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Fed to Pump $600 Billion Into Monetary System; GOP Captures House of Representatives

Aired November 3, 2010 - 15:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: When the economic going gets tough, the U.S. Fed starts spending. After the U.S. midterms politics gets nasty. Is the economy going to get left behind?

I'm Richard Quest. And, tonight, I mean business.

Good evening.

It is all in a day's work, but in one day the political and economic landscape in the United States changed. The Federal Reserve's move to a second round of quantitative easing has thrown the U.S. into uncharted territory. And American voters have stripped the Democratic Party of a chunk of their powers. On this program tonight both these changes ripple through the markets. And we ask where the good ship QE is headed next. Because within the last hour the Fed announced a bold, and some might say, a desperate step into the unknown. It is the bid to kick start the U.S. economy. Give it a bit of oomph.

It is pumping another $600 billion of newly created bank reserves into the U.S. financial system. Now at the rate will be $75 billion a month, right through until the middle of next year. Effectively it will be adding money to the banks' books. And in doing so will be buying long-term, long- dated Treasury bonds. The object, of course, as you will know, push down the yield curve and help stimulate growth, and perhaps a bit of inflation. Policy makers say the pace of recovery remains slow, they are worried about the sluggish pace and the fact employers are reluctant to take on new staff. But this second round of QE will inject fresh vigor into the economy.

Now, we knew it was coming. The signs have been there for a while. Ben Bernanke himself said in a speech last month, he said, "Inflation is running at rates that are too low, and the risk of deflation is higher than desirable. There would appear to be a case for further action."

There are many who do not agree with this point of view. The Harvard economist Martin Feldstein, writing in today's "Financial Times" calls QE a dangerous gamble with only a small potential upside benefit" and he warns, it carries "substantial risks" of creating asset bubbles that could destabilize the global economy.

That is the scenario so far. Ben Bernanke is counting on QE to set off a sort of monetary chain reaction. By pressing the button-


-yet again, he is pouring vast quantities of fuel into the system. But even he admits, this is a weapon of which we don't fully understand the full ramifications. We are in uncharted territories. So for example, the first one that there could be in the QE nuclear fall out, the dollar. It could be driven even further lower, because lower interest rates is a lower dollar. Now it is already down 14 percent against the Japanese yen in the past six months. As the dollar falls commodity prices rise and other asset prices also get a boost, particularly the stock market. Is this the sort of effect that could ultimately take a tumble and create another bubble?

But emerging markets from Brazil to China to Thailand, countries that have seen their currencies be the recipient of vast amounts of money. The falling dollar means people are pushing into emerging markets instead. We know the Brazilian government is very concerned about it. The Chinese government is concerned about it. Another effect of QE will be more money seek-going-some of that money that Bernanke is creating going from the United States, across oceans to emerging markets.

And then there is the big one, the exit strategy. Does Ben Bernanke have a strong enough strategy to get out of QE when he needs to? Even he admits there are risks. Take his speech in October, he says we've much less experience in judging the effects QE could reduce public confidence in the Fed's ability to execute a smooth exit. It could have undesired affects on inflation.

You get the idea that this is by no means an easy task. The global investment firm, PIMCO is described as the world's biggest bond house. It manages more than $1 trillion of assets. Mohamed El-Erian is the chief exec, former IMF official, he joins me now.

Mr. El-Erian, he had to do something at the FOMC. And they have done what they said what they would do. So we have a bit more money, $600 billion instead of $500, but less per month, $75 instead of $100. Are you satisfied?

MOHAMED EL-ERIAN, CEO, PIMCO: Richard, whether I'm satisfied or not doesn't make much difference. The market is reacting as if it had fully expected because the Fed had signaled all of this, starting back in August. And as you point out, the Fed had not choice but to move, even though it is using a very imperfect instrument and even though it has embarked on a very uncertain approach.

So at PIMCO we are looking at the benefits but also the costs and the risks of this approach. And there are many costs and many risks.

QUEST: I went some of the nuclear fall out, the dollar, the emerging market, the exit strategy, the inflationary expectations. Do the risks outweigh the benefits? That is the core question really?

EL-ERIAN: It depends on where you are sitting. So if you are sitting in the U.S., you see more of the benefits. And you see less of the cost, or less of the collateral damage. If you are sitting outside the U.S., you will experience very little of the benefit and you will experience most of the collateral damage. And then if you are-whether you are in the U.S. or in the rest of the world, you will experience a lot of unintended consequences. So net-net, this is probably neutral for the world. It is slightly more positive for the U.S.; it is more negative for the rest of the world, but this is not the solution to the headwinds that the U.S. and other industrial countries are facing in terms of growth and employment.

QUEST: You talk about that in your article in "The Washington Post" this morning. Ultimately the monetary policymakers, the FOMC, the Fed, they cannot-they have been handed the only weapon in town, but really does this more properly belong with the president of the United States and the Congress, with a stimulus package?

EL-ERIAN: There are two things that one has to realize up front. First this is a structural issue that requires structural solutions. Simply throwing more money at a debt problem doesn't solve anything. So the first thing to remember, is the structural problem and it requires a structural solution. Second, the Fed does not have the instruments it requires. Think of the Fed operating in the fourth best world, it is not even in the first, second, or third best, it is in the fourth best world. Why? Because it is acting alone, it is not getting cooperation from the Treasury, from the housing agency, and it is not getting cooperation from the rest of the world.

QUEST: In that scenario, what I have been reading from yourself and from others, is that this attempt-well, this-this QE, this latest printing of money is destined to be limited benefit, at best.

EL-ERIAN: I think that is right in terms of its economic outcome, so at the end of the day, in terms of the critical, critical challenge of generating jobs, having high growth. That is not going to make much difference. It will cause lots of excitement in the market. And when you have a big player, with a printing press, enter different markets, it changes the dynamics of the markets.

QUEST: In our interesting discussion, forgive me, I completely forgotten about the midterms. We must just finish on the midterms. We have these elections. We now have a Congress that is probably-most definitely not wanting to do business with the president. Are you worried about gridlock and the economy taking the toll?

EL-ERIAN: Yes, I am. The normal view, Richard, is gridlock is good. Why? Because it paralyzes the government, the government then is out of the way, and the private sector can do its thing. But today, in today's America, the private sector is not able to do its thing. It has a debt overhang, it has structural issues, it faces structural unemployment, and therefore it needs good government action. And this idea that gridlock will simply paralyze the government, really worries us a great deal.

QUEST: El-Erian, very kind of you to join us. We look forward to talking to you again on the program, QUEST MEANS BUSINESS. Many thanks, indeed, joining us from the United States.

So, QE2 has set sail and as we have just been hearing it is uncharted territory. There are the QE2 skeptics. A the New York Stock Exchange Maggie Lake is there.

I'm not suggesting that you are one of those skeptics, Maggie. Interesting-interesting the $600 billion, the $75, they gave a little but they are not doing it as fast as everybody though.

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Yes, you know, Richard, in this environment now you really see the complicated situation the Fed faces, itself faces, because the reaction down here, it took a few minutes to filter, and I think overnight we are going to see a change. The market sold off into it, bounced back when it saw that $600 billion, sold off again. You know it is moving also off of bonds and currencies. The number was a little bit higher than expectation, but a lot of that good news had already been priced in, now the conversation is really going to turn to the risks that come with it, that you and Mohamed were just discussing.

So there is a little bit, I would say, of caution, a little bit of confusion and uncertainty still out there. Certainly not the disappointment that we would have seen, had that number been a lot smaller, but this is obviously not the silver bullet that is going to solve every problem, and everybody knows that, Richard.

QUEST: OK, so we have a phenomenally intricate scenario, Maggie. QE from the Fed, potential gridlock on the fiscal side, I mean, help me understand where does it leave us?

LAKE: It leaves us with a bit of uncertainty, but I will say that, you know, there are these risks. There is uncertainty long-term. But in the short-term this is stimulus, even if you don't like it. So that is going to lend some support.

There is an interesting thing too, Richard. We are so focused on that number, that $600 billion number, I don't know if you noticed in the statement, but there was something that jumped out at me. And that was a little paragraph that said the committee will regularly review the pace of its purchases, the overall size, in light of the incoming information, and will adjust the program as needed. The Fed is giving itself a way out of the corner that it has painted itself into.

And with the change of power in Washington, and with the economic data coming in, it is possible that we see this scenario that they just painted for the next six months, change if the information changes. We know from conversations we have had with Fed governors that they are uncomfortable. They know there are a lot of risks with this policy. Do they step backwards, should the economy pick up? I'm sure that they would love to. We already know there was one dissenter on the committee today. So, I would say watch this space, that is the plan for now, but it could change.

QUEST: My betting is the whole $600 billion gets spent.

LAKE: I'm sorry, Richard, what was that-how does it get spent?

QUEST: No, I said they spend a lot. My betting is they spend the whole lot.

LAKE: Oh, yeah.

QUEST: Maggie, many thanks to you. Maggie Lake at the New York Stock Exchange.

All right, the people have voted. The balance of power has shifted. The Democrats lost control in the House. What does it say about the economic record of the president?


QUEST: You might say it is a wake up call for President Obama. He seems to think so. The Republican Party has taken control of the House, the Democrats' majority has been slashed. It is the barest possible minimal of one. President Obama says the results are a shellacking for him and his party. With the economy the major election hot topic. The president admitted the results show Americans have doubts about his effective economic policies.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Voters are not satisfied with the outcomes. I mean, if right now we had 5 percent unemployment instead of 9.6 percent unemployment, then people would have more confidence in those policy choices. The fact is, is that, well, for most folks proof of whether they work or not is, has the economy gotten back to where it needs to be? And it hasn't.

And so my job is to make sure that I'm looking at all ideas that are on the table. When it comes to job creation, if Republicans have good ideas for job growth, that can drive down the unemployment rate, and we haven't thought of them, we haven't look at them, but we think they have a chance at working, we want to try some.


QUEST: Peter Morici is the professor of economics at the Robert H. Smith School of Business at the University of Maryland. Peter is in Washington and is always a delight to have on our program, QUEST MEANS BUSINESS.

Peter, we start first with QE, because we need to begin there. So, another $600 billion? It won't do much, but is it worth it anyway?

PETER MORICI, PROFESSOR OF ECONOMICS, UNIV. OF MARYLAND: Oh, I don't think it is really worth it anyway, but I don't know that it is going to do all the harm that Europeans fear. You know, foreigners-you know, people outside the United States, don't hold dollars, they hold bonds. So if the Fed buys bonds and replaces them with dollars, it is really just transforming the kind of liquidity that is out there in international markets.

Domestically, you could drive down interest rates a little bit, but let's face it, you know, mortgage rates are already lower than a snake's belly and people aren't buying houses. This is hardly going to inspire them to take the plunge, until we start creating jobs again.

QUEST: Right. So, let's then move to perhaps what might be more serious, a Congress that won't do a deal with the president, and a president that won't compromise to get a deal done with the Congress-a gridlock.

MORICI: Well, you described it perfectly. You know, the president today said he would try their ideas. You know, he has been offered ideas, he doesn't like them. For example, on the China currency issue, you know, he has been trying to avoid, at all costs, confronting China on currency. Even though he has acknowledged how significant that problem is.

But on tax cuts today, he basically reiterated his position, the Bush tax cuts extended, except for those over $250,000, he said it cutely, but that is what he said. Basically, the biggest thing last night was Harry Reid winning. None of the Republican ideas are going to get through the Senate.

QUEST: Right, but-but does the economy, Peter, does the economy suffer over the next year, 12 to 18 months, because of all of this? Does the economy suffer?

MORICI: Absolutely. You know, the president doesn't really want to take ownership of what has happened. He says well, the record isn't as good as it should be. He's not saying the record is bad because I've made mistakes. And as a consequence if you don't recognize that you are making mistakes, you are more like the CEO of General Motors, three years ago, than the CEO of Ford. One turns his company around, the other one bankrupts and ended up in the hands of the government looking for aid. This guy refuses to recognize that it is not a communications problem. But the policies aren't working.

QUEST: OK, but-and I-we end up then with a scenario with lower interest rates through QE, slow growth because things aren't happening, and a dollar that is going down, for all the above reasons and more. That is not a particularly pleasant sight from this side of the Atlantic.

MORICI: I acknowledge that, but you know, guys, one of the reasons that we are doing this and we are in the terrible box we are in is because of China's currency policy.


MORICI: The dollar is weak against the euro, but it is too strong against the yuan, and we asked the Europeans for help on that issue two weeks ago, at the G20 finance ministers meetings, President Obama's Treasury secretary was told to pound salt by your finance ministers. So it isn't like we are getting a whole lot of support on what is really ailing us.

QUEST: And just as gasoline goes on the flames I have to say, Peter Morici, many thanks indeed.


Lovely to have you as always, Peter.

Now, a double blow for the air cargo industry. A series of parcel bombs has air mail in Greece grounded, and all this less than a week after explosives were found in the cargo hold of a U.S. bound plane. This is QUEST MEANS BUSINESS, good evening.


QUEST: In Greece it is far from business as usual. For 48 hours all shipments of mail by air are suspended. The country is tightening security after a series a of parcel bombs had been discovered earlier in the week.

Nine, at least, suspicious devices were sent to embassies in Athens. The bombs aren't confined to Greece. On Tuesday authorities in Berlin discovered that package I was telling you about, addressed to the German Chancellor Angela Merkel. And in Italy a device addressed to Prime Minister Silvio Berlusconi, the packages were sent by air and discovered before they reached their destinations, destroyed by controlled explosions. Thankfully no one has been hurt.

Ivan Watson is in Athens and joins me now.

Ivan, there is much we need to clear up on this. When we-I mean-were these devices serious, credible threats, or were they amateur bombs which could do damage, but not suggest systemic terrorism?

IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: That is a good question. And authorities here say that these are not deadly weapons per se. The amount of explosives in these are probably not enough to kill somebody, but they could injure the person who opened them, disguised in some cases in books, in dossiers and folders. But the authorities are also saying that this is definitely an act of terrorism. They are describing this as homegrown Greek terrorism, not linked to international groups or anything like Al Qaeda.

They say that what they believe is the motive was try to put out some kind of symbolic message. And there have been a number of arrests on Monday. Two suspects arrested, actually, carrying two of these letter bombs as well as pistols, according to Greek police. A total of 13 of these explosive devices have been found in all, according to a spokesman for the Greek police, who I just spoke with, within the last hour.

These two suspects? Men, aged 22 and 24, one of them already had an arrest warrant out, Richard. And he was linked to a group with the name, the Conspiracy of Cells of Fire, it is a rough translation of the name of the organization. Now, one of the possible motives also could have been to try to upset Greek society just days ahead of the country going to the polls on Sunday in municipal elections.

And it is important to point out that the Greek prime minister has gone to the airways and warned, has sent out a call to the Greek people, saying that democracy cannot be threatened, Richard.

QUEST: All right. How-taking all of that into account, how much of this is a violent and unpleasant backlash against European leaders for what is perceived to be the way they have drubbed Greece into austerity?

WATSON: Well, that could be one of the motives that might spring forward. But then, look at who received some of these packages. The embassies of Chile, the embassies of Bulgaria, of Mexico, these are not exactly countries that have been involved in the turmoil and the financial crisis and assessments that have been going on, that have been dominating Greek political life. So, it does seem like the targets of this process seem to have gone far beyond that .

And we have not gotten a formal claim of responsibility or any kind of ultimatum or manifesto that has come out from the people who have carried out this attack. It is important to point out, also, Richard, that Greece has had a long history of leftist, anarchist, radical, terrorism, domestic terrorism that has taken place, that have claimed lives in the past. At least five U.S. diplomats killed here in the past quarter century. A British defense attach killed about 10 years ago, here in Athens. And some terrorist analysts that I've talked to have said these perpetrators maybe the next generation of these leftist, radical homegrown terrorists, Richard.

QUEST: All right. Ivan Watson in Athens tonight. Ivan, we thank you for that.

Before we go any further, let me just tell you, from Department of Homeland Security in the United States, the Secretary of DHS Janet Napolitano spoke today with the leaders from DHL, UPS, TNT, all the major carrier companies, the courier companies, to discuss enhanced air cargo screening and efforts following last week's attempts, the Dubai and the London devices. She underscored her commitment to partnering with the industry to strengthen cargo security, and to terrorism awareness training for personnel. She then went on and spoke to the head of IATA, Giovanni Bisignani. We will have more on that in the days ahead.

In a moment, we turn back to what happened in the Fed, the floodgates of cash open again. The spigot pouring money into the U.S. economy, which banks around the world might decide to follow suit.



QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And as always, on this network, the news always comes first.

Voters in the U.S. have handed the Democrats and President Obama a resounding defeat at the polls and control of the House of Representatives goes back to the right. The Democratic Party's majority in the government was reduced. President Obama conceded he needed to do a better job. He asked for partisan differences to be set aside, warning a tough legislative road would lead to otherwise -- would otherwise lie ahead.

Airmail in Greece has been suspended for two days after a series of parcel bombings and attempted bombings. Authorities say the attacks are not related to international terrorism and groups like al Qaeda. Two suspects have been arrested. The men, both in their 20s, are Greek nationals.

In Indonesia, Mount Merapi has blown its top again. The volcano sent an ash cloud into the air for seven minutes on Wednesday. Merapi has killed at least 39 people since it began its eruptions more than a week ago. Tens of thousands of people have been forced to flee their homes.

Viktor Chernomyrdin has died. He was Russia's prime minister during the turbulent years following the breakup of the Soviet Union. Mr. Comm. Is best remembered for overseeing economic reforms under the president, Boris Yeltsin, during the 1990s. Chernomyrdin was 72.

The Fed has spoken and on Thursday, it will be the turn of British -- British policymakers to decide whether to turn on the monetary taps. The Bank of Japan will get its own go at doing a deal on Friday.

One of the few people who knows what it's like to be making those sorts of decisions, our old friend, David Blanchflower, professor of economics at Dartmouth College and a former member of the Bank of England's monetary policy committee.

David is in Hanover, New Hampshire, and joins me now.

As always, you get one I told you so -- one a month, because you did quite rightly predict $600 billion.

Have they done enough?

Should they have done more?

DAVID BLANCHFLOWER, PROFESSOR OF ECONOMICS, DARTMOUTH COLLEGE: Well, no, I think -- I think that was a pretty reasonable number. People -- in a way, the market thought there was a possibility they should do more. I mean this is a start. They have to sort of see how things go and -- and put things out as a series of options. So it always gives them the possibility to do more later.

I think this is a sensible number. They're going to keep the thing going.

QUEST: Right.

BLANCHFLOWER: But I think they've shown the markets they're ready to act on a day where it looks like the Congress is in gridlock. So it's no longer fiscal policy, it's all about monetary policy.

QUEST: If I was one of your students in Economics 101, and I said but, Professor, Bernanke has warned about the risks. Bernanke's talked about the exit strategy problems, inflationary expectations, all the problems of the Yield Curve.

Why would you tell me that I was talking rubbish?

BLANCHFLOWER: Well, I would say to you that that's -- that's always relevant and interesting, but not now. We're in the position where the economy is sluggish. There looks to be no prospect of fiscal strategies changing. So we about inflation down the road. That's not the right time for that. The is if you don't do this, we'll go into deflation. And there are times for certain policies. And this is the time to expand the quantity of money, because you can't lower the price of money.

So I would say that's fine, but not now, because the economy has not responded. And down the road, when we create some inflation, that will be good. We'll get back to normal.

QUEST: Right.

BLANCHFLOWER: But we're trying desperately to create some inflation.

QUEST: Are any of the arguments from the Fed today going to weigh with the Monetary Policy Committee, do you think, in the U.K., particularly Andrew Sentance, of course, who is the holdout on the committee. He's the lone voice. But he may be gathering support -- or at least he seemed like he might have been.

BLANCHFLOWER: No, I don't think he's gathering support at all. The last thing the U.K. needs is to have a raise in interest rates. What it needs to do is to actually do some QE, as well. In a way, this QE is now the alternative of the currency wars. You do QE and what that does, is it raises equity prices -- and we've seen that. But it has an effect on your exchange rate. So the exchange rate falls.

So basically you're sitting on the MPC, if Blanchflower was still on the MPC, I'd be voting for lots more QE to not allow the U.S. to have a competitive advantage...

QUEST: Oh, but David...


QUEST: David...

BLANCHFLOWER: -- from another planet...

QUEST: hang on, hang on, hang on. David, you've just -- you've just launched a salvo in a currency war. You said I would do QE to raise -- to lower the dollar so the U.S. wouldn't have a competitive advantage. That is a currency war.


QUEST: Right.

BLANCHFLOWER: That's what I said. It's now into QE wars.

QUEST: Right.

BLANCHFLOWER: I mean that's where we are...

QUEST: Right.

BLANCHFLOWER: -- in a sense that you need to -- the only stimulus you have in town is your exchange rate and quantitative easing, because you have the fiscal authorities in the U.S. doing nothing and in the U.K. doing, well, exactly the opposite to what they should be doing. So, yes, you have to look after yourself and unfortunately, if you think Bernanke doesn't have, you know, his remit doesn't way about any other country. His remit says do what's best for the United States. And if you're sitting on the MPC, you say do what's best for the U.K. That's what you have to do...

QUEST: And...

BLANCHFLOWER: And, you know, it is beggar your neighbor.

QUEST: All right, but then you can hardly complain when Brazil and other countries like that -- and Singapore and other countries -- start tinkering with their exchange controls regimes and their taxation regimes...

BLANCHFLOWER: Well, yes, that's, yes...

QUEST: Well, you can't have it both ways.

BLANCHFLOWER: I wasn't -- I wasn't expecting to have it both ways. That obviously is the . That's the concern when the consensus in the G20, which was there in 2008, has broken down. And every -- if it breaks down, you're all in doing your own thing. So, yes, I do understand that. But you've got to do what you've got to do.

So the fact that they couldn't get an agreement at the G20 makes it much more likely that each country has to pursue a strategy best for them. And if I was trying to do something for the U.K., I would be voting for about $200 billion more QE to try and keep -- keep it competitive.

QUEST: Oh, you're -- you're a devil, David. You just got that $200 in so that you can have a one more I told you so before the end of the year. Well, I'm not ready -- I'm not going to give you that one.


QUEST: Yes, try. All right. Many thanks.

David, lovely to see you.

David in Dartmouth with two -- believe me, he'll be the first person to come back on this program and say I told you so.

The markets in Europe closed before the Fed's decision.

How did the expectant sentiment play out in trade?

The FTSE, the CAC and the DAX were marginally lower after an anticipated lackluster session. The CAC in Paris a boost from early trade from French bank Societe Generale. It reports of a doubling of their profits for the quarter. And overall, the French markets ended the session down .6 percent.

There was more bad news for Spain. It has the highest number of registered unemployed people in Europe, a number that climbed higher yet again, now hitting over four million.

That's where we stand on the markets and, indeed, the way things are trading at the moment.

In a moment, a Profitable Moment and the weather.


QUEST: The U.S. market is trading and -- and interesting, I've got the numbers from what happened earlier. Have a look at the Dow Jones, which is now just about ready. As you can see, in terms of its movement, it is unchanged at 11188.

Before the QE announcement, it was down just a 10th of a percent. Now, it is unchanged. So very little movement, as you can tell from what happened. Even oil didn't move much. Gold didn't move much. The dollar didn't move much.

This was a classic QE priced into the market in the days ahead and when it actually happened, things held themselves normally.

OK, the weather forecast where you are at this time and into tomorrow.

Very strong winds are prevailing in Northern Europe.

Guillermo is there at the World Weather Center -- strong winds. It sounds unpleasant.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes. Yes, it is. And London is going to get some problems, too, because of the winds, because, as you see, the rain prevails there to the north. And we have some rain in the Midlands in Northern England, as well. But London appears to be OK. So it is cold. It is turning out to be -- it's -- it's actually becoming colder all over. London with winds. We may see delays. Look at this, this is not nice at all -- Dublin with windy conditions. Actually, we don't have any alerts or warnings for England. We do have them in Northern Ireland and in Ireland.

Then everybody else appears to be fine. Frankfurt with windy conditions. Copenhagen with clouds and Berlin with winds and everybody else fine, especially Italy.

Remember that we had some bad storms here and landslides, actually?

Well, now the low is weakening, boom -- it disappears. Right now, it's over Sicily. And I'm going to show you what's going to happen in the next days. You see how into Friday we have this low, as it's fizzling out. And then the sunshine returns from the Arabian Peninsula into Italy. I mean if you were coming from Italy, you know what I mean, because it's been awful for days. But now it's going to be nice. The winds, though, it's a combination of low pressure and high pressure. So that's why we have intense winds here, very strong, indeed, all over the north. I'm talking about Denmark, Southern Scandinavia and also Britain.

Temperature-wise, here it is, 18 in Paris, 16 in London. Not bad at all. It's going to be windy, Richard. Not bad.

I went to the chiropractor in my flip flops today. It was 9 degrees. So you get the picture.

QUEST: No, thank you.


QUEST: You've just put a men -- you've just put a mental picture into my mind of Guillermo going to the chiropractor in his flip flops that, frankly, has ruined my day.


QUEST: Guillermo...

ARDUINO: Come on.

QUEST: Thank you.

Guillermo Arduino.

I just feel sorry for the chiropractor.

Tomorrow on this program, Q&A, Quest and Ali. You can send us the specific topics and we take them and we talk about them. Tomorrow, we're going head-to-head on QE -- what is quantitative easing and can it end the economic downturn?

Ali and I will battle it out to see who gives the best answer and even a little quiz afterward. I promise you, there won't be a mention of Somalia. Go to and ask about QE.

Before the battle and just to make sure you are in on the great QE debate, Felicia Taylor has a tongue in cheek look at the magic of making money out of QE thin air.


FELICIA TAYLOR, CNN CORRESPONDENT: Here we are at Fantasma Magic in Midtown Manhattan and I am joined by the CEO of Fantasma, Mr. Roger Dreyer. We're going to try and explain the idea behind quantitative easing. So for today's purposes, Mr. Dreyer is going to be the Federal Reserve Bank, and its CEO or chairman, Mr. Ben Bernanke.

So the problem is, is that the Federal Reserve has to ignite the economy. So they're -- they're going to print more money to inject it back into the economy to get things going again. The hope is by injecting money into the system, that, hopefully, is going to push down interest rates like Mr. Bunny (ph).

But these interest rates are going to go even lower than they already are. That is going to light a fire under the consumer and hopefully small businesses, so that they, too, will start spending again, create jobs. And that is going to revive the economy.

The problem with quantitative easing is that it doesn't always work. And one of the biggest concerns is inflation. And that means that our dollar will get stretched so thin, because prices are going to go higher. So it's going to cost more for us to buy groceries, gas, clothing, whatever it may be.

The other problem is, it could make our dollar even weaker than it already is. And that, of course, means when we travel overseas, that the dollar just simply won't buy as much.

This is magic.

And if Mr. Bernanke and Company does his magic and actually gets the economy rolling again, the economy will be lifted and supported by jobs being created and get the economic engine moving once again. That is the hope that's on quantitative easing.


QUEST: And that was a brilliant explanation from Felicia Taylor.

But don't forget, in the months ahead, the dangerous of the dollar, the emerging markets and the exit strategy. A Profitable Moment thought -- quantitative easing is uncharted territory and QE2 is downright dangerous and risky in the eyes of many.

And that's QUEST MEANS BUSINESS tonight.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I hope it's profitable.