the former head of saudi intelligence, prince al faisal, talks about the osama bin laden he knew and much more. finally, how this man became this man. the most wanted man in the world. an unbelievable story. first, here's my take. i was in germany this week, and the mood there is pretty grim. europe is facing its most severe challenge since 1945. if the greek crisis morphs into an italian crisis, italy being too large to bail out, the entire structure of post-world war ii europe could unravel. finally european leaders seem to recognize that their strategy of kicking the can down the road has not worked, and they will come up with a plan. not a dramatic solution, that's not how it works, but a series of steps that together will be more comprehensive than anything done before. but they will not address europe's core problem which is a lack of growth. the europeans, by which i mean the germans, are trying to find some solution to the crisis that will not let countries like greece and italy off the hook. germans feel these countries need to feel the pressure. only then will they reform their budgets and their habits. so the solutions will be complex, trying to stop a crisis while not bailing out these countries entirely. the real problem, however, is not so much that greece has been unwilling to make sacrifices, it has made many. but greece's budget numbers look bleak because its growth forecast looks bleak. it needs to address a much larger question of competitiveness. wh what can the greek economy do to attracts capital and investment, and at what wage levels? these are the questions most european countries will need to answer to fully solve their problems. italy's economy has not grown for an entire decade. no debt deal will work if italy stays stagnant for another decade. even germany is not immune. it has an. growth rate of about 1.5%, and german officials know that with a declining population in five to seven years, the country could grow at an annual rate of just 1%. that's not much of an engine for europe. europe needs a crisis agenda to get out of its bind. but beyond that, it needs a growth agenda which might in the short term require investments. but in the long run, requires radical reform. the fact is that western economies with high wages, generous middle-class subsidies, complex regulations and taxes have become sclerotic. now they face pressure from technology and aging population, technology which has allowed companies to do much more with fewer people, and globalization, which has allowed manufacturing and services to locate across the world. if europe and for that matter the united states cannot adjust to this new landscape, it might escape this storm only to enter another. let's get started. occupy wall street and the tea party come from i diametrically different parts of the global, but what will these movements come about? i have a panel to talk about that and more. steve forbes and chairman and editor-in-chief of forbes media and ran for president in 1996 and 2000. nobel prize-winning economist paulg krugman is a columnist for "the new york times." bret stevens is the deputy editorial page editor for the "wall street journal." and krista freeland is global editor at large at reuters. paul, you have been counseling us to take these guys seriously, not just in terms of the political power but actually in terms of a coherent message. >> yeah. we had -- we are just three years after the greatest banking crisis since the 1930s. it was brought on by excesses on the part of the financial industry and the financial industry was bailed out at the public's expense and risk. and yet we're still in an economic crisis. and somehow all of that, the discussion of who are these guys, why are we supporting them, why haven't they paid more for this, what are the reforms that are going to stop this from happen, all of that disappeared from the debate. we're arguing about who's going to cut social security and what about the budget deficit. we lost the whole thread of the core issue at -- in our society right now. and these protesters who are a mix of all sorts of people suddenly brought that back into the center of our national debate. and just for that, that's an enormously positive contribution. >> do you think that the crisis was caused by the irresponsibility of the private sector? >> i think the crisis is where i wish the protesters would go against the fed instead of wall street. if the federal reserve hadn't been on such an easy money path in the early part of the last decade and dragged the central banks with it, you would not have had a housing boom and bust. the juice would not have been there for it. so you get monetary policy right, and a lot of the excesses you see as a result of that would have gone away, whether it's artificial winners like wall street and commodities, or artificial losers in other parts of the economy. it's destructive when you deliberately weaken a currency. >> what do you say to that? that government regulation, principally the fed's decision for easy money was the root cause? >> you have a hard time -- there are so many levels in that. you know, first of all, i think that this is a really kind of desperate effort to change the subject, right? we know about the bankers. we know about how much money we need. we know about the packaging of seemingly -- of what were in fact bad loans as aaa assets which turns to toxic waste. you're saying it was alan greenspan doing it. well, i'm no fan of greenspan's, but a financial system that depends on always having the perfect leadership at the central bank is a financial system that is doomed to failure. monetary policy is always less than optimal. what we had was a financial system that thanks to deregulation, thanks to financial developments that had bypassed the existing regulations was far more prone to abuse. those are the abuse that we have to have a reckoning about. >> it has to do with the political allocation of capital thanks to fannie mae and freddie mac and various government interventions on behalf of various kinds of not only lenders but borrowers. i want to just push back on another point. before you sort of make -- assert the premise that this is a populist movement that's taking place on wall street, i lived down there. i don't know if any of you have gone to zakadi park and chatted with some of these guys. this is not pop limp, this is many anarchism or something entire different. what you don't find is a populist move. you find sort of 9/11 truthers, you find people -- by the way, take down the fed is one of the slogans of some of these people. and i wonder -- i wonder about the wisdom of the democratic party or its partisans tying their carriage to this particular movement because it doesn't strike me as representing anyone except the same kind of extreme fringe that you find at, you know, ramsey clark marches. >> you were there, as well? >> yeah. i've been there. it's not that hard. it's not brave reporting to take the subway down. but i would totally disagree with bret. i do think that the occupy wall street movement, like the tea party, is a genuine grassroots expression of people being really angry. people being angry about the fact that median wages are stagnating in the united states. and they don't see economic growth, people are worried about their jobs, they are losing their houses, and, you know, i think there is no consensus whatsoever on the political solution, but this -- this is real anger. >> so far they haven't had the volume the tea party's had, and what they like about the tea parties is they went to what they considered the real source of the problem which was washington, d.c. just to get one last thing on the fed, it is the most boring subject in the world and i don't want to erode your ratings. the bottom line is you could not have had a housing boom of this scale you had, if you hadn't had that easy money. we saw this in the 1970s. again, you know, excess oil profit and the like. huge, spectacular bursts afterwards. i think if you didn't have fannie and freddie, $1.5 trillion of junk paper, it could haven't reached the level it. let's start with the root causes and take it from there. >> this is why people like me welcome this so much, because there's been this concerted effort to hijack a massive case of private sector failure. a massive case of the failure of deregulation and turn it into an anti-government case which is what you're doing. and it's all wrong. i mean, that's another program. we'd have to go through this. but the point of view that says, hey, wait, let's go after the actual bad guys who are not in washington. no, barney frank somehow as a member of a minority party under the iron thumb of tom delay did not somehow cause this financial crisis. to say, look, the bankers are the ones who profited and left the rest of us in a ditch. that's a very good thing to have people saying that. >> isn't it the end actually that the bankers were able to do that because the rules of the game were wrong? it's not that the guys who work on wall street are evil individuals. they're not more evil than the guys who work on bay street in toronto. it's just that the rules were such that, you know, i would say particularly on leverage and on capital requirement that encouraged bad behavior. and the financial sector had an incentive to do things which ended up toppling the economy. >> let me ask steve this question because it -- you know, you're an old-fashioned executive in a sense, not a financial executive. and surely you must look at what the financial executives were paid and the massive increases in pay that -- that seemed disproportionate. if you look at average financial executives compared with the average executive pay, it used to be 2-1. it became 6-1 by the time of the crisis. >> sure. and when you can look at that and say, you know, what were they producing for the real economy? these weren't technology ceos -- >> again, when you undermine a currency, you do get these artificial winners. you saw it in the '70s. oil companies did extreme lewell and a handful of others did extremely well. you had a land boom in the farmland. it was pointed out well after world war i when austria was hit by inflation, on every street corner there rose a bank instead of a coffee house. when the recession was conquered, the banks went, the coffee houses came back. if you have a stable currency, stable environment, those excesses can't take place. the juice is not there for it. >> the -- where there might be a real movement here is not, i don't think, with these guys downtown. i think it's the problem of joblessness. you have youth unemployment that's 18%, you know, regular unemployment which refuses to come below 9%. i think the figure is five jobseekers for every available job. and that's a real problem. and you can do one of two things. you can march on jamie diamond's house or on jpmorgan, never mind that jpmorgan was one of the banks that didn't get itself into the mortgage mess, or you can have some serious discussion about what we have been doing over the last three years to create jobs. you know, just -- just now this week, we're signing a free trade agreement with south korea, panama, and colombia. the white house itself says that the korean side of the deal is going to create 70,000 jobs. why was this sitting there for three years when the treaty had already been -- the deal had already been negotiated under the previous administration? 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>> yeah, and somehave more of w steve forbes hates, more expansion -- >> it's worth mentioning, these numbers about south korea, free trade pact and all that. first of all, the numbers are disputable. the main thing is 70,000 jobs in the u.s. economy? you're talking about a rounding era. this is not where important stuff is going to come from. it has to come from a major increase in demand. the only ways we know is to increase government spending temporarily or possibly some more aggressive action by the fed, moving in exactly the opposite direction of the way that people like steve want it to go. this is -- we are -- we are recapitulating the great depression now, making the same mistakes of pulling back on stimulus too soon. tightening money too soon, that were what made the great depression go on for so long. >> i think what we're recapitulating is the experience of japan. you talked about more stimulus. we had the greatest experiment in stimulus spending in a very long time in this country, about a trillion dollars worth of stimulus. rounds of quantitative easing by the federal reserve, and what -- you know, what are the results that we have to show for it? we have a -- a worse than a jobless recovery -- >> what would you regard as a success? i've never understood what that means. clearly it's mathematically true that by keeping schoolteachers in place and not firing them and not firing firefighters you preserve those jobs. do you mean that it didn't trigger a round of private sector hiring? is that the idea, that it didn't jumpstart the economy? that government spending did keep -- >> the whole notion that government by that way can jumpstart the economy is a false one. why weather did they get that -- where did they get that trillion dollars from? it comes from borrowing, printing money, a form of taxation, or taxation itself. it removes resources from the private sector where it could be put to productive use and perpetuates a lot of things that should not be perpetuated. again, if you let the -- >> the private sector is saving now because it has an overhang -- >> it does because of the weak dollar, sending private capital overseas, uncertainty about the carbon monoxide code. massive new regulations coming on health care and the financial sector. those are real headwinds. president obama had done nothing, if he had done nothing when he took office, he'd be a genius today. >> this is, again, why we need an occupy wall street. i've said this many times, people like steve are recapitulating 80-year-old economic fallacies, hijacking this discussion on the eve of the greatest failure of those conservative policies that we can possibly imagine. somehow making the case that the problem was that we weren't conservative enough. but because of the way our normal discussion is structured, because of who has access to mega phones, because of who ends up dominating debates in congress, the other side which said, wait, the problem is not that we're doing too much, the problem is that we're not doing enough, got practically squeezed out of the debate. thank god a rag tag group of protesters in zukati park and elsewhere, had us going, wait, what is the problem here? shouldn't we be doing more? >> when was government spending ever revived economy in peace time? >> why does a war make a difference? we do know that -- >> you said world war ii of revived by government spending? >> yes. >> when 12 million veterans were taken out of the work force and after the war we cut spending -- >> you really want to make this about something else. you want to have the argument. as i see it actually, there's been a sustained surge of economic research the past years in austerity. take the austerity, does it have an expansion effect? the international monetary fund has done studies, it's been overwhelming. the world works the way analysts say it should. >> answer bret's question about japan. japan did have a massive round of infrastructure spending. >> they actually -- they dribbled it out. they dribbled it out instaini s. if you look year by year, you discover at that years when japan ramped up the spending, their economy started to grow. then they pulled back, and the economy sank again. the actual -- if you go through the actual history, sort of run the tape on japan, what you find is a strong confirmation that increases in government spending do lead to economic growth. and when they happen -- >> look, the basic problem also you have is even accepting the idea that stimulus money in theory could -- just for the sake of argument -- could revive the economy, how is that stimulus money spent? economists look at how why this failed and figured out this government doesn't have a good idea of where to spend the money. so you have cases like solyndra, capital allocation, and you find this is the wave of the future, and you have a bust. you're looking at a series of successive failures in this huge investment in so-called green technologies which could have been predicted were going to be fearless. the real problem is you don't know where the jobs of the future are going to come from. you talk good schoolteachers and so. on yes, we'll have schoolteachers in the future. but who's the next steve jobs of the economy -- >> stimulus spending, bret, though, stimulus spending isn't about betting on the next steve jobs. stimulus spending is about do you believe that you need to kick-start the economy in time of recession, especially after a financial crisis. >> and did the stimulus kick-start the economy? >> the question is -- you have to think about what would the case be had there been no stimulus. you can't say, okay, the economy isn't perfect so the stimulus failed. >> you have 850 billion of misallocated capital -- >> no, fareed was right. you would have had more people unemployed. and the jobs in the middle are the ones being hollowed out. and the place where we're seeing jobs created are at the very top, steve jobs, silicon valley, great to be a software engineer. and at the bottom. not so bad to work in a kitchen, to be a gardener. what about the middle-class jobs that really the backbone of the america that i think steve yearns for? >> in the 1980s