unedited, uninterrupted and at length, 4:00 eastern time right here in the cnn newsroom. i'm fredricka whitfield. "your money" start right now. millions of americans are still out of work. could things get worse before they get better? i'm ali velshi, welcome to "your money." nine out of ten people say this economy is in poor shape. that's according to a cnn/orc poll and that number has been rising steadily throughout the summer. we have the managing director for the cycle insy taout. we think of lakshman as our ground hog. you came on this show, very early in 2008, you were the first person on our network to call that recession. you told us when we were out of it. now you say we are either headed for a new recession or we're already in it. >> right. absolutely. this is based on the forward looking indicators of the business cycle. that's all we do is watch those

indicators, monitor them. there's an overwhelming message when we look at those indicators that is consistent only with the new recession starting here. if you think back to 2008, when we made that call, then it was prior to the lehman crisis economists were looking backwards at gdp. and all they saw was positive gdp. >> once we saw the lehman crisis everybody was on board with the fact there was a recession. before that there was a question. >> correct. when you see gdp positive or jobs numbers positive, you say there isn't a recession and you get pushback. time will tell. >> harvard professor ken rogooff is chief economist for international monetary fund. you've been on the show before. your point of disagreement, you say a lot of people feel the recession never ended. now, we are four years away from the official start of this recession. it started in december of 2007. we're certainly three years into the worst of it. where do you think this ends?

>> well, i think we may be going very slowly for a long, long time. lakshman is right. it could get worse before it gets better. it was a pretty mediocre jobs report. it's hard to distinguish this from whether we are or not already in a recession. >> all right. i want to take this to some of the frustration people are feeling. the "occupy wall street" protests are going on three weeks now and spreading to other cities. unfocused as they may be, the movement even got the attention of the president. >> you're still seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on abusive practices that got us in this problem in the first place. yes, i think people are frustrated. the protesters are giving voice to a more broad-based frustration about how our financial system works.

>> chrystia freeland, editor of reuters digital. here's the thing, the president alluded to this in a different part of his speech, how about taking these protests and picketing the lawmakers who are blocking the protection bureau from fully functioning. it was designed to protect people from the banks that got us into this financial mess in the first place. whether that's a solution or something else, how do you focus the anger, random anger of these people occupying wall street into something meaningful that could actually result in positive change? >> i think you're right, ali, to point to the fact this is a movement at the moment which is about protest and anger and frustration with the way the economy works, the way the economy is structured. it is less a movement that has a very clear agenda for how to fix it. in that way, i would contrast it with the tea party. i think in some ways the

grievances are -- >> contrast did not compare -- >> i think grievances are the same. i think grievances are legitimate. i think the bottom line is the american economy right now is not working for a broad swath of the american middle class. that is not the deal in america, not part of the american social compact. people are angry about it and right to be. the difference is the right has a clear point of view about the culprit and how you fix it. the view on the right is government is too big. if government shrinks, everything will be okay. the view on the left. the economy isn't working, bankers are probably getting too big a share, but there is a less coherent answer to how you fix this unbalanced economy. i think that's why we're seeing "occupy wall street" protests have a less clearly defined agenda on the changes they want. >> although, ken, it starts to look like class warfare. there are some who say the part that's broken about our economy is that everybody doesn't have a chance to become prosperous.

it's disproportionate. with these protests, what you're seeing are things, direct hate towards the rich, hate towards the banks which we know noticed -- need to operate. we're getting into this weird situation, maybe it's high unemployment or inequality in the economy, but it is developing into class warfare. we didn't really think we'd see protesting in the streets of america the way we're seeing. >> yeah, i mean, if we have unemployment drag on, teenager unemployment they reported, almost 25%, when you have so many young people unemployed without hope, discouraged, it's a very, very volatile situation. sure, if we get better in a year or two, it will be fine. i do worry where this will go. kris ya is absolutely right. there's a huge undercurrent of anger. you see it in the tea party, wall street protest, see it when you talk to people. where will that go, in our political system, what will it bring in the election, what will it bring.

i think that is a very tough question for america. >> just jumping on that, with the teenager unemployment, long-term unemployed, i think that's really the issue. i'm not getting into the politics but when you look at business cycles, more frequent recessions, what we have in front of us, we're not going to have the unemployment rate go way down any time soon. it's right now about to jerk back up noticeably. so that kind of unrest or idle hands, as it were, you're going to get a lot of pushback. >> we'll talk after commercial more specifically about jobs and how to solve them. let me ask you this, for the people occupying wall street or the streets of these other cities right now, they probably think the conversation that you and chrystia and i have about whether it's a new recession we're going into or the same one, highly academic. how do your forecasts show things changing on the ground for people, separate from unemployment. are there other measures people will feel if we have another recession.

>> absolutely. i will not debate this is a bad economy even prior to going into a new recession. make no mistake, when you go into a new recession, even if it's mild, it's worse. jobs are weaker, sales, income, production, all of those are going to be slipping. news flash, it's happening around the world, not just here. this is a global issue as well. we're not going to get out of this very easily. >> i think the other element -- >> europe going into a recession too. >> the other element, which is really important and you alluded to, ali, it's not the same for everyone. the pain is concentrated in a particular group. if you're unemployed it's really bad. >> for some people -- >> if you don't have job security it's really bad. >> for some people they didn't feel a recession the first time it came around. >> for some people it's terrific. look at luxury goods sales. those are fantastic. some people who are doing incredibly well with the technology revolution, with globalization and that's part of the reason you see the anger in the streets. people see that.

>> we all agree if we had a lower unemployment number, greater job creation, it would certainly get us a long way to the solution. we are all seeing. all of you stay there for a second. stay where you are. jobs report came out better than expected. is it meaningful enough to put this recession talk on hold? we'll talk about it after the break. confidence, with depend in color. now available in gray. looks and fits like underwear. same great protection. depend. good morning. great day. [ female announcer ] improve the health of your skin with aveeno daily moisturizing lotion. the natural oatmeal formula improves skin's health in one day, with significant improvement in 2 weeks. i found a moisturizer for life.

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8.7 million jobs lost since the recession began. numbers like we saw in september won't do much to aid the meaningful recovery we all so desperately want an need. let me show you the september jobs report. there were an increase of 103,000 jobs. that was actually more than economists had expected. the numbers for august and july were typically -- they were always revised. they were revised higher. painted a little better pick. the unemployment rate still remains stubbornly high. 9.1%. this far into the recession while that's a politically

popular number to talk about, it's less relevant than the number of jobs actually created. in the private sector, that's where we want to see more jobs created, 137,000 jobs were created. the government continues to shed jobs, 34,000 jobs were lost in the government. lakshman, in a recovery, not the recession you think we might be in or going into or the one ken agrees has never really improved since this recession substantially, in a real recovery, what does jobs report look like? not only the number of jobs created, number of jobs created but where and what type? >> well, across the board, a recovery is going to be pervasive so it's not going to be limited to one area of the economy. that's key. it has to be pervasive. i think we saw what it looks like at the beginning of this year. between february and april the economy was creating about a quarter million jobs a month. that's about as good as it gets for the u.s. economy if you look over the last 10 years. whenever we reach that pace, that's about as fast as we can go on jobs creation.

so it's critical we have a long expansion. here in this recovery that i believe is ending, we had over two years of gdp being positive and since 2010 created about 2 million jobs. in your lead in you said we lost 1.7 during the recession, we didn't have time to recover that. >> you told me, it takes a long time to ever recover all of the jobs you lose in any recession. >> absolutely. see this is the thing, all of our recent memory is about the 2000, the 1990s, the 1980s. the 2000 was a record length of expansion, a decades long expansion, over 20 million jobs. that's our goal. we need to see something like that. >> you have often said that's not likely. >> that is just not -- the fundamental problem is we're not going to get that any time soon. we're back to short expansions. that's actually normal from 1799 to 1829, 90% of expansions are

three years or less. in the '70s, it was the same way. that's where we lived now. that's the problem. >> this is going to make my next question to ken particularly complicated. ken, when we started this recession unemployment 5%. a term many economists used to represent full employment. you can argue whether that's right or wrong. we were at 5%. in the recession the projections from the federal reserve were that we would get down to that 5% level by about 2013. everybody gasped and said oh, my goodness, that's a long way. ben bernanke started to stretch that out a little bit. the newest numbers, projections indicate around 2017 before we are there. is there any way to make that glass look half full? >> no, i'm afraid not. i think after you have a deep financial crisis, this kind of contraction, recession is typical. it's hard to come out of it. frankly if you talk to businesses, they are not seeing much sales growth.

maybe 1% or 2%. they don't need to hire more people, they can buy ipads or something to get the extra output. i think we're not going to see rapid growth. consumers are hurting. their housing prices have collapsed. they are overindebted. they are worried about their work. you're not going to see that demand feed into the business. wanting investments. our exports have not been as good as we liked. >> chrystia, we heard from the economists, paint a picture politically, we know demand is what causes jobs to grow. we know indebtedness can only be solved by an increase in income. you only increase income if you've got more jobs. we know we're not going to get back to where we are for a long time. the president wants better jobs numbers if nothing else to save his own job. is there anything in this jobs bill that he's presenting that would significantly bring down unemployment in this next year we're talking about, the next politically important year.

i'm not really hearing that from these two guys. >> i think actually the jobs bill is a good bill. i think it would make a difference. i don't think it would move the dial hugely but it would help. the bigger issue, i think the political chances of that bill passed certainly in its entirety, maybe in parts, is not that great. so i think the political issue that the president faces is how does he present that. i think the choice we've seen him make is the choice that i think a lot of people feel he should have made a year or year and a half ago, which is rather than seeking compromise behind closed doors, to go out publicly and aggressively and say this is my program. if we were able to pass that program, we could improve things. i think the real dilemma for the president is what professor rogoff was pointing to his excellent research on financial crises and what happens afterwards is the recovery from those crises is longer and more

painful than the typical recession we are familiar with. and that is something really, really hard politically to deal with. on top of that, i think there are big structural issues in the economy. structural issues that tend to make unemployment a more difficult issue to grapple with. we kind of didn't feel those structural issues because the credit bubble hid them. the credit bubble meant there were lots of construction jobs, lots of consumer spending. you had your house as your atm and you could easily borrow money on your credit card. that's all gone. really america is now coping with how to restructure its economy in the age of globalization and technology revolution when as professor rogoff said you buy a few ipads instead of hiring more people. >> thanks to all of you. we'll continue this discussion. ken rogoff, chrystia freelander, editor of thompson reuters and lakshman achuthan the managing director of the economic cycle

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and no embarrassing odor. break the grip of pain with aspercreme. unemployment stands at 9.1% nationwide. depending where you live the story can be different. let me show you on a map. as of august unemployment in el centro, california, and yuma, arizona was around 30%. las vegas and vero beach around 14%. still well above the national average, rocky mountain, north carolina almost 14%. on the opposite side, take a look at these place, portsmouth, burlington, omaha, nebraska, midland, texas, all under 5%. richard florida senior editor at the atlantic. richard, tell me about these cities that are doing much better than the rest of the country. half the unemployment rate of the national average. what are cities like that doing right or are they doing anything

right at all? >> well, ali, as chrystia just said, it is a structural unemployment challenge we face. as the economy transitions from this older industrial economy to this newer more knowledge driven, also resource driven. what you see is that structural transformation chrystia and ken talked about imprinted on america's geography. places that are way out on the coast that had economies in the sunbelt built up on the housing boom and credit bubble, las vegas, riverside, california, even places in arizona like yuma over 30% and those old manufacturing centers like detroit, tragically, 15%, in the city the mayor said it could be as high as 50%. you have this other thing going on where college towns next to detroit like ann arbor have low unemployment, medical centers,

education technology, boulder, colorado, down in florida, gainesville as well. the knowledge centers of the country, washington, d.c. performing very well. then what's really striking is the plains, bismarck, fargo, lincoln, omaha, nebraska, oklahoma city, that belt. you have this new geography of america where some places almost don't feel the recession and others have been whacked with long run structural unemployment and no new job creation. >> it's very interesting. like that conversation we had with chrystia and lakshman and ken talking about two economies and people feeling the recession differently, geographically we have two economies as well. richard, hang on a second. christine romans, my colleague and host of cnn's "your bottom line" gallup finds in the midwest and south, 14% more companies are hiring than laying workers off. that is more than anywhere else in the country. but christine, the idea of packing up and moving to a job, to a place that is more prosperous than where you are, is that strategy sensible?

you and i have argued about this. i think people should. you're saying maybe sometimes they can't. >> there's two pieces of conflicting advice i can't square here. one, there are places in the country doing so well. opportunities there, ann arbor, north dakota, iowa, some parts of texas. great, go in there, get a job. on the other hand, you know people are hiring people they know. the most important way to get a job right now is networking. if you don't have a network somewhere, how are you going to be the one who is going to break in. if you can square those two pieces of advice, i say, yes, move. if you're not beholden to a house 25% under water and you can move. you know the schools are good where you want to go, fine, move. but remember we know that the way to get a job in this economy is knowing someone who knows you or knows someone who knows you helping you get in a place a good fit for you and the company. >> back to politics. richard, many of the states with the slowest recoveries and highest unemployment are swing states

that could decide the election. clearly the president has motivation to dramatically improve the unemployment situation in places like that. but as we just heard in our previous conversation, there may be very little that he or any politician can actually do. although, we will for the next year hear about the fact if you vote to so-and-so they are going to improve the economic job situation in the geography. >> i don't think the president can do much. this is what washington, both sides of the aisle have to understand. as you heard from chrystia and ken and everyone, it's a structural challenge. this isn't just we're going to stimulate the economy and bring back jobs back. how are you going to stimulate a construction sector that is completely dead in the water. that was covering the sins of the economy. the credit bubble provided lots of low skilled jobs in construction. in politics, i think this is where the president -- i've written on this -- faces huge problem. where unemployment is high, we have older industrial economies, those are the states that are turning redder.

in the past he was able to take those states. but now with unemployment surging, what i've seen in looking at approval and disapproval rates and correlating that to the economy, that's where he faces his biggest challenge. he's got the states that are blue, those knowledge economy states on the east coast, california, but it's the states struggling with not only unemployment but struggling with structural transformation from old manufacturing economy to new knowledge and service economy, boy oh, boy, that's where we see the approval and disapproval ratings really being challenged. >> richard, you do write about that. you can read what richard writes, senior editor of the atlantic, author of a great book called "the great reset" professor at the university of toronto and see christine every morning along with me on "american morning" and saturday morning at 9:30 on "your bottom line." mitt romney reemerging as the front-runner for the presidential nomination. how does president obama plan to challenge his economic record? that's next on "your money."

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number one in online equity trades. trade commission-free for 30 days, plus get up to $500 when you open an account. sarah palin and chris christie officially took them -- themselves out of the gop presidential race this week. a recent cnn poll of polls shows mitt romney as the current front-runner among republicans. strategist donna brazil is a cnn political contributor. donna, going to be a tough economy for president obama to run on. if the opponent ends up being mitt romney, i don't know if you think that is the case, what weakness could the president point to in romney's economic record? >> there's no question the president can point out mitt romney's record as governor. he was ranked 47 out of 50 states as governor. his job record was so bad he was unable in many ways to use that

in his bid back in 2008. i also think that mitt romney's economic plan to get the economy moving again is a prescription for going back to the past policies that pretty much got us in the mess we're in now. what mitt romney and many republicans have gone for right now is tragically is the unemployment rate, economy stalled, but i do believe things will get better and the president will be able to campaign on his vision for the future on an economy that is, albeit not growing jobs as fast as most americans would like them to grow, the economy is showing some signs of life. we've got to do more to get things moving again like pass the americans jobs act. >> will, as a cnn contributor, will cane, and as a conservative, based on mitt romney's past, do you think -- i'm not talking about whether he can campaign to say he's going to turn the economy around, do you think he's got what it takes to turn

the economy around. >> i think he has a better vision to turn the economy around than does obama. i think mitt romney's economic plan so far is a very hard thing to evaluate. it's hard to come on here and defend it as an economic policy, i see it largely as a political document at this point. the reforms he says he won't enforce that's a good thing, he won't enforce obama care, the dodd frank financial regulations. the reforms he won't put himself out there in favor of such as tax reform or medicare reform, those are the parts concerning -- i can't give you 100% solid answer whether he could turn the economy run but i am confident he's a wiser choice than obama. >> as perry slips herman cain starts to benefit a little bit. part of the businessman's economic plan is to do away entirely with the existing tax code and replace it with what he calls the 999 plan. 9% corporate tax on corporate income, 9% on personal income and 9% sales tax. really nifty in debates, because

he uses it in interviews. rick newman, chief correspondent for "u.s. news and world report." rick, critics say this is another republican plan that protects the wealthiest and puts an unfair burden on the poor. you've looked into this do you agree. >> it's a populist plan. 9-9-9, sounds like a two-for one pizza special. sit has this sort of nice ring to it. i don't think we should just dismiss this idea. i don't know about his numbers. herman cain says he could start out by raising the same amount of revenue the government has now while totally revamping. that's way too oversimplified. here's one of the main things he wants to do. usually you hear conservatives say we need to cut income taxes and the economy will magically prosper. herman cain is saying this. but he's saying he's going to make up the difference with the sales tax on the other side. this sounds radical but there's soundness to the concept. let's lower taxes on running companies, starting companies,

and working and let's raise the tax on consumption which would encourage people to save money the principle is economically sound. >> will, you've just written on this while saying the principle may be sound, you've got a problem where this would go. >> from a conservative perspective i think 9-9-9 plan is absolutely terrible. let me tell you why. 777. in 1937 united states enacted permanently income tax, in seven years we went from 7% to 72%. there's no way you can give the united states government a new stream of revenue, taxing power and expect it be kept at 9%. supporters say we'll have a constitutional amendment require two-thirds supermajority vote. >> doesn't make sense to put a percentage -- >> look at history and look around the world. >> france has 20%, italy has 20%, why do you think we'll be at 9%. >> although canada kept its very low. donna, let me ask you this. people like herman cain. doesn't mean they will necessary vote for him for president they

may just want him to be their grandfather. people like herman cain and he gives interviews where he says things like this. he takes simple ideas, the ideas ron paul has but somehow herman cain makes them sound nice. and appealing. not president obama schtick to do this. does he need schtick to say here are major changes i'm going to make that will somehow make you feel like i've turned this engine around? >> he's the common sense candidate. i don't know if he'll win but he is getting the nice guy vote at this hour. the 9-9-9 plan is a recipe for disaster. for starters, we cannot raise the revenue necessary to pay for the government that we currently have let alone the government we might want five, 10, 15, 20 years from now. that's the first problem. the second problem, it will disproportionately hurt the poor and middle class, national sales tax 9%, the wealthiest 1% of americans will see their taxes reduced.

for middle income americans seeing their wages stagnate, this is a prescription for more pain. it sounds good. i agree with one of my colleagues on the panel, it sounds like a plan to order pizza but not a recipe for an ailing economy. >> donna, will, rick, stick around. we're talking about "occupy wall street" next. which side are you on? do those folks even know what they are protesting. we're going to take a look at it after this. yeah. how many tires does ford buy every year? over 3 million. you say you can beat any advertised price on tires? correct. anywhere? yes. like this price? yes. riously? yes what about this one? i'll beat it. this one? s we will. right, i only have one more question for you...this one? (laughing) yeah. get $100 rebate when you buy four tires. 100 bucks! only at your ford dealer. 3 million tires. 11 major brands, fiona's kind-of-nice. i don't know why you're not here.

well, we know the major theme of occupy wall street protest is a general discontent with corporate america. the president made the point the consumer protection bureau was designed to help protect consumers from financial institutions and their actions. will, why won't the protesters turn their attention to lawmakers, in this case conservative and republican lawmakers who are holding back consumer financial protection board. >> i don't know. the protest and that bill go hand in hand, ali.

it's really hard to criticizes or support with the "occupy wall street" protest because i can't define them. i don't know what they are about. i can tell you this. i feel like the tone is about a lack of responsibility. displeasure with responsibility. i don't like my student loans, credit card debt and i don't want to have to pay them. i think the consumer financial protection bureau would help them in that respect. that bill came out, my critique was you're here to help us with the voluntary contracts we made with credit card companies. we don't like them. can you help us out elizabeth warren? i think the consumer financial protection bureau ought to be with the wall street -- >> whether or not you agree whether you like the bill or not. >> i don't. >> they could go to massachusetts, donna brazile and help elizabeth warren run for office. we'll get to this in a second. despite the myriad of reasons, given for the protests, representative defazio of oregon, thinks the movement boils down to a central issue. >> corporate profits are up, jobs are down. ceo pay up.

jobs are down. bonuses on wall street, whoa, six figures. up. jobs down. it's time to rectify this. i think the young people and others joining them on wall street get it. they may not be totally focused but they know if isn't a country that gives them a fair shot at the american dream anymore. it's a stacked deck. >> donna, your thoughts. your thoughts on whether the left or democrats are trying to get wall street to occupy wall street into part of their movement whether being coopted by others, whether it makes sense or whether we should worry about whether they are not all that strategic. >> you know, i think conservatives can look at this movement and say, you know what, they are trying to hold everyone accountable for the mess that we're in. liberals can look at it and say, you know what, they are filtsing

to protect 99% of americans who feel like they haven't gotten a break. 1% of americans seem to have gotten a pass. the way i like to look at them, it's an organic movement, bottom up movement. they are not affiliated with democratic party, the republican party, tea party or anyone else. they are frustrated. they are angry. the misery index has gone up. yet they want some results. they are also aiming their ire not just at wall street, three years after the collapse of lehman brothers, they are also aiming some of their fire against washington, d.c. for not working on behalf of average americans. they think politicians are beholden to corporate donors and not beholden to average ordinary americans working hard each and every day to make ends meet. >> so i talked about consumer finance for protection board. talked about elizabeth warren. you mentioned that. rick, you have written and i love reading what you wrote, i don't know why we're going out

of our way to find a focus for this group. they can find it for themselves. you have written there's specific economic problems america should be protesting and actually written about solutions to them, five of them. >> i think what's happening with these protesters -- i think these protesters represent something fundamental that's going on in america. people know that something is wrong. they feel they are falling behind. data shows people falling behind. the question is what do we do about it. the answers are not simple. what's really happening as incomes falling for typical family, crystal clear. income worse, that's true. the data clearly shows that the haves have more and have notes have less. a dysfunctional situation in washington. nobody doing a thing about these problems. the way we get out of this, we make the economy grow by more than people -- the economists say it's likely to grow in the future. we innovate. we come up with new ideas, the kind of stuff steve jobs did terrifically and many people do well, too. we're getting no leadership on this right now.

this is all stoking what we're seeing down on wall street and it's spreading to other cities. >> will, we're going to bring herman cain back into this discussion for a second. when asked about "occupy wall street" this week, he told "the wall street journal" the protesters should not necessarily blame wall street or the banks. he said, and i quote, if you don't have a job and you're not rich, blame yourself. rich, as our resident conservative. >> is there truth to this, by the way, ali, yes, there is. if you want an answer to why herman cain is rising in the polls, you just gave it. that's why herman cain is rising in the polls. i have substantive problems with his 9-9-9 plan. i have a lot of problems with herman cain. >> you like his straight talk. you like the fact he says people can pull themselves up by their bootstraps and pull themselves out of the situation. instead of stay on the streets and protest and get arrested. >> core beliefs of conservative values and herman cain gave voice to it very well right there. >> donna brazile, i have to say, in following the tea party and how it grew out of a grassroots

movement albeit with money and support, i don't recall a tea party protester ever arrested or sleeping in the rain. >> well, these individuals are motivated. look, there are a lot of americans right now who are looking for work. they lost their jobs through no fault of their own. their company decided to move overseas where they could get cheaper labor. their factory closed down because sales were down. there are many americans, our fellow citizens, our neighbors, our family members, they want to work. let's stop making excuses why we can't get this economy moving and find them jobs. i applaud those who are out there exercising their first amendment. i applauded tea party republicans when they went out there and exercised their first amendment. this is america. we should allow people to protest peacefully and to try to get government and corporate america and others to listen to them. >> i think we agree on that, donna. thank you so much for being can with us.

donna brazile, cnn political contributor and democratic strategi strategist. rick newman, chief business correspondent with "u.s. news and world report." we're on a mission, find the driver to turn this whole economic mess around. what could it be? we'll look into it next. [ boy ] hey, i thought these were electric? uh, it is, yeah, it's a chevy volt. so what are you doing at a gas station? well it still takes gas to go farther. but you're not getting gas. true. not this time. uh, don't have to gas up very often. so you have to go to the bathroom? no. yes you do. thought these were electric? yes, it's a uh, a chevy volt. so what are you doing at a gas station?

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some days the market goes way up, some days way down. you can thank economic data all over the place and a looming debt crisis in europe for that. look at this chart of the dow in the third quarter. the third three months of this year. it's an absolute whip saw over the past three months of the dow, s&p 500 and nasdaq each lost more than 12% during the period making it the worst quarter since the 2008 financial crisis. investigators are worried we could be headed for another bear market. stephen leeb is capital of leeb capital management author of a new book. "red alert how china's growing

prosperity threatens the american way of life." my colleague christine romans back as well. stephen, this volatility is starting to look like the new normal. what needs to happen to get this market moving again? >> ali, i think we need a policy called growth in this country. you listen to the budget debates we've had and continue to have,e to have, the word growth is really not mentioned ever. and, you know, i can't help it, but i have to contrast it with china. china is spending literally at least half a trillion dollars a year and over the next five years will spend many trillions of dollars, about what he we spent on world war ii on new industries. we need to create new industries and be willing to pay a temporary price for this. >> new industry, like solyndr and the solar industry in the united states? >> but take another solar company, evergreen, traded at $100 a share, the bellwether solar company in 2008, it is bankrupt today. and that's because china is

funding their solar companies to the tune of, you know, massive amounts of money. much, much more than we're willing to. and now china controls the solar industry. they basically do. and with their monopoly on rare earths, they can probably control the wind industry too. we can't let this stand. >> their investments have been targeted and consistent in part because they're not a democracy. somebody can make this decision and flood the money. they're also a surplus. >> they don't have to call the ceo before congress and testify as to what they knew -- >> you're right, but our investments have been haphazard, right? >> totally haphazard. >> and not consistent. >> totally. >> and no national strategy for how we're going to compete with other countries have national strategies. in the solyndra case, you're right, by the time we said this is our strategy to loan money to these companies, china had already done it too long ahead of us and already had the advantage. >> right. just one quick point. and if we can do it, we did it during world war ii, we were willing to come together,

industries, government, et cetera. if you look at debt as a percent of a gdp, at the end of the second world war, higher than it is today, but we set the stage for a generation of growth. if we're willing to spend correctly, we can and the only way we're going to do it, someone has to wake up and say, but we're not shooting at china, but we're fighting a war for our role in the 21st century. >> will cain left, we lost him, i'll try to represent his view to you. >> you're going to channel will cain? >> will is going to say despite what stephen says, why should our government as opposed to just private industry, be in the business of deciding what's going to succeed and what the future is going to be? stephen's response would be because china is doing it. >> and we're at war with them. >> what is the answer. >> you think we're at war with china? >> absolutely. this is a war for our survival and for our way of life, in my opinion. there is no guns fired, but the same consequences, losing this

war will be -- >> you articulated for china in an area in which they want to compete and you named solar and rare earth. >> rare earth, et cetera. they go, not only develop the industries and subsidize them, but buy other companies around the world and shut them down as competers. >> right. they have five-year plans that are part of ten-year plans that are part of 50-year plans and that's the way the chinese government operates and i think they're in the third five-year plan of their current longer term strategy. the u.s. thinks in election cycles and we -- it is a difference between a command and control economy and a democracy. we prefer democracy, right? but you have to have a democracy looking at what is happening around the world and responding in kind. i feel as though we have been caught off guard by the rise of china. it is u.s. and multinationals, private industries that set the rules for globalization and we're like, wait, other people are getting the benefits of globalization at a time when the u.s. stagnated.

that's a very uncomfortable place to be. >> philosophical conversation, but does lead to your first point, stephen, we do need to have a strategy. we're out of time. thanks, guys. good to see you both. steph stephen leeb with leeb capital management and author of a new book called "red alert." coming ue ing up, what the states could and should learn from the death of steve jobs. oh, jerry, i'm so sorry. i would love to help but remember, you dropped us last month. yeah, you know it's funny. it only took 15 minutes to sign up for that new auto insurance company but it's taken a lot longer to hear back. is your car up a pole again? [ crying ] i miss you, jessica! jerry, are you crying? no, i just, i bit my tongue. [ male announcer ] get to a better state. state farm. but they also go beyond banking. we installed a ge fleet monitoring system. it tracks every vehicle in their fleet.

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time for the xyz of it, it is a difficult time in the country. we all know we need some serious inspiration. the passing of steve jobs gave us a little of that this week as we look back on his legacy. there is no question his vision changed the world. comparisons to thomas edison, walt disney and harry ford are not overblown. he turned a geeky hobby into a technological revolution, creating things we never knew we needed and making them

indispensable extensions of our lives. steve jobs was a concrete example of what true innovation looks like. jobs and apple didn't just create cool products, he changed the way a business was run. he was the ceo who knew what you wanted before you knew what you wanted. when was the last time you remember the passing of a ceo that generated so much emotional response from people who had never met the man? steve jobs started apple in his garage with one other guy and very little money. his partner from those days, steve was knack, says other than hampering them, those financial constraints pushed the bounds of their creativity and drive, causing them to make smart decisions that would turn their little computer-making operation into the apple empire. it is a lesson that should resonate with the current generation of would be innovators, especially in this lousy economy. you don't need loads of cash to come up with a new idea, start a

company and build something the world has never seen before. if you're on to something, the money will come. in the replay of a speech you probably read or seen in the last few days, jobs warned stanford graduates, quote, your time is limited, so don't waste it living someone else's life. don't be trapped by dogma, which is living with the results of other people's thinking. don't let the noise of other opinions drown out your own inner voice and most important, have the courage to follow your heart and intuition. they somehow already know what you truly want to become. everything else is secondary. i want to end with the last line of that speech, one that brings a smile to my face for its simplicity and its depth. stay hungry, stay foolish. that's it for me. thanks for joining the conversation this week on "your money." we're here every saturday and sunday at 3:00. check out my new book with