alix: we are moments away from the closing bell and i'm alix steel. joe: i'm joe weisenthal. ♪ [closing bell ringing] alix: 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? greece avoids a under very tough terms. was it an agreement among

lenders, or a brutal coup? alix: we have not one but two nobel laureates here to discuss one of the biggest economic stories and years. joe: also weighing on the economy today hillary clinton , had fiery words for wall street. can she really play the role of populist? alix: but we begin with the stock markets, with a pretty important day for the s&p 500. it bounced and closed above the 50 and 100 day moving averages. the reason i bring this up is that they were key levels. they close below the 200-day twice last week, and yet, they close higher. some technical momentum continuing to claw higher. joe: the 200 day moving averages completely debunked. alix: you hate these technicals. i love these technicals. now we are above all of those key levels. joe: we have seen three huge days. the german market up like 7%, all three major u.s. indices now positive for the year, so

things are looking good again. alix: it was definitely a risk on day. i want to deep dive into my bloomberg terminal and look at saudi arabia oil production. so, joe the big news of the day , -- saudi arabia pumping 10.5 million barrels a day. a huge record. oh, my god, there it is. it going to hit 11 million barrels. what does that do to spare capacity? that's oil you can get within 30 days, and it can pump for about 90 days. they only have 1.5 million barrels of oil a day left. so the question is 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. joe: does it look like they will keep producing? they can keep producing, sure, but at the expense of the oil bank we have been used to seeing in the market. what do you do without saudi arabia? joe: i still find this fascinating. into the terminal, and 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. there was a brief spike in the euro, but then, 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. alix: it's like go along european equities and we have to hedge our bets. joe: it could be. i think there is an aspect of that. when you're panicking, you need a bunch of cash and sell everything else. when you are ok, you don't have to sell currencies. alix: let's get to the star of the day. nobel laureate paul krugman is with us following a late-night greek debt deal with european creditors after months of negotiations. professor, welcome. great to have you on what feels

like a historic day. joe: last night on twitter, the is a coup," it trended globally, all around the world, not just locally, so was this a coup? prof. krugman: that may be pushing it in bit far. it was a raw assertion of power. 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 -- unless you go along. joe: it wasn't just the european central powers. you had really tough lines from 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?

prof. krugman: well, obviously they can, but the funny thing is nobody thinks this money is coming back. greece cannot in fact pay more. 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 there is no 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 humiliation, kind of a ritual humiliation for greece, and that's not a good sign. that basically means the notion the euro is a road to a united europe, that it's a force for commity for peace and among european nations is totally off. we have seen who holds the power and it's quite sad. alix: 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.

so greece is not a successful economy, but it was not the disaster it is now. and so what we are looking at right now is that greece desperately needs some relief. it needs some relief on debt, it needs some relief -- actually -- if it had its own currency, you would say in a heartbeat, it needs devaluation. if we think about argentina, which was something like greece, argentina has massive structural problems. it continues to this day but , when argentina abandoned its peg to dollar, the economy began to recover and grew 63% over the last two years. greece does not have that alternative. the fact the euro has turned into a roach motel -- once you go in, you cannot come out, it's really a very disastrous thing. joe: argentina, big commodity exporter and also did it at the same time when china was booming. with greece, what's the value of devaluation given that they don't have a manufacturing sector, and you don't associate greece with exports?

prof. krugman: first of all, greece has what it always has had -- sun and sand. the idea of a post devaluation greece -- it is not happening right now, but it would be a very favorite tourist destination for large numbers of beer swilling brits. they would come to the greek islands. but the argentine story was not about exports. this is a widespread misconception. it was about the end of deflation. it was about 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. so it was mostly to mystic demand that drove argentina, so with greece tsipras 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. alix: i want to go back to what you said about debt restructuring. a bank had interesting note out talking about the actual , interest payments -- it might look bad if you are looking at the ratio of debt to gdp, but it

is in actuality much more manageable than other countries. prof. krugman: but it is always hanging over them. yes the burden of debt service , is not very large. the interest burden is not large and they have only just begun to run a primary surplus. the demands are that it gets much bigger, but the demands are always there. as long as the debt has not been written down in some way that takes it off the table. then any progress they make is just a reason to tighten the screws further. they need to see some kind of debt number that goes down as the economy makes headway and that's not going to happen because they are just too deep in the hole. joe: you have been, obviously a , huge critic of austerity pretty much anywhere, obviously greece. in 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. then they elect this new

government that comes in and sort of gets into a fight with the rest of europe and the , economy collapses again. first of all, 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 prepared to call europe, not to bluff by taking the measures that would be necessary to leave the euro if that was the alternative. so that was a disaster. if you are going to go into a fight, you have to be prepared to use the tools you have and they were not. it is amazing to me. you can look at a place like spain, which is growing, but still has 23% unemployment. is nowhere -- it is many, many years away from recovering the losses it took, and call it a success story. if you ask why they are starting to grow, it is not a mystery, and for one thing although they , are still practicing intense austerity, they have not been tightening the screws much lately, so the rate of change of austerity has basically

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 d success down incredibly here. alix: which is more important, debt relief for finding new ways for greece to actually grow? prof. krugman: well, 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. joe: all right. alix: talk about an about-face. joe: nobel laureate paul krugman is with us for the whole half-hour.

alix: i am excited. 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 crunched the numbers and will walk you through them, right after the break. ♪

♪ alix: i'm alix steel. joe: i'm joe weisenthal. what did you miss? alix: we told you about hillary clinton going to be tough on banks if she becomes president, but tougher than what? in 2012, no wall street banks had pleaded guilty to a felony, and this year, eight have. joe: and there have been record fines. arrow financial crimes reporter. alix: 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. secretary clinton: every time they have a chance to try that approach, it explodes the national debt, concentrates wealth even more, and does practically nothing to help hard-working americans. alix: still with us is nobel laureate paul krugman. professor krugman, what do you think about what hillary clinton was saying in terms of increasing employment and helping middle-class earnings? 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 minimum wage changes to enhanced bargaining power, to overtime rules, all of this stuff that , in fact, the economy is more malleable.

that wages are something that are more affected by politics and less determined by the invisible hand banned legend has it. than legend has it. i've seen people -- i guess i am, so hillary is that going that, saying i will try to do that. it is interesting that this is a moment of consensus among democrats that is making the belief they can actually do something. it was -- it was not a startling speech, except if you compare it to a democrats used to believe ,here the was a big division where there were new democrats that were basically like republicans except they felt compassion for the people they were hurting. at least it gives you a clear sense of where she and her party are going. joe: let's forget about political economic speeches. let's talk about what's important -- why is donald trump leading the polls?

what is your theory on that? prof. krugman: he's a 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 consists of and identifies with. it's clear it's the very thing upper side new yorkers find detestable about him are exactly what endear him to the republican base. even the big red face and yelling -- that makes him there kind of guy. joe: so when conservatives say he is not really one of us, not really a conservative. 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. they'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 polls, and in the end, they nominated mitt romney, who on substance was not that different from others, and probably the same thing will happen this time around with jeb bush playing that role. onx: with everyone focused greece, one thing you might have missed is puerto rico. they made a presentation here in new york explain why they cannot repay all of its obligations on time. they have about $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: the humanitarian and even the economic catastrophe in puerto rico is doing badly. it is not something you want to see happen elsewhere. but it's not remotely on the same scale as greece. they have not suffered a severe drop in living standards. they have high employment, but 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, receives aid on a scale that would be utterly inconceivable. joe: so the lesson with puerto rico, i have seen a lot of concern that their minimum wages too high. prof. krugman: their minimum wages too high. since their productivity is about one third of the u.s. average -- i'm in favor of a higher u.s. minimum wage, but not tripling it. 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 probably mean some puerto ricans who might work don't, although it's not clear how big an effect it is. but puerto rico is part of the united states. it has free migration to the rest 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 used to have special tax advantages which are largely gone away. in a world of fragmented 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. so, but, regions in the united states lose populations. until the oil came along, you see what's happening in the dakotas and west virginia with the erosion of the coal economy. so to see this is happening in some part of the united states, which puerto rico is, the -- is not that startling. the problem is they did over borrow and as young working be -- people leaving for job opportunities elsewhere they , leave behind a lot of people who need benefits and they have not got a good fiscal answer. greece, it isn't. greece is not on the same scale. done with youot

yet. we are going to keep you for a little while. still ahead, how does greece actually make money? we will look at greece us both potential and the astonishing ratio of debt to gdp. that number, right after the break. ♪

alix: i'm alix steel. joe: i'm joe weisenthal. what did you miss? that astonishing number -- the current greece level of debt to gdp. alix: what is even in greece plus gdp? it is wholesale. it is retail 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 welljoining us now is another nobel, lori at, the director for

the center of capitalism and society at columbia, as well as paul krugman, still with us. phelps, what can greece due to actually grow its economy? professor phelps: 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 just miles from that model. it's got huge levels of clientelism him --

and cronyism in the public sector. for example, if i'm not mistaken, pensions of government workers as a ratio to the wage or productivity is something like twice the level in spain. that shows you how the government is coddling the government workforce trying to get their votes trying to get 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 oecd economic outlook in 1998 , december, before they stopped publishing it for some reason. i looked to see what the ratio of profits to business income was in greece compared to the other countries. through the roof.

greece has a level of profits as ratio to total business income of 46%. and then the next two r frantz at 41 and italy at maybe 40. the u.s. at 32 and -- the u.k. at 32. at 41 next two are france and italy at maybe 40. joe: is that the problem? prof. krugman: it is a problem. 1998, greece has a terribly uncompetitive -- it's 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 25% unemployment. this is the reason greece is a poor country, poor than germany or france, but not a reason they

are in crisis now. professor phelps it's also a : reason they have chronically high unemployment and slow growth. it leads into all sorts of other things like with growth slow, the accumulation of private wealth builds up tremendously in relation to wages and productivity. so relative to productivity, the greeks are rich. and that pushes up wages and that pushes down employment. and pushes up unemployment. joe: with both of you here, 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? should the fed say -- does the fed had any business raising rates this year? prof. krugman: i say no. i mean, first of all, there is -- i mean unemployment looks , pretty low. except we don't know what full employment is. the idea that we know what a full employment number is is an illusion.

what we do know is inflation is still below target and what we also know from the experience of the last eight years is that it is really, really hard to get an economy going if interest rates are zero and you have shot your bolt on that. and 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 that's getting caught in another lost decade, and so the risks are hugely asymmetric. i really 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. we just don't know which way, but 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. before doing it, and we are not seeing that. phelps: 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 have a dampening, that can weigh heavily. prof. krugman: i just hate that argument. first of all what i know about , the economy -- i think janet yellen is a great fed leader and i think a very smart person, and the staff are wonderful. fundamentally, they don't know anything i don't know. it's the economy, not secret intelligence reports. we are 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 and so on understand also, that 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. or something. alix: professor phelps, what do you think?

professor phelps: well, 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. and i am disappointed that paul doesn't have more confident in the fed. i would think that the fed does have a sense of how business investment is coming along and what they're saying on the street and what they are saying in ceo offices. alix: well, gentlemen we have to , leave it there. we will no doubt continue this after the show. professor krugman and professor phelps, what a pleasure to have you both on the set. joe: thanks for watching. alix: don't miss tomorrow. bank earnings kickoff with wells fargo. ♪

♪ announcer: from our studios in new york city, this is "charlie rose." ian: good evening. i am ian bremmer, president of the eurasia group, filling in, who is on assignment. john kerry remains for talks with iran, and in their 15th day, it is the longest trip abroad of any secretary of state since george schultz in 1983. a third deadline has come and gone, with talks now extended until monday. both signs claim --