22/01/2016 BBC Business Live


22/01/2016

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continues to dominate those talks at Davos. Live from London, that is our

:00:00.:00:00.

top story on Friday 22nd January. A Relief Rally for global markets -

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but for how long? It comes after days

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of heavy sell-offs. The head of the IMF,

:00:21.:00:23.

Christine Lagarde, And we'll bring you all the latest

:00:24.:00:32.

from those financial markets where the prospect of cheap money

:00:33.:00:38.

has re-awakened investors' animal And we'll be getting

:00:39.:00:40.

the inside track on the encryption wars - it's all about the ongoing

:00:41.:00:49.

battle between technology firms and governments over

:00:50.:00:52.

the use of cryptography. We'll be talking to

:00:53.:00:54.

the co-founder of Wikipedia, Let us know, how important is online

:00:55.:01:07.

encryption? If you have a question you want to put to Mr Wales, just

:01:08.:01:14.

use the hashtag. Markets have been trading higher,

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giving some relief after the heavy Global turmoil has been

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dominating talks in Davos with the slowdown in China,

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the commodities slump and the strong dollar all issues weighing

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on leader's minds. The BBC's been hearing a range

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of views at the summit, Let's start with the words

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of the economist, Kenneth Rogoff And this was the boss

:01:36.:01:42.

of BP talking about oil - While Dr Min Zhufrom the IMF

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is a bit more optimistic about the current climate -

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he says: Our Economics editor Kamal Ahmed

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joins us from Davos. He's been there for the past few

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days. Great to see you. We know you've done a lot of the big over

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we've been doing a lot of interviewing power brokers as well.

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Can I take from this, from my own experiences, it seems like nobody

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really knows what's going on, there. You've got half the camp saying it's

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going to be, hang onto your hats, it's going to be held this year,

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others who are more optimistic, huh? It is confusing when there are two

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things going on, there is a market issue about volatility and

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fundamentals issue which is slightly more positive, and all the business

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leaders and politicians have spoken to are saying that is the issue we

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are grappling with. On the market side, the reason for this volatility

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is really the fallout from the 2008 financial crisis. Central banks

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around the world pumped out billions, trillions of pounds of

:03:17.:03:22.

money to save the financial system, the global economy. That meant asset

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prices and equities went up, because all that money went somewhere. And

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so market participants are rather nervous about what is the real value

:03:32.:03:36.

of stocks and shares. That's why you get these huge bounces on a little

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bit of bad news, little bit of good news. The markets over react. We

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were a bit overconfident at the start of last year, probably a bit

:03:45.:03:49.

over gloomy this year. On the fundamentals, yes, China slowdown,

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yes, the oil price has gone down, but China is still growing, the UK

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is still growing, America is still growing, the Eurozone is showing

:03:59.:04:01.

some health, so there are still some green shoots of recovery. I spoke to

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the US Treasury Secretary and actually asked him whether or not we

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were heading towards a more serious global crisis. I am cautiously

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optimistic watching many areas where there are downside risks. I think

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it's important not to let down side risks become self-fulfilling

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prophecies. I think the state of our financial system is not the same

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today as it was before the financial crisis. We in the US and your

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government in the UK, Europe and around the world, there is a

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different degree of capital, there are different levels of tools in

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terms of transparency and the ability to not have their beer

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contagion that spreads through our financial system. -- have there be a

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contagion. There we are. I've got to ask you this, it has raised its head

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this week, those who are positives on the fundamentals, have they been

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looking at the Baltic dry index? I don't want to put viewers off at

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home, but that isn't indexed that tracks the shipping rates, the ships

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that carry all the stuff around the world. When that index crashes,

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typically the economy crashes afterwards, it happened in 87, it

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happened in 2000, and it happened in 2008. This week that index hit the

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lowest it has ever hit before. Now you are right, it is a very

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important marker of world trade in manufactured goods, let's not

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forget. But what is different from the 1980s and the 1990s is of course

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a lot of global trade is now technological trade and is actually

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high-value pharmaceutical trade. And that is either done over digital

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platforms or is done via aircraft. And so actually the Baltic dry

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index, although very important, is possibly less of a Mark Roe than it

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used to be 20 or 30 years ago. -- less of a marker. It relies on

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technology, high-value engineering, and that goes much more by air

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flight. I agree that it does show there are big headwinds in the

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global economy but still people here are saying, when they look at their

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own business, what they want to invest in and where they are going,

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they feel slightly more confident. Great stuff, really appreciate it.

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Are you going skiing on the weekend? Sadly not, I'm going to be working

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hard for the BBC. OK, OK, thanks. Do you believe him? Know, all the

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others are going skiing! Anyway, let's talk about some other news

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that's going on at the moment. The head of the International

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Monetary Fund, Christine Lagarde, has told French media

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that she will run for a second term. The UK, France and Germany have

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already called for Ms Lagarde to be re-appointed; however,

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she is due to face trial over payments to a French

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businessman made in 2008. Under her leadership,

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the IMF has made several significant reforms, including adding China

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to it's list of global reserve Brazil's currency closed at a record

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low against the US dollar on Thursday, after the central bank

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surprised markets by not The country is in its worst

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recession since the 1930s: it's been hit hard by the slump in commodity

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prices, a sprawling corruption scandal and attempts to impeach

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President Dilma Rousseff. The boss of JP Morgan Chase,

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Jamie Dimon - saw his total pay package rise 35% last year -

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to a total of $27 million. His basic salary was unchanged -

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the rest is tied to performance Despite the increase,

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his compensation package is less than those enjoyed by bosses

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at rival banks Goldman Sachs Hey, listen, we were talking about

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the whole mixed picture, here is why we are all confused, right, about

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it, all the stuff coming out of Davos. We've got this. We've got Mr

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Soros, right, many would say a genius investor. We are all doomed,

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this is what he is saying. Doesn't his face tell it all, really? He's

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seen it all and he is not happy. He says the EU was falling apart, he

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says you've got panic in the European asylum policy, with too

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many refugees to assimilate and integrate, everybody is out for

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himself, he says. He talks about Russia. He says it's in a very weak

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position, lots of people are forecasting that Russia will go back

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into recession for a second time. He's saying it faces impending

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collapse. China again, he uses the words hard landing. And he

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criticises the US had come he says they are about one year too late in

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doing the interest rates. But perhaps it happened too soon. Who

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knows? We are all confused. Charlotte is in Singapore and

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tracking the Asian markets. Better way to end the week than we started,

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right? Most certainly. This rally across Asia was led by Japan which

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bounced nearly 6%. Partly due to the higher price of oil and yen, but

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also comments from the World Bank that it will consider more monetary

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stimulus. The market was buoyed by a report that the central bank in

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Japan is possibly planning to ramp up its massive stimulus programme.

:09:57.:10:01.

Investors don't have this new round of spending in Japan confirmed but

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they are hopeful it might be announced as soon as next week.

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So we have seen the Nikkei with its best performance in recent months.

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So yes, investors in this part of the world are breathing a sigh of

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relief at this positive end to a volatile week. The elixir of life on

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the markets, cheap money. For most of 2016 we've been talking

:10:28.:10:29.

about falling markets. According to me, what I think is

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going on. Investors who rode out the financial

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crisis have become conditioned to rally at any sign of additional

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central bank stimulus - and the prospect of the European

:10:58.:11:00.

Central Bank making another move in March has triggered

:11:01.:11:02.

that muscle memory. So we're seeing risk assets

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and local sovereign debt becoming European stocks love

:11:05.:11:07.

a weakening currency. So when the euro weakened

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against the dollar off the back of those comments from

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Mario Draghi on Thursday, we saw the value of export sensitive

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indices like the DAX The FTSE at the moment

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is trading about 1.6% higher. And it's the mining stocks and oil

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services firms leading the way Now, Neda can tell us what's

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going on in the US today. Another day of earnings, and it is

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the turn of General Electric to impress investors when it reports

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fourth-quarter results. The company is undergoing a massive

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restructuring to slim down its portfolio in order to focus on

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manufacturing in the digital age. It recently agreed to sell its

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appliance business for $5.4 billion and plans to hire more coders to

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transform the way it runs its engines, power turbines and medical

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equipment. Wall Street will have more US economic data to absorb. The

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National Association of Realtors will put out its report on existing

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home sales through December. Compare to a sharp drop of 10.5% in

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November, sales are expected to have risen by 8.9%. We will get a look at

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the strength of US manufacturing in January.

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Paul Kavanagh, CEO, Patronus Partners.

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Paul, always good to see you, thanks for coming in. So, Mario Draghi

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speaks, throws out the hint of more stimulus to come, and the markets go

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up. Isn't the problem with the central banks pumping out that cheap

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money, but all it does is end up propping up the market, it doesn't

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prop up the economy as it supposed to be, that was the whole idea.

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That's the lesson we learned from the first time they had a go at

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quanta easing in 2008. That reduced interest rates and the return you

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will achieve on your safest assets, the US Treasuries, and it we priced

:12:56.:12:59.

every other asset out there, whether it be property, stocks or bonds. But

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that game is over. We've had the full benefit of that. And it has

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made things palatable for us during a very difficult period. And

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markets, yes, I responding to Draghi's comments that he may be

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doing more in March. But have we lost the effectiveness of QE? China

:13:19.:13:24.

becomes the central story for us in the next 18 months, is that showing

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the effects of QE. I want to ask you about China, because George Soros

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says a hard landing for China is unavoidable and already happening.

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Oldman sacks are coming out and disagreeing saying we are just

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overreacting, what are you hearing? Somewhere in the middle of those

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too. I think it is a timing issue. Goldman Sachs sees that China can

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continue to keep the game going, whereas George Soros is positioning

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his trade to say there is an endgame in China that will be ugly and

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devastating for financial markets. I think what we are seeing within

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China is the effectiveness of their policies is starting to wane. See

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the devaluation of the currency at the moment. We've seen anecdotal

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evidence. We were talking about the Baltic dry index and commodity

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prices. All commodities are really going very badly wrong in the past

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six months, and I think it's giving you more of an indication about what

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is beginning to unwind within China than necessarily what is happening

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with financial stimulus. We will come back because we've got papers

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to go through, but we've got a bit more news before then. See you,

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Paul. Still to come - how important

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is online encryption? We'll be talking to Wikipedia's

:14:47.:14:49.

Jimmy Wales about the ongoing battle between technology companies

:14:50.:14:52.

and governments around the world. You're with Business

:14:53.:14:54.

Live from BBC News. And now a look at some

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of the stories from around the UK and what impact has this weeks

:15:00.:15:02.

market turmoil had on our pensions? Tom McPhail is a pensions expert

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at Hargreaves Lansdown. Tom, I don't know if you can see us?

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Good morning. With a great beard! Let's talk first about what is going

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on with the markets, is anyone not affected by what's gone on this

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week? Clearly it is all scary news. Some people are looking at it from a

:15:28.:15:31.

pensions context, just ignore it, tune out, it does not affect you. If

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you are in a final salary pension scheme, the turmoil is your

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employer's problem, nodules. You will get it promised pension every

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time, there's no immediate cause all worry. If you are in your 20s, 30s,

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40s, even your early 50s, if you are away from retirement, this

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volatility will be in the past before you get to retirement. It

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means you are buying assets cheaper than you would have done a year ago.

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Keep putting money into your pension, don't worry. For a lot of

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people, from the pensions point of view, the turmoil is not a concern.

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For most people, it is not a cause for concern, who will it be trouble

:16:15.:16:19.

for? For people who are already in retirement, if you rely on a

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portfolio of assets to pay an income if you draw dividends from the

:16:24.:16:28.

shares or portfolio committee had to be mindful as to why the turmoil is

:16:29.:16:32.

going on. People worry about earnings, we've heard about oil,

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gas, natural resources, earnings hit there, they could hit dividends. You

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need to look at investment and think if you are in the right place and if

:16:43.:16:46.

you will get an income stream coming through into retirement as the year

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progresses. It's a link to be mindful. The people who have to pay

:16:52.:16:53.

attention are the ones just approaching retirement. If you have

:16:54.:16:58.

money in the market and are planning to sell investments to generate cash

:16:59.:17:03.

or by a guaranteed income for life, it could be a problem and you might

:17:04.:17:06.

have to readjust expectations as to how much money you have and the

:17:07.:17:10.

income it might provide you with. Tom McPhail, pensions expert and

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all-round guru, thank you very much! Do you note on, right? Of course I

:17:15.:17:26.

do. What was the beard thing? -- do you know Tom McPhail?

:17:27.:17:38.

You're watching Business Live, our top story - markets trade higher

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after days of steep falls, buoyed by a rebound in oil prices.

:17:42.:17:48.

Let's take a look at online security - and the so-called 'encryption

:17:49.:17:51.

wars' playing out between governments and technology firms

:17:52.:17:53.

After the mass spying revelations by Edward Snowden -

:17:54.:17:56.

firms have been determined to appear to be giving control of data

:17:57.:17:59.

But unbreakable encryption has been opposed by many authorities,

:18:00.:18:08.

arguing access to information is needed to fight crime.

:18:09.:18:14.

The UK's Prime Minister, David Cameron, has vowed to close

:18:15.:18:16.

what he calls the 'safe spaces' used by suspected terrorists

:18:17.:18:19.

Well, online security has been a big topic at Davos.

:18:20.:18:28.

Let's go to Jimmy Wales, the co-founder of Wikipedia,

:18:29.:18:30.

Good to have you on the programme. Apart from the possible financial

:18:31.:18:41.

collapse around the world, cyber security is a big topic where you

:18:42.:18:45.

are in Davos. I want to ask you before we talk about encryption,

:18:46.:18:50.

generally, we've seen Hack attack after hack attack, we've talked

:18:51.:18:54.

about it on the programme and a lot last year, big corporations

:18:55.:18:58.

attacked, governments... Do you get a sense in 2016, that corporations

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are finally getting it and realise this is a new battle ground and

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spending the right money needed to build the walls? I think they're

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starting to. I think it is a relief fantastic thing. We are seeing

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corporate networks being hard and -- a really fantastic thing. Consumer

:19:20.:19:24.

software is hard on. All around, we see the percentage of Internet

:19:25.:19:27.

traffic that is secure, or encrypted, it's more than doubled in

:19:28.:19:32.

the last year. We'll probably double it again this year. We are looking

:19:33.:19:35.

at many more than 80% of traffic on the Internet encrypted. That's a

:19:36.:19:40.

good thing because it means credit card numbers are safe, identity is

:19:41.:19:45.

safer. Hopefully we won't see as many attacks in future. We will

:19:46.:19:50.

probably still see attacks but hopefully we won't be as one ball to

:19:51.:19:57.

them. Between encryption data, as a layman, that's who you are speaking

:19:58.:20:02.

to, I'm trying to get my head around it -- vulnerable. Tech companies are

:20:03.:20:07.

being very supportive of the consumer. They are saying, to the

:20:08.:20:12.

government, if you are serious about data protection, we want to make it

:20:13.:20:17.

easier for you. We have two making correction even more difficult, even

:20:18.:20:26.

stronger? Yes, we need to have strong encryption, we have to make

:20:27.:20:32.

sure that, as much as possible, all personal information is protected.

:20:33.:20:36.

It's not floating loose on the Internet where it can be stolen.

:20:37.:20:41.

It's an important thing and I think we are starting to pay attention,

:20:42.:20:46.

finally. Jimmy, Victoria here. We are seeing increasing levels of

:20:47.:20:53.

security, being stepped up by these companies. Quite frankly, they are

:20:54.:20:57.

low barriers of entry to anyone who wants to come in and say they can

:20:58.:21:02.

provide data solutions. Anyone who can speak computer jargon can set up

:21:03.:21:06.

and do this. A lot of CEOs do not know the difference between

:21:07.:21:10.

different products. Do you think some companies are being taken

:21:11.:21:13.

advantage of? There are so many different products out there. I'm

:21:14.:21:18.

sure that some of them are. That is always true. I would advise

:21:19.:21:23.

companies to look for industry-standard solutions, open

:21:24.:21:27.

source software. That can be examined. There are standard

:21:28.:21:31.

solutions, very strong. Anyone selling and encryption that is

:21:32.:21:37.

supposedly inventive and new but is not studied by the community... They

:21:38.:21:48.

need to be careful. I have to ask, anything new? What is next for

:21:49.:21:53.

Wikipedia? I think the biggest thing for us is growth, we are really

:21:54.:21:59.

excited about things going on there. We are nonprofit, a charity, we'll

:22:00.:22:03.

raise money from the general public and we just announced we are looking

:22:04.:22:07.

to create an endowment, we are becoming more like a university,

:22:08.:22:12.

cultural institution, we want to keep Wikipedia say. We are doing a

:22:13.:22:18.

good job of raising $100 million for the endowment -- say. We aren't

:22:19.:22:22.

close but we had a lovely gentleman who left as $1 million in his well

:22:23.:22:26.

and maybe here in Davos maybe someone has some money! You are in

:22:27.:22:34.

the right place -- will. At the weekend, apparently they all go

:22:35.:22:40.

skiing. Hang around at the weekend. Unfortunately, I'm from Alabama and

:22:41.:22:44.

I don't like snow! That's what you have to do, sit in the bar and

:22:45.:22:47.

weight, ply them with booze! Thanks Jimmy.

:22:48.:22:56.

In a moment, we'll take a look through the Business Pages but first

:22:57.:22:59.

here's a quick reminder of how to get in touch with us.

:23:00.:23:02.

We'll keep you up-to-date with the latest details, insight and analysis

:23:03.:23:09.

from the BBC's team of editors around the world. We want to hear

:23:10.:23:15.

from you, get involved on the BBC Business Live web page. On twitter,

:23:16.:23:27.

and you can find us on Facebook. On TV and online whenever you need

:23:28.:23:28.

to know. Paul is back to take us

:23:29.:23:30.

through the stories in the papers. Let's begin with this in the Wall

:23:31.:23:39.

Street Journal. It turns out the US Treasury Department wiped $1.7

:23:40.:23:47.

billion -- sent. To run the same time as five Americans were released

:23:48.:23:52.

from jails. The Wall Street Journal is talking about whether that

:23:53.:23:58.

amounts to a ransom payment? It's dates back to the late 1970s, at the

:23:59.:24:03.

time, Iran was a big purchaser of defence missiles from the US. At the

:24:04.:24:08.

time of the overthrow of the government at the time. The US owed

:24:09.:24:15.

Iran money. It was peeling fought through the courts, President Obama

:24:16.:24:19.

has indicated it could run into sums of billions of dollars. -- being

:24:20.:24:28.

fought. It seems he has resolved this particular case but it comes at

:24:29.:24:31.

a time when the relationship has been much better, the best for over

:24:32.:24:36.

30 years, particularly surrounding the nuclear programme and, in the

:24:37.:24:39.

mix, this could mean the release of hostages. You could probably argue

:24:40.:24:44.

there is a lot going on within this agreement. To pinpoint that it is a

:24:45.:24:48.

ransom for the release of hostages would be unfair. The Financial

:24:49.:24:55.

Times, we saw the US banking numbers, the big bucks are back.

:24:56.:25:03.

Jamie Diamond, JP Morgan Chase, some would say that yes, he deserves

:25:04.:25:11.

this, up by a third? -- Dimon. Not quite the peak that was achieved in

:25:12.:25:15.

the good old days, where it was over $30 million. The main difference is

:25:16.:25:19.

that it is about the three-year plan. The question is, do these

:25:20.:25:25.

three-year plans work? At the moment, we have enough evidence to

:25:26.:25:29.

suggest it changes the dilemma between all of the employees and

:25:30.:25:34.

Chief Executive is at the bank. Bang on time, thank you.

:25:35.:25:35.

Have a great weekend. There will be more business news

:25:36.:25:36.

throughout the day on the BBC Live webpage and on World

:25:37.:25:41.

Business Report. We did not mean ice scraper is this

:25:42.:25:53.

morning, we needed windscreen wipers. Even the rain for most will

:25:54.:25:58.

clear quickly. Milder air has replaced the

:25:59.:25:59.

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