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Restoring Europe's Strength; Europe's Crisis Talks; Future of the Euro; Buying European Bonds; European Markets Down, Bond Yields Fall; US Stocks Slide After Labor Day Holiday; US Economy; Dollar Makes Gains; Comic Appeal

Aired September 4, 2012 - 14:00   ET


NINA DOS SANTOS, HOST: "No magic wand and no silver bullet." The president of the European Commission warns against simple solutions to the debt crisis.

28,000 planes in 20 years. Airbus ups its forecast for demand.

And making money even when you've got no cash. Now, that's what I call a Millennial business model.

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

Good evening. The president of the European Commission says, quote, this: "There's no magic wand and also no silver bullet for an instant recovery." Speaking in Brussels today, Jose Manuel Barroso said that for Europe to regain its economic strength, it must tackle its excessive debts. And he's not just talking about the public borrowings, here, but also private debts as well.

Barroso's call for action came as the European leaders held crisis talks in places like Rome and Berlin. And from there, our very own Diana Magnay and Ben Wedeman report.


DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: A rash of meetings between European policymakers over the next few days and weeks, which Angela Merkel, the German chancellor, has termed "a very ambitious agenda."

In some of those meetings, you'll hear statements at the end of them, and some of them you won't, such as the meeting today between the European Council president, Herman van Rompuy and the German chancellor. He is going on to meet the Italian head of state and the French head of state in separate meetings this week.

The German chancellor will be meeting the Spanish prime minister on Thursday, all of them trying to talk about how these various tools, these various pieces of a mosaic that are going to be taking form over the next few days and weeks will mesh together.

Let's talk about what's coming up on Thursday. You have the bond purchase program that Mario Draghi is going to be outlining at the ECB's meeting. What exactly will the form of that be? What form will that take? Is it what the markets are hoping it will be?

Next week, you have the Federal -- the Constitutional Court here in Germany deciding on the legality of the fiscal pact and of the permanent bailout fund. You also have the European Commission going to be unveiling plans for what a banking union might look like.

And those aren't just sort of key structures on their own. The question is, how do they all merge together? How do the banking union work together with the ECB? Does the ECB take charge? If so, is it over all the banks in the eurozone or just over the top banks?

How does the ECB work in conjunction with the rescue, the permanent rescue fund? How does the ECB structure any kind of bond-purchasing and stay within its mandate? And that's where you see real conflict between Mario Draghi at the ECB and Jens Weidmann, the head of the Bundesbank.

So, all of these topics are in discussion at the moment. The holidays definitely come to a very sharp end for European policymakers. Let's go over to Ben Wedeman, now, in Rome, who has details about a meeting that took place there today.

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Italy's prime minister Mario Monti and French president Francois Hollande are fast becoming allies in an epic eurozone struggle pitting them, the proponents of economic growth and stimulus against the queen of austerity, German chancellor Angela Merkel.

President Hollande and Prime Minister Monti lunched in Rome Tuesday. It's the third time they meet since Hollande was elected just three months ago. They're hoping to rebuild some muscle onto the eurozone economy, not just slash the fat.

FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): Our will is to put together the pact of growth as fast as possible so the funds of 120 billion euros can be mobilized everywhere in the projects that are needed for growth and employment. We have to make sure that Europe is regarded as a stable zone where the confidence can return.

WEDEMAN: A Bank of Italy study published Tuesday indicated that shaky investor confidence and not economic fundamentals are behind the current downturn in the Italian economy.

MARIO MONTI, PRIME MINISTER OF ITALY (through translator): And also, we have developed with our colleagues within the European Council a discussion in particular amongst us about how to make the arrangements in Europe about the problems of the eurozone crisis and how to finally achieve the stability of the markets in the eurozone.

WEDEMAN: One of those proposed arrangements is to have the European Central Bank, the ECB, buy short-term government bonds, thereby sidestepping an EU ban on direct ECB loans to member states.

It would also allow for the ECB to provide direct assistance to beleaguered governments like those of Greece and Spain. It would also eliminate middle men, in this case, investors and private bankers.

Unlike Italy and France, Germany is lukewarm on this proposal, however, which is likely to come up in a critical meeting of the European Central Bank on Thursday.

I'm Ben Wedeman, CNN, reporting from Rome.


DOS SANTOS: And the bell tolling ominously in the background there in Rome perhaps a reminder that these leaders have very little time to sort this crisis out.

Well, Nigel Lawson was the British chancellor or finance minister from 1983 to 1989 in the government of Margaret Thatcher. At that time, the Bank of England was under his remit, and it was not an independent institution. Earlier today, he told me that the eurozone was a bad idea to begin with and politicians should be dissolving it rather than trying to fine-tune it.


NIGEL LAWSON, UK FINANCE MINISTER, 1983-1989: The fundamental problem is that the European monetary union can't possibly work. It had never made economic sense, it was entirely a political project in the first place. It was designed to force the countries of Europe to have a full-bodied political union.

And the -- the people of Europe don't want this. Whether you think it's a good idea or not, they don't want it. And the monetary union can't possible work without that.

And I'm not saying this just from the benefit of hindsight. I as chancellor, I warned precisely that this would happen. I wasn't the only person who did. This was a disaster which was not merely predictable, but predicted by a number of people, including me.

DOS SANTOS: This famous fiscal pact, buying bonds -- will it work? And if it doesn't, what will be the consequences?

LAWSON: The real issue is how do we dissolve this misconceived and disastrous experiment at the minimum cost? What do we have to do to shore up those banks that need to be shored up, because it's not going to be painless if we get out of it. But it is going to be less painful than lingering on with it.

Because so long as this continues, the European economy, the economy of Europe as a whole -- that's important to the world, not just to Europe - - will be underperforming.

DOS SANTOS: It's fine to say that, but 320 million people depend on the euro as their common currency. So, in the short-term, what do we need to do about this? Would you advocate the ECB should be buying bonds immediately? Would that give a little bit of temporary relief to the solution? Would you advocate that?

LAWSON: No, I don't think so. There is, I think, that which has undermined the ECB, which is what the Germans are concerned about. It would also probably be illegal. There is a -- you know, there is a constitutional setup for the ECB, and it has already been pushing probably the bounds of what it is legally entitled to do.

No, there is this European -- this new-found European Stability Mechanism, which is there to do bailouts and so on.

DOS SANTOS: So, which lesson should we learn from, for instance, those kind of experiences that you remember vividly during your time as chancellor?

LAWSON: Default is inevitable.

DOS SANTOS: For whom?

LAWSON: A number of --

DOS SANTOS: Not for the whole of the eurozone, surely.

LAWSON: No, no. But there are a number -- the Greeks are bound to default even more than they have. There are other countries who've got a burden of indebtedness. Not every country, no. I agree with you.

But there are some countries who've got a burden of indebtedness which is totally unsustainable. So, there's going to have to be default, and therefore the banks have got to be prepared for that.

DOS SANTOS: That's interesting. You used the plural there. If some people assume that Greece already may eventually be forced out of the eurozone or decide to leave of its own accord, not many people would say it'll be two or three countries. You seem to be saying that there will be more than one country leaving the eurozone here.

LAWSON: Well, I think there are two quite separate things. There is the -- there is the future of the eurozone. And the eurozone has no good future. It will be a misery so long as it continues to exist.

And therefore, as I say, the important thing, and this is what statesmen have to look to, and it's very difficult, but if a statesman does what a statesman has to do, is to take the long view and say, this is a disaster, we have to accept the disaster. How do we get out of this? Dissolve it? Go back to national currencies with the least damage?

The idea, for example, that Mario Draghi saying that the European monetary union is irreversible, that is the most stupid statement. And I know Mario Draghi, and he's an intelligent man, but that is one of the most stupid statements that's ever been made. Because there is absolutely nothing that is irreversible. Nothing.


DOS SANTOS: Well, later this week, Europe's central bank is expected to unveil details of a plan to buy those government bonds. The idea here is to bring down those dangerously high borrowing costs being paid by some countries in Europe that aren't in present insolvent. We're talking, of course, about Italy and also Spain.

ECB president Mario Draghi has already been dropping all sorts of hints about how this might work, but let's just have a look at realistically what the options are with Jim Boulden in our London studio. So, Jim, there are plenty of players, many stakeholders, but there's limitations in what they can do here.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: There are limitations. The treaty hasn't been changed. If you've been on holiday, don't worry, the treaty hasn't been changed. The ECB cannot buy bonds directly from governments. They cannot buy these bonds. So therefore, we have this broken line here --

DOS SANTOS: But that stop sign there --

BOULDEN: Exactly.

DOS SANTOS: -- shall we back it up to be clear?

BOULDEN: Yes, the stop sign there. So, they still can't do that, so what are they thinking about doing? Well, what Mr. Draghi has been hinting to is actually the ECB somehow backing up the funding of the ESM -- this is the bailout fund, the new bailout fund.

DOS SANTOS: That's the permanent one --

BOULDEN: Exactly.

DOS SANTOS: -- versus the ESFS, which is temporary.

BOULDEN: Yes. And so, the ESM ban buy these bonds in the secondary market. We're talking about from one to three years. We're talking about short-dated bonds. This has been --

DOS SANTOS: So, short-term, here?

BOULDEN: -- very critical. Yes, exactly. Short-dated bonds up to three years. Before he was saying, Mr. Draghi, up to about 12 months. And so a lot of people in the markets have cheered that he said up to three years. We're not talking about ten-year bonds at all.

DOS SANTOS: Let's cross that one out. Presumably, this is the compromise, really, isn't it?


DOS SANTOS: With the Germans who don't want any kind of longer-term issues. Because of course, that would take away the impetus for reform. The other thing I want to talk about, Jim, is that the governments will have to ask for help, won't they, really? And that is the stigma.


DOS SANTOS: It's the taboo, isn't it?

BOULDEN: Because the ECB could already do this if it wanted to, but what the ECB seems to be saying with the Germans as a compromise is that these governments have got to ask the ESM for help.

So, we would call it -- I would call it a bailout. Of course, Spain doesn't want to call it that. But if you have the high bond yields in the markets and you say we need help, you have to go in.

And of course, we know what happens next. We talk about the strings attached with the ESM. And that's what the governments are worried about. You have to get the strings attached from the ESM in order to get these bonds being purchased by the ECB.

DOS SANTOS: Well, you've exemplified it perfectly. Pretty messy picture, it is. No offense, Jim Boulden --


BOULDEN: It's a very messy picture.

DOS SANTOS: -- here in our London studio. You see? Plenty of lines on the picture. So, how did the markets react to the latest news from the eurozone? Let's take a look at them.

The leading European markets were all down between one and two percent today. When it comes to the bond markets, we also saw sentiment there being slightly more positive than on the equity markets, as you can see, at least towards countries like Spain and Italy.

As I said, those are the ones that aren't as yet insolvent, like three other European countries that have been bailed out. But they are countries where the yields are still very high.

As you can see, we've got the yields on government bonds for Italy and Spain both falling as investors show quite a bit more readiness to lend to these kind of countries, and that in turn reflects hopes that the ECB will be announcing something very soon to help them this week. Italy's yields standing at 5.66 percent. Spain well below that 7 percent mark but still at 6.6 percent.

As the US goes back to work after the Labor Day holiday, we'll have all the latest from the New York Stock Exchange and all the market action. That's coming next.


DOS SANTOS: After Monday's Labor Day holiday in the United States, Wall Street is back to work and back in business today, but it's been a bit of a gloomy return to work. US stock markets are currently falling after two disappointing economic reports that show continued sluggishness in the world's largest economy.

Let's go over to Felicia Taylor, who joins us now live from the New York Stock Exchange with all the action. Bit of a -- bit of a bump on the first day of work, wasn't it, after the summer holidays?

FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Yes, absolutely. Basically, the markets are all down across the board. This is the first full week for economic numbers that we've had for September.

So far, though, the reports aren't very positive. The markets, of course, reacting to the ISM Manufacturing Index number, which dipped in August. That shows that it's still sort of in a contraction mode.

Factory reports have been pretty inconsistent, not only in the United States, but also around the world. That's obviously not a good sign, since that was sort of one of the strongest areas that we've seen in this recovery. We've also had a big drop in construction spending. That fell by its largest amount in almost a year in July.

Still to come, though, the Big Kahuna of the week which, of course, is the jobs number. Expectations are looking for about a gain of 130,000 jobs in August. That again is less than July's 163,000 which, of course, that was double the expectations. But again, that jobless rate still rose with many of those jobs being created in lower-paying areas.

Now, the big reason that this is the Big Kahuna is because that's what the Federal Reserve is going to be looking at, that jobs report, to determine whether or not they're going to make any move at their policy meeting next week. It'll help determine whether the central bank announces another round of QE, which we've talked about, Nina, or some other form of stimulus.

The more we see this economic numbers that disappoint, the more likely the case is that there will be further easing by the Fed. Most traders and investors are leaning toward to the fact that we are going to see some kind of a move.

What it is, we're not sure yet until more of that economic picture becomes apparent over the next few days. We're also getting figures on worker productivity and the service sector this week, which will add to the mix.

The only good thing that we have heard today, which really isn't playing out in the marketplace, I have to say, are sales numbers from the US automakers. GM, Ford, and Chrysler all posting better-than-expected sales in August. It seems that finally buyers are getting greater access to financing. There's also been pent-up demand from the prior months.

So, as far as the stock, though, Ford is reacting ever so slightly to the up side. GM, on the other hand, is down just a fraction. So, not reflecting in the stock market -- or the shares, I should say -- of those stocks. Nina?

DOS SANTOS: Yes, another bizarre start to the every-so-bizarre month of September. Thanks so much. Felicia Taylor, there, at the New York Stock Exchange.

Well, that's how the US markets are looking right now, but for more on the state of the economy and also the impact that these upcoming presidential elections in the US could have on the world's biggest economy, let's go over to our New York economist of the day. Anthony Chan, the chief US economist at Chase Wealth Management. Thanks so much for coming on the show, Anthony.

Obviously, as Felicia was just telling us before, it's a very mixed picture. Different indicators seem to paint a completely different picture and we've got the Fed poised to decide on something that the markets are betting ever so heavily on on basically very differing pieces of data.

ANTHONY CHAN, CHIEF ECONOMIST, CHASE WEALTH MANAGEMENT: Well, I think that right now, the Federal Reserve is sort of walking a tightrope. I think that they're anxious to do more quantitative easing. I think you certainly heard that from Ben Bernanke.

But at the same time, they don't want to jump the gun and do quantitative easing if the economic data is improving. And that's why it's correct to say that this Friday's employment report will be crucial in terms of determining the timing of any additional action by the Federal Reserve.

DOS SANTOS: OK. So, that prompts two questions. Bear with me. One, what are you expecting the Fed to do? What would you put your money on? And B, well, how bad is the US economy? How much will it need to be stimulated?

CHAN: Well, I think the US economy can use a little help. We're growing it at about a 2 percent pace or slightly below that. So, in that context, you certainly can justify some additional quantitative easing.

But at the same time, in this kind of political environment, the Federal Reserve, if the economy is sort of on the edge, might be swayed into moving in the direction of waiting a little bit longer to ensure that the economy does need help.

But I think the most important point I want to make is that I think at some point, the Federal Reserve will add additional stimulus.

DOS SANTOS: So, you're expecting more QE eventually? The problem here I want to get into is that, aren't we seeing a situation of sort of moral hazard, if you like, where the markets are constantly front-running and trying to guess the world's central banks, they will ultimately be extremely disappointed?

CHAN: Well, that is an issue. But remember, that if the economy were growing at three or four percent, we would not be having this conversation, because in that case, the need for additional quantitative easing would be moot.

But when the economy is growing within a range of one to two percent, most people would agree -- and I'm sure you would agree with me -- that the economy is in danger of slipping into much slower growth that could point us in the direction of a recession.

We're not there, but we certainly don't feel very comfortable when the economy is growing at one to two percent, and that's why the Federal Reserve is inclined to add some insurance to this overall economic expansion.

DOS SANTOS: Anthony, the elephant in the room is the fact that, of course, it's an election year, and that skews economic policy an awful lot. Do you see that as a threat? A help or a hindrance?

CHAN: Well, I think that if the economy is sort of on the edge of slowing or, perhaps, expanding a little bit, I think that the Fed would wait, given the fact that we are in a political environment.

But if you've listened to the rhetoric over the last couple of weeks, even months, the Federal Reserve officials have gone out of their way to say that they are looking at the economy and they're going to try to sidestep or, may I say, ignore political constraints?

So, I think if they felt that the economy was headed towards a recession over the near term, I don't think political considerations would really play an important role in their decision.

DOS SANTOS: Anthony Chan, thanks so much for giving us your time this afternoon here on QUEST MEANS BUSINESS.

A Currency Conundrum for you now. What was the name originally given to the Australian dollar? Was it A, the imperial? B, the royal? Or C, the buck? We'll have the answer for you later on throughout the course of the show.

Well, speaking of the currency markets, let's have a look at how they're faring. It's a rather strong day for the US dollar, which made some pretty good gains against the euro, also against the Japanese yen. It also held steady against the British pound at a price of $1.5874.


DOS SANTOS: It might be something to do with the popularity of the superhero movies, but whatever it is, new magazines, it seems, are attracting new younger readers these days. It's the classics, it seems, though, that are struggling. And as we speak, the hammer is actually coming down on an auction of rare British and US comic books.

So, here's a question. Are there bargains to be out there -- to be had out there when it comes to old comic books or are they losing their investment value? We sent Jim Boulden down to investigate.


BOULDEN (voice-over): "The Beano. " "The Dandy." "Judy." "Girl." "Eagle." "Dan Dare." If these names mean something to you, then you grew up reading British comic books.


BOULDEN: For Malcolm Phillips, they are also a business.

PHILLIPS: Lot 21, your bid was 70. High bid is now 120.

BOULDEN: He runs a comic book auction out of his north London home. But British comic books have a limited worldwide appeal.

PHILLIPS: Do Americans collect British comics in general? No, they don't. Comics is all about nostalgia.

BOULDEN (on camera): Yes.

PHILLIPS: It's what you read as a kid, and the value of comics today reflects on purchasing the innocence of the youth.

BOULDEN (voice-over): So, while a recent US auction saw the first "Superman" sold for over $2 million, a top-grade first issue of a pre-World War II British comic might bring in $6,000 to $7,000 unless the toy which came with it is still attached.

PHILLIPS: A number one issue with the free gift, we hold the world record for, which is $30,000.

BOULDEN: That doesn't mean comic books are dead. Blockbuster films have brought younger readers here to MegaCity Comics, which just had its best summer.

MARTIN KRAVETZ, MEGACITY COMICS: "Avengers" is a massive hit in the cinema, and that's reflected -- customers then see that and maybe have not thought of buying comics for a long time, come back in the stores.

BOUDLEN (on camera): But they aren't buying too much from the past. For instance, this 15-year-old "X-Men" comic used to be worth around $3 or $4 in this shop. Now, its on for less than a dollar and it sits in the sales bins.

KRAVETZ: People are just buying the next episode and the collector side of it is far more minor than it used to be.

BOULDEN (voice-over): Not to mention that the age of those collecting is, well, maturing. Phillips says the days of passing comics down through the family is fast coming to an end.

PHILLIPS: Inevitably, this will be the fate of all comics. Because it's a genre that is, quite frankly, outmoded.

BOULDEN: Outmoded but still fun to read if not to collect.

Jim Boulden, CNN, London.


DOS SANTOS: As the Democratic National Convention gets underway in North Carolina, we'll speak with one of the leaders of Barack Obama's reelection campaign after this short break.


DOS SANTOS: Hello and welcome back. I'm Nina Dos Santos. These are the news headlines.

The president of the International Committee of the Red Cross is in Syria negotiating for better access to civilians caught up in their country's brutal civil war. The president, Peter Maurer, met earlier with the Syrian president, Bashar al-Assad, and officials describe those talks as, quote, "positive."

The United Nations says that the refugee crisis caused by the violence in Syria is getting worse. Officials say that more than 100,000 people got out of the country in August, more than any other month since the conflict began last year. The UN says that there are now around 245,000 registered Syrian refugees.

The president of Colombia says that peace talks between the government and the guerrilla group, FARC, will begin next month. They'll be held in the Norwegian capital of Oslo. President Juan Manuel Santos says that he expects the talks to take months rather than years.

The German airline Lufthansa canceled hundreds of flights from Frankfurt, Berlin, and Munich today. Cabin crew were staging a second wave of strikes over pay and conditions. Their previous walkout on Friday left something like 26,000 passengers stranded.

Apple has sent out invitations to an event for next Wednesday, so September the 12th, when it's expected to launch its eagerly-awaited iPhone 5. Tech experts say that it could come with bigger screens and also a faster chip.


DOS SANTOS: In the U.S., Democrats had to sit back last week and listen to Mitt Romney, Paul Ryan and even Clint Eastwood all lay heavily into the president, Barack Obama, and tell voters just how much better a Republican president would be this time November. Well, now it's up to the Democrats to try and convince people.

As first lady Michelle Obama's set to give the keynote speech as that convention gets going. And this, in fact, is the picture in Charlotte, North Carolina, right now as we speak. As you can see, outside and inside the convention center, this is just a few hours before Ms. Obama will be taking the stage.

Democrats want to use the convention as a springboard to edge ahead of the Republicans in the polls. The parties, as we stand, are currently neck and neck.

I'm joined now from Charlotte by Ted Strickland. He's the co-chair of President Barack Obama's campaign and also the former Democratic governor of the state of Ohio. First of all, Ted, thanks for coming on the show. Ohio will be crucial for you, as it has been for the Democratic Party in many years before, and (inaudible) Republicans.

TED STRICKLAND, CO-CHAIR, OBAMA CAMPAIGN: Well, no Republican has ever won the presidency without winning Ohio. And so Ohio is hugely important to this contest.

DOS SANTOS: Can you win it?

STRICKLAND: I think he can. I think the president is slightly ahead in Ohio at this time. He has maintained a consistent small lead over the last few months. And we're working hard in Ohio because we think if we can deprive Mitt Romney of winning in Ohio, we can deprive him of winning the presidency and Barack Obama will have a second term.

DOS SANTOS: Now the other place you're working awfully hard is obviously North Carolina. And you in Charlotte, as we speak -- I can hear the preparations going on behind you.


DOS SANTOS: The key thing will be the economy here. And in fact, where you are, the rate of unemployment is quite a bit higher than the national average. It's about 9.4 percent versus 8.2 percent. The economy will be key. You will have to convince people that you can make things better.

STRICKLAND: Well, I think things are better in America than they were four years ago, when President Barack Obama took the oath of office. We had lost 750,000 that very month. We've now had 29 straight months of private sector job growth.

And in my home state of Ohio, the unemployment has decreased rather significantly. And I believe Ohio and some of the other swing states are experiencing a better, more positive economic climate than some of the states that are not swing states. And I think that's going to be very helpful to President Obama.

DOS SANTOS: Well, we do have jobs numbers coming out, crucially awaited jobs numbers, at the end of this week. And that will dictate the terms, let's say, of how well your -- it'll form a crucial backdrop to your conference.

STRICKLAND: Well, you know, this conference is following just a few days from the Republican conference. The issue in America today is that the country is so polarized -- and most people have made up their minds as to who they're going to vote for in this election. There's just probably a handful of undecided voters, maybe 5 percent, maybe 6 percent.

So all this effort in these final weeks will be directed toward trying to convince these undecided voters who they should throw their lot in with. And I believe the president is in a strong position, because as I think most of your listeners probably know, right now in America there are literally seven to nine true swing states. Most of the other states, we know how they're going to vote.

California is going to vote for Obama; Texas is going to vote for Romney. But these swing states really hold the key to the ultimate winner. And I believe the president's doing better in many of the swing states that than he expected to do.

DOS SANTOS: (Inaudible) briefly, extremely briefly, if I may, Mitt Romney says people get a better deal under him. Why would they get a better deal under Obama?

STRICKLAND: Well, because Obama is really committed to building a strong middle class. Mitt Romney is committed to giving really rich people more tax cuts while privatizing Social Security, voucherizing Medicare and I think the people will decide that it is President Barack Obama who is really fighting for the large middle class and wanting to rebuild it and expand it, while Mitt Romney is primarily concerned with taking care of the richest people in our country.

DOS SANTOS: OK. Ted Strickland, thanks so much for joining us here on QUEST MEANS BUSINESS. And apologies to our viewers if they had some hard time hearing Ted. Obviously, we had the preparations well underway there at the Democratic National Convention Center. And Amber Riley from "Glee" was practicing her rendition of the U.S. national anthem ahead of the first lady's speech later today.

After the break, we'll hear from the chief commercial officer at Airbus to explain why the company could be in for a busy few years to come. That's (inaudible) to today's "Currency Conundrum" when we come back.





DOS SANTOS (voice-over): Time now for our answer to today's "Currency Conundrum." Earlier in the show, I asked you this question, what was the original name of the Australian dollar? And the answer to that question is B, the royal. It was chosen by the Australian treasurer back in 1963, but it was frankly still unpopular (inaudible).

But three months later, the government caved into public pressure and instead decided to rename it the dollar.

Well, one company is pretty familiar with currency hedges is Airbus. And (inaudible) came out with some pretty bullish predictions today. This is what the company said its precedent air traffic boom will drive demand to nearly $4 trillion worth of new planes over the next 20 years to come. And as such, it's mapping out the future growth of the industry and its global market forecast.

This is the forecast that it came out with. It says that 28,200 aircraft will be needed between now and the year 2031. That includes about 27,000 passenger jets at about $3.7 trillion worth of the total $4 trillion, as you can see. Also it says that the global fleet of commercial airliners will be more than double over the next 20 years to come and it'll reach a level of 321/2 thousand planes, pretty big figures here.

More than half of this kind of growth will be coming from -- surprise, surprise -- the world's emerging economies. And in fact, they told me earlier today that China, they reckon, is going to be the biggest market eclipsing the United States for domestic aircraft by the end of these 20 years.

Well, the Airbus predictions are based on an assumption that passenger traffic will continue to grow on average by about 4.5 percent a year. I got the chance to sit down with John Leahy, the Airbus COO. And I asked him about the outlook for demand.

JOHN LEAHY, CHIEF COMMERCIAL OFFICER, AIRBUS: This is a growth market. You can't have GDP growth without aviation growth. They're intertwined. So the interesting thing is that you have Asia Pacific growing rather dramatically. It took a while, but now they've reached that inflection point and they're taking off. There are three big markets in the world today.

In fact, we've traditionally been there. Asia Pacific, about 27-28 percent; Europe about the same 27-28 percent; North America, the same. In 20 years, a third of the market is going to be Asia Pacific and only 20 percent in the U.S.

DOS SANTOS: And a lot of that has to do with the mergers, the China, the economic superpower, now the world's second largest economy. You're expecting the Chinese domestic flight market to eclipse the United States by 2031. That, again, is a big prediction.

LEAHY: Absolutely. I think there would be no surprise if you asked people what's the number one domestic market for air travel, everyone would say the U.S. But think about the U.S. You get out to La Guardia, you go to National Airport in Washington; the captain comes on and says you're number 18 for takeoff and you look out the window, and sure enough, there are airplanes lined up all over the place.

In 20 years, that's going to be China. But maybe not with as much congestion because they're building about 10 new airports a year. They've been doing it for about the last five years. They intend to do it for the next 10 years. So the infrastructure in China is building up.

DOS SANTOS: That's an interesting point, actually.

The other thing we should talk about is how this demand breaks down into single (inaudible) twin (inaudible) aircraft because that speeds the gate into the domestic market equation, doesn't it?

LEAHY: Yes. We're looking at about 19,500 new single aisle aircraft. It's like our A320 Neo, the New Engine Option, which burns 15 percent less fuel.

DOS SANTOS: Which has been tremendously successful.

LEAHY: It's been extremely successful. No new aircraft program has ever had that sort of reception ,and we're very proud of that.

But the fact is that fuel prices are, as I said before, a two-edged sword. The airlines lose a little bit money, maybe don't make as much profit, but then they look at the fleets they've got and know they have to retire some of that old kit a lot faster. And that's where we could sell you even more aircraft.

DOS SANTOS: How do you think that's working out, though, because it could, as you said, (inaudible) at the moment, on (inaudible). It could go either way, really, with fuel price just remaining persistently high.

LEAHY: It could. We're forecasting about $130 a barrel on average. And in future dollars -- so that's essentially saying that oil prices stay around where they are today, maybe go up by 10-15 percent. Even less than the rate of inflation.

But still, because the airlines have become so efficient and they've taken so much cost out of their operation, fuel is becoming a higher percentage of their operating cost than it was in the past. So if you're looking at 40-50 percent of your operating cost, over 50 percent in places like India, being the price of fuel, you've got to find the most fuel- efficient aircraft you can.


DOS SANTOS: No signs of turbulence in the air above Europe these days. Let's get a check in on the weather forecast, which I understand is the price of New York domestic, as Jenny Harrison at the CNN International Weather Center.


DOS SANTOS: It makes a change, doesn't it?

HARRISON: I know, and I can tell you're excited, too, because it does actually mean that you should be in some -- in for some pretty nice weather, actually, as the week goes on. We've got high pressure across the north of Europe and the temperatures on the rise.

Now it's not all good. You know that. And I'm really referring to this area of low pressure across the central Mediterranean. And it's been there now for several days. It really did sort of set up shop over the weekend, and refused to budge ever since. Elsewhere, it's a very quiet picture the last few hours, just really just one or two scattered showers. Instead, it's all about this low across the central Med.

Now it is moving very, very slowly. You'll begin to show a bit of movement as we go through the next couple of days, but really not moving very far. Meanwhile, all the way around this low, we have got high pressure. That means calm conditions, sunny conditions and also an increase in the temperatures. But the rain continuing to come down in parts of Italy, 50 millimeters, 60 millimeters, 108.

Now the only good thing with this rain is that actually there's a severe drought across much of Italy. So that is something. But they could be severe at time, some of the thunderstorms embedded within that area of low pressure. And so we could have some strong winds. And there's always that risk of some isolated tornadoes.

But this is what I mean about the drought, extreme in some areas, severe elsewhere, pretty much all of Italy, as you can see, under some form of drought. So the rain that is in place will at least be helping a little bit in these areas. But as I say, it's very slow to move, so again, of course, is the downside which could be some low (inaudible).

But there is the rain. And eventually toward the end of this 48-hour period, it will begin to push into the southeast of Europe. Also you'll notice a bit of a band of cloud with some rain showers pushing across the northern U.K. on towards Scandinavia. So a little bit cooler there, even some snow likely to the mountain tops in Norway.

But look at the temperatures. This over the next couple of days, that green goes, replaced by nice warm colors, 21 in London on this Wednesday, 23 in Paris. But towards the end of the week, because we've seen temperatures around 25 or 26 degrees Celsius.

Just very quickly to tell you the remnants of Isaac still out there, pushing towards the northeast also across the south. (Inaudible) areas of low pressure developing along that system. So that is where we're seeing the heavy rain.

There is some warnings in place across the south in particular because we could see some pretty (inaudible) accumulations again through the Florida Panhandle and Alabama. We'll keep you updated. Now it's time for a short break here on QUEST MEANS BUSINESS. Nina is back with you in just a couple of minutes. (Inaudible).



DOS SANTOS: This week on "The Millennials," Sam and Harry are under pressure to deliver on a challenging project for their new client. The question is, can they take the heat? Let's take a look. This is "The Millennials."


UNIDENTIFIED MALE (voice-over): Previously on "The Millennials," eyes on the prize. Tom Bompas and Harry Parr face a big-name client.

(Inaudible) kick off new things (inaudible).


UNIDENTIFIED MALE (voice-over): In central London, Sam and Harry are on the hunt for some culinary inspiration. It's been a few weeks since they've pitched the concept and packaging for a food installation to be part of a Mercedes promotion called "The Avant Garde Diaries."

TOM BOMPAS, FOUNDER, BOMPAS & PARR: So going back in time a year ago, Mercedes approached us to (inaudible) to their arts program for "The Avant Garde Diaries." And for us, the answer was obvious. They make cars; we make food. We want to make the world's best drive-through.

UNIDENTIFIED MALE (voice-over): With three weeks to go until the project goes on display in London Fashion Week, Harry and Sam are into the final stretch. They have the concept and the design. Now it's time for what goes inside.

UNIDENTIFIED MALE: Try the logo. There's a lot of joy in the logo.

UNIDENTIFIED MALE: And what about the puffers (ph)?


UNIDENTIFIED MALE: We've been on a fast-food odyssey.

UNIDENTIFIED MALE (voice-over): And that includes stepping outside their comfort zone.


UNIDENTIFIED MALE: Apple (inaudible).

UNIDENTIFIED MALE: Apple (inaudible). That's sounds the one for me.

UNIDENTIFIED MALE (voice-over): The truth, though, is in the eating.

UNIDENTIFIED MALE: So this is real sort of food savagery, food on all fours. It doesn't hold back. it presents itself -- I'm not sure if the fashion crowd are going to be ready for it yet.

UNIDENTIFIED MALE: (Inaudible) there's something really good we could do with these chicken poppers. Maybe something more French would be nice. Well, we've got snail in there.

UNIDENTIFIED MALE (voice-over): On that note, it's time to move up market.


UNIDENTIFIED MALE: Very tasty burger.

UNIDENTIFIED MALE (voice-over): Although this presents new challenges.

UNIDENTIFIED MALE: If you've got that much meat in a burger, it's maybe not going to work for us (inaudible).

UNIDENTIFIED MALE (voice-over): With the food tasted and tested, branding is next on the menu, and the boys are literally bringing in the big guns.

UNIDENTIFIED MALE: (Inaudible) roadside cafes in America, roadside drive-thrus and you have on the picture, on the wall like pictures of Schwarzenegger (inaudible). And these are like icons, the truckers that eat (inaudible) and really want (inaudible) and create something very beautiful.

UNIDENTIFIED MALE (voice-over): Sam and Harry are using images of body builders to hammer home their concept. And they're confident it won't detract from the food itself.

UNIDENTIFIED MALE: There's something rather shocking about the way that these youthful buff figures somehow elevate the burger or the chicken into a whole different realm.


UNIDENTIFIED MALE (voice-over): On this stage, every detail matters. And these young entrepreneurs admit they're feeling the pressure.

BOMPAS: It's so stressful. Look at Harry's hair. He's 30 and he's gone gray.


HARRY PARR: I think the more productive (inaudible), the more you have to up the challenge. Otherwise, there's (inaudible).


UNIDENTIFIED MALE (voice-over): Next week on "The Millennials" --

UNIDENTIFIED MALE: It's better to be a glorious failure than never to have tried.

UNIDENTIFIED MALE (voice-over): How taking one big risk can pay off. Some final words of Millennial advice as we say goodbye to David Lloyd.


DOS SANTOS: Well, Sam and Harry actually had no idea whether their jelly (ph) venture could turn into a profitable business. So they actually kept their day jobs and launched a business with their spare time. And roughly about -- wait for it -- $18 -- just $18 per person.

Rachel Bridge is here to tell us how you can launch your own business, crucially on the cheap. And I've got to say there are plenty of paragraphs and chapters here which start with "How to Spend Nothing on -- ".

That intrigues me, Rachel. You've got at least five chapters about how to spend nothing on promotion, marketing, advertising -- and spend nothing on staff, premises, surely not.

RACHEL BRIDGE, AUTHOR: Well, the whole idea is that people think you need a lot of money to start a business. And people were coming to me and talking to me and saying, how do we get money to start our business? And I would say, hold on a minute. Let's turn it on its head. Actually, you don't need money to start a business, and there's lots of free stuff out there. So let's use that to start a business.

DOS SANTOS: And if you look at some of the free stuff that you mentioned, this book gets quite interesting. Who'd have thought that there were things like Freecycle (ph). You can get stuff off Craigslist. The government might help you with either grants or give you ideas, depending on what business you're in. (Inaudible) there for free.

BRIDGE: That's right. And the Internet has transformed everything. And as I say, in my book, I talk about technology. Really, technology's made everything free, promoting your business through social media, through the Internet, through your website, and you can build for free, absolutely transformed.

DOS SANTOS: I was just listening into our piece about Sam and also Harry there on the jelly (ph) -- on their jelly (ph) business. I've got to say it's the first time I've heard a jelly (ph) business being described as a solid business model. But they've got about 1 million pounds of revenues every year. How do you go from nothing to 1 million pounds?

BRIDGE: Now, you see, they've been very clever and they started very, very small. They kept their day jobs, did it with, you know, $80, 50 pounds to start with, and gradually built it up. And that's what I say to people, actually start really small. If it fails, you can move on. You haven't lost everything.

But this myth that you need to kind of put your house on the line and your life on the line and throw yourself in and somehow that will make it work, more likely. And it isn't at all.

DOS SANTOS: So I suppose people think, if I've got a lot riding on it, well, it's going to keep me linked to the project. But the reality is, you sometimes got to find out which ideas work.

BRIDGE: That's right, exactly. And I think start for a particular (inaudible). Start small, see if it works. I'm always recommending that people take stools and fans and trade at sort of village fairs or school fairs, to just try things out, meet the customers, do they like it. You can tweak it. Nothing's lost and you learn a lot.

DOS SANTOS: Rachel Bridge, the author of "How to Start a Business" -- crucially without any money at all. That intrigues me. Thanks so much --

BRIDGE: Thank you very much --

DOS SANTOS: -- this evening.

We'll have a full check on the numbers on Wall Street for you after this short break.



DOS SANTOS: Let's have a look at how the U.S. markets are faring. Remember that this is the first chance to react to what's been going on yesterday, because of course, they were closed for the Labor Day holiday. And as you can see, we've got the Dow Jones industrial average down by around about 22 to 23 points at the moment, around about a 10th to a 5th of 1 percent.

But what I want to show is that this is a bit of a rebound, actually, because earlier today, this market was down by quite a bit more, largely on the back of disappointing economic data out of the United States, namely manufacturing figures from the ISM and that wasn't countered by the fact that we are slightly better than expected car sales from some of the big U.S. carmakers.

One of the reasons why some of these markets are showing a bit of a rebound is because we've now had an invitation from Apple to a major event on September the 12th. And this is when they are widely expected to launch their eagerly awaited iPhone 5 model. So one of the reasons why the U.S. markets are down albeit not quite as much as they were earlier in this session.

And you can get in touch with us to let us know what you think about anything you've seen on the show at our Twitter handle, starting out with me, NDosSantosCNN as you can see, and the slightly shorter Richard Quest one which, remember, is QuestCNN. He'll be back in the hot seat next week.

And in the meantime, that's it for QUEST MEANS BUSINESS. I'm Nina dos Santos in London. Thanks so much for joining me.


DOS SANTOS: The president of the International Committee of the Red Cross is in Syria, trying to persuade the government to allow greater access to civilians caught up in the country's ongoing brutal civil war. The Red Cross chief, Peter Maurer, met with the Syrian president, Bashar al-Assad, and officials described those talks as, quote, "positive."

The president of Colombia says that peace talks between his government and the guerilla group, the FARC, will begin as of next month. They're going to be held in the Norwegian capital, Oslo. President Juan Manuel Santos says that he expects the talks to take months rather than perhaps years.

The European Commission has launched an investigation -- an anti-trust investigation into the Russian energy supply Gazprom. It's looking into whether the company is hindering competition in places in central and eastern Europe, especially in the gas market in breach of E.U. rules.

The Pentagon has condemned a book written by a former U.S. Navy SEAL who took part in the raid that killed Osama bin Laden. It says that his account of the raid contains sensitive and also classified information and that he also could be prosecuted as a result. Well, no easy day by the ex- commander (inaudible) went on sale just a few hours ago.

And as I was saying, the president of the International Committee of the Red Cross as well is another major story (inaudible) try to be negotiating more access to people caught up in the brutal civil war in Syria. That's a look at the main headlines this hour. Christiane Amanpour is next.