Angry North Korean Editorial Blasts U.S. Over Sanctions; EU Suspends Polish Law Lowering Retirement Age of Judges; Manchester United
<Show: QUEST MEANS BUSINESS>
<Date: December 17, 2018>
<Head: Angry North Korean Editorial Blasts U.S. Over Sanctions; EU
Suspends Polish Law Lowering Retirement Age of Judges; Manchester United
Face PSG in Last 16 of Champions League; Protests Against Hungary’s
Government Turn Violent; Brexit Debate Resumes January 7th; Paul Krugman
Teaches Economics in New Master Class; Dow Drops 500 Points in Final Hour
of Trade; Google to Invest $1 Billion to Double Workforce in New York; Elon
Musk Prepares to Launch New Tunnel Technology; Google Launches New Shopping
Service in India; Alan Greenspan: Bull Market is Folding. Aired 3-4p ET - Part 2>
<Sect: News; International>
<Byline: Richard Quest, Julia Chatterley>
<Guest: Paul Krugman, Jay Walder, Ravi Agrawal, Ian Bremmer >
<High: Angry North Korean editorial blasts U.S. over sanctions. EU
suspends Polish law lowering retirement age of judges. Manchester United
face PSG in last 16 of Champions League. Protests against Hungary’s
government turn violent. Brexit debate resumes January 7th. Paul Krugman
teaches economics new master class. Dow drops 500 points in final hour of
trade. Google to invest $1 billion to double workforce in New York. Elon
Musk prepares to launch new tunnel technology. Google launches new shopping
service in India. Alan Greenspan says bull market is folding.>
<Spec: North Korea; U.S.; EU; Poland; Manchester United; PSG; Hungary;
Brexit; Paul Krugman; Stock Market; Google; Elon Musk; India; Alan
KRUGMAN: That’s right. I mean, what’s been happening in Hungary, we -- it’s best been obvious for a long time that they were chipping away at democracy, and Poland is a shorter time horizon, but they’ve also been at it for years. And the EU has been unremarkably unwilling to face-up to the reality.
I mean, we’ve basically seen democracy effectively destroyed in two EU nations, and the EU has only now said, well, you know, we’re going to tap you on the wrist a little bit.
QUEST: This is -- it’s damning for the EU that this is happening.
KRUGMAN: Yes, it is. If this -- the whole EU is supposed to be not just an economic thing, it’s supposed to be about democracy, about -- it’s supposed to be a guarantor of democracy in its member states, and it hasn’t been fulfilling that role.
QUEST: And yet, Brexit, of course on the other side of it adding on, loading on the problems.
KRUGMAN: Well, yes, that’s a whole other thing, and wow, what a mess. I mean, it’s a --
QUEST: There’s no -- there’s no easy, obvious or good solution at the moment.
KRUGMAN: Well, I mean, Brexit -- you know, Brexit is I would say a bad idea economically. But it’s not that bad an idea if it was carried out in an orderly fashion. But what has happened is that there have been no contingency plans. So at the moment, if there’s -- if Britain just bombs out of the EU, it doesn’t have the infrastructure, it doesn’t have the customs inspectors.
The flow of goods through Dover falls by 60 percent or 70 percent which is catastrophe and a totally avoidable one. So it’s amazing that they’ve gotten to this point.
QUEST: And the deadline is just --
KRUGMAN: No --
QUEST: It’s like we’re there, we’re there --
KRUGMAN: We’re both there, it’s as if you -- it’s like, you know, flooding the tunnels for -- but nothing physical going on. It’s just lack of contingency --
QUEST: Right --
QUEST: The Prime Minister’s strategy of basically putting her deal at the last possible moment such that failure of that vote --
KRUGMAN: Right --
QUEST: Is calamitous.
KRUGMAN: Well, it’s brinksmanship, and the trouble with brinksmanship is sometimes you end up going over the brink. And I -- and it’s not -- yes, I have to say, you know, I talk to my British friends and I say, there’s no - - I say you know, our bad guys are much worse than your bad guys, but you have no good guys. This whole -- and this mismanagement here is just astonishing.
[15:35:00] QUEST: How -- bringing you back to the United States and the lessons that can be learned because you’ve written on that --
KRUGMAN: Yes --
QUEST: As well, and when you look at what’s happening in the rest of the world, and you see the -- what in your view would be the U.S.′ lack of action, lack of leadership --
KRUGMAN: Right --
QUEST: Is that what’s driving things worse?
KRUGMAN: I mean around the world?
QUEST: Yes --
KRUGMAN: Well, I mean, no. That’s -- we shouldn’t have delusions of grandeur. Most of what’s going on in the world is -- but we’re not there to the extent that the U.S. has historically been a voice, saying, we need to preserve the system, we need to preserve democracy.
Now we’re out of it, if anything, we’re leaning in the opposite direction. So we’re -- maybe the EU should be able to take care of its own affairs, but in fact it’s proving not to and the United States is not being a help.
QUEST: There is a very volatile noxious cocktail of events out there. One MDB in Malaysia which you know, Brexit in the U.K., China trade, the U.S. chaos in the administration.
KRUGMAN: Yes --
QUEST: All of which bodes ill in trying to suggest for what happens next - -
KRUGMAN: Yes, I mean, it’s --
QUEST: Or I’m overstating it.
KRUGMAN: Well, I think the -- some of these are unrelated. I’m not sure that 1MDB -- then, look --
QUEST: No, but they could all end up being -- they’re not related to each other, but they could all end up creating an effect.
KRUGMAN: Well, that’s right, and the point is we normally count upon a certain amount of technocratic management and then a certain base level of competence in leadership. And the technocrats are still there but have limited scope to act, and the base competence is really missing.
And so yes, this is what scares you. Who’s in charge? Who’s minding the store? Are there any adults in the room and it’s hard to find many.
QUEST: Let’s remind ourselves again of your master class. Have a listen to yourself giving a talk.
(BEGIN VIDEO CLIP)
KRUGMAN: Instead of saying, oh, it’s complicated world, I don’t get it, say, all right, let me try to figure this out. Let me make sense of this. Doing economics requires stepping back from all of the details to say what is this essential here? What is the story? It’s about people. It’s not about money, and it ends up being about what people do.
(END VIDEO CLIP)
QUEST: And isn’t that what we need to remember in terms of -- I have to remind myself this frequently, that when we talk about the Dow is down wherever and it’s not just a number in the abstract.
KRUGMAN: That’s right, and a kick actually right now, we talk about institutions. We have all these institutions, we have all these institutions that don’t want the institutions to save us. But the institutions are people. And if the people don’t, you know, make them work, it doesn’t work.
But you know, the economics is about what people do. It’s not about numbers, and it’s a huge -- this is what -- one of the great fallacies is to think that it’s just about numbers, and if you look at some charts and so on, and that tells you -- the charts are only there to help you tell a story about what people are doing.
QUEST: Finally, let me ask you, the U.S. economic team for want of a better phrase, the Treasury Secretary, the economic adviser, the Fed chair --
KRUGMAN: Right --
QUEST: The Fed governors, do you -- the USTR -- do you have confidence?
KRUGMAN: Well, some of it, yes. I mean, the Fed is still the Fed and they’re still very smart. And I don’t always agree with them, but they are hard thinkers. USTR I think there’s a lot of residual competence in there. As for the rest, I mean, we have a chief economists who as people have said, he’s turned flamboyant wrongness into a form of performance art.
I mean, and so -- no, that’s just -- there are -- so in a way, we’ve got a stool and at least one of the legs of that stool is gone. So it’s not very well supported.
QUEST: Good to see you, sir, thank you very much indeed.
KRUGMAN: Well, thank you, thank you.
QUEST: As we -- reminded that the Dow -- unfortunately, well, it’s come -- the accelerating down as much as 580, major markets all down 2 percent or more. And not surprisingly, if you see these sort of numbers, every Dow stock is lower. We opened lower, we went lower and now we’re going down even further.
They say go big or go home, that’s the message big tech is taking to add as it expands beyond Silicon Valley, and there are big challenges and transport is one. The future in just a moment.
[15:40:00] (COMMERCIAL BREAK)
QUEST: Silicon Valley, you heard, big tech is again expanding outside of California. Google says it will invest more than a $1 billion to double its workforce in New York City. Google follows Amazon which is expanding in New York and other cities.
Now, the tech giants -- well, how to consider the entire issues of getting their staff to and from work. The challenges are enormous on systems already facing great stress. Now someone who knows all about futuristic travel -- Jay Walder is the new CEO of Virgin Hyperloop One, previously in charge of the transports and demands made, just financial centers, literally in New York, London and Hong Kong. And Jay joins me in the C- suite.
JAY WALDER, CHIEF EXECUTIVE OFFICER, VIRGIN HYPERLOOP ONE: My pleasure.
QUEST: Hyperloop, and again we’ll talk about these other things. How long before something meaningful? And when I say this, I’m aware this is going to happen. This is the future. I may be -- I probably won’t be alive when it does.
WALDER: I think you will be. I think you will be. That’s actually the point, I think you will be. You know, last year, we built a test facility in Nevada, 500 meters and demonstrated the Hyperloop system, worked end- to-end. You can see it, you can do it. Two hundred on that test loop, up to 240 miles an hour.
QUEST: Just remind us how it does -- it will work.
WALDER: So actually what this is doing is putting together technology that we know and understand.
QUEST: Right --
WALDER: It’s creating a low pressure environment to be able to do this. And you’re using pods running through a low pressure environment. And then the other beauty of this is its magnetic levitation. So it is so smooth that at the top speeds, you should be able to hold a cup of coffee.
QUEST: Right, and let me just add dot, and it is so expensive.
WALDER: Well, look, it’s infrastructure. There’s no question about it. We’ve never built infrastructure anywhere that doesn’t have a lot of costs to be able to do it. But this is game-changing infrastructure, I think that’s the big difference.
QUEST: For someone like yourself who’s had real grassroots experience with the world’s largest public transportation systems, subways, why did you get involved in this?
WALDER: It’s exactly the point. The point is that this is now add -- it’s your question from the beginning, you said will I be able to see it? Will I be around to see it? I think we’re at that point. We’re at the point where we’re moving from saying, this is an amazing incredible technology to the fact that it is now becoming a transportation system. That’s what I want to do.
QUEST: When you hear people like Amazon moving into New York and Google also with another 20,000 or 10,000 staff, and it’s great for the economy at one level, but the infrastructure of this city cannot really -- I mean, the subway is already antiquated.
WALDER: So let’s generalize it a little bit.
QUEST: Yes --
[15:45:00] WALDER: Let’s generalize it, let’s take the fact that cities are becoming increasingly important all over the world, 50 percent of the world’s population will be in cities by the year 2050. That’s just 30 years away in terms of being able to do it.
We also know that the model of the city that we have today with expansion, with reaching out and doing that, doesn’t really work that well, that we need to keep it much more concentrated in the way that we’re doing it. What this is really saying is reimagine that paradigm.
Imagine that you can actually have cities that are -- that are in a geographic cluster now, perhaps a 100, 200, 300 miles away, and you can be moving between those cities in a matter of minutes.
QUEST: I feel very luddite when I -- you know, because, you know -- oh, I haven’t seen the light, I haven’t understood the nirvana, but I push down to when you think one would expect to see something like this?
WALDER: I think we can begin to see construction of the next test facility by the end of next year. And I think you could be in construction on a full-scale project within a couple of years after that. The step that we have to take, and that we have to be able to do is to be able to test and gain the certification of this technology. But it’s there and we’re ready --
QUEST: So --
WALDER: To do it.
QUEST: Which cities are best suited?
WALDER: Here’s one -- you know, we have in this country --
QUEST: Yes --
WALDER: We have four project studies under way right now in Texas, in Colorado, in Missouri and in the Midwest. And let me talk about the Missouri one for a second because I love that one --
QUEST: So they’ll go between --
WALDER: St. Louis and Kansas City. The i-70 right there, the first section of the interstate highway that was built in this country, now reimagine that. Instead of thinking about cars moving at 70 miles an hour, what if we were thinking about pods moving at 670 miles an hour? That’s the incredible difference.
That journey, Google it, right? I’ve Google it all the time, St. Louis to Kansas City, you Google that, that’s three and a half hours to get there, that’s what comes up every time -- 30 minutes.
QUEST: So tell me how much that would cost? I know, this is -- how can one put up price on the future. But how much would it cost?
WALDER: All right, estimates right now are that this is roughly 60 percent to 70 percent of the cost of high-speed rail. So we believe that this can be done for the linear cost of high-speed rail, about 60 percent to 70 percent --
WALDER: For the cost of that --
QUEST: Taking infrastructure --
WALDER: Well, you know, you won’t -- so take the example --
QUEST: Right --
WALDER: I just give you, you want a gig, you’ll do that above ground --
QUEST: Oh, yes --
WALDER: And I think again we’re talking about -- we’re talking about distances that are not digging underneath the heart of New York City, we’re talking about how we’re connecting areas.
QUEST: Final thought, are you a masochist?
I mean, you -- you’ve taken on some of the -- you know, get your rubber gloves on, strong rubber gloves to deal with the world’s subways in the biggest cities with the most entrenched problems. And now this?
WALDER: But this one is so much fun.
QUEST: It is?
WALDER: This one is so much fun. I’m surrounded by people who are truly coming up with disruptive game-changing technology, and I have the opportunity to go around and talk to people all around the world right now about how we are going to put this into work with them, this one’s fun.
QUEST: Do I get a seat on the ride?
WALDER: I’d love you.
QUEST: Excellent --
WALDER: Thank you --
QUEST: Good. I wish I had better news for you. Never mind what’s happening in the future, let’s look at the present. If you look at the present, the market, it is -- even I wasn’t quite expecting that. No laughing matter but it is down 630 points. We’ve got 12 minutes left to trade, who knows where -- gut tells me it can’t do much worse, but then we know what gut did, we’ll be back after the break, thank you.
[15:50:00] (COMMERCIAL BREAK)
QUEST: Welcome back. Earlier, we talked about how Google is expanding its workforce. The company is expanding in India, thanks to a new shopping service. Ravi Agrawal is the author of “India Connected”, and he’s also Cnn’s former New Delhi Bureau chief. And most important of all is a good friend, good to see you sir, thank you --
RAVI AGRAWAL, AUTHOR: Good to be back.
QUEST: For coming here. The book “India Connected”, how are the smartphones transforming the world’s largest democracy. So much of India has -- I mean, obviously leap-frog the fixed line, and in many ways --
AGRAWAL: Yes --
QUEST: Leap-frog even the basic phones --
AGRAWAL: Yes --
QUEST: You know, the analogs and have gone straight to the digitals.
AGRAWAL: Yes, that’s right, and so, you know, if the west went through an evolution going from PCs and dial-up to cable and then WiFi and then 3G and 4G, India’s story is not an evolution story, it is a revolution story.
Hundreds of millions of people discovering the internet for the first time on a smartphone. And it’s not just the internet, this is also for most of them their first camera, their first TV, their first streaming device and all of those things.
QUEST: So how does this actually translate itself to economic benefit? We’re familiar of course with the whole idea of Bangalore and the whole tech sector in India. But for ordinary people, how are the economic benefits being received?
AGRAWAL: Well, the smartphone boom is precisely for ordinary people. Because the old boom in India was for people who were upper class and English speakers and tech literate. This time, it’s really for people who are not any of those things. So you could be illiterate and you can still speak to a phone.
QUEST: Doesn’t India, though, no matter how good the device, no matter how -- doesn’t it still suffer from a lack of infrastructure, decent broadband capabilities and capacity, which I always find fascinating when I go to India, that the country that is the heart of much of the internet --
AGRAWAL: Yes --
QUEST: Has appalling internet service for the rest of the country or even the major cities.
AGRAWAL: It does, and that’s what it’s beginning to improve. So there are newer companies like Reliance Jio in India which is, you know, unrolled this massive 4G sort of data spree across the country. And so many people who are discovering the internet in India are discovering it on phones that cost $23 if you lease it across three years, and data that is almost free but also quite fast.
So things are getting better, but it’s slower on that front.
QUEST: Has the Prime Minister ridden this wave well?
AGRAWAL: Well, I mean, you asked the question a week after he’s lost election, state level elections in much of the India heartland. So it’s not a great story for him right now --
QUEST: But hold on, why he should be able to be riding this and saying, you know, look at what we’ve managed to do but it’s not working.
AGRAWAL: Well, but everyone is riding this, right? So much of the bet on India’s smartphone boom is a future boom. So there’s been a lot of promise. Everyone knows that everyone is going to get a smartphone, everyone will be online eventually.
The question is how does that translate into jobs, how does that translate into the middle class spending more? That’s going to take some time.
QUEST: Good to see you, sir, thank you very much indeed --
AGRAWAL: Good to see you --
QUEST: Thank you. Now as we continue, last minutes of trade on Wall Street and well, we’ve just pulled up a bit, but really, frankly, not much -- I mean, look at it, we’re just slightly up a tad, still down two and a third points, some gains earlier in the day for Boeing buying majority stake in Embraer and now everybody is out -- that’s just the least worst of the rest of them.
[15:55:00] And American Express is still the worst of the day. Alan Greenspan just -- the former Fed Chairman Allen Greenspan has been talking about the bull markets. Speaking to Julia Chatterley, and she asked Alan Greenspan if the nine year rally is still going strong.
(BEGIN VIDEO CLIP)
JULIA CHATTERLEY, CNN CORRESPONDENT: Is the bull market still intact?
ALAN GREENSPAN, FORMER CHAIR OF THE FEDERAL RESERVE OF THE UNITED STATES: Not really, no, it’s really a fumble. You can see it by reaction in the recent days. It would be very surprising to see it sort of stabilize here and then take off again. But it’s happened in the past, however, at the end of that one, run for cover.
(END VIDEO CLIP)
QUEST: We will have our profitable moment after the break.
QUEST: Tonight’s profitable moment, arguably the writing is now very firmly on the wall. That particular wall, look at it. Paul Krugman tonight talks about being a 1990s-style recession. If you remember 1990s, it wasn’t that particularly severe or deep, but it did last for a long time and it was followed by quite some considerable growth, that is until you go into the Clinton years and thereafter.
So put it all together, the situation at the moment is serious and grim, but one wouldn’t necessarily say grave. And as for the question of putting up of U.S. interest rates, well, the Fed on Wednesday has a very tricky task because having been brow-beaten by Donald Trump not to put up rates, they can hardly acquiesce or give the appearance of acquiescing, which means that a rate hike that might not be necessary with slower growth is almost certainly going to happen regardless.
The president probably would have done wise to have kept quiet and seen what happens. The global economy is slowing down, but how bad with nobody can say so far. And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York.
Whatever you’re up to in the hours ahead, yes, I hope it is profitable.
The bell is ringing, the Dow is off the lows of the day, still heavily down, the day is done.
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