america's economic future is uncertain. the crisis threatening it is on the other side of the world. welcome to "your $$$$$." i'm ali velshi. concerns in the european crisis threatening the global economy and certainly the economic recovery in the united states. stephen moore, editorial writer "wall street journal," chrystia freelander and assistant managing editor at "time." stephen, let's start with you. we know europe's debt crisis has a very direct impact on the u.s. economy. with europe's future still uncertain, how much influence do americans, does congress and president obama have on what's really happening around the world right now. >> not so much. look, a lot of people probably wondering how can a small country like greece and a bigger country like italy throw the entire globally economy into this turmoil. the answer is it's the first domino to fall. it's a threat where there's a contagion threat. if italy falls we're now seeing their interest rates rise on their bonds. it will affect other countries like portugal and spain and maybe france and germany. that's where the interconnection comes in. the united states, the banking system here is very interconnected with what's happening in europe. >> let's explore the contagion with chrystia. if i get the flu shot and you get the flu i'm not getting it from you. other countries do not have the back stops or ability to prevent what's happening in greece or italy. is that what we're worried about, this could spread? >> yes, it's worse than your flu shot analogy would suggest, ali. the european countries are all living in the same family and eating the same food from the same bowl. that is the euro. >> you're worried if it does get out of hand -- we don't know if we're there yet -- if it did get out of hand it would be substantial worse. >> i interviewed him in europe and he said this could absolutely be worse than lehman. the truth is while we're still suffering the after affects of lehman, the rescue happened, the rescue worked, financial markets were restored of the nightmare scenario we're looking at in europe, what happens if there is a disorderly collapse of the euro, euro currency. the scary thing, that was designed as a roach motel. you can go in but never a system designed for countries to go out. that was on purpose. they didn't create an escape clause. no way to get divorced. now strong countries referred to, france and especially germany, they have to decide now, are they willing to pay up. >> might be interested in a divorce. >> let's bring this into perspective. i still hear it after all the reporting all of us have done on this, i still hear people say how is greece, the 32nd largest economy in the world and not been central to these kind of affairs in over 2,000 years, how is it that important and why is italy -- obviously we get why italy is more important. let's have the argument one more time. >> i think greece was important not economically in the absolute sense but because of underlying these incredible european problems in the european union. greece showed it was not a proper political union but a selfish economic union. when times got tough people weren't willing to come together to back each other up. you saw this between rich and poor countries, hardworking germans and greeks, generalizations but meaningful. italy is an entirely different story. italy is the third largest bond, i spoke to the world's largest bond trader and he agrees italy can be worse than lehman. >> you call it the most dangerous country in the world. >> can i bring this back to the root cause. i read so many stories, what's the big problem in europe. in my opinion they have built up incredibly large overall generous entitlement programs they are incapable of reining back in. >> in a vacuum, that would be fine. we don't live in a vacuum. we here in the united states think we're not competitive with asia. europe is less competitive. >> that's the problem for europe right now. i'm going to get hate mail for saying this, europeans are lazy and asians are eating their lunch. >> i would like to push back against stephen's analysis. germany which has very generous entitlement perhaps is incredibly productive, a much more successful exporter than the u.s. actually much more successful export economy than china. sweden, another country with very generous entitlements is not suffering a crisis. the countries in europe which have slashed their government spending, drastically, countries like ireland, actually have not have the markets say hurrah -- hang on, final point -- the real european crisis is not at the moment a structural one. it is that countries are issuing debt in a currency they don't control. if you control the printing press. >> i don't agree with that. >> you're never going to have a sovereign debt crisis. >> it's the fact they can't control their spending and there's no hope of controlling their spending. >> i think there's a lot of similarity between the problems on both sides of the atlantic. you've got rich countries in debt and they still have to grow. that's pretty impossible. >> however, let's go back to the people coming out of the woodwork now saying ten years ago i warned you or five years ago i warned you about the euro. it's not the problem but you're saying no divorce mechanism, they never built a house. they created common currency, didn't come up with a way -- you get announcements from eu but nobody has power to doening. >> no hank paulson of europe. >> no ben bernanke. in order to have a currency that works, you need to have a central bank which is the creditor of last resort. what we're finding in europe, the ecb is not allowed to do that. that's their big question. this crisis could end tomorrow if the germans and french agreed that the ecb could provide unlimited backstop. >> but they would have to get over -- >> of course they would but that's why i'm saying it's fundamentally -- that's why it is fundamentally a political crisis. >> rana after greece, italy, portugal and spain, keep buzzing around. nobody wants to bail anybody else's bank's out. here in america we don't want to bail our own banks out. >> absolutely not. going back to the point why not let the ecb print money. that goods to deep european fears about hyperinflation. there's deep psychological stuff hindering efforts. >> if you are greek and you've been under this austerity program for sometime already, all these european countries have been cutting back, your economy is already recessionary, if not close to it in many places in europe. you're asked to do more to save investors in another country. this is unappealing for everybody involved. >> you have the greeks running a primary -- greek actually now -- not today. greece today is on the verge of running a primary surplus. that is, if greece defaulted on its debts, were not going to pay, their current budget on the verge of surplus. you're starting to hear some greeks say let's forget about europe. >> italy is at the forefront of the problem with italy partly demographic, huge entitlement programs. the birth rate is 1.2 per married couple. they have all these people retiring and no kids. >> rana, chrystia, stephen say where you are. normally mild mannered tim geithner came out swinging against republicans on cnn. stephen more will have a chance to swing back next on "your $$$$$." stay with us. 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[ male announcer ] trade commission-free for 60 days. plus get up to $600 when you open an account. this was a week in the united states where a lot of the political discourse was focused on anything but economic issues, whether it was rick perry's memory lapse or continued accusations of sexual harassment against herman cain. chrystia, is there a chance, and i'm hoping not despite everything else, is there a chance this election could turn on things that are not economic, even though for three years now the voters of america have said the economy is their number one concern. we are spending a lot of time on things not about the economy. >> yeah, but it's 2011, not 2012. when push comes to shove, people are going to focus on what really matters. i have a lot of faith in american voters. look, i think these other issues, they are easier to think about. they are more fun. they also are less scary, actually, they are about other people making mistakes. >> i said herman cain fascinating though he is and his story can't wreck the world, greece could. >> talking about euro bonds and how the ecb should average, esf. that's not that fun. >> you conservatives take some credit or blame for making this such a big issue, making americans understand the economy and debt are serious. you conservatives of derailing the conversation with everything going on this week. it's your presidential candidates who are diverting the conversation. i mean, as a conservative, who in the republican race is keeping this conversation as focused as they should be? whether you agree with them idea logically or not, huntsman, gingrich, romney we haven't heard a lot from. >> there's no question the last week or two have been bad for republicans because all the talk has been about herman cain's sexual harassment allegations when they want to talk about the economy. this is a celebrity culture. it's amazing to me 90% people know who joe paterno is than better than bernanke. this is part of the problem. turn on tv they are not talking about the economy, herman cain sexual harassment allegations, joe paterno. it's too bad we should be focused -- >> chrystia is right. it's 2011 we have some time to go. in an exclusive interview with cnn's white house correspondent jessica yellen, treasury secretary tim geithner came out swinging. >> unless republicans are willing to do more things for the economy now, unemployment will stay too high, won't come down fast enough, growth will be weaker. that's not a political statement just basic reality. >> stephen, have republicans reached a point where they have more to gain in november 2011 by stalling, by not having this economy improve dramatically in the last year so they win the election. >> certainly a weak economy is going to help republicans win the white house. but i think that's an unfair allegation. what's the big thing going on in washington right now? it's the super committee. guess who is not represented at the table there, who wants the super committee to fail? that's barack obama. the reason he does, he wants this narrative for the election season that the republican congress is -- >> isn't that too dangerous? >> i think it's dangerous. >> you believe the president wants the risk of these automoti automatic cuts that come in that will cripple this economy. >> republicans and some democrats say obama has not been represented. he has no interest in seeing this succeed. >> chrystia, what do you think? >> i don't agree. i think it's very clear what's going on right now. stephen is right, the republicans don't have an interest in the economy getting better. >> i didn't say that. >> right now. right now. we shouldn't blame them for that. politics is an oppositional race. it's perfectly fair and justified to say we don't believe in your policies and we're not going to help you execute them. >> the danger is everybody gets sprayed by the same skunk. the economy gets worse they are going to smell the same. >> i don't think everything happened in a super committee and i don't expect it to happen there. it's all about jobs, the economy. if europe goes into recession, will that push u.s. into a recession. that's why occupy wall street matters. it's about the american dream, feeling you can do better than your parents. >> gridlock is dangerous for both sides. what you could have in november 2012 is throw all the bums out. >> except someone does have to win. ultimately there will be someone who is the president. it's not a case where everybody can lose, one person will be president, either barack obama or -- >> i don't want a partisan judgment, i ask as financial journalist, both of you, because we know where he stands. is there someone that stands out in this race regardless of their politics or the likelihood they might win. >> i truly think it's impossible to give a purely technocratic answer to that. i think in the republican field technocrats will see mitt romney and jon huntsman makes the most sense on the economy. i think barack obama and tim geithner are a strong economic team. >> i agree romney is sounding better than he did four years ago, less like a salesman. that's a good thing for him. we haven't seen a real coherent what are we going to do about jobs plan. obama is trying but keeps getting gridlocked. whoever can do that will win. >> if europe gets worse or fails what are we going to do about jobs plan suffers greatly. >> it affects u.s. economy. we're in a global economy now. look, i do want the economy to get better, i think jobs are number one. i think there's a complete ideological difference. republicans say they don't want to raise tacks. i hope they are right. i hope they get an agreement another super committee. if we can't cut the first trillion dollars, how are we going to get to the next 9 trillion. we'll talk about the super committee. there has been some movement. one guy responsible for some of it. let's see where we're going debt crisis may be america's problem. what it means specifically for your investments and job search. stay with us. 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[ whirring and beeping ] [ ding! ] and we give you a discount on both. great! did i mention no hands in the bundler? bundling and saving made easy. now, that's progressive. call or click today. i tell you what i can spend. i do my best to make it work. i'm back on the road safely. and i saved you money on brakes. that's personal pricing. as i told you before the break, europe's debt crisis has real implications for your job and investments in the united states. our good friend cnn.com poppy harlow joins us with a man from zephyr management. take it away. >> we started looking at greece now about italy. jim, we're going to break down for people why they should care so much about italy. i'm going to pull away countries in europe, all the highlighted countries on the periphery where we're concerned about a debt crisis. take a look at italy. you've got $2.2 trillion economy, seven times bigger than greece. the fear is the lack of confidence and the ability for that country to pull back from a debt to gdp ratio that's clearly unsustainable. first scenario if we have italy implement austerity measures and the market believes it, then what happens to jobs in the united states? what does that money? >> that's good news. that means europe will not pull us down, continue to grow in the united states, not as fast as we want but continue to grow, employers will add jobs and you will have a gradual decline in the unemployment rate from 9% now to 8 1/2% in a year. >> not enough in terms of creating jobs in the country. investments, people with exposure through 401(k) to europe, what should they be doing in terms of the equity market right now, in terms of their bonds? what should they be doing to protect themselves. >> europe is going to have a recession. many would say they are in it. you want to invest where the growth is. the growth is in the united states and select emerging marriages, china, asia. you want to own the biggest, most conservative u.s. corporation with a global footprint, lever to the emerging markets, united states with dividends and select high-quality companies in the emerging markets. >> be very conservative. corporations, they have been able to weather this recession better than consumers. you've got record corporate profits for a number of companies of the question is what would this situation mean for corporate profits? >> corporate profits would grow. the decline in europe would be offset by decline in the united states and see corporate profits grow 5 maybe 10% next year. >> look at this scenario and it's more likely than the next scenario, italy doesn't implement austerity measure, or they do and the market doesn't believe that. in that case, what does it mean for jobs in this country? obviously a worse situation? >> it would be a problem. what would happen financial markets and economy in europe would freeze up. it would blow back to the united states. corporations would have fear, would not add jobs and you would not see an improvement in the unemployment rate. >> what do you do with your investments? how much more conservative should you be if this is the case with italy. >> you should have more bonds in that case, more fixed income, u.s. government debt, corporate debt in the united states. to the extent you had equities, again, you'd want to lever where the growth is, which are the emerging markets. to the extent there is growth the united states would participate. again, you'd want to own big conservative stocks. >> for corporations, obviously the situation gets more perilous for corporations. what do we have flat earnings for corporations or see a decline. >> you can have a decline in corporate profits under that scenario. europe could pull the whole world down and you could have a 4 or 5% decline. >> the reason why we care about corporations, obviously, ali, is we're exposed to them in terms of our long-term investments. >> they are in 401 (k)s, employers. jim, great description of the various scenarios. i want to take your temperature on this. you keep your eye on this closely. what's the scenario you think is most likely. does it get worse in europe or level out or start to get better? >> i think it will level out. i think you have technocrat governments coming in now. they are going to build a bridge for the next year or two. we will not collapse in the next year or two, europe is long-term no growth modestly growth situation. no growth in europe, some in the united states and some in the emerging markets. >> one important jim reiterated, the united states tipped europe into this position, really led europe on its knees to get to this point because of our housing crisis. >> the housing tripped up the whole financial markets worldwide which exposed the problems in europe. ultimately the problems in europe woul