BUSINESS-01
Fix Single Currency; International Tesla Unveils Its Fastest Car Yet; South
African Finance Minister Summoned By Police, The Controversial Practice
That Made Trump Millions; Slovakia to Host EU Meeting on Brexit; Asian and
African Leaders Due to Gather in Nairobi; Rio Mayor: Olympics "Already
Leaving a Legacy". Aired 4-5p ET - Part 1>
Dos Santos, Zain Asher, Shasta Darlington >
the biggest threat to Europe's economic future. That a one-size-fits-all
policy does not work for Europe's diverse states. Tesla has unveiled new
versions of the Model S. It can go from 0 to 60 in 20.5 seconds. The
South African rand tumbled after reports that the countries finance
minister had been summoned by the police. The rand fell 3 percent on
concerns of a rift between Pravin Gordhan, the finance minister and the
president, Jacob Zuma. A CNN investigation into Mr. Trump's controversial
time as an activist investor reveals that the same strategies people say
he's using now were used to garner massive profits and allegations of stock
manipulation back in the 1980s. For all the many years he's been in
business, economists have ranked Donald Trump as their third choice when
asked, which candidate would be best at managing the economy? Most
economists also support boosting growth through relaxed immigration policy
and more free trade. Slovakia is the host of a meeting of all the EU
countries, all except the U.K., next month. They'll be discussing the
details of Brexit. The mayor of Rio de Janeiro says the 2016 Olympics have
cemented an important legacy for his city and for Brazil. It proves, he
says, that developing countries are worthy hosts of the games. Britain's
wine industry is making gains. The lower pound is helping exports. If
you're looking for evidence of longstanding ties between Japan and Africa,
look no further than the car industry. >
Government; Donald Trump; Europe; Crime; Stock Markets; Brazil; Olympics;
Automotive Industry; Currencies; Japan >
[16:00:00] RICHARD QUEST, CNN ANCHOR: Those ringing on Wall Street, FedEx is ringing the closing bell. The Dow has actually given back most of the gains. Still just about positive for the close. I'm feeling good today about the man in the patriotic tie. Oh, yes, re-rack the tape. That has only happened two or three times that I can remember. It was obviously a very firm gavel. Well done, sir. Your firmness and patriotic tie, a little bit of history has been made. It is Tuesday. It's the 23rd of August.
Tonight, bouncing back from Brexit. The U.K. and Europe defy the predictions of doom. The Nobel laureate, Professor Joseph Stiglitz is with us tonight on the program.
Elon Musk is revving up his engines as Tesla announces two big upgrades. But what are they?
And the cutthroat corporate tactics that made Donald Trump his millions. A special CNN investigative report.
I'm Richard Quest. We have an hour together and I mean business.
Good evening. Just a couple of months, and it was the divorce that many predicted would create economic Armageddon in Europe. I'm talking about Brexit. The vote was on June the 23rd, and just about everybody and their brother said all hell would break loose across the economies of Europe. But now, if you look at the numbers, new figures show that both sides of the Brexit split are forging ahead.
I suppose there's an argument that says it's still too soon for the full ramifications. But even so, we've got of course the question of the pound. Now we know that the pound has been down since June. That came straight hard on the heels, a full throttle devaluation that the market enforced. But that had encouraging for foreign buyers. And as a result you can already see that even allowing for the traditional trade gap lag, the export orders hit a two-year high. And those export orders will to some extent counteract the sluggish domestic demand that is being experienced in the U.K. as a result of the Brexit vote.
On the other side of the channel, on the Eurozone and the EU side. The Eurozone economy is now expected to grow by 1.2 percent annually. That's similar to the first six months of the year. So growth, if not exactly robust and ebullient, is certainly steady and firm. The PMI in services and manufacturing they are at a seven month high. Although competence has fallen.
You can see the numbers. The point about these numbers, individually we can pass them to the nth degree. It is the totality of the numbers that suggests that financial ruin or ruination has not arrived either on the Eurozone side, the EU side, or in the U.K., at least not yet.
Now over the course of this program we're going to be talking to Professor Joseph Stiglitz. He's a prize-winning -- Nobel Prize winning economist. And he's warning that it's the euro itself that poses the biggest threat to Europe's economic future. That a one-size-fits-all policy does not work for Europe's diverse states. And Professor Stiglitz, as you'll hear on this program, is calling on the Brussels to change its policies or risk more exits.
The professor says the following. There should be a focus on growth instead of austerity. Some would arguably say that that is a shift that has already happened. We'll ask him about that. He also tells us how he wants to encourage industrial policies that allow the laggards, mainly in the south in some cases, to catch up. And there needs to be a requirement that deficits stay below 3 percent. And finally, to change the ECP mandate to focus on growth and employment, rather than just inflation. We are very glad Professor Stiglitz is here to put this into perspective. Good to see you, sir.
JOSEPH STIGLITZ, NOBEL PRIZE-WINNING ECONOMIST: Nice to see you.
QUEST: And you're going to be here for a while this evening as we talk not only of the U.S. but will be talking the EU but also the U.S. This is your new book, "The Euro: How a Common Currency Threatens the Future of Europe."
[16:05:03] When we just talked about Brexit, for this first second. Yesterday the leaders were in Italy. They're going to have a summit to talk about how to get rid of the U.K. or how the U.K. should leave. Are you optimistic or pessimistic about how the Brexit scenario plays out?
STIGLITZ: I think in the end I'm slightly optimistic. It's a balance. When the Brexit first occurred, Juncker responded, he's the head of the European Commission, by saying very forcefully that they were going to punish the U.K. It was a really -- I thought -- an ugly moment. They say, the only way we can keep the Eurozone together is not by providing them growth and shared benefits, but by threatening them if they leave, things are going to be even worse.
QUEST: So do you now perceive the euro as being if not exactly a wonderful example of a single currency, at least a stable currency?
STIGLITZ: No, I don't view the euro as a stable currency, in the following sense. There is a real risk of an exit. We had a risk of a Grexit last year.
QUEST: Who is going to go? Which countries do you perceive as being at risk, besides the U.K., obviously, which is out?
STIGLITZ: It was never in part of the Eurozone. It was in the EU but not the Eurozone. And you were mentioning a little bit earlier how the way it adjusted, you emphasized the exchange rate fell, and that gave a boost to its experts. You put the hammer really on the head on the nail by pointing out that it's the exchange rate adjustment that is a very forceful way of countries adjusting to shocks like the shock of the referendum. I think the real issue here is politics more than economics. Right now there's lot of discussion, what will happen in Italy if the referendum fails, and --
QUEST: This is the constitutional referendum that Matteo Renzi is trying simplify procedures in the various parliaments.
STIGLITZ: That's right. Around that referendum everybody has gathered against Renzi. If it fails, Renzi government falls. There's talk of a Five Star Movement getting power. They're committed to having a referendum. If there's another referendum, who knows the direction in which it goes? Europe has lost most of the referendums they've had.
QUEST: Besides Brexit, and I like yourself have looked at this, not in as much detail, but Europe always managers pull it back on the final hurdle. Alexander Steppe talks about a drama leading to a crisis leading to a sub- optimal solution.
STIGLITZ: Voters are not fine-tuned in the way that the European leaders are used to pushing things to the precipice and then pulling back. You know, they've done it over and over. They've said they were going to fine Greece -- Portugal, and Spain for their deficits. Everybody thought, how could you do this. Last minute they said, oh, no, we're not going to do it. You see that over and over again. But voters don't turn on a dime like that. If there's the kind of referendum, whether it's in Italy or whether it's in Portugal or some other country, they're not going to turn around like that.
QUEST: Staying with the euro for a second. We've got the ECB with its negative interest rates and it's pretty much quantitative -- it's not a limited quantity but it is in the sense that they'll keep going until they get the results. We're seeing that QE doesn't really work in anything like the measure. Even the Bank of England is discovering that as it does it post-Brexit.
STIGLITZ: And some of the countries have actually found that it has negative effects. Because the negative interest rates hurt the banks. The banks contract lending, and that actually hurts the economy. This experiment with negative interest rates, it hasn't been done as carefully in some countries as it should have been, but it is not going to get Europe back to anywhere near health. That's why what you need is the end to austerity. You have to go back to a growth policy. The Eurozone is having very difficult -- it's sort of in the regulations of the Eurozone. It's in the, you might say, the Constitution of the Eurozone. They don't have quite a Constitution but it's like that. The result of that is, it's the structure of the Eurozone itself which is holding it back.
QUEST: That's going to change.
[16:10:00] STIGLITZ: That's what worries me. As that happens, and as that stagnation that's been going on for years continues, the likelihood that the voters get fed up in one country or another is going to increase.
QUEST: You're going to stay with us. We're going to talk the U.S. in just a moment. Good to see you. Don't go any further. Now, the encouraging economic data that I talked about, that may be Joe isn't quite so encouraged about, but it certainly pushed European stocks higher. All the major indices in Europe were up between 0.5 and 1 percent. If you look at the market numbers, Union Credit shares are up 6.6. Reports that the Italian lender is close to selling its Polish banking business.
To Wall Street, where the stocks just closed with a gavel that dropped. Small gains for U.S. stocks. Started out really rather ebulliently in the morning, then drafted away as the day went on. Look, I'm going to say this repeatedly over the next few days. It is the last days of summer before we come to a long weekend. And I think you're seeing an element, an element of that in the market.
Tesla's shares fell back in the last hour. They had been up more than 2 percent. The company has unveiled new versions of the Model S. The shares up .7 percent. It claims P100D is the world's fastest production car. It can go from 0 to 60 in 20.5 seconds, which is as long as it's taken me to read it. In fact, let's just see. You're at 60 miles an hour. The bigger battery increases the range. It's going to take me about two seconds to introduce Alison Kosik at the New York Stock Exchange. Then I could be up to 60 miles an hour, Alison.
ALISON KOSIK, CNNMONEY CORRESPONDENT: You very well could be. What's interesting about this announcement from Tesla, Richard, is that it came out in a tweet hours ago. You can see the anticipation that investors had about this. Because you saw Tesla shares up more than 2 percent throughout the day. And then came the announcement. And the shares lost ground. As you said, closing just under about 1 percent. So obviously, still a favorable announcement for Tesla but nothing that investors were really hoping for. But for Tesla, this announcement is all about the battery pack, as you said, launching this 100 kilowatt hour battery pack for its Model S and Model X cars. A lot more energy, a lot of range, better acceleration. This is for the new version of the Model S. The Model S, with Ludicrous mode. So with this new battery it makes this even more ludicrous, Richard.
QUEST: Alison, we had a moment of minor New York Stock Exchange history. Let's show the tape again. I didn't think the gavel was going to fall off on this. Oh, there it goes. I don't know whether you saw that at the closing bell. The gentleman who did the gavel managed to break it. Which doesn't happen that often.
KOSIK: I missed it.
QUEST: You missed it.
KOSIK: I was busy writing.
QUEST: You are busily writing while a bit of history there. Alison Kosik at the New York Stock Exchange. Go see if you can find me the gavel on the floor.
KOSIK: I will. If I do, I will bring it to you tomorrow.
QUEST: Love it. Thank you very much.
The South African rand tumbled after reports that the countries finance minister had been summoned by the police. Take a look at the rand and you can see the way the share price has been moving. This is the rand intraday price. It's always interesting to show you an intraday. It fell 3 percent on concerns of a rift between Pravin Gordhan, the finance minister and the president, Jacob Zuma. You have to remember that Pravin Gordhan, former finance minister, came back into the job to rescue after three in a week and is enormously respected. But look, there you have that very sharp fall.
David McKenzie is in Johannesburg to put this into perspective. David, I mean, we've known that Pravin Gordhan has been questioned and been part of a completely unrelated investigation. Now what is this all about? Or is it all tied up with the same facts?
DAVID MCKENZIE, CNN CORRESPONDENT: Well, Richard, it is all tied up with the facts. And whether they are facts or whether they are politics, is another matter indeed. But what we do know is according to local media reports, Pravin Gordhan, the finance minister and several others from the South African Revenue Service have been asked to come in to speak to the elite police unit here, The Hawks, later this week. We did confirm that they had received correspondence. Their finance ministry telling us that.
It is on an ongoing saga between that unit of the police and the finance minister and others where they have hinted at accusations of the finance minister being involved in his time at the Revenue Service in a specialized unit specialized unit.
[16:15:05] An investigative unit which they say was a kind of rogue unit of South Africa's respected Revenue Service. Gordhan has repeatedly denied there was any wrongdoing. The elite unit hasn't really said what the charges exactly are, and many people believe, Richard, that this is more about a rift between President Jacob Zuma and the finance minister. We have a president on one hand accused of corruption. Accused of contravening the constitution. On the other hand, the finance minister is trying to clean up shop, it seems, Richard.
QUEST: Just remind me, David, bearing in mind the ANC's very poor showing in the last local elections that took place just a couple of weeks ago, just remind me, how long left does Jacob Zuma have in office? When is the next real test, if you like, of what we've seen from his administration?
MCKENZIE: Richard, there's the next election, and there's the next party conference. Those are two different things. The next election is in 2019. That's when his terms run out. But even today the party was hinting, the ANC was hinting, Richard, they could call an earlier party conference potentially to try and censure or even kick out Jacob Zuma. That's a long shot. But given the fact, as you describe, that the ANC was heavily punished in that election recently and have lost key metros, there will be pressure to jettison the president. But this move today against the finance minister could show that he's trying to continue to show his hand and take control of the treasury here in South Africa. It could have major financial complications. Any perception of a rift between the two could lead to turmoil in the rand. And of course the long-term implications as South Africa teeters on the edge of a major recession, Richard.
QUEST: David, watch these events carefully for us in South Africa and come back when there's a more to report. Thank you, sir.
As we continue our nightly conversation, the height of the 1980s economic boom, corporate raiders will the stars of Wall Street. We're going to explain how Donald Trump's venture into this high risk, high reward world gives us a window into his 2016 campaign.
(COMMERCIAL BREAK)
QUEST: Welcome back to QUEST MEANS BUSINESS. Going against the advice of top advisors, using the media to advance his goals, and a tendency to bully opponents. Now according to some, it's a part of the playbook that's been used by Donald Trump as part of his campaign for the presidency in 2016. CNN's Phil Mattingly explains.
(BEGIN VIDEOTAPE)
[16:20:00] PHIL MATTINGLY, CNN CORRESPONDENT (voice-over): In the high- flying '80s, it was the corporate raiders who got the big headlines and even bigger paydays. Donald Trump wanted in on the action.
DONALD TRUMP, U.S. REPUBLICAN PRESIDENTIAL CANDIDATE: Money is a scorecard. Money is a scorecard as far as I'm concerned. Believe me, money is not the most important thing, but it's a way of keeping score.
MATTINGLY: It's something Trump rarely discusses on the campaign trail, the four years where he played the stock market and mostly won, big, to the tune of more than $200 million.
But a CNN investigation comprised of hundreds of pages of never- before- released depositions, testimony and financial documents, as well as more than a dozen interviews, opens a window into a playbook with striking parallels to his campaign. One driven by a bare knuckle strategy, strong arm tactics, media leaks and public statements that often ran contrary to the truth.
TRUMP: The difference between me and other people is I'll attack back. If I have to attack whatever method is necessary, I will. I will.
MATTINGLY: The review also discovered repeated allegations of Trump's use of one particularly volatile, yet completely legal tactic -- greenmailing, the practice of buying a large stake in a vulnerable company for the sole purpose of forcing its management to buy the stock back to avoid a takeover at a premium. With companies like Bally and Holiday Corp, Trump used his unique position as holder of a casino license, which allowed him to target his competitors in New Jersey and make millions as their management scrambled to stave off a takeover attempt.
Walter Reed, the New Jersey casino commissioner at the time, equated Trump's action to using, quote, "A casino license as a weapon to weaken or undercut the financial integrity of his rivals." Trump and his lawyers vigorously disputed the greenmail charge. But Trump in an unsolicited moment during testimony in front of the commission took pains to remind the commissioners greenmail is, quote, "A totally legal practice. However, it's something the name, greenmailer, is not a very pretty word", according to transcripts obtained by CNN.
But a tell-all account from former Trump executive, John O'Donnell, paints a different picture. In his 1991 book on the billionaire, O'Donnell recounts Trump behind closed doors is making it very clear what he was doing. Bashing Bally executives as idiots who caved in.
In addition to making money, Trump had another motivation. "I really enjoyed doing it, because it put a real scare into them," Trump said, according to O'Donnell. With Bally and Holiday, Trump never went so far to make a tender offer for the companies, leaving critics to believe he attacked to juice the stock and sell for profit.
CARL ZEITZ, FORMER MEMBER, NJ CASINO CONTROL COMMISSION: I don't think he intended to acquire another casino hotel.
MATTINGLY: Carl Zeitz, a Democrat who supports Hillary Clinton, served alongside Reed on the New Jersey Casino Commission and raise major concern about whether Trump's greenmailing practice made him unfit to keep his state gaming license.
ZEITZ: In those days, the term was "greenmail" where you went into a public corporation that was vulnerable and bought stock and kind of held it up. I think that was his purpose. We did not regard it as conduct sufficient or the level to say, you're no longer qualified. But if we did -- we took it seriously. We didn't like it. And we hoped that by doing that, we put a stop to that kind of business.
MATTINGLY: Trump kept his casino license. But the companies themselves never recovered. Holiday Corp's management, bogged down by the debt it took on to ward off Trump, soon had to sell off valued business lines. Thousands lost their jobs. Bally was also left wounded and similarly mired in debt.
As for Trump, despite the millions in profits and the weakened competitors, it wasn't all positive. His efforts sparked a Justice Department investigation in the 1980s, alleging that Trump concocted a scheme to dodge federal stock purchase notifications. Something done specifically to hide his intentions from Bally and Holiday.
Trump settled the resulting federal lawsuit of $750,000. He did not admit any wrongdoing.
In a separate civil lawsuit brought by Bally shareholders, Trump agreed to pay them $2.25 million for his role for artificially inflating the company's stock.
Yet for Trump, one thing remains clear, then as now, there are no apologies for his tactics.
TRUMP: I love battles. And, unfortunately, battles -- I'm not controversial to be controversial. I mean, I get into a lot of battles and that's part of winning.
(END VIDEOTAPE)
QUEST: Phil Mattingly reporting there.
[16:25:00] Now, for all the many years he's been in business, economists have ranked Donald Trump as their third choice when asked, which candidate would be best at managing the economy? If you asked the general public, they have him as number one behind Hillary Clinton. But a survey of 400 experts from the National Association for Business Economics -- a fine body of men and women I'm sure -- a majority chose 55 percent, chose Hillary Clinton, even the Libertarian candidate, Gary Johnson, comes in second with 15 percent. Donald Trump comes in third with 14 percent. Very different than viewing results from the economists than you get from the general public.
Most economists also support boosting growth through relaxed immigration policy and more free trade. Of course free trade is how long is a piece of string? One man's protectionism is another man's free trade, and both people will see the same facts in exactly the opposite direction. Which is a very good moment to return to our guest of honor tonight, Professor Stiglitz.
STIGLITZ: Nice to be here.
QUEST: You're an adviser to the Clinton campaign on economic and trade issues. And when it comes to -- let's do the trade first. When it comes to trade policy, Secretary Clinton is against TPP. You're against TPP. But it's possible, or it's likely, the president is going to try to get TPP through in a lame duck Congress before the end of the year.
STIGLITZ: Yes, I find that outrageous. Both parties in their platform and the leaders have said this shouldn't be the way things in our democracy works. When you have an election, the leaders of both parties, the platforms, have raised deep doubts about TPP. To rush it through in a lame duck session I think is absolutely wrong. And I hope there is the will on the part of both parties --
QUEST: What's wrong with that though? In the same way that the Democrats have said no, the president should be able to bring his Supreme Court nominee and not wait for a new president, what's wrong with TPP? He is still the president.
STIGLITZ: He is, but the question is at that point, at the lame duck session, you have Congressmen voting who know that they're not accountable anymore. They've been kicked out. And --
QUEST: They're the ones who can give the best votes.
STIGLITZ: The idea is that a lot of people who are not politically accountable because they're not leaving may, in response to promises of jobs or, you know, just subtle understandings, do things that are not in the national interest. Let me try to explain why I and a lot of other people are against TPP.
It's not that we're against trade. Adam Smith, going back to Adam Smith, economists have talked about expanding markets, it opens up advantages of economies of scale. And taking advantage of comparative advantage. This is not a trade agreement. Even the administration's economists have come to calculations that the effect on GDP is minuscule and a more realistic estimate say that the effect on the economy is actually negative. What people care about is the provisions on intellectual property that will drive up drug prices. The provisions, what they call the investment provision, which will make it more difficult to regulate, and actually harm trade.
QUEST: But under the fast track authority, there's not the ability to tinker with it. So this thing either goes down or there has to be a full scale renegotiation with the other 11 partners.
STIGLITZ: Not necessarily a full scale negotiation. I've talked to some of the people in the partners. It wasn't that we bargained badly. It was that our interests were reflected in corporate interests. They were at the table. Ordinary citizens weren't. Even Congressmen couldn't find out what the U.S. bargaining position was. They wanted to renegotiate. We wanted to renegotiate.
QUEST: So would have to be a renegotiation though. Everybody back at the table?
STIGLITZ: Back at the table. But there is an understanding about where the problems are. The problems are in the investment agreement. The problems are especially with the intellectual property provision, that can be done.
QUEST: Would you leave NAFTA alone?
STIGLITZ: No, I would change NAFTA to. Because Chapter 11 in NAFTA has the same provision of trying to discourage regulations with disastrous effects in Canada. Interestingly, when I was in the Clinton administration, no one ever discussed Chapter 11. Even as Clinton was pushing the agreement through, there was no discussion. And the reason was it was inherited from the Bush administration and nobody wanted to tinker with it. That was a big mistake.
[16:30:02] QUEST: Finally, Professor, and bearing in mind that you are coming from party pre-standpoint in the sense of supporting one candidate. Are we at a moment in history where all the globalization rhetoric and policies that have driven trade for the last two decades are going to be rethought?
STIGLITZ: Oh, very much so. The reason is very simple. The advocates of trade said it was going to benefit everybody. The evidence is it's benefitted a few and left a lot behind. It could have been different. We could have managed trade in a way that would have had shared benefits. But that's not the trade agreements that we've had. And now people are realizing that that rhetoric that everybody was going to be better off was a lie.
QUEST: We are grateful, sir, that you came to talk to us tonight.
STIGLITZ: Nice to be here.
QUEST: Much appreciated, thank you very much indeed.
As we continue on QUEST MEANS BUSINESS, you have the names you want to hear. We have from a Nobel laureate. We're going to be talking to a foreign minister next. The Slovakian foreign minister will join me to talk about the EU and the Bratislava informal summit. Where they're going to try and decide what they're going to do in the future. Is it going to give us any idea? In a moment, QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. When the mayor of Rio tells us that the city will start to feel the benefits of this year's Olympics.
And British vineyards say they can take on the French at their own game. Now that Britain is leaving the European Union.
And in talking about that were going to have the foreign minister of Slovakia in the program in just a moment to talk about how they will be holding an informal summit of the other 27. All of that in the second or three, but before, this is CNN, and on this network, the news always comes first.
