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 ali velshi. 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, i'm generally an optimist. but i understand the u.s. 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 the good 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 united states are 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 scald, robo. 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 causes you to pay more money f for exactly the same thing you paid something else for 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 probably own if you have a 401(k) or an i.r.a., 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 put together the best minds in business and politics for you this hour. christine romans, the host of "your bottom line" is here with me. 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 yellin is cnn's chief white house correspondent. she says neither president obama nor republican rival mitt romney are being honest with you 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 harvard economist ken rogoff is the former imf chief economist, the world's 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 right now. you look at what is happening in europe, if that blows up, there's nowhere to hide. we have to hope it doesn't. there is not a certainty by any means. it is not just the greek election. 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 critical 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. jessica yellin, you have heard those words many times over and you think both candidates are running on their ability to turn this economy around or 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. >> that's not how you win elections around here.

one question that often gets asked of americans -- are you better off than you were four years ago? it is a question that often times ultimately decides many presidential elections. 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 you that there is 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 candidate wins going forward. ask you the question, are you better off? you elect presidents state by state, those are national poll numbers you just showed. go to the state of ohio where the two candidates duked it out this week, the unemployment there is actually 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 down a little bit. so we go state by state with that question. but when you have a hung jury, are you better off today, people ask a second question then if they aren't quite sure on that one, and they look at their children -- say would they 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 engender the confidence that 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 he 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, and 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.

a framework now would be helpful. >> 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 kind 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 into it, it makes guys like me say -- 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. us a said, that's not a very bold prediction. if the economy starts to come back, get 2.5%, 3% growth. that is the unemployment rate you would get, if you get that consistently. 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 decisions. they have had to do all these things themselves. 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

incumbent 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 just 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 for two years and i'll do it before the election, but only if you give me construction spending. only if you give me the teachers, police, firefighter money so i can give that to governors and mayors. let's try and 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 would be an interesting question. >> that becomes a key question. when you arrive at that grand compromise, which candidate is more likely to embrace it. that may get them the votes. john king, always a pleasure to see you. jessica yellin, our chief white

house correspondent. 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. ♪ don't worry. we haven't forgotten. you still like things to push. [ engine revs ] the all-new cadillac xts has arrived, and it's bringing the future forward.

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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 kree seize. 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 crises to say, this is not just 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 economy 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?

>> i wouldn't suggest it is 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 from the financial crisis, the consumer is in 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. ken is absolutely right. 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 but 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 to keep that wallet in my pocket. >> for one thing, they know that

obscure risk can all of a sudden blow up, hurt their jobs, make the price of their home go down even more potentially. 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. they've been running down their savings to keep up consumption. 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 infrastructure. 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? you see us, at the start of the day.

on the company phone list that's a few names longer. you see us bank on busier highways. on once empty fields. everyday you see all the ways all of us at us bank are helping grow our economy. lending more so companies and communities can expand, grow stronger and get back to work. everyday you see all of us serving you, around the country, around the corner. us bank.

[ car door closing ] [ male announcer ] time tot! check your air conditioning? come to meineke now and get a free ac system check. meineke. we have the coolest customers. 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. meanwhile, 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 speak 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 to you -- 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 some kind of 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 put together some kind of

infrastructure, stimulus package combined with a tax reduction package that might, maybe, could get bipartisan support. i would suggest president obama's lost any bipartisan will 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 we're 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, part of the problem with the word stimulus is it's a four letter word now. you have argued for a long time that there is a way for the government to spend money in the united states, lots of it, time

it properly and make it actually 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 in an efficient manner, then 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 loathe 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 would elect the three of you. i suspect the three of you 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. eafood feast for just $14.99. start your feast with a soup, like our hearty new england clam chowder. next, enjoy a salad with unlimited cheddar bay biscuits. then get your choice of one of 7 entrees. like new coconut and pineapple shrimp shrimp and scallops alfredo

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on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? the u.s. economy is paralyzing by indecision. the economy is adding jobs -- it has for 20 months -- but not enough jobs.

consumer confidence that's dropped for three months in a row. that is despite record government spending. the non-parts congressional budget office, the cbo, projects that the u.s. will end the fiscal year with a $1.33 trillion deficit. that's the shortfall between what we take in and what we spend. that's just for one year. 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 editor of a new book called "crisis of 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.

to $23 trillion. it gives the government $3.9 trillion in tax revenue. at 17%. we all prefer the second scenario. how do we get there? >> we have to be very serious about taking on entitlements and recognize they're not sustainable. in their current form right now, 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 ultimately 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, ali, 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 spending did not lead to growth in europe. is that what you are 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. probably in the range of 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. christian, david says cut 11% from the federal budget. i don't know if we can cut 1% given the way that congress operates these days. our biggest problem is are they going to get things done that are going to send us off a fiscal cliff at the end of the year, and we can't even speak with certainty that they'll actually 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. say hi to toronto for me. david, always a pleasure. thanks for being here. coming up next, politicians in the united states have proven incapable of fixing the bigger problems. but in one country, that's simply not an issue. and that country is kicking our you-know-what. 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.

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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 american and european economies together 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 the 19th century belonged to england, where 21st century belongs to china. >> i have sold my house in new york. i moved to asia and my girl's

speak perfect mandarin. what more can i tell you? i'm preparing them for the 21st century by knowing asia and by speaking perfect mandarin. >> 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 bearish america? >> aren't you? don't you know we're the largest debtor nation in the history of the world? i don't like to say this, 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 responsible for consuming 10% of the world's oil. 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 symbiotic relationships with countries not just in africa, in brazil, argentina, colombia, 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 focused 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. >> i was just going to get to -- is it just because it is a mature democracy? we roll over governments on a regular basis which by the way many americans think is a great idea. you can throat bums out every two years in congressnd every four years everywhere else, and six years in the senate. but that does create short term thinking. it creates less of an ic paretive to have long-term thinking and imperatives, the sort that china has developed. >> yes. absolutely. and, you know, i think no one, whether you're on the left or right side would disagree with the statements that the problems the united states faces right now are basically at their core long-term problems.

issues are on pensions. issues around poor and declining education standards. issues around deficits and debt. 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 myopic sort of short-term cycle where you have elections every two years, there is no space for an incumbent president or congress to focus on those issues when every other year there is a new election campaign to be fought. >> pleasure to talk to you. thank you so much. she is the author of "winner take all." an economist. 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. tdd# 1-800-345-2550 let's talk about the personal attention

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party and the left leaning party. the main point of contention is whether or not to continue harsh austerity measures that greece agreed to as part of two internationally financed bailout packages totalling hundreds of billions of euros. unemployment in greece has grown to 22.6%. it's more than double that for youth, 52.7%. greeks are angry over government spending cuts and tax hikes. the left-leaning government promises to cancel all of the austerity measures. the consequences 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. a greek exit from the euro could lead to a break-up of the euro zone. either way european banks would face severe stress. with banks in spain, italy and portugal already on the ropes,

the risk of global contagion is real. think back to 2008, the financial crisis, failure of lehman brothers. it set off a worldwide credit freeze, proving how interconnected the global financial system is. back then a car buyer in oklahoma couldn't get a loan because an investment bank in new york he probably never thought about collapsed. that credit crunch hurt america and the world. it forced businesses and economies to pull back, and when a business needs to cut costs, it lays people off. could the same thing unfold in greece? could greece be the new lehman brothers? how did choices made in a small country in europe, the 34th largest economy set off another worldwide credit crisis? whatever the answer, the eyes of the world are on the greeks as they go to the polls. john, you're there in athens where the fate of the world could be in the hands of the greeks for the second time in

two years. do they get it that this is an election on the world's economic condition? >> i think they are aware of that more than ever before. we should take a step back and think about this. we are at embarrassment square. this is the cradle of democracy. if you give a deeper thought, there is potential of voting in communism and opting out of the euro. 1-2 youth don't have a job right now. economists say we could have another three years of austerity. in america, recession lasts 12 to 24 months. we are in the fifth year now. another three years, they are so desperate they are saying we may vote in communism. they fought off communism between 1947 and 1949. that is extraordinary if it happens. it would be a jolt to the world markets. greeks are well aware of this.

>> jessica yellen said earlier what would be great if mitt romney and barack obama were honest with americans saying we are in for a rough long slog. in greece this is the reality. you're asking people with a 25% unemployment rate, 50% youth unemployment rate to take more cuts and there isn't an obvious light. why would they vote for greater austerity? >> greater austerity is one thing. also the reforms are another. the unions here have been resisting the reforms. the reality is, and this is quite interesting, that there is a productivity gap in greece. it's 40% between a greek worker and u.s. worker. it's about 29% between a greek worker and his breaththren hered the european union. they have low interest rates from germany. they had a structural boone because the european union money was coming into the country leading up to the olympics.

between 2000 and 2007, this economy was booming, growing 4% to 5%. public spending was going up 40% to 45% a year. right now the payback is very, very painful. that's what the greeks are voting for now. do they go for more austerity or follow the euro line stay and have the confidence of their currency. >> john is part of cnn's team in athens coming those elections. next, final thoughts from me on the economic storm heading toward the united states. 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. i'm one of six children that my mother raised by herself, and so college was a dream when i was a kid.

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let me end the show the way i started it. i told but an economic storm gathering off our shores that we are starting to feel the effect of. the way i know that, because the u.s. consumer is starting to slow down. this may be temporary. there isn't a lot they can look at on our shores and across the world to suggest that things are getting better any time soon. it's up to washington to do whatever it can to create a