months. five straight months and you can see how bad it was back here in the earlier part of the year. now look. there's a lot in here that's come from the conference board. money supply growth. stock market advance. treasury yield curve. weekly jobless claims. there's consumer goods' orders. investment production of goods orders and equipment for high-tech and almost everything else under the sun, transportation and manufacturing. i don't know why people just didn't want to talk much about this today and it's interesting because our great friend, jim grant, had a wonderful story in the "wall street journal" over the weekend. the deeper the slump, the zippier the recovery. mr. grant has been rather optimistic. i believe this spring and summer and so have i. he appeared on the show not long ago. frankly, the combination of easy money from the fed, which may come to bite us in the butt later on, but that, plus the

internal correctives, profits are doing better. consumers are starting to spend a little more. housing is bottomed. there's an inventory siek in front of us. the point is, we may be under estimating the possibility of economic growth. that's what this leading indicator's index shows us and it's very important. there's more. there's another show called "the leading to co-incident" indicators. the co-incident indicators are things like employment and production and sales and income. when you take the ratio of the go, and i talked to my friend john riding today -- a distinguished wall street economist. at key turning points this ratio of leading to co-incident indicators, notice here in 1991. a key turning point it took off. notice down here, in 2001, it took off. here's where it is today.

up here. and, in fact, it is stronger than it was back in the early 2000s. this is another very important issue. it shows you that the handwriting is on the wall. and i might add, the economic cycle research institute is showing the same thing with their sets of various leading indicators for the month and for the week and whatever. and jim grant cites that in his article and i fully agree. the mustard seeds were planted last winter. you heard me talk about it. that was a lonely battle. right now you could be looking at stronger growth, if not in the third quarter but the fourth quarter and on into 2010 before the tax hikes take effect in 2011. this is the lead story tonight. are we all underestimating the strength of this recovery? are the leading indicators, in fact, signaling a barn-burner of recovery? something that the economic's profession and government

policymakers are not considering? now, the next question is -- will the group of 20 meeting in pittsburgh beginning this thursday, nurture or block the rising tide of world economic recovery? are these guys going to go, pro growth? or central planners? why don't they talk about investors or business instead of just government, government, government, which is what i'm hearing. let me start out with a little table. my impression of where the g-20 is headed based on news reports and everything i hear. check this out. they are not going to deal. this is the "no" list. they are not going to deal with a plunging dollar. they are not going to deal with soaring gold prices. they do not have a strategy, an exit strategy for spending, borrowing and budget deficits. they don't seem to talk specifically about free trade versus tariffs and, by the way, last week, the united states declared a protectionist war

against china by slapping tariffs on the china imports. these are the things that the g-20 won't look at. what is the g-20 going to look at? what are their obsessions? let's get that one on the screen. they'll atalk bankers. they are going to cap banker's pay and they may kill banker's profits. there's the story in the "wall street journal" this morning that says the four largest american banks, jp morgan, bank of america, morgan stanley and i don't know who was the other one, maybe goldman sachs, if these regulations on the bankers from the g-20 go through the major u.s. banks could see a 30% drop in profits. i can't think of anything dumber. obsessing about bankers? how about all the other more important issuers on the table? how about something for investors? or maybe even businesses? well, let's get some discussion. let's bring in dean baker of the center for economic and policy

research. let's bring in lapper of lapper investments and former ray gone economic adviser. andy bush of capital markets and steve were global cio of equities at federated investors, which has over $400 billion in assets under management. let me start with migrate pal andy bush. andy bush, am i exaggerating or is this thing just aimed at bankers and almost nothing else at the g-20? will it do us harm or help the global economic recovery? i ask you, andy bush? >> i really can't see a lot of good coming out of this. they are going to talk about financial regulation reform. they are going to talk about capital adequacy increases and how banks are going to need to set aside more money for risk capital. and that leads right into what you discussed before, larry, which is the decrease in profits for major banks because of something like that. that will occur. i almost guarantee you 100% that

will occur not only for the g-20 but, of course, for the united states, too. they are looking into this and i think by the end of the year we'll have a proposal by the obama administration on increasing capital adequacy ratios. >> the banks, by the way, from the "wall street journal" story -- and i want to be accurate -- a potential 30% profit drop. bank of america, jp morgan chase, citigroup and morgan stanley. dean baker, instead of promoting investment or business incentive, they could make it so a bank will never make a loan again because they'll be so afraid to take risks that they'll go to jail. do you really approve of what this g-20 talk is all about? >> larry, you probably don't remember but when back in september of 2008, all the banks were essentially bankrupt and went run k to congress saying world will end if they don't cough up $700 billion immediately. just give us the money. that's what they got. the major banks, everyone knows. they are too big to fail. they could do the stupidest

things in the world and they'll tax you and me to make up their losses. you might think that's okay but i'm in favor of free market capitalism. i thought you were, too. i don't want them operating with a blank check. >> you've touch aid responsive cord. the banked that are still t.a.r.p.ed will have to weigh down by some banker bonus and banker pay caps. it does bother me, dean, to follow-up before we get to the rest of the panelists -- i'm all for higher capital but i don't want it ought at once. and i don't want you to make such an atmosphere, whether it's t.a.r.p. or not, that banks don't take risks. everyone is crying for banks to make loans. if the recovery is to launch and be sustainable, we'll need loans. so i'm saying that they are going too far. there are better ways to promote economic growth, dean, than just to obsess about banker pay. >> let's just deal with the

concretely in terms of this too big to fail issue. a number of banks, city, bank of america, goldman. everyone knows if they went under the government would go to their rescue. one choice, we recognize their dependence on the government and we tell them what they can and can't do or break them up and say, you're on your own. tame gakables. if you lose you lose. we're not there for you. but not a situation where they know if they take risk and they lose we'll come to their rescue. >> i'm completely opposed to the "too big to fail" doctrine. and i think there should be some resolution or bankruptcy authority. let me go to art. art, we're going to put up some of the old prosperity killers on the full screen. so people can get a good glimpse and a good sense of where you're coming from. i think we have it. this is the "four prosperity killers" rising tax rates.

inflation their money. trade protection and i'm paraphrasing, reregulation/government controls. when you look at the g-20 and what's happened here in the u.s., art, do you see the prosperity killers or do you see the prosperity nurturers? >> the g-20 is a disaster, larry. everything they should be worried about they are not and everything they shouldn't worried about they arerried about. when you look at it, we should fight profedexism. obama's administration is become protectionist. there have been 28 trade agreements that have not included the u.s. in the last year and a half. and we have literally dropped the ball and the g-20 is not coming after us. monetary policy is the one that's stimulating a lot of the recovery and a lot of these asset appreciation items are all monetary policy. you're going to get the natural recovery because you fell so far you're going to bounce back. it's really true what you said earlier.

but the government's not helping this process. >> how can you have a g-20 meeting without such obvious issues? this is what blows me away. gold is soaring. the dollars is collapsing. and everyone, every american taxpayer -- and i'll bet this is true in democracies all around the world -- are clamoring for an exit strategy from all the overspending and debts and borrowing. how can you have a g-20 meeting that is obsessing about banker pay and not dealing with these bigger picture items? >> because i think they are afraid of obama and afraid of offending us or something. who knows? but the issues that you said, the deficit, the spending, the dollar, gold, tax rates, protectionism, that's what these people should worry about. they shouldn't worry about whether the ham sandwiches are warm or cool at lunch. come on! these guys are shedding light on nonproblems. it's ridiculous. >> in fairness to the g-20, they

are going to discuss these. they are talking about trying to get china to shift to more domestic consumption to get the u.s. to excessively overspending and -- >> where's discussion of collapsing dollar? where is that discussion? if the dollar keeps falling we won't export any -- >> let me say, the chinese really needs to strengthen if the chinese are serious about getting the u.s. to change their fiscal situation. the chinese have to consume more. the best way would be to ayou the chinese worker see their currency be worth a lot more and buy imports from the united states. >> i think china is the only one growing. they've been cutting taxes on investment. let me to go to steve. from an investor standpoint -- what bothers me among other things, with respect to president obama's speech today and all of his media offensive that he had over the

weekend, i never hear the word "investor." i never heard the words, what would help investors. how to create wealth and incentives to save, invest and form capital. and sendly, i don't hear the word "business" except to punish business. how can you grow an economy without the help of investors in business? >> you can't. i think it's the investors that are causing it to recover. my hope is they stay out of it. the g-20 we're pleased to have them in our home city of pittsburgh. >> it will be serving a lot of hamburgers and everything, whatever it is they eat. we don't think they'll accomplish much of anything. a lot of talk and not much action. the government in a long term, some of the policies you talked about it could be very negative for the long-term economic growth. but that remains to be seen. right now i'm focused on what's in front of us which is the natural recovery of this economy. it's stronger than people

anticipate. if the government just gets out of the way, the economy can keep going. >> you're a stock market bull, i take it? >> absolutely. >> how bullish are you? are you still bullish? >> we are. since march. and we're still bullish. we think we're going to 1200 by the end of year. >> 1200 on the s&p 500? >> right. >> which would equate to over 11,000 on the dow? >> right. >> you're not worried about the g-20 because you think it's all talk? >> i think they are only consolation -- they'll accomplish less than the u.s. congress. >> dean baker, did you hear that? ham sandwiches for baker notwithstanding. steve says not to worry about the g-20. >> these are basically get-toges. not a lot ever happens at these things. in any case we give them lots of attention. your concern of the trade war, china responded by put penguin up terrorist in chicken feed. >> did they say that they are

considering it. >> okay. well we're supposed to worry about that. we're not going to get in a trade war with china. this is silly. >> how about a currency war? >> well, we do need the dollar to fall. the comment was made earlier that the only way to correct the trade and balance of china is to get the dollar down. you can't deal with the situation where the dollar is overvalued by 20 arrest 30%. if we get the trade balance we can correct the budget deficit and it's an accounting thing. if we're borrowing internationally that means we have low private savings or large budget deficits or both. >> art, do you want to see the dollar depreciate against china? or would that be a form of currency protectionism? >> i think that would be currency protectionism. i think what's happening is the dollar is depreciating because of the fed policy because of increasing the monetary base having people buying foreign currencies and commodities. which has people buying stocks.

i agree that we're going to have a nice solid recovery. it's going to be here a while but with a tax income of 2011 and with the long-term consequences of fed policy, this is not a scenario for prosperity of america. >> does this still feel and sound like a 1970s replay of some kind? >> it does. it does to me. i can see it everywhere, i think. and i do worry about protectionism. and i do worry about a trade war, maybe not smoot holly, but, goodness gracious, we're not part of a frayed that we have been for the -- trade that we have been for the last 70 years. this is a reversal of trends and i think it's dangerous. >> andy bush, the last word. do you expect any particular market impact? steve says don't worry because it's going to be all sound and fury signifying nothing if i paraphrase shakespeare or somebody said that, maybe it was confushs. i'm so old i can't remember. andy, let me ask you. will the markets react to the

g-20 meeting? they won't deal with the dollar or gold. the trade thing -- it's like all they want to do is bash bankers. do you sell financial stocks? what happens, andy? >> here's what's going to happen. the g-20 won't do anything outrageous or that hasn't been planned out. the g-20 announcement or communication is not what the meeting is about. it's about the commentary coming from the financial ministers and central bankers and that will surround what will happen tomorrow. if the fed talks about an exit strategy. that's the elephant in the room for all these guys. they'll have to come up with an exit strategy. >> in my heart of hearts and dean wow won't like this, i'd like to see currency stability and lower tax rates. that's what is missing, art. >> so would i. >> i'll give dean baker a whack at that. slam me right here. >> once we get the rates down, sure, they should be stable. we now have a badly overvalued currency and that's why we have

a large trade and budget deficit. they go together. >> i fear you would be right and the dollar is going to continue to fall. but i don't think that rebound a pleasant investment or economic outcome on the other hand, we'll revisit this. thanks very much. thank you so much. so, is this going to be a barn-burner recovery? we return to that theme. market expert peter schiff and jeff will weigh in when "the kudlow report" comes back and let me tease in another segment, mr. schiff has thrown his hat into the ring. he's a senate candidate in the state of connecticut and we'll visit with him on that as well. you're watching cnbc, first business worldwide.

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to return to our theme, will this be a barnburner of a recovery, adjusting for the g-20? we have connecticut senate candidate, peter schiff, the author of "crash proof 2.037" and also a distinguished investment adviser. and we have our great friend here from lpl financial. jeff, i'll start with you. the leading indicator also put the picture up on the board.

five consecutive months the ratio of coincidence of leading indicators is doing very pell. is this going to be a barnburner, jeff? how much room does the stack market rally still have? >> you can't deny the facts. we've seen an incredible turn around of market performance. whether it's the stock market, credit markets, clearly the leading indicators you can see the upturn in our current conditions index that turned it back in march and that's when we began to add risk back to the market. we haven't pulled that off. even though the market is ahead of our year-end target estimate which is around 1050 on the s&p 500. we see more gains to come on the back of higher earnings revision. and a lot of cash on the sideline. >> peter schiff, if you would, put on you were financial hat. i want you to respond to jeff's optimism and my thought that we could be in, for the if next year or year and a half were in

for a barnburner of a recovery. >> we might get a stock market recovery. we might get a positive print or two on gdp because we spent some more borrowed money but we're making the economy worse not better. that doesn't mean stocks can't rally. i own a lot of stocks. i own them outside the united states where the rally is stronger. with the dollar weakening that intensifies the gains from an american perspective of what's happening abroad. but i don't think that the stock market going up means the economy is turning around. the stock market dropped dramatically. you're going to get a bounce. and when you're creating all this inflation, nominally, prices have to rise. but the real question is, is there any real gains that are going to be made adjusted for inflation by owning just stocks? >> i don't think so. >> jeff, that's a good question. in real terms, will we get ainflation adjusted gains in the stock market? i want to pursue this, jeff. a lot of prints, a lot of data, retail sales, business spending,

factory orders, the ism reports for manufacturing and so forth, they are all beating the street, jeff. lead into that for me. what can investors take away? >> yeah. all these numbers are not only exceeding expectations, larry, they are good. they are solid numbers. this isn't just better or less or worse. these are gains. look at the housing numbers with industrial production. retail sales. everything you cited, the labor market is still weak but its improving quickly. if the pace continues we'll have jumped growth by the end of this year. but look at what this means for corporate america. earnings estimates have been rising, up 40 cents in the last couple of weeks as we look to 2010. the stock market is trading at 14 times 2010's conservative expectations. that means there's more upside on fundamental estimates on what companies can produce. >> peter, there was a piece out

by somebody that said -- i don't remember who -- but the idea was that the economy is beating everyone's expectations so much and so with the profit that, in fact, i had a good idea to buy even lower-quality stocks, particularly small-cap stocks and mid-cap stocks. what do you make of that? >> certainly you're going to get, short-covering rallies. you might have more shorts in the lower-quality names and they could be covering. if you want to gamble, sure. in a bear market rally you could get a bigger move. i'd prefer to avoid the u.s. market. there's better values abroad. the economic fundamentals are better. you don't have to worry about whether it's a bull or bear market rally. there are legitimate bull markets outside the united states. i would rather participate there. >> would you be selling treasury bonds, peter? >> i don't own any to sell. if i had them i would certainly sell them. >> why would you sell them? >> because the government has

undermined the value of the dollar. the dollar is going to lose a lot of value. all treasuries are are promises to be paid dollars in the future. the dollar will lose a lot of value in the future so why would you want to own a receipt for dollars? those aren't my only choices. >> jeff, on the way out, as an optimist about the stock market, i want to ask you what could go wrong? what is your biggest fear? >> there are several but to narrow them, protectionism is the number one and reinflation. if policymakers make mistakes and inflation gets out of control that's a big enemy. >> how long in view of your concerns, how long can the rally go? we're coming into the fourth quarter of 2009. if it get pushed into 2010, when you sell? when would you contemplate selling? did it cross your mind? >> there are certainly levels at which, maybe 1200 on the s&p.

but it's the middle of 2010 when the fed need to make a decision about the balance sheet and that's will be discounted ahead of time so we need to see how well the fed is managing. forget the g-20. it's the fed that matters. let's see how well they manage their exit strategy. >> thanks ever so much. coming up we'll talk about politics.

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with accuracy scores... to help you decide which analysts to trust. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity. your friend and distinguished adviser were peter schiff has thrown his hat into the connecticut senate race as a republican. are you running add republican or libertarian? >> republican, larry. >> let me gloss over for a minute the gop primary. running against senator christopher dodd. what's your key issue? >> if i get the nomination and get the run against dodd, and i know you considered the senate seat yourself, so i guess you can run vicariously through me. >> i didn't feel a calling, peter but i wish you all the best of luck. >> well, i would love to run against chris dodd. i think he's the ideal opponent

for me and the poster boy for the financial crisis. he represents everything that's wrong with washington. and i think he would be a great matchup. he was completely complacent when everything was happening and i was out there warning people about the problems. i'd love to have a debate with him about why the country is in so much trouble and why the markets are the solution. not more government. >> will you promote stuff like -- are you going to run for a flat tax rate? or constitutional amendments on spending and borrowing or things of that nature? >> we're in a real crisis. we have to get the spending under control. i would love to cut taxes and go to a flat takts. i'd to abolish the income tax but government is enormous and we can't cut taxes until we make government small sorry we need massive spending cuts. unfortunately right now we're doing opposite. barack obama is growing government when we need to shrink it.

>> the later irving crystal, the father of neoconservism. if you wait for the spending cuts to come you'll never cut taxes because somehow we never cut government spending. might you fall into that trap? we'll stay with high tax rates because we'll never get government spending down? >> the reason i want to go to washington is i want to make sure we do that. i want to reform the federal reserve. we need to restore sound money. we can't just keep taxing and printing money. we're going to destroy the economy. if someone can't bring the spending under control, we can talk about tax cuts all we want. nobody is going to get a tax cut. everybody's wages are robbed by inflation. >> last one. you've been a pessimist on the american outlook but optimism wins elections. can you turn the pessimism into optimism?

>> i hope so. there's something to be optimistic about if we can bring change to washington. if we can unleash the free market. and cage government, then there is a reason to be positive. right now i don't see it happening. >> add good reason and better reason than most. peter schiff, we wish you with best of luck. i won't make endorsements on the program. >> but you can vote for me. >> i do vote in connecticut and i wish you all the luck in the world. undoubtedly we'll be having other candidates on the program. coming up, the fed meets tomorrow and wednesday. do they have an exit strategy from future inflation threats? big wig vince rheinhart and wayne angel weigh in. beale show you the index that says it's time for the fed to take action. "the kudlow report" will be right back. boss: so word's gettin' out that geico can help people save in even more ways -

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welcome back. the fed meets tomorrow and wednesday. what about the plunging dollar, soaring gold. a stronger economy. do they have an exit strategy from future inflation potential? we have vincent rinehart, a former fed monetary big wig adviser to the board and our

great friend, wayne angel, a former federal reserve governor. before we get to question one, i'll put up a basket of commodities. it's very important chart, i think. we'll put it up. the crb commodity index. this is the spot commodity index and there's no speculation for oil and gold because they are not in there. nonetheless, we're beginning to recover from commodity deflation and, in fact, what this chart shows is commodities are now up 24% from the trough. this is a broad based basket of commodities. a good proxy for inflation. i think there's about 30 commodities in there. wayne angel, i have no indications from speeches and interviews and whatever, that mr. bernanke even looks at this kind of thing much less reacts to it. >> larry, he does look at it. every week they have a commodity price chart and they circulate the report that the circulate that they circulate to all the

board members and it's time for them to act because they cannot let this go on longer with the weak dollar and soaring commodity prices. they are out of time. they've got to call a halt to low interest rates. >> all right. that's all interesting. but vince rinehart, as much as a theoretically agree with wayne as a practical matter i don't think any of that is happening. isn't the fed targeting the unemployment rate, unused capacity resources and so forth and so on? and by the way, the chart -- >> the chart the governor referred to is known as the angel chart. >> the "angel chart." >> and my bet is it's at the bottom of the in-box. you heard the chairman talk at brookings where all he talked about was the past unemployment rate. it's going to be high and decline gradually. that's what matters for those models of inflation determination. and so they are looking like

they've got some time to run in their forecast. >> wayne angel, i actually want to pause it further. a agree with your commodity price rule. but if also agree with vince. it's at the bottom of mr. bernanke's in-box. i think the fed and treasury want a cheaper dollar because they believe it will drive the export-led growth and they also believe that will stop overambitious consumer spending on exports. in other words, i think they are deliberately targeting a lower dollar, wayne and that's going to backfire into inflation? >> absolutely. they can't run the fed based upon fear and they are running it based on the fear that they will do what japan did in its decade and a half problem and that's the first gesture to higher rates and the economy tumbles. but that's not the case. we have a v-shaped output recovery. it's stronger than anyone

believes. and it's time for chairman bernanke and the fomc to back it up with action. >> that's another point. maybe we'll put the leading inkay tors index back up. that's one of the themes of this show. we could have a barnburner recovery at least in the next year. it sounded like you don't expect any clear exit strategy from the fed at this meeting? no signals? no nothing? >> you know what the most important date is? the most important date is chairman bernanke's confirmation hearings. you're not going to get any news coming out of 20th and constitution until that's over. i don't know if you saw the report today the treasury in the white paper of the summer wanted the federal reserve to produce a report on its structure. and give recommendations on how to reform the institution. they let reporters know, they are not going to proaugust it, why? they are not going to write a report that gives the 20 hard

questions for senators -- >> that's an interesting point. i'll ask you some more. now the fed, in battle. they are battling for their independence. not just against congress but also the treasury, vince. this is almost unprecedented. has to slow them down for any tightening or snugging up or inflation worries with it near 10% unemployment. is that what you're infer something. >> i think it was the right thing to say "no." it's not the job of the treasury to give instructions to the federal reserve. it's a feature of the congress. >> the commodity price rule you advocate, would suggest looking at the basket of the commodities -- i don't even have energy and gold in there for fear someone would call it trader speculation. this is about 30 commodities. should the fed be snugging up the target right i rate right now to get it to 25 basis points and then suggest it's going to snuggle up higher and use

commodities as a proxy the way you long advocated during your price stability term at the board? >> they should do it right now. and they must not talk about extending for a long time these low interest rates. they've got to act. and the fact of the matter is, the 52-week growth rate of these commodity prices are soon going to be driving the cpi inflation rate higher and they've got to act. they are out of time. >> vince rinehart, i think wayne's right. doesn't this foreshadow higher inflation? we know the fed isn't going to tighten ahead of schedule. they are behind schedule. you both essentially say that. should we look forward to this inflation to become real? >> the risk are to the upside on inflation. no question. central banks always act asi met

rickly. and that's a good point. >> every central bank not just the federal reserve. >> the investors are right. they are buying everything. they think they are right. vince and wayne, thank you. i appreciate the illumination. coming up, a different subjected. the fcc, federal communication's commission, proposes new rules for the internet. my question is -- how much control should the government have over web traffic and internet commerce? this is a tricky one. "the kudlow report" will be right back. (announcer) take your time to find the right time

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- one just got an email. - woman: what?! hmph. it's being revised again. the copilot is on mapquest. and tom is streaming meeting psych-up music - from meltedmetal.com. - ( heavy metal music playing ) that's happening now with the new mifi from sprint-- the mobile hotspot that fits in your pocket. sprint. the now network. deaf, hard-of-hearing, and people with speech disabilities access www.sprintrelay.com. how much control should the government have over web traffic and internet commerce and profit. we are joined with the full story. this is a tricky but important story. hampton? >> absolutely, larry. first of all, president obama has put broadband access for all americans at the top of his technology agenda. his sec chairman says that won't happen without net neutrality, a policy that forces internet providers to treat all web traffic equally. the internet, the sec chairman says, is at a crossroads. >> we could see the internet

stores shut down for entrepreneurs, the spirit of inknow skbrags stifled. a full of free throw of information compromised or take steps to preserve internet openness. helping insure a future of opportunity, innovation and a vibrant marketplace of ideas. >> internet traffic doubles every two years. more and more consumers watch videos and download music and a host of other services that eat up a lot of band width. net neutrality is a win for google and amazon.com who hope to profit from expanding streaming and downloading demand. but the sec in the end may lock horns with telecom giants like at&t, verizon and comcast, who don't like the government telling them how to run their networks. >> this is not about government regulation of the internet. i had about fair rules of the road for companies that control access to the internet. we will do as much as we need to do and no more, to ensure that

the internet he mains an unfettered platform for competition, creatity and being an entrepreneur. >> you're absolutely terrific. coming up, chris of ctia, a wireless associate. i think we'll put him up and ask him a quick question. chris, thanks so much. first of all you heard half the support. yes or no. do you think net neutrality will pass as a firm regulation by the fcc? >> i hope not. we have a job to do to education the fcc and policymakers why it's not necessary. >> and let me ask you another quickie before we come back. what happens to the profitability of the web providers? everyone wants access to the web. we have a lot of that now. but after all, somebody has to

build out the band width. what happens to their profits and investments? >> that's a cause for concern. that's the uncertainty we're troubled by. the exact time when the government hopefully is facilitating investment, and innovation, these rules may, in fact, do opposite. we'll come right back and delve in a little bit more. tricky with you very important topic. thanks so much. we'll be right back. we'll pursue this. this is a power play by the government to turn the providers in another highly-regulated utility. we'll be right back.

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potential government control over the internet is net neutrality will it limit inknow jags and customer service? we have chris of the wireless association. chris let me go through this. everybody wants total broadband access. i don't know anybody in their right mind that wouldn't. my question is this. the amount of viem and traffic on the internet is growing exponentially. it's phenomenal and wonderful for the economy and information and wonderful for the ages. what about the buildout? how can we accommodate all this potential congestion? is anybody at the fcc dealing with that? >> to give you a sense of the scale and scope of the buildout, the industry put $100 billion into the u.s. economy in the last three year as loan and spent close to $43 billion on

spectrum to help facilitate the buildout. you raise some significant concerns that we have. a great example is, a youtube download to a wireless device takes 100 times after band width of a voice call. that's almost a per forget storm of usage. our concerns are if forced to deliver every bit all the time, you're going to lead to a problem. and that's a concern. >> if you're forced to deliver every bit all the time, and meet the demands of these consumer groups, i think they are radical, but what happens to the profits of the delivers? and the much -- look. it's easy to hate telephone companies and the cable company. okay? what happens to their profits which are supposed to go into the investments to expand the very broadband band width delivery? that's the part i don't get. does the fcc understand that? >> first of all, i believe they

do. i think it's our goal to encourage them or to facilitate that understanding. because there is a recognition that the networks themselves, particularly in the wireless space, need to be buildout to facilitate the broadband development and growth. it's unique, i think, to the wireless space in that we've seen an explosion in broadband as the networks have moved to the third and fourth generations and that's been sort of indicative of where consumers are going. it's a cycle that consumers want more. carriers build the networks. hand set manufacturers make the handsets and application developers develop their handsets. it's a great story and unlike any other wireless market on the planet. >> let me just ask. obviously you're not from one of the telephone companies. you're not from the cable company. what's your meat in the game? who are you representing? >> we represent the entire wireless ecosystem. the wireless carriers. the manufacturers of the infrastructure.

the handset manufacturers. we do have companies like google and microsoft and motorola and nokia and all that. but we also have t-mobile and at&t and verizon. >> google, i thought, google wants the open access. they are for net neutrality. >> that's interesting. i think you're correct in saying that they do. but i pose the question, are they allowed to cash their content closer to the customer to provide a better service under these net neutrality rules? you mentioned amazon earlier. is amazon, which is basically a wireless device, a single-purpose device, is that allowed to under new net neutrality rules? these are some of the questions that will come out as the commission considers these new rules. >> you are basically saying, this rule promulgation or proposal has a long kay to go until it's implemented? is that your thought in. >> i certainly hope so and we've got a lot of educating to do. >> chris you're so helpful.

>> thank you. >> a technical argument. but it's hugely important. everybody wants access. the question is, what about the profitability to invest in the expansion of those types? gee we're "the kudlow report." catch me tomorrow morning on the call with melissa and trish at 11:00 a.m. see you tomorrow night right here.

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