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YOUR MONEY

Energy Debate Heating Up the Campaign Trail; Our Addiction to Cheap Goods from China; Why a Change in Our Shopping Habits is Affecting the Economy; One in Three Uninsured Americans Have Chronic Illnesses: Are There Any Solutions to this Growing Problem?

Aired August 9, 2008 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FREDRICKA WHITFIELD, CNN ANCHOR: He was a king of comedy, Bernie Mac, he died this morning at a Chicago-area hospital where he was being treated for pneumonia. The 50-year-old actor and comedian suffered from a long-running inflammatory lung disease, but his publicist says that this bout with pneumonia was not related to the disease.
An American visiting Beijing for the Olympics was murdered today at a popular tourist site. He's identified at Todd Bachman, the father-in-law at a U.S. Olympic coach. China's official news agency says Bachman was stabbed to death by a Chinese man, who then committed suicide right there at that popular tourist site. Bachman's wife, Barbara, was seriously wounded and their Chinese tour guide also was hurt.

Russian Prime Minister Vladimir Putin has arrived near the border between Russia and Georgia. The two former Soviet republics are locked in an increasingly violent conflict over the status of south Ossetia, a break-away region of Georgia. Georgia's parliament today declared that a state of war.

We'll update your top stories at the bottom of the hour. Now time for YOUR MONEY.

ALI VELSHI, CNN HOST: Welcome to YOUR MONEY where we look at how the news of the week affects your bottom line. I'm Ali Velshi and look who's here.

CHRISTINE ROMANS, CNN ANCHOR, YOUR MONEY: I'm Christine Romans.

Coming up on today's program, gas prices are falling across the country. But the energy debate is heating up on the campaign trail. We'll tell you where the candidates stand and what it means for your gas tank and your wallet.

VELSHI: Plus, our addiction to cheap goods from China and why a change in our shopping habits is affecting the entire economy.

ROMANS: And one in three uninsured Americans have a chronic illness. We look at a new study on this growing problem, the growing cost and find out if there are any real solutions out there and just who is prepared to solve that problem.

VELSHI: But first big news for YOUR MONEY this week. Oil prices sag, hovering near three-month lows. Gas prices declining for more than three weeks. The U.S. dollar hit a 17-month high against the British pound. It's gained against other major U.S. -- world currencies like the euro. Meanwhile, markets have seen some wild swings and Christine Romans has returned to YOUR MONEY to cover it all with me.

ROMANS: And there's so much to cover. I was out on maternity leave and the United States banking system seized up with a credit crisis and all of these things happened. But now we're back to talk about oil prices, just the health of the U.S. banking sector, all kinds of things, your job, everything that matters to your wallet and an election. Every president since Richard Nixon has talked about energy independence.

VELSHI: Are we anywhere close?

ROMANS: Are we anywhere close. And that time, a big feeling that this next president has to do something.

VELSHI: And let's just see where things are going with the price of gas. I'll talk to you in a few minutes. The price of gas has fallen more than 20 straight days since hitting the highs of more than $4.10 a gallon last month. That relief at the pump mirrors the drop in oil prices. So just how low do oil and gas prices go?

Well, for the answers we turn to Stephen Leeb, president of Leeb Capital Management and Shawn Tully, editor-at-large with "Fortune." And before I went away, we were talking about how high will this go. Now asking how low will it go? But really the issue may be less about that than the concern about what happens if it goes much higher or much lower. And Stephen, you are a minority of those who are concerned about the price of oil going much lower and gas going much lower.

STEPHEN LEEB, PRESIDENT, LEEB CAPITAL MANAGEMENT: Very much so, Ali. I mean this is not a problem that's going to go away. It may go away for six months. But basically the world is facing a chronic mismatch between supply and demand in oil. And the lower it goes right now, if it went down to $90, you are going to see a lot of projects canceled. You might even see Brazil put on hold --

VELSHI: Projects about finding more --

LEEB: -- more oil. Alternative energies will somehow move to the back pages and you know what, the problem has not gone away. I mean oil supplies are very, very finite. And demand growth for oil is going to continue. I mean, just you know, one statistic. 2.5 percent of China and India drive automobiles. In Brazil the number is 14 percent. Here the number is 80 percent.

VELSHI: Right.

LEEB: Capitalism is out of the bag. People in these developing countries want -- now define themselves in terms of how much they can afford.

VELSHI: Right. LEEB: That tells you demand is going to increase.

VELSHI: What do you think, Sean, do you think the price of oil goes up from here, stays where it is or goes down? And what do you think of those consequences that Stephen's talking about?

SHAWN TULLY, EDITOR AT LARGE, FORTUNE: Well, I respect Stephen's arguments, but I don't agree because we've seen this movie before, Ali. We saw it in the early '80s when we were told by the Carter administration, oil prices were going to $100. They went to $12. What happens in these periods where the price of oil is very far above replacement costs which is currently the case. Anadarko (INAUDIBLE) , $50 a barrel. They're making $70 a barrel. They're making more than 100 percent margins. You have a supply explosion.

And what happens is the longer the price stays high, the more overinvestment in drilling you get. And then they start -- the oil companies start drilling at marginal costs, which is below full costs. And this can go on for years. So the longer the price is - it's just like the real estate market, the housing market, the prices stay too high for too long, that's why we're having this huge decline in prices.

LEEB: Ali, there's a real big fallacy in that kind of argument. I respect Shawn tremendously but it's simple to see. Let's say you have a certain amount of water in your backyard. And you want to find an additional barrel of water, a gallon of water and it's right below what you have and it might cost you only $1 to find it. But the next gallon of water is 30 miles underground. That's going to cost you thousands and thousands of dollars to find.

Sure, you can get marginal oil for $50 a barrel. But you can't get 2 or 3 million of barrels of oil at $50 a barrel. The head of Conoco's exploration division and he knows something about finding oil, says he needs and I'm quoting him -- or certainly paraphrasing him accurately, $100 oil in order to be able to increase production. Depletion rates in this world are running very, very strong and if you just look at production profiles, we've had high oil for a long time.

VELSHI: Yeah.

LEEB: Oil well above $50. There's been no increase in oil production over the past five years.

VELSHI: What about McCain talking about drilling offshore?

TULLY: He's right. We should definitely increase drilling. Obviously, it's going to happen with a lag. But the entire oil market and the reason I don't agree with Stephen's analysis is it reacts with a substantial lag, very much like the housing markets.

You have the prices being set now by the buyers who are bidding up, as you said, and it's true, that last barrel of oil way above replacement costs. However, the longer that price, that gap between the production cost and the price that's being paid, the more incentive producers have to bring out enormous supplies. And also you're going to have a demand reaction at the same time. The combination will cause a very steep decline in prices.

LEEB: I don't see how you rationalize that with Petrobras budgeting $250 billion to develop those so-called marginal oil, that's Mount Everest deep under the sea. That may cost $100 to bring up to the ground. We're not talking about single barrels here, Ali, to keep the world going. We're talking about many millions of additional barrels. And, yes, to bring on the next barrel may be $50, but to bring on another million, the marginal cost of that millionth extra barrel may be $300 and that's the situation that we're dealing with.

VELSHI: In the end do we need to find more oil, do we need to use less oil? What's the answer?

TULLY: Well, the market is going to take care of this. And that's why I oppose.

VELSHI: And so the market -- when gas prices went to $3.50 or $4 a gallon, Americans ran away from SUVs.

TULLY: Absolutely. You have an enormous demand reaction in the market now. The train stations are full. People are driving less. People are using public transportation far more. They're going to be heating their houses at 55 degrees all winter. You're having an enormous demand reaction now. That happens with a lag too. It's happening much faster than I ever expected. That's on the demand side. On the supply's side, clearly you're going to have a surge in supplies. So you never -- whenever you have prices quadrupling, people produce a lot more of it. It never fails.

LEEB: If there's only so much, how can you produce a lot more of it? I mean there are certain geophysical facts that don't make -- that don't jibe with this. I mean if you want to repeal the law of physics, fine, we can talk about science fiction. But you look at this country. We've had all the technology in the world. We've been through a lot of oil crises in the past and production's been in about a five-year downtrend, doesn't jibe with geophysical laws. If you want to repeal the laws of physics, go ahead, have a discussion on science fiction. Me, I'll stick to the facts.

VELSHI: We'll leave it at that. You'll get the last word next time. You two are great to come and tell us about what the differences are and why people see this differently. Shawn Tully and Stephen Leeb, thanks for joining us. Christine.

ROMANS: Good stuff, Ali. Coming up, your next president will have to solve this country's growing energy crisis. We'll break down the energy plans of McCain and Obama next.

(COMMERCIAL BREAK)

ROMANS: The presidential candidates are detailing their plans to solve our country's energy crisis as they campaign in battleground states. Senator McCain's energy policy relies heavily on technology and science. He hopes to build 45 nuclear plants by the year 2030. Senator Barack Obama vowed to eliminate the need for Mideastern and Venezuelan oil in the next 10 years. How will they reach those goals? Can they?

Steve Hargreaves joins us now to look at each of those plans. He's a staff writer for cnnmoney.com. Let's start at the beginning here. Both of them really out really detailing where they stand on the energy problem. Offshore drilling is where the flip-flopping charges have come back and forth, but politic aside. What do each of these candidates say about offshore drilling and how big of an impact does that have on solving the energy crisis alone?

STEVE HARGREAVES, STAFF WRITER, CNNMONEY.COM: Right. Well, McCain has supported it from the get-go. He wants to keep Alaska off- limits but he's supported drilling off the east coast and off the west coast as do most Republicans. Obama was against it as are most Democrats. Now Obama says that he might be open to some type of limited drilling.

ROMANS: He's not happy about it.

HARGREAVES: No.

ROMANS: He'll do it in the sake of compromise

HARGREAVES: Compromise, basically. The Congress has been far apart on this issue. The Democrats have been pushing for you know, taxes on oil companies and a big push into renewable energy. And the Republicans have been pushing for drilling and you know, neither one -- neither side is willing to give so far. So it looks like people are starting to compromise a little bit. But you know, in the long run, most experts say that it's not that much oil. It's not going to make a huge difference in the price.

ROMANS: Let's talk about the strategic petroleum reserve, there are four sites. I think a lot of Americans don't realize that we are actually buying and hoarding oil for emergency purposes. Is this an emergency purpose? And what do each these candidates say about that petroleum reserve.

HARGREAVES: Right, well we've actually stopped buying oil and filling it right now but we still have this giant reserve down in Texas and Louisiana. It's about 700 million barrels of oil. It's quite a bit of oil. And McCain does not want to tap into it right now. And again, it comes down it a partisan thing. Most republicans say that we need to keep it. We need to keep it for a genuine emergency. Obama and a lot of Democrats, they are in favor of tapping into it right now.

ROMANS: And selling it into the market, which would lower gas prices. That would be the theory.

HARGREAVES: That's idea. Again, most experts say that it would not have a huge affect on prices.

ROMANS: What about alternative fuels? I know that Obama in his speech this week detailed huge spending for alternative fuels and alternative sources of energy. And said he would put the full force of the United States government in basically, retooling the American economy away from fossil fuels.

HARGREAVES: Right, this is probably the biggest difference between the two candidates. Obama wants the government to embark on a massive R&D effort into renewables. He wants to fund it to the tune I think it's about $150 billion over the next 10 years. McCain wants to -- he wants to rely on the free market to develop this type of thing. He wants to limit the amount of greenhouse gasses we emit. And then he wants to basically use the free market, rely on the free market to develop these alternatives.

ROMANS: The biggest, I guess, difference in these two candidates on energy, I think comes in the nuclear component of this, nuclear power. McCain wants 45 nuclear power plants on, you know, online by 2030. And Obama has more traditional Democratic view of, well, let's figure out how we're going to reprocess the waste. Let's figure out where we're going to put them and the safety issues first.

HARGREAVES: Right. Right.

ROMANS: Without ruling it out of course.

HARGREAVES: Right, no, of course. Obama -- it seems like he tolerates you know nuclear energy. He realizes that it's important you know in solving the whole greenhouse gas issue, the whole global warming issue. But he has not made a big push for it, a big call for it like McCain has. McCain wants to build 45 new plants. It's an ambitious goal. It'll cost a lot of money. Could it be done? Yeah, it could be done. It'll cost a lot of money. But as a lot of people point out, anything we do is going to cost a lot of money.

ROMANS: Right.

HARGREAVES: Wind costs a lot of money. Cleaner coal costs a lot of money. You know, so, it's kind of -- anything we do is going to cost a lot of money. And you know then there's the whole -- there's the whole security issue. Some people are concerned. Some say the waste and there's obviously the fact that there can be vulnerable to a terrorist attack or something. So it depends. It's a tradeoff.

ROMANS: All right, Steve Hargreaves, thanks so much for joining us, cnnmoney.

VELSHI: Steve and his team over at cnnmoney follow this very closely as you can tell. So go to cnnmoney.com when you want to know anything more about the energy debate.

Now there's this national debate on more drilling for domestic oil that's taking place that they were talking about. Meanwhile there's this tiny town in North Dakota that is quietly buzzing with good fortune because it's sitting on top of what many geologists are calling an ocean of oil.

Thelma Gutierrez has the story from Stanley, North Dakota.

(BEGIN VIDEOTAPE)

THELMA GUTIERREZ, CNN CORRESPONDENT (voice-over): Stanley, North Dakota, a farming town of about 1,000 near the Canadian border.

UNIDENTIFIED MALE: Drive by Stanley, you'll blink, you'll miss it.

GUTIERREZ: It's hard to miss what's happening here now.

UNIDENTIFIED MALE: I mean, you're talking hundreds and hundreds of wells.

GUTIERREZ: Everywhere we went, the talk was about black gold, oil two miles beneath the surface.

KEVIN FREDERICK, GEOLOGIST: The continual amount of oil we find in North Dakota is as much as three times as much as in Texas.

GUTIERREZ: It's called the Bakken formation, a vast 200,000 square-mile area, rich with more than three billion barrels of crude.

GARY DAZELL, STANELY RESIDENT: Oil field have blessed us. We're making lots of money.

GUTIERREZ: Are you in the six-figure range or?

DAZELL: Yes.

GUTIERREZ: Hauling water?

DAZELL: Hauling water. Doesn't get no better.

GUTIERREZ: That promise of money is bringing hundreds of workers in.

MAYOR MIKE HYNEK, STANLEY, NORTH DAKOTA: The economic health of Stanley is just fantastic at this point.

GUTIERREZ: The town's mayor is still reeling from the boom that started just eight months ago.

HYNEK: I'm fairly certain that if they drilled a well here, they'd have oil. You know --

GUTIERREZ: Right where we're standing?

HYNEK: Yes.

GUTIERREZ: So how many potential millionaires did we run into? 24-year-old Aaron (ph) (INAUDIBLE) now has a well on his farm.

UNIDENTIFIED MALE: My family has three. And so -- and there's more and more getting staked out every day.

GUTIERREZ: How many mineral acres do you have?

GREG BOSCHEE, MOUNTRAIL CO. COMMISSIONER: Enough that it would make me wealthy, my family wealthy, I should say. GUTIERREZ: Forty eight years ago, you were working on these rigs. Now it looks like there's going to be one on your property. Could you have ever imagined that?

UNIDENTIFIED MALE: No, no not in my lifetime.

GUTIERREZ: Robert Western is 74. He took us to his farm and pointed out a stake right in the middle of his canola field, a sweet sight for a man who grew up during the depression.

ROBERT WESTERN, GRAIN FARMER: We certainly won't have money problems in the future.

GUTIERREZ: Do you wish it would have happened sooner?

WESTERN: It would have been nice.

GUTIERREZ: Better late than never for a farmer who could become a oil baron in a brand new boomtown.

(on-camera): The mayor of Stanley says the town desperately needs doctors, nurses electricians and plumbers. He says just about anyone who works hard would have no trouble finding work here. Thelma Gutierrez, CNN, Stanley, North Dakota.

(END VIDEOTAPE)

VELSHI: Coming up after the break, is it getting any easier to find a job? We'll check the employment picture next on YOUR MONEY.

(COMMERCIAL BREAK)

ROMANS: A big week for business news and Jennifer Westhoven has been following it all, retail sales, jobless claims. We learned a lot more about the consumer and about the economy this week, didn't we, Jen?

JENNIFER WESTHOVEN, CNN CORRESPONDENT: Yeah, unfortunately though, none of it was really good news. And one was the jobs market which is so crucial when it comes to the economy, a very sobering picture. We already new nearly half a million jobs lost already in 2008 and then this kind of a thunderstorm.

The number of people who had to stand on line and file for unemployment benefits for the first time hitting its highest level in six years. And it's now at a rate when it gets to more than 400,000 in a week, these claims, many economists say that that is a signal of recession. So very tough right now if you're trying to get a job.

VELSHI: And to be clear, we talk every month about the unemployment rate and the monthly jobless losses, but we don't often talk about the weekly claims. These are the weekly claims. But this trend is a little bit alarming. That number, well above 400,000 was what got our attention.

WESTHOVEN: To see such a jump here was surprising. Now one of the things has come up is because there's been an extension in the unemployment benefits that may have skewed it. So if we're lucky, it may come down after that, but they're saying it may skew it for a little while. It does just look pretty tough.

ROMANS: ...like a long-term unemployed continues to glow. Those are people who simply drop dropped out of the labor market because they have given up trying to find a job or were never able to find a job. I guess it's no big wonder really, that you're seeing it on the retail fronts. You're seeing people pull back even after those stimulus checks are now over, people are paying for the -- the day-to- day necessities.

WESTHOVEN: And I think you could guess, right, you could guess from higher prices for food and gas that people are spending less, but we did get in some ways confirmation that that boom from the stimulus checks does seem to be over as far as retailers are concerned. Wal- Mart said that it had smaller than expected July sales. That people really the fizz that they got from those checks dried up. They've spent them all.

The Federal government of course sent out more than $90 billion in stimulus checks. That's money's largely spent so retailers like Target and the Gap had weak sales. It also looked very much like clothing was something that when you get right down to basics and you got to cut something out, clothing was something that people cut. Gap had its sales down by about 11 percent and I think it really starts to raise the question that if the stimulus check boost is gone, what are we left with?

VELSHI: What are the long-term effects? That was the thing that was supposed to kick into high gear.

ROMANS: Well, some people are starting to talk about the need for another kind of stimulus package, but at what point do you just have to take the pain? This will be the other side of the ideological point. (INAUDIBLE) take the pain before you can fix the problem in the end. So it looks like it's going to be a painful next couple of months for spenders.

VELSHI: And these stimulus packages are not free. They cost the economy a certain amount of money to do that. A lot of people said it's not how much. It was when and maybe it should have been earlier. At this point it may not be as effective.

WESTHOVEN: If we are going to go into recession, right, that's going to have a huge implication for the government and the kind of money that they bring in. So if they go spending this kind of money, that could be seen as irresponsible.

ROMANS: Jennifer's coming back later, but coming up, the biggest loser in the Beijing summer games may just be the host nation China. Find out why and what that means for the goods that we buy here in the U.S.

And later, leasing a car, one big auto maker shutting its doors on the popular financing option. But first, this week's "Right on Your Money."

(BEGIN VIDEOTAPE)

VELSHI: Introducing your child to the stock market early on may help them go from a corner lemonade stand to cashing in on Wall Street.

TROY DUNN, AUTHOR, "YOUNG BUCKS": It teaches them a quick understanding of profits and losses, make money, lose money.

VELSHI: Author Troy Dunn says step one is making it fun. He suggests having kids use their own money to buy a single share of stock in places they like to shop.

DUNN: Kids love Toys "R" Us. Kids love Wal-Mart. Kids love Disney. And so when you help your child understand that they can actually own a piece of Disney, that's very exciting for a child.

VELSHI: Dunn says the stock market is a great way for kids to learn about more than just math and money.

DUNN: They get to figure out over time is that the world events that are happening that we see on the news and read about in the newspaper are impacting the money that they have in the stock market.

VELSHI: And parents could profit from the lessons too.

DUNN: One of the benefits of teaching your child about the stock market is you'll learn right long with them. And who knows. You as a family might end up increasing your personal net worth.

VELSHI: And that's this week's "Right on Your Money."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WHITFIELD: Hello, I'm Fredricka Whitfield in Atlanta.

Now in the news, an American visiting Beijing for the Olympics was murdered today at a popular tourist site. He is identified as Todd Bachman, the father-in-law of a U.S. Olympic coach. China's official news agency says Bachman was stabbed to death by a Chinese man who then committed suicide, right there at that tourist site. Bachman's wife, Barbara, was seriously wounded, and their Chinese tour guide was also hurt.

Russian prime minister Vladimir Putin has arrived near the border between Russia and Georgia. The two former Soviet republics are locked in an increasingly violent conflict over the status of South Ossetia, a breakaway region of Georgia. Georgia's parliament today declared that a state of war exists.

He was a king of comedy. Bernie Mac died this morning at a Chicago-area hospital where he was being treated for pneumonia. The 50-year-old actor and comedian suffered from a long-running inflammatory lung disease, but his publicist said this bout with pneumonia was unrelated to that disease.

And Elizabeth Edwards says she knew about her husband's affair, every painful detail, after it happened two years ago. Former presidential candidate John Edwards admits a relationship with a campaign videographer. He denies that he fathered the woman's child and says he will take a paternity test to prove it.

Coming up at the top of the hour, CNN's "SPECIAL INVESTIGATIONS UNIT: Buddha's Warriors." Now back to more of YOUR MONEY.

VELSHI: Well, the 2008 summer Olympic games kick off in Beijing this weekend, but leading up to the games, China hasn't exactly gotten a PR boost. Allegations of human rights violations and rampant pollution have outraged a lot of people.

ROMANS: And internally, China's economy is struggling. After more than two decades of runaway growth, things are starting to cool down. A lot of that has do with our own shopping habits here, of course. Gordon Chang joins us now with on this. He's the author of "The Coming Collapse of China." Gordon, welcome to the program. Nice to see you.

GORDON CHANG, AUTHOR, "THE COMING COLLAPSE OF CHINA": Thank you.

ROMANS: A lot of the talk before the Olympics is about the pollution, it's about human rights violations. The president made a comment about human rights earlier this week. Quickly -- the foreign minister quickly said, Don't mess around with our internal politics, and that's always kind of the subtext. But there is a little bit of a slowdown happening there after a lot of growth, and that could have an affect here, as well.

CHANG: Oh, sure. You know, in China everyone talked about a post-Olympic slowdown. Well, it started to happen before the Olympics. And really, there are about three trends that are coinciding at the same time. There's the post-Olympics hangover. There's, you know, 10 years of solid growth in China, so they're nearing the end of their cycle.

And also, you know, you've got the problems with the consumers here because China still has an export-led economy. And that means if consumers here are spending their discretionary dollars at the gas pump instead of buying goods at Wal-Mart, it means that factories in China are slowing down and some of them are even closing.

VELSHI: To what degree does that have to happen to slow down that growth in China that has been feeding demand by Chinese consumers? As they get wealthier, Stephen Leeb was saying earlier, they'll buy more cars and they'll buy better homes and they'll have to heat those homes. What has to happen in this economy for it to slow down enough to have China really slow down?

CHANG: I don't think the slowdown has to be that big to have a disproportionate affect on the Chinese economy because people in China are expecting this really outside growth. Last year, it was 11.9 percent, according to official statistics and was probably a point or two higher than that.

You know, it's the expectations. And people now are talking about next year at 8 or 0. You know, most countries would die for 8 or 9.

VELSHI: Yes, to have that kind of, sure.

CHANG: But in China, you know, 8 or 9 is a real problem. So I think that, you know, when people start to say the economy's slowing down -- and we were there last month, and everybody was saying this. And people were saying it's really, really bad. A fund manager that we know, who's really into optimism, said that all of his colleagues are selling out everything, although he's not doing it himself. But even he thinks that the coming slowdown will be very bad.

ROMANS: What does it mean for the American consumer, then? We have grown so used to cheap stuff from China across -- right down the food chain. I mean, drugs, food, processed foods. I mean, we send fish from Alaska to China to be filleted, and then they come back to the United States to be eaten. And gas prices, by the way, at this level. You know, that can't be sustainable for much longer.

CHANG: No, no. Certainly, it can't. I mean, there's inflation in China. It's quite serious. The government number is probably understated by a very substantial margin. And that means that the cost of inputs from manufactured goods that come over here is going to go up, and that means that we're going to see higher prices in our stores. And we're also going to see -- you know, have an affect on interest rates, as well. So the knock-on (ph) effects of what happens in China, you know, will be felt here, just as what we do here...

(CROSSTALK)

CHANG: ... over there.

VELSHI: ... gets the point that it is -- it's entirely cyclical and...

ROMANS: Sure.

VELSHI: ... while we see these effects over time, what we really saw over the last year is when we had these big market gyrations, where we've seen something happen here on the Dow, and then we see it work its way all the way through Asia and into China and then back here. We're really just much more connected than we've ever been before.

CHANG: Certainly. You know, but we're also starting to learn a lot more about the way the Chinese stock market works, and so I think when we do that, we're not going to be so concerned by a drop in Shanghai, like another "Shanghai surprise." And that's partly because things move that market that really don't have any relevance to us and to the world economy.

ROMANS: Quick question. You know, there's been a lot of discussion about the higher energy prices and whether that's going to make domestic manufacturing in this country more attractive, rather than...

VELSHI: Buying and shipping it across...

ROMANS: ... buying and shipping parts all across the country. Even with low wages in China, if you've got these high, high energy prices, could we see domestic manufacturing rebounding?

CHANG: Oh, I certainly think that's going to happen. It's going to happen not only because of high transportation costs...

ROMANS: That'll mean jobs here, hopefully.

CHANG: And that'll mean jobs here. But also, you know, we're seeing, you know, a real fundamental questioning of globalization and lowering trade barriers. You know, the Doha trade round has either...

ROMANS: Collapsed.

CHANG: ... failed or will fail. And really, that means that this whole period since end the cold war, where trade barriers and tariffs have come down, could easily reverse. And if they do, that's going to have certainly a very big effect on domestic manufacturing.

VELSHI: All right. Very good. Gordon, good to talk to you. Thanks very much for being with us.

CHANG: Thank you.

VELSHI: Gordon Chang is the author of "The Coming Collapse of China".

Still to come on YOUR MONEY, one in three Americans uninsured Americans have a chronic illness. Find out how the candidates plan to change that when we come back on YOUR MONEY.

(COMMERCIAL BREAK)

ROMANS: A first of its kind study out this week looks at the specific health effects of being uninsured. CNN medical correspondent Elizabeth Cohen joins us now with more. Elizabeth, we already know that millions of Americans lack basic health insurance. What is new in this data?

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: What's new in this data, Christine, is that they've actually detailed the health problems that uninsured people have. That really hadn't been done in this way before. So let's take a look at what they found.

First of all, they found that nearly one out of three adults without insurance has at least one chronic condition. Now, these aren't elderly people. This study was looking at people under age 65. So for on4 in three to have a chronic condition, that's quite a bit. It adds up to 11 million Americans living with chronic conditions who don't have insurance, and those chronic conditions include cardiovascular disease, hypertension and diabetes. And Christine, I think we all know, to some extent, where they get their care. People who are uninsured often get their care from emergency rooms. We're talking routine care from emergency rooms. This is bad for them and it's bad for the rest of us. That care is very expensive and drives health care costs up -- Christine.

ROMANS: Drives health care cost up, also drives waiting times up in the emergency room...

COHEN: That's right.

ROMANS: ... and makes the emergency room the first point of contact for people when prevention and treating those underlying -- it would cost much less for taxpayers in the beginning.

COHEN: Absolutely.

ROMANS: So what are policy makers doing about this? What are the candidates saying about this issue?

COHEN: You know, the two presidential candidates have very different approaches for how to solve this problem. Let's take a look first at what Barack Obama plans to do. He talks about expanding Medicaid for poor people, also mandating insurance coverage for all children and requiring most companies to offer insurance to their employees. Right now, he thinks that more companies ought to be doing that.

John McCain looks at it from more of a private sector way. He says that there should be tax breaks so that people can buy their own insurance. Presumably, if you get a tax break, you would use that money to buy insurance. And also, health savings account so that you have some tax-free dollars to spend on health costs. So two very different ways approaching this problem, Christine.

ROMANS: You know, I think that some people look at that 46 million Americans -- or 46 million people, somewhere around there, who don't have health insurance as some sort of ticking time bomb, but I think this study shows that it's gone off. I mean, the time bomb has gone off. Right now, we are dealing with some very expensive, very serious, morally and financial, issues in this country for health care.

COHEN: Oh, right. I mean, I think that everyone agrees that something has to be done. I mean, no one pooh-poohs this. Everyone knows that this is serious, and as the economy slows down, that 46 million could get even bigger.

ROMANS: All right. Elizabeth Cohen. Thank you so much, Elizabeth.

COHEN: Thanks.

ROMANS: Ali?

VELSHI: Coming up on YOUR MONEY: Why one auto insider says in a time of high gas prices, leasing your next car may be a bad choice for your finances.

(COMMERCIAL BREAK)

VELSHI: Well, soaring oil costs have hurt automakers as sales of SUVs and pick-up trucks declined, and this has trickled down to the leasing market, as well. Some automakers are losing money on the resale value particularly on SUVs and pick-ups that are returned after leases expire.

The gas-guzzling cars are worth much less than the auto companies, the leasing companies anticipated a few years back, when they offered them up. So this has contributed to the recent multi- billion-dollar losses that have been posted by some the automakers. And Chrysler announced last week that it's walking away from the leasing industry altogether.

Well, what does this mean for you? Lawrence Ulrich is a contributing auto writer for "The New York Times" and an old friend of ours. Lawrence, good to see you again.

LAWRENCE ULRICH, AUTO WRITER, "NEW YORK TIMES": Good to see you, Ali.

VELSHI: First of all, is there -- is leasing going away?

ULRICH: Absolutely not. This is a real tough time for the automakers. These unanticipated losses that you mentioned, you know, have really caught them -- caught them unawares. You could argue that they should have seen more foresight, should seen the SUV party coming to an end.

VELSHI: Right.

ULRICH: But right now, you know, just these, you know, these thousands of white elephants are coming back into dealerships.

VELSHI: Yes.

ULRICH: They can't sell them. They're worth thousands of dollars less. That contributed to -- $2 billion of Ford's quarterly write-off was due...

VELSHI: Was these (INAUDIBLE)

ULRICH: ... to lease -- to these losses alone. So now their calculators, their out...

VELSHI: Right.

ULRICH: ... and they're re-punching the buttons. And we're going to definitely see some adjustments, especially trucks and SUVs. We're going to see probably monthly lease payments to go up or for them to have to subsidize those leases to try to keep -- but leasing is not going away.

VELSHI: Will people have to pay more at the front end when they get a -- when they lease a car?

ULRICH: Perhaps more at front end, perhaps more monthly payment. There's some calculations that -- say your typical $500-a-month SUV, by late fall, end of this year, that might become more like $700 a month.

VELSHI: Right.

ULRICH: So you know, the great thing about leasing, especially for a truck buyer, maybe a business who writes it off and really needs a truck for his business -- you know, you're protected against that tumbling residual.

VELSHI: Right.

ULRICH: You know, you can sleep well at night.

VELSHI: You finish with it, you give it back, and it's not your problem.

ULRICH: And you never have to worry about what it's going to be worth, and that's going to be a key for a truck buyer. So if you really are in that truck and SUV and pick-up market right now, you might want to keep your eye on rising rates and try to get a good deal while you can.

VELSHI: So in other words, if you're looking to lease a Chrysler vehicle, you'd have to go through a third party. Somebody would have to buy it and lease it to you.

ULRICH: Absolutely. And that's going to be difficult. It's doable, but I'm skeptical over Chrysler's strategy. Look, a lease customer, by his very nature, is saying he's willing to pay a little bit more for the convenience of leasing. He doesn't want to hear that he can get a six-year car loan for the same payment as a three-year car loan. He doesn't want to keep a car for six years, he wants to flip into a new car every three years.

VELSHI: But you and I both share a view that while this is very convenient for some people leasing became just popular because it was a low monthly payment for a car. It may not be in everybody's best interest to be leasing a car. You might want to take the car loan.

ULRICH: Absolutely. I've always been a proponent of that. If you look at the buy-and-hold strategy, you know, having no car payments is a beautiful thing.

VELSHI: Right.

ULRICH: You know, if you really do -- if you have a five-year car loan and then keep the car for a couple more years, you know, that's gravy. You look at the guy who's spending $5,000, $6,000 a year in lease payments to the guy who's got no payments...

VELSHI: Right. ULRICH: You know, that's going to pay for all your gasoline, plus money left over in your pocket. But you're just not enjoying a new car and the convenience.

VELSHI: Sure. But your bottom line is that leasing is still going to be available, might become a little more costly.

ULRICH: Absolutely.

VELSHI: All right. Are we going to see the other automakers follow this trend? You going to see GM and Ford do this?

ULRICH: Definitely not. The signs don't show that. You know, Chrysler is taking a huge risk here. You know, they can ill afford to lose any more customers. Lease customers are good customers. This is a guy who's willing to...

VELSHI: They're always buying...

(CROSSTALK)

VELSHI: They're always into a new car, yes.

ULRICH: Every three years. And if you tell the guy that he can't lease anymore -- and remember, this is a guy who's willing to actually pay a little more per month...

VELSHI: Right.

ULRICH: ... for that convenience.

VELSHI: He'll go somewhere else.

ULRICH: And they're going to walk to another dealership.

VELSHI: Lawrence, good to talk to you. Lawrence is auto writer at "The New York Times."

Well, if you have rented a car recently, you probably know the feeling of returning that car if the tank is not quite full and the shock you get at what the you're charged for that gas. Well, I sat down with Hertz head man Mark Frissora to find out what they've got in store to make sure you are not hit with insane charges when you rent your next car. What I didn't know is that the rental car industry can actually predict the future.

(BEGIN VIDEOTAPE)

MARK FRISSORA, HERTZ CEO: We're a very good barometer for the overall economy. So what we're seeing right now is there must be some GDP growth in the third quarter. I would gauge it at 1.5 percent, 1 percent to 1.5. Fourth quarter, I'd say that there's no growth, you know, what we're seeing right now. But again, these are advance reservations. They're not a really good indicator of what's really going to happen because they're so far out. We book a lot of our rental demand closer in at 30 days or closer in when we actually see demand patterns that we can kind of say, Hey, this is where it looks like it's going.

VELSHI: That's interesting because we often think of other industries as good barometers of the industry -- of industry in the United States, trucking or shipping. And there's no penalty to not keep those reservations. So if somehow, you were able to be in a world where there was an incentive to book and keep that booking, you'd probably be a very accurate barometer of the economy.

FRISSORA: That's correct. You're right. We don't do that now.

VELSHI: Interesting...

FRISSORA: That's correct.

VELSHI: In the car rental business, we know that some of the complaints obviously are about fuel. You have people complaining about fuel no matter what they drive. But there's sort of been some feeling that maybe it's a little bit unfair in the car rental business, and you're taking some steps at Hertz to address that. Tell me about what you've done.

FRISSORA: That's exactly right. In fact, the two biggest customer service issues that we see in the industry at large is fuel prices and charging, like, $7.99 a gallon when you return your car, or service, that it takes too long to get in the car in the first place.

So Hertz is announcing that we're going to have two big guarantees. One will be that you can get in your car in 10 minutes or less. And when you return your car on a less than empty tank, we're going to charge you price to pumps. So whatever the pump price is, it'll be that. So right now, it's $7.99 a gallon. It'll go from $7.99 down to some level between $4 and $4.50 a gallon, whatever the local market dictates.

VELSHI: What would you say is the most dramatic change you've seen in terms of percentages of green to SUVs? How has that evolved?

FRISSORA: I'd say the green collection is up 40 percent year over year this year on rentals, OK? So green is a very big, evolving universe for us. Our fleet has upsized from maybe 12,000 to 40,000 or 50,000. It's in that range. It flexes every month, but let's say 40,000 to 50,000 cars, which is a big percentage of overall cars. We typically have about 320,000 cars in the U.S. driving around, and in Europe, it's more like about 100,000 to 120,000 in Europe. So when we look at the U.S., we're seeing a big move toward greens, and then within green, there's compact and subcompact.

VELSHI: So it's -- but you don't have electric cars in the U.S. yet.

FRISSORA: No, but we are planning to have them. Probably over the next 12 months, you'll see them introduced. We do have them in Europe today. (END VIDEOTAPE)

VELSHI: Well, believe it or not, as high as those fuel surcharges can be, auto rental consultants say that selling gas is not a big profit source for car rental companies. They're not gas stations, and the cost to house fuel in the underground tanks, the labor, the expense and the productivity issues actually create significant costs for those companies.

ROMANS: All right. Coming up on YOUR MONEY, the long sagging U.S. dollar is making gains on world currencies. The CNN money team will be here to tell us what that means for your buying power next.

(COMMERCIAL BREAK)

ROMANS: Welcome back to YOUR MONEY. Jennifer Westhoven is back, and we're joined now by our good friend and colleague from CNNMoney, Paul La Monica.

VELSHI: Now, let's start with one of the scary business terms we've heard recently, auction rate securities. Don't change the channel!

ROMANS: It's serious and it's important.

VELSHI: Don't change the channel. You should know that you might own something called an auction rate security without really being conscious of it, and the money you have invested might not be available to you. Auction rate securities are essentially sold to individuals like bonds. In other words, they're -- they're...

ROMANS: They were billed as a foolproof, safe, safe investment, the safest there are.

VELSHI: Right. But as this credit crisis took hold, those investments in some cases lost value. And this week, two of the biggest banks involved in these securities, CitiGroup and Merrill Lynch, agreed to buy back some of these from smaller investors because they had a threat of legal action from New York's attorney general.

ROMANS: That gets you moving, doesn't it?

VELSHI: Yes. Some of you might be getting your money back, even if this investment lost value. But what you needed to hear was the conversation in the commercial break because we're unconvinced as to how big a deal this is. Paul, you've been covering this for a few days. Is this a big deal? Should people be worried about their auction rate securities?

PAUL LA MONICA, EDITOR AT LARGE, CNNMONEY.COM: It's a semi-big deal in the context of bigger financial problems that we're having right now. Clearly, there's only about -- I think Merrill had about 40,000 accounts with auction rate securities and Citi about 30,000, so we're not talking about millions of people that are affected by this. But for those that are -- I mean, you talked about the auction rate security market losing value. It was worse than that. The market completely froze up...

VELSHI: Right.

LA MONICA: ... so people couldn't even take their losses, if you will.

VELSHI: You just couldn't get the money.

LA MONICA: Right.

(CROSSTALK)

VELSHI: ... thinking that you had a fairly liquid investment...

LA MONICA: Right.

VELSHI: ... and then that was it.

LA MONICA: Yes.

(CROSSTALK)

LA MONICA: It's one thing to see the market fall...

VELSHI: Yes.

LA MONICA: I mean, you just couldn't get your money out at all. So with that in mind and the fact that the banks were, as Christine mentioned, billing these as, These are great safe investments, and they weren't...

ROMANS: I would be so ticked off if I had a lot of money that I thought was going to be available to me in these auction rate securities and weren't.

VELSHI: I think the conversation here, though, Jennifer, that's wise (ph) to people is that it used to be that there was a bond or there was a money market or a CD. Now, along with banks getting all very creative, so have investors. And there are things that you may not know the conditions of. If there's no other news out of this, people should check what they're invested in and how liquid it is and when it's available, if there's any risk (INAUDIBLE)

WESTHOVEN: I think that's absolutely true. One of the lawsuits that came out of this, too, is not just that I think people were putting in their money in something they didn't understand. One of the allegations is that it's possible -- and I wonder what you think about this -- is that some of the banks were actually using these to put people into riskier areas, so that, basically, they were shifting the loss of risk onto their customers and away from the banks.

LA MONICA: Right. Yes. That was definitely one of the problems there. And in the case of Citi, there was also allegations that they may have destroyed some of the documents related to the investigation. So I think Citi clearly wanted to settle with New York state as quickly as possible to get this behind them. ROMANS: We talked about another big money story this week, and that is the American dollar, which has been really in trouble for much of the year, starting to rebound now.

VELSHI: Yes, it looks like...

(CROSSTALK)

VELSHI: ... I specifically picked a summer vacation in a country that doesn't use the euro because I was totally -- I was going to be the smart guy here. And guess what? The dollar is at the strongest point in five months against the euro.

ROMANS: Is it a reflection, do you think, of better fundamentals in the United States, or why is it the dollar getting better?

LA MONICA: I think part of it is that the rest of the world is unfortunately catching up with the United States in terms of a slower economy because the Fed had been -- the Federal Reserve had been lowering rates aggressively earlier this year because of the credit crunch.

Meanwhile, the European central banks, they kept rates steady, for the most part, and even raised them last month because they're more concerned about inflation. Now you're finally starting to see Europe slow down a little bit, and it's the euro that has been so strong versus the dollar. So with Europe's economy finally starting to slow, the euro is going to weaken and the dollar's going to strengthen against it.

ROMANS: You know, the Canadian dollar went, like, 95 cents...

(CROSSTALK)

VELSHI: It's 95 cents to buy a Canadian dollar. But I think you're right. We think of it as our dollar going higher or lower, but it's a big basket of world economies and they might be going -- going lower than ours.

WESTHOVEN: I think so often, we play such close attention to our own economy, we don't necessarily...

VELSHI: Right, realize it's going to...

WESTHOVEN: ... what's happening in Europe, but they have started showing some signs of weakness.

VELSHI: Didn't you mention the other day -- we were talking about the European credit crisis, and you had sort of a -- you know, why should we be that interested? But we're all one big interconnected...

ROMANS: Well, I am -- I am interested...

VELSHI: ... neck bone connected to the ankle bone...

ROMANS: ... in the Europe credit crisis. I am interested in the European credit crisis.

VELSHI: Oh, yes!

ROMANS: I'm just saying...

VELSHI: You seemed real interested in it the other day.

ROMANS: There's a lot of things I'm interested in that are happening right now to me that are a little more important than me worrying about what's happening to some guy outside Paris.

VELSHI: This show -- this isn't -- this show isn't seen in Europe, so you're not really offending anybody.

ROMANS: I'm not offending anybody.

VELSHI: Sorry to all you European tourists who are here enjoying our strong U.S. dollar, who happen to be watching this show, who now...

ROMANS: Paul La Monica and Jennifer Westhoven...

VELSHI: ... got insulted by -- by...

ROMANS: ... thank you. I'm not -- I'm not the one who's...

VELSHI: Good to have you back. It's so good to have you back, Christine.

(LAUGHTER)

ROMANS: Thanks for joining us for this edition of YOUR MONEY.

VELSHI: We'll see you back here next week, Saturday and 1:00 and Sunday at 3:00. See you then.

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