the financial market is an inkrezably powerful level to affect behavior because it is so alarming to the people of the world when they watch the net asset vault of all productive assets in a day lose 4% of its value. you're in a multipercentage decline in the overall value of all assets at a time when we could be releasing tremendous prosperity. >> none of our viewers are doing to leave because you're the man to explain all of this. so take over. >> thank very much and for the opportunity to use some of your time to get into this at market closes. nice to see you. breaking news at this to hour as the u.s. stock market, closing bell at this hour, seeing a day that saw investors flee the market. you know my name. i am dylan ratigan. let's get after it. stocks drops 4% on the day, concluding their worst decline in two years' time. think about the past two week. this is less about a reaction to a specific bad economic report

or debt fight, although we have plenty of them. this massive sell-off is much a result of the global perception america has tremendous challenges with employment, with prosperity. by the way, we also have tremendous resources to solve them, but they are political structure at this point, it's so lacking in integrity and shared purpose that it is too weak to actually address the problems. to our benefit in america, the same indictment of character and process applies across western europe. in fact, they may be worse than us, which might be our best hope for the short term. the reaction has been in the making for two weeks. the dow down nine of the past ten days as they have observed the carnival of american additionmaking s&p down eight of the past nine. the markets in effect shedding risk saying i don't know that the prosperity of employment and production is likely to manifest over the six, nine, 12 months ahead and as such i think i want a little less risk, a little

less invermts. after two weeks watching d.c. politics up close, a tipping point after ten days of pressure, selling, selling, selling, finally it let's go. with us on the phone, president of fleckenstein capital. years ahead of time traded through it but a consistent voice on the need to restore xaept in this marketplace to avoid the nonscenes we're still navigating. bill, do you think market's reaction is appropriate? >> well, john, first of all, nice to be with you again. >> nigs ce to talk to you i. th what you were explaining to martenmart en en and what you just said is accurate. folks need to step back and recognize that this reaction that happened today or that has been sort of building here was

not a reaction to the debt ceiling. we've done that dance many times before, and, you know what they did was, you know, next to nothing as usual. maybe this was even a little better than the last time we did this. as you said, this was -- we have broken financial system and sort of capital broken in this country for some time. in 2008 and 2009 the crisis was the banking system was tiering, and we and europe gave their banking systems a do-over as central banks and government stepped in. now what's happening is it's a sovereign debt problem. it's not about the banking system so much. it's about the governments that are behind the central banks, and in europe, we have the situation where they can't quite get a bailout going, as much as they'd like to, because of the mechanisms of the esfs and all that, and over here ben stopped qe2 and positioned people to believe he has their back even

though he can't fix the problems largely createed by the feds and bubble blowing in the past and now a gun to his head and the markets are saying give us more qe3, we're going to melt down by wednesday. unfortunately, they're going to bring more of the same medicine and until the markets take away the printing press from the fed so that the politicians in washington or the new ones we send there next time when we finally get fed up with the people not doing their jobs, the markets are going to force the politicians to come to grips with these problems you eloqu t eloquently scribe every day on your show. health care is broken, we can't afford entitlement. doesn't matter how want to solve the problem, we have to admit these things and solve these things. if if i made you king, you could find a commission, get it settled up in three months' time. political with we don't have the nerve to do it because our political system is out of control. just like the fed's out of control.

>> how do you resolve, how do you begin the process of resolution knowing that you owe more money than you have, that you have this corrupt relationship between the financial system and the government that you have? that the markets and the world is concerned that future employment is not going to be there, future prosperitisy threatened because of what we're discussing and how do you use the incredible incentive that the threat is, the incredible opportunity that that level of problem-solving represents to compel a real resolution as opposed to insane sort of single issue crusades to annihilate spending on this or annihilate spending on that without actually engaging in an understanding of what of the long term goals are and how it all fits together? >> well, unfortunately, that's a very difficult question to answer. i think the pressure has to get intense enough that the people in washington are actually

terrified. we saw a little taste of that when we wound up getting the t.a.r.p., and, you know, those other bills. and -- and i guess the pressure hear to get intense enough so -- that the people that keep passing the bills who don't know anything actually scratch their aides andy is, what's the problem? where they listen to a guy like ron paul they love to hate because he tells them the truth and is worried about the long-term problems, not the problems between now and the next election. so unfortunately, you know, markets, which make people money, also sometimes take money away and they discipline the politicians that you pointed out, and it's going to take more pressure from the financial markets, i'm afraid, to get people to focus on these issues. i don't know that they'll be a magic bullet. has the catalyst will be which two thingless come together any more and that you and i could be talking about the problem as we have for a long time, why, in the last two weeks did it

finally happen? well, it was just ready to. we have to hope somehow we can spawn spontaneous combustion in washington, but i think it has to get uglier first. >> yeah. i don't necessarily disagree with that bill. i wish it wasn't the case and i appreciate you grabbing the phone at the end of the market. a pleasure to have you back in this conversation on this program. and to benefit from the your insights. thanks for the time, bill. >> i'm here any time for you. let's bring in former pennsylvania governor ed rendell, who full com prehenlds the conversation we're having and an shared active value solver in government, in pennsylvania, understands the process of having a north star and shared with groups of people to work with integrity to pursue those north stars. governor, how is it that we -- how much pain do the markets have to bring down upon this government before they get it? >> probably no level of pain can

do it before the 2012 election. it's pitiful. had you hear from the republican leadership that they're not going to put anybody on this super committee that participated in the gang of six on the simpson bowles commission, the only group that's really tried to roll up their sleeves and have real discussions about what we need to get the nation's financial picture and economy under control, when you hear that, you know that the next 16 months are going to be wasted. wasted. i'm not sure we can afford to waste those next 16 months. >> let me ask you a question, though. assume by political analysis, history information, you're more or less correct. let me introduce a new variable, however. the stock market was down 500 points today. the bond, absolutely, was a safe haven. the movement and decline in the bond, ten-year bond to 2.5%, because everybody was getting out of commodities, getting out of stocks. getting out of anything that was perceived to have any risk because they're concerned about

the forward prosperity of this country? i get a few more days like this, i know it will snap back a little tomorrow, but if you start to get a financial market that is leaning on the economy. people's 401(k)s and the political environment, remotely the way it did in 2008, how is it possible for either democrats or republicans to sit there arguing, you know, we won't play or we want to go on a bus tour? >> well, the problem, dylan is, there's no certainty among politicians. even the good ones. even the tom coburns and mark warners. no certainty in the market's message. assume for a second there's a sports writer in philadelphia has a column called "if i were king of the world" and he says what he'd change in the sports world. make me king of the world for a second. i would basically make the gang of six, the senate representation on this committee. and let's assume the gang of six did its work, and we put together some long-term

entitlements reform that saves significant mon on entitlements and does, yes, even cut some benefits and we put together a revenue package that makes sense, that is consistent with the data and the fact-finding from the last 20, 30, 40 years? we know what works and doesn't work when it comes to producing revenue. assume question all of that. can you guarantee us that the market's going to turn around and do well? >> you know what i can do is, i don't know about doing all that, but i can tell you, whatever you do drives an increase in employment, and increase in investment in america and an increase in production in this country, i can guarantee you the stock market will go up. so whether your policy initiative does that or not is a matter for debate or mine or anybody else's, i guarantee you, if we are working together to create investment in this country using the tax code, using trade policy, using a bank reform and bank policy that drives that level of investment,

that, that actually results in hiring prosperity and job creation i can assure you the stock market and 401 askes, yes, will go up. >> i think that's correct, but i'm not sure that all of those thingless have a short-term effect on job creation. we've got to listen to simps's bogue zipsen bowles and invest's in when debt reduction is the key, find ways to invest in things we know will produce good paying jobs and help american manufacturing rebound. you've heard me say it before and you've been a proponent of it. right now the best thing we can do for the job picture in tis country is dedicate ourselves to a long term, five, ten-year prime minister to reform and revitalize this country's infrastructure and make us economically competitive. >> and how about funding that by taking the offshore profits that are -- >> absolutely. >> bring them back onshore. we talk about this i. think you

could do federal government initiative. you could do a $ 200 billion a year program coming from the federal government. the rest come from state, local and private investment. so if we repatriated that money, at 15%, half of -- less than half und are the tax rate, producing $210 billion. start us off the first three years of instlaechlt we need. bingo. >> but i guess -- >> bingo. >> the issue. i want to bring the panel into this, governor. whether it's you and i talking on television or a variety of various smart, hi guys, there's jimmy, karen and susan. no shortage of ideas as to, we have the idea we're discussing now. many others. but there is a shortage of a sense, jimmy williams, that the government can take any set of ideas and integrity resolve a debate using those ideas to actually pursue a share purpose. >> well, first and foremost, the government doesn't normally pro-act. the government reacts. that's pitiful but that is our government.

the question is -- >> it's time to change that. >> i agree, governor. couldn't agree more. live, i would love to see the president of the united states introduce a bill when they gets back from chicago that says it's simple. keep personal income rates exactly where they are. lower corporate rate to 20% and get rid of everything else. you don't guess depreciation, nothing eggs. we're going to do a workers project, have like you just said, hundreds of billions of dollars worth of investment to rebuild schools, impose a 1% tax on billionaire, et cetera. >> that's a plan. >> i get it. karen finney, the question is not are there good plans. >> right. >> it's evident there be many good plans of a wide variety of persuasion and idea. the market is not indicting our plan. the market is indicting our ability to discuss plans and implement things. >> exactly right.

dylan, i heard you talk about this earlier today. the american people have been saying it for weeks and weeks and we're weeks and the market saying it for weeks and weeks and weeks when they said we are losing confidence they weren't talking just about the mechanics of implement this cut and that forth. it was the back and forth hostagetaking. soerp, got to put some of this on the republican because i do think democrats were more likely to compromise. >> susan's here and will take care of that side. >> okay. the point being, when you see freshmen republican members of congress who say, you know what? let the thing go over the edgewe don't care. that's not going to instill confidence that people's going at the end of the day is to actually implement something. i think that, whether or not it's, you know -- this president back from chicago. the point is, we have to prove that they can actually get it done. you know, take one of the many ideas you guy was just talking about. just get it done, just to show, you know what? we can actually. >> get something done.

>> go ahead, susan. >> i was going to respond to the political comment. you brought up a bigger issue that's more important. >> appreciate it. the audience gives you full respect for not getting suckered into the prior conversation. >> you mentioned people having ideaed, what does it take? what we don't have is leadership to do it. we don't have individuals willing to charge that way. right now, politicians are too afraid. in congress, they only have two years. after the first six months, they have to start in mayou see a little bit more the leadership. >> what aboutmoreaderip on e na but not that much. republican or democrat, they wi -- the country turns to their president for leadership. and that's where they need to see it coming from. >> susan, what -- >> hold on, karen. i'll keep you the next block. one last word from the governor and i'll bring everybody back. go ahead, governor. >> dylan, i think susan and

jimmy are both right. i think this is an area where the president needs to step up. and he needs not to do politics. he needs to do substance, and he should do substance, because the best politics is good government, and people want their president to lead. even if they don't necessarily agree with it. if it's a plan that's workable and can get things done, i think people will appreciate that. i think the president should outline a bold plan. i love the infrastructure bank. i think we need the infrastructure bank. but it only helps us in private dollars in. private dollars aren't going to repair up a the thing we need to repair because many can never have a return on investment. >> not to mention the tax code and -- >> absolutely. >> the loopholes, jimmy williams had a narrative on. >> the president's got to come in big. we talked about the grand plan. if we're going get the economy straightened out, if we're going to do this, the president should put on the table his big vision, the big plan.

but he also should have a big plan for creating jobs, because in the end, the way that you solve the government's deficit problems is produce revenue. produce revenue. that's what happened in the clinton years. we produced revenue up the gazoo and it worked. >> bottom line, referendum today with the sell-off, biggest we've seen in two years over a ten-day period of time, the stock market saying, i am skeptical of the american government's ability to do that. >> think of what happened, dylan, if the president essentially gave us his version of simpson bowles and at the same time an agreasive jobs program -- >> listen, i feel we have to go to 1945 and do a comprehensive look at prosperity plan, roll it out and get after it. you guys stick around. we do have to pay the bills around here. we've got a wonderful conversation, ai