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Many Americans Fear Another Great Depression is Looming; More People Retiring, Less Businesses Hiring; The Booze Economy; OPEC: No Production Hike; Dow 20K?

Aired June 12, 2011 - 13:00   ET


ALI VELSHI, HOST: We are not headed for another Great Depression, but can perception equal reality? Welcome to YOUR MONEY. I'm Ali Velshi.

Forty-eight percent of Americans say that another Great Depression is likely to occur in the next year, that's the highest that figure has ever reached.

Stephen Moore is an editorial writer with the "Wall Street Journal." Can the fear, Steven, of a depression whether it's warranted or not cause consumers to behave in a way that actually really does end up threatening this recovery that we're in?

STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL": Well, Ali, first of all, I'm with you. We are not facing another Great Depression, thank goodness. So those people are thinking about walking into the ledge of their window and jumping out. We don't need that right now.

The truth is, people are in a state of real fear right now, Ali. There's no question about it. If you look at the statistics on the economy that have come out in the last month, they've just almost all been negative.

But, you know, sometimes the things are bleakest before the dawn and I think that's the case right now. But you're right, the big problem is because people are in such a state of fear.

They're not spending, businesses aren't investing and that's actually -- so it's becoming a self-fulfilling prophecy. People -- the economy shrinks as people become more afraid.

VELSHI: And we have all sorts of examples of people who otherwise would know sounding afraid. Listen to this, Federal Reserve Chairman Ben Bernanke expressed optimism that the recovery will regain some momentum in the next six months.


BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: Growth seems likely to pick up somewhat in the second half of the year. Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven at across sectors and frustratingly slow from millions of unemployed and underemployed workers.


VELSHI: And that's what he hit on the head. Former "New York Times" columnist, Bob Herbert is a distinguished Senior Fellow at Demos.

Ben Bernanke, Bob, acknowledges that the job situation is far from normal. In fact those are his words. Americans are telling CNN that just under half live in a household where someone has lost a job or are worried that unemployment may hit them in the near future.

Bob, Americans are simply afraid right now. What role does that play in holding back this recovery?

BOB HERBERT, SENIOR FELLOW, DEMOS: I don't think fear holds back the recovery so much as the problem that we're talking about and that is employment. Not enough Americans are working.

What we're finding out is since the -- corporations in America are now producing as much as they did before the great recession hit. But they're doing it with seven million fewer workers. Corporations don't need as many workers as workers need jobs in this economy now.

VELSHI: And that's a trend that's been going on for years.

HERBERT: Yes, but we need to have a conversation and figure out what our policies are going to be going forward because even if we have modest job growth and the economy recovers, which people seem to expect.

A lot of Americans are going to be facing what is an extended recession and we don't have employment for those folks. Ultimately a consumer society can't work if the consumers, if so many of the consumers are tapped out.

VELSHI: CNN's chief national correspondent John King joins us from New Hampshire where he's going to moderate Monday night's Republican presidential primary debate, which is right here on CNN.

John, voters are giving President Obama low marks on his handling of the economy. What do you expect the Republicans to offer to counter that?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, the Republicans are blaming the president, number one. Now, President Obama makes the case, Ali, you've heard it for months that he inherited a horrible economy from George W. Bush and that it is better now.

He says not great, but better now than we began his office. That's the president's case. The Republicans are saying all the big spending in Washington. They think the Obama administration has too much regulation on the economy.

Most of them don't like the Wall Street package that was passed by the Congress and signed by the president. So it was an anti-Obama, anti- Democratic message you get from the Republican candidates.

They say they would cut corporate taxes. They say they would dramatically cut federal spending. Now there's a big debate and your other guests here can help with that debate about whether cutting spending is the right thing to do when you want to increase employment.

But deficits and debts are driving the economy right now, not so much employment. An interesting thing, the early contests are in Iowa and New Hampshire, two states that have an unemployment rate well below the national average so it's a somewhat of a different dynamic in Iowa and New Hampshire than it is nationally, Ali.

VELSHI: Bob, this debate is going to hinge on whether or not we're talking about maybe another leg down in the economy. Forget the depression talk, but there is some talk that things might weaken a little bit. This idea of cutting spending right now, it really flies in the face of what many Democrats are trying to push.

HERBERT: Well, most of the economists I talked to are not just liberal economists, think that's exactly the wrong thing to do right now. Where the economy has weakened, employment has not picked up the way people wanted it to.

So if you don't have spending in the private sector, you need to get it from government. If government is going to cut, it's just going to depress the employment statistics even further.

VELSHI: Stephen?

MOORE: I don't agree with that at all. I think we've had this kind of giant Keynesian experiment over the last two years where we've flooded the U.S. economy with money. We flooded the U.S. economy with government spending and the economy is still really flimsy.

It's been an anemic recovery. I think the case that Republicans are going to make next week as this presidential campaign rolls on is that we need to get back to the kind of Reagan formula.

Look, I think this is a very good analogy. The last time we had a horrible, horrible recession like we do right now was in the early 1980s. Reagan didn't flood the economy with money. He actually slammed the brakes on the money supply, got inflation down and we did tax cuts.

By the way, Ali, over the next 20 years, we created about 35 million jobs. We know how to create jobs in this economy and by the way, we did that even as employers got much more productive in terms of their producing of goods.


KING: Well, Ali, look at the reality of it. You're having a great debate between Bob and Stephen about whether you should cut spending or increase spending. Here's the political reality. It's not going to happen.

The president has said, let's increase spending on infrastructure. Let's do some more research and development credits. Let's try and the House Republican majority just elected because of the Tea Party support, which is mostly cut spending and shrink Washington.

The House Republicans simply are not going to go along. You may get a payroll tax proposal from the president in recent weeks that he thinks the Republicans might like, but it will be mostly small ball. Don't expect anything big right now.

I talked to David Axelrod, the president's top adviser the other day. He said that's why you have elections to debate these ideas. So we'll have a big debate about these issues in the 2012 presidential election. But what about the millions of Americans who are unemployed and underemployed in the meantime?

VELSHI: Let's talk about the president's opinion -- the CNN Opinion Research poll shows that the president's approval rating has dropped since late May. It's down six points, now 48 percent.

You know, we were talking after the killing of Osama Bin Laden, John, about this bounce that the president got and people saying, well, he's walked into his next election victory.

I mean, nobody really thought it sensible to predict in May of the prior year whether that was going to be sustained, but the reality is it does seem to be coming back to the economy.

KING: It is all the way back to the economy. There could be some world event, there are global challenges, Afghanistan, Libya and beyond that could come into play as we get closer and closer to the election, but without a doubt, everybody is serious about this race.

The president's team, the teams around all these Republican candidates who will debate here believe the number one, the number two and the number three issue will be the economy.

Stephen just mentioned Ronald Reagan. The employment rate was 7.2 percent when Ronald Reagan was re-elected back in 1984. He was able to convince the American people that things were getting better.

I give you another example and this is what team Obama worries about. George H.W. Bush, if you go back to 1992, unemployment got up around 8 percent. It started to come down steadily throughout the election year. George H.W. Bush was telling the truth when he said by the numbers, things are getting better.

You mentioned perception of reality, the voters here in New Hampshire and across the country didn't believe it. They didn't feel it. Didn't think they were getting better. They said, good-bye, Mr. President. That's what team Obama worries about in this stagnant economy.

VELSHI: All right, John, stay where you are. Bob, Stephen, you, too. The top five most important issues to voters have one thing in common. I'll tell you what on the other side.


VELSHI: The economy remains issue number one to voters. The only one that more than half of the public says will be extremely important to their vote for president next year.

But look at the rest of the top five, unemployment, health care, gas prices and the federal deficit. They're all about your money. You need to go to number six before you get to terrorism.

And down even farther than that, we're showing you to find hot-button issues like abortion, illegal immigration and gay marriage.

Bob, what exactly can a voter reasonably expect from a president in a presidential election when it comes to fixing unemployment or lowering gas prices?

HERBERT: Well, in terms of lowering gas prices, nothing, hardly anything at all from the president. But I think John was correct in the prior segment when he said we're not going to get much in the way of investment before the election next year.

Because the Republicans hold the House and they're just not going to permit anything like that. So I think we're going to continue to have a stagnant economy. Employment is still going to be depressed.

And ultimately I think that's going to be harmful to the president's re-election efforts. You know, he's not invulnerable. I thought that it was really interesting the reference to George H.W. Bush's re- election bid.

VELSHI: Stephen, give me some sense of whether or not we have unrealistic expectations of the presidency and from government when it comes to the economy.

MOORE: Well, you know, what's the old saying? It's the economy, stupid. That's going to be the theme of this election just as it has been almost every presidential election that I can remember, Ali.

For better or worse, presidents get blamed for bad economies and they get the credit when the economy does well. Look, after four years of a president not turning the economy around, I think it's time to fire that person.

If the economy is better next year, if we get that employment rate down to say below 8.5 percent or 8 percent then I think the president is going to be in much firmer footing.

But it's going to be hard for President Obama to make the case if we still have 9 percent unemployment, if people were still running the $1.5 trillion deficit that he deserves four more years.

VELSHI: John, the problem with Stephen is he's too young to remember the last time that we dangerously pulled up on spending in the middle of a tentative recovery in the depression.

It's ironic that people are talking about a Great Depression right now when in fact that was an example of place where we didn't spend the right way and we pulled up a little too fast.

Republicans, John, have scored a lot of political points with the Tea Party by advocating trillions of dollars in cuts as part of a deal to raise the debt ceiling.

This recovery, the way it's going right now, do you expect any of the Republicans in Monday night's debate might back off the idea of severe and deep cuts to this economy?

KING: No, in a word, no. Why? Because, Ali, it's an old rule in politics, you wage this campaign based on the last campaign. Remember, these Republicans are competing in a primary first. We're not in the general election. They're not appealing to all of America.

They're appealing to conservative Republican voters in Iowa. They're appealing to conservative Republicans and independent voters here in New Hampshire. Their lesson is in 2010, those same voters, conservatives and conservative-minded independents were concerned about spending, spending, spending deficits.

That's where they're tracking their appeals right now. They're talking about cutting spending and in terms of any stimulus to the economy. It would come through cutting taxes not through government spending.

They believe they need to frame themselves as against President Obama. So don't look for any vacuum play at least now in the primary.

VELSHI: Stephen Moore is nodding his head in agreement with you. Stephen, you're a died in the wool fiscal conservative who is not running for anything. Do you think it's reasonable for somebody who's running in the general election, forget the primaries, for a conservative Republican in the general election to say, maybe we shouldn't be as drastic as we're suggesting being right now?

MOORE: You know, first of all, John, I think you nailed it. I think you're exactly right. The Republicans are going to be talking about which one can cut spending the most and which one can cut taxes the most.

That will be the most appealing candidate, I think, in this Republican primary. Look, I just think that this model of spending, spending, spending hasn't worked very well. Ali, I take issue with this.

I think if the president and this Congress could come forward with a credible plan to bring this enormous debt down and these $1.5 trillion deficits down, I think that would unleash the animal spirits of this economy and we would get growth.

So I'm making the case the debt and the deficits are holding back this economy. They're not stimulating it.

VELSHI: Bob, can there be something that unleashes the animal spirits of this economy? That is exactly what we need.

HERBERT: Yes. It would require investments. I mean, if you had a business and you wanted to grow the business, you would have to make investments in that business. And we're doing just the opposite.

So I think your reference to 1937 when FDR and the Congress pulled back prematurely on spending is a terrific example. We're in danger of doing something similar. Not on the same scale because we're not facing a depression, but we're in danger of making the same mistake again.

VELSHI: All right, guys, it's a good conversation. Thanks for joining us for it. Bob Herbert is a senior fellow at Demos, a former columnist with the "New York Times," Stephen Moore, a good friend, editor and writer with the "Wall Street Journal" and John King, of course, our chief national correspondent and the anchor of CNN's "JOHN KING USA."

Make sure to tune in to CNN Monday night at 8 p.m. Eastern. John is moderating the Republican presidential debate from New Hampshire and we'll have full coverage of it all day.

All right, how much money is your friend making? You know you want to know. From engineers to teachers and everything in between, we'll reveal what you and everyone here you know is getting paid.


VELSHI: How can you cut 10 percent of government employees without handing out any pink slips? I'm joined by Christine Romans, host of CNN's "YOUR BOTTOM LINE," Chrystia Freeland, editor at Thomson Reuters Digital and Pete Dominic, host of Sirius XM stand up.

Welcome to all of you. Listen to this, a new bill from House Republicans aims to slash the government workforce by 10 percent over the next five years without laying off a single employee, how?

Well, for every three federal workers who retire, the government would only be allowed to replace one.

Chrystia, if the government is not hiring in the name of cutting cost, does this give the private sector the green light to behave exactly the same way?

CHRYSTIA FREELAND, EDITOR, THOMSON REUTERS DIGITAL: Well, the private sector doesn't need the green light, Ali. That is exactly what is happening. I think one of the things that we're seeing in the economy right now is another jobless recovery.

And in some ways, that's great because it means the private sector is becoming ever more productive. People are investing in new equipment in technology. That's great for American companies and great if you're a shareholder in those companies. But the devastating consequence is the job situation is really, really dreadful.

VELSHI: What do you do about it, Christine?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, they're paying for new equipment and not new employees because they know they need the new equipment for the rest of the year. They're not sure they're going to need the new employees for the rest of the year.

In terms of the government and this massive attrition program, Republicans would like to do this swiftly and quickly. They would like to get the federal workforce whittled down.

But it's not so different from what the president's own deficit- cutting commission recommended, although on a slower scale. I think the bottom line for the big federal workforce is that it's going to be -- the belt's going to be tightened.

VELSHI: The way you look at working for the government is entirely different in 2011 than it was 30, 50 years ago. Pete Dominick?

PETE DOMINICK, CNN CONTRIBUTOR: Yes, I mean, three retire, one hire. Let's think of some other great and catchy-sounding names, but they don't make any sense. I had a congressman on my radio show last week, a Republican congressman who said the FDA is inefficient.

That's because you're gutting it. I mean, listen, it's a narrative that government is the problem. Reagan started it 30 years. Let's have that discussion. Let's focus on where government is the problem. But you know what, the intelligence analysts analyzing Bin Laden's thumb drives right now, I don't think we should remove all of those guys right now.

VELSHI: Point well made, Pete. All right, let's talk about something that a lot of people are worried about right now. What your college degree worth once you're actually in the workforce. Let me give you a sense of it. We've got a chart here on the wall.

Basically that yellow -- that orange line through the middle is $55,000. These are various different occupations. The red part at the bottom of each one of them is the 25th percentile of what you earn once you're in that profession.

The blue bar at the top is the 75th percentile. This has done by Georgetown University Center on Education in the workforce. Take a look at that cluster right in the middle. Computers and mathematics, 25 percent, almost 48,000, but top of that, the 75th, 100,000.

Move over to education, we're talking a lot about teachers. Not big earners in this society, the 25 percentile, 32,000, the 75th, 55000. Christine, you and I talk about engineering all the time, $53,000, right on the line at 25th percentile, 7th $102,000.

And health care, an industry that's been growing despite the recession we went through and the recovery, $45,000 is the 25th percentile and $80,000 is the top of that, Christine.

ROMANS: What it tells you is that a college degree is not treated equally in the workforce. Now more than ever to get that degree, you're going to have a lot of debt and you might have diminished job prospects.

You look at education versus engineering or health versus some of these other ones. Their top earning part of that field is at the bottom of some of these others. I look at social sciences. This is one that kind of surprised me.

Inside social sciences, there's something called economics. You know what, this economy is rewarding economists and $87,000 is the top earning quarter of that profession. Why?

Companies and industries have to figure out how to make money in a very difficult economy and what could be a difficult to operate environment. So that's another interesting place, economics there.

VELSHI: Chrystia, does anything on this chart surprise you?

FREELAND: You know, what I think is really striking about it is the winner-take-all phenomenon we're seeing within each profession. So if you take out, for example, education where you're going to lose out no matter what -- which, by the way, isn't that devastating?

Isn't there an education crisis? Shouldn't teachers be not only honored and respected but well-paid? If you take out outliers like education, the biggest difference isn't between the different degrees but between the top and bottom of each degree.

This reflects what we're seeing across the economy where the winners in every area are doing tremendously well and the people at the bottom --

VELSHI: Pete, what's it like?

DOMINICK: Ali Velshi, all your charts and statistics about how much money you're going to make is all great. If you're taking into consideration that money is what makes you happy, that money is what provides you with personal satisfaction.

VELSHI: Hold on, there's one up there -- arts, the second one. There are a whole bunch of people going into that, not really thinking they're going to be all that prosperous, but they're doing it.

DOMINICK: Right. That's the idea. You can go into investment banking if it makes you happy and if money makes you happy. But if you think you're going into a profession just so you can make money, you probably are going to end up unhappy.

Listen, you're looking at a guy who has a two-year liberal arts degree, has his own national radio show. He's a CNN contributor. He's has a great family life and a really big gummy grin. Things can work out.

VELSHI: All we're trying to do here, Pete, is give people some information. I think there should be lots and lots of teachers and we should show that we respect them. We're just giving people an outlook. I'm glad that teachers in training ignore that kind of thing and still go into the profession. Otherwise, we'd all be in trouble.

DOMINICK: That's the idea, that teachers have such -- they have such easy jobs. I mean, teachers don't go into it for money, clearly. They go into it because it's a calling enough with the bashing the teachers.

VELSHI: I hear you. It appears regardless of this struggling economy, Americans are sometimes glass half-full kind of people. Many of those glasses are half filled with alcohol. Alcohol sells grew by nearly 10 percent over the last 12 months. Pete, surprising or predictable?

DOMINICK: I'm actually intoxicated right now because I just saw your charts and graphs, totally predictable. I want to throw you another curveball here. The thing we're not able to measure is how much illegal drugs people are using, specifically marijuana. If we were able to tax that and not spend so much money to fight it, you'd be able to bring a lot more money --

ROMANS: Here we go. Pete, are you a legalization of marijuana man?

DOMINICK: Who isn't at this point?

VELSHI: Chrystia?

FREELAND: Well, as it happens, I am also and Vicente Fox, former president of Mexico interviewed him a few months ago and he's in favor of that, too.

But on this alcohol consumption, Ali, you know as well as I do that this is the classic recession phenomenon. They call them the sin companies.

The classic was lipstick, liquor and cigarettes which I guess speaks to Pete's drugs category and clearly when things are not so great, we turn to those small comforts.

ROMANS: I think it's interesting that now you can buy a beer or glass of wine for cheaper than a gallon of gas and so as long as --

VELSHI: Hold that thought because when we come back, if you're ready to pay an extra dollar for a gallon of gas, that's the idea that one CEO has, the CEO of General Motors charge you an extra buck a gallon. We'll find out why and whether it's a good idea after this.


VELSHI: Lots of coverage this week after OPEC decided not to increase oil production. At the end of April and beginning of May, prices soared -- check that out -- to $113 a barrel. And that fueled calls for OPEC to boost production, boost output of oil.

But over the past few weeks, prices are back down -- we're relieved -- down to just around $100 a barrel.

Chrystia, it will be another three months before OPEC considers increasing output again. This is tricky for them because if they -- if oil prices go too high, people pull back. And if they got too low, OPEC doesn't make enough money, according to them.

So, where are we in terms of oil?

FREELAND: Well, I think the Arab cheap oil is over. And it's over for a couple of reasons. The single biggest one is China. China is getting rich. India is getting rich. As the emerging markets start living more like people in western developed countries, they are consuming more energy. And, you know, fossil fuels are going to run out at some point. So, prices are going to go up. It's your classic supply and demand.

VELSHI: Or we've got to go look for them in places where it's more expensive.

I mean, in the United States, consumption of oil has actually been relatively flat over the last decade. So, people say if you conserve, it will bring prices down. It's actually -- as Chrystia said -- not about us.

ROMANS: Right. And we've been more efficient in our consumption of -- alcohol, sorry, but of gasoline over the past -- maybe alcohol, too, over the past decade or so.

But I think for everyone, whether you're a company, whether you're a president of a company, whether you're the president of your household, there are two things you have to know -- emerging markets are on fire and oil prices are high and could go higher. If they go low, good, good. But if they don't, you need to be prepared for it because I just think this is -- this is the theme song of the next decade.

FREELAND: It's the new normal.


VELSHI: Which is why it makes me want to pull my hair out, Pete, and yours when I hear people angry at whether this president or the last one about gas prices as if somehow the president has some ability to do something about this.

DOMINICK: Right. That's absurd, of course. Summer 2008 is the last time we saw these really, really tough gas prices.

But Chrystia Freeland is spot-on about the rise of the rest, China and India. But, listen, the fact of the matter is we can complain all we want. The Saudi prince admitted on television the other day he needs oil to go back down so we don't look for alternatives.

We are not looking for alternatives. We are spoiled. We are wrapping a rubber band around our arm and pumping crude into it.

We are addicted to this. We have to find alternatives and we have to start finding them now.

The idea that we can find more oil is the solution -- come on, let's be honest with ourselves.

VELSHI: Which is why sometimes high gas prices do the job because they spur some of that innovation. In fact, one person who might be happy about gas prices rising is General Motors CEO Dan Akerman (ph). Akerman said this week that higher gas prices would help his industry, not hurt I, and then he'd prefer a $1 per gallon gas tax hike as opposed to tighter fuel economy regulations.

Now, Christine, I have said it over and over again. The answer to high gas prices is high gas prices because it causes people to conserve. It causes people to look for alternatives. I didn't really think I'd have the CEO of G.M. on my side in this situation.

Does this make sense, that he thinks there should be higher gas prices?

ROMANS: Well, it's clear he means instead of higher fuel economy standards. It's important to make that.

But also, look, I mean, automakers -- Ford, for example, a lot of these automakers are doing whatever they can to try to find the new reality or as Chrystia says, the new normal --

VELSHI: Right.

ROMANS: -- for the kind of cars they're making. Are we ready, American consumers ready for that new normal? That's what I mean by saying you got to start thinking like high gas prices and roaring emerging markets are going to be here with us to stay.

VELSHI: Right.

ROMANS: Even in your family, you have to make these kinds of choices because you do not want to be paying 80 bucks to fill up a van.

VELSHI: It's hard, Chrystia -- it's hard because people who are listening to this are saying, do you understand what I pay to fill up my tank? And times are tough and we have way more unemployed people than we can handle in this country? So, it's tough to suggest that an increase in gas prices might be helpful in the long term. Do you think it could be?

FREELAND: Absolutely. And actually, I mean, as you say, Ali, it's a great paradox. But higher gas prices -- and I absolutely agree, a gas tax is the way to do it. Much more than fuel efficiency standards because what it will do is create an incredibly powerful incentive for Detroit to produce cars that are more fuel efficient and for all of us to buy those smaller cars.

And guess what? In a few years, people may find, OK, maybe their gas bill isn't smaller than it is now, but it doesn't keep on going up even if the price at the pump does keep on going up, which it will do.

VELSHI: And whether it's a tax or the price just keeps on going up, from the consumer and manufacturing perspective, it has a similar effect. In fact, Ford, you mentioned, Christine, is boosting its production by 50 percent over the next four years.

I sat down with Ford's CEO Alan Mulally. I asked him where on earth he's planning to sell all these cars they want to build.

(BEGIN VIDEO CLIP) ALAN MULALLY, CEO, FORD MOTOR COMPANY: We're at about 74 million vehicles worldwide in sales. That's going to go to 112 million over the next few years. And so, tremendous growth industry. And, of course, as you pointed out, Ford is really positioned well.

For example, to your point, in India, we're going to go from three models up to eight models. And in China, we're going from five models up to 15 models by mid-decade.

So, we are going to have a 60 percent to 70 percent of the entire coverage of the market with Ford.


VELSHI: Pete, General Motors sells more cars in China than it sells in the United States. Ford upping its production of cars in India and China and Brazil. Is America no longer the land of opportunity when it comes to an iconic American brand like Ford?

DOMINICK: Yes. And that's because in America, you'll never see a large man get into a small car. In all those countries you mention and in Europe, they do. I go to Italy every year -- you have giant men getting in tiny cars. Why? As we talked about earlier, g as is so much more expensive there because of the taxes on it.

It's interesting to hear the head of G.M. whine and complain and say, "I want a gas tax." Learn how to compete, be innovative and compete with your foreign competitors, with those fuel economy standards that should be even higher in the law of the land.

And, Americans, I know you're big, but we have to get rid of some of our comforts.

ROMANS: Ali, maybe you know this -- isn't the biggest profit center still the United States for all these different kind of manufacturers?


ROMANS: Think of the biggest growth is in emerging markets.

VELSHI: That's correct.

ROMANS: But the cash cow is still for most of these companies is here.

VELSHI: SUVs and those cars are going to become a little less popular.

ROMANS: And that's why they're still building them because they are still making money from them.

VELSHI: Chrystia, what do you think?

FREELAND: I agree with everything. I mean, I think that some -- I think the Mulally point about the growth being in the emerging markets is really significant. And this is a wider shift. American business and Ford is the perfect example.

The Ford Motor Company was built on the U.S. middle class and was built on the notion, Henry Ford doubled the wages in his factories because he wanted the workers to have the money to buy his products.

VELSHI: Right. They kept the middle class going and they sold their product to the middle class.

FREELAND: And there's a really important shift happening right now, which is American business has decided, rightly, I think, in terms of the numbers, that the U.S. middle class is no longer its base. It's the middle class and the emerging markets and rich people in the United States.

That is a sea change and it is having political consequences that I don't think we're talking about enough.

VELSHI: Yes. It's --


DOMINICK: Which is why I'm working on a book called "Capitalism is Not Patriotic." Because Chrystia is totally right and all these companies are doing all the right things so that they compete in the world market. But they don't need to be selling their products whether it's automobile manufacturers or anybody else to Americans. It doesn't matter if we can buy them as long as they can buy them in other countries.

VELSHI: Somebody can buy them.

All right. Pete, good to see you. Thanks, Chrystia and Christine. We'll talk to you again soon.

All right. Do cell phones cause cancer? The government says there's no evidence. The fine print on cell phones says be careful. And my next guest says there's reason to be seriously concern and she can prove it.


VELSHI: Can your cell phone kill you? The question on everybody's mind after the report from the World Health Organization that cell phones are, quote, "possibly carcinogenic," end quote -- meaning they might cause cancer.

There are no independent government tests. And the cell phone industry remains quiet. They were thought to be safe by the FCC but not anymore.

Devra Davis is the president of the Environmental Health Trust and the author of the book called "Disconnect: The Truth about Cell phone Radiation, What the Industry Has Done to Hide It and How to Protect Your Family."

Devra, thanks for joining us. What is it that the industry knows about cell phones that you say they're not telling us?

DEVRA DAVIS, AUTHOR, "DISCONNECT": Well, they know that cell phones are two-way microwave radios and that you should never hold them close to the brain or body. And that's what the fine print warnings tell us.

They also know that these radio frequency signals from cell phones can damage DNA. And animal studies show damage to the brain, liver, eyes and skin.

VELSHI: Not to be naive, but if it's true, what you're saying, what would it do for the cell phone companies not to tell us? And I say this because it's not the same as cigarette, where when you find out they're dangerous, the only option is to stop. With cell phones, there were -- there are alternatives. There are things you can do to mitigate to use of having a cell phone next to your head.

So, why if they know this wouldn't they tell us?

DAVIS: Well, because I think there's a general sense, that if you understand that you need to be careful using a cell phone, some people might decide not to use them at all. That's why right now in Europe, they're resisting the idea that you can have on/off switches very easily, which is what we really need. We need the ability to turn phones off very quickly so we can turn them on quickly.

VELSHI: Right. Again, a solvable problem. Those who claim that cell phones are safe say that the sort of radiation you're talking about that's being emitted is not dangerous and not cancer-causing. You've found other cases.

DAVIS: Well, as a matter of fact, the radiation from a cell phone is too weak to cause damage like X-rays do. It's called non-ionizing. But even though it's weak, it is digital and it's pulsed.

And studies conducted in Europe in 12 different laboratories have shown that the weaker signal from today's modern phones can actually be more damaging than the signals from the earlier phones because the pulse digital signal disrupts the membranes, weakens the blood brain barrier and that's why it can damage DNA.

VELSHI: All right. One thing you point out in your book, that a lot of people don't realize, is that the cell phone industry is issuing warnings about this. But they're in very fine print.

Take a look at this one from Research in Motion which makes BlackBerrys. It says, "Use hands-free operation if it's available and keep the phone at least 0.98 inches from your body, including the abdomen or pregnant women and the lower abdomen of teens when the device is turned on and connected to the wireless network.

So, the industry is obviously aware of the effects. Why is the U.S. government, for instance, not getting more involved in putting these warnings out there and regulating it?

DAVIS: The government right now, as you well know, is overwhelmed with so many things to deal with. And they've taken advice that's been provided over the years from committees that have been dominated by industry. But I think those days are over and that's why I'm really glad for the attention that you're bringing to this issue and that CNN has done a very good job on.

My book "Disconnect" makes it clear. We know enough now to take simple precautions and we don't need to stop using phones. We just need to be smarter about how we do we --

VELSHI: Right, which is -- which is why I think that, you know, this can go the wrong way for the cell phone industry or the right way. If they know something, tell us and we can change it. Unlike smoking, as you said, we can figure out ways to use cell phones more effectively.

The studies that have been conducted so far based on the adult male brain, your Web site states that children absorb more radiation than adults do. The reason I talk about this is because millions of kids are using cell phones. I'm guessing the penetration for kids is greater than it is for adults. And yet, there is not a single peer- reviewed study looking at the dangers of cell phone in children. Why?

DAVIS: Because a way of looking is a way of not looking. And we've not wanted to think about this possibility because, again, cell phone radiation is weak. So, it doesn't work with the power. It works because of the erratic nature of the signal. You take a rubber band and pop it once, it's fine.

VELSHI: Right.

DAVIS: You keep popping it over and over again, eventually you'll break it. And that may be why 3G phones look to be more dangerous than 2G phones when tested in laboratory studies.

VELSHI: What's the end result for those watching this right now irrespective of what the industry does and what government does -- what do you recommend people do?

DAVIS: I recommend they do what I do, which is to use a headset. Use a speakerphone. Don't sleep with the phone on your body. For goodness sakes, don't give phones to young children to use as pacifiers.

Yesterday's "New York Times" was full of all the gadgets and gizmos. But think about the fact that distance is your friend. You can use a phone safely if you use it with a speakerphone and earpiece. And don't give phones to young children as toys. It's a bad idea.

VELSHI: All right. Good advice. Devra, thanks for joining us. Devra Davis is the author of "Disconnect" and the president of the Environmental Health Trust.

When it comes to Wall Street, there are bears, there are bulls, and then there's the man who says the Dow is going to 20,000 by just 2013. But he says you maybe shouldn't be invested in it. I'll tell you why on the other side.


VELSHI: Take a look at the Dow over the last year. Look -- your investments, your 401(k), your IRA might look a little bit like this. It's up 20 percent since last June, for all the people who are telling you how bad it is.

But this week, the Dow fell below the closely watched 12,000 mark. You know, all of May has been rough for the Dow.

Our next guest says don't worry about it. By this time next year, we could see the Dow soar to 20,000. I guess he's saying between next year and the next 18 months.

James Altucher is managing director of Formula Capital.

James, make your case. Pure, simple terms -- why do you think the Dow is going to go up to 20,000?


I mean, for one thing stocks are dirt cheap. You have a company like Apple with 100 percent earnings growth that's just trading for 12 times earnings. Now, typically that's almost as cheap as utility company. That's never been seen before.

Microsoft at 10 times the earnings. Intel is the biggest cheap company in the world, at 8 eight times for earning. These are cheap stocks.

Another very important reason -- everyone's talking about quantitative easing and federal stimulus. But the reality is, that federal stimulus, that $600 billion in federal stimulus has not even hit the economy yet. It takes six to 18 months -- once the dollar bill leaves the printing press, it takes six to 18 months before it even touches the economy.

So, we won't even be seeing the effects of this federal stimulus until the end of 2011 or early 2012, that's the very least, we might not (INAUDIBLE) the end of 2012. At that point, I don't know, we might start seeing bubble-like proportions on the stock market.

VELSHI: Well, let me ask you this then -- why is it that you recommend most investors completely away from stocks?

ALTUCHER: Well, you have to figure, it's not -- you're not just buying stocks by yourself in a little arcade or whatever. There are really violent people out there who want to slit your throat on the stock market. So, guys like Warren Buffett will want to take every dollar you have. And he's a very smart guy.

So, you can't just go around day trading or buying investments or stocks. If you're going to buy stocks, don't do the same thing that 95 percent of the people do which is to buy high and sell low because the psychology makes you sell when you start to panic. Turn off -- basically close your newspapers and stop picking up all the panic that's always out there. Hold only your stock, be like Warren Buffett. Hold on to it through the hard times, even buy when things -- when the headlines are the most scary and the most dangerous.

When you see an outbreak in Japan, that's when you want to buy stocks. If you see a pandemic, that's when you buy stocks. Buy every single time you panic, otherwise the psychology is going to make you go broke.

VELSHI: James, good to talk to you. Thanks for joining us.

James Altucher is the managing director of Formula Capital.

Well, ditching your mortgage just because you can, more and more people are saying that's a good idea. I'm not one of them. I'll explain on my "XYZ," next.


VELSHI: Time now for the "XYZ" of it.

I know it is a roughhousing market out there. We track it every week right here on this show. Prices are still dropping. Nearly 11 million Americans owe more money than their home is worth.

It's especially tough for people who took out second mortgages. Nearly 40 percent of them have mortgages that are worth more than their homes.

These dismal numbers have more people opting to walk away rather than keep paying the mortgage on a home that has lost value and may still lose value. Fannie Mae reports 20 percent of homeowners would consider this. That's up from 15 percent last year.

Now, if you're one of them, I've got to be honest -- I can't even believe this is seen as a legitimate option for people who are not in dire financial straits. I get it if you simply can't afford to pay for your house. But to walk away just because you want to is reprehensible.

You made a decision to buy a home at a certain price and you can't just walk away from that obligation. We often buy things that decrease in value, a TV, a car. Making a commitment to pay is the bedrock of our capitalist society and, yes, I know that you've seen businesses walk away from their responsibilities but that doesn't make it right either.

And if you don't want to hear the moral or legal argument -- let me give you a financial one. Walking away can have disastrous consequences for your pocketbook. First, your credit score will take a huge hit. We're talking about more than 200 points in some cases. Second, you won't be able to get a mortgage again for years. And if you're thinking, that's OK, I'll just rent -- don't you think your landlord is going to see your credit report? It might not be so easy to find a place.

Bad credit will also hurt your ability to get credit cards and auto loans and it could even hurt your professional life. We know more and more employers are looking at credit reports. So, you could lose your home and not get the job you need.

And it doesn't just affect you. It hurts the value of your neighbors' property. It makes it harder for those of us who take our lumps in the property market to get property mortgages. Walking away is not the answer. It's part of the problem.

That's it for me. Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday, 1:00 p.m. Eastern, Sunday at 3:00 p.m. You can also catch Christine Romans on "YOUR BOTTOM LINE," Saturday mornings at 9:30 a.m. Eastern.

Also, stay connected 24/7 on Facebook and Twitter. My handle is Ali Velshi, and I read everything you post.

Have a great weekend.