environmentalists, if you can't save this mountain, you can't save any mountain. >> announcer: who willin? the battle for blair mountain, working in america. next sunday night on "cnn next sunday night on "cnn presents." -- captions by vitac -- www.vitac.com consequence from the downgrading of u.s. credit for the first time in history. markets one by one are beginning to open on the other side of the world. i'm christine romans. welcome as the u.s. and around the world to a cnn special report. the debt mess. what happens next. the first asian markets opened in tokyo an hour ago. others will follow this hour are closely monitoring to see the reaction to the news that standard & poor's downgraded from aaa to aa plus rating. the u.s. stock futures are also trading tonight and they are trading lower.

about 2% lower. they are one of the first gauges of investor attitudes to s&p's down grade. timothy geithner this evening taking part in a conference call with other member nations of the group of seven nations strategizing as republicans call for his head over the downgrade. a downgrade of america will be a line in the history books someday but what does it mean for your pocket book today? we'll break down how and why and we'll do it with the help of our own richard quest and candy crowley. we'll get to them in a moment. to help us make sense of all of this. first to the white house. president obama returned there earlier after spending the weekend at camp david. our white house correspondent brianna standing by live. the administration is striking back sharply against the s&p assessment in the s&p downgrade. isn't it? >> certainly. the white house is, top officials are. we heard white house official and surrogates blanketing the sunday shows, calling this amateurish, calling it bad math, calling it a political decision.

and you saw it just seriously, a blanketing of the sunday shows by white house officials, top advisers. you had david axelrod, the outgoing economic adviser, the president's former top economic adviser, larry summers. he was actually on cnn on state of union with candy crowley. and all of them were saying in a very coordinated fashion, a couple of things. first they were really hitting on a calculation error that the treasury says it found with s&p's number. what they're calling a $2 trillion mistake in calculating deficits. but this was a back and forth that went between treasury and standard & poor's. and standard & poor's said it stood by the downgrade. the other thing you're hearing from white house officials and surrogates for the president, because s&p really cited that

very chaotic process that really took us to the last minute of getting that debt ceiling deal this week, you heard white house officials blaming house republicans for being in their words, very uncompromising. so certainly pointing fingers there, christine. >> and it sounds like there will be no more uncertainty about who will be running the treasury secretary. >> this was pretty interesting. speculation whether secretary geithner would go. his answer was that he would be here for the foreseeable future, didn't do a whole lot to clear that up. it has been cleared up. he will be staying on. we're told into fall of 2012. so election season. and white house secretary jay carney put out a statement saying the president himself

asked treasury secretary geithner to stay and welcome the news that he is staying. >> thanks. >> all eyes on the asian markets to gauge reaction to the downgrade. we've got our reporter live in tokyo. and live in hong kong where the market opened at 9:30 in 27 minutes. let's start with tokyo where trading is already underway. it is already happening. what are investors there saying about this downgrade? at least as you can see the nikkei and how it is trading? >> reporter: let's start with the numbers. the market in tokyo did open down sharply, 1.5%. it is slightly recovering off that low. we're down about 1%. and in making some calls to traders this morning here in tokyo, what they're describing, the mood here as is tense. and frankly, all that bickering out of d.c. over the weekend isn't helping matters. they already feel fed up with washington politics. even on this side of the planet. because it is having a true economic impact in asia pacific. tokyo is the largest stock market here in asia. it is also the second largest holder of u.s. debt.

what they want to talk about are some market fundamentals. they want to hear that there is going to be some sort of turn-around and what they know is that this is a brave new world where it is no longer a aaa world for the united states. >> interesting though. a 1% decline going in the market. that is a run of the mill sell-off. that's nothing that makes it into the history books. >> reporter: certainly. and part of the reason for that is because of the g-7 statement, we're thinking. that's at least the thinking from the tokyo stock exchange. or there has been some positive movement out of europe.

all of these factors combined. people were preparing over the weekend for a really bad day here so perhaps the preparation of that. and some positive moves may have contained some of the damage here. >> it will be a long day of trading still ahead. then another few hours before we get into the u.s. we'll continue to watch and see what's happening there. we'll check back with you very soon. let's go to pauline cho in hong kong where that market opens up in less than half an hour. what are the indications there? nervousness but mostly, it feels as though the selling, the anticipation of the selling is modest. >> yeah, that's right. and i think that she made a great point. the markets are off their lows and most of the markets here in asia started in negative territory. it was down further than it is now. it is down by about 1.3%.

sydney is down by about 1%. taiwan just opened. it is down by 1%. singapore opened down 2%. singapore and taiwan just opened within the past couple minutes. so at least they're off their lows from earlier this morning. it is mostly financial and energy stocks are being dragged down. for australia, a big commodity sell-off last week. so we're seeing the effects of that. but they're off their lows. mainly because of the information that is coming out of g-7. the g-7 finance ministers coming out saying they want to support and sustain growth and also the move by the ecb saying they'll move into the bond buying program. but also, this negative

reaction, christine that we're seeing in asia, definitely pegged to that u.s. debt downgrade by standard & poor's. >> we'll check in with you exactly in 23 minutes when your markets open there as well. don't go away. let's go to beijing. what we're seeing around the markets, one by one. big selling. then also backing off a little bit. not as dangerous as some people had thought. it is still early though. isn't it? >> it is still early. like you said, these are run-of-the-mill declines. not much to speak about. for the most part here in shanghai, what we're hearing is that the market will open down but at the same time, a lot of the talk about the downgrade was already baked in and priced into the market.

because of that, there is some debate as to whether or not there will be a decline or it will be a signal to a longer term bear market. still up in the air as to whether or not, which way that would go. for the most part now, investors have been focusing on economic data coming out of china. the consumer price index is going to be released tomorrow. so people are talking about how the inflation figure in china could come in on the high end and that could possibly lead to interest rate hikes on the part of the chinese authorities. now there has been talk that maybe chinese authorities won't raise interest rates. won't tighten further because of what's going to in the united states. >> we're going to check in with you in just about 20 minutes or so. stay close.

thanks so much. conversation and bring in our own richard west and the host of cnn. these are run-of-the-mill declines. these sort of when you've got selling or unease, you sell 1%, you sell 2%. it is not vigorous sell-offs but it's early. >> no, it's not panic selling and that's to be congratulated and fairly welcomed. however, there is a nervousness and a volatility, the people i've been speaking to in the market. those who look at these things. there is a worry about what is happening here. and it is not just concerning the u.s. debt downgrade. it is mainly about europe, spain and italy and whether or not there will have to be bailouts in those countries. the truth of the matter is, nobody believes that this crisis is over or that the regulators and the policy makers are ahead of the curve. unpalatable to say but that's the situation. >> that's right. many people have been saying did you see last week? did you see the correction in u.s. stocks?

and much of the malaise in stock markets over the summer is for exactly the reason why the s&p downgraded the united states. so it is one of those that by the time s&p does it, it has been baked in. let me to go candy crowley. i know this weekend you had some fantastic analysis on your program as well from both sides of the aisle. from, on the right and on the left, who were both against the s&p downgrade. tell me about that. >> it was interesting to me. we had larry summers who is, as you know, bill clinton's treasury secretary. always top economic adviser to president obama. and then we talked to steve forbes, ceo of forbes inc. both very good economic analysts. so i expected they come from different ends of the spectrum here as they look at what's wrong with the economy. but the first question out of the bat, of course, was what do you think of this s&p downgrading the u.s. credit rating? and they agreed on that.

take a listen. >> i think in a narrow sense, it is a political move and i think it is really, it will sound strange for me to say, an outrageous move. the government can't pay its debts. it is legally obligated to do that. it has the wherewithal to do it. in a larger sense, i think the u.s. economy is in a perilous state. this recovery has been the worst from a severe recession since the great depression but i'm surprised s&p would play politics. >> look. s&p said to sell warren buffett said to buy. that should tell you something about the quality of u.s. bonds. at the same time, this happened because s&p was seeing what most americans are feeling. which is unhappiness with the solution that's are coming out of congress for a critical economic problems. to say that s&p is suspect is not in any way to say that all is well. >> what i loved about this,

christine, is that all weekend long, the white house was pushing back so hard on s&p. amateur hour, this was a vanity tour. they suggested that s&p was looking to help its own tarnished image. it wanted its 15 minutes of fame. really rough stuff. at the same time they wanted to embrace the part that seemed to criticize conservative republicans. so it was this, i think you saw larry summers do that a little bit. well, no, this was terrible them shouldn't have done it. this was an awful move on their part. on the other hand, they have a point about how bad the politics are. so i found that interesting. to sort of trash it and say, but by the way, they have a good point that republicans were terrible about this. >> it is a careful maybe contradictory message.

s&p is wrong but it is the tea party's fault. >> exactly. [ gnome ] ahh... [ male announcer ] this is what it's like getting an amazing discount on a hotel with travelocity's top secret hotels. the easy way to get unpublished discounts of up to 55% off top hotels. harpist not included. ♪

domain for almost 20 years. it has recently been upgraded. our decision to lower the rating to aa plus from aaa was really motivated by two things. one is the increasing political polarization which we think is

going to impede the ability of policy makers to act proactively to get our public finances in order. the second really is the public finances themselves. the current level of debt is high. >> welcome back to the cnn special report. we're all waiting to see what happens on wall street in the morning. joe duran, one of the largest independent wealth counseling firm in the country with some $15 billion in assets under management. he joins us from irvine, california. what that fancy introduction means is that you've got clients and you've got money invested in the markets around the world. and what happens on these markets is important to you and your clients. and you're cautioning people, don't overreact.

don't make any big moves. don't panic. >> one of the worst things that people do at times like this, they react with their emotions. your emotions are probably not a friend when it comes continue to investigating. what we tell everyone is, quite simple, don't make any decision when's you're emotional. it is very important to step back and think about the long term implications. this is, i don't often get to say it, it is different this time. we've never experienced our rating going down. we have examples of it happening in other countries from aa down and then coming back. first don't overreact. >> let's talk about those examples. this happened to canada in 1993. over the next year, canadian stocks were up 15%. it happened in 1998 in november.

1998 to japan. over the next year, japanese stocks rallied and had a big rally. you know, interest rates, of course, went up. that hurts real people in the economy who are trying to borrow money about it means if interest rates go up, that help some people who are on a fixed income or who are living on interest payments for things. it is complicated and we don't know how this time will play out. is that right? >> i would say yes. the things i've shared with you that are very important is, this is like a long term tax. because out there, it is less attractive to other countries. the reality as long as our economy is weak which it has been, a lot of concern it will continue to be weak. you don't need to worry about interest rates going up. if you have a lot of bonds or municipals, they won't react initially. we have a down day. you might see interest rates go

down. the implications are much more longer lived in nature. this is a big surprise to the folks who haven't been following this but not a big surprise to the institutional investors. a research team has been waiting for this. what i can say for everyone is, the long term implications are that on a relative basis, our rates will be higher than they would have been if we had kept our aaa rating. a lot of folks would like to buy german debt or australian debt

which is aaa rated. but there is very little, in fact no different level of risk to us repaying what we owe. if you have u.s. government debt, you're still in the same place you were with a aa plus as you are with aaa over the course of ten years. the other thing i share with people is, very important that you think about what it means to your investing. the reality is that we have the italian and the european situation which is a much bigger issue for us in the short term and secondly, our own very anemic recovery. what i hope this does is put a firm hand in the back of our government to actually do something and compromise. because the underpinning of what is being said is you can't do this by reducing spending.

your economy needs to also generate more revenues. you have to grow the economy. what i think you saw last week in the decline was a statement about the fact that if you cut spending, you're going to have a slower growth. and if you slow growth, it is much harder to earn your way to a better rating. what we're seeing are the implications of a very soft recovery in concerns that it will continue. the reality is, we all expect a fairly weak market for some time. but there are many good strategies you can have in times like this, too. >> you talk about, those

strategies include making sure you own companies that are the big companies. i keep saying it is the big boring companies with a lot of cash. why aren't they hiring more people? because they're worried about things like this which is why they're being so cautious. what do you recommend to people? >> think about it. downgrading of our credit rating. the democrats are saying it is the conservative republicans, the tea party. the big bludgeon. on the other hand, it can also be a push. because while they are using it politically, while they're using the downgrade politically, they take it seriously, this is an embarrassment. yes, they think it may lead to slightly higher interest rates, et cetera, et cetera. for the u.s. to lose its aaa

rating even to an aa plus, that it is an embarrassment. it can be a push to the super congress that is going to be looking at how to bring down the deficit by another 1.5 trillion. so i think it can serve as both, believe it or not. but in the time between now and that committee gets working, it will be used as a political bludgeon. >> let's talk a little about europe. that is something that joe durant talked about. it doesn't take very long themselves look at futures. they look at what happens happening in asian markets but they stay debt crisis in europe. this is another very big issue. almost as big as the downgrade. it is getting all the headlines in the u.s. >> no. no, no, no.

no, no, no, no, no. no, no. i've got to take issue with you here. >> please do. >> the european debt crisis is a bigger issue than the u.s. debt downgrade. it was expected. it is not going to have a noticeable effect. it is a constant that has become a variable. and it is certainly an absolute that has been changed. but actually business as usual tomorrow. what you have in europe is a fire that is smoldering, in some cases, and heading out of control in others. and if that continues, if they, if the ecp does not get a handle along with the european endeavors, i know what the european commission and others on italy original spain, worry about whether portugal and ireland will need a second bailout, what will happen long term even though it has been put off the agenda for the time being? fiscal union.

within the union. if they don't get a handle on those, everything else, pardon the pun, everything else looks like a tea party. >> ha ha! there you go. richard quest, stick with us. we'll hit a break on that note. on richard telling me no, no, no. he says europe is a bigger issue than the downgrade. we're going to talk to john about this as well. europe needs a bond buying boost. will the european central bank take the risk? futures are down about 2% right now. or a better snack. here, try this. it's yoplait greek. it has two times the protein of regular yogurt. you'll feel satisfied. [ female announcer ] yoplait greek. it is so good. it's pretty good!

the world now reacting after standard & poor's' down grading of the u.s. credit crating. so far markets have opened in tokyo, singapore, sydney. we're watching to what the u.s. markets will do tomorrow. all of the markets have opened lower but they're off their lows. with stock index futures which are really good indicator of what the sentiment is with u.s. stocks, those are down but they're off their worst level as well. only down 2%. the senior correspondent john vause joins me now. how volatile a situation is this? >> there is the expectation that it will be incredibly volatile. especially for the europeans. an indication of how big this crisis is, not one but two conference call for the g-7. france, germany, the united kingdom, japan, u.s., candada,

they put out a vaguely worded statement promising coordinated action to support financial markets, financial stability, economic growth. officials from the g-20 have been talking. but overall, there is a growing anxiety. richard touched on it a short time ago about what the downgrade might mean for europe. especially for the countries which have a high level of sovereign debt. we keep talking about spain and italy. they're ones who are particularly in the firing line of the bond markets right now. what we saw last week is that concern over their position pushed up their costs of borrowing. essentially if you have a bad credit history or a bad credit rating, it costs you more to get a house or a car, the same is true if you're a government. that's what's happening to italy and spain right now. that was one of the big reasons why there was such a sell-off in world markets last week. what has happened over the weekend, the european central bank has said it will go out there and actively buy euro bonds. didn't specifically say it would buy bonds from italy and spain but that's the assumption. what that should is do push down the cost for borrowing for both

rome and madrid. give the governments a chance to get their affair in order. the italian prime minister has said that will happen but hasn't given details. not everyone is happy. the germans in particular are not happy. >> why are the germans so unhappy? >> they're the ones bank rolling all of it. they hate the bailouts. they hate this kind of fiscal, what they may see as irresponsibility on the parts of various governments around europe them don't like the the risk. >> so richard, candy, john, let me start with you, first richard. this is so important, what happens, what's going on here next with with the g-7 issue, and the european issue. what are the big sticking points. where's the progress? if the markets will have a decent day tomorrow, it is because of what happening in europe. >> i have to come in first of all. with a bout of indigestion on what the g-7 statement said. look, you and i, christine, have spent far more years than is honest or decent reading this boilerplate nonsense. there is an entire raft of it tonight from the g-7. i understand that they had to the germans in particular are not happy. >> why are the germans so unhappy? >> they're the ones bank rolling all of it. they hate the bailouts. they hate this kind of fiscal, what they may see as irresponsibility on the parts of various governments around europe them don't like the the risk. >> so richard, candy, john, let me start with you, first richard. this is so important, what happens, what's going on here next with with the g-7 issue, and the european issue. what are the big sticking points. where's the progress? if the markets will have a decent day tomorrow, it is because of what happening in europe. >> i have to come in first of all. with a bout of indigestion on what the g-7 statement said. look, you and i, christine, have vause and richard west and candy crowley about the g-7 coming without the boilerplate

statement and the ecb saying they will move into the bond buying program. i think the question is will they buy italian bonds and the spanish bonds. for the asian markets here, the real question is what is it going to do to the u.s. dollar? is the dollar going to stay weak because there are so many trading partners here with the u.s. what are the big sticking points. where's the progress? if the markets will have a decent day tomorrow, it is because of what happening in europe. >> i have to come in first of all. with a bout of indigestion on what the g-7 statement said. look, you and i, christine, have spent far more years than is honest or decent reading this boilerplate nonsense. there is an entire raft of it tonight from the g-7. i understand that they had to say tonight that if they did not, if they did not come up with a form of words saying that they would do everything possible, its mere absence would be noted. the fact is you have flames licking all around the world in the financial markets. you've got nerves, all sorts of thing. the best they can come up with is a wishy washy statement saying that, a, they'll do whatever they can. one would hope they would. b, that the fundamentals don't

justify the reaction to spain and italy. well, that may be true. but once again, it seem to me that they're living in some sort of parallel universe. what they expect this statement to do, i have no idea. you're seeing the market reaction. you're seeing nervousness of individual investors and that will be the problem for the next few days and weeks. >> you know, here the issue. if you've got spain and italy, if you have the pigs, the portugal, ireland, italy. the whole greece, spain, the problem we've been talking about for a year now, the white house, i would think they would rather us be talking about that than talking about the downgrade that has happened under the watch of this president. >> they do agree with what richard had said earlier which is, when i was talking to administration officials this weekend prior to the show this morning, they said, listen. the story of what's going on with spain and italy. the story right now is about those european markets. not this downgrade.

now they were worried about the downgrade in so far as it was another element. to spoke -- spook the markets. would it pile on and become a part of the snow ball. they saw the european economies as a much larger issue as to how, what was affecting the global marketplace than the downgrade. >> okay. you guys stick there with me because we'll check in with all the reaction in the asian market. hold that thought. we have to come back and check with the asian markets. they're just opening up. we're back in less than two minutes. stock index futures. the futures gauge of u.s. markets. those are down about 2%. dow futures down triple digits. [ man ] i got this new citi thankyou card

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what i think is s&p did was hit a nerve. that there is something basically bad going on. the u.s., the psyche. it is having a much profounder effect than what i can see would happen. >> it will hit the markets? more markets are opening in asia. everyone watching to see the reaction from that u.s. credit

downgrade. pauline live in hong kong. let's start with you. they've been open for seven minutes or so. what are you seeing there? >> we are seeing all the major indices down. it just opened in hong kong, down by about 6.2. the nikkei is down by 1.3. the kospi in sydney also down. so is taiwan and singapore. here is the bright spot this morning. most indices are off their lows. for example, sydney opened down 2% but now it is only down by .8 of 1%. the s and p down grade. it was slightly built into the markets. >> we got those statements that you were talking about with john

vause and richard west and candy crowley about the g-7 coming without the boilerplate statement and the ecb saying they will move into the bond buying program. i think the question is will they buy italian bonds and the spanish bonds. for the asian markets here, the real question is what is it going to do to the u.s. dollar? is the dollar going to stay weak because there are so many trading partners here with the u.s. christine? >> all right. excellent. >> live in beijing, what are you seeing? the same story there? the story we've been hearing across the region is, an initial shock opening a couple of

percentage points lower. and then not so bad after that. >> reporter: the shanghai market opening lower. modestly so. by about 1%. in the context of emerging markets, that isn't a very big move at all. what people have been saying is the s&p downgrade was baked into the markets. for the most part they were expecting to see something like this. and right now the debate is more about whether or not this is short term volatility or what we're seeing is the beginning of a longer term slide.

now, what hasn't been debatable is the frustration on the part of the chinese. there hasn't been any official reaction on the part of chinese government. however, there have been several scathing editorials. the news agency just had one which said really put the blame on washington politics, and u.s. debt saying that washington politicians, politicians in washington should stop playing chicken with the global economy and also, they've been saying that as one of the largest creditors of the united states, china has the right to demand that the u.s. look and review and change the structural problems with its debt. there is a lot of frustration on

their own credit rating to worry about the aaa downgrading of the united states. >> i could not agree more with that i-report. maybe this is a chance for all of us to take a look at our own personal finances could the united states losing its aaa status as a borrower affect you as a borrower? we'll ask an author and finance expert. i'm not doing anything different tomorrow except making maybe working a little longer. i have a feeling you are in the

same boat. yes, i won't do anything different. there is one market we've been avoiding here. and i think it means a lot ultimately to americans. we live in dollars, plan in dollars. how much do i need to retire? what will that dollar be worth? we talked about europe. they're now, the central bank said it will buy bonds. with what? where are they getting the money? we had alan greenspan say, we will never default on our debt. we'll just print the money. we should look now at the gold market which reached a new high a few hours ago of $1697 an ounce. it backed off to the 1680's, now

back to 1693. what it is telling you is all the scared money around the world is trying to figure out, which place is safest? and i have to tell that you given the problems in europe, japan has a debt problem twice the size of our ratio to gdp. i don't think we want to trust china to be the world's currency. so probably on monday morning, you will see that global scared money coming back to the united states. and the fact that it all wants to be here has pushed interest rates down. not up temporarily. let me take this one step further. if we've got the smart money coming here, putting the money on the banks on friday. some large banks said we're paying you zero interest and you

have to give us a fee just for the privilege of leaving your money on deposit. because it is safe here. now don't you think some of that smart money might look around and say, we're getting zero interest but we're in dollars. we want to be in dollars. maybe we should look at some of these big companies. they're paying dividends. they're food companies. they're not going out of business. people are still going to eat. and maybe some of that money in dollars moves into the stock market. there is a contrary wave here. a positive spin for stock. >> here another sort of contrary

way to look at it. big boring companies that do things that you know every day that have been sitting on a ton of cash and not necessarily hiring people. we've been complaining because they're not hiring people. they're sort of the safe harbor in all of this. >> yes, their business will continue. many of them pay dividends. on the edge, they might not be quite as profitable. these businesses aren't going away. america is not going away. we have a lot of people out of work. we have financial problems and we have a government that

doesn't seem to be able to get together and deal with them but america is still here. before you get caught up in this panic of my goodness, i'm never going to go through this again. last time i would sell my stock. don't do that and panic. it might just be the place to be is stocks. stocks, by the way, have a long term track record with dividends included, of beating inflation. if what you fear is the value of the dollar going down, maybe you want to have some and normal diversified way over the long run to your stock market. >> let's talk about the loans that you take out. your home mortgage, your car note. you've heard a lot of very simple analysis over the past few days that those rates are going higher. it is not clear that those rates are going higher. your mortgage rates could be going lower in the near material. if you're in a 30-year fixed rate below 5%, god love you.

you should be. because rates have been very, either political party. it's about the difficulty of all sides in finding, you know, a consensus around fiscal policy choices now and in the future. >> a failure to find consensus landed us in this mess. now the markets will decide what it will cost us. here to help us understand, is chairman of the board of the kanaly trust company. your reaction to what we have seen from asia and stock index futures?

this is a run of the mill sell-off so far by nation. >> it will probably spill over from our week last week here in the u.s. let me say this. what's going on in the equity markets is not a reaction to the downgrade. it is a reaction to the potential for a general economic slow down here, in europe and if the chinese have their way in their inflation battle you could see a slow down there. all the equity markets are correcting based on an assumption we may be seeing an economic slow down not tied to downgrade. >> we had a tough week in stocks. we are seeing that continue this morning. you think it's more tied to a slow down in the u.s., a global slow down, concerns in europe. not what is a historic downgrade of our u.s. credit rating but the real world impact of that will be minimal. this is about a slow down. >> yeah. let me be clear about it.

i assume cnn viewers at home it's news, right, that we have had a big downgrade, never happened before to the u.s. that is news. in financial markets here and around the world this was expected. this was telegraphed ahead of time. when you have debt to gdp ratios here and in europe at unprecedented levels this is what happens. the viewers should understand that a aa rating is still a very good rating. it's not pretending we are not going to make payments. in fact, the structure of u.s. debt is far superior to european debt. not so much of our debt is coming due too soon. it's not like we have a debt payment problem. we have political problems, right, about how to solve the debt ceiling but our issue is one of changing a spending one of changing a spending habit we have been into for 30, 40, 50 years. it's not something we'll change

overnight it is a political workout. we as a nation have to decide how big a role government will play and how much we can spend. >> drew, let me ask you -- >> what's going on there. >> we have what could be -- i mean, frankly treacherous politics as we head into december 23rd when this super committee, this bipartisan committee has to decide how to cut another $1.5 trillion. what are you expecting for how complicated that could be for markets? i mean, every now and then you get some kind of reaction in markets to political things. do you think it could be tough going? >> yeah, it is. you just don't know. markets discount good news and bad news but they can't discount what they don't understand.

you can't understand the politics of what will unfold for a while. i don't think anyone understands how specifically this will work. what markets do know now is if there is a concern about financial markets around the world, chances are the u.s. bonds is probably the best place to be, the most liquid, the deepest market, the place where you can park several billion overnight without worrying about being money good the next day. it's an interesting confluence of situations, isn't it? we have a downgrade but we are probably the best possibility for parking money. >> i know. >> i wouldn't be surprised if interest rates didn't go down in the face of the downgraded debt. that's how deep the situation -- for viewers to look at things, at least from our perspective at kanaly, we would be watching europe first. we would be watching european bank stocks. we would be watching the asian markets, specifically about the

slope of the growth rate in china going forward. we would be watching earnings impact on our stocks here domestically. that's the order of thinking, the aaa to aa thing is not as far up on the worry list presently. >> drew, thank you so much. really great to talk to you. we'll talk again soon. wanted to take a look at the futures board. the dow is slipping back a little bit more. it's down 211 points. dow futures. s&p 500 futures. the s&p is the broader gauge that your 401(k) is tied to. it's down less than 2%. i want to go to candy and richard. richard, what we are hearing here, he says the downgrade has no impact in the markets. >> he's absolutely right. it won't have an impact in the market. but john mccain summed it up

today when he said, is anybody seriously saying that the s&p decision doesn't tell us that there is something wrong with what's happening in the u.s. economy at the moment? i'm paraphrasing senator mccain. that's the important of the downgrade. one thought to take away is this -- how do the regulators, the policy makers get ahead of the curve? they have failed to do so time and again. particularly in europe. that's what the markets are looking for. the sort of leadership qualities that let them say this crisis is finally under control. >> you know, candy, a source close to s&p told me they expected only mild real world impact from this. that's what we have been hearing from other folks as well from this downgrade. there are other things that could hurt you like the fact that there aren't jobs in this country, as many as we would like. you still have a lot of problems in the economy overall. you know, the fact that drew

kanaly is saying the downgrade won't affect stocks must make the white house happy. >> yes. it's what they said all weekend long which is there is a difference between whether or not we are credit-worthy, which we are, and whether or not the economy is in trouble globally and in the u.s. they think those are two separate issues and agree the economy doesn't look good. in fact, one of the things somers said and he was an architect of the stimulus plan, a lot of things the obama administration put in place. he is now a former official, but there when they were doing the

planning. i asked him. i said, you know, now we are seeing headlines about double dip recessions. he said, it's a possibility. he thinks the u.s. needs to pump more money into the economy, become the employer of last resort and put more stimulus money in. i don't think there is a political will with the republicans or democrats to do that. >> he could call up the tea party caucus and say, hi, i was wondering if we could spend more money we have to get the economy going again. another stimulus is almost unheard of. richard, would it be the fed to do that? >> well, look, everybody's a bit busted. monetary policy is out of the game. qe-2 proved -- i'm not sure what it did prove but it didn't work as they hoped. qe-3 and it would create huge problems for the fed in terms of unwinding the balance sheet and what it does for the monetary policies. fiscal policy is tied up with congress and clearly isn't going anywhere while the tea party carries sway. in that scenario, the grid lock is total and that is where s&p comes in and launched this

grenade. >> final thought from you, candy, about whether we'll see a kumbaya moment and have a supercommittee that easily agrees and says, oh, we found $2 trillion more for you. >> yeah, right. >> that will make everyone happy. >> key word "easily." no, they will not easily find it. honestly, i don't know. congress does tend to come through under two circumstances. one, when they have run out of time and, two, when their back is against the wall. they tend to get something done. you can always tell because no one's happy when they do it. they all hate parts of whatever it is. yes, you can say yes, the s&p was a smoke signal. they've got to do something that this super congress has to come up with solutions that congress