opposed to the changes on immigration policy announced by president obama. and at 3:00, we'll show you some useful gadgets to take along on that family vacation. "your money" starts right now. you probably heard everything you need to know from these two guys about the economy and how they plan to fix it. what if i told you they are both misleading you about how they can fix it and how right now things may be about to get a lot worse. welcome to "your money." i'm going to tell you the truth about the economy. i'll tell what you the candidates aren't telling you about what is and what is not within their power to change. but first, i'll tell you about a storm that's raging in the distance. it's headed to our shores. it's an economic storm. it hasn't hit yet. we're starting to feel the outer bands of it. those who watch me every week know, generally optimist, but i understand the economy. the u.s. economy is driven about it confidence of its citizens. the customer in this case is the american consumer and is always

right. they think things are slowing down, it will welcome self-fulfilling because they'll stop spending. businesses stop hiring. and the economy could grind to a halt. let me tell what you i'm talking about. here's got news. we had 20 straight months of job growth in the united states. the pace of that growth is slowing. the last five months, there have been fewer jobs created each month than were created than in the month before. but jobs are being created, not lost. so that should make people feel better, not worse. let's talk about your homes. a lot of your equity is there. the home prices in the routes probably at or near their bottom. the so-called shadow inventory of homes is lower. foreclosures are up. but those are a new wave of foreclosures from the signing scandal. we're probably near the end of this thing. fewer homes, less inventory makes it a good time to buy. if you're buying a home, at 4% mortgage interest rate or lower on a 30-year fixed mortgage, the rate you pay has much more impact on the total price of that house over the course of owning it. mortgage rates are at record

lows right now. and how about gas prices? when they are up, they're like a tax. it costs you to pay more money for the same amount of something you bought before. but those prices are down. the national average for a gallon of gas, $3.52, not cheap, a lot lower than they were a couple months ago. speaking of energy, by the way, we hardly had winter. americans saved a lot of money on home eating bills. the problem is that none of this is pushing consumers to spend. and without consumer confidence, another recession looms. already we've got a jittery stock market. the s&p 500, the broadest representation of stocks that you own if you have a 401(k) or ira, down more than 5% over the last three months. we're seeing record lows in treasury yields. that's because the smart money doesn't want to take risks right now. it's parking itself in u.s. government bonds. why is that smart money so nervous? because of europe. the potential collapse of european buying power if the euro breaks up. europe is an economy the size of

the united states. the worst things get there, the fewer american goods and services europeans buy. that costs us jobs. let's not forget about the fiscal cliff that lies ahead in washington. some tax cuts are expiring. some benefits are going away at midnight on december 31st if congress does nothing. happy new year. congress may be the one body, by the way, which you have some influence over which can avert the disaster. but i probably have a better chance of growing an afro by december 31st than congress has of getting its act together. while i grow my hair, i have one piece of advice, deficit hawks, leave the room for a while. this is not the time to be discussing spending cuts. you democrats, this is not the time to be raising taxes. all right. we pit together the best minds in business and politics for you this hour. christine romans, the host of "your bottom line" is we m she'll tell why you this is an important moment for america and why it's europe and china, not the u.s. presidential election that will decide the outcome here at home.

jessica yellen, she says neither president obama nor republican rival mitt romney are honest about the depth of the problem and their ability to arrive at a solution. john king is cnn's chief national correspondent, anchor of jkusa. he can read the political tea leaves like no one else can. i'm going to ask him if americans are better off today than they were four years ago and more importantly if they feel better off. will cane is a cnn contributor and a conservative who i think agrees cutting spending or raising taxes now are both the wrong thing to do. and ken rogoff is a former imf chief economist. he is the leading authority on financial crisis. we're going to start with you, ken. you're the expert. you made a career out of studying economic crisis around the world. i just laid out how i see this gathering storm. where am i wrong? >> well, you said you're normally an optimist.

i'm normally pretty calm. i'm nervous now. you look at what is happening in europe f that blows up, there is nowhere to hide. we have hope it doesn't. there is not a sescertainty by means. there is instability in spain. there is instability in italy. and we're looking really at a nation in the making here. are they going to pull it together or won't they? and china also is having problems. that's another engine of growth. i think we have our own self-made problems fundamentally the u.s. is still a great franchise. we're not an island. and there are some just huge risks out here. you're right, it's making everybody nervous. >> and ultimately, what it makes the consumer nervous, it starts to cost us all. president obama and governor romney had a showdown in the pretty call battleground state of ohio on thursday. both laid out why not to vote for the other guy. but neither has a clear plan for getting us out of the mess. >> it's usually the president's right when he said the private sector is doing fine.

he's the guy to vote for. >> if they win the election, their agenda will be simple and straight forward. they spelled it out. they promise to roll back regulations on banks and polluters, on insurance companies and oil companies. they'll roll back regulations designed to protect consumers and workers. >> want to bring in our chief white house correspondent. you heard those words many times over. you think both candidates are running on their ability to turn this economy around, at least that's what they'd like us to think. but neither candidate is leveling with americans about the depth of the problem that we could be facing. >> i think that's right, ali. i think part of it is natural politics. neither one of them wants to sound like a pessimist. that's not appealing. but there is an appeal to authenticity and honesty. and neither one of these candidates is saying to the american people that this could be a long and protracted hole that we're in or a long, slow slog. and neither -- we're not offering you a policy that's

going to get us out of it terribly quickly. but stick with me because i'm being honest and telling you the truth. what they're saying is president obama is saying i have seen progress. it might be not happening as quickly as you'd like. but if you stick with me, we'll get more progress down the road. and the other guy, he's going to serve you snag is really rotten. and romney is saying he hasn't turned it around fast enough. so let's change horses. you know, neither of them is really telling you this could be bad for a while. >> thank you. that's how you win lectihe lebs herher -- elections. are you better off than you were four years ago? now a recent cnn/orc poll asked americans that very question. today we have a hung jury. 44% say they're doing better. 43% say they are doing worse. the final verdict comes in november. john king, cnn's chief national correspondent, john, i'm telling

that you there's zero question that america generally is substantially better off with a trend toward being not better off. you follow the politics of this. can the president or mitt romney convince voters that they will be better off with one of them? >> well, the confidence question, which candidates wins going forward. ask you the question, are you better off? you elect presidents state by state, those are national poll numbers go. to the state of ohio where the candidates duke it out this week. the unemployment there is down a little bit from when president obama took office. you go to nevada, the unemployment rate up is a little bit. michigan it's up a little bit. so we go state by state with that question. but when you have a hung jury, you are better off today? people ask a second question then if they're not sure on that one when they look at their children and say you would be better off? when people look around, they think about their children. their legs are tired. they have been treading water for two or three years. they had to make very tough choices in their own lives.

they don't see any tougher choices being made or bold new proposals being made by the candidates. we have a hung jury at the moment. this election as we speak today is as close as they get. if one of the candidates can change the confidence question about what's around the corner and what's over the hill, they'll win the election. >> how does that happen? how do you ingender the confidence you need to turn things around, get businesses to hire, get people to feel good about the economy if you do what you suggest that these candidates should do? be honest this is going to be a tough slog. it's going to take a long time and not feel a whole lot better for a while? >> i'm arguing that the authenticity allows them to say that's why we need to make certain kinds of choices. and that's a frame to outline an agenda. for example, president obama could have said at the very beginning of his administration, look, this is -- could be a longer turn around than we would like. and so i'm asking for everybody's patience so we should be able to spend and stimulate for a while, for

example, because that is the philosophy clearly believes in. but we're going to have a plan to save in the long term, to cut down our debt in the long term. here's how i'll lay it out. and so you understand a framework then why he stimulating and also why he believes in debt reduction. and that could have made sense of his entire agenda. instead, he kept saying we're going to stimulate. now i support debt reduction. now we're going to be for jobs bill. but, no, i also support debt reduction. he kept telling us we're in this recovery. we're in the moment of regrowth. and it was whiplash for the american people. there was no framework. >> and, sean, you've got mitt romney saying under him unemployment will go down to 6%. he didn't invent that number. the congressional budget office also has that kind of thing. but that's the kipd of specificity that mitt romney gets hammered for not having when he talks about tax cuts and he talks about spending cuts. so the minute you bring specificity in it, you can't control the unemployment rate. the world is controlling the

unemployment rate right now, not washington. >> of course they can't control it. that's not a very bold predicti prediction. if the economy starts to come back, get 2.5%, 3% growth. that is the unemployment rate you get. but that's not terribly bold. look, again to the confidence crisis. no american voter trusts any big institution anymore. they see what happened to j.p. morgan chase. they watch what happening in europe. they don't see any politicians making bold decisionsme. so what can mitt romney do? in part, it's a very different challenge. one of the reasons his campaign will tell you he's not changing his plan despite the changing circumstances is we have a president. if the american people reach the threshold decision you've had 3 1/2 years, mr. president, sorry. you're a nice guy. we don't think you've done enough. you haven't tried hard enough. you haven't been bold enough. things are not that much better. sometimes the challenger can win on that. so you have a fear on the obama side of doing something big and bold. he can say okay, i'll extend the bush tax cuts. i'll do it before the lection. but only if you give me

construction spending. there is still summer months left. let's put money out there only if you give me the teachers, police, firefighter money. let's try to cut that deal before the election. the president doesn't want to do that because extending the tax cuts infuriates his base. he could put pressure on governor romney. congressional republicans if such a deal were offered would say what should we do, mr. nominee? >> that becomes a key question. when awe rife to that grand compromise, which candidate is more likely to embrace it? john king, always a pleasure to see you. thank you both. ken, stay where you are. christine and will are here as well. we know the problems and the politics. what do we do about it? how do we avert that storm heading to our shores? the conversation continues on "your money" next. [ male announcer ] now you can swipe... scroll... tap... pinch... and zoom... in your car. introducing the all-new cadillac xts with cue.

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i said that storm clouds are gathering over the u.s. economy. the question is what, if anything, can be done about it? we have a former imf chief economist with us. he is one of the world's leading authorities on financial crisis. you've seen him on the show a lot. but he really does understand this. ken, study this for us. help our viewers who don't study cross-ice to is to say this is just not a slow recovery. there is something alarming you, alarming me and alarming other people about a shift in sentiment of the american consumer that suggests something -- this may not be just a slowdown. something else may happen. >> the basic problem is we're not growing that fast. we're still fairly weak from the deep financial crisis recession when he which unfortunately is typical. and now we might be hit by another hammer blow coming from

europe, coming from china and already from europe there's a lot of uncertainty. so even if you don't know that the meteor is going to hit, you're hiding worrying about it. so it's a very, very tense state where i think the only move in this situation, the only move is really to have the central banks flood the which he with liquidity to try to support the short term confidence. i mean that's not a good thing in the long run. but europe has to lead. they've still been timid because nobody's in charge. they don't have a central government in europe. >> that's right. and we're going to address this later on about why china is able to make the decisions. they're so centralized. but to your point about the only thing that can happen that can really have an effect on this is the federal reserve putting more money into the economy. will cane, why is that a problem? >> it's a problem. i would emphasize the word can. that is the only thing that can happen. the central bank has the authority and power and political will. it doesn't have to respond to

political will to put any short term solution. we're talking about short term solutions to batten down the hatches for an economic storm. there is no political solution to. this the central bank is the only one that can put something together. it is surely not the prettiest picture in the world as ken suggested. again, it's the only thing that can be done. >> christine romans. here's the problem we have. what ken is suggesting is something that would create liquidity. it would make banks able to lend more. people could borrow more. you think that fundamentally we've got a problem now. we're fueling this economic fire with stuff we shouldn't be using as fuel. >> we're talking about -- look, my concern is we keep talking about the consumer slowing. oh, know the consumer is slowing. didn't we learn that consumer is the middle of a very long deleveraging. they have too much debt. maybe the consumer doesn't have borrowed money, savings and money in the house they can spend. the consumer is in a weak position. so thinking that we can rescue ourselves with the consumer after we rescued ourselves with the fed and with central banks, i mean there are going to be --

the economy is going to grow faster. there need to be fundamental drivers of growth that aren't just necessarily consumers on borrowed money which is what drove so much of the economic activity. >> let me show you, ken. let's look at consumer confidence and what we're talking about, where this alarm comes from. consumer confidence is a measure of how consumers feel about the economy and how it's going. it's been going up in the last year or. so the last three months you've seen a little bit of a drop. it's not drastic. it's not crisis, ken. but why is all of this stuff that we're talking about a potential slowdown in china, the european crisis and whether greek leaves the euro zone, greece leaves the euro zone. why is all of this somehow playing out for consumer? why would that happen? what would the american consumer be saying to themselves, i want that wall net et in my pocket. >> they know that obscure risk can blow up, hurt their jobs. they're in a very weak position.

ali, the government -- the census bureau recently reported that wealth of the average american had fallen by 40% in the last three years. their home prices have gone down. a lot of unemployment. i mean people are already nervous. and they know that something else could hit. the other shoe could drop. i do think we have to work on the long term fundamentals. i completely agree with christine. there isn't a quick fix to this. we have to improve our tax system, our education system, our fran structure. and certainly when i talk about flooding the world with money, that's a drastic response to a very, very dangerous situation. but that does not solve the long term problem. i'd like to see the presidential candidates talk about the long term more. >> all right. so now this is the issue that we have to move to. that is a lot of people asked me, what can we do about this? if there is this hurricane, if there is this storm coming to our shores, what control can we have over it? we discussed the federal reserve. we discussed central banks.

now we're bringing into politics. stay with us. we're coming back with ken, will and christine in a moment. and then voters go to the polls in greece for the second time in a little over a month. could the choices made by this small country, the 34th biggest economy in the world, set off this worldwide economic meltdown? e announcer ] when this hotel added aflac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪ ha ha! ♪ if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this.

i'm back with ken rogoff economics professor at harvard and also joined by cnn contributor will cane and christine romans, host of "your bottom line." ken, you just said, and many agree, the biggest thing that can happen is that the fed can inject some more money into the economy, create more liquidity and make up for any dropoff in consumer spending. i'm going to offer there something else that can happen. and that is that the american people can speak in some fashion loud and clear before the election and certainly on election day to tell their congress avoid that fiscal cliff

at the end of the year where taxes go up. some benefits get eliminated and spending cuts across the board. could that have an impact? >> i think they will avoid it. the question is which direction? president obama really does have a very different vision than governor romney. and i won't get into the details. but i mean the question -- we don't know which way it's going. they might not win a strong enough majority, a strong enough plurality to be able to do all that much. and we could be frozen for a while. i mean so we're stuck in this limbo facing this crisis not able to act comprehensively, decisively with a long-term vision. everybody is struggling for tactical advantage in the short term. mean whi, the economy is very, very frail. as you say, ali, it could get a lot worse. >> it could get better if we do the right thing. who knows? will cane, let me ask you about. this democrats generally speaking like the idea of an environment like this increasing spending, call it stimulus if you will, and cutting back on taxes. republicans typically have been

saying they want to see spending cuts. and they want to see lower taxes. the truth lies in the middle. we shouldn't be increases taxes right now and we certainly shouldn't be cutting short term spending. if we were to propose that, which candidate would embrace it? >> i would submit you to, by the way, we should add this caveat that, is a short term solution. high spending, low taxes. that can't last forever. >> absolutely right. >> i suggest that mitt romney is the candidate to be able to deliver some kind of situation like that. i would say that he campaigns on spending cuts. he campaigns on short term spending cuts. i don't know that i believe facing an economic storm he wouldn't embrace stimulus. if we're talking about a stimulus here that actually works. it is not hung with christmas tree ornaments from every congressman across the united states. mitt romney is the guy who can pult together some infrastructure, stimulus package combined with a tax reduction package that might maybe could get bipartisan support. i would suggest president

obama's lost 85 bipartisan well at this point. >> i think neither of the candidates has really talked about what is happening in the economy. we're telling the truth about what is happening in the economy. they haven't said what is really happening. they have to say can you have his version of that or my version of that. nobody wants anybody's version of bad. everybody wants to know i'm going to have a job, my kid can go to college and i don't want to know about the fact that 30% of all of the college graduates by 2030 are going to come from china and only 5% of them are going to come from this country and doing nothing to address, as ken says, the long term issues. >> let me ask you this, ken. will said to me in the hallway earlier, port of tart of the pr with the word stimulus is it's a four letter word now. you can find ways to spend lots of money in the united states and make it work to stimulate the economy. what is that way? >> i mean who can doubt that we need better infrastructure? we really have been

deteriorating relative to the rest of the world. you want to bring back manufacturing. you want to have more jobs. you have to have the infrastructure to support it. interest rates are very low. if the government could borrow and actually do something useful with it, build things we need, improve the electric grid, improve our road system and our courts, et cetera, of course that would be a very good investment. but it's all paralyzed by politics that everybody has their pork barrel projects. everybody has priorities. >> the christmas tree scenario. >> the christmas tree that we talked about. >> doesn't that make stimulus good in theory and bad in practice? fiscal stimulus, stimulus coming from the democratically elected branch is fundamentally flawed then. if it can't be put into practice, we shouldn't waste time worrying about it. >> we need infrastructure. so if we're not doing that through borrowing by the government, we have to let the private sector do it. the u.s. has been very slow to do that compared to a lot of other countries. we want the government to do

everything coming to roads and bridges. other countries are much more, you know, will take private money. >> all right. ken and christine and will, i suspect you three could solve our problems. >> who is president? vice president? treasury secretary? >> i like ken to be somewhere where he is making decisions. like that idea. thanks to both of you. my next guest agrees there is a crisis coming. he has a book by that name. he knows how bad it's going to be if we continue with government as usual. but he actually has a solution to turn the economy around. stay with us. you're watching "your money" on cnn. ♪ ♪ [ male announcer ] you've been years in the making. and there are many years ahead. join the millions of members who've chosen an aarp medicare supplement insurance plan insured by unitedhealthcare insurance company.

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like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. the economy is adding jobs but not enough jobs. consumer confidence that's dropped for three months in a row. that is despite record government spending. the budget office, the cbo projects that the u.s. will end

the fiscal year with a $1.33 trillion deficit. the editor of thompson reuters digital is joining me from our hometown of toronto. david newton is a professor and venture capital expert. he is the author of a new book called "crisis confidence." thank you for joining us. david, you lay out two scenarios for the u.s. economy going forward. the first scenario, we change nothing. the economy grows at 2.3% and in ten years the gdp stands at just over $19 trillion. the government takes in 15% of that in taxes. here's the second scenario on the right. the economy grows at 4%. that pushes gdp a lot higher. it gives the government $3.9 trillion in tax revenue.

how do we get there? >> we have to be very serious about taking on entitlements and recognize they're not sustainable. they're already in deficit. they're going to remain in deficit going forward. and ultimately the spending that creates all the annual deficits and adds more debt each year is going to have to be paid in terms of the interest on that. >> christian, let's show you this poll from the national federation of independent businesses. they represent small businesses. 26% of small businesses or owners cited uncertainty over business conditions as a severe impediment. 24% cited lack of demand and 19% cited lack of finance. we talked about all of these things. access to finance ranks almost as high as uncertainty. does that mean david's point is exaggerated? >> i wouldn't say exaggerated. but what i would say is, look, you can think about the u.s. economy as a person who has a bullet wound and also dangerously high cholesterol

levels. now if you're a doctor, i would handle the bleeding gushing bullet wound first while being concerned about the cholesterol level. and for me, the cholesterol levels are the fiscal situation. david is right. this is a medium term issue which must be addressed. i think entitlements have to be fixed like you, a. ly. i'm a canadian. i think the health care system has to be totally fixed. but the short term issue, the short term uncertainty which is killing the economy right now, that is not about the u.s. budget deficit. the world is practically paying the u.s. treasury money to lend the u.s. money. the big problems right now are that the world economy is coming apart at the seams. >> david, one of the things in the book is a focus on government spending. you say that the deficit is out of control. that's undermining businesses' ability to plan for the future. but cutting government spend dg not lead to growth in europe s that what you're proposing in the united states? >> we have to do several things.

we have to cut spending. it didn't have to be 30% or 40% across the board. it has to be intentional. 11%. get us to $3.3 trillion as spending pace. then we have to get entitlements under control. we have to recognize those are not sustainable in the current form. then we have to send a signal to the private sector that taxes, labor costs, health care costs and ultimately energy costs are going to be something they can plan on. >> cut 11% from the federal budget. i don't know if we can cut 1% given the way that congress operates. the biggest problem is are they going to get thing donz that send us of a fiscal cliff at the end of the year? we can't speak with certainty that they'll do that. >> well, that's absolutely right. there is deadlock. there is paralysis in washington. i think it's not just a question of can they get things done. it is a question of -- i think the speeches that we heard this week from mitt romney, from barack obama point attention to one important thing -- there are two very different ideas out

there right now about the direction the u.s. has to take. >> christian, great to see you. david, always a pleasure. thanks for being here. coming up next, politicians in the united states are proved of incapable of fixing the big economic problems. but in one i can trcountry. for three hours a week, i'm a coach. but when i was diagnosed with prostate cancer... i needed a coach. our doctor was great, but with so many tough decisions i felt lost. unitedhealthcare offered us a specially trained rn who helped us weigh and understand all our options. for me cancer was as scary as a fastball is to some of these kids. but my coach had hit that pitch before. turning data into useful answers. we're 78,000 people looking out for 70 million americans. that's health in numbers. unitedhealthcare. there it is ! there it is ! where ? where ? it's getting away ! where is it ?

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america's got economic problems. neither barack obama nor mitt romney can fix most of them. our problems are big. they are caused in large part by global issues and they require long term planning. not the kind of short term fix that's the u.s. congress fixates

on. we need a good example. we actually have one. it's china. christine romans host of "your bottom line" joins me now. jim rogers is making a big bet on china. >> right. when jim rogers bets, you should pay attention. he's bearish on america. so why is he placing his money and his family in asia? we took a walk in the park so he could explain. let me ask you about china. is china the answer here? china is slowing as well. >> china has been trying to slow its economy for three years, rightly so. they got overheated. they had a property bubble. they need to slow inflation. china cannot say they've done a about great job. the economies are ten times as big as china. ten times. so even if china booms, if the rest of us have problems, china cannot save us no matter how smart they might be. >> a lot of people think we're looking back on a chapter that will be written in the history books where 20th century belong to england.

>> i have sold my house in new york. i moved to asia and my girl's speak perfect mandrin. what more can i tell you? i'm preparing them for the 21st century by knowing asia and by speaking perfect mandrin. >> can you still get rich in america? do you only get rich in china? >> it's easier to get rich in asia than america. now the wind is in your face. we're the largest debtor nation in the history of the world. all the assets in the world. >> are you parish-american? zblr >> aren't you? >> i'm an american taxpayer and citizen like you. but we're the largest debtor nation in the history of the world. the debts are going up by a trillion dollars every year. the largest creditor nations in the world are china, japan, korea, taiwan, hong kong, singapore. the assets are in asia. you know who the debtors are and where they are. look at greece. look at spain. i mean, i don't like saying this. you know, i'm an american, too. but facts are facts.

>> so if those are the facts that jim rogers lives by, what is he doing with his money? he is short stocks. short u.s. stocks. he also says you got to own real things like silver and rice, real commodities. he still likes commodities. he has gold in his pocket. he carries around gold coins in his pocket. but he's not buying more gold here. he's not buying more gold here. he says you have to look at stocks to be short, long commodities and you got to just hold on -- buckle up for a couple years that will be rough. >> you and i better get the little mandrin things and buck up so that we're safe in our own economy. >> i know. >> jim rogers says if you want to understand what china means to you and your financial future, you have to read a book called "winner take all." now we took him so seriously that we brought her here. before we asked her what we need to know about our competition with china, let me lay out per issue. let's start with oil. oil is still the thing that we consume in america more than anyone else. america is number one in oil consumption in the world.

using 21%, 22% of the world's oil every day. that's about a fifth. china is sporesponsible for consuming 10%. it's the only commodity, by the way, that the u.s. consumes more of than china. so let's look at some of the others. every other one of these, wheat, aluminum, zinc, copper, and steel. look at steel. america uses 5% of the world's steel. china, which is still building a lot of infrastructure uses almost 46%. china uses more of all of these things except oil than america does and china has a long term plan for securing those resources that might put them at an advantage and puts the u.s. at a disadvantage. as i told you, she's an economist. she's the author of winner take all. china's race for resources. and what it means to the world. thank you for joining us. why does america not think this way? why is america not out building the long term relationships? in your book you point to

africa, for instance, which has a much higher economic growth rate than america or europe. and, yet, china is the key partner involved with these african countries in building resources and building infrastructure. america seems mostly consumed with matters that are coming due at the end of this year and short term types of economic concerns. >> well, i think you point out exactly the schism that exists. the chinese approach is a multilateral approach. they're focused on building relationships with countries not just in africa, in brazil, argentina, kazakhstan and canada. australia is the largest recipient of foreign direct investment from china. and it's that which has been basically the big marker that has separated the chinese approach from that of the united states which has tended to be a unilateral approach with looking to secure resources. >> all right. i started this discussion with christine and talking to jim rogers about the idea that we need an example of long term

planning. and that perhaps america should look to china for that. they don't -- they're not driven by the same political concerns that we're driven by in the united states. but they are driven by economic concerns. is that a fair statement? should the united states be taking that page out of the chinese book? we don't want all the pages. shouldn't we be taking that long term planning page out of the chinese book? >> absolutely. in the context of the united states and indeed europe, you know, the lens to look at economic problems i believe is three key ingredients, capital, labor and productivity. you can see in the united states and across europe that these three key ingredients for economic growth are eroded. if you look at productivity like china, we know that there is a lot of money. the labor force is big and quality is improving n terms of productivity, they've been significant productivity gains over the last several decades. so that is where the difference really lies. i would say that fundamentally, you would hope that they would

be much more focused on long term issues in the united states. but, again, very rationally political sort of imperative in the united states and in a democratic society like europe are driven by short term concerns. they're incredibly focuses in myopia. you get what you pay for, basically. >> let me address that. >> one of the things that they could do, perhaps, is maybe extend the terms of a presidency as they've done in south america. >> is with just going to get to is it because it's a mature democracy. we roll over governments on a regular basis which by the way many americans think is a great idea. can you throw the bums out every two years in congress and every four years everywhere else and six years in the senate. but that does create short term thinking. it creates less of an imparityive to have long term thinking in relationships the sort that china has developed. >> yes. absolutely. and, you know, i think no one, whether you're loeveon the left

right side would agree that the problems that the united states faces right now are at their core long term problems. issues are on pensions. issues around poor and declining education stabbed ardndards. these are all structural problems that need to be addressed. the way that you solve those things are a painful long term solutions. and in a myopia short term cycle where we have elections every two years, there is no space for an incumbent president or congress to focus on those issues with every other year there is new elections campaign to be fought. >> pleasure to talk to you. thank you so much. she is the author of "winner take all." later, greece is on the brink of economic ruin. most people here in the u.s. say who cares? i'll tell you why you should care. art your business... protect your family... and launch your dreams. at legalzoom.com, we put the law on your side.

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on sunday a little more than a month aftera know inconclusive parliamentary election that

failed to form a government. the two leading contenders are the right-leaning new democracy party and sirisa, the left-looning party, the main point of contention is to continue harsh austerity measures that greece agreed to as part of two internationally financed bailout packages totaling hundreds of billions of euros. unemployment in greece has grown to 22.6% and more than double that for youth, 52.7%. greeks are angry over government spending cuts and tax hikes. the left-leaning sirisa-led government plans to cancel the austerity measures and the consequence of that could have a huge impact, not just on greece, but on the entire world. many fear greece would default on its financial obligations and quit the euro either by choice or by force and a greek exit to the euro could lead to a brake up of the entire eurozone.

either way, european banks would face stress in italy, spain and portugal already on the ropes. the risk of a global contagion is real. why? think back to 2008 and the financial crisis and the fall you are of lehman brotherses. it set of a a worldwide credit freeze showing how interconnected the financial system is. back then a car buyer in oklahoma knew he couldn't get a loan because a bank in new york collapsed. when a business needs to cut costs, it lays people off. the question now is could the same thing unfold in greece? could greece be the new lehman brothers? how do choices made in a small country in europe set off a worldwide credit crisis? whatever the answer, the eyes of the world are on the greeks as they go to the polls. joining me now from athens, cnn's john defterios, host of "global exchange" on cnn international. you're in athens where the fate

of the world could be in the hand of the greeks for the second time in 2,000 years. do they get it? do they feel that pressure that this isn't just an election about greece and this is an election of the world's economic condition? >> reporter: i think they're more aware of that than ever before, but i think we should step back, ali. we're in parliament square. this is the cradle of democracy. if you give deeper thought to this, there's a potential fear here that they could be in communism and opting out of the euro and 22%. one out of two youth don't have a job right now and the economists i've spoken to say we could have another three years of austerity. so in america, recession, as you know, lasts 12 to 24 months and they're so desperate they're saying we may vote in communism and they fought off communism in this country between 1947 and 1949. that is extraordinary if it happens and it would be a jolt

in the markets and the greeks are well aware of this so they have a divided society. jessica yellin said earlier, what would be great is if mitt romney and barack obama said we're in for a rough, long slog and it will not be fantastic in the other end. you were asking people with a 25% unemployment rate and a 50% youth unemployment rate to take more cut and there isn't even an obvious light at the end of the tunnel? why would they make the choice? why would they vote for greater austerity? >> reporter: well, if greater austerity is one thing and the reforms are another. they've been resisting the reforms and this is quite interesting that there is a productivity gap in greece. it's 29% between a greek worker and his brethren here in the european union. they delayed the tough austerity when they came into the euro. so they had low interest rates in germany so they could borrow like crazy and they had a

structural boom because the eu money was coming into the country leading up to the olympics so between 2000 and 2007, this economy was booming and growing 4% to 5%, but at the same time public spending was going up 40% to 45% a year. so right now the payback is very, very painful and that's what the greeks are voting for now. did they go for more austerity and did they stay in and have the confidence of the currency or not. defterios, part of the team covering those elections. coming up next, some final thoughts on the economic storm headed to the united states. ♪ [ man ] excuse me miss. [ gasps ] this fiber one 90 calorie brownie has all the moist, chewy, deliciousness you desire. mmmm. thanks. at 90 calories, the brownie of your dreams is now deliciously real.

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i started it. i told you about an economic storm that is gathering off our shores that we're starting to feel the effect of and the way i know that is because the u.s. consumer is starting to slow down. this may be temporary. they may pick up again, but there isn't a lot that they can look at on our shores and