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QUEST MEANS BUSINESS
Fed Decision; US Growth; State of US Economy; US Market Reaction; Investors Like Facebook; EADS Rebrand; New Siemens CEO; US Dollar Higher; Social Media Scrutiny
Aired July 31, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, HOST: Bernanke's back. The Federal Reserve statement has just come out. We'll bring you the full analysis in a moment's time.
Party like it's 2012. One year on as Facebook has finally beaten its IPO price.
Also on the show, acronyms are out, Airbus is in. The chief executive of EADS explains why he's decided to rebrand the company.
Hello, I'm Nina Dos Santos and this is QUEST MEANS BUSINESS.
Hello and welcome to the program. And let the Fed frenzy begin. The US central bank, the Federal Reserve, has just decided to release its latest statement from the latest policy meeting that's taken place over the last two days. And this has all come on a day which had already been stuffed with crucial figures from GDP readings to unemployment numbers.
With US stocks already at record highs, some say it's a perfect storm of economic news. Let's bring you what the Fed has had to say so far. They've also said that the US economy has grown at a modest pace in the first quarter of the year.
Remember that, of course, they're targeting growth as well as unemployment figures here, for the Fed to distinguish how long they need to keep the quantitative easing program on hold.
And for the moment, I can say that according to the latest Fed statement, the QE program of bond-buying, $85 billion worth of these bonds every single month by the world's largest central bank, has continued on hold for the moment. Interest rates remain at their record lows of between zero and 0.25 of one percent.
Let's bring in Maggie Lake, who joins us now, live from CNN New York with the digest of what's been said so far. I suppose it's not so much what he's said about today, but it's about tomorrow, Maggie, isn't it?
MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Yes, that's right. And this looks, Nina -- and of course, this just crossing, so we're going to have to really dig into the details. But it looks like this is a Federal Reserve that is continuing to try to reassure the market that they are not going to withdraw any time of stimulus prematurely and threaten this economic recovery.
They're still going to purchase $85 billion of bonds each month, so not starting taper yet. And they said that, again, this is -- and this is the fine-tuning that happened after Bernanke sort of set the markets a flutter back in May.
In subsequent testimonies, he's been really saying, listen, there's a difference between tapering and tightening, and we will not only -- yes, we might reduce the amount of amount of bonds we buy, but we might increase them as well, depending on the conditions in the economy and the labor market. And they mention that again today in the wording.
You mentioned some of the things they said about the economy, and although we are recovering, they continue to say that unemployment rate remains elevated. We know they had given us that target of 6.5 percent some time ago as the level they're really looking at in terms of the economy and the labor market getting back to where they would want it to be.
I don't know if we have the big board, if we could put the big board up, but we were just about flat heading into this statement release, investors really getting on the sidelines. They had given back some of the gains we saw earlier in the day.
And it looks like we have a little bit of tentative buying coming back in, the Dow up about a third of a percent. So, they're not off to the races, but again, exactly the goal, the Fed wanted to sort of reassure the markets that they're going to stay here.
Another thing that -- a sentence that was in there last time they introduced, and it seems to be in there again is that they are going to remain accommodative for a considerable period after asset purchases end and once the economy is in recovery.
In Fed speak, that is saying we are going to hold those interest rates to the ground until we are absolutely sure that this US economy is recovering. That's the difference between the asset program and the actual interest rate mechanism they use. So, this looks like a Fed that gave the market what it was looking for today, Nina.
DOS SANTOS: Yes, they're certainly targeting growth but also unemployment, and in this statement -- I'm just reading -- in the fourth paragraph they still continue to reiterate that they won't move until the US unemployment rate comes down before that key level of 6.5 percent.
Maggie, do stay with us, there. Let's get into the semantics of growth here. The Fed's analysis takes place, as we were just saying before, amid a backdrop of faster economic growth. The US economy actually grew by 1.7 percent in the second quarter of the year.
That is faster than economists had predicted, but it is still considered weak by this time last year's standards, when people were targeting around about 2.5 percent.
Robust consumption and investment managed to offset the drag from public spending cuts. And in the meantime, the US is making some significant revisions to how it calculates GDP, so we're talking about the methodology here. The Bureau for Economic Analysis now counts research and development, arts and entertainment production, and other factors as investments, and that has managed to boost economic growth output figures, some say.
Let's take a broader look at exactly what these figures mean for the US economy and go back to Maggie Lake. As we were just saying, part of it is the unemployment rate, and part of it is growth. And what we've often had on this show is economists saying to us, Maggie, you can't have one without the other.
LAKE: Yes, that's right, and you have to remember, the Federal Reserve has a dual mandate here. They watch inflation -- which by the way, Nina, has really been helping in their effort to continue the stimulus without being boxed in, because the inflation has been very low. In fact, it's been falling, and a lot of Fed members talking about that, too.
So, there is no pressure coming from the inflation side, so they're able to focus on both growth and employment, and that is going to be continued -- continued to be what they keep their eye on.
The one thing I'm wondering, and I'm looking here and I don't see it yet, but they -- one thing the market wanted today was for them maybe to provide a little bit more of a road map on the timetable for when they might reduce those asset purchases or begin to taper, as it's now known. Maybe a little bit more detail.
I don't know that we're getting that from the Federal Reserve today, which is why we may see a somewhat muted reaction in the market. It seems like they want to keep the utmost flexibility. They don't want to have a situation happen again where the markets got spooked.
Because remember, the markets will move in anticipation of anything the Fed says and act immediately, and they did make a -- take pains to point out in the statement that they did mark that rise in mortgage rates that happened off the first time Bernanke mentioned the idea of exiting even slightly.
They don't want to see rates run up, borrowing costs go up, and that hamper the recovery. So, it looks like the Fed is trying to maintain flexibility, but at some point, it is going to have to give them some direction and start to signal to the market exactly what this exit of the asset program looks like. Not sure we're getting that detail today.
DOS SANTOS: And there's a main reason for that, isn't it, Maggie? Because Ben Bernanke will be moving on at some point soon. Now, you've done a lot of work on the candidates that could replace him. On the one hand, Janet Yellen could replace him. We could also see Larry Summers. And they have very, very different points of view on whether or not QE should be continued.
LAKE: That's right. And those do seem to be the frontrunners. Of course, there could be another name that emerges. We don't expect the White House to start to even talk about this until the fall. Bernanke is not expected to leave until sometime next year.
But they're going to want to make sure the markets are happy and send some trial balloons up. Janet Yellen, the number two at the Fed, very much believed to be in line with Bernanke's thinking, supportive of stimulus, perhaps erring on the side of continuing longer than needed in order to absolutely make sure that they don't undermine the recovery.
Larry Summers in some speeches, while he hasn't been against QE and the asset purchases, he has used language that suggests that at this point, the risks may start to outweigh the benefits. Remember, this is unprecedented. We don't know if pursuing this stimulus program will create unexpected consequences, maybe speculative bubbles down the road.
The Fed is very aware of that, and he's just sort of raised the idea, as have many on the Fed board, that they feel like maybe it's time to start exiting and that they are worried about those unknown risks right now.
He has not suggested, however, pulling back immediately. I think Larry Summers has been through many global crises, he really understands the working of international markets, he knows how much investors read into the Fed's language.
So, if he were to become the person who looks like they're going to take over, I would expect him to be very careful about how he talks about that. But yes, he is believed to maybe be in favor of trying to sort of think about reducing those asset purchases maybe before Janet Yellen, who's really taken pains to point out that inflation is not a threat right now.
So, very different choices, very different personalities, it's going to be a very interesting fall. One thing we can agree on, Nina: whoever takes over, it is probably going to be the most important appointment to a Fed chairmanship position we have seen at a very critical time, and they are going to have the task of trying to unwind what is an unprecedented move, basically.
DOS SANTOS: Yes, and that might also make them rather unpopular, not just in the United States, but right around the world, because of course, whatever the Fed has to say has huge implications for markets --
DOS SANTOS: -- not just in America but elsewhere. Maggie Lake in New York, thanks so much for that.
Well, let's see how the US stock markets are reacting to the Fed's announcement. Maggie just brought us the big board before, as you can see. It was up around about 0.35 of one percent. But let's go over to Zain Asher, who joins us from New York at the Stock Exchange over there for the full reaction to what Ben Bernanke has had to say today. Zain?
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Hi, Nina. Yes, we just got the policy statement about ten minutes ago. Stocks are trading slightly higher, up about -- let me just see -- 27 points.
Initially, earlier on in the day, investors had sort of been really slowing down ahead of the policy statement. It's just been released, though, and it was music to investors' ears. The Fed is going to be maintaining its bond-buying program of $85 billion a month. Obviously, they will adjust it if necessary, but certainly investors did get the reassurance they needed today.
Earlier in the day, we saw stocks creep into record high territory after better-than-expected GDP and private sector job growth. Second quarter GDP 1.7 percent. They had been expecting just 1 percent. Then after that, stocks sort of pulled back, and now, after the Fed statement, they are up about 30 points.
Now, traders I spoke to said it is actually not really about the policy statement today, but really all about the Fed meeting in September. That is when many analysts expect tapering to begin. But at least today they did get the reassurance they needed. Nina?
DOS SANTOS: Now Zain, do stay with us for a moment's time, because I want to home in on one stock in particular that has had a stratospheric rise of late. Fifteen months after its IPO, Facebook is trading back where it started.
Shares touched around about $38 a piece earlier in today's session. And as you can see, they've been hovering around about that price ever since, even if they're down around about just shy of two percent at the moment.
They've risen 43 percent over the course of the last five days, and 75 percent, as you can see on this chart, over the last 12 months. This chart shows us how Facebook's share price has been doing in the year since its IPO. The company has been making good on its promise to try and monetize growing mobile user bases in the world.
It's expanded more than 50 percent in the last quarter, and there's roughly 819 million people using Facebook on their mobile devices. That is a huge change from the kind of worries that surfaced around about the time when this company went public about whether or not they could actually get into the mobile space and capitalize on that.
Let's go over to Zain Asher again, who still is standing by at the New York Stock Exchange. How has Facebook managed to do such an about face?
ASHER: Yes, it's quite the comeback story, Nina. Facebook basically has been desperately trying to prove to investors that it can make money off of mobile. That has been their biggest concern for the company since it went public last May.
Facebook's earnings last week showed strong revenue growth and a greater demand for mobile ads, and that was really the push it needed. Facebook said that its mobile ad sales grew 75 percent over the span of three months, that far surpassed analysts' targets.
And then yesterday, they announced plans to help distribute mobile games in exchange for a cut of the sales they generate. That certainly raised hope for a possible new revenue stream. The headway in mobile has led to a big wave of positive reception from analysts in the past couple of months.
Investors who stayed with Facebook through all the ups and downs I'm sure are very happy, Nina, that they stuck around. Nina?
DOS SANTOS: Yes. Talk about saving face.
DOS SANTOS: Zain Asher, there, joining us in New York. Thanks so much for that.
Well, we're going to take a quick break in a moment's time, but when we come back, EU unemployment figures are out and there's good news this time. Behind the headlines, though, there's still plenty of causes for concern overall. We'll crunch the numbers later on in the show.
DOS SANTOS: Welcome back. EADS, the European aerospace and defense giant, is rebranding and reorganizing its business. The company is now changing its name from EADS, which in case you didn't know stood for European Aeronautic Defense and Space Company. As you can imagine, that is a bit of a mouthful, isn't it? And it's simply becoming Airbus, which most people agree is a more widely-recognized brand.
The new structure will consist of Airbus, the commercial aircraft division of this particular company, the Defense and Space Division, as you can see there in the middle over there -- it'll have its CEO, Bernhard Gerwert, over there -- and Airbus Helicopters, which will have Guillaume Faury as its own CEO. Fabrice Bregier will become the CEO of the Airbus Plane division.
A little earlier today, my colleague Charles Hodson asked EADS's own CEO Tom Enders about the name change and also the outlook going forward for this firm.
TOM ENDERS, CEO, EADS: I think it's a step long overdue. The revenues of the entire EADS Group are almost 70 percent coming from Airbus. We have a good momentum, good dynamic going with our commercial aircraft activities, plus Airbus is the best-known brand in our group and it's internationally very renowned. So, I think this is a step, as far as I'm concerned, long overdue.
CHARLES HODSON, CNN INTERNATIONAL CORRESPONDENT: -- aircraft is a very popular area. We'll return to that. But the problem is that, for example, in the defense area, there are a lot of difficulties. It's a struggling area of the business, and it needs the dynamization, if you like, of having this big brand behind it, right?
ENDERS: Well, in the defense area, we are struggling with budget cuts that are something of a common feature in the Western hemisphere, particularly in Europe. So, obviously, we need to consolidate our defense business that is current scattered over all four divisions into one strong division.
We are grouping together the defense and the space activities, and that should boost the growth profits -- the growth prospects, sorry -- but certainly also the profit prospects for the defense business going forward.
HODSON: Well, you've signaled that there will be restructuring charges, which means to say that there probably will be job losses. How evenly will those be borne? Clearly one of the problems that you have is that there is a tremendous amount of political lobbying in your business, and you'll have to arm-wrestle with some very senior politicians at the European level when it comes to announcing where those job losses will come.
ENDERS: Political influence is something of a common nature in the aerospace and defense industry all over the world. We are not in a position today to detail what the restructuring and consolidation means. Obviously, we're going for cost and market synergies.
The new top team that is now in place will elaborate on this, and we will certainly be able to provide details in the fourth quarter of this year.
DOS SANTOS: That's Tom Enders, there, the head of the EADS, which is now going to become Airbus.
There's change at the helm of another big manufacturing firm across this region, too, because Europe's biggest engineering company, Siemens, has replaced its CEO. The board of this firm lost patience following the latest profit warning to come from Siemens.
The chief financial officer, Joe Kaeser, will be taking over at the helm after Peter Loescher's resignation was accepted by the board. Kaeser says that his priority was to bring calm to the company.
(BEGIN VIDEO CLIP)
JOE KAESER, INCOMING CEO, SIEMENS (through translator): There is talk and writing of chaos and collapse, misfortune and mishaps of the human and the inhumane and much more. But that, ladies and gentlemen, is not what Siemens is about and not what it stands for. Above all, it is not what it should epitomize.
(END VIDEO CLIP)
DOS SANTOS: The outgoing CEO accepted the move, saying that there had been a lack of trust. And in a statement, Peter Loescher had this to say. It would, quote, "be disastrous for the company's future and for its employees if its progress in setting a new course were jeopardized by this lack of trust."
Well, one irony won't be lost on him, and that's the fact that his replacement matches the criticisms that he made himself when he took over the firm. The Austrian said of Siemens at the time that it was too white, too German, and too masculine.
Let's bring you a Currency Conundrum for you out there now. The severe shortage of hard currency in North Korea has meant that shop owners over there must be creative when it comes to giving change to their customers.
As a result, one particular commodity is being used in the place of small change. And my question to you this evening is what is it? Is it A, a credit note? B, tea bags? Or C, ginseng roots? We'll have the answer for you later on in the show.
Speaking of currencies, the US dollar continues to track higher against the British pound and the single currency, the euro. It has rebounded also against the Japanese yen.
DOS SANTOS: The world's biggest social media companies are facing closer scrutiny these days. In the UK, lawmakers want to question executives of Twitter over complaints the micro-blogging site failed to protect women from online abuse. That's after rape threats were sent to a feminist campaigner as well as members of parliament who tried to defend her on the site.
In the meantime in Italy, Facebook may face a legal challenge after one girl took her own life due to online bullying. Here's Ben Wedeman with more.
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): She was like so many girls her age. Her identity, her pictures, her thoughts, her life splashed across Facebook.
But when a video of 14-year-old Carolina Picchio allegedly showed up on Facebook in which she appeared to be drunk and disoriented at a party, the social network became a social nightmare. An ex-boyfriend and his friends posted a steady barrage of abusive, offensive messages aimed at Carolina.
"He was insulting her, mistreating her," recalls her sister, Talita. "We naturally spoke about it with her, but she told us not to worry." Talita and some of Carolina's friends say they reported the nasty messages to Facebook, hoping they'd be removed. But nothing happened.
In the prosperous northern Italian town of Novara, what started online spilled into Carolina's daily life at school and among her friends. Unbeknownst to her family, it was all becoming too much for her to handle.
WEDEMAN (on camera): Sometime between 2:00 and 3:00 in the morning on the 5th of January of this year, Carolina jumped out of her bedroom window and landed head-first on the concrete below.
WEDEMAN (voice-over): She left a final letter addressed to her tormenters, which her mother, Cristina, read to us. "Are you happy now?" asks Carolina. "Have you hurt me enough? Have you had enough revenge?"
Novara prosecutor, Francesco Saluzzzo, is looking into the possibility of throwing the book at Facebook for failing to remove offensive content that may have led to Carolina's suicide.
"In the case of Carolina," he says, "it appears some of her friends, some of her relatives, asked for the removal of this strong content, and it wasn't removed, and this played a role in her decision to commit suicide."
In a response to a request for comment on this story, Facebook provided CNN with a statement. "We are deeply saddened by the tragic death of Carolina Picchio and our hearts go out to her family and friends. Harassment has no place on Facebook, and we actively encourage teens and parents to report incidences of bullying using the links located throughout the site.
"We remove content reported to us that violates our statement of rights and responsibilities and we escalate reports of harassment and bullying to law enforcement where appropriate."
Carolina's mother feels the time has come for Facebook to confront the reality of online bullying. "My battle," she says, "is to make the social networks responsible so that there are protections for minors. We can't allow for more Carolinas or other mothers who must cry and be deprived of the lives of their daughters."
Carolina's uncle has posted a video on YouTube dedicated to her. Carolina's death now a rallying point in Italy in the fight against online bullying.
Ben Wedeman, CNN, Novara, northern Italy.
DOS SANTOS: This really is such a tragic story, so the question is, how much responsibility should social media companies bear for offensive content that has been posted on their sites. Let's bring in Bernie Hogan. He's with the Oxford Internet Institute of Oxford University and joins us now live, via Skype.
Clearly, responsibility is the key issue here, isn't it, Bernie? Are companies like Facebook, Twitter, and others really getting the message? And if not, why not?
BERNIE HOGAN, OXFORD INTERNET INSTITUTE: These companies are getting the message. Are they doing stuff fast enough and are they doing the right things already? That still remains to be said.
So for example, it's not clear how quickly an individual can have a video removed or have a photo removed. In the many years that I've done research on this, speaking to people about Facebook, the first question I get is, how can I get something removed from Facebook? The fact that it's not that obvious is the first problem for them.
DOS SANTOS: But obviously, if they're providing a platform that increasing people, it seems, may be tempted to misuse, they need to invest more resources into policing this themselves. Because in the case of Carolina Picchio, she was a very young and vulnerable teenager.
HOGAN: Facebook are not in the policing business, and we walk a dangerous line when we consider them to actually policing this rather than having it policed by people. Right now, that could open up a whole host of issues that could actually do a lot of damage to the web and a lot of damage to the way we think about how to participate on the internet.
Unfortunately, this is not a simple issue and they are providing mechanisms. What they have to do is be more responsive to people when people make complaints. But active policing of content on Facebook is a wildly dangerous issue for them and one that they are likely not going to get into, nor is Twitter, nor is YouTube in the immediate future.
DOS SANTOS: Yes, and it also borders on the contentious issues surrounding the world of regulating media generally on the internet as well. And that brings me to the Twitter issues that we've seen so far.
Now we're going to hear that lawmakers in the UK are going to set up an inquiry and look into alleged threats that were made on Twitter towards a feminist campaigner and also MPs. What do you make of the situation there? Because that is also extremely worrying. Because what it could do is alienate women from Twitter.
HOGAN: Yes, that's a serious issue, and it's kind of a different one than the issue on Facebook. What happened on Facebook several years ago was people that were known to this teenager and they were bullying her directly.
What was happening on Twitter is sort of a hidden threat, someone hiding behind an anonymous account and making very specific accusations of rape and when, where it would take place and that they would do it.
So, in one case, we have -- this is people who are known around me that I can't escape. This poor teenager could not escape these people. And in the other case, it was that we couldn't find the people to escape from in the first place.
In both cases, however, law enforcement were not particularly responsive immediately, either. We assume that Facebook and Twitter, its' their jobs, but we wouldn't assume that if a letter came in through the mail or if somebody called me on my phone.
In both cases, we would say you should go to the police or you should go to a mental health professional. And that should still be the case for bullying on Facebook and for dealing with direct, threatening harassment on Twitter.
DOS SANTOS: OK, Bernie Hogan, there, research fellow at Oxford University's Internet Institute. Thanks so much for coming on to talk about those issues today.
Up next, the Fed statement is barely half an hour old and, of course, markets are trading on the back of it. We'll have more analysis next when we come back.
DOS SANTOS: Hello and welcome back. I'm Nina dos Santos. These are the main headlines on CNN this hour.
(BEGIN VIDEO CLIP)
DOS SANTOS (voice-over): Supporters of the ousted Islamist president, Mohammed Morsy, are holding a rally in the Nasr City district of Cairo. That's despite a government order to end pro-Morsy sit-ins. The cabinet says that these sit-ins are, quote, "acts of terrorism" and present a threat to national security.
The polls have now closed in Zimbabwe's presidential elections. And according to the African Union observation team present, they were peaceful, free and also fair. Long-time President Robert Mugabe is running for reelection against his reluctant coalition partner, Morgan Tsvangirai. Mr. Mugabe has vowed to step down if he loses the race.
The U.S. economy is growing faster than expected but it's still considered weak. GDP rose by 1.7 percent in the second quarter of this year. Some significant revisions here are being made to the way that GDP is being calculated in the United States and that's designed to take into account research and development as well as arts and entertainment production.
Stock in Facebook rose above the $38 a share for the first time since its IPO in May of last year. So it's exceeded its initial offering price. In later trading the stock though did slip back below that figure. It's now trading around about $37 a share. Facebook has been a roll since the company exceeded its earnings estimates last week with shares gaining nearly 43 percent in just the past five days alone.
Thailand says that it may need help from other countries to contain a major oil spill. On Saturday, an estimated 50,000 liters of crude oil leaked from an offshore pipeline near the popular tourist destination of Koh Samet. Well, the cause of the spill as yet remains unknown.
DOS SANTOS: The U.S. Federal Reserve has held its interest rates on hold at their current super low level, the key rate will now remain between zero and just a quarter of 1 percent. In its latest statement, the Fed says that it expects economic growth to accelerate from its current pace but that fiscal policy does remain a drag.
The Fed says that economic activity has expanded at what it calls a modest pace in the first half of the year, with household and business spending strengthening. It says that inflation remains persistently below the 2 percent that means it could pose a risk for economic performance and it expects that inflation will pick back up in the medium term.
So not to worry for the moment on inflation; but further down the line, it could be a problem.
Let's take a closer look at what the Fed has had to say and also (inaudible) general strategy going forward.
Randall Kroszner was actually a governor of the Federal Reserve from 2006-2009, right at the height of the financial crisis. That period was -- he's now professor of economics at the Booth School of the University of Chicago.
Great to have you on the show, Randall Kroszner.
First of all, what do you make of the Fed's statement here, because one of the interesting things I was reading further down the statement is that they're going to be revising downwards their targeting on unemployment from 6.5 percent to perhaps even 6 percent.
What does that say?
RANDALL KROSZNER, PROFESSOR, UNIVERSITY OF CHICAGO BOOTH SCHOOL: Well, I think the chairman has made it really clear that 6.5 percent ain't what it used to be because the labor market isn't what it used to be. There are a lot fewer people who are actually looking for work. There are more long-term unemployed.
And so the way unemployment is calculated it's the number of people working relative to the number of people looking. And if there are fewer people looking, you know, you could have the unemployment rate come down, but not for the right reasons. So that's why they may be revising that target.
DOS SANTOS: Now you're obviously at the Fed yourself. Give us the inside scoop on exactly how these kind of decisions are made, because one of the things that worry people earlier on in this year is that quantitative easing seemed to not have the same unanimous support as it had in the past.
KROSZNER: I think there's a lot more question about the costs and benefits. And the chairman's also been very clear about that, that it's not as clear how much it's helping. He doesn't see the costs outweighing the benefits yet. But I think the previous rounds of asset purchases, we had the specter of deflation coming. And that motivated each of them.
That isn't the motivation here, but they're still leaving that concern on the table as they mentioned in the statement today.
DOS SANTOS: Well, one of the things I do want to get into is the fact that we live in this age where the markets want information from the Fed. If they don't get more information from the Fed, then the chairman also runs the risk of rolling the market (inaudible). He's got to toe a very tight line between the bond markets and the equity markets here. You've often said that the less said is the better.
KROSZNER: Oh, no, I think that open mouth operations are valuable. I sometimes say all this talk about what they're going to do is an open mouth operation rather than an open market operation. The actual purchases and sales of securities in the open market.
So I think on net it's better to get the information out there. But it's really difficult to make sure to get that balance right, exactly as you had said, Nina, to make sure that people are understanding but not misinterpreting or getting confused.
DOS SANTOS: And this is where the interesting thing moves forward, towards the next person who's going to be in Ben Bernanke's shoes come this time next year.
To a certain extent, whatever Ben Bernanke says now doesn't really matter because people are already looking forward to see whether he could replace by somebody who's pro-stimulus or anti-stimulus.
KROSZNER: But I think at least the candidates that seem to be out there -- Larry Summers and Janet Yellen -- I think, at least in the short run -- are likely to maintain similar kinds of policies. Certainly Janet Yellen has been an architect of the current policies and I doubt very much if she were to become chair she would suddenly say, well, I'm going to throw away everything we've done before.
As I said, it's highly unlikely. (Inaudible) probably true with Larry Summers coming in, at least at first I don't see a sea change. He may not be as wedded to the policies that have been developed over the last few years because he wasn't there. But I don't see him suddenly saying, ah, we've got to dramatically change course.
DOS SANTOS: Randall Kroszner, thank you so much for joining us there to help dissect exactly what the Fed has said in its statement today.
Randall Kroszner there, who is of course the governor of the Federal Reserve from 2006-2009. He's now a professor of economics at the Booth School of Business at the University of Chicago. We thank you for your time.
Now Wall Street has been boosted by the Fed's statement. The Dow was already trading near a new record high before this kind of announcement. And as you can see, it's back up around about where it was when the Fed started releasing its statement for its two-day rate setting meeting, as you can see.
It's up around about a third of 1 percent, 51 points on the Dow, which is trading at 15,571 at the moment. But still remember that these markets around about all time highs and a lot of people have said, well, that is a Fed-led rally, because obviously the money that is being printed by the Fed feeds its way into the equity markets as well.
So European markets finished fairly flat again on the day today investors waited for that Fed statement, which was -- came well after the close.
Only London's FTSE 100 closed with any significant gains to speak of and that's unexpected drop in (inaudible) jobless rate did also help to underpin the kind of stock market performance that we're seeing at the moment, as did earnings from the Belgian brewer Anheuser-Busch and the spirit maker Diageo, which came out with figures as well today.
Disappointing German retail sales, though, did weigh on the Frankfurt Xetra DAX, which closed today just a notch above the flat line, but as I was saying before, companies like Diageo, which are listed on the London markets, not doing too badly in the latest set of earnings.
And that helped to push gains on the FTSE 100, a bit of a lackluster performance as of course people digest the mixed signals on the Eurozone economy with some of the other Eurozone markets with the CAC 40 ending the day up with just 0.1 of 1 percent.
Well, after more than two steady years of increases, unemployment in Europe has finally fallen for the first time. But hold the champagne, though, because the decrease is literally tiny. We're talking about a level coming down from around about 11 percent for the month of May to 10.9 percent for the month of June.
The picture in the Eurozone is even less rosy. It's stagnant at around about 12.1 percent and this is according to the latest set of research from Eurostat, which monitors these figures across the European Union.
So looking back at E.U. unemployment since the start of 2012 on this chart, you can see the upward trend building from around about March until finally last month's reduction, which is just at the end of the chart of 2013, as you can see. The E.U. says that across the Eurozone is the whole more than 19 million people were actually out of work for the month of June.
Austria continues to enjoy the lowest jobless rate across this region at around about 4.6 percent. German unemployment came in at just under 5.5 percent. And in Spain, the jobless rate remained about that key 26 percent, (inaudible) one of the highest in the region.
But there is a glimmer of hope here because Spain has just reported its first fall in jobless figures in around about two years and there have also been reductions in places like Portugal and Ireland in that key peripheral part of the Eurozone as well.
Well, in case you've ever wondered, how does this stay on the air? We'll give you a look behind the scenes of an Airbus jet. That's after the short break.
DOS SANTOS: Time now for today's "Business Traveller" update. When we step inside a plane, many of us don't even look or think about how it actually gets off the ground. I can attest to that for one.
The Airbus A330, though, is one of the most technically advanced planes ever to grace our skies and as Richard Quest reports, he was allowed to take a closer look up inside some of the places that we don't normally get to see as passengers.
RICHARD QUEST, CNN HOST (voice-over): If we're getting to know planes, it's time to learn the ups from the downs, the ins from the outs and Virgin's given me my own A330.
QUEST: Where's the best place to be? At the front?
ROB BAIRD, CABIN ENGINEERING MANAGER, VIRGIN ATLANTIC: Up front.
QUEST (voice-over): Now galleys are extremely complicated.
BAIRD: These are custom made by (inaudible) manufacturers around the world, specifically for this purpose.
QUEST: Let's talk about seats. The modern trend is for extremely complicated seats.
BAIRD: We've hidden all the wiring inside these panels. There's (inaudible) within this very thin piece of structure. It's a rat's nest in there. Within a few hours, we can take a whole seat out and put a new one in if necessary.
BAIRD: This is an air bag, so it's there for the passenger's safety.
QUEST: So this is an air bag. People don't know it.
BAIRD: No, they don't. And we've designed it such that it's as supple as we possibly can. Only in certain seats where the seat is just far enough away from you that you have a higher chance of injuring yourself.
QUEST: Why are you all obsessed by seats into the upright and locked position for takeoff and landing? What difference does it make?
BAIRD: Well, it makes quite a big difference, unfortunately when seats are out of position, we lose control of where the surfaces are and where the injurious items are. Every seat on this aircraft is (inaudible) 16 G. It's same kind of crash test with a dummy.
QUEST (voice-over): So what's down below?
QUEST: We're climbing stairs not to the cabin but to the cargo bay.
NEIL TAIT, DUTY MAINTENANCE MANAGER, VIRGIN ATLANTIC: This is your avionics bay, all the avionics on the vast majority of all the flight controlled computers, navigation computers, communications, in plane entertainment, all the computers sit down here.
QUEST: (Inaudible) along here.
TAIT: Well, we've got wiring, air conditioning ducts, water supplies, all to support the cabin upstairs.
QUEST: So if I had to fly in here, would I freeze to death or --
TAIT: You wouldn't freeze to death, but you'd get cold because they don't have the same level of air conditioning down here as they do upstairs.
QUEST: Now where are the fuel tanks?
TAIT: The fuel tanks sit in the wings here.
QUEST: It doesn't look that big, though. I mean, or that deep, to carry that much fuel. It's not like one big tank.
TAIT: They are deep; you can almost stand up in them.
TAIT: They go almost to the tips of the wings.
QUEST: And this is the.
TAIT: This is the gear bay.
QUEST: We hear, of course, stories of people who've stowed away in gear bays. I'm -- it's not a good idea.
TAIT: No. You'd freeze up there.
QUEST: Now, look, this is the engine.
QUEST: Not cheap, these engines, are they?
TAIT: No, they're not.
Thinking about $37 million U.S. each. Here they're moving a magnetic chip detector.
It picks up metallic (ph) particles in the engine. It gives an indication as to where the engine's failing.
QUEST: And did you find any?
UNIDENTIFIED MALE: (Inaudible). So now we can read this.
UNIDENTIFIED MALE: (Inaudible).
UNIDENTIFIED MALE: Yes.
DOS SANTOS: Now for anyone who wants to know what the skies hold in store for the weather forecast, for all you business travelers out there, let's go over to Jenny Harrison at the CNN International Weather Center.
JENNY HARRISON, CNN METEOROLOGIST: Hey there, Nina, yes, some pretty stormy weather I have to say across parts of Europe. That of course has been the case really for the last few days but this is what we have got, some pretty good clear skies across central and southwestern areas. That's because high pressure has been building in steadily over the last few hours.
But look at this. The rain has been fairly persistent and heavy at times across the northwest. Ireland in particular pushing through, Wales, northern regions of the U.K. as well. So not surprisingly, Wednesday into Thursday, there are some warnings, mostly for heavy rain across much of Southern Ireland.
You can see that there, that flood orange area and then Thursday into Friday, it real comes in all of Ireland, pushing into Northern Ireland and also the west of Scotland for the rain as well, but also some strong winds, large, damaging hail and also the possibility of tornadoes.
So with all of that to consider, do be prepared on Thursday at the airports, Glasgow and Dublin, you could have some fairly lengthy delays later in the day. Maybe up to 45 minutes, possibly because of very low thick clouds. So of course reduced visibility. Copenhagen, Stockholm, the delay's not as long, but again, it's a fairly cloudy day on Thursday.
This is the picture as we continue through the week towards the end of the week. So there's that high pressure, the heat of course across much of the south and the southwest. Very unsettled across the northwest, those winds on the increase as that area of low pressure pushes on through, keeping the temperatures down, of course, across the northwest.
But on Wednesday, it was a very warm day in Toulouse. Look at that, 35 Celsius. The average is 27. Rome at 34, Paris not as warm as it was, 27 the average. It's 24 degrees Celsius.
And over the next few days, it will warm up, though, 34 then back down by Saturday to 26 degrees Celsius, Rome in the low 30s and look at this, Vienna, once again, by Saturday getting very close to 37-38. That's 100 degrees Fahrenheit.
Basically fine and dry across the central areas, but with that system across the northwest, it will usher in some much cooler air across western areas of Europe, which is why the temperature in Paris is set to decline. But make (inaudible) Thursday, it'll be warm and sunny then but very, very warm in Madrid, a high there of 41 degrees Celsius. So just be aware of that, Nina.
DOS SANTOS: Jenny Harrison at the CNN Weather Center, thanks so much for that. And obviously Europeans who aren't used to those kind of temperatures often head to warmer shores, places like Thailand (inaudible) for their holidays. And Thailand has long been known for unspoiled beaches.
But the country is now struggling to clean up an oil spill that has sullied the shores of one of its popular beach resort islands. (Inaudible) straight ahead on this show after this.
(BEGIN VIDEO CLIP)
DOS SANTOS (voice-over): Time now to answer tonight's "Currency Conundrum." Earlier in the show I asked you which item North Korean vendors are using instead of giving small change. And the answer is B, tea bags. The shortage of hard currency means negligible change is substituted with a tea bag or two over there.
In 2010, Pyongyang offered to settle part of a $10 million debt with the Czech Republic with a shipment of (inaudible).
(END VIDEO CLIP)
DOS SANTOS: In other news, Thailand's deputy prime minister says that his nation's tourism industry is under threat because of a crude oil spill that has now reached the shores of a popular island resort.
Workers and volunteers and even the Thai navy are now rushing to clean up the sludge from the weekend's oil leak, which occurred off of the island of Koh Samet. Tourists have already been evacuated from the island.
Thailand's largest petrochemicals company admits that 50,000 liters of crude oil have managed to leak from an offshore pipeline there. The deputy prime minister says that PTT Global Chemical will be held responsible.
(BEGIN VIDEO CLIP)
PLODPRASOP SURASWADI, DPM OF THAILAND (through translator): We're trying with all of our strength to perform a thorough cleanup operation. After all the work is done, we will estimate all the losses and the PTT Global Chemical PCL will be responsible for the losses caused by the accident.
(END VIDEO CLIP)
DOS SANTOS: The company's president -- we're talking about PTT here - - tells CNN that he doesn't know how (inaudible) actually happened.
Andrew Stevens is in Koh Samet and sends us this report.
ANDREW STEVENS, CNN CONTRIBUTOR: Cleanup crews are working around the clock at one of Thailand's most important tourist destinations to clean an estimated 50,000 liters of oil, which leaked from a pipeline on Saturday. This is the main impact zone, a small beach about 1 kilometer long on the island of Koh Samet, not one of the main beaches, but an important one nonetheless.
Beside me are vats and drums of oil which has already been collected from the sea. Officials say it should be (inaudible) cleaned up by Saturday at the latest. The fear is, though, that if this cannot be contained quickly, it will have an adverse impact on tourism, which remains so important to this country's economy -- Andrew Stevens, CNN, Koh Samet, Thailand.
DOS SANTOS: (Inaudible) QUEST MEANS BUSINESS will be back with more news after the break and also how the Fed has been affecting the market.
DOS SANTOS: Hello and welcome back. The International Monetary Fund has sounded its clearest call yet that the Eurozone governments may be forced to write off even bigger chunks of the bailout loans to Athens unless, of course, the Greek economy begins to turn around immediately.
And its quarterly assessment of the Greek rescue plan, as you can see here, the IMF admitted Greece's second bailout will see a funding short- haul of around about $14.5 billion over the next two years to come.
Latin American countries are not in favor of the country's latest charter funding. Paulo Nugaja Batista (ph) of Brazil, who represents 11 Central and Southern American countries on the IMF's own board, says that the IMF has its own economists being rather optimistic -- "over optimistic" were his words -- about the state of Greece's economic prognosis and the sustainability of this country's total debt level.
And on that note, it's time to say goodbye. Thanks for watching QUEST MEANS BUSINESS. I'm Nina dos Santos at the CNN Center. I'll be back with a full check of the news headlines in a moment's time.
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DOS SANTOS (voice-over): You're watching CNN. These are the main news headlines this hour.
Supporters of the ousted Islamist president, Mohammed Morsy, are holding a rally in Nasr City. That's a district of Cairo. This comes despite a government order to end pro-Morsy sit-ins there. The cabinet says that these kind of sit-ins are "acts of terrorism" and present a threat to national security.
The polls have now closed in Zimbabwe's presidential elections. And according to African Union observation teams present, they were peaceful, free and fair. Long-time President Robert Mugabe is now running for reelection against his reluctant coalition partner, Morgan Tsvangirai. Mr. Mugabe has vowed to step down if he loses the race.
The U.S. economy, it seems, is growing at a faster than expected pace but that's still considered weak. GDP rose by 1.7 percent in the second quarter of this year. Some significant revisions are also being made to the way that the United States calculates its GDP. And those have been designed to take into account research and development as well as arts and entertainment production.
Thailand says that it may need help from other countries to contain a major oil spill. On Saturday, it's estimated that 50,000 liters of crude oil leaked from an offshore pipeline near the popular tourist destination of Koh Samet. The cause of this spill is as yet unknown.
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DOS SANTOS: That's a look at the main stories that we're watching for you here on CNN. "AMANPOUR" is next.