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Japan's Bond-Buying Boost; Risk of Stimulus; Understanding the 47 Percent; Dow, European Markets Make Gains; Barclays Warned About Diamond; Forbes' Richest Americans; Forbes on US Tax Code and Romney's Comments; Yen Rises on Stimulus News; Formula 1 Finance

Aired September 19, 2012 - 14:00   ET


NINA DOS SANTOS, HOST: Buying bonds to boost the economy. Japan follows in the Fed's footsteps.

Steve Forbes gives us his thoughts on the upcoming US presidential election.

And a winning Formula. We examine F1's finances ahead of the Singapore Grand Prix.

Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.

Good evening. Well, Japan's economy is getting a fresh $126 billion shot in the arm. With the global economic recovery flagging these days, the Bank of Japan has now joined a whole host of central banks around the world and decided to promise to beef up its stimulus plans to shore up its economy.

Let's take a look at exactly what they said today. Well, the Bank of Japan is pledging to expand its bond-buying program to $126 billion by an extra amount of money. This means that its total purchases of assets so far will eventually top about $1 trillion. That's a huge figure.

The other interesting thing about this decision is that it was unanimous. The bank says that it's just too worried about Europe, the US recovery, and the strength of the emerging economies to take any risks these days and, as a result, it says, quote, "The economic pick-up has slowed to a pause."

And, as we know, it's not just the Bank of Japan that's worried these days. Let's have a look at what everybody else has done.

Notably, the big thing of the month has been in the United States, the Federal Reserve has already launched that badly-needed third round of quantitative easing, promising last week to buy up an extra $40 billion worth of assets each month until the economic picture improves for the world's largest economy.

And in the UK, well, they're also opening the -- opening towards the idea of more monetary easing, if you like. Some members of the Old Lady of Threadneedle Street, the Bank of England, say that they now feel, quote, "that additional stimulus was more likely than not to be needed in due course."

That's according to the latest minutes today that were released from the last meeting of the monetary policy committee, which too, place on September the 5th.

John Silvia is the managing director and also the chief economist for Wells Fargo, the US bank. Earlier, I asked him whether quantitative easing was becoming something of a dangerous trend.


JOHN SILVIA, CHIEF ECONOMIST, WELLS FARGO: Yes, we are seeing a sequence of quantitative easing measures, where basically the Central Bank of Japan, the ECB, or the Federal Reserve, is out there supplying additional reserves, increasing the money supply.

There are two different impacts here, in terms of economics. One, you can see the currencies change. So, there's a little bit of a question mark about the relative change in currencies.

And second of all, there is some concern that long-term interest rates might be rising. We saw that particularly in the United States, when the 30-year bond rate has actually gone up pretty sharply in response to the Fed easing.

DOS SANTOS: How concerned are you about this situation, though? Because if we've got central banks in all of these different places around the world feeling as though they just have to put more unsterilized money on the table, otherwise they'll feel the wrath of the markets, that isn't a good long-term solution, either, is it?

SILVIA: No, it's not a good long-term solution at all. There's -- again, a couple of real key points here. One, it does mean that longer- term, inflation's probably going to be higher than a lot of people expect, and we know a lot of investors and savers have a lot of their money in very short-term instruments were the real return after adjusting for inflation is already negative. So, there is some -- there are some problems here that we need to be very careful about.

DOS SANTOS: Are you concerned about us moving from a situation, now, especially in the eurozone, even in the United States, where young people can't get jobs, but looking ahead in five years' time, old people can't afford to feed themselves or power their houses because inflation has eaten away from their savings? So, you've got both ends of the age spectrum being really badly affected.

SILVIA: Yes, it's kind of funny in a way, that we always perceive as money in the bank, or money under the mattress, or -- buying sovereign debt is a very, very safe investment.

But if inflation picks up, even modestly -- we're not talking about double digits -- but even modestly, then the real return on a lot of these investments is much less than people had expected. And that means a lot of older people, pensioners, are going to have trouble making their budgets meet their expenditures in a more inflationary environment.

DOS SANTOS: How concerned are you about the state of the US economy? Of course, we've got the elections coming up very, very close from now. And when it comes to the jobless picture in the United States, the unemployment rate is still 2 percent higher than in 2008 last time we went to the polls.

SILVIA: Yes, the unemployment rate is higher. That feeds into less jobs, and that's pretty obvious. But it also means that the real income, the real after-tax income of a lot of people in the United States has actually not grown at all in the last year and a half. That means a weaker economy overall in the United States, since consumption is such a big part of the overall economy.

So, we have a situation here where inflation creeping up just a little bit but not creating enough jobs in the US economy means real incomes are sort of flat, and therefore consumer spending is pretty weak as well.

DOS SANTOS: Obviously, this is a pivotal point of discussion at the moment because Mitt Romney, one of the presidential candidates, has effectively branded nearly half of the US electorate "victims."

SILVIA: Yes, the challenge, I think, in the United States is, as we know, 46 percent of people who have income don't pay income taxes at all. And the challenge is that when you look at this 46 percent, a lot of these people, well, they have some income. But they're not working up to potential.

The economy's pretty weak, they probably could get or should have better jobs at this stage of the economic recovery. That's a tough scenario.

And it's not as if this 46 percent are going to pay the same high tax rates as other people, but when they pay nothing, then in democracies, that creates a huge group that has no, as we say, skin in the game in terms of more federal spending or higher taxes.

So, that becomes a problem in democracy itself when such a huge group of people don't see higher government spending as a problem or higher taxes as a problem, let's go tax the man behind the tree, don't tax me.


DOS SANTOS: Let's take a closer look at those "off the cuff" comments made by Mitt Romney at that private fundraiser back in May, comments that surfaced just recently. You'll recall that Romney said that nearly half of all Americans pay no federal income tax and would never vote for him.

Let's go over to Maggie Lake, who's joining us now, live from our New York bureau. First of all, Maggie, Romney's math continues to be creating something of a political firestorm, here. He says he got his facts right, but it's just badly worded.

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Yes, that's right. And even when you just listened to the guest about talking about taxes, it's easy to come off thinking that half of Americans pay no taxes because they're either poor or freeloaders. It's a little bit inaccurate, Nina.

It is true that 47 percent of Americans pay no federal income tax. They're not all just poor, although some are. Some are middle class and some are even millionaires who are able to take advantage of tax breaks that were mostly put in place during the Bush era. Some of them are child credits, some of them are related to marriage. That's where you get that very broad number of 47.

When you look at a sort of more accurate picture of are we paying taxes here in the US, you come up with something very different. Federal income tax aside, that line item, when you look at payroll taxes, only 18 percent of Americans paid no payroll tax. That's very different from that federal income tax.

When you break it down even further and look at state and local income taxes, which we have, as well as sales tax, which is in effect in almost every state, when you take a look at that, virtually every American pays some sort of tax. So, that 47 percent number, not exactly accurate when you look at the details.

And the important thing is also the context. In that same quote, Nina, he mentioned that people who rely on the government, these victims who rely on the government to provide for them, that's really sort of rankling Americans, some of the people who are on some sort of benefits.

Many of them are senior citizens, the elderly. That is a very important voting block in this country, not to mention people who, for many years, paid taxes so that they'd be taken care of in their old age. So this is, not only in terms of accuracy, but in terms of sort of politically, a very difficult comment for Romney to come back on.

He has said he was trying to explain the role of government and his specific platform on income taxes that 47 percent of Americans wouldn't be interested, but it's sort of playing a little bit differently across the country and has a lot of people on both sides of the political spectrum sort of scratching their heads, Nina.

DOS SANTOS: Yes, not to mention the fact that some might see it as just grossly insensitive. Maggie, surely this overshadows the big issue, which will be the economy. How damaging is all this for Romney in the economic stakes?

LAKE: Well, it can -- it can potentially be very damaging. Remember, Mitt Romney was the one that -- the candidate, the contender who was going to run on the economy. That was supposed to be his strong spot, because it is an area of weakness, given the unemployment rate, for President Obama.

Instead, with comments like this, he comes off reinforcing that -- the idea that he is an elitist who is out of touch with the American -- the economic realities of many Americans.

And I want to run you a little bit of a campaign ad that's coming out today from the Obama camp, late yesterday, today, targeting that idea. Have a little bit of a listen to this ad that's going to be playing in some swing states.


TEXT: Recently, Mitt Romney held a high dollar fundraiser behind closed doors. We asked Americans what they thought about what he said to donors.

UNIDENTIFIED FEMALE: I think the fact that Mitt Romney made all these comments behind closed doors really shows his character.

UNIDENTIFIED FEMALE: I just think it sends a bad message. I think it's not the person that I would want representing me.

UNIDENTIFIED FEMALE: That isn't somebody who I'm thinking, oh, I want him as my president.


LAKE: Now, this is ordinary people, we think, reacting to -- or at least people in this ad reacting to the comment as they're watching it. This is going to be the difficulty, now, for Mitt Romney to overcome that sort of -- some of them had a very visceral reaction to that -- to overcome that perspective that he's out of touch.

We do have debates coming up, Nina. They're going to be very important. But Romney now has a much higher hill to climb to sort of combat that and show the country that he has the economic plan to set things right.

DOS SANTOS: OK, Maggie Lake, thanks so much for bringing us the latest on that. Obviously, something that continues to get people talking, despite the fact that those comments were made in May.

Now, let's have a look at something else that has got people talking. It's, of course, not just the state of the economy, but the state of the markets, especially in light of another round of quantitative easing by one of the world's major central banks, this time today coming from Japan.

And that really surprised the markets, as you can see, in a positive sense. We've got the Dow up about 39 points or about a third of one percent at the moment.

One of the other things that's also helping to support the US markets is the fact that the oil price has come down. This is after Saudi Arabia, one of the biggest producers of oil in the world, has said it's going to be turning on the taps to bring that price of the commodity down. We also had bigger figures in the US housing market, as well.

When it comes to European stock markets, they also got something of a boost from the Bank of Japan's latest stimulus program. As you can see there, all of them closing higher on the day. The gains were limited, though, on the other hand, by concerns -- persistent concerns over the eurozone economy and the ability of politicians to get people to see eye- to-eye on a new European banking union.

Now, the UK's top banking regulator says that it warned Barclays over the appointment of its now former CEO, Bob Diamond, some time ago. Documents released today show that the Financial Services Authority only approved Diamond's appointment two years ago pending the outcome of the investigation into libor-fixing.

The FSA said that it was prepared to withdraw its support for Diamond getting the top job if the inquires had, quote, "an adverse effect." The libor scandal eventually forced Diamond to resign in July of this year.

After the break, Steve Forbes talks to us about the latest Forbes' rich list and, of course, that US presidential election. Plus, it's a race with just a bit more at stake than a podium finish. We're in Singapore, where Formula 1 and finance go hand-in-hand.


DOS SANTOS: Forbes has named the 400 richest people in the United States. Together, they're worth a staggering $1.7 trillion.

Bill Gates holds onto his pole position with his $66 billion fortune. There's no change in second place, either. It's the sage of Omaha, Warren Buffet, standing steady at $46 billion. And in third place, the Oracle CEO and co-founder Larry Ellison, with a total of $41 billion. Each of these three saw their fortunes increasing at least $7 billion this year.

Now, the biggest falls in wealth came from the social media sector. Famously, this guy, Facebook's founder, Mark Zuckerberg saw his network fall to about $8 billion -- his net worth, I should say, rather than his network.

Also, we saw Groupon's Eric Leftosky, here, and Zynga's Mark Pincus, they saw their fortunes dropping off the list altogether. It just goes to show how things can change, of course, in the fast-paced world of technology.

Forbes media's editor-in-chief, Steve Forbes, joins us now, live from New York for a look at how rich people are getting and who's falling off the list.

So, Steve, I suppose a take-home message from your Forbes' 400 United States rich list is that in the US, the rich are getting richer.

STEVE FORBES, CHAIRMAN AND EDITOR-IN-CHIEF, FORBES MEDIA: They have been since the crisis of 2009, 2010. Equity values in certain areas have gone up. But normally, in a recovery, you would have more people getting on -- not more getting on the list, but having the net worth go up even more.

But it just goes to show the versatility and the flexibility of the American economy that you can have things like a Facebook come along, even though Zuckerberg's taken a hit -- taken a big hit. You have to look at where he was three or four years ago, and this is a dropout from Harvard.

So, there is still a lot of entrepreneurial ferment in the American economy, despite the headwinds that we have today.

Yes, that's an interesting point. I'll come back to Zuckerberg, if I may. Just indulge me here for a second, though. Elsewhere around the world, it does come across as slightly ironic that we're in the midst of a very shaky recovery for the United States, and an all-out recession for many of the countries in the developed world, and people at the top of the list are just still getting richer and making money.

FORBES: Well, in the case of Bill Gates, you have the situation where Microsoft has had something of a comeback. Warren Buffet continues to do well as an investor. Larry Ellison has been made -- making some good acquisitions in recent years, so Oracle is becoming a more formidable force.

And so, even though the -- economy's not moving ahead very quickly, people who run companies find ways to get ahead, either through acquisition or through opening up new markets and finding new ways to do old things.

You see it in the clothing business, you see it with Kevin Plank and Under Armour, you see it in other areas. So, people don't stand still even if the economy is.

DOS SANTOS: Now, one thing we don't know is necessarily how much tax they paid, and tax is a huge issue as we come up to the US presidential elections. We all know that Americans generally on both sides of the divide are in agreement that taxation needs some kind of reform. And surely some would say, like Warren Buffet, these people should be showing an example.

FORBES: Well, in terms of the US tax code, which badly needs reform, I've been trying to do this for 15 years to simplify the thing so if you make it you pay it. But I think in terms of incomes in this country, the IRS statistics show that upper income people, as a group, pay three times the tax rate that middle income Americans do.

And the top ten percent of American income earners pay about 70 percent of our income tax, which is higher proportionately than any other developed nation in the world. In no other country do the top ten percent pay that much of the government's income tax revenues.

So, the tax code needs to be reformed because it's hopelessly complicated. But in terms of people who make high incomes paying tax, most of them do.

DOS SANTOS: Now, you're a well-known Republican, you were nearly nominated as a presidential candidate by the Republican Party no fewer than two times, here. Hence the reason why, as you've said, you've had a good look at the tax policy yourself. What do you make about Mitt Romney's comments?

FORBES: Well, I think that his elaboration, which he never made -- the newspaper, the "Wall Street Journal," ran an item on it today, the notes from that speech -- makes the point that if you want to get more people on the tax roles, you need a more vibrant economy.

And that is a legitimate point, and one of the things that we have done is increase preferences in recent years so that a lot of people don't have to pay income tax. And the way you get them to pay income tax is by having their incomes move up so they're in a position to pay income tax.

So, he was maladroit in handling the thing, but his point that prosperity cures a lot of ills, I think, is an eminently sound one.

DOS SANTOS: Steve Forbes, thanks so much for giving us your time this evening.

FORBES: Thank you.

DOS SANTOS: Steve Forbes, there, joining us from New York.

It's time now for today's Currency Conundrum. In which country can a deadlocked election be decided with just the toss of a coin? Is it A, in France? Could it be B, in Ireland? Or C, in the United Kingdom. We'll have the answer to that later on throughout the course of the show.

Well, obviously the yen is the big currency in focus in today's session. It's been rising against US dollar after the Bank of Japan announced additional stimulus plans. Right now, as you can see, a dollar will buy you just over 78 yen. That's a change of around about half of one percent.

The dollar's almost unchanged against the euro, and it is up slightly against sterling. So, at the end of the day, despite the fact that the Bank of Japan tried to weaken the currency, that is where it ended the day.


DOS SANTOS: Hello and welcome back. Formula 1 teams are arriving in Singapore ahead of this weekend's Singapore Grand Prix. It's the first race there since the F1 IPO in Singapore was delayed in June. That's done little, it seems, though, to stop the Asian appetite for this sport. And as Ben Wyatt now reports, the sponsorship money is moving almost as fast as the cars.


BEN WYATT, CNN INTERNATIONAL CORRESPONDENT: As one of the world's largest ports, Singapore has always been a center for trade and commerce. Money is a driving force for the many communities that call this place home.

The Marina-based circuit is certainly very spectacular, but money is a key reason that Formula 1 is in Singapore, too.

LAWRENCE WONG, SINGAPORE STOCK EXCHANGE: In terms of securities, creating, for example, the range between $1.5 billion to $2 billion per day. Singapore is a global financial center and a world hub of Asia.

At the top end, you're talking about China, having around 7 percent, 8 percent growth. The other countries, obviously, show for example, ranges from 2, 3 percent to 5 percent.

Ten years ago, we are about 21 percent of the world GDP. Today is about 26, 27. And the forecast is that by the end of the decade, we will reach about 32.

WYATT (voice-over): By racing in a trade center like Singapore, Formula 1 is better placed to attract Asian investment. But that's not the end of the benefits, according to some.

CHRISTIAN SYLT, AUTHOR, "FORMULA MONEY": Formula 1 has 515 million viewers annually, and these countries, the likes of Singapore and obviously South Korea and Malaysia, et cetera, they're now, by having Formula 1 races, they're on the global map. And so, it helps them draw in tourists.

WYATT: According to Sylt, Asian circuits account for 60 percent of the hosting revenues made by F1 annually, and he suggests Singapore alone pays around $40 million for their Grand Prix. But is this money well- spent?

S ISWARAN, SECOND MINISTER FOR TRADE AND INDUSTRY, SINGAPORE: F1 has brought a certain level of value for us. In direct terms, in terms of tourism spending, it's averaged about $140 million a year. In terms of this has induced tourism spending.

In terms of visitor arrivals, we know that we get about 35,000 to 40,000 foreign visitors just for the F1 race over that weekend. It gave us an opportunity to present to the world that Singapore is a city where you can have an exciting lifestyle while to come here to work or to do business.

WYATT: An opinion owners of F1 certainly seem to agree with when they announced plans to float their business, valued at just under $10 billion, on the Singapore Stock Exchange back in May. But the float stalled.

SYLT: I think it would have been a bad decision to float largely because of the state of the economy. That is nothing internal to Formula 1. When you look at what's happened in terms of the valuation of Facebook, look at the valuation of Manchester United. Not as high as people expect - - wanted and expected.

If the markets pick up well, and if there's a real strong bounce, I'd say it's very likely that it will float.

WONG: The market condition during the first half of this year was not so good. When things start picking up, especially in Southeast Asia, I'm hopeful that things will happen, not only for them, but other companies that are here looking to open door to Asia to come to the market as well, where they can find the kind of investors that understand them.

And this is a place for them to actually catapult into the rest of the region, and Asia is the region of growth.

WYATT: The float may well go ahead, even leading, as some have speculated, to an Asian buyout. But the future of the Singapore race for all of its supporters remains in doubt. A multimillion-dollar contract extension beyond 2012 between F1 and the Singapore government has yet to be signed, though Iswaran remains cautiously optimistic.

ISWARAN: I'm hopeful that we can find an area of mutual benefit to go forward together. You cannot just look at it just on the cost side. You also have to look at it on the benefit side and then come to a conclusion on it.

So, certainly terms with the Formula 1 management would be one aspect of it, but it's by no means the only aspect in coming to a decision.

WYATT: Whether F1 returns next year remains to be seen, but it's fair to say the focus of Formula 1 will stay in Asia for some time to come.


DOS SANTOS: That's Ben Wyatt reporting there from Singapore. Well, racing fans should stay tuned to QUEST MEANS BUSINESS this week, because the future is electric. The CEO of Formula E will be telling me why electric cars racing -- cars races are going to be coming to a city near you. We'll bring you that interview on tomorrow's show. You certainly won't want to miss it with Alejandro Agag.

All the latest headlines for you after the short break, and also why Japan's latest efforts to boost its economy came as a pleasant surprise. That's next, we'll bring you more.


NINA DOS SANTOS, CNN HOST: Hello and welcome back. I'm Nina dos Santos. These are the main news headlines this hour.


DOS SANTOS (voice-over): Republican U.S. presidential candidate Mitt Romney is standing by his controversial comments about American voters. His words were secretly taped during a fundraising gathering last May. In an editorial for "USA Today", Romney says that his economic plans will promote private investment and personal freedom. (Inaudible) he says creating a web of dependency.

French police are guarding the offices of the Paris magazine that has published some controversial cartoons. The drawings depict Muslim men in offensive positions that some say represent the Prophet Muhammad. Well, the magazine says that it's satirizing recent news events, but the French government is still closing its embassies and other facilities in 20 countries on Friday as a precaution.

Amnesty International says that the Syrian government's use of heavy, inaccurate weapons in residential areas amounts to targeting civilians. The group issued a new report studying dozens of regime attacks. It says those attacks often indiscriminate with no clear military target.

The Duke and Duchess of Cambridge wrap up their trip to Asia and the South Pacific with a stop in the Polynesian island of Tuvalu. They certainly appear to be enjoying themselves. And this video (inaudible) a scandal over topless photos of Kate isn't going away. Several European publications have printed these photos and more have now promised to follow suit.


DOS SANTOS: Returning now to our top story of the evening, Japan's central bank is (inaudible) an actual $126 billion of its bond purchasing plan of quantitative easing in a bid to get its economy moving again. Earlier today, I spoke to Seijiro Takeshita, who's the director of Mizuho International (inaudible) and if this move as a shock to people like him.


SEIJIRO TAKESHITA, DIRECTOR, MIZUHO INTERNATIONAL: I think it was a pleasant surprise. I think most people were expecting BOJ to make a move after the reporting in October 30th. And look at the yen, actually not strengthening at all, after the QE3 in the States, in fact, it was weakening after Japan Chinese (ph) and I think many people did not expect BOJ to make a move at this point.

DOS SANTOS: But that's the difficult situation that Japan is finding itself in at the moment. Obviously as we see a third round of money printing put on the table for the world's largest economy, the United States, people are moving out of the dollar, because that weakens and of course, the Japanese yen has just been locking up (ph) so much of the safe haven trader base (ph).

TAKESHITA: Very true. I mean, as you just depicted, it's like rounds taking places and I think it was almost a case where the Bank of Japan were afraid not to disappoint the market more than anything else.

Now in the long term, if you really look at what they were doing today, it's nothing as extravagant as what, you know, ECB or U.S. have announced last week. However, in saying that, they did make the move, which was pretty much a surprise to the market.

DOS SANTOS: People like you are part of the market, right? Aren't you concerned here that the Bank of Japan and other major central banks around the world are taking their shots and taking their cues from the market and not from themselves, which is the status quo many years before (ph)?

TAKESHITA: Unfortunately, I think there is too high a correlation now with the financial side (inaudible) reaction to the market, which actually reflects on the real economy, the effect of that now is far greater than, let's say, a decade or two ago, with all the advancements of the financial tools.

So unfortunately, BOJ and other central banks would have to take that into account nowadays.

DOS SANTOS: Which of the two (inaudible) would you choose if you had to? Easy money printing, which could help with the deflationary situation that Japan has suffered for the last 20 years, or otherwise a strong yen, presumably the latter would be really the death knell for Japan.

TAKESHITA: At this point, yes, unfortunately. I think the Japanese companies are just coping to around 876 or even 78 to a dollar (ph), around that level (inaudible). Many of the corporations have started to cope at that level.

But if we are going to see another round accommodated with the energy crisis that we're having, accommodate it with a possible worldwide recession that are taking place, accommodate with the Japan-China relationship getting worsened, and all these things down the road, if we get another hyper yen, of course, that will be a very, very negative blow to Japanese manufacturers (inaudible).


DOS SANTOS: Unlike the Bank of Japan, the U.S.' decision (inaudible) the Federal Reserve to boost stimulus was not unanimous. Now the head of the Dallas Fed, Richard Fisher, admits that he was skeptical about launching another round of quantitative easing. Felicia Taylor asked him why QE3 eventually got the go-ahead.


RICHARD FISHER, CHAIRMAN, DALLAS FEDERAL RESERVE BANK: One of the arguments is that you have a wealth of (inaudible) go up, and in this case, with mortgage-backed securities hopefully, it'll push along a sector of the economy that actually is moving upward. it is making progress.

There are three sectors of the economy here, automobiles, airplanes and housing, that are picking up. So the theory is this would help it along. And we'll see. My point is that they're -- the cost exceed the benefits here.

FELICIA TAYLOR, CNN CORRESPONDENT: But what if the argument that actually made the majority of those voting this time around actually think that further stimulus is going to work? I mean --


FISHER: Because the August unemployment numbers were so bad. That's was one of the many triggers, a concern that the economy's not moving forward with enough steam. The present status of inflation is that it's running at less than 2 percent. It wasn't too long ago we heard about the death of American capitalism. The Europeans' model was the way to go, et cetera. That's off the table.

Our businesses are so lean and so fit and so ready to roll and they've got abundant capital at their command, whether they're big or small.

TAYLOR: Why aren't they hiring?

FISHER: Because they're not incented to hire by fiscal policy. If we could get our fiscal policy right, Felicia, we would take off. The Congress that mandates it of us isn't doing their job.

TAYLOR: What do they need to do?

FISHER: Well, they need to --

TAYLOR: Spell it out.

FISHER: They need to provide a fiscal solution to this country that incents businesses, whether it's small, large, public, private, to take the abundant and cheap capital we, the central bank, have made possible, and put it to work in creating jobs.

TAYLOR: But what does Congress literally have to do --

FISHER: They have to do something. They have to provide some --


TAYLOR: -- need to do to make corporations say, fine, we're ready to hire?

FISHER: A, make a decision, because businesses, when they know for certain what's going to be there for a long term, will plan around it. They may not like it, but they'll plan around it.

The really bad guys here are the Congress of the United States. And it's both Republicans and Democrats. They can beat up on us, and we got a lot of heat back in this last decision. Again, I wasn't for this decision, but I am part of a loyal team. We got a lot of blowback from the political sector.


FISHER: How about doing this, political sector? Why don't you solve the problems that you create through indecision? And don't just point your finger at the Federal Reserve, but instead create the conditions for people to use this cheap capital and put it to work?

TAYLOR: Is this a political move?

FISHER: No, but you have to realize, within the constellation of Federal Reserve banks, the Dallas Fed is the Bundesbank of our system.

So it is our firm belief -- and it is my firm belief -- that monetizing the deficits -- which we are -- have been doing by buying Treasuries and taking further accommodative action, it's just stalling behavior that will actually incent people to move. I don't see a trace of any political influence whatsoever.

TAYLOR: Are you satisfied that the Federal Reserve has done the best job they can in helping this economy get to where it needs to be?

FISHER: I think it is not us that's holding things back. It's the Congress of the United States, the fiscal authorities are holding us back. If you're looking for who's at fault here, I don't think you can blame the Fed.


DOS SANTOS: (Inaudible) QE there. That was Felicia Taylor in conversation with the head of the Dallas Fed.

Coming up next, Japan's great corporate comeback story. We look at how Japan Airlines recovered from financial ruin. It's a tale that involves a Buddhist monk and some pretty extreme cost-saving measures. You'll want to stay tuned for that.




DOS SANTOS: It's time now for this week's "Business Traveller," and Japan Airlines is back on the Tokyo stock market. This as this company continues its journey towards corporate health. Well, the airline collapse (inaudible) bankruptcy nearly three years ago.

Wednesday's comeback, though, was somewhat modest with shares closing about 1 percent above the IPO price. Alex Zolbert takes a look at how the airline is finding its way back from one of Japan's biggest corporate catastrophes.


ALEX ZOLBERT, CNN CORRESPONDENT (voice-over): A Japanese icon, back from the brink of collapse. The relisting of Japan Airlines marks the world's second biggest IPO this year, after Facebook, and what's it taken to get here? There are the steps one might expect. The carrier has eliminated roughly a third of its routes.

Employees have agreed to pension cuts of 30 percent to 50 percent and the airline has slashed a staggering 40 percent of its workforce in a country where lifetime employment was once all but guaranteed. The airline's competitors are also quick to point to $6 billion in debt being waived as well as an injection of $4 billion from a government-based agency.

But Japan Airlines says it's all been by the book, all part of Japan's bankruptcy restructuring process.

Then there is this, the small cost savings as well. We had rare access to the company's maintenance facilities at Haneda Airport.

ZOLBERT: Is that what's inside here (ph)?

ZOLBERT (voice-over): Hiroaki Takahashi shows me how the company is rethinking what can be recycled with employees bringing in old clothes that can be used as rags. And that's not the only step.

ZOLBERT: It's cost savings taken to an extreme. For instance, each of these bins has a label. Twenty yen or about 25 U.S. cents for one of these new paintbrushes. And over here, more labels, about 4 yen for one of these new plastic bags. That's about a nickel -- a way to remind employees that every yen or cent counts.

The turnaround is also partly thanks to this man, Kazuo Inamori, a Japanese business legend. He says before he took the job, he hadn't flown the airline for years.

"I found Japan Airlines to be arrogant. And they just did everything according to the manual," he tells me. Inamori, who is also an ordained Buddhist monk, has worked to change the way it's thinking. Employees from pilots to maintenance workers to customer service reps are encouraged to attend a philosophy course.

Ichiro Yumiya (ph) tells me, "Today we talked about safety and company values. It was a good discussion."

The key for Mr. Inamori? "I want the employees to be happy working here," he says. "You have to have an open heart and work as a team."

Small steps leading to one of the biggest corporate turnarounds in Japanese history -- Alex Zolbert, CNN, Tokyo.


DOS SANTOS: Well, for all you business travelers out there, wondering what the weather will be like over the next few days, do stay tuned, because Jenny Harrison will have the full forecast for you up next.





DOS SANTOS (voice-over): Time now for the answer to today's "Currency Conundrum," earlier in the show I asked you which country can be dead -- in which country can a deadlocked election be decided with the toss of just a coin?

Well, the answer to this "Conundrum" is C, the United Kingdom. If two recounts fail, well, (inaudible) leaders the law says that the winner could eventually be decided by a random act, such as for instance, the toss of a coin.


DOS SANTOS: Who'd have thought?

Well, speaking of elections and the future of countries like the United Kingdom and, indeed, the rest of Europe, the Finnish minister for Europe says that we should not be making a new Berlin wall between the north and south of this region. Alex Stubb says that it's time to stop sulking and fix the bloc together at the moment.

I spoke with him earlier today and he told me that the pieces that are so badly need for Europe's recovery are already in place.


ALEX STUBB, FINNISH MINISTER FOR EUROPE: I actually think that we're starting to see some light at the end of the tunnel.

There are a lot of good signs here: the action of the ECB a couple of weeks back, the elections in the Netherlands where pro-European forces won, the decision of the Kaus Rua (ph) to allow Germany to enter the crisis mechanism, the proposal by the commission on a banking union, Ireland coming partially back onto the market.

My argument is we have three crucial European councils, one in October, one in November and one in December. If we play our cards right, I think we will have turned the corner of this crisis.

DOS SANTOS: Obviously, the markets are so much ahead of the problem, perhaps even dictating the shots. Your personal view, as somebody in Brussels, who's having to make decisions, how can you second guess the markets?

STUBB: Well, it's constant, I think, tension between the markets and the politicians, so between the public and the private sector. And the markets are always quicker. What I don't like is this sort of vicious cycle that we are in.

And the vicious cycle is politicians talking loose stuff, media interpreting that loose stuff and then markets reacting to what the media reports. And we get into this vicious spiral. I'll just give you an example. The images that Europe is doing really badly, well, since the crisis started in 2008, public debt in the Eurozone has increased by 25 percent. OK, that's bad.

But in the U.K. at the same time, it's increased by 40 percent. And in the U.S., by over 40 percent. So public debt in the Eurozone is 88 percent U.K. 90 and the U.S. 112. Yet everyone puts the blame on Europe all the time.

DOS SANTOS: How concerned are you about the propensity to develop bailout fatigue? Because obviously as a Finnish MP, that is crucial for people in Finland.

STUBB: Yes, definitely. I mean, it's an issue of fairness. I guess in Finland a lot of people, including myself, are thinking, listen, we've done our bit of the deal. We had an agreement to take care of our public finances. Why should I be paying if you haven't done the same thing?

At the same time, we have dealt with the alternative cost. If we let things rumble like we did in 2009, after the downfall of Lehman Brothers, all the economies plummeted.

DOS SANTOS: How concerned are you about the situation? Because even if we do have the ECB ready to act, it's by no means a given that the Spaniards will actually see the need to put their hand out to ask for help.

STUBB: Yes. I guess the starting point in that is that the help has to be conditional. In other words, if the ECB's involved, if us, the other member states are involved, it needs to be conditional and a basic message is you need to do the structural changes.

The good news with Spain, of course, is that actually they're doing really, really tough measures. I have a lot of respect for the Spanish government because they've taken a lot of tough decisions in the past few months.

DOS SANTOS: If we talk about the banking reforms, because those are the most pressing ones that have been put on the table, again, this opens up a whole new can of worms where some countries are saying, well, yes, all 6,000 banks across the Eurozone should be supervised by the ECB. Other countries are saying there's no way realistically to have the resources and expertise to do so.

Where do you stand?

STUBB: Well, this proposal on a banking union is great news. That's exactly what we need to do. We need to decouple the link between the state and the banks and the sovereign (ph), in other words, taxpayers paying for mismanagement of banks.

DOS SANTOS: If we're talking about big banks that have large businesses in U.S. and countries, although let's say the mother ship isn't within the Eurozone, what should they do? What would be the ideal solution here?

STUBB: I think the ideal solution is that they join the banking union. But we have to start the banking union from a clean sheet, from a white piece of paper. We cannot be in a situation whereby those banks, which have taken care of their funds, have a good balance, would be paying for those banks which haven't done so well.

Now Finland is a great case. We are in the euro, but two of our biggest banks have their headquarters, one in Stockholm, Nordea; the other one in Copenhagen, Danske Bank. Neither countries are in the Eurozone. But I think, you know, if we have a common financial market, then we also need to have a banking union.


DOS SANTOS: Time now to take a look at how the weather is faring up and particularly in the United States where a number of states have in counting the cost of the storm damage as (inaudible).

(Inaudible) Jenny Harrison at the CNN International Weather Center.

So I suppose everybody's trying to sort of figure out what the damage is, Jenny.


JENNY HARRISON, CNN METEOROLOGIST: I know. I can only imagine. It's very, very widespread, Nina. These films that came through, they're coming through really through Monday and Tuesday. But even the last few hours there have still been quite a few showers and one or two scattered thunderstorms across eastern areas. And for a time, there was even a thunderstorm watch out there as well.

But really, the worst is now finally over. But have a look at some of the images of the damage. This was in Maryland. This time of the year, these massive trees have still got their leaves on. So when you get winds that were around 100 kph at times, gusting that strongly, it literally is enough to just uproot some of these massive trees.

The rain was coming down and in some areas, they actually saw over 200 millimeters of rain. There was over 100 reports of wind damage. Thankfully, despite all the tornado watches, there weren't actually any tornadoes reported. But as you can see, there's the damage anyway was widespread enough.

Now what about Endeavour? Let's have a look and talk about the flight (inaudible), because this weather did delay it taking off. But this is the weather conditions as we go through the next couple of days, the front (inaudible) the north, but of course Endeavour left Cape Canaveral at this Wednesday. And en route to Ellington Airport just outside Houston in Texas.

And then it will depart from there on tomorrow, which is the Thursday of the 20th. There's one more fuel stop en route in El Paso, Texas. And then once it stops off there, it will continue on towards the Edwards Air Force Base. It'll stay there overnight and then finally, the final leg will be flying into LAX on Friday, September the 21st.

And it will do that, as I say, the end of this week. So the weather conditions are going to stay fine for the next few days, no rain, nothing really to hamper any of that. And of course, it will remain down till October the 12th and then it'll go all the way through the streets.

Now in the meantime, as I say, very quiet conditions across the U.S. That is good for everybody and the temperatures are lovely, 26 Thursday in Atlanta. Of course, humidity's gone; 32 in Dallas. That's still pretty warm across much of the South.

Now we've still got some fairly good warm air across southern Europe as well, but we're also seeing a scattering of shower s and thunderstorms and to the northwest, that new system beginning to push in. So that is bringing with it those scattered showers. This is the main system, that we have a high pressure for a while, but that's just been sort of booted eastwards.

And then we've got this stationary front line across the north. But the drought is still widespread across Europe. In Poland, not one of the countries worst affected by the drought, but even so, we've got images like this along the main river (ph). Why am I showing you this? Well, just very quickly, a bit of a tease here, really, I think, Nina; I haven't got time.

But the Vistula River, yes, there's a lot of buried treasure at the bottom of this river. They now believe they can get to it because it's actually been made visible by these receded waters. But get this: it's 400 years, this treasure, Nina, and at one point, the water was too deep to use the equipment to get to it.

Now they can see it but guess what? The water's not deep enough to use the equipment. So bit of a fine line. So at some point, I will bring you the pictures of the treasure when they can get to it.


DOS SANTOS: We'll see whether it glimmers through the surface. Thanks so much, Jenny Harrison there with a rather heartwarming tale from Poland.

Now we'll be back in a moment (inaudible) glimmer of light in these dark days of the Eurozone crisis.



DOS SANTOS: (Inaudible) crisis is dragging on. But according to Europe's policy makers, guess what? There's some light at the end of the tunnel.


STUBB: I actually think that we're starting to see some light at the end of the tunnel. There are a lot of good signs here.


DOS SANTOS: Well, Alex Stubb is not alone. Earlier this week, France's finance minister said almost exactly the same thing.


PIERRE MOSCOVICI, FRENCH FINANCE MINISTER: I think there is a clear light, good signals, light in the tunnel, because if you look at six months ago, you see that the mood there was uncertainty (inaudible). And we are moving to a situation where we have the hope of stability plus growth.


DOS SANTOS: Germany's foreign minister used almost exactly those words.

Guido Westerwelle told the Sueddeutsche Zeitung that he can see light at the tunnel as well when it comes to fighting to end that Eurozone crisis.

And on that conciliatory note, it's time to say goodbye. That's it for this edition of QUEST MEANS BUSINESS. Thank you for joining me. I'm Nina dos Santos in London.