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QUEST MEANS BUSINESS
Fed Releases Updated Economic Forecast; New Documentary Disputes Official Reason For TWA 800 Crash; Britain Parliamentary Commission Urges Senior Bankers To Be Jailed For Misconduct; Return To Normality For A Day In Brazil; Boeing And Airbus Celebrate Major Orders At Paris Air Show
Aired June 19, 2013 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST: Get ready for the Fed. The U.S. central bank has just announced its latest thinking on the U.S. economy after an interest rate meeting.
Also tonight, an air crash reconsidered: new claims on what brought down TWA Flight 800.
And tonight, bankers behind bars: Britain's urged to jail a finance industry's worst offenders.
I'm Richard Quest back in London where, of course, I mean business.
QUEST: Good evening tonight. We're reacting to one of the most keenly awaited Fed decisions in months. The U.S. Federal Reserve has released a statement after its two-day meeting. It has also updated its forecast for the U.S. economy.
Looking at it now, because the statement has only just come out and we will, of course, be comparing the statements to the ways -- to the one that it came out just in the beginning of May.
The committee says it will keep QE in place. But it has trimmed its 2013 U.S. growth forecast to 2.3 to 2.6 percent. The Fed slashes 2013 U.S. inflation estimates to 0.8 to 1.2 percent.
Looking at the wording at the moment, once again, the committee's -- it says -- and this was the new language -- the committee's prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation. That's the same as we saw in the previous one. They will continue to take appropriate account of the likely efficacy of QE.
And -- I'm just checking; yes. The language highly accommodative stance of monetary policy will remain for a considerable time.
So initially, it looks as if the statement is not going to be the big talking point; rather, the inflation forecast and in the hours ahead, we will get, of course, how the individual committee members.
Let's put this into perspective and how the markets have traded. There goes Dow, 56 points.
Now the market hasn't really turned turtle. It's down just a tad since we got the statement and we got the results. But keep an eye on it and see if it holds around this level just up a third of a percent, because the decision affects stocks in the last two hours of trade, which is exactly where we are at the moment.
Randall Kroszner joins me now from Chicago, professor of economics at the Booz School of Business at the University of Chicago and a governor of the Fed from 2006-2009.
Randall, it's always one of those days, isn't it? We get the results; you know, we get the results and within four or five minutes, people like me are poring over it, trying to note the nuances of what's been said.
What do you make of what we're hearing so far?
RANDALL KROSZNER, PROFESSOR, UNIVERSITY OF CHICAGO: Well, all I've heard is what you have said. But it's pretty much what I had expected. I didn't see any major change or any reason for them to make a major change in their statement. I know there have been some speculations to be pulling the punch bowl away.
But there was really no foundation for that. The economy's not doing better; they're waiting for a sustainable economic recovery, sustainable job growth. We just haven't seen that yet. And exactly, as you said, inflation is falling. It's not going up.
QUEST: But they do say labor market conditions have shown further improvement in recent months on balance. Now this is back to Bernanke's suggestion, isn't it, that he may -- and he's not going to abandon QE, but he might reduce the rate of purchases sooner rather than later.
Is it your gut feeling that's what's going to happen?
KROSZNER: I think that's right, eventually if we do see a sustained improvement in the job market -- and I think they're noting that there has been some improvement -- but if you look at the average number of jobs created based on the payroll survey, it's really about the average that it's been for the last year, year and a half.
Now it's good that we're creating jobs. But I'm not sure it's quite strong enough for the Fed to feel comfortable to start pulling away from the support that it's giving.
QUEST: How risky is it now for the Fed, this particular juncture? I mean, let's not enmesh ourselves in long discussions about exit strategies and can they do it. I'm just talking about the need to telegraph intentions to a market that has got a serious case of bucolic (sic) plague.
KROSZNER: Well, I think what I'm sometimes refer to this as a change from open market operations -- that's the purchases and sales of securities we're just talking about -- to open-mouth operations, talking about what its intentions are, what it's going to do.
And as I think has become clear, it's the talking about what they're going to do that's become even more important than what they're actually doing at the moment.
And so that's why the press conference is going to be very important to see the nuances that the chairman gives. So how much more recovery do we need to see in the labor market in order to start pulling the punch bowl away?
QUEST: And do you think, bearing in mind what President Obama said on the Charlie Rose show, I mean, he didn't quite say in as many words, Mr. Bernanke, Dr. Bernanke's out of a job at the end of the year, but it wasn't far off it.
Do you think that has a -- that that's just stating the obvious? Or it can potentially have a destabilizing effect?
KROSZNER: I think market participants were pretty sure that the chairman was going to conclude his chairmanship in January. So I don't think it's news. I think perhaps the way the president put it was not the easiest way for the Fed, the chairman undoubtedly will get a lot of questions today about that in his press conference.
It might have been a little more convenient to do that later. And particularly now able to do it once the president names a successor or a nominee for that position.
QUEST: Well, it's one of those days which, frankly, as I say, we get the details and we pore over it and we are very glad, sir, that you joined from Chicago's Booz School to put into perspective. Thank you for joining us.
When the Fed does its numbers, we get the economic forecast, not just from the total committee, but we also get the individual breakdown when they think the -- what they think the central tendency is going to be, where they believe interest rates will start rising and, crucially how fast.
It'll be like a straw poll of members of the committee that we look at and you look at and you can see it on the Fed's website, to make it and make sense of it all.
Maggie Lake is with us from the New York Stock Exchange this evening.
Maggie, what are we seeing from the information we're getting from the Fed?
MAGGIE LAKE, CNN CORRESPONDENT: As far as the market's concerned, Richard, we are seeing the Fed start to set the stage for rolling back QE. They're not doing it this time. But let's focus in. I'm not sure what you've got on the screen. I want to talk about that, the GDP, I think first, and the unemployment. They're both critical to what the Fed's going to do.
GDP, they're actually taking the range, the upper range of growth down a little bit. So that would suggest slower growth.
However, critically, in this statement, they remove the language of the downside risk. They're now saying that the downside risk to the outlook for the economy and the labor market have diminished since the fall. The market's really grabbing onto that sentence. When you couple that with we look at that unemployment rate, they are seeing the unemployment rate start to improve.
That also coming down, but that's an improvement. And when you look out to 2014 you get down to that 6.5 percent. So somewhere between 2013 and 2014, they're going to get to their target. Those two things together, as far as investors down here are concerned, seem to signal that they are laying the groundwork.
However, the wild card here is inflation. They're also bringing their inflation forecast down. That is very important to the Federal Reserve. They don't want to see rapidly falling inflation, and they do also say in the statement that that is running below target. So this press conference going to be very critical.
How are they balancing all of this? Are they setting the stage? Is unemployment still the most important thing? Or has inflation come back into the picture?
QUEST: Right. But what I also think is very interesting, looking -- and do forgive me, dear viewers. I'm looking at the target for the Fed's funds rate that they are forecasting and we're now starting to see, with the exception of one member who still thinks the rate should go up this year, more of them have moved across to saying that the rates, the first rate movements and the higher rate movements will now be in 2015, not 2014.
LAKE: Here's the problem, though, Richard. No one thinks that the Fed, although there has been some discussion that Bernanke today is going to try to explain that; tapering bond purchases is not the same thing as tightening interest rates.
No one thinks the Fed is ready to tighten. But the market, stock markets around the world have become addicted to the easing money, to the quantitative easing when they start to bring that out, that's what the market's focused on.
So the market not so focused on interest rates; the market focused on are they going to start buying less bonds and what does that mean to the market. So that's really what we're going to key in on here today.
QUEST: You're going to get reactions on the market floor in a short while, Maggie Lake, who's at the New York Stock Exchange.
Before we take a break, a reminder of where the Dow Jones stands at 12 minutes after the Fed gave us their opinion on what is happening. Let's take a look at the big board and you'll see the markets. That's not the big board markets, I don't believe.
The market is down 58 points. So no major shift there. We are just holding roughly where it should be.
After the break, new claims about a catastrophic plane crash and a new film disputes the official version. It was TWA 800, New York to Paris. (Inaudible).
QUEST: The official explanation for why Trans World Airlines, TWA Flight 800 crashed in 1996 is wrong. That's the assertion of a new unreleased documentary. All 230 people on board the aircraft died. And the plane exploded and crashed into the Atlantic shortly after takeoff.
It was flying from New York's John F. Kennedy to Paris. Now crucially scores of witnesses say that they saw streaks of light and a fireball over the Long Island Sound where the plane crashed.
The report by the NTSB, which runs to some 341 pages, the report says that actually what happened was a short circuit in the fuel indication system, the fuel indication system, which caused an explosion in the center wing fuel tank. Now the NTSB has never officially formally said it was the spark that caused it.
But they've always said -- we always said that is the most likely cause. And, indeed, the NTSB have repeatedly ruled out missiles, bombs or any other form of illegal or terrorist activity.
The explanation that they give for the fireballs and the streaks of fire across the sky was the plane blowing up.
The documentary, however, has a different view. The documentary maker says he has solid proof that there was an external detonation just underneath at the central wing tanks.
CNN's Rene Marsh has more on these new major claims.
RENE MARSH, CNN CORRESPONDENT (voice-over): It was a crash as horrific as it was mysterious. TWA Flight 800 explodes in mid-air 1996 off the coast of Long Island.
UNIDENTIFIED MALE: It blew up in the air and then we saw two fireballs go down (inaudible) the water.
MARSH (voice-over): All 230 on board the 747, dead. The cause after a four-year 17,000-page NTSB investigation: a spark from faulty wiring leading to the center fuel tank.
But now six retired members of the original investigation team are breaking their silence. In a new documentary, they are challenging the NTSB's findings and calling for the investigation to be reopened.
JAMES SPEER, TWA 800 ACCIDENT INVESTIGATOR: I was convinced that the part had been damaged by a high explosion because of the entrance hole and the exit hole.
MARSH (voice-over): These former investigators, whose credentials range from the NTSB, TWA, Airline Pilots Union and forensic experts, now claim that radar and forensic evidence shows the wiring was not the cause of the crash.
UNIDENTIFIED FEMALE: What would your analysis have been?
UNIDENTIFIED MALE: The primary conclusion was the explosive forces came from outside the airplane, not the center fuel tank.
UNIDENTIFIED MALE: Would that statement have been in your analysis?
UNIDENTIFIED MALE: If I got the right one.
UNIDENTIFIED MALE: The agenda was that this is an accident. Make it so.
MARSH (voice-over): These investigators say that the evidence they examined proves that one or more explosions outside the aircraft caused the crash. However, they don't speculate about the source of the explosions. Among the theories considered and rejected by the NTSB at the time was that a missile was responsible.
The filmmakers plan to petition the NTSB to reopen the investigation.
In a statement the NTSB left that possibility open if new evidence is uncovered, saying, "Investigators and staff spent an enormous amount of time reviewing, documenting and analyzing facts and data . While the NTSB rarely re-investigates issues that have already been examined, our investigations are never closed and we can review any new information not previously considered by the board."
QUEST: A "Currency Conundrum" for you now: the French government still issues francs for use as legal tender. The question is where are they used? The South Pacific, the Caribbean or the local markets in the south of France? The answer later in the program.
Now the currencies tonight, the dollar is up against the pound, the yen and the euro. The rise came immediately after the news from the Fed.
Those are the rates, this is the break.
QUEST: The key points from the Federal Reserve statement and its revised economic projections have now been released in Washington. QE stays in place at $85 billion a month -- no surprise there.
There's a trimming of the 2013 U.S. growth forecast from 2.3 percent to 2.6 percent. Now that's the range-- or that's the median, actually, that the FOMC now believes. So it's just trimmed a very fraction, largely, perhaps, on the back of the sequester effect.
Maggie Lake's at the New York Stock Exchange, joins me now.
Maggie, the market's held its nerve, down 50-odd, 60-odd points, which does suggest that although there's not surprised, they're not worried, either.
MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: Or they just don't have enough information. I'm not sure which, Richard. But you're right. We did see that selling. We saw the Dow get all the way down to a loss of 80 points. I think really because we saw that downside risk language removed that it bounced back up a little bit. But let's hear it right from the horse's mouth, not from me.
Alan Valdes joins us now.
Alan, it doesn't look like the statement enough gave us any clarifying information. What do we want to hear from Bernanke today?
ALAN VALDES, DME SECURITIES: Well, you know, you would have loved to hear at the press conference when they're going to start tapering. But you're not going to hear that, you know.
I think that closest we got was that 2014 he sees the labor market getting stronger, unemployment getting down to 6.5 percent. That seems to be the flashpoint where they start tapering. So I think in October, the next meeting, he'll probably come up with more detail. But you saw what happened last month when he chatted after May.
I mean, the market really we've come down about 1 percent since that.
So I think he's taking it very easy because we'll come up to the end of the quarter and to the half, so July and August could be very slow. He doesn't want to upset the apple cart. So I think they're going to wait till the fall before they make any really major tapering noise.
LAKE: But the reality is, we are getting close to the end. I mean, you know, 2013-2014, somewhere that unemployment rate's going to get there. The Fed is already saying in some spots things are improving. So he's got to start laying the groundwork.
VALDES: Oh, there's no question about it. That's the key, you're right. I think in 2014, the economy can handle it. Right now I think we're still shaky.
LAKE: Can the economy handle it? Look how fast mortgage rates jumped up. If you didn't lock in in the -- in May before he made those comments, you just saw a huge jump.
LAKE: Relative, the speed.
VALDES: Relative, but you know, the housing market still getting stronger. You know, rates going up, in -- it's not necessarily a bad thing in the long run. Yes, it is if you're going to get a mortgage. But basically that shows the economy is getting stronger. So I think that's what Wall Street's looking for, that we know the economy's getting stronger.
Right now, we see it as a disconnect between the economy and the market. But I think come the fall, you may see the numbers; you may see job numbers getting better, housing numbers, auto sales, right across the board. If that's the case, Wall Street will embrace tapering. No question about it. But right now, people just think it's too shaky.
LAKE: A lot of people think there's going to be a lot of talk at this meeting about Bernanke leaving. Some have said that's noise; we don't need to hear. We knew he was going anyway. We need to hear about the Fed's plans to exit on -- is it going to dominate? Do you guys care? Were you prepared for this?
VALDES: Well, you know, we think this is probably going to start being a legacy problem with Bernanke because, yes, he is going to (inaudible), whether it's (inaudible). Is he going to leave this on their shoulders? I don't know. I mean, he's an expert with the depression.
We think he's going to probably -- that's why we think October's big. When he starts to mention it, we think he's going to mention tapering in October because of that legacy coming up with him.
LAKE: He's got to. He's got to --
VALDES: He's got to -- and I don't think he wants to leave it till the next Fed head. So, yes, I -- that's why everyone is saying it's October.
LAKE: Alan, great to see you.
Richard, one thing is for sure, we are definitely entering a new period of scrutiny for the Fed. If they're going to lay the groundwork, we're going to have to parse every word even more carefully. This is uncharted territory, right? We don't know the playbook. We don't know the language we're going to be looking for. So these kind of press conferences and meetings are going to be key for the market, Richard.
QUEST: This is a very polite way of saying making it up as we go along, and I suspect that's the Fed doing it as much as the rest of us. Maggie Lake on the floor of New York Stock Exchange.
Senior bankers must be held accountable for their actions and those guilty of reckless misconduct should be jailed. That is the bottom line from the long-awaited, some 600-page report of a U.K. Parliamentary commission on banking standards. It was commissioned by the British government and it recommends a whole variety of fairly dramatic things.
For instance, the first one, of course, is the creation of a new crime -- reckless misconduct in the management of a bank, reckless misconduct. Now the phrase "reckless" is well known to lawyers, recklessness has long been defined. It's closing your eyes to the obvious or not taking notice of things that are reasonable and bankers should do.
But also that we'll get rid of is what the committee called the "Murder on the Orient Express" defense. In other words, everybody's to blame a little bit. And of course, the senior executives will have an incentive to know what was happening on their watch.
Another recommendation, defer bonuses for up to 10 years. After all, it gives an incentive to know what's happening now. Don't take the money and run because in 10 years' time, you may not get the money if things blow up in your face.
And senior persons' regime, individually, assign responsibilities. In other words, get rid of a complex, confused mess, as they call it at the moment, have individuals who are responsible, who must formally accept responsibilities. The British Prime Minister David Cameron says he accepts the report's (inaudible) recommendations and will act on them.
DAVID CAMERON, PRIME MINISTER, GREAT BRITAIN: Penalizing, including criminal penalties against bankers who behave responsibility, I say yes and also making sure that banks who are in receipt of taxpayers' money that you can claw back and ban bonuses, I say yes, too.
QUEST: Paul Moore is former head of Group Regulatory Risk at HBOS. It was -- the bank was rescued by the government in 2008. It had cost around 46 billion. Paul joins me now.
Paul, if we look at these recommendations, do you support them? Would they have made a difference?
PAUL MOORE, FORMERLY OF HBOS: Absolutely without a shadow of a doubt. It really is a game-changing report. (Inaudible) around at first, because it's so long. But I thought you summarized it beautifully.
QUEST: You are too kind.
QUEST: (Inaudible) major change. I mean, is it the individual responsibility? Is it the new crime? Is it the deferred bonus? What would make them think twice?
MOORE: Well, let me just say this, if this regime had been in place when I was head of regulatory risk at HBOS either I wouldn't have been fired and Crosby would have been, or if I had been fired, most of the board would be in jail now, would have had half their money taken away or all of it and would be banned.
Look, I don't hate bankers. This is good for banking. It's good for good bankers. It's bad for bad bankers.
QUEST: But what point do you bring the criminal law in? I mean, I was looking at the definitions of recklessness earlier today.
MOORE: When you do things as badly as the board of HBOS or the board of Royal Bank of Scotland. But it won't happen very frequently. By the way, there's always a criminal offense for reckless misselling in the act now. That could be brought to bear on the misselling of creditor insurance, interest rate swaps, et cetera, and LIBOR.
QUEST: Do you -- well, the LIBOR thing is -- I mean, that's -- a lot of people should be feeling the full weight of the law on that.
MOORE: It's L-I-E-bor. LIEBOR.
QUEST: Right. But what about, would you be in favor of long sentences or short, sharp, swift -- basically, it doesn't -- for some of these bankers, three months is enough, because that's what people will care about.
MOORE: I don't really care how long they go to jail, so long as when they do something as ridiculous as some of the things they did do, they do go to jail.
You can be put in prison for stealing a water bottle in a riot. Why shouldn't you be put in prison if you put 37,000 people out of work and --
QUEST: So from your point of view --
MOORE: -- 30 billion or whatever it was?
QUEST: -- so from your point of view, the idea of merely looking away, of closing your eyes to the obvious, not being part of it, is almost as culpable as being part of it?
MOORE: It as absolutely. There's carelessness, recklessness is a willful disregard to the obvious. Now some of these things were completely and utterly obvious.
QUEST: I'm going to leave you there.
MOORE: Very good.
QUEST: Thank you very much indeed.
Coming up next on QUEST MEANS BUSINESS, mayhem and destruction in Sao Paulo. In a moment, why some Brazilians have turned on their government. Good evening.
QUEST: The Federal Reserve Chairman Ben Bernanke is now giving a news conference in Washington following the interest rate decisions. Have a listen.
BERNANKE: Inflation has been running below the committee's longer-run objective of 2 percent for some time and has been a bit softer recently. The Committee believes that the recent softness partly reflects transitory factors. And with longer-term inflation expectations remaining stable, the Committee expects inflation to move back toward its 2 percent longer-term objective over time.
We will, however, be closely monitoring these developments as well.
In conjunction with this meeting, the 19 participants in our policy discussion, the seven board members and 12 Reserve Bank president, submitted individual economic projections.
As always, each participant's projections are conditioned on his or her own view of appropriate monetary policy. Generally, the projections of individual participants show they expect moderate growth, picking up over time, and gradual progress toward levels of unemployment and inflation consistent with the Federal Reserve's statutory mandate to foster maximum employment and price stability.
In brief, participants' projections for economic growth have a central tendency of 2.3 percent to 2.6 percent for 2013, rising to 2.9 percent to 3.6 percent in 2015.
The central tendency of their projections of the unemployment rate for the fourth quarter of this year is 7.2 percent to 7.3 percent, declining to 5.8 percent to 6.2 percent in the final quarter of 2015.
QUEST: Ben Bernanke going through the projections from the various members.
The chairman of the Fed will spend some time going through all of the statement of the FOMC before he starts taking questions and that, of course, in many ways, is the more interesting part away from the rote (ph).
But the core thing from what we're hearing so far is that the unemployment rate remains elevated for the rest of the year. The growth forecast has been reduced a tad by the FOMC. And what all this means in plain English is that there is very likely to be no rate -- no increase in interest rates; in fact, not very likely there won't be until 2015.
And we're going to wait and see exactly when he starts to hint about taking away the punch bowl from the party, reducing the QE currently being imposed or prevented in the United States.
While we wait to hear more from the Fed, we'll move on.
Let's go to South America now in Brazil, a return to normality, at least for a day, as protesters took a break from the rallies and the marches that have swept across the country.
The protesters are promising to be back on the streets on Thursday. There were scuffles in Sao Paulo last night and reports of looting as well. At one point, 50,000 people stood in front of the city's main cathedral in protest.
The issues range from the high cost of hosting the World Cup next year to government corruption and poor public services.
The protests coming as Brazil is playing host to the Federation Cup and special security forces have been deployed to protect the football venues.
I spoke to our correspondent, Shasta Darlington, in Sao Paulo.
Looking at the protesters we're seeing them, how does she view the movement developing?
SHASTA DARLINGTON, CNN CORRESPONDENT: Richard, I think these images of violence that we're seeing are fairly isolated.
What's keeping this movement going is exactly the peaceful aspect these tens of thousands of people taking to the street and demanding not only that the government revoke this hike in bus fares, but much bigger demands. They're venting their frustration over government corruption, over paying higher taxes, but still getting abysmal health and education, while they spend billions on the World Cup.
So this is something that's touched a nerve in broader society. And it's not going to go away. The visions of these videos of violence won't help. So I don't think that we're going to see perhaps massive demonstrations here in Sao Paulo in the next couple of days because of that. But this movement is not going away, Richard.
QUEST: And the ability of the president, as she did the other day, to do a version of "I feel your pain," I hear your protests, democracy is growing up, whatever way we want to take it, is that going to work? Or is that just politics as usual?
DARLINGTON: Richard, it's not going to work. And that's partly because this party, her party has been in power for a decade now. So while a lot has happened, we've seen millions of people lifted out of poverty into the lower middle classes, the middle class really has gotten bigger. It's also a fact that they're realizing that the services that they pay for with their taxes are subpar.
And so in fact, their voices are rising. And these complaints are only going to grow. And while these protests aren't directed at her, she is certainly feeling a bit of the pain herself. They are angry with her, Richard.
QUEST: OK. So let's take one extreme, one absolute extreme, the Arab Spring. We can take Turkey, Taksim Square, at the absolute extreme on one side, and then at the other side, we take Occupy Wall Street, Occupy London, the anti-capitalist Occupy movement.
Where do you put these Brazilian protests?
DARLINGTON: Right in the middle, Richard. I don't think Brazil's going to be destabilized any time soon. The big question is will this fizzle out without anything happening? At this point, I don't think so. What they're looking for is a gesture, and that gesture would probably be something along the lines of the government, the local government revoking that hike in bus fares.
But they won't go away without some kind of a gesture, a gesture that says we're listening to you; this is the first step and more is coming.
So I hate to sit the fence like that, but right down the middle, Richard.
QUEST: Shasta Darlington in Sao Paulo.
Coming up next, QUEST MEANS BUSINESS, the pain of any air traveler is getting stuck in security. At the Paris Air Show, one firm is offering a secure and quick way out.
QUEST: Boeing's celebrating a major order at the Paris Air Show. The Irish budget carrier -- ultralow flyers, as the carrier likes to know themselves -- Ryanair has confirmed an order for 175 737s. Now the interesting thing here, of course, we did know about this order back in March. But they've not confirmed it.
Airbus is celebrating a deal, 25 big A350s. That's the new XWB for Air France KLM. So putting in the orders that we know today -- and, look, it is not a -- it is not a science. It's a fine art because some were reported before; some of this, some of that, some of the other.
So test the wind. And today, Airbus secured, ah, 65 new orders and commitments whilst Boeing is out in front today. There we are, 213. We'll have the final result on who won the battle of the orders in tomorrow's program.
Now special temperature sensitive video from the air show let's you see just how powerful some of the Airbus planes truly are.
(BEGIN VIDEO CLIP)
QUEST (voice-over): This is an Airbus A380 shot in infrared. The camera cuts through the fog and bad weather. And as you can see, completely in the dark, you can make out the sharp details on the plane itself and see how much heat those engine -- look at this -- is carrying. These are -- those are the helicopters, of course, and before that it was the A400M that you were looking at.
FLIR Systems, the company that shot the video, says it was their infrared cameras on police helicopters that helped locate the surviving Boston bomber suspect.
(END VIDEO CLIP)
QUEST: Speeding up border controls while improving security at the same time, speeding up border controls and improving security. Is this a contradiction in terms, I hear you say? Absolutely not. It's a challenge with Safran, the French aviation manufacturer. Says they have risen to and cracked at the air show.
It shows what it calls the checkpoint of the future, speeding up all stages of security before boarding, using a hand sweep. Never mind (inaudible) literally, wave your hand in front of the machine. I tried it out with the Safran CEO Jean-Paul Herteman.
QUEST: We're looking at the security aspect. What is the goal of all of this, because if there's one thing frequent travelers hate, it is security.
JEAN-PAUL HERTEMAN, CEO, SAFRAN: Well, the goal is just to make it even more secure and more convenient, easier to go, easier to travel and that I'm sure it would make a big, big difference for many people, including yourself (inaudible).
QUEST: Yes, but whenever anyone says they're going to make it easy --
HERTEMAN: OK, let's --
QUEST: -- it always ends up making it more difficult.
HERTEMAN: No, no, no. Look at that. It's -- first of all, it's a combination of securing ID and the fast track for getting indication about any drugs, explosive, any (inaudible).
So well, now, ID secure-proof biometrics. Biometrics can be tedious. It's no longer is.
You go. Fingerprint. No need to put fingers on the glass. You just fingers apply. And this is detection of, how to say, unmade explosives. You just go through. No need to stop. You go.
QUEST: Right. Well, what about -- what about metal detectors and things like that? Is that what that is?
QUEST: So that's not only doing explosives, it's doing --
HERTEMAN: Knives and --
QUEST: But I didn't have to stop.
HERTEMAN: And this is a big change as well. It's capable to detect liquid explosive and very thin layer of explosive in hand luggage on a fast track. So and not only it detect but it tells the operator what it is, the chemistry. So secure and fast.
QUEST: Right, so is it -- the goal here is what? The goal ultimately --
HERTEMAN: Single channel to secure flying without being annoyed by all that queueing (inaudible).
QUEST: (Inaudible) is all of this for government to spend the money necessary to put it in place in large scale?
HERTEMAN: It would be an investment for the agencies, governments. (Inaudible) for sure it's an affordable investment and it's an investment with a huge and fast return because it will -- because less manpower (inaudible). So not only it's faster, it's more secure, easier to -- easier to handle but the agency at the airport will have a more effective way to run the system.
QUEST: The CEO of Safran, talking about new production and new ways of going through security.
After the break, a series of production line, of cargo (ph) deals with 120,000 orders a week and still claims to know you as well as your local greengrocer, after the break.
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QUEST (voice-over): The answer to tonight's "Currency Conundrum," we asked you where French francs were still used as the legal tender, and the answer of course, the South Pacific. You can still find francs in French countries like New Caledonia and French Polynesia.
It's pegged to the euro, one euro buys around 120 francs. In other words, because they're not Eurozone countries per se, they have to use the franc. But the franc is a manifestation of the euro and you get the idea of how this works along.
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QUEST: Shorting stocks, that's where you sell a stock or you borrow stocks and sell it that you don't own. It can be a very dangerous business if investors bet against the stock that's likely to rise. For instance, the online -- the online grocer Ocado is finding exactly that is the problem, or at least investors are.
It's the sixth most shorted stock on the London FTSE, according to market. If you had shorted the stock, you'd be -- realize why you got some serious problems. Get right in there and you'll see exactly what happens. Shares have risen more than 250 percent. And we're looking at these areas, these areas and those. And those are the big touchpoints.
For instance, there was a tie-up of talks where another supermarket was going to get involved. Morrison's was going to use Ocado as its distributor. Then you actually have the deal announced, a 25-year deal worth $264 million.
And finally, you actually have Amazon acquisition, most advanced technology platforms. So you've got in there -- this is the potential, one analyst saying exactly that. The (inaudible) described it as (inaudible) potential Amazon acquisition.
All in all, when you look at what's happening with Ocado, you start to see a company that really is at the forefront of the modern production line.
TIM STEINER, CEO, OCADO (voice-over): (Inaudible) back on again. It will find its way back to where it should be. But (inaudible).
You take your order (inaudible) between 50-55 items. We run it through some very complex algorithms to work out how many boxes the customer needs and which routes the boxes should take through the building and which products they can pick and (inaudible) into which bags within the boxes so that we make sure we never put biscuits and bleach in the same bag.
And then we make sure we never drop a can on top of a mango. We work how long each box is going to take in the building irrespective of which customer it's for. We know when we want the routes to leave and which customers on which routes. And on a busy day, we can send out over 1,400 routes in that day.
STEINER: That's (inaudible) today's orders today. If we finish early, we (inaudible) tomorrow's orders. And if we finish late, we can't finish late. That means a customer wouldn't get their stuff in. Because this industry is very intense, very competitive, and we have to be very efficient, we have to make a lot of (inaudible) as we're learning.
So normally in a production facility or warehouse facility (inaudible), you would normally expect that you stock (inaudible) into the operation once every two to three years. But we (inaudible) building two to three times per day.
STEINER: (Inaudible) grocery market and we went back 50 or 60 years, when all grocers were (inaudible) behind the counter. There was also a boy on a bike outside.
And if think about two things are happening there, the person behind the counter knew every customer by name and knew their preferences. And the emergence from counter service to sales service to supermarkets, to hypermarkets, all of that personalization has been lost.
When I look at this industry and realize what technology could do for us today, I realize that it could bring back all of the personalization and all of the service.
(Inaudible) in the first 10 years is really only chapter one of a very long book.
QUEST: And if you want to know how the share price has risen so sharply, there's the answer.
Jenny Harrison is at the World Weather Center. I know, Ms. Harrison, I know I need to say to the world, you were right. Absolutely right. You forecast that rain and thunderstorms in Paris this morning. And when I went to get the Eurostar, the garduno (ph), that's exactly what it was. I take my hat off to you.
JENNY HARRISON, CNN METEOROLOGIST: Well, thank you very much, my goodness. I do feel most honored.
Yes, you know what, though, you still actually -- you did pretty well because, my goodness, there were some really ferocious storms, Richard. We had some torrential downpours in some parts of Spain across into France and in particular Austria that really did cause some problems.
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HARRISON (voice-over): Look at this in Spain. I mean, this rain came down just so suddenly and these thunderstorms and of course just caused these incredible flash floods that caught up the debris, swept away cars. Hatstadt (ph), across in Austria, this little town, it's actually U.N. Heritage site, this was really inundated with water.
And you can see here on (inaudible) satellite, it actually captured the amount of water that came down, over 100 millimeters up here in the Pyrenees. So again, in all cases, we're talking particularly about these very mountainous areas. So of course it comes down very quickly. It's got to go somewhere and, my goodness, it just goes plowing its way through a lot of these little towns and villages.
Of course, the streets are so very steep, but in the last few hours, again, some pretty ferocious storms erupting at times through areas of France, pushing through Paris into the Low Countries. And this is pretty much the same as we go through the next few days, still some very unsettled weather, some severe thunderstorms at times.
This is the system responsible and it's being blocked from moving any further into central or eastern Europe because of high pressure across this particular central and southeastern area, where of course the air is pretty dry and warm, some above average temperatures meanwhile and across the north and the northwest we've got temperatures actually below the average.
So we're going to see those temperatures coming back down again over the next few days. This Thursday, Berlin, 34; the average is 22. But by Saturday it'll be back down to about 24 degrees Celsius.
Similar story in Prague, the temperatures coming back down certainly by Saturday to 23 as opposed to 32 on Thursday. But the heat will just cling on that bit longer across into Hungary. So Budapest 33, 34, Saturday 32 and the average at this time of year is normally 25 degrees Celsius.
Still, though, we could have some of those severe thunderstorms so the warnings are in place. And in particular, this red area showing where we might actually see some pretty strong thunderstorms, that large, damaging hail, some very strong winds and we can never rule out the threat of those tornadoes.
So it's a very unsettled picture across the north and the northwest. Not bad across the south, the Mediterranean, some very nice sunshine. So that of course is whether the best temperatures will be, 29 in Rome, so that very nice. Warm in Vienna at 33, 23 in London. But it will actually cool off over the next few days, Richard.
QUEST: Jenny Harrison at the World Weather Center, make the most of my being nice about you being right.
HARRISON: I will, don't worry. It's being ticked off. There aren't many occasions.
QUEST: You're right. Probably won't see it again for another couple of years.
All right, Jenny, we thank you.
Now no tapering just yet. The Fed sticks with its $85-a-month bond buying program. There's one thing investors aren't happy about, the Fed's lowered economic forecast for this year with a growth between 2.3 percent and 2.6 percent. The Fed chairman spoke a few moments ago and said that the accommodative stance, that printing of money, will likely remain for a while.
BEN BERNANKE, CHAIRMAN, U.S. FEDERAL RESERVE: In the projections submitted for this meeting, 14 of 19 F1C participants indicated they expect the first increase in the target for the federal funds rate to occur in 2015 and one expected the first increase to occur in 2016.
Moreover, so long as the economy remains short of maximum employment, inflation remains near or longer-run objective and inflation expectations remain well anchored. Increases in the target for the federal funds rate, once they begin, are likely to be gradual.
QUEST: That's Ben Bernanke, two important points: increases are likely to be gradual and they ain't happening until 2015 at the earliest.
U.S. stocks are still in the red, and that's not just because they're worried about when the increases will happen. It's also about when they're going to start withdrawing the actual amount of bond buying. A "Profitable Moment" after the break.
QUEST: Imagine if you were a bunch of reckless bankers, turning a blind eye to dangerous behavior, almost as bad as taking part in it, now we know what will happen to those found guilty of recklessness. A U.K. Parliamentary commission told us very sternly, go to prison. Seems to be the answer.
Well, will it ever happen? So far not one banker has been locked up as a result of the Great Recession. And still we wonder what it will take to see the real justice being meted out to those who cause so much destruction and devastation, particularly to the young and the unemployed.
And that is QUEST MEANS BUSINESS for this midweek edition. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST (voice-over): The headlines: President Barack Obama made mention of Europe's unemployment crisis during a rousing speech in Berlin. The president followed the footsteps of previous U.S. leaders by delivering his address from the Brandenburg Gate.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: America will stand with Europe as you strengthen your union, and we want to work with you to make sure that every person can enjoy the dignity that comes from work, whether they live in Chicago or Cleveland or Belfast or Berlin, in Athens or Madrid, everybody deserves opportunity.
We have to have economies that are working for all people, not just those at the very top.
QUEST (voice-over): The Federal Reserve has kept quantitative easing program on hold, saying it will keep buying bonds at the rate of $85 billion a month.
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QUEST: You're up to date with the news headlines. Now to New York and "AMANPOUR" is live.