does his teeth ♪ >> i like this song. let's hear it a little more. good morning. welcome to "squawk box" here on cnbc. happy friday, everybody. i'm becky quick along with joe kernen and andrew ross sorkin. our top story today is oil. prices really jumping off the rails yesterday. you can take a look right now and see that this morning it is above $108 once again. $ $108.15. this is what people have been watching closely. the concern over cuts are offsetting some worries that high oil prices could restrain demand. european buyers of iranian oil have cut back on purchases ahead of an eu embargo effective in july. some of iran's biggest customers in asia including china have reduced purchases. we'll talk more about oil in just a moment. meantime, take a look at the broader markets this morning. the dow did close higher yesterday, up by 54 points. this morning the futures are

indicated up another 38 points which would finally push us over the 13,000 mark it if we were to close there. yesterday we attempted another run at 13,000 and then gave it up. the s&p did come within a fraction of its 2011 closing high. and when i say within a fraction, we mean within less than 0.2 of a point. we're going to be watching that level very closely, too. also, let's take a look at the ten year this morning. we do 0 have a very big day. tim get near will be joining us at 8:30 and we'll see if that has any movement on the notes. the yield on the ten year is 10.998%. you will see the euro at 1.3387. finally a look at gold prices. you'll see now that gold is down by about $6.

>> and joining us now, the famous founding partner of again capital and a cnbc contributor. he was saying that it's a vacation week and we were supposed to thank him for being here. forget that go you are a cnbc contributor. >> no, no. my point is there are a lot of people not around. >> so we went with you. john, i don't know. i read "the wall street journal" lead editorial and there's so much swirling around, all of this discussion about oil, what's causing it, who can take credit for it. where gas prices are going. how it will affect the election. a lot of this is israel and iran, right? >> oh, absolutely, joe. >> a lot of things could happen. >> this is the mother of all supply disruption fears. this is the -- this is for all the marbles. this is 30% hanging in the balance. it's 50% of their oil. it's the majority by far of the saudi oil, all the kuwaity oil

going through the strait of horm hormuz. the shipping transit could be degraded. they don't have to close it. they don't have to committeely shut it down. you have a headline that says they sunk even a barge in that space, we're off to the races. >> and here you've heard cheney said something about iran years ago and it seems insane that the u.s. would really think about that after the experience in iraq and afghanistan. you bring up israel. is there anyone here that would say if they woke up and saw there was a targeted strike from israel, would anyone say they were totally surprised by that? would you be. >> no. you would have to be living under a rock. >> i wouldn't be surprised. >> israel will, when it comes right down -- >> shocking, right? >> they will do what they have to do, though, andrew. >> they would to it. >> the analysis is the military in israel isn't as much for it as the politicians.

is what we're struggling with. you usually have the politicians pushing back against the military in these situations and that's what the market is pricing in, joe. >> pricing in that it's less serious because of the politicians pushing? >> no, i think the market is pricing in that obviously the politicians do have the power to push the button and they may and they might. on the other side of this, too, the iranians are getting desperate. nbc's guy on the ground in iran talks about how there's hyper inflation in the food market. >> talking about $25 when they only make about $400 a month. >> they had a revolution that failed. it's simmering under the surface. so there's a lot of desperation seeping into it this equation and the big thing this week is when the iaea inspectors left iran and it gives israel another argument to say, look, the diplomacy won't work. wife to strike while we can now

and that's what has the oil prices up another leg higher. >> we have continuing -- what would you call it, tepid economic activity in europe. you have some good signs here of demand maybe building, and then you've got people finally realize, what month is it? >> february. >> we're in february. you know what will eventually come. the summer driving season. every year it occurs to someone the summer driving season is coming and then they run up gas prices. >> the high last year was in april. >> it was in april. we got to $4. >> just about. just about. the economy buckled to a degree. >> partly responsible for that summer, a little bit of the summer slowdown. there were a lot of other issues. >> i love this lead story. it's a lead story in "the journal" because they got to sit down with mario draghi, i guess. but i wonder if we're listening here. the traditional social contract is obsolete now.

again, the second day in a row where yesterday it was china deciding from state capitalism, entrepreneurship and we read this it again. >> we knew this. >> we knew it but we're still, you know, we haven't learned from the problems that europe has right now. so do you think that we get 3% plus gdp so that oil is even higher than it is or is it all going to be geopolitical? >> in situations like this, joe, a diplomatic solution could come out of the clear blue in a heart beat. >> really? how? they're going to stop with their nuclear aspirations? >> there will be a climbdown. we went through the whole thing with saddam hussein. it did ultimately end in a war but it ten years' worth of back and forth of allowing inspectors in, kicking them out and situations rising and falling. if this situation calmed down, oil prices would be back down $10. if if these prices sustain themselves, and we've rallied

from $75 back in october, on the good economic data. on the jobs and the gdp and other issues, on the good pmi. put us around $90. you're talking about a good percentage being shaved off. >> and there was a piece last week the leaders in iran are acting under pressure indicating they feel their position is tenuous right now so they're more ready to even act, i guess. >> they are. there's a school of thought -- >> are they losing a grip? >> there's a school of thought that the revolutionary guard would welcome a limited conflict with israel so that they could consolidate power. >> too many people on facebook in iran. right? they know what's happening in the rest of the world and tweeting. have you tweeted over there? >> i haven't but i may have followers over there. >> do we not want to stir things up we want to get rid of that

guy. >> we want to get rid of the guy but what are you left with? >> no, you can't get a devil worse than ahmadinejad, can you? i guess you could. another ayatollah. >> khamenei. may be worse. >> no, no, that's what they say. >> it gets confusing. this is with an "a" and the lost was with an "o." >> unyielding on the nuclear -- >> oh, he is? >> ahmadinejad has been rumored or thought to want to strike a bargain. >> that he can stay in power. he would give it up if he could stay in power. >> and move iran then into a more secure place in the world, an elevated position as well. ahmadinejad coming out of the revolutionary guard has that support. that's why they would welcome this potential conflict with israel and consolidate power. >> we're at $106 -- >> $108. >> $108 without anything. if something did happen it would be $150? and then if nothing is happening, it's $108.

so is this the low end where we are if things aren't -- >> i think this is the upper end, joe. >> it is? >> we've priced in a lot of the tensions. i think the inspectors leaving was another several dollars higher. i'm wait to go see what comes out of statement out of friday prayers to see what the weekend brings and to see if there's more pressure, more rhetoric than to come. word today that the obama administration is apparently working to get india oil supplies away from iran. they are the last major buyer. >> does that decrease or increase the tension? >> that will increase tensions. and another bolt out of the blue is the support from the europeans on this, the french and the uk. in terms of putting the squeeze here. this dueling embargo. >> putting the screws on is a good thing or a bad thick ng one market? >> it will push oil prices hi

higher. it's bad for consumers. ultimately the pressure brought to bear will be too much one way or the other. >> what happened to linsanity last night? >> got burned by the heat. >> burned by the heat. >> how did you go -- >> don't you watch the ticker? >> i do. >> it just went by, miami killed the knicks. >> it was awful. >> don't you see things as they -- >> this is how some people watch the show. they don't listen to a word they say and they just watch. >> diplomatic save at this, what happens to oil prices? they drop precipitously? >> i think technically tratding on the charts the $115 high from last year. we're not quite at the top yet. yes, i think there's about $15 worth of iran premium in these prices right now. i think based on the economic conditions especially here in the u.s. that $90 is probably a

fair price given where we're at globally in terms of global supply and demand. this is priced in steadily and not irrationally. >> we've these 0 other guys, got bullard and geithner but thank you. this is going to be the highlight, i think. >> i'm humbled to be here. >> john kilduff, thank you. >> you are so kind. >> i try to kill you with kindness. do you feel it? >> i feel like i'm trying to kill someone. in corporate headlines this morning aig reported 82 cents a share, a 21 cent beat, shares were rising on that news in after hours trading. recording an enormous one-time benefit due to an accounting change. it means aig will not pay tax on tens of billions of dollars in

income in the coming years thanks to benefits that stem from its financial crisis, losses, and i don't know if you saw ben lashay on closing bell but he looked great. people have been worried about his health. it was great to see him on the air. gap reported better than expected earnings after the close yesterday. the retailer says it is looking for earnings in the current year of $1.75 to $1.80. street at the high end of that had $1.80. the gap is one of those companies -- this is an amazing thing that they beat given sort of the sad and long slide. >> there were a lot of questions, they did have to do deep discounting to get people into the stores. if if you offer discounts, they will come. >> and finally, tivo posting a bigger than expected q-4 loss a. company i like, though. but the company says it added 234,000 new subscribers in the quarter as it sold new agreements. it's the greatest increase in six years and the ceo tom rogers

says the company has more deals on the horizon. >> banks of america has stopped selling some mortgages to fannie mae because after dispute arising from claims related to sour home loans. banks have absorbed billions in losses to buy back defective loans sold to them by the banks during the housing boom. in a filing yesterday boa says it will freeze the benefits employees have earned on its company pension plan as of june 30th. employees will be offered a 401(k) retirement plan. and it's official. billionaire steve wynn has removed his business partner from the board of his macau casino company. when the board voted to remove kazuo after allegations he was making improper payments to gambling regulators. okada is the biggest shareholder in wynn resorts. the company is trying to forcibly buy him out. >> this is the greatest courtroom -- not courtroom, boardroom drama. >> it's going to be a courtroom drama. >> it's a boardroom drama and

it's face nating. >> okada wouldn't show up yesterday at the board meeting. forget it. >> reminds me of the old casablanca -- there's gambling going on here. >> that's what i thought, too. >> you had to bribe some regulators in macau. >> wasn't it thailand or somewhere else? >> it was the philippines. i believe they would put them up in the big suites. >> really? >> that's what this was about. the question is whether -- >> they think that there's something more to this than just that. >> part of this is that steve wynn gets to buy the stake at a massive discount. so the question is it would be nice to find something that's a problem. >> that makes a lot more sense to me. >> i don't know what the situation is. >> i did read the full report. it is pretty bad about the things that they did in terms of bribery. >> all right. >> so there is real bribery. i don't want to suggest there

isn't but it's inconvenient bribery. >> there's real bribery taking place? >> and once you know that as a board you have to decide you can't have this going on. complicated. time for the global markets reports. b beccy meehan is standing by. gains for the equity markets, that's the name of the gain. plenty of green on the regional map behind me and, in fact, overall we are coming off the highs a little earlier in the session in europe but are still managing to gain just about 0.3%, just over, in fact. on market by market basis, this is how the picture is shaping up. the ftse 100 in the uk has been a bit of a laggard today just up by three or four points but gains of 0.8% for germany. france up by half a percent as well and the ftse mib has been higher today but pairing back those games 0.7 and 0.8%. we have the launch of the greek

bond swap today, one of of the big stories dominating proceedings. the euro is continuing to trade higher. the euro against the dollar has had a strong run of things. it was touching 1.34 earlier today. it's come back from those levels now but still trading 1.3393. euro/yen 107.88. dollar/yen 80.54. the sterling is gaining by 0.4%. we had some revisions to the gdp data earlier which macked to hold steady and we saw a bump up in sterling as a result of that economic data. let's move on and talk about what's going on in the bond market. where brent is trading at 123.54. holding steady but a strong run up since the january lows. back to you. >> thank you very much, have a great weekend. we're going to go from oil prices to economic data. what do today's top stories mean?

we'll find out after this. first, though, a programming note for you. warren buffett is ready to answer your questions. he'll be live on "squawk box" monday morning. e-mail those questions to us.

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welcome back to "squawk" on this friday morning. u.s. equity futures this hour. take a look at the board here. we're looking at -- can we see some boards? that would actually help there. green arrows across the board. about 42 points if we opened up about now. making headlines this morning, los angeles developer rick caruso and former dodgers manager joe torre have

reportedly with drawn their joit bid to buy the los angeles dodgers. why? apparently because current owner frank mccourt won't include the parking lots outside the stadium in the deal. second-round bids were due yesterday. former lakers legend magic johnson, capital advisers chief stevie cohen, and st. louis rams owner stan, and media executive all said to still be in the bidding game. becky, back to you. >> andrew, thank you very much. let's get a check on the u.s. markets and the current state of the economy this morning. joining us is the co-founder and chief operations officer at the economic cycle of the research institute. we take a look at all of this stuff, you had been calling for a recession and most of the numbers that we get point to all kinds of growth. we're feeling better about the jobs market. we're feeling better about just the general growth, manufacturing growth that's coming in. what do you see and does your

call still stand? >> yes, our call still stands and since our recession call -- >> which was? >> at the end of september, late september. so it's five months. all of the definitive -- when you look at the definitive hard data that is used to officially date business cycle recessions, it has been getting worse not better despite what the consensus view of an improving economy has been. and so i can clearly explain that. i would like to list them. so gdp dwrogrowth, year over yet peaks in 2010 and falls down to 1.5% by q2 of 2011 and has flat lined essentially since then, the last reading 1.6. simil similarly personal income dwroet, how much -- i'm talking big, aggregate numbers, has the same kind of pattern, broad sales growth. the broadest measures of sales, same kind of pattern, industrial

production growth year over year. as of january it is at a 22-month low. so you put all of this, this is what normally is done. this is not something just done for this conversation. you put it into a coincident index of the u.s. economy and if you look at the year over year growth of that index it's now at a 21-month low. so 0, to be clear, it is the definitive measure of economic growth. in english the growth has been slowing. >> but we feel a lot better than we did. >> let's get to that but i want to be first on this. the index, the chart on the right-hand side of the chart that's a 21-month low. it has not -- you haven't had a decline like that in the past 50 years without a recession following in short order, okay? so the right-hand side of that chart is a 21-month low and the growth rate of all of the indicators output, jobs, income,

and sales. okay? and that's not cherry picked data. that is dat at that that is always used. so that's the reality. why do people feel better? >> what's interesting is you know who seems to agree with you -- >> uh-oh. now i'm worried. >> you ought to be able to figure this out if you think about it. the fed. >> well, no, i understand that. >> we all said, what? they said we're going to -- we're even going to stay low longer. it's like, wait, everything seems to be improving. why are you saying this now? what do you know that we don't know. >> fisher and those on the fed have said that they disagree with the general consensus. >> why did they put it in writing through 2014? they know what lock knows and maybe, i'm trying to help you not hurt you. >> thank you. >> i think you might need a little help. >> i'll take it. i wish this wasn't our forecast. we are the skunk of the garden party. it's no fun. but to the point of the fed, what's going on there, you've got -- you've never seen something like this.

the world's central banks, plural, are printing money like crazy. >> like they know something. >> it's part of the republic you feel better. that does make you feel better but go to where that interacts with the economy. you look at the velocity of money. how often does money exchange -- all that money that's going in, they're goosing the money supply, how often does it exchange in the economy? that's a really important metric on the health of the economy. it has dropped to a record low in the united states. it's near a record low in europe. it's even near a record low in china. okay? these are not symptoms of health. and when you have all that money out there, it's got to do something. so it is goosing the markets. >> does the coincidence index -- >> that's a fact. that's not a forecast. >> does it give an indication of what's coming in terms of the jobs outlook? have we seen the best number and is the jobs picture going to get worse from here? >> the index itself does not forecast forward. what we've seen there in that decline in the growth rate you haven't seen in the past 50 years is not a recession in

short order so that doesn't bode well for jobs. speaking to jobs, i admit, i am acknowledging they have improved through the latest readings, okay? but jobs are basically a bit of a lagging indicator. they follow. they do not lead consumer spending growth. c consumer spending growth -- >> would your call be that jobs are going to get worse? >> yeah, and i'd say in the next few months i would expect them to start to flag because they follow, they lag at turning points where consumer spend issing growth has been going and we know that's clearly been going down and if you delve into that, look at personal disposable income. this gets to your gas stuff. you look at personal disposable income that has been negative now growth for five months. you've never had that, not even close. >> we talk about short order. you keep say that go a recession is supposed to follow in short order. so thousand we're timing the

market a little bit. >> timing the economy. >> what does short ultimately mean? you made a bold call. how long can you hold on to this call or how long is it supposed to last? and when do you re-evaluate and say maybe this is right? >> last year in the wake of making the call we did say that the recession should begin by midyear 2012. >> midyear 2012. >> by midyear 2012. >> so you still have time in. >> i still have time but here is the rub, andrew. if you look historically, we're not -- i can't tell you today it start this had second because i won't know because all the data is going to get revised like crazy for the next year but when you're looking in the rear-view mirror, it takes about half a year after a recession begins before people realize that a recession has begun. the markets are a little bit better than the consensus view but right now with the consensus being totally against what i'm

saying today, all i'm saying is look at the facts. >> we figure it out around november, right around the election? >> if now is the beginning, let's say the recession started right around now, you figure it out, i think the consensus would figure it out in six months. >> you think about europe and you think -- >> may, june, july, august. >> you think about europe, austerity. you think about china, you think about gasoline prices and, you know, you put all that together he may not be crazy. >> but i want to know has there been any moment or number you've seen in the past two, three, four months since we last saw you where you said, you know what, i have to plug these new numbers in and this may change the way i'm thinking about it? >> no, no, no. now let's switch to our leading indicators. we are talking about facts and not forecasts so far. now looking at the leading indicators -- >> stock market. >> is one of them. >> but the stock market, just like it's forecast nine out of the past five recessions, it's forecast nine out of the past five recoveries.

>> it could be qe related, too. >> that's it. >> first off on the leading indicators i look at them across the board. they are not negating our recession forecast, the full array. when we look at weekly index, people say, hey, it's running up. it's risen a little from its lows in december and given the mountains, i mean, we're not in kansas anymore. we're printing a lot of money. and given all that money i'm surprised the index hasn't lifted more because the risk assets are being goosed and look back to early '08. the recession begins in december of '07 and what happens? you get a springtime rally, double digits in s&p. we've gone much further this time. we've printed more money. we were cutting interest rates a little bit and back there inside of a recession oil went to $147 because the economy wasn't able to absorb all that liquidity. it didn't need it for commerce

or for activity and what's the dollar bill to do? >> your world, too. it's very troubling. this messes up your election. >> messes up my election. >> this is very troubling to you if this were to be -- i see you over there very concerned. >> i'm trying to understand. >> but it would -- >> i'm trying to understand the thinking and the black box and what's in the box. >> there's no -- >> oh, my god, this is horrible. >> this is not a black box. >> remember that day you said -- i can see you over there going, oh, my god. this new evidence. >> these are facts not forecast. this is not a black box. gdp year over year growth rate peaked in early 2010. it's flat lined at 1 1/2. personal income growth down. sales growth down. industrial production growth down to a 22-month low as of january. throws are the indicators that

are used to define recessions. >> you have to stop. number one, we have to go. i'm worried about your weekend. >> i'm renaming -- i think lock is going to take the mantle of dr. oubiue beaniroubini, pegt a. >> thank you for coming in. >> we'll call the recovery, too. >> tell us if anything changes the picture but we'll have you back more to talk about this. thank you. >> thanks for the conversation. coming up, a quantity tum physicist in training by day and a strategy by night. gemma godfrey will join us to solve the debt crisis at the speed of light coming up after the break.

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♪ until the weekend sthoet

good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. welcome back. these are the headlines today. >> tell us about them, joe. >> well, you saw oil prices rising again today. you know why? >> why? >> traders say it's concern over cuts in iranian supply. >> really? >> offsetting worries that high oil prices could -- >> demand. >> european buyers of iranian oil have cut back on purchases ahead of an eu embargo that is effective in july and some of the country, iran's biggest customers in asia including china have also reduced purchases. also new home sales topped today's economic agenda. the report is due at 10:00 eastern. we will be so long gone by then. but earlier in the week the national association of realtors

said that home retail increased 4.3% to the highest levels since may 2010. the u.s. postal service pushing ahead with planned cuts to more than 260 mail processing centers around the nation. the agency says it's complete add review of closings and the consolidations are to result in a loss, unfortunately, of roughly 35,000 jobs. >> thank you. it may take a lot more than a central banker to solve the european debt crisis. maybe a quantum physicist can get the job done. let's bring in one of our favorites, gemma godfrey, at brooks mcdonald asset management. great to see you this morning. i gather that you are not so optimistic about what's going on over there though the markets seem to be. >> potholes remain in the road to recovery and after the substantial rally that we've seen, european equities are up about 20% since november.

it means that there is a significant risk of a correction in the short term. there are three reasons for that. so, first of all, there are still question marks over the rescue fund. second isly, liquidity, which the ecb has been pumping into banks, has not been passed through to the wider economy. and, finally, the debt and deficit situation has been deteriorating so until we see a correction and actually see some movement on these three issues, then once we've seen that, then we'll see substantial stability return to the european markets. >> gemma, let's talk about the first pothole you mentioned, this idea that there wasn't enough firepower at the table and i think we all agree on that and everyone assumes there will have to be more money coming in. i thought the working assumption is that more money is not going to have to come in at least for another year or two, that you kicked the can sufficiently.

and i guess my question then becomes at what point -- when do you think new money would have to come in and when would that, therefore, drive down the market? >> well, there are significant hurdles along the way which is why the money should be received as soon as possible. for example, if you look at the case of portugal, they're going to be having about 16.4 billion euros maturing this year. so there needs to be enough firepower to protect portugal, putting aside greece. there is an imf summit in april. and by that time, they need to see -- and they've come out and said it -- they need to see significant work being done everybody to give them conviction to contribute to the rescue fund. >> gemma, is italy safe? do we take them off the table or putting them back on? >> italy is definitely a significant risk and they've also seen as the wider context shows us, 14 out of the 17 members of the euro are actually

breaching their limits already. and italy is actually a prime example of two things. first of all, how actually the lending, as i said, is not coming out to the market. lending to companies has fallen by 20 billion euros in december alone and we're seeing capital flows out of italy into germany. and what that means is that inve investors are under the surface nervous and that's removing a certain level of stability. >> and, gemma, so when clients call you, you tell them this and they say, what am i supposed to do about it? the answer is what? >> the answer is that you have to be very selective. so what we're saying is that until we see these three issues resolved we're cautious about putting a significant risk back on the table. there are still significant things that we can do in the meantime. for example, we are focused on companies that are well capitalized, so they are stronger and we'll see some

uplift in the longer term, but they're strong enough to weather the shorter term a. company may be situated or headquartered within europe but the revenue streams might be coming externally. >> thanks so much this morning. i imagine we'll be seeing a lot more of you. happily and sadly for the rest of the world. happily for us. >> you know that we're, what, i went back to the lows of someone saying that 30% forecast will be wrong. from the lows in october we're up exactly 25%. so we're good to go. i'm done. that's close enough for government work. 25% is close enough. i'm already -- >> you have 5% more. >> he's taking his chips off the table. i feel like lock is really influencing you this morning. >> not really. i don't know. i do like the idea that you get

ten coincident indicators and if you just compare those over the last six months, if we do see something like that, it is, at least it's good to know that, to put it into 0 our quiver of how we try to decide where we are. it does look like we had -- and maybe it's oil prices or gas or whatever. but it also allows us to think about the next march number. just to have enough -- >> that's pretty intriguing. >> it is. >> also the poll showed us, what they are seeing in their oin polling. >> the numbers are not going to be good. >> i don't know. do we know that? >> it can't be as good. >> it may not be as good. >> said that last month, too. we've been thinking that for a while. >> if it was anywhere near 200, even if it went -- >> the weekly jobless claims have been impressive, too. yesterday they came in low. the lowest level, staying at the lowest level.

>> you are telling me to listen to him and then not to listen to him. >> don't change -- i don't want it to ruin your weekend. we work hard. >> it's only been a four day week. >> we still have the rest of the day to get through. if you have any comments or questions about anything you see here on "squawk" e-mail us. we're just getting start this had morning and we have a big show for you. it's an all-star packed lineup. still ahead this morning we have st. louis fed president james bullard as our guest host. he will be here. also pimco strategist, former presidential candidate jon huntsman and timothy geithner joining us on "squawk." [ male announcer ] we know you don't wait

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welcome back, everybody. take a look right now at the u.s. equity futures. right now the dow futures are indicating a gain of 40 points at the open. that would be a dwayne of 0.3% and this would be the thing that would finally push us over 13,000 at least if we were to close there today. we made another run at it yesterday and ended just shy of that. in our headlines on this friday morning, pepsi is trying to win back consumers with a mid-calorie soda rolling out pepsi next. it has half the calories at just about 60 a can. the product should hit store

shelves nationally by the end of march. this is pepsi's biggest product launch in years. andrew? we've got much more "squawk" still to come this morning including st. louis fed president james bullard as our guest host. one-time presidential candidate, now romney backer, former utah governor jon huntsman. and then an exclusive with tim geithner. first a programming note. on monday warren buffett ready to answer your questions live. becky will be in omaha. e-mail them to us or tweet your question #askwarren. responding to your questions starting monday at 6:00 a.m. eastern. stay tuned for that.

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yeah, that's our open. it's the first time you got to see it. >> how do you feel about that? >> you like it? >> you should have seen us taping this stuff, it was even better. welcome back, everybody, we're in the chairs this morning and we're talking about some of the stories that have caught our attention. i don't know if you would of consider doing this, you wouldn't, because you don't have a facebook or a twitter page, so you don't have to worry about it. klm is allowing who you can sit next to. you can pick a seat based their

facebook profile or twitter profile if you think they are an interesting person which to me seems like the worst idea ever. the last thing i want to do when i get on a plane is talking to the person sitting next to me. >> think about the mile high club. think about what this will do. >> the mind of someone that goes right there. >> you know, you know, there are going to be people waiting outside the bathrooms, i'm just saying. >> this has been brought to you by andrew ross sorkin. >> think about what this is like. think about what is going to happen. >> i'm with becky. i would hope somebody would not -- i would pick an empty seat if at all possible. >> i always try to pick an empty seat. >> i am the person that i don't like to talk to people on planes. i am studying on planes and reading on planes and getting things done. >> thin is good, measurements. >> you can, if you can see their facebook profile you can see

pictures of them. >> and do people put them there, they don't put the fat pictures -- >> you have more space on the seat is what you're saying? >> if you are within 20% of total body weight. do you know who died? >> who? >> steve cordek. >> who is that? >> guess how old he was? he was 100, i love that. he was the most important innovator of pinball machines ever to have lived. i didn't know about this, but the pinball machine in the '30s all it was -- the balls would come down and you had no flipper. no flipper, so you'd move it around and you cooperate do anything and you would bang it and do this and nothing would ever happen. i think people quit playing after they played it once. so, someone came up with six flippers on each side, so you are, like, trying to hit the flippers as it's coming down, well, that was stupid. he came up with the idea of putting only two flippers all the way down at the bottom where

you can stop it from going in -- >> the little extra flippers in the middle? >> there are. there are. that's another innovation. but people that talk about this guy say he was as important to pinball as d.w. griffith moving from silent films to color and sound. >> wow. what year did he do that innovation? >> 1947, i think. the other thing he did -- the other thing he did, it had been alternating currents that was used on the flippers, so you could sort of -- you could do it, but you had no accuracy. when you went to dc, yeah, you were able to actually aim it because it was so quick and so much more accurate. so, this guy -- i mean, look at the write-up he got -- which i love. >> i hope he did well. >> he did. he did. and for 40 years he was the known -- the greatest pinball innovapter ever. they have all the games listed that he was involved in making.

>> if he would have lived now, the chinese would have stolen it. >> you need to stop and think about it on a day that he passed instead of, you know, at 30,000 feet which you've got everyone focused on. >> i have to say i went there with andrew, too. >> you always do. people -- i get the mail and you are the one that's behind the scenes directing things. >> i sat next to you for seven years. >> maybe that is why. >> part of the reason, too. >> but you can't plan to have your mind immediately go there, that's just -- that's just very telling to me. all right, when we come back we're going to have the "squawk" reserve, meeting setting up right now. we have a very special guest host with us, st. louis fed president james bullard. and later another cnbc exclusive, secretary treasury tim geithner will join us with steve liesman at 8:30 a.m. eastern time, a fabulous friday. ♪

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fed policy part two - >> i would view it as a statement that rates are going to stay low for as long as it is practicable. >> now st. louis fed president james bullard joins us to talk about a wide range of topics affecting interest rates and the economy. it's an exclusive interview you cannot afford to miss. opportunities for investing. meet the man who is on the watch for the next big buy in the markets that could boost your portfolio. oil uprising. >> the amount of oil that we drill at home doesn't set the price of gas by itself. the oil market is global. >> surging pricing sending shock waves throughout the economy. cnbc's global energy expert dan juergen tells us how long the

surge may continue as the second hour of "squawk box" continues right now. ♪ good morning, everybody, welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin and among the stories we're following on this friday morning the increasing price of crude oil. if you haven't seen it, it's on the rise once again this morning on increasing concerns about iran and possible supply disruptions. right now oil prices are at their highest level since last may moving back above $108. and a minor but significant buy for apple, it bought chomp, with 550,000 apps, developers complain that the offerings remain undiscovered. we could be hearing about a $7 billion deal as soon as

today, there's a group led by global management that is said to be near a deal to buy el paso's oil and gas exploration unit. el paso is in the process of being acquired by kinder morgan in a $21 billion transaction. we're watching the futures and it does look like they are indicated higher. >> thanks, becky. we're joined by a special guest host this morning especially after yesterday's -- well, it was really a warm-up i think from the dallas fed president. we actually have -- you are here and i have him here. st. louis fed president james bullard joining us from washington. and steve liesman is at the treasury department this morning because he's going to have an exclusive interview with tim geithner and, you know, for a geeky nerd like you, steve, i mean, to go fisher, bullard, geithner, this is -- i mean, you must be beside yourself, but welcome in.

>> thanks. >> it's quite a two-day stretch for you. all right, president bullard, we just had -- i'm really glad we had him on. did you see the interview that we had? were you in the green room? did you hear any of that? >> i did hear some of that. >> i can't wait to hear your response. have we overshot on our expectations for how solid this recovery is and do you feel the coincident indicators are indicating that it's much less vibrant than we think? >> i thought he was like the weather today, a little bit gloomy, so, no, i think -- i think the economy's looking brighter in 2012 here. i think we can get 3% growth. i think we can get unemployment down 7.8% by the end of the year. >> what the heck was he talking about? what was he looking at? >> he is looking at coincident indicators and they are great things to talk about and on the show -- >> are they declining? >> i will say this, the

indicators don't know about things like european sovereign debt crisis and probabilities of meltdown in europe falling. those kinds of things aren't factored in, so i think that that's really what's changed here early this year at the european situation has settled down some. it's not -- obviously it's still a problem but it's settled down some, and the ecb has done a good job of restoring calm. >> why does the fed have -- you heard my question to him, it seems like the fed agrees with you because when they went out to 2014, things are getting better. why do you see the need to do this or do you know of something we don't know about? >> the data is better and so it's a natural time for the committee to be on pause for a while. we've already got a very easy monetary policy, you know, operation twist still going on through the middle of this year.

we've got -- >> will it end in the middle of the year? >> twist runs out of ammunition at some point because there's only so much balance sheet you can work with so -- i think it is. but that's still going on. so, with the better data, the super easy policy already in place. we already put these promises out there into the future, so i think -- i think we've got a lot on the table here. so, this is a normal situation for the committee to sit back, get more data, and address -- or try to collect our thoughts about the main things that are affecting the economy right now. probably the oil situation. >> is it possible for the fed to be able to say that the situation -- the economic situation is improving and that's good news, which means you may not see qe-3 if i'm interpreting that correctly? but it could be enough of a

concern still that we would keep rates low through 2014 as we've indicated? is it possible to walk that fine line? >> monetary policy always walking a fine line, so, yes, i think that's about right. and, you know, i wouldn't take qe-3 off the table ever. i've been one that says this is a potent weapon that we can use, but we should use it only if the economy deteriorates and especially if the inflation numbers come in below our inflation target and start to look -- start to drift down into, you know, more disinflation or deflation, and so we're not -- we're not in that circumstance right now. headline inflation above target. even core cpi's above target measured from a year ago so -- >> do you have -- we want to bring steve in. >> bring steve in and then i'll -- >> are you sure? >> absolutely. >> good morning, president bullard. "the wall street journal" has an editorial this morning basically

saying that higher oil prices are in part or in large part the result of fed policy, and you can't go out there and take responsibility for higher stock prices and not take responsibility for higher oil prices. is it right? >> you know, i was on here last year when, you know, probably about this time when qe-2 was in full force, and i do think that some of it said true that commodity prices, and i think that's a serious issue for the committee to consider exactly how that's working i think is a difficult thing to get our heads around. but i do think it's an important consideration. i think it would be very worrisome that you have the situation in iran being a wild card for global oil prices. you wouldn't want to feed into that with new policy moves at the fed. >> when you put together higher oil prices and what you just said, which is that core is

running ahead of target, headline is running ahead of target. >> core cpi. >> core cpi, right. together with your forecast for 3% growth, how secure is the 2014 forecast in the monetary policy statement right now in your opinion? >> well, there's conditional language around that. i think it's really not possible to forecast out to 2014 as you guys know, you're tracking the economy every day. views of the economy that far out change. so, all you can say is that based on what we know now, that's where the committee is, but the situation could easily change in six or nine months. the economy might look very different. and at that point we might -- we might change our tune. >> i was going to ask you more about oil. we'll have dan juergen on later to talk about the various permutations of what could happen next. but when you guys are in the room thinking through the permutations, how do you think about it and how do you model

that out into your forecast? >> permutations in what could happen in the oil markets or just generally? >> no, what's happening in iran, but how does that actually factor in to your thinking? >> well, something like that we would probably take analysis from elsewhere, certainly have a lot of people and we're looking at these things, but we try to factor everything in and look at all the possibilities and i think critically get the whole range of uncertainty, the whole range of possibilities out there and assess downside and upside risk. >> which leading indicators do you think would throw into doubt the idea that the coincident indicators -- if you do see coincident indicators, and you saw that chart, they were actually slowing or decelerating and coming down, which leading indicators do you see that makes your point that that's probably something to focus on? >> well, labor markets have improved in the last several months. you've got this claims number

having come down now below 400,000 down to 350,000 pretty, you know -- >> stock market? >> stock market up pretty substantially. that's certainly a good sign. so, i think that the labor market data, you know, suggests that unemployment will continue to tick down this year. obviously it's not great. we're still at high unemployment, but it will be a lot better if we can get that contained and tick down. >> i guess if you -- if you do take some blame or credit for oil prices where they are, you do think that fed moves have helped the stock market, you think that's been part of the idea to increase the wealth effect and make everyone feel a little bit better? >> well, one of the ways that this works with the quantitative easing and i think it's not just in the u.s. but other countries around the world, that, you know, you do push rates lower. that does push investors into riskier assets and does tend to

push up asset prices. i would see that as, you know, one of the effects. now, it's an inflationary thing. you're going to get higher inflation expectations and you might not like that, so that's a balancing act you have to play. >> i don't know, we got to get at -- do we need to go? or do you need one -- steve, go. go ahead, steve. >> president bullard, can you pick up on the jobs discussion you were just having, first of all, i don't know what your specific unemployment rate forecast is but in general the committee has had this wrong, it's been to the upside of where the unemployment rate is and it's fallen to. why has the committee gotten this wrong, and do you believe in these numbers that have come down from 9% to 8.3% relatively quickly? >> yeah, i do believe in them, so i guess i was just going to go on a little bit about this claims number. all the time i've been in the fed people have been saying that 400,000 is the -- is sort of the

cutoff for the claims numbers. i asked my staff, could this -- i've been in the fed more than 20 years. could it be that this number hasn't changed in 20 years? so, we did an estimate to try to figure out that threshold. it turns out it's still 400,000. so -- >> that's crazy. >> so, every time claims numbers consistently come down below that number, then unemployment continues to tick down pretty reliably, i think that is what will go on here. >> why has the committee had it wrong, what was the -- >> the committee, i think 2011, you know, i think the chairman said maybe obliquely, but it's a bit of bad luck in 2011, i have to say. i was expecting better things in 2011. i thought that that would be the year -- >> bad luck for the committee? >> bad luck for the economy. >> bad luck for the economy. >> you had this thing in japan which turned out to have ramifications around the world that made it more difficult. you had oil prices going up in the spring.

you had this sovereign debt -- i'm sorry, this debt debate in the u.s. which was very difficult. you had the revisions to gdp data in the middle of the year, which everybody had to absorb. and by the time you got to september, everyone was talking about recession, putting 50% or 75% probably of recession. we passed that recession scare, the economy turned out to be more resilient than people anticipated. but, you know, it was a year where we -- and you had the european sovereign debt crisis go off in a bad direction instead of getting better, it got worse. so, i think you had a lot of things go in the wrong direction in 2011, most of those, or all of them, maybe, are reversing now, and so hopefully we'll have a better year in 2012. i think it's very natural. the economy didn't perform that well. you'd expect it to perform a little bit better in terms of growth rates. >> we had someone earlier this week, i can't remember who it was, someone saying that low

rates on mortgages, we've been doing it and doing it and doing it, and nobody does it. it doesn't -- it hasn't really helped in terms -- >> meredith. >> i think it was, meredith whitney. if there are possible negative consequences, the reason for keeping it there if you are not keeping the positives out of it, there's no reason with the possible negative consequences to keep it down there. i guess, would you argue that if the stock market goes up maybe even if people don't get into the mortgage market, you're getting a positive effect from the loose money, or would it be better to start maybe to take the foot off the gas before 2014? >> well, i'm going to talk today -- i'm in a conference here in new york today and i'm commenting on a paper on housing. it's a good paper, so once it's released, i encourage have been to read it. the notion in the paper is that there's some -- some households are constrained and some households are not constrained by the collateral in their

house. the ones that aren't constrained can react to the monetary policy in the usual way, and the evidence in the paper says they have. and the people that are constrained, they can't react. no matter what you do with monetary policy, they are frozen. that's the hypothesis, it's interesting and i'd like to see more about it. that's the paper i'm talking about today. >> this is your paper? >> this is your paper? >> no, i'm the discussion. >> whose paper is it? >> it's michael feroli and three other co-authors. >> that would expect the bifurcation, why the lucksy items are doing well? >> it's an idea that has been kicked around. >> i thought it was his paper. it's a good paper. >> you say it's a really crummy paper. >> if you flew to new york, it must be a good paper. >> thanks, president bullard. we'll have more from you after this, it says. >> after this. if you've got comments, questions about anything you see here on "squawk," what mr.

bullard is saying and other things, shoot us an e-mail squawkbox@cnbc.com is the address. we'll have more from our guest host st. louis fed president james bullard in minutes. and crude realities, oil prices surging amid the iran crisis, we'll talk about the move higher. "squawk" is coming right back. [ male announcer ] if you believe the mayan calendar, on december 21st, polar shifts will reverse the earth's gravitational pull and hurtle us all into space, which would render retirement planning unnecessary.

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your diabetes and that starts with a free meter. and liberty now accepts private health insurance in addition to medicare. call today and get a free meter. plus when you join you'll also get a free cookbook call the number on your screen. welcome back welcome. let's look at the futures they've been indicating a higher open. the dow futures up 45 points, the s&p higher by six points. in our headlines, kenneth cole is proposing to take his company private for $15 a chair. he's keith and chief creative officer of kenneth cole productions, he currently owns 47% of the common stock, it's a small market cap stock and we mention the deal because cole, of course, is a well-known name. the stock is indicated higher,

14.76 to 16.88 after closing at 13.07. our guest host st. louis fed president james bullard. we covered a lot of ground in the first opening bit of the interview, but when we talk to people and we speak with you today, we spoke yesterday with the dallas fed president, richard fisher, and the two of you seem to be a bit more hawkish than other members on the board. you in particular have been pretty strident in making sure you stay on top of things and i wonder what you think about just the overall take of the board right now. are there more dovish people who are voting members at this point? >> i don't think the voting is as critical as it's often portrayed, because everyone goes to every meeting. everyone talks the same amount at every meeting. there is a lot of attempt to get consensus. the chairman works very hard to try to fashion a consensus in the middle of the group. and these days, you know, you are making policy and policy

commitments out into future years when someone else is going to be voting. and so we really have to come together as a committee in total. as for who's who on the committee, you have to just talk to the different members and see what you think. you know, i like to think i'm sensible. >> well, i guess the thing that strikes me is sometimes you come on -- and i feel like i have a very clear understanding of what's going on and it's not necessarily what i expect to see in the voting that comes out, and i guess that's part of the consensus building in coming to some sort of a conclusion. >> the chairman has to work very hard and these are very contentious times as they have been the past three years for monetary policy. i think all the members feel like they're going to, you know, play their role and they're going to bring their opinions to the table and that makes it all that much harder for the chairman to sort of find a way to get everybody on the same page as much as he can. and so that's where we are. i think the chairman does a great job of that. he's very much a conciliator and

a mediator. >> is part of that just each of you represent your own districts and the districts have very different economic outlooks at this point? >> i don't think that that's so true. i think people make policy with input from their districts but they are thinking nationally when they're making the policy, a place like california would have, you know, more housing problems, more unemployment than my district. >> and you're suggesting that when california's voting, that they're voting more on a national -- >> more on a national basis. more on sort of -- well, i don't know, ask them. but a -- but i think most people are thinking about national monetary policy. but they do get input from their district on what's happening in the economy and where they think the economy's going. >> and what have you been hearing just in your district in particular? what do you hear from the business leaders and the people that you speak to? >> i think there's a more

optimistic tone. i think it's cautious. a little bit more worry maybe about europe because europe now is going into recession. i'm hearing some reports about, okay, well, that is affecting some sales of companies that operate there. of course, not all the companies are big companies. a lot of them are smaller. they're chugging along. i think things are going, you know, reasonably well, but not knockening t enining the ball o park. i think the holiday season went fairly well. one of the thing i was impressed with with the holiday season, you talk about big retailer, but i get reports from even little retailers and they seemed to have a good holiday season, but, of course, it's always a mixed bag. i think generally cautiously optimistic. >> we're going to slip in a quick break. still to come a closer look at the move in oil and how it may affect your wallet. plus, we're going to have much more with our guest host

st. louis fed president james bullard, and be sure to tune in monday when the oracle of omaha graces us with his presence for all three hours of the broadcast, the cable, the show, whatever. warren buffett will answer your e-mails and tweets. send them in, we'll get as many of them on the air as possible.

so -- tell me again what happened. i was downstairs making coffee, and we heard it. it just came crashing through the roof, out of nowhere. what is it? it's our ira. any idea what coulda caused this? maybe.

i just sorta threw a little money here, a little money there. and i loaded up on something my dentist told me was hot. yeah. ♪

♪ this 84 million views, went to number one on the altnation countdown. it was so cool. >> this guy's name is woote wooter debacker, if you were to translate it, gauthier is his first name. >> i played it for my kids, and i would go on -- >> it is good. welcome back. a couple of corporate headlines for you, fiat may close two of its five plants in italy, if its plans to export to the u.s. market don't materialize.

chrysler factories in the u.s. are already working at full capacities, and the ceo says that plants in mexico, canada, and europe are needed to fill a third of the u.s. demand. and the chinese firm trying to stop apple from using the ipad name in china has launched an attack on the company in the united states. it filed a lawsuit in california accusing apple of employing deception when it bought the trademark. up next, we have more of our exclusive interview with st. louis fed president james bullard, and keep it right here for the 8:00 as well, timothy secretary -- timothy geithner, the treasury secretary, will be joining steve liesman live from washington, that's coming up at 8:30 eastern this morning. as we head to a break, here's jay leno on gas prices. "squawk box" will be right back. >> they said here in los angeles the price of gas is flirting with $5. as i said, flirting. you know, we're beyond flirting.

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welcome back to "squawk" on

this friday morning. checking our headlines today, germany's economy shrunk by 0.2 during the fourth quarter, slumping exports w s weighing oe activity. analysts expect the german economy to rebound later this year. and the federal reserve at the center of a bill about to be introduced in congress. mr. bullard, i hope you're paying attention to this one. congressman kevin brady said they'll focus the fed on a single mandate to fight for the dollar. they want to contain inflation and maintaining full employment. becky, back to you. let's get more thoughts right now from our guest host, st. louis federal reserve bank president james bullard and also joining us from washington this morning our senior economics reporter steve liesman. steve is at the treasury department this morning ahead of his exclusive interview with tim geithner, coming up at 8:30 a.m. eastern time and i know you have questions that you want to jump in right away with with president bullard. >> thank you, becky.

i want to warn the fed watchers to get their pencils out because i want to ask president bullard, something that we can ask the fed president in the wake of the disclosure of the interest rates, or the date of the first interest rate target, so, president bullard, would you care to share with us where you came in the spectrum of when you believe the fed -- when you forecast the fed will first hike interest rates? >> 2013. >> so, you're one of those people. so, how is it that there are so many people, you among them, i'm sure president fisher was in there, we interviewed president blosser, he's in there, too, 6 of the 17 members say there will be a hike in 2013, but the statement says 2014, how does that square? >> well, it's up to the chairman to form a consensus. i guess what i'm impressed about that date, you can think about the date and you can think about the uncertainty around that date and it's pretty wide. it's pretty wide, and the dispersion on the committee shows that, and it just shows you that different people can

have different views of how the economy's going to behave in the next several years. very hard to forecast out to, you know, it's hard to forecast out six months, you know, much less two years or three years. so, that's where we are. and i do think the date's adjustable if the economy changes. >> could be december 31st, january 1st, too, steve, right? >> exactly. >> 24 hours. >> but, joe, just to be clear, the statement does say late 2014. >> that's true. >> but i think the real significance here, president bullard, is that you're asking traders and investors to go out there and really make a trade based on this language in the statement. that if i understand it correctly is the point of it. you tell them late 2014 so they can go out and hold these treasuries for a period of time, bringing down treasury interest rates, but you're saying it's not really a commitment, it's a

just a forecast. >> well, what else can it be? how do you know what the economy is going to be like in late 2014? we don't know, no one knows. so, this is a best guess. and it's the guidance. i was on the show before and i was saying that trying to make promises that far in the future is not a credible thing to do because -- exactly because of this, there are too many rocks that can hit the economy. there's too many things. >> why make the guidance? >> i was saying maybe this wasn't the right way to go because -- because of this problem that how do you know what's going to be going on that far out in the future. >> but it's more than just a forecast, because it's in the policy statement. so, how is it that you put a forecast in the policy statement and you don't have the markets consider to be policy? >> all i'm saying that it's difficult to forecast that far out. if you read the -- if you read the literature, this is part of where this is coming from is the

macroliterature, it says that if you promise out into the future, you can get some bang today for the economy, but what i say is that that literature says that that's a perfectly credible promise and that isn't what the real world is, because you don't have -- in the model everyone understands that you're going to stick with that and do that come hell or high water. and in reality we know that that's going to be adjusted as the data adjusts and so -- >> steve, can i ask the president about this, what we just talked about -- what andrew talked about before? >> oh, absolutely, sorry. yeah. >> i just wondered quickly whether -- is it -- is it completely ridiculous to talk about a single mandate? would you be -- would you be friendly to that at all? that's my first question. my second question is, if there were a single mandate, the one that he was talking about, would unemployment be as low as it is right now? >> oh, that's a good question. >> i think policy would be the same under a single mandate.

to have the dual mandate properly interpreted and properly understood which i think is the way the fed has handled it over the last 25 years, then it can work fine to have a dual mandate. it's when you try to misinterpret the dual mandate to say that monetary policy can do things that it can't really do, that's when you get into trouble. the only thing the fed can do in the long run is control the inflation rate. you always have to keep that in mind about monetary policy. and so, you know, one way to ask this is -- >> i don't know what you just said. i'm trying to figure it out. >> it's something greenspan has told us, too, in fact, president bullard and i have talked about it, it's essentially ignoring the dual mandate, you focus on the one and figure the second mandate will come by keeping the first mandate. >> by providing stable prices in the economy, you allow the prices to send the right signals to all the suppliers and demanders in the economy. you get the best allocation of resources that you can get. so, this is -- this is the way

you get the highest -- the best employment that you can get. >> if you had seen inflation much worse when we were at 10% unemployment, are you saying that you wouldn't have -- that the fed would not have remained as accommodative if unemployment was still at 10% but inflation expectations were much worse, you would have cut -- you would have tightened at that point, even with 10% unemployment? >> there's always trade-offs to make and you got to make a judgment. and that would still be there, but this is a question about, you know, what is the mandate and what can the central bank do. >> it sounds like you have a dual mandate that you ignore one of the mandates. >> that's exactly what greenspan said, too. >> if that's what you think that we're doing, you should go to the single mandate. clarify -- it would clarify what the central bank can do in the long run and doesn't get mixed up. >> it sounds like we would vote for the brady bill, huh? he would vote for it, yeah. >> i said before -- i've said before that it's okay for me to

go to single mandate because i think the dual mandate -- the consensus that we have especially with what greenspan said around the dual mandate what you were doing was providing stable prices to get the best employment outcomes you could get. that was what's we always said about it, and that's kind of breaking down and maybe to clarfy thclar clarfy clarify, i would be willing to go to a single mandate. >> i wrote a column about that and i spoke to greenspan about it. >> the magazine "fortune"? >> yeah. >> check that out. >> check it out. >> yeah. >> good for you. >> thank you, president bullard. coming up, fears over iran's nuclear ambitions pushing oil higher for the eighth straight day. how high can it go and how will it affect the global economic recovery? we're going to discuss that, kick that around next. and latter jon huntsman throwing his support behind mitt romney, we talked politics and

much more around the former governor and former presidential candidate and former chinese ambassador.

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nice look at the white house this morning. crude oil is up for the eighth straight day -- eighth straight day. with us now dan yergin, he is the author of a great book, "the quest, energy security and remaking the modern world." and he's cnbc's global energy expert. it's great to have with us. let's talk oil prices and how much of this is what's going on with concerns in iran? >> most of it as a result of what's happening in iran. we entered a new phase really late last year when the u.n. came out and said iran is going towards a nuclear weapons capability and then, of course, all of the threats that have come from iran, expectations, the cutbacks are coming, and

it's a rather tight oil market. so, all of that together is what's driving prices. >> okay, walk us through the permutations in your mind of what will happen over, let's say, the next month or two. the short term, unless you want to go longer term. >> no. i think over the next month we are on track for oil prices to continue to go up. i think what we're seeing now is, of course, oil prices, gasoline prices are now becoming political issue in the united states and any continue they co up, we'll see greater pressure to use the strategic oil reserve which would modify prices for a time, but basically, andrew, we're locked into this what appears to be an end game with iran in some form or another and the sanctions really start to kick in over the next several months and the whole aim is to choke off iran's oil revenues and that means choke off its exports. >> when you talk about using our strategic reserve, what number does i'll have to get to to get to that tipping point? >> well, i don't think there's a

specific number. the president in about a month has to make a determination as to whether to go ahead with the sanctions and the iranian central bank without damaging the world economy and so forth. so, that might be a point there. you're seeing it this week, some of the democrats on capitol hill have started to call for it, and as we always see when gasoline prices go up, the pressure is to use the strategic petroleum reserve not to deal with the disruption, which was its real purpose, but to deal with gasoline prices at the pump and the public's anger. >> do you see the president getting friendlier on the issue of fossil fuels broadly? and how does that play out over the next six months as we creep into the election? >> andrew, there's definitely been a change. if you just gauge from the different state of the union addresses, we didn't hear all of the above a couple of years ago. it was all about clean energy. natural gas i think the

administration is very interested and focused on this job creation impact, something like 600,000 jobs created in the last few years. and even there's a kind of positive noise about the fact that one of the brightest spots in the whole world of oil situation is that our own oil production is going up. >> but you look at keystone, and how do you square that circle? >> well, i don't think it's a -- this is not a full circle. keystone was responding to other pressures. keystone's very significant, through-put in the keystone is equivalent to a third of iran's total exports, so it's a mixed picture. but i think if you stay along the spectrum, there's definitely been a move from where it was a year or two ago. >> dan, at some point they would have to give the okay or implicit approval to building new infrastructure for hydrocarbons and his base doesn't want to do that. i mean, that will be an affront to the base, because they don't think -- they don't think

there's any upside in building any more infrastructure for anything with hydrocarbons and they will have to give the go-ahead, maybe it will be after the election when they finally do it. >> well, i think that can has been kicked down the road until the first quarter of 2013. but i think you're right, i think if the keystone decision was coming up today, it might be a different decision than it was when oil prices were a good deal lower late last year. >> dan, this is jim bullard. what's your take on the fact that the euro price of oil is higher than it was in 2008, dollar price is not at that level, and also the differences between brent and west texas intermediate? what's going on there? >> well, i think the second question's really in response to what joe said. we lack infrastructure to catch up with the fact that there's been this big change in oil production that, you know, eight years ago north dakota was not the fourth largest oil producing state in the country. so, we need new pipelines and

the lack of those pipelines, the lack of catching up is reflected in the disparity between wti and the brent price. i think obviously currencies affect the price of oil and that this higher price that the europeans are seeing above 2008 is hardly good news for their economic recovery. and, you know, at $123, we're kind of in the range that we were not necessarily in july of 2008, but june of 2008, and as you know, this is -- this is a drag on an economy that is supposed to be poised to recover. >> dan, we're going to leave it there. dan yergin, thanks so much for joining us this morning. when we come back, we'll wrap up our exclusive hour with st. louis fed president james bullard. of course, the fun doesn't stop there this morning. we have another big hour of guests coming your way, including former presidential candidate jon huntsman and

treasury secretary tim geithner, "squawk box" comes right back. coming up, sector-nomics, are these stocks doing better? will they take off? ( today is gonna be an important day for us. you ready? we wanna be our brother's keeper.

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we've been spending the hour with our guest host james

bullard, it's almost up, but let's get some parting shots before he goes. during the break, not the last break, but during the break before, we were talking a little bit about the unemployment number that came out a few weeks ago, obviously a lot better than people thought, when you saw it, did you say, it makes sense to me? a lot of people in your business i think almost actually fell off their chair. >> no, i wasn't that surprised. but i think that the committee itself, the fomc, has a pretty high unemployment forecast. they're really now in the situation of not predicting -- predicting no improvement in unemployment for the whole year. and as i was saying earlier about the unemployment claims number, that certainly suggests that unemployment will continue to tick down through the year. so, it's more a bet about what's going to happen in the labor force participation going forward. is an improving labor market draw more people in or have those people decided they'll stay out at least for the time being? >> yesterday i asked mr. fisher a question that he said was

silly but i'll ask it to you anyway, which is, had we not had qe-2, where do you think we'd be right now? >> you're never silly, andrew. >> thank you. i'll take it. thanks. >> qe-2 if you remember in the fall of 2010, all measures of inflation were low and were trending lower. and if you just look at the data, all those turned around, they came up. so, if the goal was to get us more toward our inflation target of 2%, i think qe-2 was pretty successful in that. other things happened that are the normal things that are associated with monetary easing like higher equity prices and a depreciating dollar. so, i think -- i'm one to say qe is a potent weapon. it has to be deployed very carefully, but it is a potent weapon. >> and it worked. steve liesman, let's bring you into the conversation. you got a question? >> thanks, andrew. yeah, i probably have to ask a question on behalf of my good friend and colleague rick

santelli. if he were here he would be, you know, waving his arms and he'd come up with some incredibly colorful metaphor which i'm not able to do, but i think he would ask the question, qe has had the effect of distorting nearlyet t there are no true market signals out there. and i wonder if you could address the costs of qe and whether or not in the long run we're going to pay too high a price relative to the benefits we've received. >> well, i've been -- i have been concerned that maybe broader than qe, just the very easy u.s. monetary policy, you know, these policies are really designed for quarterly frequencies, year frequencies. you start stretching them out for four, five years, that's not really what they're designed to talk about. so, i think -- i do worry about that. i've become more worried about the effects on savings in the u.s., that you're discouraging

savings, you know. that might make sense over a quarter or 18 months or something like that. when you start to do that over a very long period of time, you are changing people's life cycles, savings patterns, that's really a possible detriment for the u.s. economy. >> and isn't it accurate, president bullard, that the longer we wait with these polici the faster and more disruptive the normalization process is going to have to be? >> well, when we get to that point, we have outlined a way that we're going to go about excess, and we have worked on that. and i think that's still a fairly good plan. so, as far as the speed of that, i don't think we're really to the point where we can make statements on that right now. >> okay. mr. bullard, thank you for being here. >> all right. >> tremendous hour. >> we appreciate having you in the studio. >> thanks. coming up, a west coast wake-up call from mr. crescenzi,

his perspective on stocks and bonds and more. and former utah governor and form are presidential candidate jon huntsman joins us on set with his perspective for the rails for the gop nomination. "squawk box" where business and politics collide. look at all this stuff for coffee. oh there's tons. french presses, espresso tampers, filters. it can get really complicated. not nearly as complicated as shipping it though. i mean shipping is a hassle. not with priority mail flat rate boxes from the postal service. if it fits it ships, anywhere in the country for a low flat rate. that is easy. best news i've heard all day! i'm soooo amped! i mean not amped. excited. well, sort of amped.

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small businesses that want to grow use 4g lte technology from verizon. i wonder how she does it. that's why she's the boss. because the small business with the best technology rules. contact the verizon center for customers with disabilities at 1-800-974-6006. welcome to a very special hour of "squawk box." our guest host this hour is tony crescenzi. we'll talk markets, fed policy, and the economy. and former utah governor jon huntsman will join us on set to discuss the 2012 race for the white house. it's all leading up to our exclusive interview with treasury secretary timothy geithner. it's an hour of "squawk box" you can't afford to miss, and it all

starts right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick along with joe kernen and andrew ross sorkin. we've been watching the equity futures this morning and so far it looks like we're looking at a stronger open. the dow futures up by 29 points, and the s&p up over 3.5 points. the implied percent open shows a positive gain this morning as well. the top story this morning, of course, oil. take a look at prices at this hour. it is going up, if we could see the prices at the pump, that would help us a little bit, but we have a great graphic. that's beautiful. you can see crude now, over 108.23. traders say concerns over cuts in iranian supply are offsetting

worries, but high oil prices could constrain demand, european buyers of iranian i'll have cut back on purrs chases ahead of an eu embargo in effect in july. some of iran's biggest customers in asia including china have reduced purchases. in corporate headlines aeg reporting fourth quarter earnings of 82 cents a share, that's a 21 cents beat. shares rising on the news in after-hours trading. the bailed-out insurer had a onetime benefit due to an accounting change, and it's thanks to benefits that stem from its financial crisis era loss. and gap reporting better-than-expected earnings after closing yesterday, it is looking for earnings to $1.75, to $1.80 a share, the street at the high end of that at $1.80. joe? in the last hour we spoke to st. louis fed president jim bullard, he has an optimistic outlook for 2012, he said 3%

growth is possible, and he told us what might prompt future fed action such as qe-3. >> it's a potent weapon and we should use it only if the economy deteriorates and especially if the inflation numbers come in below our inflation target and start to look -- start to drift down into, you know, more disinflation or deflation. >> bullard went on to say that disappointing trends in 2011 appear to be turning around. it's time to let past fed action take effect. our guest host for the entire hour, are you ready -- >> jcpenney numbers, the best i can tell, they came in with a loss of 41 cents a share which included transaction charges of 56 cents a share and also it was lowered by 59 cents a share from fourth quarter earnings because of pricing and promotional strategy. 74 cents is what i get based on my quick math on the back of this which looks like it's a

little better than the street ha anticipated of 68 cents. they also talk about how they're going on and closing the year but spending -- anyway, their store sales for the quarter were down by 1.8% and total sales were down 4.9%, but this is probably 74 versus the 68 the street was looking for. >> good news for bill ackermann and ron johnson. >> that's right. new logo and -- >> maybe it's two quarters in. >> wouldn't you give a rehabilitation of j.c. pen any b jcpenney and sears or kmart? i don't think it's the same thing. >> it's not the same thing. i give more credit to ron johnson. >> rojo. >> is that what we're calling him now or are you making it up? >> more than $1.3 trillion in assets under management and we know tony crescenzi, you cut your teeth at a great firm,

miller taybach, and then unfortunately to take a job you had to move from, like, staten island to -- >> what do you say unfortunately? i always say pizza, there's no pizza in california. >> isn't your office on fashion island in that white building? i don't know how anybody works. no work. you can't do any work. >> it's a very tranquil environment, and you feel great just walking outside. >> but that's why there's no work going on. >> no work. we do get in at 4:00 or 5:00 in the morning. >> richard fisher was on yesterday. were you up early enough to see that? >> i saw that. >> and you saw bullard on today. and also did you see us on tuesday? >> i didn't get to see it. >> he talked about decelerating coincident indicators like it really makes sense to think that we could be heading back into a slowdown. but then bullard kind of -- >> the current indicators do not

point in that direction as bullard suggested. look at jobless claims, the most reliable economic indicators you can find and the unemployment rate is the most understandable economic indicator that there is at least for main street. most of the indicators are better. car sales of late have picked up to 14 million annualized pace. the workweek in january is the longest since 1945, 1945 and 50,000 jobs were created. but i would say the most important indicator right now is jobless claims in terms of the current situation. the second half might be different, maybe weaker potentially because there's $525 billion of fiscal drag headed offshores on january 1st, $250 billion from the bush tax cuts expiring, $100 billion in the automatic cuts from the sequestration, $100 billion from the expiration of the payroll tax holiday, it might make some people in the second half of the year a little more cautious about spending, so consumption, who knows, could weaken then. but up to now it's good and it does look like a 2% story or so.

>> we heard 3% from bullard, could be 3%. >> potentially in the first half, but the second half might be a different story, so we'll have to wait and see but there are all these negatives out on the horizon and still europe as a major risk. >> corporations are going well in the united states. >> companies? >> yeah, companies are doing well as far as cash goes. what could hurt that? >> well, what's important there is whether they'll decide to give up some of the profit margin and transfer, if you will, to the labor. and that's what is happening, because in order to maintain market share, companies are deciding, you know, we better, in fact, add workers. as i said, the factory workweek, the longest since 1945 means sr a factory we better add workers or else we could lose market share and in a growing u.s. factory, there's a revival under way, likely secular for various reasons, they want to avoid that. so there are pressures to maintain market share and that means pressures on margins and depending on how much they give

up, could substantially affect the labor market trend. >> you just said that manufacturing is rebounding and it's secular for various reasons. name one or two of those. >> well, this yen may not be secular, it might be more cyclical, but it's been secular. the strong yen is compelling, japanese manufacturers to move to the united states. secondly, there's a rise of wages in china and then you'll probably see it also in india as developing countries see wage increases, of course, that means less compelling to produce there. they'll have to ship production to, who knows, sub-saharan africa, perhaps and productivity in the united states -- >> i think the argument you were going to make is it's coming back here. >> is coming back here. and the natural gas, the fracking story has a big impact on the ammonia industry, for example, fertilizer. it's also compelling generally to reopen factories. this sort of thing is going to be long-lasting. >> and earlier this week i think it was "the journal" had some piece talking about

manufacturing -- there's been an incredible resurgence, but not because of any of the stimulus crap or any of these -- these -- you know, the thing x the federal government has decided will be winners but it's been in spite of -- they went over these places in pennsylvania and other places where it's been all about shale and -- no, but it has been. where it's been the market doing these things, generating 600,000 jobs, nothing to do with planned state, you know, investment or capital. >> more secular. after the tsunami in japan and the floods in thailand, companies realized, we better diversity the supply sources and chain. so, they wanted to increase production here a bit more. so, some of the things will be likely long lasting. >> you didn't get ask her that question, the other day -- >> what question? >> the one about government and venture capital. she looked straight and said there's no way the government should ever be in the business of venture capital. they are not good at it. they don't know how to do it.

>> it's really tricky, and it's really tricky to do it. >> you asked other people that same question, you might get a different answer. i'm just suggesting that. even in silicon valley, if you were to talk to a john doar or somebody doing the green investing, there's certain types of businesses where you want some kind of subsidy or -- >> for example, in the part of the stimulus program had some moneys for battery, battery production, u.s. battery potential. in terms of the global production -- >> but now it's a huge cost and they are going out of business, too. >> we needed to do the batteries thing because -- >> there was the huge glut of batteries that we had. >> you are talking about two different things, though. the idea of being a venture capitalist and picking the companies that can be a winner, is a little different than seeing i would like to see alternative energy and give tax credits. >> both sides point to the internet or whatever. but if you ask steve jobs how

much does the government have to do with apple success, he would probably say less than zero. >> and i would argue that he's not measuring the impact of the internet. right? >> and you're probably overstating, you know, the ways -- >> itunes would not work, my friend, without the internet. >> all right, so we got global warming and the internet. from al gore we got global warming and the internet. >> it would not work without internet, twitter and facebook that are worth however much they are worth would not be worth anything. >> you can cherry-pick, i don't know, the hoover dam, how about that? the highway system. >> i'm trying. >> pimco's tony crescenzi is sticking around for the rest of the hour. when we come back, our exclusive interview with treasury secretary tim geithner at 8:30 a.m. eastern time. but, first, former utah governor jon huntsman making his way to the set. >> it's big. >> that's right, he's in the house right now.

we'll be talking presidential politics when we come back. before the break, kevin kunan from state bridge taking on housing and the fupt of business. for the u.s. housing market to cure and heal and for home values to go up, in a similar fashion to what we were used to over the last 20 years, the securitization market or something like that will have to come back. our opinion is that the market is dragging along the bottom. there are going to be winners and losers, and as i've said before, the winners and losers are going to be cities and states that do the right things from a tax standpoint, from a trying to attract business, trying to attract industry, trying to attract jobs. the macro outlook on housing is positive. the lower the taxes, the more and the better your long-term demographics are in your city, the more that those home values

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welcome back to "squawk box," the gop candidates are heading into the last weekend before the key michigan primary and joining us right now on set this morning is jon huntsman, the former governor of utah and a former gop candidate and, governor, thank you very much for coming in today. >> good to be here. thanks for having me. >> you got out of the race and you threw your support behind romney. why do you like romney in this part of the race? >> well, there aren't a whole lot of people to choose from, number one. and number two, i think he's probably best positioned to unify the party during a time when our party desperately, desperately needs to be unified. at the end of the day you got to bring independents into the mix or you are not going to win. do the math. mathematically those who are affiliated and registered as republicans, that number doesn't get you to the finish line. you've got to somehow break into what is the fastest-growing party in america today, the unaffiliated party, you somehow have to break into that and that will take someone that can articulate a message above and beyond the shrillness we're hearing today. >> it has gotten nasty.

it has gotten nasty. >> it's terrible. >> why so vicious? >> i can't remember a time when so much money has been spent on negative ads towards other republicans. i can't remember another time. and combined with that, lack of any large, optimistic, big-picture vision for the united states. we're looking for a vision. we want to know where this country is going. we were in the cold war when i grew up, everybody knew what our role was in the world, defense spending and foreign policy, all nicely packaged. and now we're into the war on terror and we're ten years into that and we're wondering what comes next. >> come november, given all the negativity, how much do you think that impacts romney, assuming he is the nominee, and what you argue is the lack of optimism or lack of vision being articulated? >> the negativity hurts. vision helps. but i think there's a mathematical equation that will likely spell the winner at the end of the day, and it reads something like unemployment and gas prices.

i think you can input a couple of those numbers and likely look at historic trends and find where the numbers are, you're going to find your next president. >> you saw the poll probably. it was earlier this week that talked mostly to republicans about do you think that this has been a huge negative, this nominating process. and surprisingly, a pretty large majority said this -- we're not concerned about this. we're not unhappy with the way the selection has been, and when we finally get a nominee, we're going to support the nominee, and, you know, it's only february, so once it becomes clearer and people like you, you are no longer saying negative things about governor romney, and you said some things for a while, i can't remember what -- a couple of them were pretty scathing, too. i don't remember exactly what it was, but there were some good sound bites. >> something about china. >> yeah, there was some good stuff. but that will dry up. and then i agree with you to some extent that it's the economy, stupid, which we've heard that again and again. and even so much where people will pick an unemployment rate

and say above that you're not re-elected, below that you are re-elected. i don't think it's that simple anymore necessarily. i think that there are -- i think there are philosophical differences in the way people want this country to be led. and i think that that -- regardless of the economic backdrop. >> but that's wrapped up in a narrative called a vision. >> right, right, right. >> where do you want this country to go, do you want it to be europe or the capitalist-based united states? that's wrapped up in the narrative what you want the next 25 to 50 years to look like. >> governor, you would never have another republican president if it was purely on who pays taxes, the 51/49 or whatever, if it was on the people on the receiving end versus the producing end, if they elected presidents, we'd never have another republican president ever, because the receiving is on the 51%. you have to have aspirational people, the top 20%, whatever you want to say, i don't want to go to the 1%.

you got to think about people that go individualism and i don't want to turn into europe, that's the way it will happen. >> we need structural reform in this country. the reason we're talking about the tax numbers you laid out is because we've got a tax code today that has $1,100,000 that has loopholes. people lobby for their carve-out. and it's a major drag. >> would you get rid of loopholes for energy producers? >> across the board. >> you would get rid of all of them? >> across the board. >> you don't think we need an energy policy that makes domestic drilling more attractive? >> i think we need basic research in health and in defense and in energy. i think all of that is important. but translating that into the marketplace and relying on a subsidy to make it work is bad economics. >> we're at 108 today. >> this is bad news.

this is bad news for the economy. >> we need oil, though. >> well, we have a strategic petroleum reserve that has 700 million barrels at some point we can tap that. >> you wouldn't tap that? >> of course, i would at some point. >> that's supposed to be there just for huge issues where we don't have enough oil, not just because we want to get the price back down. >> national security. if you can't make the argument that iran is a national security issue, i don't know when you can. >> yeah, but it's not ready yet. you were the democrats' favorite candidate, governor, because i'm hearing a couple of things for why they like you so much, right? >> you know, because i don't do politics. listen, i'm not a candidate anymore, so i'm just not going to spin you. i don't do politics. when i led the state of utah, i got more democratic votes than my democratic opponent, they wanted leadership. they wanted stuff done to make their state a better place. they don't want politics. they don't want sideshows. >> you're in a trance. birds and hearts flying around.

>> listen, i'm not a surrogate, don't throw these questions around. >> you can be a surrogate. >> what do you tell romney to do given the fact that some people would argue that the succession of santorum is not necessarily a function of everybody loving santorum as much a function of people not loving as much as perhaps you do or others should romney? >> listen, again, i'm not a surrogate, so i'm not whispering in anybody's ear, they're not asking anyway. i would say that politics is about competition and in any race you're going to have competition, that's a good thing. so, why is there the rise of rick santorum, who is a friend, i like him a lot. he's genuine. he's authentic. he speaks from the heart. in fact, the greatest knock against him at the debate the other night was he was too honest, too honest about his work in the senate, too honest about his support for, you know, a former senator in pennsylvania. >> do you think that romney's approach where he's -- i've seen people say there's a method to

the madness, that he didn't want in the general election, he sort of thought he would always be the nominee, he didn't want to have to return if he went too far right in the nominating -- in the, you know, race for the nomination, so he wanted to -- and that opened him up to sort of some, you know, not getting the type of backing he would get from the far right by staying more central. but it will come to serve him better in the general election, because he's not going to have to reverse stances that he took to win the nomination. did that make any sense? >> there's some complicated calculus going on in terms of how you can reconcile -- >> would you have gone to the -- >> all of the statement made over so many years. the rule in politics is be honest, be yourself, speak from your heart. you won't have to correct yourself year after year. >> i think you did that and it didn't always work. >> governor, when you look at this race, you set this up as a call to arms, which many people have done. this is the key election which direction is this country going to go. but you also say that you don't do politics and i can see you

working across party lines to make sure that you're working issue by issue. it seems to me as if the idea of somebody who can be a centrist and work across party lines, many of those people have left washington because it's become such a polarizing place. >> yeah. >> do you worry about the direction politics and washington is taking where you don't really have as many people in the center of the aisle? >> swell, yyou don't have to be centrist, you have to be a leader. politics is dumbed down if you lead, you might fail, and if you fail, you have to go back to your swiconstituents and explai. it's no surprise that nothing gets done. nobody wants to take a risk and leading is about taking a risk. >> governor, when we think of past republican leaders, they were able to cross party lines you could say and go for spending that was important to the nation, even abraham lincoln, the transcontinent railroad, ted roosevelt the shift from agriculture from

industry, and ike, the interstate highway system. >> and nixon the national institute of health. >> reagan the tax change that helped save the social security system. there is such a desire to avoid spending increasing or any type of spending that maybe we won't have the vision, on the republican side, or even on the democratic side, to engage in this sort of spending. so, when we think of simpson/bowles there's too much in the way of spending cuts it seems on the discretionary side where this type of spending typically comes from, they want to avoid the big cuts in entitlement spending, of course, where it has to be made in order for the deficit to get side. because there is no meat on the discretionary spending and those are the areas we need to spend to power growth in the long run. and r. & n. and research and development and education and infrastructure, and who has the vision and can we get past the politics to eventually invest in ourselves the way that china and brazil and others are to power

growth in the long term? >> i would still argue that we have everything going for us that we need to succeed as a nation-state, stability, longest surviving constitution in the world, a resilient innovative free market system. we're just trapped in terms of regulation. there's no confidence in our direction. our political system is inert and broken. and i would argue that some of the stuff we talked about, we need term limits in this country. you know, term limits would free up the system so when you get elected as a member, you're not running for re-election the next day, so therefore your decisions are always based on surviving. if you don't have to survive, you know, the next election, you'll make the right decisions. closing the revolving door that allows members of congress to go out and become lobbyists. >> the 25% of gdp that the government spends now, how much of that is -- you're including entitlements there? because to say there's no fat in 25% -- >> we spend $3.6 trillion, $2.1 trillion is entitlements and

there's $1.5 trillion left. >> you got to get from 25 down to 20. >> absolutely. >> and there are many ways to do it, of course, in medicare, of course, a big area of spending, the burdnen doesn't need to be put on patients, how about hospitals. some hospitals charge much more than the other hospitals even though the patient outcomes are the same, we should be tieing the reimbursements made to outcomes. >> there were a piece that colonoscopies and you could pay anywhere, did you see that, from $1,500 to, like, $14,000. >> who is watching over this stuff? so, why aren't we making those suggestions? >> the free market -- it was going to happen but now that's put on hold. >> it's your money. >> and all of these ideas are on the table. there's no leadership. simpson/bowles if you'd taken that and said here's the template, folks, we're moving on, it's not perfect and it won't look like this at the end of the sausage-making exercise, but it's good for the country. if i don't get re-elected, that's okay. it's good for the country.

>> but the entitlement cuts were too small. we couldn't even get those, you got the republicans say nothing revenue and you got the other saying not even those, not that amount. >> when you get both sides complaining about it, you know you're in the right place and that's when the president stands in the middle and says go, it's the right thing, we need to go for it. >> governor huntsman, thank you very much for your time and we hope you'll come back for two hours and guest host. >> love to come back. it was a lot of fun. >> we'll do it in chinese. >> i heard you got to roll out your chinese. coming up, we're just a few minutes away from our live, exclusive interview with treasury secretary timothy geithner. keep watching, "squawk box" is coming back with a very big interview. you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin.

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welcome back to "squawk box." let's now go to washington, where our own steve liesman is standing by with a very special guest. steve? >> andrew, thanks very much. we're joined by the treasury secretary timothy geithner on his way to mexico for the g-20 meeting but before you head there, there are some issues here, domestically, mr. secretary, thanks for joining us. >> good to see you, steve. >> let's talk about oil prices. they've shot up recently over $8 a barrel, it was $108 last we

checked. how much do high oil prices pose to the economic recovery? >> what's happening with global oil markets now is you are seeing two things work to push prices higher. the first is that growth is gradually getting stronger, not just in the united states but around the world, at least outside of europe and that's making people more confident in the expansion and that's helping to push the prices higher. but also, you know, iran is doing some saber rattling and that's causing uncertainty in that context. those are the two main factors. there's no quick fix to this, no short-term fix for this. the best strategy for the country is to expand production in the united states and to encourage americans to use more efficient, cleaner sources of energy to make sure americans are efficient about how they use energy and those are things we're over time doing. and we're making progress in that direction and the other thing is to ensure we are doing everything we can to lighten the

burden on working families in the country. the payroll tax extension is very important in that context because even when gas prices are caused by stronger growth which is part of what's happening, people really do feel it. so, very important that congress continue to look for ways to do things that will help make the economy stronger overall and help lighten the burden on middle-class families like through the payroll tax extension. >> but does it threaten the recovery? >> again, when oil prices are gert i getting stronger partly because of stronger growth, they are more a reflection of growth, but obviously iran can do a lot of damage to the global economy, we're working very carefully to try to minimize that risk, make sure that there are alternative sources from saudi arabia and others to help compensate for reduced export from iran, that's an important part of our strategy. >> are we at or near a point where the government, the u.s. government, should get involved in helping to lower oil prices through release of the strategic petroleum reserve? >> again, there's a case for the use of the reserve in some

circumstances and we'll continue to look at those and evaluate that carefully. but, again, the right thing for the country is to make sure we are focused on long-term investments in energy, changes in energy policy to help solve these long-term problems. you can't view this as a problem that can be solved by short-term fixes. >> is there a danger that the policy we're pursuing with iran is one that will end up costing us perhaps more than it's worth? >> i don't think so, because, again, what's at stake for not just the united states but for the entire regional global economy is a terrible risk. if iran is successful in its nuclear ambitions, the world and oil markets and the global economy and stability in the region would be in jeopardy in that context and that's why we're making so much progress working with countries around the world, not just europe, japan, but china, india, countries everywhere to try to substantially increase the pressure on iran so that we can

deter them from their missions. >> the "wall street journal" has an editorial this morning saying one of the reasons why we're having this problem with energy prices is that the obama administration has been behind almost every average when it comes to permitting, when it comes to approving new exploration and drilling in the gulf of mexico. >> no credible argument to support that, again, in my judgment. as everybody can acknowledge and the facts show this, there's been a very substantial increase in exploration, production in the united states during these last three years. a lot of things kr contributed that but it's getting better, not worse, and that's the good thing for the long run, of course, you see profitability in the energy sector very high, investment in the united states very, very strong and those are fundamentally good things for us over the long run. >> you know, the obama administration recently released the corporate tax reform principles and outlines. i'm confused by one of the principles where you say that the issue is reducing loopholes, and yet this seems like you

enshrine and/or add new loopholes, for manufacturing, and other sectors end up being winners and losers, and that's been a big criticism of the policy from the republicans. >> good question. let me explain what our proposal is. we want to clean up, eliminate, reduce dozens of special tax breaks in the tax code today so that we can lower the overall rate and improve incentives for investing in the united states. so, we propose to cut the rate by broadening the base and eliminating dozens of special benefits to particular industries and sectors. now, you are right, we are proposing to preserve a set of targeted and incentives for investment for research and development in the united states. we think that's a good long-term reform imperative. good for growth here. but we're going to replace dozens with a very narrow, very targeted set of things to make sure we're encouraging companies

to create and build things in the united states, and i think you'll find very broad bipartisan support for reform based on those basic principles. >> is there any chance that anything gets enacted this year, being a political year, a presidential election year and a year when people criticize the administration, well, why did you wait so long? >> we think there's a good chance that by starting to lay the foundation for reform now, working with democrats and republicans, we can improve the odds that reform comes sooner than otherwise would and on terms that are better for the economy long term. you know at the end of this year congress faces some very difficult decisions, because you're going to see the bush tax cuts all expire without legislation. the sequester,utomatic cuts in spending pretty substantially will hit automatically unless there's a broader agreement, bipartisan agreement, that combines tax reform with efforts to help reduce long-term deficits. that creates a very powerful motivation for congress to act and what we're trying to do is

lay the foundation for a key elements of tax reform that will be good for the economy as part of that ultimate progress. so, we hope there's a chance to move. i think you heard chairman camp say this morning, you know, that it is a political moment, but things can happen even in election years. >> you are on your way to mexico city for a g-20 meeting where it's pretty certain that europe will be a big part of the discussion. do you still see europe as an issue that could derail the u.s. recovery and cause global financial contagion? >> it could, but it seems much less likely now because europe has made a lot of progress in trying to convince investors around the world that they will do what's necessary to reduce the risk of a catastrophic failure in your roeurope. and the combination of the governments implementing tough reforms in italy, spain and greece and the steps the ecb has taken and the improvements and confidence in the broader banking system, together those have had significant impact in

reassuring the world that europe is not going to make a catastrophic mistake in allowing a financial crisis to engulf the continent of europe. they've got some more work to do and, of course, the critical next step for them as you've heard the europeans acknowledge is building a stronger fire wall that will help support the broader reforms. >> how big a fire wall does europe need? >> bigger than they have today, and it needs to be big enough to make credible the commitment that you've heard from leaders of europe that they're going to hold this together. >> if europe puts up a credible fire wall, one that i guess is determined by whether or not the market believes it, does the imf need to have a big rescue package? >> makes it much less likely, but, again, our view has been if europe takes the necessary steps to put in place for the world a sufficiently strong fire wall, then we are fully prepared to see the imf play a larger role in support of reform, if that's necessary. imf's got a lot of resources

today and they've been playing a very important role in europe today, and we're happy to see that role continue as long as europe is putting in place a stronger fire wall. what we don't want to see is the imf substitute -- and it really cannot substitute -- for a stronger european response. >> so, are you saying that countries should not commit to this imf fund until we know the size of the european fire wall? >> yeah, and they won't commit. i think it's very unlikely, most countries around the world have the same view we do, which is that they need to see europe put in place a more -- i want to be fair to the europeans, they've done a lot, and they've made quite a lot of progress, but they've got more work to do, and until we see that, i think it's unlikely that you'll see the major shareholders of the imf to play a larger response. >> let's turn to the dodd/frank rule in the united states here. frankly it seems that everything i've read, it seems the volcker rule, the facts that banks cannot do trading, it seems like

a regulatory mess, that there's no way that regulators can come up with a bright line, a not bright line, a soft line, any kind of line, to regulate how banks can or cannot do proprietary trading. in addition i understand you've received some criticism from the europeans about this. >> we've seen a lot of concerns from the markets and from governments around the world, central banks around the world, about the initial proposals you saw the regulators release. but these were draft proposals for comment. and the federal reserve and the other agencies are looking through those concerns now. they're going to do that very carefully. and i'm very confident, steve, you're going to see the federal reserve and the other agencies able to do what the law requires. that as we are limiting the risk these large institutions pose to world, could pose in the future, we're preserving well-designed, carefully constructed exceptions for market making hedging as the law intended. >> there was a story the other

day where the fed is making most of its banking rules secrecy, only having two public hearings. do you think it should be more open? >> that's a question for the fed. we've got a process in the united states as you've seen from concerns, we propose regulations in draft form so that people have a chance to assess them, and the regulators who write the rules have a chance to take advantage of broad-based view from everybody affected, and that's the strength of our system. >> last question, mr. secretary, on housing. there are concerns that foreclosures could start up again or could -- because a lot had been held back. and meanwhile, our understanding is that the new refi program that's been proposed by the administration is probably dead on arrival in congress. is the government done with helping foreclosures in the housing market at this point? >> no, i don't think so. i think it's very important that -- and we will continue to do this with all the authority we have, and we'd like congress to do more, too. we're going to do everything we can to help americans refinance and take advantage of lower rates, to help americans who can afford to stay in their homes

take advantage of the modification of their mortgage so they can do that to help address the communities across the country that are most devastated still by the damage caused by the crisis in housing. this is going to take more time. it's going to take more effort and, again, we'll continue. we'll keep at it and where we find a good case for new programs for adjustments, we'll do that. but we need congress to act, too, because there are limits what we can do with our own authority. >> what happens if congress doesn't act? >> well, then, if congress doesn't act it will take longer for the housing market to heal and longer for people to repair the damage caused by the crisis. and there's no reason why when there's a good, compelling case to help americans to refinance that congress shouldn't act to make it possible. >> mr. secretary, one more thing, you've proposed, what, $2.1 trillion in gross revenues that the president has in 2022 in the budget. and yet it seems like almost all the additional revenue is taken up with additional spending.

where's the real deficit reduction? >> that's not the fair way to judge the net impact of the president's proposals. the president proposed $4 trillion in deficit reduction over a ten-year period. that's $3 trillion on top of the agreements we reached last august to cap the rate of growth in defense and nondefense discretionary spending. and that additional $3 trillion deficit reduction comes with a balanced mix of revenues for tax reform. about half is through tax reform revenues and through hundreds and hundreds of billions of dollars in savings across the programs of the government from farm subsidies to even medicare and medicaid reforms. and if congress were to enact those proposals, then we would put the u.s. much closer to a sustainable fiscal position for the next decade and that would make broader confidence in the american economy stronger. so, it's a balanced package. it's roughly 2 1/2 spending cuts for every dollar of revenue

increases. of the incremental $3 trillion that we haven't already locked in, about half in revenues and half in spending cuts. it's a balance. why is that the case? because if you don't try to generate more revenues through tax reform, if you don't ask, you know, the most fortunate americans to bear a slightly larger burden of the privilege of being an american, then you have to -- the only way to achieve fiscal sustainability is through unacceptably deep cuts in benefits for middle-class seniors or unacceptably deep cuts in national security or unacceptably deep cuts in things that are very important to how we grow in the future like infrastructure or education or innovation. so, i do not believe there's a credible strategy to restore fiscal sustainability in the united states that doesn't recognize the fundamentality reality -- >> is it class warfare? >> no, not at all. you need modest additional revenues in every bipartisan fiscal plan from simpson/bowles to others released over the past year have recognized that modest

increase in revenues need to be part of the solution. >> mr. secretary, thank you for joining us. >> good to see you, steve. >> back to you guys in englewood cliffs. >> steve, great interview. let's get reaction from what we just heard from the treasury secretary, let's talk to tony crescenzi from pimco. take it out. what was the highlight for you? was there something you want to push back on? was there something a big takeaway for you? >> two things. regarding europe and the last comment he made on the united states and the budget. for one, he said that we want to see the united states and much of the world, wants to see europeans deliver a larger response of their own before the imf and the countries that contribute to it would consider doing more. and this continues to make sense, because the europeans need to do more. for example, why would china, a relatively poor country with a median income annually about $6,000 a year want to make loans to europeans making $40,000 to $50,000 a year?

think of labor market reforms that are needed in italy. they have something called article 18 that's been around for 40 years. it's in the labor statute, it says you cannot lay off people in italy unless you show wanton negligent on the part of the employee, and unless you do that, you must pay 15% severance or hire the worker back. it gets in the way of competitiveness, and that's what timothy geithner said, the europeans must do more yourself. you can retire at age 53 with 90% of pay, some of these include hairdressers and pastry chefs and taxi drivers. the only thing dangerous about being a taxi driver from what i understand from here in new york is being a passenger. and hairdressers as well, considered a hazardous -- >> joe has a high drier and getting near the thing is hazardous. >> there was a movie called "con

air" do you remember how hazardous that was? >> i do. >> the hairspray. the bottom line is they do need to do more and that's what we'd hope they do. regarding the united states and the budget, it still seems the emphasis on taxation and it hasn't been shown even if you tax the rich to much higher levels, you won't get the deficit, the $1 trillion annual deficit down to where it needs to be. there's not enough emphasis even on simpson/bowles to cut the entitlement spending which is where the meat is. >> you got to broaden the base. >> this is next year's story. >> we'll continue the conversation in a moment. tony is sticking with us for the rest of the show. when we come back, we'll have more of the day's top stories and we'll talk stocks on the move with the "squawk on the street" crew. sq "squawk" will be right back. ♪ giving you exceptional control from left to right... and right to left.

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welcome back to "squawk box." let's get down to the new york stock exchange. david, melissa and jim join us now. good morning, guys and gals. we had bullard. we had -- i think we had geithner. >> jam packed show there. huntsman and geithner. lin. jeremy lin. sorry. cut from the roster. geithner interview just fabulous. what can i say? he answered everything about energy that i thought shows you that they're doing their best. they're doing their best. there's no quick fix. he elaborated on what obama said yesterday. i thought it was very coherent. you just can't drill. it's just not going to help. it's not going to help to expand drilling. we don't have enough.

>> interesting he opens the door once again to the tapping of the strategic petroleum reserve. >> at the same time, isn't it for when middle east erupts into a -- and they cut us off. i remember when it was first started. the idea that iran could take themselves off the market. >> yeah. >> he's obviously deeply involved with iran. weren't you guys amazed at that? he's the point man in the administration on iran, i think. >> so much of it is financial and the sanctions involved go right through treasury in terms of continuing to cut off iran from any of the payment systems and things of that nature. >> i think liesman made a lot of news. really terrific. >> quite a few flashes and a lot of bullard flashes. i like bullard saying -- he almost sounded like he wishes there was a single mandate because they can only do one thing at a time anyway. i don't know if that'll ever happen. but there's a bill. thanks, guys, see you in how many minutes? 8 1/2 minutes. coming up, more from our guest host. then don't miss "squawk on the

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without the stuff that we make here, you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world.

they go into power plants which take some form of energy, harness it, and turn it into more efficient electricity. [ ron ] when i was a kid i wanted to work with my hands, that was my thing. i really enjoy building turbines. it's nice to know that what you're building is gonna do something for the world. when people think of ge, they typically don't think about beer. a lot of people may not realize that the power needed to keep their budweiser cold and even to make their beer comes from turbines made right here. wait, so you guys make the beer? no, we make the power that makes the beer. so without you there'd be no bud? that's right. well, we like you. [ laughter ] ♪

[ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development.

some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ europe has made a lot of progress in trying to convince investors around the world and europe that they are going to do what's necessary to reduce the risk of a catastrophic financial failure in europe. >> treasury secretary tim geithner speaking to us earlier about the crisis in europe.

final thoughts now from our guest host from pimco. you got bullard to talk about, geithner, jeremy lin. >> didn't do so well. yesterday, was it? the economy is improving, clearly. there are certain things happening. you want to stay alert. the good thinks are fraking and factories. credit. car sales are better. multifamily housing is fairing better. jobless rates have plunged to the point which suggests jobless rate might go below 8%. the three rs of risk, rating risk, roll overrisk and restructuring. these things remain alive. it won't go away until europe restores its growth and competitiveness. by staying alert, this means, of course, maybe you can take some risk in markets but you've got to be careful and make sure you're fortifying your portfolios against these downside risks which are significant. with respect to the united states, remember the budget.