[closing bell ringing] u.s. stocks climbing and european equities capping the biggest rally since 2011 on greece's bailout agreement. the euro sliding on speculation the deal may clear the way for higher u.s. interest rates. joe: the question is, what did you miss grexit question mark greece avoids a under very tough terms. was it an agreement among lenders or a brutal cu? alix: we have not one but two nobel laureates here to discuss one of the biggest economic stories and years. clinton had fiery words for wall street. can she really play the role of populist? the: but we begin with stock markets, with a pretty important day for the s&p 500. it closed above the 50 and 100 day moving averages.

these were key levels. a closed below the 200 day twice last week, yet some technical momentum continuing to claw higher. moving averages completely debunked. alix: you hate these technicals. i love these technicals. now we are above all of those key levels. market up like 7%, all three major u.s. indices positive for the year, so things are looking good again. deep dive into my bloomberg terminal and look at saudi arabia oil production. day -- saudiof the arabia pumping 10.5 million barrels a day. a huge record. it going to hit 11 million barrels. what does that do to spare capacity? that's oil you can get within 30 can pump for about 90 days. they only have 1.5 million barrels a day left.

what happens if there is supply shock or demand picks up? saudi arabia may not have the wiggle room and capacity for big swing producers. rate at produce at this the expense of the oil to bank we have been in use to in the market. what do you do without saudi arabia? still find this fascinating -- this is a three day chart of the euro. there are two points i want to look at. really early in the morning -- i passed out last night and woke up at like 3:30 to check the news. i woke up right when they announced they had a unanimous deal. spike in therief euro but later in the day, the euro really sold off on the news. that's the third time we've seen this, where you get some event that looks like a deal or no deal and the euro did the opposite of what you might expect.

go alongs like european equities and we have to hedge our bets. joe: when you are panicking, yield a bunch of cash and sell every else. when you are ok, you don't have to sell currencies. alix: nobel laureate paul krugman is with us following a late-night greek debt deal with european creditors after months of negotiations. professor, welcome. it feels like a historic day. joe: last night on twitter, the hash tagged this is a 2 -- it trended globally all around the world. was this a coup? that may ben: pushing it in bit far. there is never a case made that yesterday program made sense or there's a reasonable way of working your way out, but all

that happened was essentially, the european central powers -- i just coined that right now -- the european central powers that we will destroy your economy was you go along. joe: it wasn't just the european central powers. you had the finance ministers of slovakia and finland who were being asked to -- this is their taxpayers money they are giving to another country. why can't they demand strict conditions? they krugman: obviously can, but the funny thing is nobody thinks this money is coming back. fact pay more.n this is not about how much greece will repay, which is going to be very little regardless. it's about how much the greeks have to suffer and this was all about sending a message that you can't escape, you don't get away with anything. greece has been clear they were not willing to contemplate leaving the euro, so it's actually a very sad day. it was a ritual humiliation for greece, and that's not a good

sign. that means the notion the euro is a road to a united europe, that it's a force for peace among european nations is totally off. we have seen who holds the power and it's quite sad. even without the euro and greece was on its own, wouldn't have some structural problems -- you can chart back to the 80's the problems. prof. krugman: greece had structural problems but it did not have 23% unemployment. greece is not a successful economy, but it was not the disaster it is now. greece desperately needs some relief. debt, itsome relief on needs -- if it had its own currency, you would say in a heartbeat, it needs devaluation. if you think about argentina, argentina has match the structural -- has massive structural problems. but when argentina abandoned its peg to dollar, the economy began

to recover and grew 63% over the last two years. euro has turned into a roach motel -- once you go in, you cannot come out, it's a disastrous thing. argentina, big commodity exporter and at the same time china was booming. with greece, what's the value of devaluation given that they don't have a manufacturing sector to her and you don't associate greece with exports? prof. krugman: first of all, greece has what it always has had -- sun and sand. the -- a very favored tourist destination for large numbers of peru -- of beer swilling brits. but the argentine story was not about exports. this is a widespread misconception. it was about the end of deflation and knowing the suffering would not continue indefinitely, that money would not gain in value as the economy

shrank, but that you would have some inflation. vetoed all the proposals even take seriously the possibility of an exit. that was foreclosed and in the end, he had no alternative except to give into german demands. back to whatto go you said about debt restructuring. there was a note talking about the actual interest payments -- it might look bad if you are looking at the ratio of debt to gdp, but it is much more manageable. prof. krugman: but it is always hanging over them. the burden of debt service is not very large. burden is not large and they have only just begun to run a primary surplus. but the demand are always there. the debt has not been written down in some way that takes it off the table. any progress they make is just a

reason to tighten the screws further. they need to see some kind of ast number that goes down the economy makes headway and that's not going to happen because they are just too deep in the hole. huge critice been a of austerity pretty much anywhere, obviously greece. and the rest of europe, countries are growing again. even by the end of next year before they called the new elections, greece was starting to grow. they elected to government and they get into a fight with the rest of the europe and the economy collapses again. how do you explain the fact the rest of europe is growing and would greece have been better being on the glide path? prof. krugman: it turns out you had a government that was not repaired to call europe plus bluff by taking the measures that would be necessary to leave the euro if that was the alternative. if you are going to go into a fight, you have to be prepared to use the tools you have and they were not. you can look at a place like

spain, which is growing, but still has 23% unemployment. many, many years away from recovering the losses it took, and call it they -- and call it a success story. although they are still practicing intense austerity, they have not been tightening the screws much lately, so the rate of change has dropped to zero. and over time, time heals many things. if you have 22% unemployment long enough, your cost start to drop and you become more competitive. so some recovery, yes, but the idea that we have to define success down here. alix: which is more important, debt relief for finding new ways for greece to actually grow? prof. krugman: the growth is what matters. the debt blocks that. as long as you have a dead gdp ratio that's ever growing, when

are you going to get people to believe that it's time to spend or invest, even in exports? it does fit together but i have to say nothing was resolved except we learned this greek government doesn't have the courage of its own convictions. alix: talk about an about-face. nobel laureate paul krugman is with us for the whole half-hour. alix: coming up, hillary clinton took on wall street today vowing tougher oversight on wall street if she makes it to the white house. tougher than what? we will walk you through the numbers after the break. ♪

alix: i'm alix steel. joe: i'm joe weisenthal. alix: we told you about hillary clinton going to be tough on banks if she becomes president, but tougher than what? no wall street bank had pleaded guilty to a felony this year. joe: and there have been record fines. but the main focus was how to grow the middle class. she even took a shot at ronald reagan's legacy of trickle-down economics. >> it explodes the natural -- expose the national that, concentrates wealth even more, and does practically nothing to help hard-working americans. alix: still with us is nobel laureate paul krugman. what do you think about what she

said? prof. krugman: what she is reflecting -- there's an emerging consensus, kind of a liberal consensus, that you can do quite a lot to make the distribution of income somewhat more equal. that you can do everything from them wage changes to enhanced bargaining power, to overtime rules, all of this stuff that the economy is more malleable. that wages are more affected by politics and less determined by the invisible hand and legend has it. ive seen people -- i guess am, so hillary is that going that, saying i will try to do that. of consensusent is makingcrats that the belief they can actually do something. is a startling speech, except if

you compare it to a democrats used to believe which is that there were new democrats that were basically like republicans except they felt compassion for the people they were hurting. it gives you a clear sense of where she and her party are going. let's forget about political economics beaches. let's talk about what's important -- why is donald trump leading the polls? he's arugman: belligerent loudmouth racist without an ounce of compassion for less fortunate people. in other words, he's exactly the kind of person the republican base identifies with. it's clear it's the very thing upper side new yorkers find detestable are what in deer him to the republican base, which is himcally people who see in everything -- even the big red face and yelling -- that makes him there kind of guy. joe: so when conservatives say

he's not one of us, you don't buy it? prof. krugman: not really. the establishment has lost the ability to restrict the field so that only people who can put a smoother face on it are competitors. .hey've lost control the dynasties, the corporations have lost control at least for part of the primary process. we saw the same thing in 2012 -- one after another, ludicrous candidates, loudmouth, angry ludicrous candidates shot to the top of the pole and demanded they nominated mitt romney, who on substance was not that different. probably the same thing will happen this time around with jeb bush playing that role. alix: one thing you might have missed is puerto rico. they made a presentation here in new york explain why they cannot repay its obligations. they have about 72 million -- $72 billion in debt load.

you wrote about puerto rico and one of the reasons it's not greece in a positive way. what is it? prof. krugman:+++ and economic test for you puerto rico is not something you want to see happen elsewhere. but it's not remotely on the same stale -- same scale as greece. they always have high unemployment, but there are cushions because they are part of the united states and that means puerto rico, just because of the programs america has for everybody, we see a tiny scale that would be utterly inconceivable. joe: i have seen a lot of concern that their minimum wages too high. prof. krugman: their minimum wages too high. isce their productivity about one third of the u.s.

average -- i'm in favor of a high u.s. average. it probably is too high. i would not recommend that level relative to productivity in the u.s. but it's also true that is government safety net programs some puerto ricans -- it's not clear how big an effect it is. but puerto rico is part of the united states. it is an economy that doesn't have a good justification for having as many people in it as it does. they use special tax advantages which are largely gone away. in a world of supply chains to bring something to it and move it, that's how manufacturing is done -- puerto rico is an island with not great access and shipping expense because of the jones act is not a great place to manufacture. came along, you see what's happening in the dakotas and west virginia with the erosion of the coal economy.

to see this is happening in some part of the united states, which puerto rico is, the problem is they did over borrow and as young working be believed for job opportunities elsewhere, they leave behind a lot of people who need benefits and they have not got a good fiscal answer. greece is not on the same scale. still ahead, how does greece actually make money? we will look at greece us both potential and the astonishing ratio of debt to gdp after the break. ♪

alix: i'm alix steel. joe: i'm joe weisenthal. that astonishing number -- greece plus level of debt to gdp. alix: what is even in greece plus gdp? wholesale trade accounted for 25% while other makes of a greater piece of the pie than greece's industrial production. joining us now is another nobel laureate and the director for the center of capitalism and society as well as paul krugman, still with us. welcome to the nobel laureate edition of what you missed. what can greece due to actually grow its economy? it has to invite an awful lot of private enterprise. ireland might be an example. it did not go for a transfusion from brussels. it managed to coax in a lot of

time at capital which helped start new businesses and sparked a lot of employment, and a pretty decent recovery from the depression. the trouble with greece is that it is miles from that model. it's got huge levels of clientele is amend cronyism in the public sector. for example, if i'm not mistaken, pensions of government wagers as a ratio to the or productivity is something like twice the level in spain. that shows you how the thernment is coddling government workforce trying to trying to gets reelected. in the private sector, companies don't compete with each other very much. there is probably some cartel

agreements there and it's hard for newcomers. i looked up a number last week that surprised even me. i look at an old issue of the in 1998nomic outlook before they stopped publishing it for some reason. ratioed to see what the of profits to business income was in greece compared to the other countries. through the roof. greece has a level of profits ratio to total business income of 46%. to our friends at 41 and italy at maybe 40. 32 and -- the u.k. at 32. they are just off the charts. they are on a different planet in terms of the way they think about what a good economy should be. joe: is that the problem?

a problem.an: it is in 1990 eight, greece has a it'sbly uncompetitive -- definitely true. they had generous pensions and all of these things. less generous now. they have made much bigger cuts and people appreciate. so in 1998, they did not have any 5% unemployment. this is the reason greece is a poor country, poor than germany or france, but not a reason they are in crisis now. it's also a reason they have chronically high unemployment and slow growth. it leads into all sorts of other slow, like with growth the accumulation of private inlth builds up tremendously relation to wages and productivity. relative to productivity, the greeks are rich. that pushes up wages and pushes down employment.

joe: i want to turn the conversation to the u.s. economy, and economy perhaps not growing as fast as we like. the fed is clearly like to raise rates this year. is it too soon? have any business raising rates this year? no.. krugman: i say unemployment looks pretty low. we don't know what full employment is. ae idea that we know what full employment number is is an illusion. inflation is still below target from thewe also know experience of the last eight years is that it is really hard to get an economy going if interest rates are zero and you have shot your bolt on that. if the fed waits too long to raise rates, then we get a little bit of inflation. if the fed raises its rates too soon, we risk doing caught in another lost decade.

the risks are hugely asymmetric. i find it quite mysterious the fed is so eager to raise rates given that they are going to be wrong one way or the other. the costs of being wrong in one direction are so much higher than in the other, they should -- i think i coined the phrase, they should wait until they see the whites of inflation's eyes. guest: i think the counterargument would be if the fed hangs on to near zero interest rates, people will think my god, the fed is really worried about the economy and that can weigh heavily. prof. krugman: i just hate that argument. what i know about the economy -- i think janet yellen is a great fed leader and smart fed person and the staff are wonderful. fundamentally, they don't know anything i don't know. economy, not secret intelligence reports. where not talking about nuclear weapons and some failed states.

we're talking about stuff everyone can look at and i would hope most people out there in wall street understand the fed is a bunch of pretty good people operating on the same data we are and the idea the fed can't do what it should do because of the fear people might think it knows something they don't is one heck of a way -- it's a hall of mirrors. that is policy turning into the singularity. we just had an example in china of the government throwing ammunition to raise share prices there and every day the chinese government acted, the market reacted badly. i'm disappointed called is have more confident in the fed. -- paul doesn't have more confident in the fed. a sense ofnk he has how business investment is coming along and what they're saying on the street and what they are saying and ceo offices. it there.ave to leave

we will no doubt continue this after the show. what a pleasure to have you both on the set. joe: thanks for watching. joe: thanks for watching. alix: this is a great place to work. not because they have yoga meetings and a juice bar. because they're getting comcast business internet. comcast business offers convenient installation appointments that work around your schedule. and it takes- done. - about an hour. get reliable internet that's up to five times faster than dsl from the phone company. call 800-501-6000 to switch today. perks are nice. but the best thing you can give your business is comcast business. comcast business. built for business.

>> returning as a ceo after the resignation of ellen pao. ♪ emily: i am emily chang, and this is "bloomberg west." and losing a pioneer, looking at the legacy of the nintendo head. and cyber security, leading at investment.