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QUEST MEANS BUSINESS

White House Meeting Postponed; Dow Starts Lower, Finishes Higher; Deal in the Works; CEOs React to Debt Ceiling; Debt Debacle; Markets Higher on Debt Deal Optimism; Nobel Prize for Economics; Regulating E-Cigarettes; Banksy Street Sale

Aired October 14, 2013 - 16:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(NEW YORK STOCK EXCHANGE CLOSING BELL)

RICHARD QUEST, CNN INTERNATIONAL HOST: Consider it a sort of Monday malaise. The bell on Wall Street signaling the end of the trading day on Wall Street. Bash the mallet for Monday the 14th of October.

The story tonight, of course: debt, default, deadlines, delays. Time is running out to get a real deal on the US budget crisis.

You know about these? E-cigarettes. There's a full-page ad in the "New York Times" from a chief exec who wants to vaporize the critics.

And also, Banksy sets up a stall in Central Park, and you could've picked one up for a song.

The start of a very busy week in the financial world. I'm Richard Quest. I mean business.

Good evening. We start tonight, as we have so often and we will, probably, until a deal is done. Time is getting tight in Washington and in the financial markets. A meeting between President Barack Obama and the congressional leaders this afternoon has been postponed because of signs of progress.

(RINGS BELL)

QUEST: Such progress as there was. The White House says that the Senate leaders need more time to put together a compromise. But this is what they need more time over: the clock countdown.

Start here, of course: day 14 of the US government shutdown. Well, it's a partial shutdown. Some bits of the government are working in the United States, and some bits are not.

But this is the part that is, perhaps, more significant. The debt ceiling deadline, or at least to when seriously extraordinary measures are no longer effective. There are only three days to go before a potential really difficult incident where the US could default.

As to the markets and how the Dow Jones traded, and you'll see with the Dow a really interesting session. The day started very much lower -- bearing in mind also it is a public holiday in the United States, it's Columbus Day.

So, we started off quite low, and then it continued in that fashion, and at just after lunchtime, there was word that the Senate -- the leadership in the Senate, McConnell and Reid, may be getting a deal together to go to the White House, and that's the way the market went considerably higher.

So, for being more than 100 points down, up more than 64 at the close, and the president noted hopeful signs when he visited a charity food pantry in Washington.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think that there is -- there's been some progress on the Senate side with Republicans recognizing it's not tenable, it's not smart, it's not good for the American people to let America default.

There's been some progress in recognizing that we're not going to be able to completely bridge the differences between the parties all at once, and so it doesn't make sense in the meantime to try to use a shutdown or the threat of default as leverage in negotiations.

QUEST: Erin McPike is live in Washington. So, let's start with what we know, and then we can go into the rampant field of speculation. There is a deal in the works, but they've delayed getting together to talk about it. Why?

ERIN MCPIKE, CNN CORRESPONDENT: Well, Richard, there have been meetings all day long. A group of moderate senators met this morning for several hours to try to hash out a deal. Then around noon here on the East Coast, Harry Reid and Mitch McConnell met for quite some time to try to work out a deal, and then Republican leaders, John Boehner the speaker of the House and Mitch McConnell, met as well.

And this is because this deal has been changing all day long about what -- in terms of what Democrats can accept and what Republicans can accept. Until they come together with the contours of a deal that both sides can accept, at that point, then they will go to the White House.

But as you said at the top of the show, it is supposed to be taken as a sign of progress that this meeting was postponed because they're working, they said.

QUEST: Right, but this has got to be a deal that will not only satisfy the president in the Oval Office, it's got to satisfy the leadership of both parties in the Senate, it's got to satisfy the leadership in the House. And it's got to satisfy the truculent members of the House that Boehner's got alongside as well, is that correct?

MCPIKE: To some degree, yes, there is talk that the deal in the House could be a group of House Democrats as well as more moderate House Republicans. And even conservative House Republicans who are ready to end the shutdown, maybe not some of the most far-right Tea Party Republicans.

But let's talk about what the deal is that stands now. What they've come up with is a bill that would fund the government through the middle of January. Now, at a lower level of spending than Democrats and also that would raise the debt ceiling through the middle of February.

There are a couple of concessions -- smaller ones -- that Democrats are starting to talk about as far as health care is concerned, Obamacare. Income verification for Obamacare subsidies, repealing the medical device tax, which is another piece of Obamacare, something that the White House does not want to do, Democrats are starting to leave that on the table. But that's a sticking point as well. But things are moving as far as this deal is concerned, that is true.

QUEST: Erin, thank you very much for that. Erin McPike joining us from Washington. If the pressure has been put on, then in some cases, it's chief execs that have been doing it. Certain chief execs say the debt ceiling impasse in Washington is affecting business.

One of the most vocal is the Expedia chief executive, the travel company, Dara Khosrowshahi. He previously called the disputes unnecessary and unhelpful. I spoke to him earlier about the deadline, and he was urging lawmakers very simply: get it done.

(BEGIN VIDEOTAPE)

DARA KHOSROWSHAHI, CEO, EXPEDIA: It's time for the government to come through. If it doesn't come through, I think that there are a lot of issues that are going to come up in the financial sector, et cetera. But it looks like the energy is at least moving in the right direction at this point.

QUEST: What is it that you fear, because obviously in a travel company like yourself, besides business travel, discretionary leisure travel is often one of the first and few things that gets hit once people's confidence evaporates.

KHOSROWSHAHI: Well, I think that's the issue. It is confidence. We've had a number of years now of a slow recovery, both in the US, and Europe looks to have stabilized now. What neither the US or Europe or, frankly, the world needs is another financial shock to the system similar to the one that we had in 2008. That's just something that we can't afford, and it's something that's unnecessary.

QUEST: What do you fear might happen if they don't solve this by Thursday?

KHOSROWSHAHI: Sure. On the corporate side, the one pattern that we are seeing is we're seeing a lot of volatility. And we aren't seeing corporate spend come back quite as strongly as you would expect. So that tells me that corporations are fairly uncomfortable in this environment.

And corporations need to feel safe as far as what the interest rate environment is going to look like, what the liquidity environment is going to look like, in order for them to invest aggressively to grow, as we have as a company over the past couple of -- as we have in the last couple of years. So, we're hoping that that volatility passes through.

(END VIDEOTAPE)

QUEST: That's the chief executive of Expedia talking to me earlier, obviously looking for a deal to be done. Nathan Sheets is the global head of international economics at CitiGroup. Good to have you, as always.

NATHAN SHEETS, GLOBAL HEAD OF INTERNATIONAL ECONOMICS, CITIGROUP: Good to be here.

QUEST: I won't bother starting by asking the ramifications. Everybody and their brother is now talking about the ramifications. But are we seeing any evidence in the markets? We saw a bit of volatility in equities, but of an effect yet?

SHEETS: I would say the most striking place where we're seeing an effect of this stress is in the government bills market, so very, very short-term securities that are likely to mature over the next month or two. We've seen their yields move up meaningfully. People don't want to hold this stuff. They're not sure how it's going to be resolved over the next month or six weeks.

QUEST: And to the viewer who's watching and says, not unreasonably, look, even if they do default, even if they do delay by a week or three, everybody knows they're going to get the money back eventually.

SHEETS: I think that that is -- that's right. The US is fundamentally solvent, and eventually, the United States will make good on its debts. But even so, this is a very, very risky strategy. We are the safe asset with treasuries, we are the reserve currency, and we should hold ourselves to a higher standard.

QUEST: But as an economist -- and I was looking at some of the stuff that some of your economics division has been writing on this department -- if they merely push this to January or February, as we've just been hearing, what does that do, in your economic view?

SHEETS: I think that what the markets will conclude is that we're in a game of brinksmanship, and we've seen this with the debt ceiling in 2011, we saw it with the fiscal cliff in 2012, and we're seeing it again, if that happens, and that is they posture, they posture, they posture, and then at the last minute, they do something else. They kick the can.

QUEST: But at which point do the markets lose patience and give them a bloody nose?

SHEETS: Frankly, from what I'm seeing, the markets are almost taking the opposite --

QUEST: But why? Why?

SHEETS: -- and I think it's just largely that that's what they've seen in the past. If we do go over, if we go past October 17th without an agreement, I think that the effects in the markets -- man, are going to be very severe. So, if they do something different than what we've seen in the past, I think then you'll see bond yields rise and you'll see the equity market fall.

QUEST: And of course, even though that might be reversed immediately --

SHEETS: Right.

QUEST: -- after they pass a deal, the damage is done.

SHEETS: The damage will be done.

QUEST: -- and we have gone into new territory.

SHEETS: Yes, and my feeling, looking at the effects on the broader economy, October 17th is the key date. If they go past October 17th, I think then we'll see more permanent damage to consumer and business confidence and it'll be a while longer before we can hope for a recovery.

QUEST: I've got to ask you this very quickly and briefly. Your colleagues at -- your Citi economist colleagues in your various divisions around the world, what are they telling you? They must be -- do they say, "Nathan, what's going on?"

SHEETS: Yes. In general, I would say that foreign observers are very puzzled as to why this economy, this country, why we're choosing to run ourselves this way. And frankly, many inside the United States are also puzzled.

QUEST: You make perfect sense, as always. Many thanks for joining us. Good to see you. Thank you for coming in.

SHEETS: Thank you.

QUEST: Now, US stocks clawed back the losses. You saw the graph a short while ago. They finished the day marginally higher, having been down 100 to be up 60. Zain's at the New York Stock Exchange, and I think we can pretty much put this down to prospects of an agreement, be it ever so small.

ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Hey, Richard. Yes, there is certainly a degree of optimism here on Wall Street, but you did mention correctly that there was some volatility today. We had a low of 100 and then a high of around 70.

The general feeling, though, is certainly one of hopefulness. We have senators talking about getting closer to a deal, and that's really when the markets sort of started to turn around.

But I do want to mention also, Richard, that part of the volatility we did see is because of the holiday. It's Columbus Day here in the US. Obviously, banks are closed. The bond markets also is closed as well, so the number of trades taking place is muted.

And lastly, some of the traders I spoke to said that even though they're hopeful that a deal will take place sooner rather than later --

QUEST: All right.

ASHER: -- they're saying that if October 17th comes and goes, we may not run out of money until the end of the month. So, there is some wiggle room as well, Richard.

QUEST: Zain at the New York Stock Exchange on a bank holiday. Now, predicting the performance of the markets may become a little easier thanks to the work of three American professors. These are the three: Eugene Fama, Lars Peter Hansen, and Robert Shiller.

They are the winners of this year's Nobel Prize in Economics. They are rewarded for forecasting the price of stocks and bonds over the longterm for about, say, for example, three to five years. Certainly not the next quarter.

Shiller, the one on the right there, is most famous for having warned about bubbles in technology and stocks and housing, and he also helped develop the so-called S&P Case-Shiller Home Price Index. He has already given his prediction about the debt ceiling.

(BEGIN VIDEO CLIP)

ROBERT SHILLER, WINNER OF NOBEL PRIZE IN ECONOMICS: Probably nothing big is going to happen. It's all -- it should be OK. That's apparently a political science deal. This is how you can't divide things up. It's my sense that we still have in this country a sense of cooperation, that we'll emerge and prevent a default.

(END VIDEO CLIP)

QUEST: That's Robert Shiller. Now, coming up in a moment, the industry which could produce a billion dollars a year from a puff of water and a bit of old vapor. A look at the myths and misconceptions of the e-cigarette. The chief executive of V2 Cigs is with us after the break. This is QUEST MEANS BUSINESS.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Now, you may well know someone who has switched from smoking to vaping or vapping -- I think it's vaping. We'll find out from the expert in a moment. It's otherwise known as smoking an e-cigarette.

As the popularity of e-cigarettes grows, so do the questions about the product. The chief exec and co-founder of V2 Cigs has written an open letter directed at consumers. It's in "The New York Times" and in "USA Today."

Now, in this letter, which I suspect cost tens of thousands of dollars to publish, J. Andries Verleur says "We all know that candles and light bulbs are vastly different. The same can be said about tobacco cigarettes and electronic cigarettes."

Europe's e-cigarette makers celebrated last week. The EU ruled that e-cigs should not be labeled as a medical product. Here in the US, the Food and Drug Administration has not yet made such a ruling.

In Atlanta at the CNN Center, Andries Verleur joins me, the chief executive of the retailer. So, why did you decide to bring out this letter at great expense, tens of thousands of dollars. What did you hope to achieve?

ANDRIES VERLEUR, CEO AND CO-FOUNDER, V2 CIGS: Well, there's an enormous amount of communication coming from both legislators, regulators, and it's aimed at the American people, and it's in preparation of an upcoming regulation from the FDA as well as regulatory and legislative changes at the state level.

And what we felt is that there wasn't enough coming out of the leading companies on the e-cigarette in the e-cigarette world, and there wasn't anyone really representing the consumer of these products.

QUEST: Right. Now, your e-cigs are -- they're nicotine, they're not tobacco. You say that they're therefore considerably less harmless (sic) than their traditional rival. But what I ask you is, with e-cigs -- and we've been talking a lot in the office -- who's your market? Is it the existing smoker trying to ween off, or are you also looking to get new people into the market?

VERLEUR: It's the existing smoker. Smokers are our market through and through. We have so far about -- the entire industry as a whole has touched only about 5 million US consumers. There's over 35 million smokers in the United States market.

Our company has a little over a million customers, so there's no reason for us to really search outside of the smoking market. We offer an alternative to the traditional smoking experience.

QUEST: Right. But would you accept that giving up and abstinence is better than even an e-cigarette in the long run?

VERLEUR: I would say that when compared to breathing air, we're not going to say that our product is healthier, we're not going to make any sort of health claims, but what we will tell you is that when compared to cigarette smoke, which contains over 3,000 harmful chemicals that are known to the medical community that are widely regarded as cancerous --

(CROSSTALK)

QUEST: No, no, I understand that. I understand that. I understand that, and I'm not suggesting otherwise. But what I'm saying is that -- and obviously, given the druthers and the choice to a smoker, should a smoker give up completely rather than going to e-cigs?

VERLEUR: I would advise anyone who is smoking today that they should give up completely. At the same time, we offer an alternative, and that alternative has been embraced, now, by, as I mentioned before, over 4 million US consumers. It is a growing category.

And the sound -- the science that underlies what we're trying to accomplish as e-cigarettes is sound. It's the elimination of smoke.

QUEST: Right. Now, if it's -- well, why -- finally, why do you think both the regulators and the critics, want to do you, basically? Want to have -- have got it in for you and the e-cigs industry?

VERLEUR: Well, I -- frankly, there is an enormous amount of interest in this category, especially where there economics are concerned, and the lobbying that is going on is such that I don't believe is there to really protect the consumer.

I believe the FDA has the right intent, and I believe that responsible regulations are needed for the category. But at the same time, I would state that there are those that would like to see regulations and legislation put in place that would help benefit certain players within the space.

QUEST: Right. We'll have to leave it there. Thank you for joining us, sir. I appreciate it. Thank you for coming in.

VERLEUR: By all means. By all means.

QUEST: Many thanks, indeed. Now, how much is a Banksy worth if no one knows it's a real Banksy? It's a bit like the old idea of if a tree falls in the forest and no one hears it, has it really fallen? Well, if you've got a Banksy and you don't know it's a Banksy, what have you actually got? The artist go the answer for himself this weekend, and we'll tell you about it after the break.

(RINGS BELL)

QUEST: This is QUEST MEANS BUSINESS, good evening to you.

(COMMERCIAL BREAK)

QUEST: Now, welcome to the QUEST MEANS BUSINESS art emporium. My word! Lots -- two lots of items for you today. The question is, can you tell the real from the fake? Now, "This is not a photo opportunity" image from Banksy's website in the 19 -- there we are. That one is worth $60, and the same picture up for sale double at $88. So, can you tell the difference between the two?

Banksy, the elusive British street artist whose work usually commands six figures in art auctions, sold his works on the streets of New York this weekend. He had an elderly man broker sales of his spray-painted canvases in New York Central Park.

Banksy's takeaway wasn't the princely sum he usually nets. When you look at the total amount that he got. Over four hours before the first sale was made, it was to a customer who bargained to get two paintings for $60 each. Later, a woman from New Zealand bought two at full price, according to this video. She's not terribly happy about getting a kiss on the cheek.

The total for eight paintings at the end of the day, $420. CNN senior international correspondent Ivan Watson has been hunting for the Banksys and -- across the city. Do we know who go the Banksys and do we know if they realize they know what they've got?

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: We haven't found the purchasers, so whenever they've discovered this, whenever they do discover this, they're in for quite a treat.

In the meantime, Banksy hasn't stopped. There's been a new piece unveiled today that I went to visit out in Queens --

QUEST: All right.

WATSON: -- on a nondescript corner. And within a matter of hours, Richard, it was attracting a small crowd. It's become a tourist destination already.

QUEST: Do we know that it was Banksy -- these were Banksys being sold in Central Park?

WATSON: Well, we have to presume so because it's his web page, Banksy New York, that is unveiling a new art piece every day, some of them stencils spray-painted on New York streets, others pieces of video art or whatever.

And that's what we were shown yesterday that he pulled yet another trick that has really surprised both his fans and, of course, the people who buy and sell and collect his pieces of art. And I was just out walking on that corner of Central Park where these pieces were selling for $60 a pop, and an auctioneer says that they would easily go for minimum, $5,000 to upwards of six figures.

QUEST: If we look at the video again of what was happening in Central Park when they were sold, it is an extraordinary story.

WATSON: Yes, and --

QUEST: And it's captured everyone's imagination in quite a remarkable way.

WATSON: Absolutely. I think people are looking forward to what is going to be his next trick.

QUEST: But what's amazing is people walk past these things and they don't even notice them. And yet, if they're told, that's an original Banksy, they would stop.

WATSON: Of course. And I think that's one of the messages he's trying to send. And you've probably walked past this same corner. I have. There are bits of kind of popular art, postcards, posters for sale, that are basically viewed as almost tourist souvenirs. So, you wouldn't necessarily think that you could have these original canvases that could cost great amounts.

QUEST: Finally --

WATSON: But on the other hand, Richard --

QUEST: Yes?

WATSON: -- maybe that's the message he's trying to send. Art and its value truly is in the eye of the beholder. He does like to --

QUEST: No. No! Art -- no, no, no, no. No, no. Let's pause there.

(RINGS BELL)

QUEST: Art is in eye of the beholder. Value --

WATSON: Value.

QUEST: -- is in the eye of the market.

WATSON: Absolutely. And another side, another --

QUEST: Would you have --

WATSON: -- phenomenon that we've seen is a lot of graffiti artists then coming in very quickly after the original stencils are put up on New York streets and tagging over them, or defacing them within hours of them going up.

QUEST: In a word, would you have bought one? OK, here's two questions. It's an unfair question, but I'm going to go anyway.

WATSON: I just bid for one on eBay.

(LAUGHTER)

QUEST: In a word, would you have bought one if you didn't know it was a Banksy?

WATSON: No, I would've assumed it was a ripoff.

QUEST: Right. And --

WATSON: That somebody -- copied it.

QUEST: So, you -- it -- you're as naked as the rest of us when it comes to this only going when you know the name.

WATSON: Here's one other thing.

QUEST: All right. OK.

WATSON: One of the fun things about Banksy is how mysterious he is, right?

QUEST: Right. Yes, yes.

WATSON: And the New Yorkers are excited about him, and they're trying to catch him out on the streets with their cameras.

QUEST: Might be you. Could be you. Thank you.

WATSON: Could be me.

QUEST: Many thanks, Ivan Watson. When we come back, it's the Russian finance minister. We turn from fake art to shenanigans in the markets and what's happening with the debt crisis. QUEST MEANS BUSINESS.

(RINGS BELL)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.

The suspected al Qaeda operative Abu Anas al-Libi has been transported to New York and is expected to appear in a federal court on Tuesday. Al-Libi was captured in Libya by US Army Delta Force soldiers earlier this month.

The International Red Cross says four of seven aid workers kidnapped in Syria yesterday have been released unharmed. There's no word yet on the other three. Gunmen abducted the workers in Idlib province in the northeast. They were there delivering medical supplies.

The death toll is rising from a weekend stampede in India. Authorities now believe at least 112 people were killed near a Hindu temple in the central state of Madhya Pradesh. Tens of thousands of pilgrims were crossing a bridge when panic broke out over rumors that the bridge was about to collapse.

Staying in India, on the east coast is recovering after taking the brunt of Cyclone Phailin. The government is being praised for its efforts to evacuate hundreds of thousands of people to safety. At least 21 people died in the storm. In 1999, 10,000 people were killed during a storm of similar size and strength.

And British police investigating the disappearance of Madeleine McCann have released at two sketches of a man they want to identify. He was seen carrying a blonde child, possibly wearing pajamas. the night the preschooler vanished in 2007.

With three days to go, the U.S. Congress is now looking to go down to the wire in their efforts to raise the borrowing limit before the U.S. government could default. The IMF Managing Director Christine Lagarde said this weekend that nearing the deadline must spur lawmakers into action.

CHRISTINE LAGARDE, MANAGING DIRECTOR OF THE INTERNATIONAL MONETARY FUND FROM VIDEOCLIP: There's nothing like a deadline to actually reach the target, and I would hope that that deadline operates in that fashion. But that was the view expressed by all ministers in town in Washington for two days who've come from all corners of the world for the annual meeting of the IMF. They are concerned, because the U.S. is the biggest economic - economy in the world, because it trades with all of them, because it has massive financial consequences for them as well, so it's an international concern that was expressed.

QUEST: As the U.S. comes closer to potential default, China's questioning the United States' role as the global economic leader. An article from the state-run news agency "Xinhua" says " . . . it is perhaps a good time for the befuddled world to start considering building a de-Americanized world." In more moderate tones, the IMF Deputy Director - Deputy Director Governor of the People's Bank of China told me that it was imperative the U.S. sorts itself out

YI GANG, DEPUTY GOVERNOR, PEOPLE'S BANK OF CHINA FROM VIDEOCLIP: Adding this budget and debt limit uncertainty would be a hurdle for the recovery and for the future development of the economy. So I that I think they should have the wisdom to solve this problem as soon as possible.

QUEST: Now, top government officials and global finance leaders have issued pleas to Washington, many of them I've played them for you on this program in the last week. They've said a potential U.S. default could seriously damage the entire global economy. And why that is the case become very clear when you look at this map on the super screen. So we have the foreign holders of U.S. treasuries around the world. If you look at those countries in the red and obviously there's China, this is the United Kingdom and (lower) parts of Latin America. Now each country here owns more than a $100 billion worth of U.S. treasuries. In some cases like China and Japan, that's in the trillions of dollars - Belgium, Switzerland and others. All are major holders of such bonds.

Then in green, the oil exporting companies, and combined, they own more than $200 billion worth of U.S. treasuries. There you're talking about Ecuador, Venezuela, you're looking at Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and so forth. And the Caribbean countries also have extensive holdings. You have to go right in there and you'll see the Caribbean countries - the Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Netherlands Antilles and the like.

So if you take that, you see how far and wide and spread is the issuance and holding of U.S. treasuries. But, if you look at the top quarters of them, then really you're talking about these countries. 1.2 trillion from Japan - from China. 1.1 from Japan. And look at the difference. It suddenly drops off so sharply to the rest of them - quite dramatically. These are the two big countries. Russia, just as we noted in the map over here, is a major holder of U.S. debt. I sat down with Russia's Finance Minister Anton Siluanov at the IMF headquarters and asked him what the Russian view was on the debt crisis.

(BEGIN VIDEOCLIP)

ANTON SILUANOV, RUSSIAN FINANCE MINISTER FROM: I wouldn't say it was a U.S. crisis, there is of course a certain lack of understanding, a lack of desire to solve the problem between the Obama administration and Congress. Nevertheless, I hope this situation will be resolved soon because really no one needs this. The Americans don't need it, the rest of the world including Russia doesn't need it, and we hope that in the coming days it will be possible to settle it.

QUEST: President Putin at the APEX Summit was very clear about the risks the dollar is the world's reserve currency, and that something you must be obviously deeply aware of.

SILUANOV: Yes, it's true, the dollar is the world's reserve currency. The American economy is growing at a good rate. American treasury have a high degree of reliability. Russia keeps about 45 percent of all its reserves in U.S. treasuries, and we don't believe we need to change that policy now. We hope that the current tension with Congress will be resolved. We hold long-term treasuries, so we don't believe we need to change our strategy.

(END VIDEOCLIP)

QUEST: That's the Russian Finance Minister talking to me at the IMF late last week. In a moment, a spending scandal that could cost a man of the church his job. The staggering details of how a German bishop racked up a multi-billion dollar bill on his new home, in a moment.

(COMMERCIAL BREAK)

QUEST: A German bishop may be about to lose his job over claims of extravagant spending. On Sunday, the bishop flew to the Vatican. Apparently this time he went on a budget airline to explain himself. He is Bishop Franz-Peter Tebartz-van Elst of Lindberg who spent 48 - put it this way - (inaudible) - who spent $42 million dollars on his residence. Now, that's six times more than the original estimate, and includes $20,000 for a bathtub - an expensive bathtub. Catholics in Germany are embarrassed and outraged.

PATRICK DEHM, FORMER INSIDER, FRANKFURT CATHOLIC COMMUNITY CENTER FROM VIDEOCLIP: The Bishop has spread a climate of fear. He has an authoritative leadership style. He was irresponsible in how he dealt with his means - spent too much on his residence. He built his office on lies. This must come to an end. The Diocese does not deserve this.

QUEST: Now, allegedly what the Bishop's spent on various parts of his accommodations is according to reports, $1.1 million was spent on the garden, which is quite a pleasant garden. There was $610,000 that was spent for art in the palatial, $135,000 for windows not of the church but of a private chapel. So, there's all the sort of extravagances that people are talking about. There are (grand) calls for the Bishop's resignation. Let' s bring in John Allen, CNN's senior Vatican analyst, also CNN correspondent at the "National Catholic Reporter." He joins us from Denver. John Allen, first of all, from your understanding, was this unjustifiable expenditure, or as the Bishop says, there were ten buildings, it was derelict or it needed much work done to it? Which is truth here?

JOHN ALLEN, CNN'S SENIOR VATICAN ANALYST, ALSO CNN CORRESPONDENT AT THE "NATIONAL CATHOLIC REPORTER": Well, Richard, I mean I think unjustified to some extent is in the eye of the beholder, I mean, it is true, as the Bishop claims, that there are ten separate construction projects folded into this $42 million figure. It's also true, as he claims, that only about $4 million of that money is for his (friar) residence. The rest of it is for a kind of larger church structure that is used for many different things.

On the other hand, at the end of the day, the numbers you just rolled out are real, and I think the one take-away for most people around the world to be, you know, we've got Pope Francis talking about a poor Church for the poor. I think that a reasonable person couldn't help concluding this is one bishop who just didn't the memo.

QUEST: And that's the fascinating part about this, John. If I've ever heard - I mean obviously his ultimate boss is up there - but if I've ever heard of an employee being out of step with their temporal boss, this has to be it.

ALLEN: Well, I think you're 100 percent right. And look, it remains to be seen whether Pope Francis is actually going to remove this bishop from office. In September, he sent an investigator to look into the situation and the Bishop is now in Rome for meetings. But I think whether or not that happens, I think part of what's going on here, Richard, is the very conversation you and I are having right now, is part of what Francis has in mind. I mean, he has set a new example for leadership in the church - of poverty and simplicity-and he's savvy enough to know if that if bishops around the world are not following that example, people like you and I are going to beat them up for it.

I mean, in other words, what we have going on right now is sort of leadership by shame. You know, I think the Pope believes that he doesn't necessarily have to bring the hammer down if he can get public opinion to do the job for him.

QUEST: John, good to talk to you. On that, many thanks indeed. John Allen joining us on (pole) line there. But good to talk with anyway, John. Now, the weather forecast. There are certainly congratulations of sorts - - even though there was still a death toll in India. But the fact that it wasn't nearly as bad as people had feared or suggested. Bearing in mind the infrastructure, the severity of what happened. So I think that lessons learned -

TOM SLATER, METEOROLOGIST FOR CNN INTERNATIONAL: Yes.

QUEST: -- and improvements made.

SLATER: Yes, absolutely - a big difference, Richard, from the 1999 cyclone. I mean, nearly a million people evacuated, and it stayed live. So, I congratulate and of course acknowledge the government of India. Now, we still have problems, business travelers, if you have a view out your window seat on your 747. You're going to notice thunderstorms in Manila, Jakarta, possibly some delays in Singapore - typical thunderstorms but nothing like we have here. Two more typhoons. Here we go, Richard, Nari making landfall now in Da Nang, Vietnam and Wipha - this one's even larger. That's heading up toward Japan. Could cause big troubles in Tokyo.

Look at this, we've got 140-kilometer per hour winds, the wrong placement for this landfall, here, just south of Da Nang.-880,000 people live there. It's a delta region, so it's a very low-lying area along the coast. We've got a good 1,000 meters, and of course some terrain that lifts, so it's significant rainfall here. The other problem besides the size of this one, is the strength of Wipha which is actually stronger. It's encountering colder air - we'd like to see this lose some strength -- but this was almost as strong as Phailin was in India just 12 hours ago. But this is a concern now, because as it makes its way toward Japan, we're not really sure how close to the coast this is going to get, and it may actually make landfall very close to Tokyo.

Now this is again - it's just over 24 hours away, but we've got to keep in mind Fukushima - a vulnerable area right now and concerns of large waves, maybe heavy rainfall, the strong winds - these are just rainfall totals alone and Tokyo could just see a deluge. This is going to slow some business down I think, and maybe even for those trying to get there or get out of Tokyo, we at least have forecasts that are going to be at least 90 minutes. I wouldn't doubt that we're going to have some cancelations, mostly likely in the next 24 to 30 hours, looking at a temperature of 23 on Tuesday, Shanghai 21, Hong Kong 31.

Look at London's current temperature - 9 degrees, Birmingham is 7 degrees, Dublin's at 8, we've got a strong potent little area of low pressure. This one's been producing a strong line of thunderstorms, moving in toward Brussels, Paris as well. Not just one - we actually had two bands of rainfall. Take another look at Paris and watch Brussels here - large thunderstorms, most likely with some small, pea-sized hail, maybe some damaging winds, now ending in the next hour or two. But an active Jetstream, as we'll watch another system move into areas of the northwest. So with that, possibly some slight delays, maybe in Frankfurt, Munich as well, possibly 45. Always call ahead . Overall we're not looking at any major delays across Europe, but temperatures as you have on Tuesday, 13 degrees. How about that? A little autumn in the air. London 13, Berlin 12 -

QUEST: Well, Tom.

SLATER: -- Copenhagen 13, a little bit cooler down to the south - or warmer that is.

QUEST: My mother was telling me, my mother was telling me - it's nothing but rain in London over the last few days. Which is -

Male: Yes. More to come.

QUEST: More to come. Many thanks. My mother's forecast is not as good as Tom Slater's of course, but at least we know what will happen - what's happening. Now, in France, a fierce debate - a perennial , debate over whether or not to allow stores to open on Sunday. Sunday-opening for the shops. Well, on the one hand, some believe it helps job creation at a time when unemployment is hovering at a 14-year high. Others say overturning the Sunday trading law would further harm the French way of life. Jim Bittermann explains from Paris.

(BEGIN VIDEOCLIP)

JIM BITTERMANN, SENIOR EUROPEAN CORRESPONDENT FOR CNN: Ah, Sunday in France. A day of rest to take a deep breath after the rigors of the previous week and to mentally prepare for that 35-hour work week ahead. A day to be with the family, or work on personal development. But a day to shop? The government here is trying to figure out what to do after a court ruling which ordered some improvement stores to shut down on Sunday in compliance with a work law drawn up a century ago. The problem is that according to one survey, four out of five French favor the stores being open, and store owners say Sunday-opening boosts the economy.

DOMINIQUE GERELD, SUNDAY SHOPPER VIA TRANSLATER: Stores need to be open on Sundays. People, they work all week long - they run all week. I prefer that stores be open on Sunday, definitely.

BITTERMANN: What's more, employees like Mourad Tarb who are often paid extra for Sunday work, say it's one way to make ends meet.

MOURAD TARB, SUNDAY WORKER: Money talks, you know. When you pay on - when you work on Sunday you got about 160 percent of your salary. So it's more interesting for us to work on Sundays. But unfortunately it's quite difficult to get all the Sundays because there's too many people who wants to work on Sundays.

BITTERMANN: Tarb and others who want to work Sundays are part of a protest movement trying to get the government to leave the stores alone. They say it would be ridiculous to do otherwise with high unemployment and an uncertain economy. Nonetheless, the government is now imposing fines on the stores that stay open in defiance of the law.

Opposing Sunday opening hours is an unlikely coalition on both ends of the political spectrum. Neither conservative Catholics nor leftist unionists and politicians should think people should work on Sunday.

A spokeswoman for the radical Left Front Party says workers need to be protected.

RAQUEL GARRIDO, SPOKESWOMAN, LEFT FRONT PARTY: I think everyone wants the rule to be that on Sunday, you rest. The government obviously needs to put its hand in the thing because it's about working rights. If not, you will have, you know, everything will be open and then we will just have the American way of life. I think that's sad.

BITTERMANN: For the moment the government has dodged a bullet by naming the former head of the French post office to study the question of Sunday opening hours. His report is due in November. Meanwhile, the stores that stay open in defiance of the court ruling are paying hefty fines each weekend they do so. Leaving the French to contemplate whether that American way of life would ever be at home here. Jim Bittermann, CNN, Paris.

(END VIDEOCLIP)

QUEST: Now, just in to CNN, while we have been on the air, I need to update you. Sources in both parties tell us that a Whitehouse meeting is now increasingly unlikely for this Monday. Senate negotiators are continuing to make progress on their deal, but they don't feel it's necessary to go to the Whitehouse at this point. Live pictures of the U.S. Capitol. Apparently some GOP leaders - that's the Republicans -- thought there was more of a more of a photo op rather than a real negotiation.

When we come back, those of us over 50, we travel one way, but the millennials - those between 18 and 30, they travel in a very different fashion - and they are the future. In a moment.

(COMMERCIAL BREAK)

QUEST: How do we travel the world? If you spot someone at the hotel bar tonight, glued to their phone, waving the corporate credit card and on some form of device, well they're talking about the business trips they've taken recently - most likely it'll be a millennial - age 20 to 38, 18 to 30. Apparently they get about more, they spend more and they're more attached to their mobile devices according to Expedia who's just brought out this study.

Millennials are freer with their company's money than older colleagues. So, they love room service and spend more than anybody else on that. Thirty-seven percent of millennials use room service, 27 percent of the rest of us do. They also mix business with a vacation, whilst I head straight home, the millennial gets the ball, bucket and spade out. Sixty- two percent will actually go on vacation, 51 percent of the rest of us do. So all in all, use Smartphones, they use tablets for booking and when it comes to millennials, they are bigger and better and bigger spenders than the rest of us.

I heard about this from the (millennial chief exec) - from the Expedia Chief Executive.

DARA KHOSROWSHAHI, CHIEF EXEUCTIVE OFFICER OF EXPEDIA: I think you've gotten the headlines certainly right and we think those are terrific long- term trends. We think that millennials spending more obviously are great for the travel industry as a whole, and they tend to spend online, and they tend to use online services much more aggressively. So for companies like ours and other online travel agencies, we think it's a terrific trend going forward.

Now one trend that we're seeing pretty significantly is also the (uptican) mobile. Millennials are almost three times as likely to use a Smartphone than a consumer who's 45 and older, and we think that the companies that investing in great mobile technology like an Expedia.com mobile app are companies that can take advantage of that trend.

QUEST: If this research is accurate and true and there's no reason to believe it's not, everybody in the travel chain has to rethink, because you know - not being melodramatic - people like myself are dying off and the next lot are coming through, and you're going to have to adapt that chain to the new generation.

KHOSROWSHAHI: Yes, and I think the new generation expects you to have top- of-the-line online product, a great site and top-of-the-line mobile product as well. So, the travel companies that don't participate and don't invest in online technologies are going to lose share as the millennials become the main travel consumers out there. And this applies both for leisure travel and also corporate travel. If you look at the corporate travel space, there hasn't been much technology innovation out there. Most corporate travelers are calling somebody in order to book their travel. And that's just not the best way. That's not how millennials do it. We've been investing in corporate travel pretty aggressively with Egencia, but we think that is a part of travel that really is quite far behind and has to modernize, and we want to be a big part of it.

QUEST: You'd say I'm wrong - millennials are more likely to voice their displeasure - why, what do they think they get out of writing a bad review?

KHOSROWSHAHI: Well, I think that they're more likely to voice their displeasure, but they're also more likely to voice their pleasure as well. I think this millennial generation feels that sharing as far as where they're going, if they're going to a concert, if they're going to a movie, whether they liked it or not as well as their travel is part of what they do on a daily basis. It's part of their discourse. So, I think that for travel providers, you know, this is word-of-mouth on steroids, right. It's not a you or I having lunch, talking about a great travel experience, this is millennials, who put their great experiences or their bad experiences on line on sites such as ourselves where our reviews are verified, so you know that the person actually took a trip, or on Facebook or Trip Advisor, etc. There's a lot of sharing out there.

So, that's going to create the winners out of the ones who know how to great - how to provide great service, and it is going to make losers out of the ones who miss. And we think that's a great market environment.

(COMMERCIAL BREAK)

QUEST: Tonight's "Profitable Moment" - I've never quite understood why but now it seems to be official, millennials, do travel differently than the rest of us, and that has huge implications for the multi-billion dollar travel industry. I suppose what it really means is that people like me are on their way out., and it's the next generation that'll be ruling the day.

And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.

END