wording on the american economy. in june, the recovery was said to be "proceeding." now, the fed says it has "slowed in recent months." that is not news for anyone who has been looking for work in recent months, or for anyone following the recent series of sluggish economic reports. but, economist julia coronado thinks the doom and gloom has been overdone and the fed's move today should help lift some of the clouds. >> the fact that the fed is not going to stand idly by and let this continue to just stagnate is a good sign. i think it's a sign that the central bank is on the case, and they're not going to let the economy slip into a double dip recession-- that they are going to look for ways to stimulate. >> reporter: and there is no shortage of ideas in that category, from more in the way of direct federal stimulus payments to save the jobs of teachers and other local government workers, to calls for the fed to use its bully pulpit to goad banks into lending money again. >> we hear stories here and there about banks,

all week, we've been profiling the big emerging economies knows as the "brics," or brazil, russia, india, and china. tonight, we turn to china. its economy expanded by 10.3% in the second quarter, lower than earlier this year, but still robust compared to the rest of the world. so, does it make sense to invest in china? joining us now, mike holland. besides running his investment firm, holland and company, he's been a director of the china fund since its start nearly 20 years ago, and he's also a director of the taiwan fund, both trade here at the new york stock exchange. hi, mike. >> hi, susie. >> susie: despite this impressive clothe,-- growth, there's already talk about china's economy slowing down. i know you go back and forth to china regularly and talk to businesses there. are you seeing any signs of a slowdown? >> yes, and it's much to be desired, susie. the country's stimulus program worked really, really well. they institutesed theirs at the same time the u.s. instituted its stimulus program. theirs caused a growth in the economy that up until this most recent quarter was going

the real economy will pick up? >> eventually. not immediately. >> tom: we have seen investors flocking to things they will make on when they sell. given the selloff, isn't that prudent investing. >> well, actually, you pay a very high price if you were to buy the most liquid thing. in the stock market, where we work, actually, if you buy things that are a little less liquid, you can actually find the big bargains because there is less demand for those kind of stocks, and you can get them as discount prices. you have to pay lot to get the most liquid type of securities. >> tom: in fact, you brought research along with you that shows investments in the least liquid stocks have come with higher profits through the past generation, going back to 1972, least liquid stocks returning annually almost 16%, compared to the most liquid stocks, under 10%. but doesn't that come with the higher risk? >> not necessarily higher risk. actually, lower beta, and a lower standard deviation. the conventional measures of risks are not ac

so how would you describe the health of the russian economy? >> i think the russian economy is in very good shape at the moment. in particularly in compared to the very specific construction of the economy's experienced last year. >> susie: half of russia's growth comes from oil and gas. given that the oil prices are hovering around the $70 a gallon price, how could that impact the economic growth? >> indeed, russia is an economy that depends on natural resources, particularly oil. we estimate that half of the very impressive growth performance that russia boasted between 1998 and 2008 is due to oil. so if oil prices were to go to the downside, we do expect to see some down effect on the economy. in our estimate, a 10% decrease in our prices may decrease g.d.p. growth by around 100 basis points. in other words, if oil prices were to full from 70 to 60, 65, we could see the growth rate of the economy around 4%, rather than 5.5%. >> susie: let's talk a little about foreign investment. we've seen a big drop in foreign investment in russia from 2007

there's a lot of fear and loathing around concerning the u.s. economy, the global economy, the outlook for policy, both monetary policy and from the government. and this is a time to, i think, to stay cool. the economy does not appear to be going back into a renewed recession. we have had a slowdown. the slowdown is continuing. but the economy is not reversing fieldss in our opinion. >> all right, now we are getting alot of economists who are calling for a recession, even a top official in britain said today that the possibility of a double dip recession, you know, is out there. it could be what happen. how are you factors all of those forecasts and the uncertainty into your investing strategys in terms of what you are doing with client portfolios? >> well, number one, susie, we are w we are emphasizing that part of the world which is growing the fastest, and that is asia excluding japan. japan is unfortunately mird again in recession. but the rest of asia developing asia is really developing. and you probably saw the headlines. your viewers saw the hea

ben bernanke said today he'll do whatever it takes to prop up the economy. tom, the fed chief's speech at an economic conference in jackson hole wyoming came just hours after the government reported that u.s. economy grew only 1.6% in the second quarter. but bernanke didn't change his forecast. he still believes the economy will grow "at relatively a modest pace" this year. he said there was only a low risk of deflation. and he made a case that the fed alone can't solve the world's economic problems. >> tom: susie, bernanke used this speech to boost confidence that the fed is on top of things, and investors bought it for today. the dow rallied more than 1.5%. the chairman outlined four actions the fed could take, if necessary: pumping up the economy with money by buying long-term securities like government bonds. better communications on fed policies. cutting interest paid on excess bank reserves held at the fed. and resetting the fed's target for inflation. while bernanke said the fed has those options, he doesn't think the last two will do much to help the

>> i think it's connected to the perception of the growth in the economy. i think if we get beyond a point where we assume we are going into a double dip recession f we have enough economic data through the course of the year that shows yes, growth is sluggish but it is growth and we shed that mechanism of trying to price in a double dip recession investors will look at the fact they have money earning two and a half, 2 and three quarters percent in treasuries and start looking for higher yield in the marketplace like dividend yields and some of the top dividend pairs out there, that are much higher than a ten year treasury pays you right now on strong, stable companies that are probably going to be around for a wall. >> susie: you know on wall street the wisdom says that the stock market is a predictor of how the economy is going to do six to nine months from now. and given whu when you look at the dow is down something like 10% since april so is that telling us in about six to nine months we're going to go into that really, i don't know, a downdraft on the

when optimism could return to the economy. there's no business like shoe business. how one ceo is trying to reinvent retail, keep his employees happy and make money at the same time. and the best places in the u.s. to live and work for the next ten years. and some places on the list that may surprise you. . >> this is america's number one financial news program "the wall street journal report." now maria bartiromo. >>> hello, everyone. i'm sue herera. maria will be along with more of the show in just a few minutes. here's a look at what's making news as we head into a new week on wall street. the focus was on the fed this week. the federal reserve's open market committee held a one-day meeting and released a statement essentially saying the economic recovery was slowing. since interest rates are about as low as they can go, the fed reached into its tool kit for another way to help stimulate the economy. the fed will take proceeds from a portfolio of mortgage bonds that it holds and use that to buy treasury bonds and that should help keep interest rates low on treasur

that is the strength of the economy. the other reason is that the best way to planet is that the scars of this recession are very deep. until they see growth and sustained basis, they are still being careful about how they put those investments to work. private investment is growing at a very rapid rate now. we hope we can sustain that. it will probably not be at the same rate but that is encouraging. can i make one more point? is important to recognize -- is important to recognize that the policies the president is proposing fori --t -- it is important to recognize that the policies the president is proposing would leave taxes at a remarkably low level. it has been lower than it's been since the 1960's. we do not believe in proposing a set of policies that do not recognize our responsibility and burden for showing we are willing to cut things that don't work and hold things -- restore things to a much more modest share of gdp as a whole. >> the couple comments -- -- a couple of comments -- there was a president other tha

primarily because the economy is so weak. revenue is down, and the government is understandably trying to spend money to revive the economy, so you've got recessionary affects on revenues and policies to fight the recession. if you take that away, you think where is the debt issue in the united states? it was with us before the crisis, and it's with us after the crisis, and it has to do with the long run debt associated with major parts of the budget. social security, health care, defense, revenue. what do we do with those four major items to bring the debt to gdp ratio to a stable position? i think the key thing is to look at the trajectory of debt to gdp. >> the bush tax cuts are set to expire at the end of the year. taxes on the highest earners are likely to go up to where they were in the clinton administration. bad idea? we're in such a fragile situation, a fragile economy, or good idea? do we need to close that deficit? >> i think the following. i think that if we allow the bush tax to expire on the top -- the top riche

the european economies? well, it's the latest news. so people thought the u.s. was out of the woods, at least the typical wall street economist, and they said europe was headed down the drain. now, europe seems to have put the plug on that. our data is getting a little worse. i wouldn't necessarily say people are more worried about the u.s., but they've turned their worries to the u.s. they thought we were fine. now they're not so sure. >> charlie: what are your worst worries? what are your greatest fears about the american economy today? >> i don't disagree with anything ken said but the one thing, i'm sure he agrees with me if we don't fix our k-12 education system, everything else doesn't matter. we have to find a way to better educate our kids so we can compete with the rest of the world, if we are going to live in an economy that is increasingly based on selling our brains and not our muscle, then we have to spend more time investing in our brains. i'm heartened by what's happened in the last three year

the economy is not a fixed pie. when you expand the labor curve, a simple economist will say the price of labor goes down and we're all hurt. the more people that work here, the more people that are chasing jobs and we're all doomed. wrong. the expansion of the available labor force creates opportunities that did not exist before. you have innovation and entrepreneurialism that increases the actual size of small and

and jeff, the latest employment report shows the u.s. economy continued to lose jobs in july. >> jeff: that's right, susie. this is the second month in a row with a drop in payrolls. the labor department reported a loss of 131,000 jobs, most were temporary census workers. american firms did some hiring, increasing payrolls by 71,000 private sector jobs, but that wasn't enough to bring down the unemployment rate. it is unchanged at 9 .5%. >> susie: president obama noted one positive: the private sector has add ed jobs for seven straight months, but he did say that progress, quote,"needs to come faster." we have two reports tonight looking at what's ahead for the job market and what washington can do to speed things up. we begin with suzanne pratt in new york. >> reporter: the dog days of summer are never a great time to find a job. this summer, however, the labor market is even tougher than expected. experts say despite better profits at many companies, management won't hire it gets clarity on the economy and washington policy. bruce kasman says

he said we recognize the economy's struggling. and thus tried to make sure people didn't think the fed was out of touch. he told those who were worried about the economy going down in double dip that they had things they could do and he outlined them. then at the end he told the people worried about inflation, believe it or not, look we're not promptsing higher inflation. united states is not going on the record for that. i thought was a talk carefully designed to appeal to lots of audiences. >> brown: carefully designed but what about the state of the economy that paul krugman sees in dire straits needing more. >> the economy is not in good shape. i think about that. there ought to be great agreements. but the key is that the fed has done all it can do. it did a tremendous job in propping up the economy during the crisis. it is now badly extended. the key is now that we have an economy that is growing. it's been growing for about a year but it is growing too slowly. we ought to rethink this not as a crisis sort of stimulus issue b

the u.s. government is desperately trying to emulate france or other state run economies because these are the only economies that will survive of course the u.s. has started q e two right there q.e. light some people are saying but here's a headline about the u.s. u.s. is bankrupt and we don't even know it this is laurence kotlikoff boston university he's an economist and he points to a fiscal gap of two hundred two trillion dollars if you put everything on the balance sheet that's a big number well it's fifteen times more than the official debt and the discrepancy between the official debt and the actual net debt. it reflects what economists call the labeling problem what is a labeling problem well is when congress labels most of its liabilities unofficial in order to keep them off the books and into the future so the question is as laurence kotlikoff was asked by bloomberg presenter but is that to say that they are effectively lying to us. yeah they're effectively long tours there's no question about it yes governments are lying to you. wow what a revelation well how can you tell they're ly

just tells us right there that the economy is essentially -- the cement has been poured around the economy as the number one issue. what is really a big problem for the white house and for democrats running for re-election is that there is this giant disconnect between what their rhetoric is and the reality that people are feeling. there is all the empirical and anecdotal evidence in the world that people are anxious about the state of the economy and they're angry with the way washington has responded. what you are seeing now is the recovery summer not only be a policy disaster in the simple fact it showcases the biggest mistake that the democrats made, which was the trillion-dollar stimulus, but it's a terrible political message right now to try to bring to people that they are actually enduring a recovery when people just don't feel it out there. >> chris: juan? >> a couple things to say here. one is ben bernanke of the fed said this week there were some policy options that exist, you know, the things he could do at the fed to try to help the economy get some spark, some life back to it

force in the economy-- in the world? who knows. >> rose: i can tell you what the president of the united states said at west point, there is no recorded history that suggests a country that loses its economy-- economic vibrancy will continue to have the political power that it has exercised in the world. >> well, i think that's true, and i think we have to recognize that as the emerging markets become a bigger force in the global economy, we can't do everything we could politically do before, even everything we could do military before. china, india, brazil and other emerging markets will assert themselves much more. >> rose: what raises the important question-- if that is the reality what ought to be the strategy on the part of the united states, just to take one example. over the next 25 years. if that's the reality, what is the smart thing to do over the next 25 years? >> well, first, we have to make sure our economy is in good shape. so we've got to deal with our debt problems. we've got to deal with our infrastructu

so by the way is the german economy german economies and the french economy there are less financial and the u.k. and the united states so it is quite possible that when we look at national economies as rodney was doing that the u.s. has really damaged its own people in its own state in a very serious sense but secondly also in brazil to take an example that is much admired there is enormous inequality in china central committee of the communist party as i am an honorary advisor to the national academy of planners etc so i get involved in china. they have to clear that inequality is one of the big issues there and last year there were nineteen thousand revolts in china it was not the norm rich middle classes you know so we are dealing with a system that is producing enormous inequality and i would agree with one point that was a. made. which is the failure of national governments in governing finance but also in governing the larger market effects that this kind of capitalism rings around you know where if you go to you i mean this this financial ization of economies is this something

a bleaker outlook for the economy into 2011. the u.s. economic recovery will remain slow deep into next year held back by shoppers reluctant to spend and employers unwilling to hire. the latest survey show economists turning gloomier seeing weaker growth and higher unemployment than before. fed chairman bernanke said the outlook is unusually uncertain. newer generation fed speak there. does that mean -- do you think that means the economy gets worse before it gets better? >> maybe but not necessarily. i think we're in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like a quasi-recession. our problem is we have a very distorted economy in the sense there's been a significant recovery in a limited area of the economy amongst high income individuals who have just had $800 billion added to their 401(k)s and are carrying what consumption there is. large banks that are doing much better and large corporations who you point out and everyone is pointing out are in excellent shape. the rest of the economy, smal

on friday, we heard ben bernanke give an outlook on the economy. what did you think about what he said? of course, he continues to say that the fed is going to be there regardless of what happens if, in fact, we see another leg down in the economy. how did you see it? >> that's what he did say and i found there was nothing surprising, maria, in terms of what he said compared with his testimony to the senate and house earlier in the month. namely, he's ready to do whatever is necessary economic growth is subpar, inflation less than expected, all of those things. so, to me, there was no surprise, but i'm -- wondered why he didn't have anything more to say on friday compared with what he did earlier in the month, so it was a disappointment to me. >> okay, so it was a disappointment. and you know, stu, we continue to hear that chairman downgrade his assessment of the economy. do you think that the risk for double-dip recession is growing? >> well, it's clearly higher than most people thought, including i, myself, but i think the fed chairman made very c

the white house is adamant the u.s. economy is recovering but well the unemployment rate still near ten percent a major problem is in the real estate sector some say the administration is spinning the story that's according to gerald slanty from the trans research center . what they're trying to do is to convince the public that if they'd only build their confidence and they would go out and spend more and that as businesses had more confidence they would hire more he is a confidence and what did they create they dumped in nearly eleven trillion dollars that was led. and guaranteed to stimulate the economy the job numbers are terrible weighed way below what they had forecast let's look at the two losing wars america is fighting what's the word they use where making progress progress is the white house favorite word every time they're losing it's the same old story it when it's the war more men more money more time and whether it's the economy more time more money it all recovering from an illness if you're not getting a healthy

that concern is accentuated in a different sector of the economy. all those things play some role in hide the unemployment rate reedy and how high the unemployment rate is now. those are very difficult factors for us to asss quantitatively, and we have made our best estimate, but it is very hard to know. >> if other thingoccur to you, you know where to find us. we are very happy to answer your questions. thank you very much for coming today. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] [captions copyright national cable satellite corp. 2010] >> in a few moments. today's head lines and your calls live on "washington journal". the national press club will talk about the response to the gulf oil spill and what still needs to be done. and in about 45 minute as discussion of the deficit with douglas elmendorf, head of the congressional budget office. travel restrictions to cuba with rentive mario diaz-balart and

but again as i said they do have to develop the economy so. it's also the least it's very difficult situation we can see china is now facing many challenges they will be able to deal with them and. i would i would say there is a big chance they can do it but no but you can be certain that will happen life is that you know struggle who expected the collapse of the soviet union where a superpower one of the strongest so. countries in the world that cetera et cetera we had the developed economies did you cation etc and then we collapsed. and of course there is a chance china can play this but. it myself used to predict that it would happen twenty years ago fifteen years ago ten years ago you didn't have them so they they do have a chance to continue going like this thank you get me for the time. wealthy british style. market. scandal find out what's really happening to the global economy for a no holds barred look at the global financial headlines to cause a report on our face things to this is not a problem but more and. let me show you just ever

what about the outlook for our economy? despite those problems, moderate but sustainable growth of 3.5% through 2011 is likely. that would still be tested for the first couple of years of the recovery. four factors underpin that view. the shock of the european debt crisis has begun to fade. financial positions have improved, and that is essential for growth. global growth, especially in the big emerging market countries where domestic demand is strong, is still hearty. we expect global growth to be 4.7% this year, off 4.2% next year. for example, the chinese example is slow to respond to restraints on lending and tighter monetary policy, but we estimate it is to 9.5% next year. the ongoing revival of job and income gains, although modest, will provide income growth sufficient to sustain 2.5% consumer spending. that is a big step down from the past but it is sustainable. we expect the price the data to show that nonfarm payrolls and hours rebounded in july. infrastructure spending, the last part of the fiscal stimulus in 29,