India. The assaults left at least 160 people dead. A defense lawyer says the suspects are accused of acts of terrorism, among other things, and plan to plead not guilty.
The announcement comes on the eve of the first anniversary of the attacks on India's financial capitol.
This year's Hajj got off to a very wet start. Wednesday morning 70 millimeters of rain drenched the Saudi port city of Jeddah, flooding roads that lead inland toward Mecca.
The rains add to the list of concerns for the Saudi hosts and (UNINTELLIGIBLE) that is one of the dangers of H1N1, that millions of people from all parts of the globe, packed together for days. Officials say the conditions are perfect for an outbreak.
Roman Polanski has been granted bail by a Swiss court, but the Oscar- winning director must post bail of $4.5 million and remain under house arrest in his Swiss Chalet until his legal status is settled. The United States wants to extradite Polanski to face charges stemming from 1977, when he was arrested in Los Angeles for having sex with a minor.
And those are the headlines. Don't forget to tune in for more on those stories, "WORLD ONE" at 8:30 p.m. London time.
In the meantime, Adrian, back to you in the studio.
FINIGHAN: I don't know if I'll see you again, later. Many thanks.
Now the future of Saab is looking pretty grim tonight. The collapse of its sell off deal with Koenigsegg, could mean the end of the road. We take a look at Saab's options as its Swedish boss contemplates the firm's future. We'll be right back.
FINIGHAN: The U.S. dollar has plummeted to its lowest level in more than a year. The fall links to expectations that interest rates in the U.S. will stay low for sometime. Take a look at this. The dollar index, that's a measure of the dollar against six major currencies. It has fallen to its lowest level since August 2008. The U.S. dollar index was at 74.70 at around 0800 Eastern Time today. That is down naught 0.6 percent, four point shy of an all-time low.
Now the greenback has hit a 10-month low against the Japanese yen. The dollar has weakened on upbeat U.S. data. That is stoked the risk appetite. It encourages traders to buy yen. The lowest rate against the yen, by the way, was back in January, when the dollar hit 87.13 yen, the lowest in 13 years. The dollar has also hit a 15-month low against the euro. And the Swiss franc has hit parity, at the same forecasts at work here. It all about those signals that the U.S. will keep interest rates at record low levels, perhaps until the end of 2010.
CNN's Chief Business Correspondent Ali Velshi has been monitoring the dollar's dramatic slide. He joins us now live from -are you in Atlanta, or New York today?
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: I'm in Atlanta, actually. Unusually, I'm in Atlanta.
FINIGHAN: That is unusual. Hey, Ali, I know that the -I read somewhere that the Obama government is all for - the Obama administration is all for a stronger dollar. And yet, they are doing nothing about this slide. What's going on here?
VELSHI: Yes, well, they are talking about it. And that is typically what U.S. administrations have done for the last few years, as the dollar has, in many cases weakened against a basket of currencies, or other major currencies.
The fact of the matter is the U.S. has seen manufacturing jobs disappear for more than a decade and that is the one area that tends to gain. Manufacturing and tourism gain when the U.S. dollar is low, as it is right now.
But you identified the two issues here. One, is that in economic turmoil, like we were in a year ago, the dollar is still seen, perhaps, as a safe haven against other forms of investment. But right now there are other forms of investment that are steadier. You have seen the flow of money into gold. You have definitely seen the flow of money into equities. The way markets have increased in the last six months or so. You are even, in some key cases, seeing a flow of money into property values, and into properties. So the bottom line is the U.S. dollar is not the safe haven that it needed to be in other times of turmoil.
The other thing, of course, is because there might be some economic recovery, but it is still slow to come, interest rates might not increase anytime soon, as you said. The threat of inflation, while it is there in the long-term, because of too much liquidity and because commodity prices increasing, it is not there in the immediate term. Which means the Federal Reserve and the United States may not raise interest rates, as you said, maybe all the way through next year. And that means that if you have money to invest in currencies, other currencies, might be more attractive than the U.S. dollar.
So, not a fundamental problem just yet, but that trend is definitely unfavorable for the U.S. dollar right now, Adrian.
FINIGHAN: All right. Two questions, and I'm going to ask you them both at once because I've got you for a limited amount of time. And I always learn something when you are with us, Ali.
What are the implications, long-term, for the U.S. economy if the dollar stays so low? I've a feeling you can deal with that one fairly quickly. And someone said to me today that the "U.S. dollar is now the funding currency of the moment." What does that mean?
VELSHI: Well, look, the bottom line is - the answer to the first question is that it helps U.S. exports. It makes things that are made in the United States cheaper to people in other countries. That is less of a deal than it used to be because the U.S. has largely shifted into a service economy. It doesn't manufacture all that much that the rest of the world is buying. So, put that issue aside for a second.
The bottom line is, oil is still traded in U.S. dollars. Most major business transactions still take place in U.S. dollars. So, I don't think there is a fundamental attack on the U.S. as the hard currency of choice. I think what we have learned in the last decade, particularly with the euro on the scene, is that there is competition for investment. And the U.S. doesn't just get people investing in it. The dollar doesn't get invested in, just for the sake of it. There are other options and what you are seeing today is a world where there are other options for investors, including other commodities and other currencies.
I don't think the U.S. is in danger of losing its pre-eminence as the currency of trade for the world, it just means we might have a lower dollar.
FINIGHAN: Ali, many thanks indeed. It is always great to talk to you. CNN's Chief Business Correspondent Ali Velshi, joining us live from Atlanta. Rather unusually, he's normally in New York.
Now, a dark cloud is forming over an Opel plant in Belgium, after General Motors today outlined preliminary details about restructuring plans for its European Unit. Although the plans are still a work in progress, GM says the future of Opel in Antwerp is uncertain. And it announced that it would cut 9,000 jobs across Europe, with at least half of those jobs losses expected to fall in Germany. GM says European capacity will be reduced by around 20 percent.
Now, Opel employs around 45,000 people in Europe, and half of them in Germany. The head of GM's European Division, Nick Reilly, says there is one main driver behind the changes.
(BEGIN VIDEO CLIP)
NICK REILLY, PRES., GM INT'L. OPERATIONS: We are looking for funding. We believe we need approximately 3.3 billion euros to do three things. One, is to go through the restructuring. The other is we believe the European market is still going to be very weak next year, so it will be very difficult to make money. And thirdly, we want to keep investing in our products and our plants to keep improving them.
And so, we are hopeful that we will get support from all of our countries where we have major operations, to contribute to that funding - to that funding need.
(END VIDEO CLIP)
FINIGHAN: Well, another of GM's assets is looking fairly shaky tonight. The future of Saab appears pretty bleak after a crucial deal fell through. The luxury automaker Saab was meant to be sold to fellow Swedish firm Koenigsegg, but the purchase is now off. Reports say there are no other bidders for the brand and that means it could be back to the drawing board to restart the sale process or even, worst case scenario, opt for closure.
Beijing autos (ph) was meant to be joining forces with Koenigsegg in the Saab deal. Reports say that it will now reassess its options. Now, Reuters reports that closure of Saab and its Swedish production hub, would threaten more than 3,000 jobs.
Well, let's go to Sweden right now to find out what they are hearing and about how they are feeling. Joran Hagglund is the state secretary with the Swedish Ministry of Enterprise, Energy and Communication. He joins us now on the line.
Thank you for being with us Mr. Hagglund. The future, then, for Saab looking pretty bleak tonight. What is the Swedish government's position?
JORAN HAGGLUND, SWEDISH MINISTRY OF ENTERPRISE, ENERG, COMMUNICATION: Well, I think I can speak for most everyone in Sweden, at this moment, that there is a feeling of sadness, of course. Disappointment as well, that we couldn't really be able to close this deal. So we must now look at in what way we can continue the discussion with General Motors and see if there is any hope for the Saab business in the future.
FINIGHAN: Is the brand still viable? What guarantees or what help can you offer any potential bidder for Saab?
HAGGLUND: We have been very clear form the very beginning. I think Sweden was the first country in Europe out of the playing field making clear that what we are offering is state guarantees for loans from the European Investment Bank. We also have this rescue loan, the European Union regulated rescue loan. And of course, we also have a long term research and development program in the automotive sector, which would be open also for new owners for Saab.
What guarantees, if any, can you give to Saab employees, who must be feeling pretty insecure this evening?
HAGGLUND: Yes, of course, they are. And they have been through a really, almost terrifying trip the last year. Not really knowing what is going to happen to Saab. So, what we are saying now is we will continue the discussions with General Motors, who are really the owners of Saab. And our hope is to find some solution, in a way, that could keep the brand going. If that would not be the case, of course, we have a lot of different programs on the employment fields, in other fields, in education and all of that. But our main task now is really to see if we can keep the brand going.
FINIGHAN: Yes, that is a worst-case-scenario. It would be a terrible tragedy if it came to that. I mean, if it there were no buyer and GM looked at closing the plan, is there any way the Swedish government would step in and save it?
HAGGLUND: No, we have been very clear to General Motors and to the different bidders during the time, that the Swedish government will not under any circumstances, become an owner of the Saab company. And I think that is important to see that the future for Saab and for any automotive manufacturer, of course, is to have a private owner and to be very competitive, producing cars that the consumers out in the market, really would like to buy.
FINIGHAN: Minister, thank you so much for being with us tonight on QUEST MEANS BUSINESS. That is Joran Hagglund, who is the state secretary with the Swedish Ministry of Enterprise, Energy and Communication.
Now, Toyota is launching a massive recall of at least 4 million vehicles over safety concerns. The world's biggest car maker is worried about the floor mats, which could trap the accelerator pedal, when that happens drivers can experience sudden acceleration. The recall applies to a number of popular models, including the Toyota Camry, the top selling car in the U.S.
The latest recall follows another earlier in the week, covering Toyota's Tundra trucks. The problem there is excessive rust on the vehicles' frame.
And mysteriously, you can't find it on the Internet anymore. Unlike these stunning pictures of the U.S. first lady last night. The image we are talking about paints a very unflattering and many say offensive picture of President Obama's wife Michelle. Find out why search engine Google refused to remove that image, when we come back, on QUEST MEANS BUSINESS.
FINIGHAN: A picture of U.S First Lady Michelle Obama described by some as a racist caricature is causing huge controversy. The disturbing image was the top result for anyone searching for images of the president's wife. It depicted Michelle Obama with the features of a monkey. But despite numerous complaints, search giant Google refused to take it down.
In a statement Google said it, "views the integrity of our search results as an extremely important priority. Accordingly we do not remove a page from our results simply because its content is unpopular."
The image has since been taken down by the web site which had been hosting it. Well, CNN's Errol Barnett has been following this developing story and joins us now, live from Atlanta.
So why, Errol, the strange and secretive behavior today that we've seen from Google?
ERROL BARNETT, CNN CORRESPONDENT: It is strange Adrian. A few weeks ago when that image first popped up online, Google blocked the site from its index because they said, the site spreads malware. This time around they refused to do so. But as you mentioned, you go and try to search for the image now and you can't find it. Because what all of this has done is it has really exposed and drawn attention to how Google ranks results. That is their biggest trade secret. It is less about the image and more about their ranking.
You see the company built its empire on its web search algorithm. They started, as we remember, as a simple search engine. And because of its success they now provide everything from maps and e-mail to documents and they were able to purchase YouTube. So the fact that the offensive Michelle Obama image got to the top of the search results revealed what many tech insiders already know. That the more links you have on your site, the better chance it has of being toward the top of Google search results. We calling it upping your Google. Spammers know this as well.
For example, the blog which posted the offensive image time around, it is called Hot Girls, has hundreds, perhaps thousands of what seem like unrelated links, not only on Michelle Obama, but also on Martha Stewart and actresses like Jennifer Aniston. Even links to stores like Tesco and Macy's. So the more people that know about this linking secret the more manipulated Google's search results will be and that is what the company is trying hard to protect, Adrian.
FINIGHAN: Yes, this algorithm that you talk about, I mean, people have cracked it before haven't they?
BARNETT: They have, actually, to a smaller degree. Back in 2003, web programmers figured out a way to alter search results with something called Google bombing. It is basically to get unrelated search terms to group together. So that when you search for one term, another unrelated term would come up in the results. One example was former U.S. President Bush and the term "miserable failure" were linked to each other during the first few years of the Iraq war. It took Google some four years to change their algorithm to defuse the bomb's effectiveness. You see they were reluctant to do anything. But because so many people assumed it was based on Google's opinion, they changed their search formula.
FINIGHAN: But for businesses, Errol, who want to get to the top of the search rankings. This algorithm is the holy grail, isn't it?
BARNETT: Yes, you could say it is a billion-dollar lock that businesses desperately want the key to. How do they improve their visibility? They can, of course, pay for ad space, on Google, that pops up when certain terms are searched. But the cheaper alternative is just to figure out what some of the tricks are.
I came across a few blogs today and sites. This is one of them they claim to know the secrets of improving visibility on Google, being on Yahoo!, but the truth here, the fact of the matter is the only people who truly know what is in Google's algorithm, they are not telling, their lips are sealed, and rightly so, Adrian. Their jobs depend on it. But as soon as I find out I'll be sure to let you know.
FINIGHAN: Yes, please do. Thanks very much indeed. Errol Barnett in Atlanta, there, talking about web search optimization, the holy grail.
Now, on Wall Street they are gobbling up stocks on this day before Thanksgiving. Susan Lisovicz will be along to tell us about that soon.
Plus, debt and Dubai; the Dubai government asks creditors for patience as it restructures two troubled firms. John Defterios will have all the details for us in just few moments.
FINIGHAN: Hello again.
Live from CNN London, this is QUEST MEANS BUSINESS.
In for Richard Quest, I'm Adrian Finighan.
Now, if you're finding it hard to make ends meet these days, you're in good company. The government of Dubai is asking creditors for a six month standstill on repaying debtors in relation to Dubai World. Now that's the conglomerate that spearheaded the emirate's breakneck growth.
Take a look at this. Dubai World is struggling to pay off close to $60 billion. That's a large portion of Dubai's total debt of $80 billion. It's also hired Deloitte, the accountancy firm, to oversee the restructuring of the group.
Now Dubai World is the group behind Nakheel, a state-owned property responsible for some of Dubai's most ambitious land reclamation programs. They include the Palm Jumeirah, pictured here and The World Island developments. And the emirate has struggled this year following a collapse in the local property market. Prices are estimated to have fallen by 50 percent in 12 months.
Joining us now to tell more about -- tell us more about this -- is John Defterios, anchor of CNN's "MARKETPLACE MIDDLE EAST" -- John, good to see you.
In the overall scheme of Dubai dealing with $80 billion worth in debt -- I mean that's a whopping amount -- is this move by Dubai World significant?
JOHN DEFTERIOS, HOST, "MARKETPLACE MIDDLE EAST": Well, it is on a couple of fronts, Adrian. It's the first stumble on the road to recovery for Dubai. And so far, it's made all its debt obligations. Nakheel and Dubai World had a big payment due, $3.5 billion due in mid-December. So the market was waiting for that to happen.
They were surprised today that they had a $5 billion fundraising for a bond that was taken up by some Abu Dhabi banks. And many kind of naturally believed that this money would be applied to Dubai World.
So when the announcement came out that it was not going to be and it was a standstill agreement, people started to say whoa, what's happening here?
And it happened just before a four day religious holiday taking place in the region. So answers are going to be slow coming out over the next four or five days.
FINIGHAN: If I hear -- hear you correctly there, you said that the announcement coincided with -- with Dubai selling -- the government selling $5 billion in new bonds. You said that -- that's what you said there.
DEFTERIOS: And that happened today.
So -- so reading between the lines, what -- what's going on here?
DEFTERIOS: Well, it's fascinating. And what I think is happening now, it's been quite an important week for Dubai, because they're starting to isolate some of the different companies. In fact, some of the people I've spoken to, some of the major players in Dubai have actually been a bit frustrated, because in that number you talked about, $59 of the $80 billion rests with one company. But some of the other companies were taking a lot of heat for the fact that Dubai World and Nakheel were not dealing with their debt.
So if they're going to isolate Dubai World and say, look, you need six months to clean things up -- they brought in Deloitte, the global accountancy firm, to comb through the books and see if they can deal with this debt.
It's actually, if you take a step back, quite a healthy operation, because it says we're going to now look company by company here within the Dubai, Inc. structure and deal with that $80 billion and see if Dubai World and the Port business, which is very strong, by the way, can stand on its own.
FINIGHAN: The ruler of -- of Dubai was in London meeting Gordon Brown this week. Now, he's been making some pretty big changes back home. And I mean if you -- all right, this is the government doing it, but it -- it's more akin to a corporate restructuring, what's going on in Dubai right now.
DEFTERIOS: Yes, again, going back to this concept of Dubai, Inc. It's now known around the world because of the work in the last 20 years and in part because of this giant port they've built up.
So a sense of irony here. Gordon Brown, the British prime minister, was saying to Sheikh Mohammed bin Rashid that, in fact, they have moved very quickly to deal with the challenges that they've had. And then lo and behold, you see a $5 billion bond offering followed by this -- this pause. But it came at the same time that Sheikh Mohammed decided to restructure the Investment Corporation of Dubai. Four key advisers, including Sultan bin Sulayem, who is -- who is the chairman of Dubai World and Nakheel -- were asked to step off of the advisory board.
FINIGHAN: You travel to Dubai a lot. You talk to -- to Dubai businessmen all of the time through -- through your job.
I mean, what's the mood there at the moment?
DEFTERIOS: Well, I would say in the last four or five months, people were extremely pleased that they're being very methodical about the repayments. They did a bond last month that was over -- two times over subscribed. So very positive. Another private equity firm went out this week and raised money.
And they think there is a floor to the market. We've seen a 50 percent decline in property prices over the last year. This is not a great confidence builder, after putting the floor there, getting the demand for the bond and then coming out and saying we appreciate wait, we need six months to deal with this one company that represents $59 billion worth of debts.
FINIGHAN: Yes, it will be interesting to see how this plays out.
John, thanks very much for shedding light on that.
DEFTERIOS: Nice to see you.
FINIGHAN: John Defterios, host of "MARKETPLACE MIDDLE EAST" here on CNN.
Now, it is just hours before the start of the Thanksgiving holiday. And as many Americans prepare to sit down to a feast, some are finding that they can't afford it. We visit a place where families can get a little help to celebrate in traditional style.
FINIGHAN: Let's show you what's happening on Wall Street right now.
Investors welcoming a bigger than expected drop in the U.S. weekly jobless claims. Today, claims fell to 466,000. That's a 13-month low -- more than a 13-month low. And they're also climbing -- stocks, that is -- on the back of a jump in new home sales and consumer spending. When I say climbing, I mean it's up 21 points. It would seem that investors have got turkey rather than trading on their minds this Thanksgiving Eve.
Let's bring in Susan Lisovicz, who's in New York -- Susan, it's probably too early to say Happy Thanksgiving. It's Thanksgiving Eve.
But good economic numbers are -- are not doing much for stocks, it would seem, today.
SUSAN LISOVICZ, CNN CORRESPONDENT: No, Adrian. And, you know, we -- we really are -- are fitting in a lot of economic reports today because we have the markets closed on Thursday for Thanksgiving. And Friday is a half day, and basically it's just keeping the markets open for continuity for the global markets, very importantly.
And, yes, the -- the reaction right now, with less than an hour-and-a- half to go in the session, is lackluster, to be sure, because we got some terrific numbers. New home sales rose more than 6 percent in October. That was way better than the Street's estimate. And remember, this comes - - all this week we've had terrific numbers on the housing market, existing homes or homes that have already been sold once before. They came in sharply higher. Home prices improved.
And then you mentioned the jobs market -- terrific news, as well, on the jobs market, with initial jobless claims. We saw falling -- falling below 500,000, which was the first time that we had seen that in more than a year.
So this is -- this is very good news that the market has -- there's sort of a ho hum attitude right now.
FINIGHAN: Yes, well, maybe...
FINIGHAN: Maybe there will be more of a buying mood after the holiday. H
But I mentioned back at the beginning of the show here, that if you go to Oxford Street just around the corner here, the main shopping street in London, you wouldn't know there's a recession on. Shoppers are -- are packing the place out.
We got a fresh reading on U.S. consumer sales -- U.S. consumer spending today.
Are Americans in -- in a buying mood, too?
LISOVICZ: Well, that was -- that probably was the biggest piece of information, because right now especially, as we go into the holiday shopping season, it's really all about consumer spending. And we saw it jump .7 percent in October, following a pullback by about the same amount the prior month. So we did see consumers buy, partly because income rose, as well, but not by the same amount. So that was encouraging.
And, also, we did see consumer sentiment rise, as well. Consumer sentiment very important, because it often translates into what we do. You know, not a -- not a particularly strong level, but the fact that there is an improvement is welcome news, indeed.
You know, we had about five reports today. And basically all of them were pretty good, with the exception of orders for big ticket items, which fell. All in all, pretty good -- Adrian, I have to say, as we go into this -- into this Thanksgiving holiday. It's something to be thankful for, indeed.
Susan, you have a great Thanksgiving holiday.
Don't -- don't mind us. It's just a normal...
LISOVICZ: Thank you.
FINIGHAN: ...run of the mill Thursday here -- here in damp...
FINIGHAN: ...drizzly London -- Wednesday, rather. No, it's Wednesday today and Thanksgiving tomorrow...
LISOVICZ: Yes, well...
FINIGHAN: ...Thursday. Yes. Right. So (INAUDIBLE) Wednesday...
LISOVICZ: We'll have a good time.
LISOVICZ: We'll have a good time in the colonies.
FINIGHAN: Yes, absolutely.
See you again.
Some more upbeat holiday news from the States. It seems that far more people intend to hit the shops after Thanksgiving, compared to last year, anyway. According to a national retail survey, some 57 million people say they would definitely go shopping on so-called backfired. And that's a 16 percent increase on last year.
But the picture isn't quite as positive for everyone. Some families are struggling to afford the Thanksgiving feast.
In New York, where unemployment has spiked to its highest level in years, people are cueing up for help, as our Maggie Lake reports.
UNIDENTIFIED MALE: Come back Monday from 11:00 to 1:30.
UNIDENTIFIED FEMALE: OK.
UNIDENTIFIED MALE: And bring your new shopping cart with you and you can get your turkey.
MAGGIE LAKE, CNN CORRESPONDENT (voice-over): It is a sobering sign of the times. At this Upper Manhattan food pantry, New Yorkers are waiting hours to get Thanksgiving necessities on the table. Some have lined up before sunrise.
UNIDENTIFIED FEMALE: I was here at 7:00 this morning. There was some people here already by 5:00.
UNIDENTIFIED MALE: This line is just like -- I haven't seen a line this long ever. When you see this, you see this line like this, it's -- I mean it's just mind blowing.
LAKE: Among those online, Cassandra Woods, a mother of four. She once worked for a leading Wall Street firm and was starting a new job search when the financial crisis hit. She now finds it hard to make ends meet.
CASSANDRA WOODS, FOOD BANK PATRON: If I don't come here, I don't have food. And I have to pay my rent and my utilities and try to stay out of being homeless. So I'm here.
UNIDENTIFIED FEMALE: I'll put them in a nice bag and make them nice for you.
LAKE: Inside the pantry, Woods and other needy New Yorkers stock up on free vegetables, rice and other essentials. Officials say the spike in people seeking help has been breathtaking, as the city's unemployment rate hits its highest level in 16 years.
AINE DUGGAN, FOOD BANK FOR NEW YORK CITY: At this stage, what we're seeing in the emergency food system is that at least one in five and possibly one in six New York City residents are relying on emergency food to make ends meet.
LAKE: That comes out to some 1.5 million people seeking food assistance in New York City alone. Hundreds of pantries like this one are open across the city to serve them. A study shows nearly 40 percent of New Yorkers are having trouble affording food.
UNIDENTIFIED MALE: A lot of people never thought they'd be in these lines. I mean you'd be amazed. Everyone has a story why they're here and a lot of people have nine to five jobs and they're still here.
LAKE: But amid the hardships, small victories.
UNIDENTIFIED FEMALE: We have the turkey, that's the main thing. And there would have been definitely no turkey. We might have been just eating, you know, a very small, humble meal.
LAKE: And as Cassandra Woods arrives home with her holiday groceries, optimism for the future.
WOODS: I believe in this country. I'm a proud American. And I believe that the economy is going to take a turn for the better. The jobs are going to come back at some point. And I'm going to get off the unemployment line and I'm going to be back on my nine to five job every day, getting on the subway, going down to Manhattan and be happy I'm back.
LAKE: Hopes for better days in troubled economic times.
Maggie Lake, CNN, New York.
(END VIDEO TAPE)
FINIGHAN: All right, let's get a weather forecast for your part of the world.
Guillermo Arduino joins us from the CNN International Weather Center - - Guillermo, I -- I promised that I'd -- I'd get you to say hey to Lucia (ph), whose dad I met a couple of weeks ago. You know, he's a regular QUEST MEANS BUSINESS viewer and he -- he makes poor Lucia watch us every night before bed time. And I'm sure she'd rather be watching Cartoon Network or something.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Oh, definitely.
FINIGHAN: So you've got to say hi to Lucia.
ARDUINO: Hey, Lucia.
That -- that's the way you pronounce it?
Isn't it Lucia?
FINIGHAN: I think so.
ARDUINO: Is it Italian, or what?
FINIGHAN: I'm sitting here desperately trying to remember whether I've got the name right. I know her dad's name is Simon, so...
FINIGHAN: ...but I'm sure he said it was Lucia (INAUDIBLE)...
ARDUINO: Well, it can be Lucia Simone, you know. Whatever now.
ARDUINO: Well, what's going on in the U.K., Adrian, with all the rain?
You know that it's not a temperature issue, because you may have noticed that the wind is bothering you, but the temperatures are not really cold, though I must say that they are coming -- they're coming down.
Well, the rain continues. Unfortunately, it's continuing in the same areas. We're talking about Southwest Scotland and Northwest England here.
We are under a temporary lull right now, but the rain is coming back. We see it in Cornwall. And I think that most of the severe downpours or even hail that we may see is here, close to the Channel, because it is pulling in, actually, from there, so even in the south now.
But London is going to be fine, I think, compared to the rest of Britain.
Also, let's take into account that Spain here -- Galicia, Pontevedra, A Coruna got affected by this front -- parts of fronts, as well, and the low countries and into Germany, too, with these different low pressure systems like a train, one after the other.
So the difference is that the last one that is coming our way right now, it is not going to be as bad. And max, 100 millimeters, which is enough in -- in saturated areas. But we have seen 30 millimeters so far in the same areas that were flooded before.
Remember Kokama (ph) and also Calsec (ph). That's the right pronoun, I learned it, Calsec (ph) here into Cambria.
So we will see what happens. But as I said, London appears to be fine. Of course, we have the rain showers coming and going. It is like a typical day of rain on and off in Britain, you know?
And on top of that, we have the wind. Look at this, this forecast, 48 hours. You're going to see now a storm right now. Look, there. That goes and moves very quickly. That may be severe. So we may see some damage, of course, associated with it. And the winds, you see how the deep reds are fading, because the winds are descending.
Then the cold fronts are coming our way.
For this weekend, we're going to see delays, especially starting on Thursday. You see London, Paris, Amsterdam, Dublin, Brussels, the same thing. I mean it's -- I can get yesterday's tape and replay it, because it's the same thing, the same cities -- Copenhagen, too.
Well, and apart from that, now it's descending into the south of France here with the front.
You see these pellets?
Remember, the cold is coming. And into the Balkan Peninsula, looking fine. Turkey recuperating because we got floods there. We got the rain in Mecca, especially in Jeddah. And I'll be talking about that coming up on "WORLD ONE."
In the meantime, stay with us.
Adrian will be back after the break.
FINIGHAN: Welcome back.
Now, here's a story that kind of reminds me of the stock market sometimes. I know it's a little tenuous, but it's the best I can do.
Eve Rossi was up, up and away, but then he came down. And with him, his hopes of breaking a new record. The Swiss pilot, who was hoping to become the first person to cross between continents using a jet powered wing, says he's disappointed after it didn't quite work out. He was forced to ditch into the wind swept seas shortly after taking off from Morocco, ending his hopes of trying to cross from Africa to Europe.
That's amazing video, actually, of him when he -- when they launched him out of that -- out of that plane.
Would you do that?
Not for a million dollars. No thank you.
Now, wheat farmers may have to contend with the vagaries of the weather, but for one group of American growers, market fluctuations are becoming a thing of the past.
CNN's Jason Carroll reports now on an innovative idea which is helping farmers reap a little more of what they sow.
FRED FLEMING, SHEPHERD'S GRAIN COFOUNDER: Hard red spring wheat.
JASON CARROLL, CNN CORRESPONDENT: (voice-over): Fred Fleming's family has been working this land here in Lincoln County, Washington for so long, President Glover Cleveland deeded the property to his great grandfather more than a century ago. Fleming jokes how he used to be addicted to traditional farming, like his forebearers -- but not anymore.
FLEMING: I'm a recovering conventional farmer. I'm 10 years into my program. My name is Fred.
CARROLL: He smiles now, but for years, Fleming worried and wondered why there wasn't a better way to sell his wheat other than the conventional way -- selling it through the commodities market, where prices fluctuate so much, it drives some farmers to bankruptcy.
So Fleming stopped doing things the old way.
(on camera): But you are doing something different, right, Fred, in that you are marketing directly to those who want your product?
FLEMING: Right. Right. We actually develop a relationship with our customers.
CARROLL: Fleming formed Shepherd's Grain, a network of 33 farmers who bypass the commodities market, selling directly to customers.
FLEMING: It's sort of like what Starbucks did with coffee. They put pizzazz to it. What we're doing is we're putting pizzazz to wheat.
CARROLL: Fleming got his friend and fellow farmer, Karl Kupers, to help, together deciding they would set their own prices based on production costs, allowing for more stability, especially in troubled times.
KARL KUPERS, SHEPHERD'S GRAIN CO-FOUNDER: And if you're going to be sustainable, you at least have to cover your cost of production. Agriculture doesn't play in that game or hasn't played in that game. And that's...
CARROLL: (on camera): So you're playing a different game now.
KUPERS: This is -- this is the uniqueness of Shepherd's Grain.
CARROLL: (voice-over): It appealed to Mike Kunz. When the recession hit, his farm felt the impact. He joined Shepherd's Grain two years ago.
MIKE KUNZ, SHEPHERD'S GRAIN FARMER: It's a long-term plan that I think is -- is -- you know, shown more popularity. And it's going to increase in the future.
CARROLL: And that approach has attracted customers across the Pacific Northwest. Hearth Bread says stable prices and a local connection equals more sales. Their customers like seeing a Shepherd's Grain label and tracing products back to their farmers.
MONTE LARSEN, HEARTH BREAD PRESIDENT: And as we started marketing that around the area, sales have just exploded.
CARROLL: Higher sales and consumers knowing their farmers like they did years ago -- Fred Fleming's great grandfather would be proud.
FLEMING: And we've excited my customer base. And they truly are what -- have our future in their hands. When they buy products from us, then can they truly impact the world.
CARROLL: (on camera): Well, you can see Fred Fleming gets very emotional when he talks about this. That's because he cares so much about Shepherd's Grain. And, you know, when it comes to Shepherd's Grain, the model is so popular, there's actually a waiting list right now for other farmers to join.
Jason Carroll, CNN, New York.
(END VIDEO TAPE)
FINIGHAN: All right, come with me for a few moments. I want to take you live to San Francisco, where something of a holiday nightmare is unfolding as we speak. Take a look at these pictures. You'll recognize the Golden Gate Bridge there in San Francisco. There's been a multi- vehicle accident somewhere either on the bridge or -- or just off it -- and traffic is unable to get by either side of it, although some vehicles, as you can see, are beginning to make it on one side of the -- of the bridge, but it's just a steady trickle of cars.
Vehicles are backed up right on the other side. As you can see, they're -- they're backed up on this side of the bridge, the side that we're looking from -- looking from at the moment.
And, well, basically people have left the office early. It's a holiday weekend just about to begin in the States. So they got out of the office today at -- at lunchtime. They're making their way home and bang, this is what happens -- they get stuck in traffic gridlock -- a holiday travel nightmare.
Right now, this is live from San Francisco, where it looks a pretty nice day today.
This is QUEST MEANS BUSINESS.
Just ahead, we'll take a look at how U.S. stock markets are faring as investors gear up for that Thanksgiving holiday on Thursday.
Stay with us.
We'll be right back.
FINIGHAN: U.S. investors appear to have turkey on their mind, because they're not as impressed as they should be with the economic news out of the States today. A bigger than expected drop in U.S. weekly jobless claims and stocks also should have been climbing a lot higher than they are on the back of the jump in new home sales and consumer spending. The Dow Jones up now 30 points.
And European stock markets ended the day on a strong footing. Mining shares were the standout winners on the FTSE 100 today. Compass Group, the world's biggest catering company, gained 6 percent in London.
On the (INAUDIBLE) DAX, V.W. the worst performer, down about 3 percent. Disappointing revenue figures were released for Porsche today. And, of course, V.W. is in the process of buying a 50 percent stake in Porsche. That was behind the fall there.
That will just about do it for the Wednesday edition, the midweek edition of QUEST MEANS BUSINESS.
In London, I'm Adrian Finighan.
As the man himself would say if he were here, whatever you're up to in the hours ahead, I do hope it's profitable.
Christiane Amanpour is next on CNN.
Richard will be back tomorrow.
We've got the headlines from the I Desk coming up.
Stay with us.
See you tomorrow.