pescadero, we hope you enjoyed your stay in wine country and we'll see you again next time. for more information about today's show, log onto our website, inwinecountry.com. hi, everybody, welcome to the wa"wall street journal rep " report." i'm maria bartiromo. what will the new year bring for the economy and your money? politics and policies that will affect your portfolio. will we finally be able to stop talking about europe? from clinton to chopra, the best of my interviews this last year in politics, movies and entertainment. the wall street journal begirep bens right now.

>> all that and a lot more coming up, but first let's get with bill griffeth. he's got a look at headlines this week. >> here's a look at what made news as we head to a new week and a new year on wall street. wall street ends 2011 just about where they started, ironically, despite all the volatile activity we saw this year. the dow industrial average had the best performance this year, up by about 5%, followed by the s&p 500 and the nasdaq, when all was said and done. turmoil and uncertainty in europe, although the u.s. economy did show signs of improvement and growth as the unemployment rate fell and the growth grew during the year. on-line shopping was on fire this year, consumers spending more than $35 billion between november 1st and december 26th on line. that's an increase of 15% compared to last year. elsewhere, pending home sales

rose to their highest level in 18 months, climbing by more than 7% in november, much higher than expectations and yet another sign of improvement in the housing sector partly due to pent-up demand. but it was a blue christmas for sears, the retail giant announcing it would close between 100 and 120 stores, both kmart and sears stores, red light ta-- the retailers sufferg from poor sales and a strong lack of identity with consumers. marking another new year, we are taking the time now to look back at the events that shaped our lives and livelihoods in 2011 and will shape the road in 2012. peggy noonan is a columnist for the wall street journal and bill gross is the founder and co-cio of pimco. peggy, looking back at this

eventful year of 2011, protest movements, debt concerns, a credit downgrade for the u.s., the opening moves for the 2012 election, is there a story of the past year that you think has the most significant impact over the long term? any game changers, peggy? >> i'll tell you what's on my mind. it's not so much a game changer but a large theme which has played out in the world and in our society in the past few years. i think it sort of marks the feel of the 21st century as it begins and we're still at the beginning. and that is the fall of establishment throughout the world. and the fall of structures that we had come to rely on. there's what's happening in europe, there's the arab spring, there's the end of governments that governmental situations are set up that had existed for many

decades. and the rising up of people in a sort of incoate force that will define itself and become itself in time. i guess i'm saying this was a period of the most extraordinary instability. >> bill, what about you? what's the most significant, as you look back, in terms of the big events? >> i think peggy has a good theme there, the fall of establishments, and i would suggest that they tend to weaken or fall. ultimately when economic growth and when populations and their citizens are more than displeased, and what we've seen in 2012 is an extension of global insecurity from the standpoint of growth and an extension of global delevering from the standpoint of debt. what the world is going through, maria, is simply a rebasing of credit markets and a realization that you can keep growing by assuming more and more debt, and

does that apply to the arab spring? not necessarily, but it certainly has repercussions throughout the world at the pace at which the world grows and therefore the ability for its citizens to have happiness. >> and, of course, peggy, the tone of debate among leadership has been fairly antagonistic this year. what's your take on the president's relationship with the republicans in congress, the language on both sides? >> sometimes i think the essential problem with the tone of debate among the democrats and republicans in a purely political context is not that it is uncivil or too hot but that it is sort of irrelevant. do you know what i mean? to the actual concerns and the actual problems that we are all sensing as we read the newspapers and go on line every day. i think mr. obama did an interesting tonal, i guess, thing this year when he apparently decided in the past few months that his campaign

theme will be, in my view, an essentially divisive one economically in which there is the rich versus the poor and he is standing for the poor. he is positioning himself in a certain way, and it is not a come, we are all together way, it is a dividing way. and i think that will probably have implications down the road. >> bill, we talked more about income inequality this year than ever before. is the american lifestyle sustainable? what could be done to make people feel more secure? >> well, the american middle class, maria, has been declining in terms of its effluence for a long time, since the 1980s. the wages for the middle class has been on a downward trend, and it's only now that they're beginning to sense, yes, we see that in terms of wall street,

p -- wall street protests and the like. the fact is that capital has benefited labor in the past 20 years, benefited with lower interest rates, benefited to buying investments at cheap interest rates, and to the extent we have imbalances now between corporate profits relative to record levels of gdp and labor and wages which are declining percentages, then i think we'll have significant problems in the future. these imbalances take a long time to correct, and it will be dependent to a considerable extent in the elections of 2012 and beyond, but we really have a labor versus capital situation which is only now becoming recognized by the american public. >> both of you please stay with us. we'll take a short break on the "wall street journal report" and have more guests on this new year's day weekend. there's you and i.

take a look at how the stock market ended the week. back in a moment.

welcome back once again with me on this year's weekend show, the "wall street journal report" investment officer phillip growth. let's get into the economic news. how would characterize where we are right now in terms of the economy going into the new year. >> the u.s. is looking better. perhaps 3% growth rate in terms of gdp, perhaps 150 to 200,000 jobs per month and that's a decided difference relative to the midyear. we're doing better, but i would caution in terms of 2012 and the

united states because of the situation in europe and perhaps the situation in china. the rest of the world is vulnerable, certainly from the standpoint of various countries and too much debt and the explosive and implicit policies that are taking place there that may or may not produce growth over the longer term. in china we have a potential problem in terms of property and the commonsense cal question as to whether a country can continue to grow 8 to 9% year after year after year. coming back to the united states, we depend upon those areas for exports, we depend upon those areas for financial support, and ultimately it's a one global economy that in 2012, i think, will certainly slow down not to a recessionary level outside of euroland, but certainly much slower than what we're seeing here in the fourth quarter in the united states. >> peggy, how does the soft economy in the u.s. look to other countries around the world? does it change the perception of

the united states? >> how the world views us, i am certain, is affected by what's happening with our economy. it is one thing when you are, as we were for, say, much of the 20th century, the biggest, strongest, richest fellow on the block who could teach you how to do it. it's another thing, and it takes us down a peg in the eyes of the world, when you no longer seem to know how to do it. you're no longer schooled in the world. they're looking at you and saying, hey, you're america. the streets were paved with gold. you can't pay your bills. what's wrong here? that takes us down, of course, but oddly enough, i find my concerns are greater with regard to the american culture, with unemployment so high, with people sort of falling into a certain slough of despond, with

a lot going on in the middle class and working class america that's not so good. those things are affected by the economy, too, and they are increasingly a concern for me. >> so peggy, can the republican line up and inspire confidence, do you think? we're looking at the president really being judged on what's happening in the economy, what's happening in terms of the u.s.'s reputation. but on the other side, we've got a line-up of candidates that doesn't seem to be sticking. >> i think sometimes when we, who are in, you know, this world writing about politics or even being in politics, when we actually think about the meaning of things, we probably admit to ourselves, you know, a president can't change everything, you know? but once every six months somebody says that and then we all go on to covering the presidency and the presidential race again. but we fool ourselves if we think a magical leader can do

magical acts and magically turn everything around. that having been said, look, there's been a lot of combustion and percolating on the republican side of the field. it's all going to start to clarify over the next few days, actually. iowa is coming right up. it may turn around -- turn out that the front runner at the beginning, mr. romney, turns out to be the front runner at the end after all this combustion and movement. i'm always interested in republican voters who do like to make their ultimate candidates suffer for it, you know? >> yeah. and we did see the unexpected throughout europe, bill. let's talk a little about those concerns over the european sovereign debt. is this a ticking time bomb? what do you see happening with europe, bill? will the austerity measures be effective, and what are we waiting for? >> euroland is a dysfunctional family. there is the rich north versus the spoiled children of the

south, and that's the one major difference, i think, that explains much of it, and despite all the grand bargains and liquidity measures of recent weeks, there are two nearly in escapable policy errors in place that i think will ensure our recession for 2012 and this ticking time bomb problem going forward. first of all, the mandated, as you mentioned, balanced budgets over a very short time period, which is a growth straitjacket, in my opinion. they should do it over a longer period. secondly, there is the inability of countries such as spain or italy to devalue their currencies. they're hooked on the euro and they're hooked to germany in terms of competitiveness, and this keeps them from the core of euroland and the rest of the world in the short term. so euroland, especially in terms of the peripherals, will have a difficult time from getting out

from under. >> thank you both so much for your time today, and happy new year. we will see you soon. up next on the "wall street journal report," from dead and downgrade to wall street's occupation. 2011 in the words of our guests. medicare. it doesn't cover everything.

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from a downgrade to a storm to the campaign trail. some of the biggest names in business took time to tl me all. here's a look at what made news. >> a unifying theme of behavior in the u natured states is we've really become a society that's blind to the long term. >> 40% of america who has budget deficits, there is a crisis in america and it's serious. >> more information takes place globally, so if you're worried about your kid getting sick, the fact that more people are doing medical research, that's a good thing. i have a deepa biding faith that the strength of america, the work ethic, the companies, the education of the universities, it will come to the forefront again and america will get its mojo back. >> we have to better educate us in this economy.

talent matters tremendously. >> what we want is for america to be a launching pad because we have the best education, the best infrastructure, the best rule of law, the most government-funded research that everyone in the world will want to come and launch their moon shots. >> there are a lot of authoritarian and dekrcrepit leaders. one shock. >> the whole thing is expedited and it's all very promising. the main force that's been driving our economy indirectly through the financial markets is greece. as greek default goes up in probability, we run into all sorts of problems. >> in terms of unemployment, deficit to gdp ratio, the whole of the eurozone combined is

actually faring better than the u.k., better than japan, better than the united states. but the intrinsic way of organizing themselves exposes themselves to market doubts and trepidation. >> we have our own debt crisis coming in america, so the smart thing to do is preempt this debt crisis, get this under control. >> people around the world in investments and businesses are looking and you got members of the u.s. government saying, maybe it would be okay if the u.s. government defaulted on their obligations. that's literally the last thing we needed. >> the debt levels continue to rise even with the debt deals and the process of making the choices did not look any clearer at this point in time. >> we've always been and always will be a aaa country. >> right now he's out there running against himself and people's misery. that's a terrible place to be in. put people back to work. just let people see that. >> they're on strike because

they look at the excessive regulations coming out of this administration, and they're scared to death. they don't know what the rules are going to be. >> do you regret pushing health care as aggressively as you did instead of pushing a jobs package? >> that's really not the point. the point is when president obama became president, he pushed forth a budget that was about job creation, about deficit reduction, about lowering taxes for the middle class and about stabilizing our economy. >> it's safer now in new york in particular, and one of the things i would ask people to think about on september 11 is that this threat is not over. this is not history. >> hello. my name is watson. >> we're talking to craig monday today from microsoft. >> you can see as far as you and i interacting, it's quite natural. >> so there's you and i, me and maria. this is a kind of nerdy project for me to be so plucky in front of the camera, but this is a way

for my fans to be more connected to my brain. >> people ask what motivates you, keeps you going, and it's just a simple three-word motto, which is purity of motive. >> what am i observing, what am i feeling, what's the need here and what's the best way to fulfill that need? >> every time i hear you say nba champ, i still get goosebumps. the business is a sport that's played 24 hours a day, 7 days a week, every day forever. >> it's such an ideal place to do business, you know? >> it has been quite a year. thank you for sharing it with me. when we come right back on the "wall street journal report," a look at the news this week that will have an impact on your money. who made the biggest splash when it comes to money, markets and the move? ♪

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for more on our show and our guests check out the web site, ws wsjr@cnbc.com. on monday the new year's holiday is observed of the all markets will be closed. tuesday we get auto sales for the month of november. and election 2012 begins when republican votecandidates in io running for president on

tuesday. we learn how much the economy lost or gained in the month of december. finally today, it's an annual tradition on the program for my vote on who is the business person of the year. i would have to say in the last five years, the biggest event that we have actually seen that has impacted our lives has been mobility, the idea that we can take all of our information and our entertainment with us wherever we go, i would have to go with steve jobs. he's changed our lives in so many ways with all the innovations coming out of apple from the iphone to the ipad to apple tv. this year, of course, mr. jobs passed away. rest in peace. he certainly is my vote for the businessperson of the year. that will do it for us for today. thank you so much for joining me. my guest next week, actress goldie hawn on her new career as an activist. happy new year, everybody. i'll see you next weekend and next year.