the problem, as rogoff and reinhart said, is our debt. that's a real problem. it's not going to be easy to fix. i wish it were. it's not going to be easy to fix. but if we work together as a nation, we can do it. this country can rise to meet the challenge. i'm totally convinced of that. the president said -- quote -- today, "and since you can't close the deficit with just spending cuts, we'll need a balanced approach." that means we need to balance our cuts with tax increases. right? that's what that means. he went on to say, "we can't make it tougher for young people to go to college or ask seniors to pay more for health care." but at some point when you don't have the money, we might not be able to be as generous as we were just a few years ago when we had a better financial condition. you see? isn't that common sense? what do you mean, you can't make any changes in how we do business? we're going to have to make changes in how we do business. he goes on to say, and continues repeatedly to talk about investments. this is a quote just in the press conference

ken rogoff is a former chief economist for the international monetary fund. he's a co-author of a book about financial crises called "this time is different." he's a professor of economics at harvard. and terry belton works for jp morgan chase. we thank you all three for being with us. terry belton, i want to start with you since you're closest to the markets. what was behind today's massive sell-off? >> well, judy, the downgrade was a catalyst for it but it's a lot more... it's about a lot more than that. i think what the downgrade is highlighting to investors is that on the fiscal policy side, the u.s. is running out of bullets. what we really need is we need near-term monetary stimulus and longer-term fiscal austerity. i think what the markets, including now, is that near-term stimulus is not coming. we've run out of bullets on the monetary policy side for some time now. we've been at 0 interest rates. it now looks like we're there as well. on the fiscal policy side u.s. economic growth is very weak. it's not clear to the markets how it's going to be reviv

ken rogoff is back with me.r at harvard university and former chief economist for the international monetary fund. on the phone is mohamed el-erian, the ceo of pimco, one of the biggest bond dealers in the entire world. they run the biggest bond fund in the world. mohamed, thanks for being with us. i just spoke to david beers of s&p. i want to get a sense from you. because it's a question a lot of viewers who may not be involved in the world of bond rating asked me after what happened in the financial crisis in 2008 and the errors that the major bond rating agencies made, do serious bond buyers and sellers and traders listen to what s&p says? does this matter? >> it does matter, ali, but not because we invest on the basis of what the rating agencies say. here at pimco, we have our own sovereign credit assessment. we have our own internal ratings and we make investment decisions based on our own work. however, the rating agencies are through a monopoly are wired into the system in such a way as it gives them enor

my guest next week, harvard professor and author ken rogoff. join us for ken rogoff. have a great weekend, everybody. i'll see you next week.

. >> susie: joining us now, kenneth rogoff, professor of economics at harvard university. hi, ken. nice to have you on the program tonight. >> hi, susie. thanks for having me. >> susie: so let's pick up with darren just left off and talk about the fed. i think it's kind of interesting that here we've got this group of policy-makers looking at the same day dark coming up with different on collusions on what it means and not being able to agree on what to do next. what's your take on what came out of the fed today? >> there's clearly a lot of disagreement at the fed, and ben bernanke has probably purred them as far as he can right now. i think he would like to be more proactive. he would like to cut off the risk of a deeper downturn, something worse happening, but those think we can't do that much. interest rates are almost at zero, and quantitative easing didn't seem to do that much, and we're nervous about inflation. there's a lot of disagreement within the board. so i don't think you can see anything quick happening, nothing big out of the fed. also with all the outside anger abou

joining me is harvard professor and former imf economist ken rogoff. and ken, it's always wonderful to have you on the program. thank you for joining us. >> pleasure, maria. >> so is this a new crisis or the aftershocks from the last one? >> this is absolutely the aftershocks of the last one. you have slow, grinding, halting growth. that's normal. but especially what is going on in europe had sovereign debt crisis that happens almost invariably a few years after a deep financial crisis like we just experienced. >> isn't that interesting? the debt has moved from an individual and a corporate level to a sovereign government level. so how severe is what is going on in europe, then, in your view, ken? every day this week on wall street i kept hearing it's because of europe, europe is worse off than the u.s. how would you compare what is going on there and here? >> oh definitely europe is the risk in the global economy. maybe the u.s. will go into a slight technical recession unaided by europe. i think it won't. but maybe it will. europe, there is really no

ken rogoff is a professor at harvard university. you're watching a special live edition of "your money." thanks for joining us. >>> hello, and thanks for joining us. i'm joe johns in for fredricka whitfield. tim geithner will discuss the credit downgrade during a conference call tonight with representatives of other g-7 nations. in the meantime, the financial world is waiting to see how asian markets will react to the downgrade, announce affidavit the end of trading on friday. it's already monday in eastern asia and financial markets will open there in just a few hours. there is already evidence the downgrade is making some investors very nervous. middle eastern markets were open today, and prices fell 3.7% in dubai. the israeli market had to halt trading for a time and it closed down more than 6%. cnn's kevin flower is in jerusalem. >> what analysts here are telling us, this is not only a market reaction to the credit downgrading of the united states, but also a response to broader losses posted last week and on friday on global ma

but meanwhile economics expert max rogoff says the compromise achieved by u.s. legislators really changes the speed of that growth without solving the bigger problem. this whole crisis started as an opportunity of political theater these guys couldn't even choreograph success out of their fake crisis and so now we have a huge international failure which has already gone possibly lasting and certainly serious damage to the standing and reputation of the united states of america how hasn't much been mentioned that not a single plant out there reduces the national debt they just change the speed by which it grows all the showdown all this fanfare is about changing the exact forecasts ten years speed of that growth none of these plans make real efforts to reduce the long term problem of insufficient revenue and these plans do reduce spending in ways that will be painful and for many communities in the united states transformative but that will only reshift focus on to the more important long term issues of the absolute in sustainability of being committed which we a

keep your money or mattress can't do that well here to tell us the reality of how he sees it is max rogoff he's economist at the news he says it does average folks are right on the street i max nice to see you so we heard a lot of different theories from new yorkers where you're sitting on the street in times square where do you think people's money is safe. but i think that all investments particularly all long term investments in common stocks or bonds or all kinds of future opportunities involve a certain amount of confidence and confidence is not supported by the fact that over the last ten years we've seen public share markets public stock markets go through two major violent readjustments one around two thousand and two thousand and one with the explosion in the high tech bubble another in two thousand and two thousand and nine the global market slide and then since april middle of april late april two thousand and eleven this year we've seen three trillion dollars in total equity market losses in the united states as we saw two very good years in a row two thousand and ten and the s

. >> ken rogoff -- we can agree to disagree. we got this wrong from the beginning -- >> sorry? >> i said that in february of '09, didn't i? a bit early. we can go back to the tape. >> we certainly can. about 3 million people have. >> what ken rogoff thinks in order to get past this, we're going to need a round of significant inflation. what ken rogoff has argued, we keep saying what is congress going to do and the politicians going to do? in washington, in the media generally, we overlook the roll of the federal reserve. if he thinks and rin heart thinks we'll have to go through a period of recession and it's going to be painful and move money around in ways that are unfair, is that simply the only hope? >> well, money doesn't move around in ways that are unfair. people that have it, control it or invest it, it's theirs and they put it places they deem appropriate. any outsider looking at that process using adjectives like it's unfair -- >> the shift of wealth from one side to the other creditors and dealter --s. >> all of the a

. >> ken rogoff is a former chief economist for the imf, the world's leading expert on economic crises. we have got something going on in the world. is it recession? is it worse? >> i think it is pretty clear we have never escaped from the previous downturn. we're still living in the aftermath of it. it is slow and rocky. and there is some problems on the horizon in europe. i think the short-term probably is things are going to be moderate to slow growth. no question the risks have gone up, that it might turn negative again. >> peter, a cnn orc poll finds two-thirds of americans disapprove of how president obama is handling the economy. 34% approve. is there something that the president or congress for that matter, separately or together, can be doing to reassure americans either that the economy is on solid ground or that they are taking action? there have been all these calls while the markets have been gyrating for the government to do something about it. most people want the government out of their lives until things go wrong. what can the government do or say? >> we need to look a

ken rogoff is a harvard university professor. you're watching a special live edition of "your money." >>> happening now in afghanistan, what may be the deadliest day for coalition forces since the war started. a u.s. military official says more than two dozen american troops were killed in a helicopter crash in eastern afghanistan. most of them were navy s.e.a.l.s. afghan president hamid karzai said the number of u.s. dead is 31. he also says seven afghans were killed. the united states no longer has its perfect credit and that could cause problems all the way from wall street to main street. standard & poors has downgraded u.s. credit rating from aaa to aa plus. >> i think that there is plenty of blame to go around. this is a problem that has been a long time in the making. well over this administration, the prior administration. it is a matter of the medium and long term budget position of the united states that needs to be brought under control. not the immediate fiscal position. one that centers on entitlement and the reform

ken rogoff on your program among others has pointed out we're in something different. it's a great contraction, it's a deleveraging cycle, it's not clear traditional policy tools work as well as they used to. >> rose: i want to close with this which i remember the story of lyndon johnson talking to sam rayburn. jonathan, i know you've heard the story. lyndon johnson talking to sam rayburn and sam rayburn was saying... lyndon was saying he'd been to his first cabinet meeting and he met robert mcnara and he went to sam rayburn and said "the smartest one there is the guy with the comb in his hair. he's smart." and sam rayburn said "i just one time wish he had run for dogcatcher." so politics matter and the capacity to understand where america is and how you can influence america and move it. but that's also what we expect from our best presidents, the pacity to use leadership to bring the people to demand policy reversals and policy change. i'll leave it at that. thank you. >> i was going to say, charlie, that what i've learned from this aside from some really, really art

standpoint of sovereign balance sheets but also household balae sheets and historic economists such as rogoffeinhart that have written books about this basically suggest something of the order of seven years of fat and seven years of lean or perhaps even more and we're only three to four years into this delevering cycle. >> rose: standard & poor's didn't say anything that you haven't been saying for at least six months or so, right? >> i don't think so. we've basically been suggesting that the united states was a a.a. type of credit, with apologies to president obama and secretary geithner. i mean, they have not only $10 to $12 worth of existing debt, but perhaps $60 trillion worth of future liabilities discounted forward. those are medicaid; those are medicare; those are social security. basically the united states to some extent resembles some of the southern european countries in terms of their debt liabilities. we just haven't recogzed i yet. >> rose: nouriel? >> well, he's absolutely right but one of the paradoxes of what has happened today is that in the euro zone when there's fiscal tr