hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo, today coming to you from the world's economic forum in davos, switzerland, where leaders in the world of business and politics have gathered. we have a jam-packed show for you today. my one-on-one discussion with former president president clinton. we'll talk about the global economy, growth in the united states and american ingenuity. i'll talk with one of the most powerful central bankers in the world, ecb president jean-claude trichet on the survival of the euro, the region's debt crisis, and what it means to the u.s. and that's just the beginning. the "wall street journal report" begins right now. >> this is america's number one financial news program, "the wall street journal report." now maria bartiromo.

>> here is a look at what is making news as we head into a new week on wall street. the u.s. economy picked up steam in the fourth quarter of last year, although not as much as analysts had expected. the gross domestic product, the broadest view of the strength and size of the american economy, rose 3.2% on an annualized basis. consumer spending was the strongest it has been in more than four years. for all of 2010, the economy grew at 2.9%, the biggest gain since 2005. the markets hit some big numbers this week. on wednesday, the dow touching the 12,000 mark for the first time since june of 2008. then on thursday, the s&p 500 hit 1300 for the first time since august of 2008. but on friday the markets came down. the federal reserve's open market committee met this week and left interest rates unchanged. it also said that the economic recovery was strengthening, and that it would continue its $600 billion bond buying program. it's been a busy earning season

among dow components. mcdonald's fell short of expectations, hurt by higher commodities prices. verizon was in line as was boeing while united technologies, procter & gamble and at&t came in above analysts' expects. yahoo surpassed expectations but offered weak guidance. netflix powered past earnings expectations while microsoft and amazon.com beat analysts' expectations. some of the smartest people in the world gather here at the world economic forum annual meeting, and two of them are with me right now, harvard professors ken rogoth. gentlemen, great to have you on the program. ken, when we spoke a year ago, we were talking about recession. we were talking about getting out of it, and we weren't certainly through it yet. how are things today? >> a year ago, there is no question the mood was relief. we didn't have the great depression. i think now the mood is shifted much more to exuberance. my gosh, i'm making money.

i'm making a lot of money there is a bit of lip service about inequality, but that definitely feels to me the theme. >> one has the sense that if you're a ceo in a big international corporation, things are looking a whole lot better. and that's generating euphoria. it's also the equity factor. look at the equity indices and everything looks fine. my concern is leaves an awful lot out of the count. whenever i feel the mood here is euphoric or even complacent, i get nervous. big signal is that the bond market is the sleeping monster as far as the united states is concerned. it actually stirred while we were here with respect to japan. japan got a rate downgrade. >> is there an overarching theme here do you think, ken? what are people talking about? >> i suppose there is an overarching theme we're doing well instead of emerging market as are doing better. and emerging markets are numbers, the exuberance there is an exaggeration again whenever you see someone be a darling

here, it makes you wonder. >> i mean i'd say the big theme that i don't hear that people don't seem to understand is this is a recovery, but it's not a great recovery. you know we're growing, but we're just back to where we started in the united states. >> now you both brought up the debt. the deficit obviously is a major concern. the nonpartisan congressional budget office saying the budget deficit in america will hit $1.5 trillion this year. neil, do you think america has the political will to address this? >> well, there is a little sign of it. it's a little better than it was 12 months ago. for example, the most responsible-minded politician in the united states, paul rand, is now in a position of real influence which he wasn't before. he is about the only politician i've heard talk reason about how much needs to be done to bring the u.s. fiscal situation under control. you just mentioned the cbo. the congressional budget office said before christmas to stabilize the debt to gross domestic product ratio in the

united states you would have to increase all federal taxes by something like 12% or cut all entitlements by that much. the imf is a similar scenario. only japan is worse than the u.s. when it comes to the magnitude of the fiscal adjustment required. and yet virtually the same week that the cbo said that, the president agreed with congress on another $900 billion of red ink, and the deficit is third year running 10% of gross domestic product. >> what about the economic situation now in the u.s.? we got the gdp report out on friday. it came in at an annualized rate of 3.2%, ken. what does that tell you? >> it's a little under expectations and reinforces the notion we're in a solid recovery, but it's not fantastic. it's not exuberant. and it will probably dampen the mood a bit. i do think, though, that compared to a year ago, the floor is not likely to fall out from under us any time soon. >> if you're looking for your house to recover in price, it's

off because remember, that's where this crisis had its origin long, long ago in 2006-2007. that's another reason why i'm certainly not getting the champagne out to celebrate a robust recovery. >> meanwhile, in the midst of all of this, ken, the markets have been rallying. on wall street you have the dow jones industrial average hitting 12,000 this week. in fact, two milestones, important milestones this week for the markets. the dow at 12,000, the s&p 500 touching 1300 for the first time since 2008. is that symbolism? what does that tell us and why are the marketing seemingly trading ahead of fundamentals? >> well, i can't explain it easily, but it is pretty typical after a deep financial crisis that within a few years, stock prices, equity prices come back, not just to their previous highs but even go above it, where as housing, as neil mentioned, a decade or more. and maybe because it's low interest rates. maybe because it's people don't want to invest in houses where they just were. so i think it's not out of line what patterns we're seeing. japan was different.

but lots and lots of other cases we have seen. i wouldn't be surprised to see more. >> i agree with it, but i would add one thing. remember, the u.s. stock market indices global index, because the corporations closest there have massive exposure to non-u.s. consumers in the emerging markets. they're doing great that is not a good index for the performance of the u.s. economy. it tells you almost nothing really about what is going on in michigan. >> guys, thank you so much. we so appreciate your time today. coming up on "the wall street journal report," europe's central banker jean-claude trichet with me, telling me why he looks to the u.s. for clues on managing the diverse economy of 17 nations. also ahead, president bill clinton in davos talking with me and talking with global leaders about creating jobs at home. as we take a break, take a look at how the stock market ended the week. ♪

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the european debt crisis has sent fear around the globe and threatened the pace of economic recovery in 2010. here at the world economic forum in davos, i sat down with jean-claude trichet, the leading central banker in europe, the president of the european central bank. i spoke with him about today's economy in the $14 trillion eurozone. >> if i take the year as a whole, the 331 million people we were since the start of the recovery a little bit surprised on the upside each quarter. and that is not certainly reason to claim victory. we are always very cautious, very prudent, but all that we saw in now, and the most recent pmi we have seen are confirming as a whole things are a little bit better than expected. >> but let me switch gears. you have suggested that you

would be ready to raise interest rates at some point. is this right? >> i have said that we had delivered price stability over the past 12 years, as i have told you. and that having been credible in the past, we were credible in the future. the future expectations are in line with our definition of price stability. close to 2%. >> what is most concerning to you on the inflation front? >> well we have at the present moment very clearly increasing prices of commodities, particularly of oil, threats of increase of prices in food, and agro products in general. that is a phenomenon which is by nature global. so we have to take that into account and avoid second-round effects. of course, the first-round

effect we cannot void. we eare not the master of the price of oil. well are not the master of the price of the various agro products. but what we can do being very alert is to avoid the second-round effects where all other prices are slipping in. >> mr. trichet, let me ask you about the euro, because of course there is debate throughout wall street and around the world about the survival of the euro. and of course it has been tested. you are committed to keeping the euro in place, yes? >> well, i mean, i'm used to this remark because, you know, before the euro was created, a lot of observers were suggesting that it was impossible. after it was created, a lot were suggesting that it would be a technical failure. and even years afterwards, it was suggested it was absolutely impossible that this currency would be credible, and that monetary union will deliver price stability. we have delivered price stability over the first 12

years of the euro. for now we're 331 million people at the level of our definition of price stability, and better than in the previous 50 years. with the various economies and various central banks that are making up the euro. so yes, madam, the euro is there. >> how difficult has it been to manage the various differences in terms of the economic mentalities throughout the eurozone? >> well, i have to say that of course it's an immense economy, like the u.s. the u.s. is an immense economy. and we have approximately the same size in terms of population. i always looked very carefully to the u.s. and compare the diversity in the u.s. and diversity, and i trust it is

probably a common feature of the u.s. and the euro here that you have significant differences on state-to-state basis of country-to-country basis. for instance, golf, the various differences between golf in the states. the fastest growing state and the slowest growing state in 2008 and 2009 was more the same. the difference between the fastest and the slowest point. so how can you run a vehicle where you have countries that are going fast and countries that are not going fast. and they say well, it's a program that we all have. >> my thanks to european central bank president jean-claude trichet. mr. trichet was just one of the many people i spoke to here in davos about the global economy. in fact, there were heavy hitters from the banking industry as well, and the topics ranged from risk tolerance to investing in asia, the rise of

china to america's economy and when it will get going again. here is what they had to say in their own words. >> the engine of growth has to be the private sector. and it's banks and corporate working together to free up that $2 trillion in cash sitting on corporate balance sheets. and to your point, the chief executives having the confidence to invest and hire in the u.s. >> china prices have gotten very high. you know, in china there is no shortage of money. i don't know what people around the world who watch this program would think, but there is no shortage of money in china, and there is a lot of optimism. in india, there isn't so much money around. growth rates are close to the same. >> individual side, the activity continues to pick up. we released a survey about affluent u.s. investors. and they're still relatively conservative. but as you have seen the markets picked up, the activity has pick

up some. but it's still not to where it will be as people get more and more confident in the economy. up next, a report from the oval office to global citizen. former president bill clinton and his plan to spur job creation. >> there is enough money in american banks and

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switzerland. since leaving office, president bill clinton has focused on a whole host of issues through his clinton global initiative. i spoke with him at the meeting here in davos, switzerland at the world's economic forum about his top initiative today, job creation. >> in the united states i think the biggest problem we have is to try to accelerate the rate at which we're creating jobs. so where we're going now, it will take six years to recover the jobs that were lost in the recession, not counting the five million or so we'll have to generate just to keep up with population growth. >> and you're going to be launching cgi america, basically a job summit? >> yes, i am. it occurred to me that not just american employers, but international employers with operations in america ought to be brought together with banks and others. you know, there is a lot of money in america now. the banks have over $2 trillion in cash uncommitted to loans.

corporations have almost $2 trillion, right at $2 trillion there is enough money in american banks and american corporations to end the global recession if we could figure out how to get the right mix of supply and demand of investment capital properly directed. so i just thought, you know, unemployment is still so persistently high in america. it's really higher than the numbers because so many people have given up looking. that maybe we could get together and come up with some good ideas. >> and of course you've been in touch with business people throughout the years. >> i have. >> with cgi in terms of bringing that money and putting it to work. how worried are you about the states and municipalities? as you know, there is a new sort of emergency being talked about, and that is the possibility of bankruptcies, defaults on a state level. do you think that's a possibility? >> sure, i do. i think there has been a lot of misinformation out there, a lack of understanding among the american citizens about the nature of the so-called stimulus

package. only about a third of it was used to stimulate new jobs. 36% was a tax cut in a dire emergency just to get people spending money. and about 30% was aid to state and local governments to stave off defaults and to keep them from having to lay off teachers and health care workers. therefore, unless the economies and the states localities have big unserviceable debts picked up, there is a chance of default. but the collateral costs could be staggering if overcrowded schools lose more good teachers, if municipalities lose their credit rating and can't finance basic infrastructure and expansion. so i suspect in the next 60 or 90 days the key people in washington and in state capitols all across america and in the private financial houses trying to figure out is there a way to

restructure local debt, who is really at greatest risk of default, can you refinance their debt in a way that makes economic sense. that is will it be able to repay it. meanwhile, those of us who are not part of that world should all be focused on accelerating the rate of growth and employment. >> one issue for american business has been selling to new markets. and of course the president of china in town just last week. do you think anything came out of that meeting? are the markets in china truly open for american business? >> no, but we can penetrate them better. if you look at the germans, for example, and germany is more export-dependent even than japan, they have maintained an unemployment rate 2% lower than america's. through this whole mess. and one reason is -- not only the reason, but one reason is they have done a better job in penetrating the growth markets, including china.

they have studied the markets, studied the opportunities, looked at their own capacity and really worked at it. and the chinese have let them in. i think that going to growth is important. but let me also remind you i think there is enormous potential within america to increase growth in the areas that weren't doing so well before the recession started. and every poor neighborhood in every city in america, most people are working. most people have incomes. most people get a check every two weeks. and there is a lot of underinvestment in america in what i called my term new markets. and i still think that i would like to see congress take a look at this legislation we passed in 2000 and maybe upgrade and expand it to increase the incentives of the private sector

to invest in places in america that plainly have enormous growth potential that are nowhere near tapped out. i think there is another source of jobs there. >> my thanks to president bill clinton. up next on "the wall street journal report," we'll take a look at the news this upcoming week that will have an impact on your money. and then what does it take to get the in, in davos. we'll take a look at the numbers behind the economic forum. fo. well somewhere along the way, emily went right on living. but you see, with the help of her raymond james financial advisor, she had planned for every eventuality. which meant she continued to have the means to live on... even at the ripe old age of 187. life well planned. see what a raymond james advisor can do for you. at usaa, this is our executive committee. this is our advisory board. our field research team. and our product development staff.

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for more on our show and our guests, check out the welcomes, wsjr.cnbc.com. and for more on my time in davos, go to my blog, investoragenda@cnbc.com. i hope you will check it out. now a look at the stories coming up in the week ahead that may move the markets and impact your money this week. we get reports from mobile as well as mastercard. tuesday is the first of february. automakers will report in total sales for the month of january. and then on friday, we find out how many jobs the economy has lost or gained in the monthly employment report. finally, today is the davos annual meeting worth of admission? well, the "new york times'" deal book crunched the numbers on the costs of being a davos man or woman. the basic membership plus one ticket runs about $71,000. access to private sessions are

increasing the number of guests ups that fee. the priciest strategic partner level runs $527,000 annually. it includes car and driver access to the conference center, and it is open only to the 250 largest companies in the world. quite an event. that's the show for today. thank you so much for being with us. from davos. my guests next week, hope you'll join me, bill and melinda gates of the gates foundation will be with us. each week keep it right here where wall street meets mainin [ alarm clock buzzing, indistinct conversations ] [ female announcer ] important events can sneak up on you. oh, i am not ready. can i have a couple weeks? [ female announcer ] but with yoplait light's two week tune up, you could be ready. you could lose 5 pounds in 2 weeks when you replace breakfast and lunch with a fruit, grain, and yoplait light. betsy bets. you haven't changed a bit. oh...neither have you... sean.

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