"the kudlow report" moments away. look, everyone was really good yesterday, suddenly get an uplift. use the uplifts if you're really negative to lighten up. we should getting that kind of end of the quarter buying tomorrow. again, if you're nervous, take some profits or lighten up. i'm not telling you you've got to be there. but i am saying there's a lot of value. witness rupert murdoch waking up and saying let's go bring a lot of value. i'm sick of spain, i'm sick of germany. my company is worth more than you are saying it's worth.

good evening. this is "the kudlow report." president obama, are you obstructing justice? that's the question from darrell issa who questions whether the president personally had his hands in the fast and furious scandal. it comes just before thursday's contempt vote on attorney general eric holder. two outspoken members of the house oversight committee are going to join me in just a few moments. also this evening, so many democratic owners are walking out on the president. the democratic national convention in charlotte, north carolina has run out of cash. good evening, john. >> good evening, larry. this poll shows we have a close

race to the white house. each candidate has distinctive different advantages. that's coming up in a few minutes. >> also, china is not slowing down. virtually no growth in electricity and other signs of contraction. and that spells danger for the world's economy. but first up, there's breaking news out of washington, there may be a deal over the bitter battle in student loan interest rates. the late-breaking details. what is the latest? >> that's right. there may be a deal is the right way to express this. if congress does no the act, a key federal student loan interest rate is set to double july 1. that's coming up in just a couple of days. we're down to the wire here. and late this afternoon, senate republicans and democrats announce they have a deal to cover the $6 billion funding gap that separates them on this student loan interest rate.

they say they have two specific pay-fors that they will do in order to make sure the student interest rates do not increase in july. here's harry reid just a little while ago this afternoon. take a listen. >> i feel good about student loans. there's been some bipartisan stuff going on here. and we're able to do that because legislators decided they wanted to legislate. >> now, senate republicans and senate democrats may agree on this potential deal, but of course, house republicans have to weigh in. they sent this deal over to speaker boehner's office. i talked to speaker boehner's office. they say they're going to take a look at it but no guarantees in terms of where this deal is going to go with just a few days left to go. larry, back to you. >> thanks to cnbc's eamo eamon jabbers. just two days before a full house vote on whether to place attorney general eric holder in contempt of congress, new charges tonight in the intensifying war of words with

the white house. in a blistering letter to the president, house oversight chairman darrylell issa directl accusing the president in the fast and furious operation saying, and i quote, either you or your senior advisers were involved in managing fast and furious and the fallout from it. or you are asserting a presidential power that you know to be unjustified solely for the purpose of further obstructing a congressional investigation. all right, tough stuff. now we have house overnight members dennis kusinich, democrat in ohio and joe walsh republican from illinois. does this have the sense of a cover-up? does the white house order of executive privilege seek to obstruct a legitimate congressional oversight function? >> absolutely, larry. it's good to be with you. i think chairman issa got it

just right. for the president to exert executive privilege at the last minute like he did last week, it's odd and it's troubling. we've been told for almost a year now, the president had almost no awareness or involvement in fast and furious. eric holder said he had almost no involvement or awareness. and eric holder told us he had no communications with the president regarding fast and furious. so for him to exert executive privilege right now tells us he was either was involved or was aware of it. or as chairman issa said, he's purposefully using this to get in the way of an investigation. >> look, i want to make this as simple as possible. if senior white house people were aware of fast and furious. if senior white house people know, they can, in fact, claim executive privilege, but they're eventually going to be faced with some kind of independent

prosecutor. on the other hand, dennis, if this is the justice department matter alone, and the white house is not involved, then this executive privilege call is wrong, it will never pass the federal courts, and there should be a contempt of congress aimed at eric holder. those are the two choices, dennis, that i see. >> actually, my friend, you ear both wrong. just because there's an invocation, invoking of executive privilege doesn't mean the president is implicated in doing anything wrong. there's a fundamental misunderstanding of the nature of executive privilege here. listen, i'm a member of congress, i'm a member of the committee. i want congress' power to be able to get documents protected, but we also have to recognize that the president does have the ability to be able to calculate executive privilege without in any waco loring -- >> i don't disagree with that. i think in order to explore that issue, we're going to have to have a special prosecutor if it ever came to that.

but joe walsh, what i want to go back to is, inside the justice department and this letter from february 2011, which was a false assertion that they didn't know. joe, inside the justice department, you can't just call executive privilege because there's a legitimate oversight function of the committee, run by mr. issa, yourself and others. that's legitimate. you can't block out evidence and discussions of that. that's not what executive privilege is all about inside an agency. >> you're right. executive privilege goes away when there's any evidence of a cover-up. the executive privilege the president exerted here refers to deliberative documents, not documents that showed a communication necessarily between officials and the president. but when there is evidence of government misconduct, executive privilege, according to -- referring to deliberative documents disappears. and look, obama, holder,

cummings, on oversight. they all said there's clearly misconduct in fast and furious. so executive privilege just doesn't apply here. >> what are they covering up? hold on a minute. hold on a minute. >> what are they hiding dennis kusinich? >> you don't understand it because there's no evidence of a cover-up. >> we know mr. holder as this changed his whole line. we now know that senior officials were aware of fast and furious. what i want to know is what are they holding back. you can't have executive privilege to escape the normal oversight functions of this committee. that is not what executive privilege is all about. any executive function that holder tried to use when he was working for clinton. you have to come clean, dennis. why wrnt they coming clean? >> the fact of the matter is even chairman issa on chris

wallace's show on fox went and said look, there was a cover-up at the white house. that's what he said a couple of days ago. so what are we? in alice and wonderland? >> i am leaving the white house alone for a minute. >> we don't know there's a cover-up. >> what i'm saying is the white house is trying to throw an executive privilege over the -- >> a screw-up is different than the cover-up. >> and the justice department should be subjected to the investigative authority of the oversight committee. this is the part i don't get. >> listen, i was chairman of an investigative subcommittee. if i want evidence and information, i try to get it, okay? but you can not convict is someone in headlines or accuse someone of covering something up until you have real proof, even chairman issa isn't asserting a cover-up in the white house. and with respect to the department of justice, we don't have any evidence yet of anything that's being covered up. i said a moment ago, was there a

screw-up? yes. a cover-up? i don't think so 37. >> joe walsh, there's about 7,000 documents that haven't been handed over yet to chairman issa and the committee. and also i want to ask you now, as you may have heard this afternoon, the nra, the national rifle association has made this contempt vote one of their key votes. democrats are going to walk away. is this going to pass tomorrow or thursday? is it a sure thing in your judgment in. >> well, i hope it's not a sure thing that will even have the vote. i hope that eric holder provides the documents that we were looking for. look, we forget this fact. brian terry, a border control agent was killed 18 months ago. his family and the country still don't have answers as to what happened, who knew what at justice and eric holder has not cooperated in this session at all. that's all we're trying to -- >> so you're saying -- let me just get this right, just the end here. you're saying it's still possible in the next 24 hours or

so that the contempt citation will be unnecessary, and that the executive privilege would be unnecessary because a deal could be made and holder can talk to issa and whomever and provide the right documentation. >> no deal can be -- >> i'm not talking about a deal. i'm talking about eric holder turning over the documents that the committee has requested that will give the answers both dennis and i want. >> gentlemen, i know you've got to vote. i appreciate it. >> dennis kucinich and joe walsh. >> executive privilege doesn't necessarily mean there's something to hide. >> thank you very much. >> good to see you. >> there you have it. stocks find something of a foundation. they closed higher after decent housing news today. where is it all going next? we're going to get the pulse of the markets and the economy from an old friend and wall street market pro howard ludnick. he's the chairman and ceo, one

of the great comeback stories after 9/1 1. and coming up, president obama is in dire straits. he can't finance his own democratic convention. the pro business clinton wing of the party looks like it's deserting h him in droves. our premarket panel are going to tell us why the d's are proebro. free market capitalism requires the rule of law. whether it's fast and furious, whether it's national security leaks. the rule of law is part of true capitalism. i'm kudlow. we'll be right back.

recently, students from 31 countries took part in a science test. the top academic performers surprised some people.

so did the country that came in 17th place. let's raise the bar and elevate our academic standards. let's do what's best for our students-by investing in our teachers. let's solve this.

wall street wall street investment pro finding new ways to make even more money. remember cantor fitzgerald, one of the great comeback stories after the 9/11 tragedy. truly one of the great comeback store prips let's now take the pulse of the markets and the economy with howard ludnick. let's talk some stocks and

bonds. bonds are vastly overvalued with treasuries, well, 1.5%. we could be on the front end of the session. europe is going to be later on the show how poor china is. what is the person to do, how do you make money in the stock market? >> i think the stock market is in a tough spot, right? there's no growth. the fed couldn't make it more clear. tr's not really an economy out there. i think one of the places that's rally interesting is real estate. real estate, commercial real estate. why? because interest rates are so low. you have to figure if the fed is going to crush interest rates and keep them low, people are afraid to put their money in the stock market, people are willing to investment in real estate. real estate has life, even though it doesn't make sense. >> this is commercial? not rez dsidentiresidential? >> correct. we bought newmark knight frank

and grubbin ellis. in real estate alone, up from $50 million last yaurter, the real estate business has got a chance because interest rates are so low and capital is sit on the sidelines. and when you're afraid where to move, right? you hear risk on-risk off scenario, real estate is pretty safe. >> longer-term investment. what do you say to stock market investors? what do you say to them? stay out? do you look for bargains? do you just stay in cash. do you buy gold? what do you do? >> there's so much money on the sleens. so gold and things like gold are all about interest rates. interest rates go up again, gold is going down, right? oil is coming off because the economy is lousy. you've got to be focused and pick your spots. you've got to go for the companies that are going to continue to make money in a tough market. >> you are always so optimistic. this is the at least optimistic i have heard you going back many years. we were both very optimisting in the mid 2000s.

after you survived the horrible 9/11. but you sound like you're really supercautious now. >> the volumes are declining. you keep seeing the volumes declining. people just have so much money on the sidelines. when times get good, there's so much cash on the sidelines, it's going to be a great time. but you know what, interesting place to buy, people are looking for yield. ponds, not wall street or coca-cola. bbb, single-a. make sure you stick to good companies. high-quality companies. >> does the election mean anything to you? as far as the vet outlook. romney versus obama? which is your pick or does the election affect you at all?

>> we have a $1.6 trillion deficit and the feds are buying all the bonds. >> this cannot be good. >> just remember, the fed has more debt than italy. we're talking about italy. >> horrible looking balance sheet. >> is that unbelievable. >> with interest rate risks that are out of control. >> you would think finally, our interest rates on ten-year bonds are 1.6%, let's sell a lot of them. who do we sell them to? the fed. who dpnss it overnight. we are just really building a horrible, horrible -- >> this eats at the bankruptcy potential of the united states government. >> it's just driving us down. that's why stocks don't feel good. we're spending too much money. my key point is feel keep looking at what, what is the government to do? are they going to get us out of this? never. >> we need business to turn around. >> last one, you have a pretty good gaming operation in las vegas? we talked about this a queer or two ago. real quick. >> we have seven casinos in las

vegas. you can bet on sports and mobile gaming. t the cosmo, the hard rock. >> all right, trading in vegas and commercial real estate. that's what i heard from you this evening. >> i like them both. >> howard, many, many thanks. one of the great turnarounds of all time, cantor fitzgerald. it's always a great honor for me to interview him on the show. now, a programming note for tomorrow. i'm going to be joined by two power players. bob dole of blackrock and bob mcdonald of virginia. a veep candidate. some shocking news on the presidential race between president obama and mitt romney. i want to know how to get this economy and country out of bankruptcy. that's the big question. [ 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. ♪

the president from interview: i talk to folks on rope lines and

in coffee shops. people who have been out of work. you can tell it wears on them. narrator: he's fought to pull us out of economic crisis for three years. and he still is. president obama's plan keeps taxes down for the middle class, invests in education and asks the wealthy to pay their fair share. mitt romney and his billionaire allies can spend milions to distort the president's words. but they're not interested in rebuilding the middle class. he is. i'm barack obama and i aids, speaker john boehner and representative darrell issa's office met with white house and department of justice officials at the white house to troo i to work out a deal to avoid thursday's contempt vote. according to the source, an offer by the white house and justice department has been rejected. we will have much more details

on cnbc.com. now, a new nbc news wall street journal poll out moments ago, we have the details once again. good evening, john. >> hey, larry. we've got fresh confirmation tonight of just how tight this presidential race is and what the key strategic advantages are for both sides. check out these numbers tonight from the brand-new poll. nationally, president obama leads mitt romney by 47% to 44%. that's virtually the same as last month now tied with the former massachusetts governor at 48% among americans showing the highest interest in the election. yet, mr. romney benefits from high enthusiasm among whites and among those over 50. interest is much lower amongst two key obama group, hispanics and those under 35 years of age. most promising is the edge he's building in the battleground states, eight percentage points that both candidates are focusing on. there, mr. romney's business

career is viewed more negatively. and obama's economic policies positively. that appears to be because of ads like this one president obama and his allies are using to accuse mr. romney of cutting so many american job that he would be, quote, the outsourcer in chief. one wild card, the supreme court's upcoming ruling on the law. the law remains marginally unpopular, but theism pact on voter preferences and intensity remains impossible to gauge after that thursday ruling, lar larry. >> thanks very much. very interesting numbers. up next on "kudlow" the north carolina democratic convention has a serious underwater cash flow problem. and in the modern clinton wing in the democratic party is deserting him in droves. our free market panel is waiting in the wings to take me on. i tell you, i think the clinton people are leaving the obama people and it's costing obama a

lot of dough. stay with us. it's an interesting topic. [ male announcer ] introducing a powerful weapon 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. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, this is the next chapter for the rx and lexus. this is the pursuit of perfection. acceler-rental.

at a hertz expressrent kiosk, you can rent a car without a reservation... and without a line. now that's a fast car. it's just another way you'll be traveling at the speed of hertz. high schools in six states enrolled in the national math and science initiative... ...which helped students and teachers get better results in ap courses. together, they raised ap test scores 138%. just imagine our potential... ...if the other states joined them. let's raise our scores. let's invest in our teachers and inspire our students. let's solve this.

welcome back to "the kudlow report." i'm larry kudlow. forget marco rubio. we're going to talk to a senior political insider who says two front-runners are emerging. their names you would never expect. we're going to tell you who they are and it's very interesting. also tonight, we've always been worried about red china rising. what about red china falling? we have one of the leading china experts who says their economy is much worse than we think. and that adds a more difficult threat on what it spells for the world economy. and then we've got two ace investors. they're going to tell us how to play it. i'll see if you can make a buck on red china falling. but first up, a new report says the democrats are flat out of cash in north carolina. and they're cancelling one of their premier convention kickoff events as a result day one of the dnc convention has already been cancelled.

doesn't sound like much of a convention. ain't much of a good sign. just a couple of weeks left until those greek fill lars come back. you remember that. here now, the latest, wait a minute, they canceled the speedway and also canceled the first or second day? it's shorter convention and there isn't going to be a speed yea? i know the democrats have bankrupted the country. i didn't know they bankrupted their whole party. >> four years ago, corporations gave $33 million to the democratic national convention. but because they're angry over the citizens united ruling, they' banned corporate cash from being donated to the d 234 c in charlotte this year. so they have a $36 million fundraising goal but the reason they canceled this event is because as of now, according to that bloomberg report, they' only raised $10 billion. business is stay on the sidelines. >> no, man. business is leaving the party because the chooer leader, the standard bearer of the party is anti-business. we are. >> going to get into that in

this panel. who wants to raise a money for a guy who hates business, hates profits and hates success. that's my simple take. >> and it's not just business looking at this democratic national con swrengs in charlotte and saying no thanks. you have the senator from west virginia, he's boycotting the event. clara mccaskill, senator from missouri announce she's not going to attend the event. why? because they know it's not a friendly place for moderate democrats, democrats who have a different view on business than the president. >> all right, scott walker closed down the union faucets. what an interesting story. robert, thanks, buddy. appreciate it. i'm just giving you my take. the pro business, modern clinton wing of the democratic party is deserting obam many in droves. that's right. they are walking out. it is a split party. so question is, whether the democrats cash flow pro-season a result of this administration's anti-business policies. what about obama care? the clinton crowd doesn't want

any of this stuff. let's talk. i really believe this, his message is so bad and so hoos tile to business and wall street that bill clinton is leading his people out of prison and into a new promised land, which is not obama's election. that's my take, jennifer ruben. >> well, it's certainly possible. we see not only from the people that robert mentioned, but congressmen also from pennsylvania, from west virginia, i think north dakota was the last one top say they're not going. never before, not since lesionairs disease has so many people left a convention. i think this is an inacademic problem, democrats in swing states who want to get re-elected cannot associate themselves too much with the president. that's going to create an awful lot of finger pointing and democrats in these states who have other engagements when the

president wants to come to town. >> senator claire mst kas skill, she ain't even going to the convention. she's not even going to the convention. you've got yourself a problem. you're going to have a bigger problem when when that obamacare mandate are patrol roled back. democrats are going to run for the hills. i'm not saying run a block or two. i'm not saying go out to drink for a bar, they are going to run to the nearest mountainside to stay away from obama. >> i've always said if the court looks at precedent, it will uphold the law. hopefully we'll see that. but it's hard to argue in general that somehow the economy has been bad for corporations or rich people or big donors when corporate profits are at an all-time high. >> but they won't spend it. >> but they're doing well. the guys at the top are doing well. it's the goo is at the bottom who are stagnating. those are the folks who need help. >> let me tell you something, my friend. i spent a lot of time on wall street and i spent a couple of

years here at cnbc reporting. when the wives of the successful husbands get sick and tired of the president insulting the husbands, you've got a problem. >> but they're doing so well. they're doing well, better than they were doing before the recession. >> if someone is doing well, someone else is doing screwed. you can't have people doing well and other people doing well. it's all a closed circuit. >> what do your numbers show. am i on to something that a good chunk of the clinton moderate former dlc, democratic lesion counsel wing, pro business, pro wall street are leaving the party. they won't even finance the convention in not guilty next? they won't even finance the three-day convention. i've never seen anything like it. >> they're losing the first election. that's when people vote with their support. and the democrats are now going to see an austerity convention in charlotte where they can't even pump stimulus into it.

their values are totally out of touch. north carolina would go for romney today and the democrats are less in play when they start doing this. that's the first thing. the second thing is, we released a survey, 58% of the impeachment want this decision repealed on oba obamacare. and you know what, 57% favor a step kbi step approach where they want congress to do it after the ewill lex. they just overreached. a third of americans are paying more on their health care right now and they blame obamacare. 92% have health care of the people kwhor going to vote. >> but look inside those numbers, when you talk about provisions, things that are already in effect, people like the popular provisions. >> they like two things but they want a market solution.

they don't want a government mandate. and 73% oppose the government forcing them to pay -- >> personal responsibility, that's what we're talking about. >> overreach -- >> of you can take care of that without having the government take over 16% of the economy. >> it's not taking it over. it's a private system. >> what happens when the mandate is rolled back on thursday. what's the first thing that happens when the mandate is rolled in back? >> if the mandate is rolled back and the rest of the bill isn't, there's a huge problem opinion the purpose of the mandate was to sort of herd all of the healthy young people into the system.

>> so the second legislative battle and the election with obama and romney. that's going to start all over again. businesses are not going to know what the hel will happens. >> and the taxes are going to be left. the medical device tax, the super tax on medicare is going to start over again. it's going to be kind of a mess and the republicans are going to have a very strong argument, we should just clear the decks. >> children have coverage now -- >> i will say this -- someone has lost coverage already. it's the democratic national convention in charlotte, north carolina. has lost their coverage. and that there is what i call a leading indicator. thank you. up next, who should romney pick as his running mate. the senior editor of national review makes the case for a very unexpected pick. we're talking two very unexpected names on the table.

you're going to love this. that's next up. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com.

♪ ♪ ♪

[ male announcer ] not everything powerful has to guzzle fuel. the 2012 e-class bluetec from mercedes-benz. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. thin coffee shops. people who i thave been out of work. you can tell it wears on them. narrator: he's fought to pull us out of economic crisis for three years. and he still is. president obama's plan keeps taxes down for the middle class, invests in education and asks the wealthy to pay their fair share. mitt romney and his billionaire allies can spend milions to distort the president's words. but they're not interested in rebuilding the middle class. he is. i'm barack obama and i

>> scott >> scott rasmussen's latest polling shows 54% still support a repeal of the obamacarry. here's scott rasmussen. as always, welcome back. mid 50s for repeal. as this this number changed much? >> no, the week after the law passed, 54% favored repeal. it's gone up and down a few points since. by the way, before it was passed, 54%, 55% dependent b want to see it become law. the numbers are unchanging. older people, people who use our medical system the most and by the way, vote the most are among the most strongly opposed. younger adults, most strongly supportive. but look, this bill, even if the supreme court upholds it, it's gok to disappear. it does not have popular support. and as for the mandate itself, only 21% believe the goth has the authority to impose a mandate.

>> let's see the other side of him. what is the negative number, what is the opposition number to the mandate. >> people don't like when the government takes away choices. that shoeb the lodestar for reforming this thing. patient care, consumer power, patient power. isn't that what the politicians should realize? >> absolutely. 77% say everybody should be able to choose between a variety of plans. some that cover almost erg the

administration would like included in the bill. some would cover bare minimum, major medical type of events. if your employer pays if your health insurance, you should be able to use that money and buy your own policy. >> amen to that. thank you very, very much. >> now the discussion on the political side. i want to go to one political pundit. he's got a very interesting take on the romney veep stakes. ramesh, thanks for joining us. i loved your article. let's just cut right to the chase. you're looking as the inside picks, governor bobby jindal of louisiana and former governor tim pawlenty of minnesota. those are your inside picks. >> i'm trying to think about this from the perspective of

governor romney. i think he's looking for somebody he's personally comfortable with, somebody he thinks can do the job, somebody who's got executive experience. a lot of the people who have a lot of other thing goipgs for them get wiped away. i think you end up with a set of governors. governor pawlenty, somebody romney likes, somebody who's been a successful stwo-term governor, someone with a sort of familiarity with politics at this level.ernor jindal brings diversity. he may not be a rock star with the marco rubio level, but he's one conservatives are going to like when they get to know him nationally. >> you ruled out marco rubio and rob portman. and i believe you ruled out paul ryan. now, you've got three smart guys there. why do you rule them out?

>> well, they're great guys from most conservatives' perspective. most conservatives would be delighted if any one of them was on the ticket. but i think the fact that they don't have executive experience is going to be a problem. governor romney keeps on talking about his private sector experience. and frankly, none of these republican candidates, almost none of them vf any real private sector experience. at least some of them have executive experience. they run important large enterprises. i think to that's going to be a harder sell for people like senators and congressmen. >> and governor mcdonald and governor christie. they've had executive experience. two fairly sizable states but you're not betting on them? >> well, governor christie has said repeatedly that he is not ready for the presidency, which is admirable candor. i think it's something hard to walk away from if you're going to be vice president. governor mcdonald, again, he could be on the ticket.

he is an impressive guy. i think there's wariness on the part of the republicans that fairly or unfairly, he's going to be pegged as the social irk shoes extremist because of things that virginia republican legislators have done. >> louisiana governor bobby jindal and former minnesota governor tim pawlenty. those are your two surprise insider picks. have you spoken to mitt romney? have you communicated to them -- >> you read it first at blooerg view. >> well done. very, very interesting stuff. appreciate it. >> thank you. >> up next, you've got bob mcdonald coming up on my show. he's my special guest tomorrow night. maybe i'll ask him about ramesh's picks for veep. you heard me talk about the threat of the goe global recession, by the way. last night we talked about china fudging the economic numbers. our next guest says it's even worse than that. a serious contraction is under way in china. he's going to show us the real

numbers and then we're going to have two investors tell us there's a buying opportunity in all this. china may not be such a pretty story. high schools in six states enrolled in the national math and science initiative... ...which helped students and teachers get better results in ap courses. together, they raised ap test scores 138%. just imagine our potential... ...if the other states joined them. let's raise our scores. let's invest in our teachers and inspire our students.

let's solve this. in every way, shape, and form. it's my dream vehicle. on a day to day basis, i am not using gas. my round trip is approximately 40 miles to work. head on home, stop at the grocery store, whatever else that i need to do -- still don't have to use gas. i'm never at the gas station unless i want some coffee. it's the best thing ever. as a matter of fact, i'm taking my savings so that i can go to hawaii. ♪

all right. all right. we've been keeping you up to date on the china economic slowdown for many months. now is china even growing at all. my next guest thinks not and even goes as far to call their economy as moribund.

joining me now is gordon chang, the author of "the coming collapse of china." gordon, i had talked last evening about "the new york times" article which basically said that electricity is growing 3% in china. that may be a closer proximate growth rate than the 7% to 8% that is often used on wall street. 3% is a lot lower. now, question, you believe it's less than 3% growth? >> yes. traditionally, the groelt outpaces the underlying economy. in may, you had 2.7% growth inning electricity. 0.7% and that points to flat lining growth, 0 or even negative. >> all the commodities, very interesting. i've been talking about commodity deflation for weeks

and weeks. i can't get anyone who hear me. oil prices are falling, copper prices are falling. commodity index is falling. you say chien and a half business feel are defaulting on commodity contracts. what what's that all pant? >> you had 30 large ships with coal hovering offer the chinese coast because purchasers defaulted. and across china what we have are granaries filled with iron ore and copper. essentially purchasers don't want this stuff. china is locked into the long-term supply contracts. essentially, this is the best evidence of the slowdown. also if you look at the hsbc, purchasing manager's index for june, it shows that there's going to be a contraction in the manufacturing sector this month. and that's really crucial. this has gone on for more than half a year. >> hang on, gordon. let's bring in two of our sharp shooters, senior v.p. of investments at ubs and lee

munson, chief investment officer at portfolio. i don't hear wall street talking about china business people defaulting on commodity contracts. i don't hear wall street guys talking about 3% electricity output sor stockpiles of coal that are growing daily because they can't sell the stuff then a china's economy is not growing. is this wall street trying to sugar coat it once again? >> absolutely. you know, the last time i was on your show a few weeks back, i mentioned that china was having a hard landing and everyone jumped down my throat and said 7%, 7.5% growth and go china. china has always been lying about the numbers and thank god you brought in a guest that has some reasons, looking at the utilities. when you have ships sitting there with coal sitting on them, you have to wonder why do i want to invest in china. while wall street is going to tell you a tale of 7.5%, they

don't want to dig deeper and find out where value is. somebody should look at japan. it's been dead for 23 years. it's had a chance top cool off and recover. china is just beginning the decline. i would encourage investors to listen to this and take heed. >> jim, you've got europe on its back. in fact, the spanish banks are going to go into liquidation. you know that. they're worse than spain. second, the united states, we're not even growing at 2%. most of our indicators are heading south. now we have a smart guy like gordon chang who confirms what "the new york times" said is that the growth is substantially lower than the wall street fantasy of 7% to 8%. now, what does that all mean for the stock market? >> it's a natural result of a collapse of after fiat currency system. it means deleveraging around the world, starting in europe.

but it's going to happen -- it's been happening in japan for a long time, it's going to happen in china and it's going to happen here. that means you sell you have assets, that means lower prices. that means bondholders go from hair cuts to scalpings to behidings in europe. it's going to take a long time and cause restructuring. investors need to be careful assuming it means an economic turn. global debt has grown 12% per year over the last 11 years. and global growth has not kept up. sop we need to delever and it's going to be painful. >> gordon chang, i think that commodity prices may continue to fall. 2340rd, yin other words, you're describing a chinese contraction, at least in the commodity area. i don't know about their retailing area. that means commodity deflation. then a that tells me commodity deflation are going to continue

to rip through commodities, industrials and energy throughout the world gordon chang. >> it's not just commodity prices falling. they're putting all their expansion plans on hold. that's going to rock countries like usaustralia that have been really prosperous selling all their stuff to china. i think weer. >> going to see commodity deflation, but a lot of industrial production is going to just stop. >> all right, lee munson, how do you react to that? >> rio tinto, when you look at the australian stock exchange, rio tinto, bhb billiton. the first that's really going to have a problem is the european investor. the they're the largest exporter

to china. i disagree that have just because china sneezes -- >> we have it right now. look at the richmond fed, the philly fed, the new york fed. all of the manufacturing industries in the united states are already slowing down. the best one was dallas and that was only up 5. we're already seeing a manufacturing contraction in the u.s. >> more mortgage applications at a two-year high. why are jobless rates failing to go lower? >> come on. are you really blooeing this about the housings market? >> i see the facts. >> everyone is doing cartwheels. foreclosures are going up as well. >> at the margin, that's how you make money. at the margin. >> lee munson -- >> at the margin we're going to up. >> give me one thing to hang on to. you've heard gordon, you heard jim. give me one positive investment real fast. we're running out of time. >> invest in japan.

they have been dead for a coup of decades. i think there's value. the pension funds are way overweight in bonds. you have to start investing in equities. >> their consumption tax to 10%. they're going to get killed over there. >> thank you very much. >> these guys don't understand a thing. >> they're going to continue to argue for the next 20 minutes. programming note, gooift two power player, bob dole and bob mcdonald of virginia. [ male announcer ] introducing a powerful weapon

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. last season was the gulf's best antourism season in years.eed. in florida we had more suntans... in alabama we had more beautiful blooms... in mississippi we had more good times... in louisiana we had more fun on the water. last season we broke all kinds of records on the gulf. this year we are out to do even better... and now is a great time to start. our beatches are even more relaxing... the fishing's great. so pick your favorite spot on the gulf... and come on down. brought to you by bp and all of us who call the gulf home. i've been fortunate to win on golf's biggest stages. but when joint pain and stiffness

from psoriatic arthritis hit, even the smallest things became difficult. i finally understood what serious joint pain is like. i talked to my rheumatologist and he prescribed enbrel. enbrel can help relieve pain, stiffness, and stop joint damage. because enbrel, etanercept, suppresses your immune system, it may lower your ability to fight infections. serious, sometimes fatal events including infections, tuberculosis, lymphoma, other cancers, and nervous system and blood disorders have occurred. before starting enbrel, your doctor should test you for tuberculosis and discuss whether you've been to a region where certain fungal infections are common. don't start enbrel if you have an infection like the flu. tell your doctor if you're prone to infections, have cuts or sores, have had hepatitis b, have been treated for heart failure, or if, while on enbrel, you experience persistent fever, bruising, bleeding, or paleness. [ phil ] get back to the things that matter most. ask your rheumatologist if enbrel is right for you. [ doctor ] enbrel, the number one biolog medicine prescribed by rheumatologists. zagat just gave hertz its top rating in 15 categories,