csx, norfolk southern, u.p.s. these stocks run when something good is going to happen. they are tremendous tells, so to speak of liquidity coming in or chinese interest rate cuts. the reason i felt today was good despite the spanish ten-year nonsense was when i keep my one eye on america i see the rails going higher. they tell me we are going to get something good from the central banks this week. there is a bull market somewhere. i promise to find it for you. i'm jim cramer. see you tomorrow. larry, what do you have for us? >> despite the elections, greece is unresolved. spain may be a bigger problem. is the end game here going to be the break-up of the euro zone and the euro currency? dpee good evening. this is "the kudlow report." our top story, the president hit the g-20 summit of the world's power houses gathered in mexico trying to show leadership. with u.s. numbers going south

and americans worried about a double dip recession is anyone really listening to president obama? for all we know, we are already in a global recession. also this evening, greece dodged an immediate euro zone exit. like a bad episode of "grey's anatomy" you've got greece still on life support, spain holding for the emergency ward and italy with a contagious infection. plus, president obama and vladimir putin met mano a mano at the g-20, the first time since the flexibility open mike flap. where has that gotten us. we have no help from syria, russia, bailing out europe. the former kgb leader see the president as a pushover? first of all, the european melt

in which he president obama for

not having solved the economic crisis within the first term as he promised and in the form of a bus trip for mitt romney saying the deficits threaten to turn the united states into greece. >> when the people think about taking their life savings and investing to start a small business or perhaps a big foreign corporation wants to build a factory here, one thing they think about is whether america will hit a greece-like wall down the road. the path we are on -- spending a trillion dollars more every year than we take on -- is leading us to greece. i want to make sure no one wonders about that. >> the president is hitting mitt romney back with an ad attacking his economic record as governor of massachusetts. but, larry, until the president gets good news on the economy here and abroad, he's going to be on the defensive on the issue as the incumbent. >> many thanks, john. i completely agree with your point of view. the president is at the g-20

meeting of the global economic power houses trying to show his world leadership. for all we know, we are already in a global recession. in fact, the u.s. economic numbers have been going south and, oh, by the way, polls show pessimism among american vote rs. get this. the hill.com, a full 75% fear another u.s. recession. from rasmussen, 52% expect a weaker economy by this time next year. here's my question. does anyone listen to president obama and is the u.s. really still the global economic leader? i sincerely hope so. but color me worried. here now is cnbc contributor steve ratner, former obama auto czar. we have steve forbes and tony frato, former bush 43 white house deputy press secretary. steve, want to start with you. we have not seen any improvement in the european story. the rest of the world economy is

looking lousy. we may be in a recession and we don't know it. the worst part is as mr. obama dispenses advice at the g-20 his own economic story, his own numbers, jobs in retail stores and factories are going south. what kind of clout is he going to have? >> very little clout, larry, because he has nothing new to say. we have no success story here at home. europe is following policies in the early 1930s. that's austerity. they cut back the government a little bit. a massive increase on the private sector and on consumers. italy raising real estate taxes. spain 52% tax rate top incomes. you wonder why the economies spiral downward. when you practice 1930s austerity why listen to barack obama? >> what's your reaction to that? in some sense the imf looks like it's in the driver's seat. i can smell a skunk. they're saying, cut spending,

raise the value-added tax. i don't hear them harping on tax reform, pro growth measures, pensions, things of that sort. why does the obama administration follow the imf prescriptions of austerity, steve? >> with respect to europe or ourselves? >> actually, both. i'm looking at europe. i'm worried about the united states. >> first of all, it's interesting for me to hear steve forbes argue in favor of stimulus. that may be a separate discussion. but in terms of your question -- >> tax cuts. >> i think everyone in a position of knowledge and responsibility has argued for that. mrs. merkel has, the imf has. geithner, everyone has been clear europe has to engage in structural reforms. >> look. i don't understand why we keep raising taxes. to steve's point. take greece, italy. they want to raise the value added tax.

they don't make money but it does cause prices to go up. it has a depressing effect on the economy. way why wouldn't you go for pro growth supply side tax growth? >> the european, southern tier european countries are in an unsustainable position. spain's interest rates are over 7%. they don't have an option not to close the budget deficit gap. you can argue about doing it on the spending side but they will not allow them to continue to operate with deficits of that side. >> i agree. but it troubles me that the obama administration has gotten behind the imf and is making austerity worse. this troubles me. to me when they say they want growth they want the ecb to cut interest rates and put more liquidity in. it's not the problem. the problem is fiscal and regulatory and tax obstacles. those are the problems. nobody in greece pays taxes. nobody in italy pays taxes. italians don't report it.

the greeks moved to london and the united states and to switzerland. everybody knows it. where's the growth? >> as a proud first generation southern european myself, at least they do work, want to see economies grow like everybody else. the problem in europe, we definitely have to talk about growth, about long-term fiscal reality in the european countries and the euro zone. but the problem, when we talk about structural reforms in europe, what we are really talking about is a fiscal authority to go hand in hand with a monetary authority. you can't have the asymmetrical situation where germany is the bank of europe and germany benefits from the situation. it's unsustainable. we look at wage disparities. >> yeah, but -- i know. we're going to fight that stuff. they will never do it. >> they have to do it though. >> i'd love to see it. steve forbes, mitt romney said

over the weekend no u.s. checks written to europe. >> that's a good thing. you're financing stuff that got them in trouble in the first place. in terms of doing things like having a flat tax or the tax code look at the 1940s. flat physically. japan in 1950s. they got rid of the wartime controls. made the internal changes and they came back almost overnight. why can't southern europe do the same thing? why not give that kind of advice? >> if obama took the lead, they should have the power to hire and fire. they don't. is that because he's tied to the unions in the u.s. and around the rest of the world? it's a huge structural reform. hire them when you want and fire them when you want. >> europeans have deep structural problems in terms of hiring and firing. nothing to do with whether president obama is tied to the unions. >> why not say that? >> as you have pointed out we are not in a position to dictate

to europe how they operate. the old wall street saying he who has the gold makes the rules. we don't have the gold. we're not sending money to europe. without it, i don't know why the europeans would listen. >> where is the thatcher privatization, the asset sales? remember, britain looked like brooes once and they were able to get out of it. where is this stuff? >> we need to see a very strong pro growth agenda for europe. i think europeans are coming around to this, along with the need for a long-term fiscal reality. are they going to listen to barack obama? we heard it from e.u. president barasso who said, we don't need to be lectured on what we need to do here. the best thing the u.s. and president obama can do is restart the engine of growth. this is the most important engine of growth in the year. >> key point. we are not leading by example.

ed with ads coming up romney says people have lost patience with obamanomics. obama says, give me time. who will win that bat snl. >> romney, especially if he comes out with a reaganesque proposal, puts more muscle on pro takts reforms and things like that. people want change. they know this isn't working. maybe they have no credibility but why not call the imf and say, you have tried it for 30 years. change it. >> my favorite democratic president bill clinton had the story right. so did his pollsters. they said, mr. obama your message of patience isn't working. people don't see the recovery. clinton said, why don't you extend the bush tax cuts and avoid a double dip recession. i'm in love with bill clinton. are you? >> i am in love with bill clinton. at the end of the day the voters understand president obama saved

this financial system and this economy when he came in we were losing 800,000 jobs a month. now we are gaining. not a lot, but some. >> the polls don't show people believe it. that's the argument but the polls show it's not credible. just as it is not credible in europe. >> the polls, if you ask people who's to blame for the economy -- president bush or obama, the polls are clear. >> he's not on the ballot. that's the answer. >> steve forbes, steve ratner and tony fratto. thank you. coming up, the fairest tax code is the simple flat tax code. why can't congress fix jobs, the uh economy and the whole fiscal mess. harvey golub of american express tells me why. next up he's waiting in the wings. later, a breather from greece. now spain is back in the danger zone. a big dose of goold good old-fashioned supply side reform is what the euro zone needs to

curb the uh crisis. and i will show you how it's done. don't forget, free market capitalism is the best path to prosperity. it has in the past worked in europe as well as the rest of the world. time to give it another try. i went to a small high school. the teacher that comes to mind for me is my high school math teacher, dr. gilmore. i mean he could teach. he was there for us, even if we needed him in college. you could call him, you had his phone number.

he was just focused on making sure we were gonna be successful. he would never give up on any of us. ♪ i hear you... ♪ rocky mountain high ♪ rocky, rocky mountain high ♪ ♪ all my exes live in texas ♪ ♪ born on the bayou

[ female announcer ] the perfect song for everywhere can be downloaded almost anywhere. ♪ i'm back, back in the new york groove ♪ [ male announcer ] the nation's largest 4g network. covering 2,000 more 4g cities and towns than verizon. rethink possible.

all right. all right. welcome back to "the kudlow report." so a simple flat tax code is a fair according to the next chairman harvey golub said it. who will deliver -- obama or romney? let's talk to someone who knows how to get a deal done? here is harvey golub, a member of the executive committee of the american enterprise institute and former ceo and chairman of american express. tax income once, eliminate the preferences and get rid of the

corporate tax. do you have that right? >> and the estate tax. yeah. people don't realize the estate tax raises lnl $11 billion a year out of $2.3 trillion raised. in the last two decades it's never raised more than $20 billion a year. there is a whole industry created to avoid the estate tax that, if eliminated would put none to productive use. as a moral matter, all of that has been taxed already. taxing it again is unfair. >> it's taxed when you earn it the first time. >> cash or in kind earnings when you earn it you pay tax at that point. >> ditto for cap gains and dividends. you already paid it as corporate tax. >> but you eliminate the corporate tax. you have capital gains and dividends paid at the normal rate. >> you don't have to have preferences. we have a simple flas tax code, probably grow the economy and raise more money than we are doing now.

>> you would raise more money. it would be a lot simpler. >> you are a former distinguished and successful ceo. i want to ask you with the agenda in washington, corporate taxes on the agenda, personal tax reform on the agenda, entitlement reform on the agenda, the extension of the bush tax cut fiscal cliff on the agenda, why can't they get anything done? ceos get stuff done. people make deals. they walk away and everyone has common ground and common benefit. what's wrong with washington? >> people in washington like to grant favors and withhold favors. they like to raise money to run campaigns and they would not raise as much money if things were simpler for people and corporations. >> but you know the simpson-bowles arrangement. the president talks about it, mitt romney talks about it. we almost had a deal a year ago. what's missing? is it a leadership quotient in your opinion? what's missing from good

deal-making where people can walk away from the table satisfied and do the country some good? >> what is missing is leadership, larry. the first task of any leader in any situation is to define reality. we don't see this president defining the current fiscal reality and the outlook for the economy of this country in a way that would persuade people that change is needed. >> and put urgency into it. >> it is an usrgent matter. >> you wrote another piece that said this is the worst economic recovery in the last 60 years. why is this the worst? >> all of the things the administration talks about with regard to pro growth has been more than offset by anti-growth policies and actions.

so if you give people $100 billion in reduction of one-year taxes on social security and medicare you get very little stimulus. >> right. >> if you reduce tax rates on a consistent basis over time then people will change the decisions they make. >> is that what this election will be about? in part the incentive effect and limited government? it sounds like you're blaming mitt romney. i don't know if you are. i don't want to put words in your mouth, but it sounds like it. >> i'm not blaming myitt at all. he's not president. he's running for president. i would clearly like to see a president who understands what pro growth policies really mean. >> then you're blaming obama. >> i'm blaming obama for that. i would like to see mitt romney make a ringing case for free enterprise and for personal

freedom. the implications of that as would manifest itself in our tax policy, our regulatory policy and spending policy. >> all right. we'll leave it there. thanks, harvey. we appreciate the words of wisdom. up next, world leaders amp up the pressure on europe for better growth and to solve the debt crisis. maybe they need a good old-fashioned supply side approach. and i am humbly going to give it to them. if you have copd like i do,

you know how hard it can be to breathe and what that feels like. copd includes chronic bronchitis and emphysema. spiriva helps control my copd symptoms by keeping my airways open a full 24 hours. plus, it reduces copd flare-ups. spiriva is the only once-daily inhaled copd maintenance treatment that does both. and it's steroid-free. spiriva does not replace fast-acting inhalers for sudden symptoms. tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. these may worsen with spiriva. discuss all medicines you take, even eye drops.

stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. other side effects include dry mouth and constipation. nothing can reverse copd. spiriva helps me breathe better. does breathing with copd weigh you down? ask your doctor if spiriva can help. over a million people have discovered how easy it is to use legalzoom for important legal documents. so start your business, protect your family, launch your dreams. at legalzoom.com, we put the law on your side. in your fight against bugs. ortho home defense max. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max.

microsoft has just microsoft has just announced the tablet arrival of the ipad. here's more on that and the latest breaking headlines coming into the cnbc newsroom. >> that's right. let's get to the microsoft story. all day the buzz built that the company would announce its own tablet or a system to access movies and video across a range of devices. microsoft's ceo steve bomber has announced surface, a tablet. elsewhere a washington jury found roger clemons not guilty on all counts of lying to congress. the case concerned his testimony under oath about steroid use. adidas put out a picture of upcoming shoes. yes, those are plastic and velcro ankle bracelets. they are designing the quirky and light hearted style before being slammed by bloggers saying they looked like slave shoackle.

stay tuned for the recall on this one. and how about a mop top? ♪ live and let die >> or live and let live. paul mccartney turns 70 today. fresh from a monster concert tribute to the queen last week, looking ahead to the olympics opening ceremonies. he's been on stage all over the world for more than 50 years starting in the '60s when the beatles created more mob scenes in airports and stadiums across the u.s. he's just proving that age ain't nothing but a number. >> i love that. i'm very honored and pleased to be younger than paul mccartney. i'm a big fan. i'm glad he's still going strong. gives us old geezers a lot of help. >> you're not a geezer. i'm a big fan as well. >> thank you. you're very kind. up next, with a catastrophe averted in greece, spain may be a bigger problem than greece itself. there's still no real pro growth

policies to get the europeans out of this mess. you know what? it's simple and next up, i'm going to show them how to do it

♪

welcome back to "the kudlow report." i'm larry kudlow. in this half hour, stocks mixed today. the dow down 25. the nas up 23. the s&p up two. okay. as i continue to worry about bad numbers, will the fed announce a new operation twist this week that will be aimed at buying mortgage-backed securities? also this evening, somebody please explain to me what president obama's flexible moment did for us. russia is sending warships to syria. no help when it comes to iran. no finger lifted as europe's economy melts down. what's today's first mano a mano meeting between president obama and vladimir putin going to achieve? first up, a victory for the conservative party in the greek elections, but the euro zone crisis is far from over. chief international correspondent michelle caruso-cabrera joins us from

athens with the details. good evening. >> larry, the election is over. now the presumed winner has to form some kind of coalition government. everybody thinks it will happen within the next 24 hours and then the hard work begins. the presumed next prime minister has to begin renegotiations with the european union. at least he said that's what he wants to do. he thinks so far the program in greece has been recessionary. they have raised taxes and cut spending. he said it's made it difficult to raise revenues and bring growth to the country. he said that is the next step. he says greece needs time to cothe reforms in the labor markets to help it grow and also get back to having a balanced budget. can he convince the european union to give him more time and more money and more understanding? we'll find out over the next several months. larry, back to you. >> thanks, michelle. look, here's my take on what the euro zone needs. i want a growth agenda.

my big problem is the euro zone crisis, neither the e.u. nor the imf nor anybody else truly is promoting pro growth policies. growth solves debt. growth solves unemployment. first up, reagan, supply side tax reform. flatten the tax rate, broaden the base and lower the high tax and get it out of the underground economy. just depresses the economy. then sell government assets everywhere. sell government-owned companies. sell government-owned land. remember, that's what margaret thatcher did to turn around britain. third, enforce government austerity with smaller staffs and lower benefits and, last, deregulate labor markets. allow businesses to legally hire and fire at will. it's a simple supply side paradigm. i just don't see it being implemented. now to the international experts to weigh in.

here is andrew bush, global market strategist at bmo capital markets. and ben steel of the council of foreign relations. andy bush, i go to you. i know there is talk about hiring and firing. as far as tax reform, flat tax reform, lowering the value-added tax and privatizing and selling off all the government assets, these are true pro growth things. these would shrink the public sector and fire up the private sector. nobody's doing it. >> it's sad that the elections not only in greece but in france went the other way with socialists taking over there rolling back the hike on the retirement age. these are play books that don't work. for a while i thought greece may open up different sectors of the economy to competition like more truck licenses. i think they hadn't had a new truck license in 20 years in greece.

that shows you how they are in that country. >> ben, this makes me cynical and september call. what's really going on here as we kick the can down the road and the greeks get more time, more cash to do whatever shouldn't be done. are we opening the door and kind of paving the way for the breakdown of the euro zone and the breakdown of the your currency? ben, isn't that really what's happening here? we're just paving the way for the break-up of the euro and the currency. >> i completely agree with you. without pro market reforms, reforms to encourage employers to hire, businesses to invest, none of this will work. here's my problem with your position, larry. when the building is burning you put out the fire. you don't worry about privatizing the fire department. if we don't recapitalize the spanish banking sector and do it quickly, we are not going to get

time for the types of reforms you and i and andy want. >> we have been talking -- we. they have been talking about recapitalizing the banking sector for i don't know how long. more recently something i have been promoting, and others, they should guarantee all deposits, interbank loans, the r.p. market and debt. that will save the banks. i don't want to save the countries, i would like to save the banks for a while. to me, that sounds like it's leading tow the breakup of the euro zone and the your euro currency. >> first with regard to guaranteeing bank deposits, that won't work if spanish citizens aren't convinced when they go to get their money out of spanish banks they will get euros and not pasaitas or something else. that i don't think the euro zone is capable of guaranteeing. second, the current euro zone recapitalization scheme involves

the euro zone giving $100 billion euros in new loans to the spanish government which the spanish government will use to recapitalize the banks but the spanish government can't afford to take on $100 billion euros more in debt. that's got to be equity capital, not more loans. >> is that why spain is public enemy number one with bond rates over 7%? >> i think so. they didn't bypass the sovereign when they said they would give him $100 million for bank recapitalization. that's the difference between spain now and t.a.r.p. i know you're not a fan of t.a.r.p., larry, but the capital injection was equity capital, not forced debt onto the united states. we bought shares in the banks and eventually made a money of of it. that's a good story to stabilize the system. you make a good point. all the alphabet soup-type programs to stabilize money markets, provide liquidity is

something that should be looked at. that's a good step. so that's something they can do by the end of the month to some extent. also with the fdic structure they are talking about having the ecb be the lead regulator for all banks in europe is a good step. >> i think guaranteeing the bank deposits would be the single most constructive thing. i come back to my growth issues, ben. it troubles me. the imf now wants to be more central, provide more money. i don't know where the resource wills come from. the imf wants to give them more money and will say, raise the value added tax. raise mef revenues. we'll give you help, cash. greece may run out of money. just raise the value-added tax again. that's what's causing the rebellion, what david malpass calls private sector austerity instead of government austerity. it doesn't work politically or economically. >> the imf is becoming increasingly irrelevant to the

debate. the u.s. isn't willing to put capital behind a euro zone bailout. the chinese aren't willing to do it. this is the n the hands of the europeans. let's be blunt about who it is. that's the german taxpayers. the german taxpayers will have to become major shareholders in the spanish banking system. this is going to take a revolution in german domestic politics to convince people there that really fundamental change is necessary. we can't keep piling more debt on more debt. >> which is what we are doing. it's exactly what we are doing. andy busch, barack obama met with merkel. what did he say to merkel? i haven't seen anything come out of the meeting. >> he said please get some growth going. we need it in the united states. >> why don't they go to flat tax plans and sell assets? sell all the greek islands, for god's sake? >> that's not bad. they are dragging their feet. do you know what else is

interesting, too, larry? this gets to the debate of who's first in line? it gets back to president obama's discussion about making sure firefighters and policemen and educators are hired. that's the same problem in europe. they are always looking for government workers to be the main state of the work force. it puts them above members of the private sector. why is this group placed ahead of the line where the private sector isn't. that's what i don't understand. it's the same thing in europe as it is in the united states. >> it's government prosperity and private austerity. that's wrong. it should be government austerity and private prosperity. i'll tell you. they've got to sell all the assets, curb the pensions and they have to get themselves real flat tax reform so the revenues will come in. they are not making money raising the value-added tax. benn steil and andy busch, thank you. as i continue to worry about bad u.s. numbers, the question is will the fed announce a new

operation twist this week to buy mortgage-backed securities? still ahead, president obama and vladimir putin meet mano a mano at the g-20 for the first time since the infamous flexibility open mike flap. where has that gotten us? does the former kgb leader see the president as a pushover? and more on the new microsoft surface tablet to rival the ipad. the stock is moving. more details. we'll be right back. tdd# 1-800-345-2550 let's talk about fees.

tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees. tdd# 1-800-345-2550 no hidden fees. tdd# 1-800-345-2550 and we rebate every atm fee. tdd# 1-800-345-2550 so talk to chuck tdd# 1-800-345-2550 because when it comes to talking, there is no fee.

our cloud is made of bedrock. concrete. and steel. our cloud is the smartest brains combating the latest security threats. it spans oceans, stretches continents. and is scalable as far as the mind can see. our cloud is the cloud other clouds look up to. welcome to the uppernet. verizon. we have we have more on tonight's breaking news. microsoft has unveiled its competition to apple's ipad. let's go to the breaking news desk. we have more details for you. >> more details behind the highly anticipated tablet microsoft will be launching called the surface tablet. microsoft's surface tablet is

9.3 millimeters thin, weighs just under 1.5 pounds. it features a 10.6-inch wide screen display. it will be optimized for windows 8. the surface provides access to windows apps including xbox. good news for fans. it has a multi touch keyboard cover front and rear cameras. as the news comes out behind the tablet that microsoft is launching. we'll be sure to get you more. back to you. >> i may want to have one. let's do some stock market work. the ceo of bull and bear. lots to touk about. ron, i want to be optimistic like you are but i haven't seen a good economic number for three months in the usa. that troubles me. >> well, how about housing showing a little bit of a rebound here? i think you might say housing is rebounding. look at the long-term impacts of what natural gas and what's

going on there can have for the energy policy of the ice. there are good things going on. it's just all overshadowed by the disaster in europe. >> okay. i get the disaster in europe. jar for three months the pace of job growth is slower. retail sales down two months in a row. manufacturing production down the two of the last three months. housing sentiment was slightly better today. consumer sentiment was off more than anybody thought last friday. jack, this worries me. i think gdp will come in below 2% for the second straight quarter and i will ask out loud how can that be good for stocks? >> well, here's the thing to keep in mind. we are trading at such a low valuation, i think it's one of the reasons and one of the ancillary effects of some of the lack of pro growth policy you were talking about that we don't see coming out of washington here. the reality is this. you have corporate america

making a lot more money than they were ten years ago. we have an index that's basically at the same level. that tells me that the market is voting with price and valuation. having said that, that is like a coiled spring. it's the proverbial beach ball you are trying to keep under the water. eventually it will keep up. the question is what's going to be the catalyst for it? it's counterintuitive. we'll talk about the fed in a second. right now it seems as if we can't be in the middle. either you are looking for an armageddon scenario or you have to be invested. >> no, i don't want -- >> it could be lost. >> i'm not looking for armageddon. i'm looking at weak and feeble economic stuff. i worry, ron, with europe on its back with the u.s. slumping, with some of the emergings, india, brazil, china, i just worry. maybe we're in a global recession and we don't know it. i say it out loud. i know american profits and

sales are looking decent. i get it. i think that's the saving grace of the story. it may turn out that the rest of the world is suffering from more deflation than we think. we are catching it here. >> if i knew the answer i wouldn't be on your show. i would be making lots of money. i believe that the policy makers will get it right in europe. i believe europe is a huge, huge negative impact on the big thing we need to get the economy going. that's confidence. all you do every day on the show. this has been the slowest train wreck i have ever seen. we have been talking about it for three years. we are near the end game in europe. you talk deflation, entirely different game. >> i hope the end game comes in europe. it would be a tremendous bullish event.

i don't have the confidence. a lot of talk because the economy is coming in below the fed's forecast that they are meeting this week on wednesday. they will announce another trench of operation twist where they sell short-term and they will buy long term mortgage-backed securities. are you hearing that? how do you handicap the probability that the fed will do operation twist aimed at mortgages? >> i am hearing that, larry. the other thing people are starting to murmur about is maybe we'll see the inflation target adjusted from 0 to 2% to a 4% target. it's something people have been talking about and it goes with what you were talking about. you know, deflation or disinflationary pressure is the real enemy. when you look deep inside the soul of a central banker they don't say the word but that's the enemy. it's hard to fight.

>> that's what we are experiencing. >> exactly why we are going to see them flood the market. >> oil prices. i mean, that's an issue. ron, weigh in before we go. look, low inflation is great. the problem is the indexes are dropping below zero. the good news is the oil prices and gasoline at retail prices are coming off. the bad news is you have to worry that maybe the overly strong dollar is deflating because of the overly weak euro. >> well, for sure, larry. first of all, the fed is going to have certainly a bias toward easing. you will read about a that. i don't believe that any more liquidity pumps into the system will take away the risk of the economy which emulates in europe. we'll get an end game there. ireland and portugal have to refinance debt. they can't refinance it without

an end game. i'm betting that this gets resolved in a way that at worse kicks the can down the road. >> thanks, gentlemen. up next, president obama and russian president vladimir putin meet face to face, mano a mano at the g-20. how flexible will the leader of the free world be with putin? there is a lot at stake here. we'll talk to my great pal john bachelor when "the kudlow report" continues. it's very important to understand how math and science kind of makes the world work. in high school, i had a physics teacher

by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies.

>> it's the diplomatic equivalent to two heavy weight fighters meeting before a title match. president obama, russian president vladimir putin meeting at the g-20 summit today to size each other up. what's at stake? political and economic leverage in europe, the middle east and elsewhere. here is my great friend john baxter. welcome. you know it doesn't seem like a relationship. i want to go to the serious story.

russia putting battleships in syria. i think you have reports that they are being joined by china and others. what's going on there. >> we have tentative news until it is confirmed. the news is alarming. this is a very major exercise. combined air, land and sea involving russia, air assault, troops and iran and syria and to be joined by china. warships from china. that also includes the very likely scenario where iran and china have already received permission to pass warships through the suez canal. to my knowledge this is alarming for the whole region, but especially israel. >> especially israel, john. but presumably especially israel this is completely counter to u.s. interest and u.s. efforts to unseat assad and syria. what's going on? what's obama going to do about

this in the mano a mano discussion with putin at the g-20? >> quickly, back in the u.n. security council against libya, russia helped broker the deal and qaddafi was to accept internal exile. russia believes it was betrayed by the secretary of state, the u.n. ambassador and the obama administration. qaddafi's death told russia not to trust the u.s. there will be no climbing down on syria. russia intends to back the assad regime all the way. >> they have not lifted a finger to help us with iran. i never understood the business when president obama was talking to former president medvedev. there would be flexibility in the second term. there was flexibility with defense and radar set-ups. what does the united states get except more russian hostility?

>> correct. mr. putin is in charge. the former president, back story again. he was humiliated when russia was betrayed in libya. he has not regained a status since then. mr. putin won't make the mistake. russia is an energy super power deploying major combat elements. combined arms, the marines from the black sea fleet on their way to syria. this is boots on the ground. there will be perhaps 400 aircraft involved. specialists, gru units, everybody who knows special forces this is the russian equivalent. the scenario they are entertaining is in the event of an intervention from the western north and syria. they are making it clear there will be no military option ffr the united states. there is no option for the u.s. at all. >> they are in effect completely

defending and protecting the brutal murderer assad. that's what they are doing. in so doing, john, they are completely protecting iran which is essentially the syrian banker, is it not? >> correct. iran and syria are linked. russia is committed to both. they are buffer states in the middle east. there are reasons for this historical. let's speak to the election. this is a severe setback for the obama administration. when and if the military exercise takes place it is clearly in the face of the obama administration's negotiations with iraq. putin played a strong card. >> thank you, john baxter. we'll leave it there. thank you for that inside diplomatic analysis. that's it for tonight. thanks for watching, everybody. i will undergo back surgery tomorrow. i will be off for the next couple of days. wish me luck. pray for me if you will. my friend joe kernan will fill

in. a little back surgery and then i'm pack on the tennis court. wish me lucks and your prayers, folks. i'm larry kudlow. i hope to see you a week from tonight. when i found out my irregular heartbeat

put me at 5 times greater risk of a stroke, my first thoughts were about my wife, and my family. i have the most common type of atrial fibrillation, or afib. it's not caused by a heart valve problem. i was taking warfarin, but my doctor put me on pradaxa instead to reduce my risk of stroke. in a clinical trial, pradaxa® (dabigatran etexilate mesylate) reduced stroke risk 35% better than warfarin. and unlike warfarin, with pradaxa, there's no need for regular blood tests. that's really important to me. pradaxa can cause serious, sometimes fatal, bleeding. don't take pradaxa if you have abnormal bleeding and seek immediate medical care for unexpected signs of bleeding, like unusual bruising. pradaxa may increase your bleeding risk if you're 75 or older, have a bleeding condition like stomach ulcers, or take aspirin, nsaids, or blood thinners, or if you have kidney problems, especially if you take certain medicines. tell your doctor about all medicines you take,

any planned medical or dental procedures, and don't stop taking pradaxa without your doctor's approval, as stopping may increase your stroke risk. other side effects include indigestion, stomach pain, upset, or burning. pradaxa is progress. having afib not caused by a heart valve problem increases your risk of stroke. ask your doctor if you can reduce your risk with pradaxa. yep. the longer you stay with us, the more you save. and when you switch from another company to us, we even reward you for the time you spent there. genius. yeah, genius. you guys must have your own loyalty program, right? well, we have something. show her, tom. huh? you should see november! oh, yeah? giving you more. now that's progressive. call or click today. all your important legal matters in just minutes. now it's quicker and easier for you to start your business...