Return to Transcripts main page

YOUR MONEY

U.S. Economy Added Fewer Jobs in April than Expected; Interview with Economist Paul Krugman; Facebook to Offer IPO; Interview with Inventor James Dyson

Aired May 5, 2012 - 14:00   ET

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


(COMMERCIAL BREAK)

ALI VELSHI, CNN ANCHOR: From Washington to Wall Street to the campaign trail, all eyes were on the April jobs report this week. Welcome to YOUR MONEY. I'm Ali Velshi. Fewer jobs than expected were created, and the labor force participation rate dropped to its lowest level since 1981. Hold on. I'm going to tell you what that is. Bottom line, this was not a good report despite a drop in the unemployment rate. Christine Romans is here to break it down for us. Christine?

CHRISTINE ROMANS, CNN ANCHOR: Well, you're right, 115,000 jobs created certainly isn't enough to absorb new entrants into the workforce or to convince anyone there's a robust hiring going on here, hiring actually slowing. And 8.1 percent, as you point out, is a drop in the unemployment rate, Ali, but it's because so many people dropped out of the workforce in the month.

Let's take a look at where there were jobs created. In health care, we've seen that consistently, Health care, 19,000 jobs there. Also saw jobs in leisure and hospitality. Again, many of these are low wage jobs, and that's a big question about the durability of the American dream with the kinds of jobs we're creating.

Retail jobs, 29,000 jobs created there. Reversal, Ali, you remember from last month when we didn't have quite that much professional and business services. These tend to pay better, 62,000 jobs overall.

Let's look at the politics, because that is of course the fun part or not so fun part in an election year. It this is the last year of the Bush administration. You can see the job loss is really getting underway in earnest, the beginning of the Obama administration. And the judgment on the campaign trail now will be how durable is this recovery, how many people are included in these jobs that are being created, and how sustainable is it. And that's where we go from here.

VELSHI: OK, let's bring the panel into discuss some of this stuff. We have to figure out what is going on from here. Diane Swonk is the chief economist at Mesirow Financial, Ken Rogoff, economics professor at Harvard University, former chief economist at the International Monetary Fund.

And Diane, let's start with you -- 342,000 people are gone from the labor force. The labor participation rate, the number of people, the percentage of the population available to work is at its lowest level since 1981. We spoke to the labor department this morning and they said there are a number of factors here. One is that baby boomers are aging and leaving the workforce. Students are staying in school longer because the opportunities are not there. And the rate, the pace at women have been entering the workforce for the last couple of decades is now start to slow down. But there's also this idea of discouraged workers dropping out because there are no jobs. What's your analysis of this?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, the discouraged workers is the part that -- they're not being counted as discouraged yet. Nine states in the month of April it actually saw the extensions to their unemployment insurance expire. And as we know, the longer people are on unemployment insurance, the less they look for a job. But they have to look if a job at some level or they don't get the insurance. When it expires, they stop looking for a job and then they won't be counted as unemployed, but it takes like three months for them to not look for a job to be calmed a discouraged worker.

VELSHI: So are you concerned about the trend in the labor participation rate? Does that complicate the discussion about unemployment?

SWONK: It does complicate the discussion. There are demographic factors certainly at work. But when you're talking about this high of an unemployment rate, and people are staying in school. We know 56 percent from a Harvard study of people saying in school are not graduating within six years. That's a real problem, a four year degree within six years. So it's not just they're gaining more skills. They're staying in school and hiding and not getting more skills necessarily to get a better job later on.

ROMANS: Ken, this all starts to get so political. And the two talking points from the Obama administration is, look, it's been 26 months in a row of private sector job creation, more than 4.25 million private sector jobs. We are moving forward. From the Romney camp, it's broken promises, 39 months in a row above eight percent, that is a record. They're both right. But how well they resonate to people who frankly can feel like the labor market isn't really doing a lot for them right now?

KEN ROGOFF, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: There are a lot of people where the labor market isn't doing it for them right now. We're just growing enough as you said to take in new immigrants, new people leaving college and such. I worry that it will be like this for a long time, that we're healing. Do think we are moving forward, I do think the president is right about that, but we're not moving forward very fast. I'm not sure how easy it would be with so much debt out there to get us moving a lot faster.

ROMANS: Consumer gdebt or national debt?

ROGOFF: That's a good question. I'm talking there about consumer debt. The national debt is piling up, too, which will mean taxes. And between the two of them it could drag somewhat on our growth and keep us down at this level. It's enough to get new entrance, but not enough to bring a lot of people in. It could be a very, very long time.

VELSHI: Diane, let me ask you this. We have elections in Greece and France tomorrow, a special live show tomorrow at 3:00 p.m. eastern where we'll be covering those. But we have 10, 11 countries in Europe in recession now, not a surprise. We knew they were getting there. At 115,000 jobs created, is this something that worries you about recovery or is it just not as robust as you would like to be?

SWONK: Certainly some of it is reflecting the earlier gains we saw in the year. There were unseasonably warm winter weather and some of that borrowed from gains now actually things like lawn mowing companies hired up in February instead of in March and April. So we have to even it sought over the first four quarters of the year.

But I agree with Ken. There are a lot of headwinds to growth and the elections that we see in Europe are more head winds because they may further dismantle what has been at least some kind of a political consensus in Europe to save the euro. There's talk about rewriting how they go about doing that and changing the rules over there. There's a lot of uncertainty going forward and those are all headwinds, political headwinds both in the U.S. and abroad that could cause speed bumps for an economy that's not exactly rolling along at even the speed limit right now.

VELSHI: But anybody who is up for office doesn't seem to have the stomach to deal with the budget, doesn't have the stomach to deal with some tough decisions that we have to make and whether or not there should be greater stimulus now and greater austerity in the United States down the road.

ROMANS: They can't even decide on $6 billion for student loan subsidies, $6 billion for student loan subsidy throws Washington into a complete uproar, and just the sheer size of all of the problems to come, it's a little scary.

VELSHI: I'm with you on this. Ken, you made the point when you talked about debt, and Christine said do you mean consumer debt or government debt, and you said consumer debt. This may be the big problem that needs to be solved. It also may be a problem that we can start taking into our own hands if government doesn't help us solve it. We'll talk about that when we come back.

This is truly a nation of haves and have-nots, and we'll look at the growing debt divide. How much debt is good for you and the economy? Is debt the great in-equalizer in this country?

And of course later on, I know you want to talk about Facebook. It prepares to go public. We'll tell you what you need to know and if you can and should buy stock in Facebook during its IPO. Stay with us. you're watching your money.

(COMMERCIAL BREAK)

VELSHI: Government debt has been a big concern, but what about personal debt, how much are you borrowing? Household debt currently above $13 trillion in the United States. This is what Ken and Christine were talking about. Take a look at this chart, 2007, 2008, right before the recession, you saw how much it grew. Since about the beginning of 2008, though, it's been coming down, coming down. Take a look at this, though. The last three months of 2011, started edging back up.

Ken Rogoff is the former chief economist of the international monetary fund and professor at Harvard University. Ken, what do these debt levels mean for the economy? For people who don't look at these charts a lot, is it bad, is it good, is it the right trend? What is it?

ROGOFF: The debt levels are a problem. Anyone who doubts that, economists have looks state by state and county by county, and the states where the debt really ran up during the early 2000s, lots of subprime mortgages, those are the ones that are hardest hit - job losses, sales down, grocery purchases down. It's weighing it our economy. We're going to continue to see foreclosures, people struggling to reduce their debt. I think it's the number one problem which needs to be addressed to really get this recovery on firmer footing.

VELSHI: Let me ask you this as a guy who spent time as a policy maker. When you say the number one problem that needs to be addressed, who addresses this? Is this a government thing? Is it the kind of thing we talk about on TV? Is it a public service education campaign? Is it just people?

ROGOFF: No, it is something the government needs to address. Sort of happening, burning on its own through foreclosures, through all kinds of the epicenter where the problem is. I think the government needs to find ways to accelerate the rate that we get banks and borrowers to negotiate down the loans. The Obama administration has taken some administrative measures but get banks to reduce the interest rates, but he's had to do this on his own, and I think could you do a much more powerful comprehensive measure if done together with Congress.

VELSHI: Diane Swank, we generally like to differentiate between good debt and bad debt. If we didn't take debt to get mortgages, nobody would be able to afford a house until they were 70 years old. You need to take a loan sometimes to go to school. When we look at this piled on consumer debt, are we making it look worse than it is?

SWONK: Actually I think Ken brings up some really good points. One is the issue is the mortgage issue. We now have the subprime people who took advantage of the system who were fraudulent. They've been flushed out. They've gone into foreclosure. The foreclosures we're see dag are the guy who put 20 percent down, locked in to a 30 year mortgage, their house has fallen 30 percent in value and they now lost their job and they can't make the mortgage payments anymore. That's someone who did everything right and is now having to deleverage and it's causing problems throughout the system.

And there could be principal sharing, all kinds of issues that we could restructure the loans in ways that we could keep them in the home and keep them as they regain confidence and get back into the job market. I think that's important.

The other issue is student loans have more than quadrupled and they're now the fastest growing cat better of loan growth. So they account for almost all the loan growth that we've seen in recent quarters. They've nearly more than quadrupled since 2007. And we have record numbers of people enrolling in school, but also record numbers of dropouts. And return to just a four year education is not the same as it is to a licensing degree or something with a certificate. Sometimes you can make more money getting less education.

So the whole system really needs to be rebalanced, and certainly the public/private sector partnerships in community colleges where they do a short term training program and you get a job, that might be better and less money than a four year degree.

VELSHI: This is an issue, Christine, you spend a lot of time on.

ROMANS: And I was talking to community college people doing aviation mechanics degrees, $100,000 after a few years or mid-career, two years, a certificate program. And there are a lot of other things like that that are in good demand. But what you hear from a lot of people is the mismatch between the skills they need and the kind of workers that are available.

Meantime, kids are running out and taking on loads of debt. You almost need to be a money manager by the time you graduate to handle all of the debt you've got. And they're taking out degrees that aren't necessarily going to fit in this this economy. We don't do a really good job I think, Diane and Ken, of really telling kids where to focus that debt so it's a good investment and not something that will hurt them.

Ken, you teach at an elite university, so clearly those people know how to handle their loans.

VELSHI: We're having a good discussion explaining debt to our viewers. I just want to take it over to the wall and have a different discussion with you, and this is debt to income ratio. Bear with me for a second. The blue line represents the bottom 95 percent of income earners. The red line is the stop vive percent. Look at that blue line, it goes up basically all the way through to 2007 to the point that it's at almost 150 percent. So people have one-and-a-half times their annual income in debt.

Now look at the red line. That is the top five percent of earners. It started actually higher in 1983, went down, went up, never got higher than the bottom 95 percent again, and moved around to the point that it is substantially lower. So on the right side of your screen, you're looking at the gap. The blue is 95 percent of the population have more debt than they make money, and the red shows that the biggest earners in society are carrying less debt. Again, Diane, let me turn to for you an interpretation of that. Is that good, bad, or does it matter?

SWONK: It does matter. And it gets to the heart of Ken's point. And I think the issue on the 95 percent is those are also the people it that have been affected the most by stagnating wages or loss of job. So their income has not kept up with their debt accumulation, and that may be why they're taking on more debt. So both sides of that, all that equation is not good going forward and we have to alleviate some of that debt burden.

The top five percent aren't people taking student loans. Those aren't the people taking on a lot more debt right now. And their incomes have held up relatively well and come back in recent years.

VELSHI: Ken, if you go back to the beginning of that chart, it showed that higher earners carried more debt than everyone else. How and why did that change? How did we get in a society where lower income workers carried more debt than higher income workers?

ROGOFF: Well, of course part of it, as Diane said, is the high income worker, their income has been soaring and the low income have been flat or stagnant, and they've haven't had as much money to support the debt. But there's also a case to be made that it was used as a palliative to let people consume more so they didn't think about the fact they weren't earning as much. But of course that runs out eventually.

VELSHI: No kidding. What a great discussion.

SWONK: The expansion of the subprime debt. You saw subprime debt expand quite dramatically in the 1990s and debt was used as sort of buffer to deal with the fact that people just didn't have the incomes. The bottom 50 percent of income earners were stagnating or losing earning power or purchasing power, so they took on more debt.

VELSHI: It's important that we recognize that this household debt is a bigger issue to most people than government debt is. Thanks so much, Diane Swank, Ken Rogoff, Christine Romans.

Coming up next, "End this Depression Now!" a call to arms from Nobel Prize Winning economist Paul Krugman.

(BEGIN VIDEO CLIP)

PAUL KRUGMAN, AUTHOR, "END THIS DEPRESSION NOW!": A recovery is when things are going up. A recession is when things are going down. A depression is a time when you have wiggles, but you're basically down the whole time. That's what we've been in.

(END VIDEO CLIP)

VELSHI: He's got a powerful message for anyone who has suffered over the past four years. My interview with him is next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: You might be worried about the economy, where it's going, but signs that there is a recovery is strong. The DOW industrials are up, markets are up, the S&P 500, your 401(k), they're up. Corporate profits are strong. Jobs, the economy has added jobs for 19 months in a row. But my next guest says none of this is enough. Paul Krugman is a Nobel winning economist and a columnist for the "New York Times." He's also the author of a new book, get this, it's called "End this Depression now." He says the United States isn't in a recovery. It's in the fifth year of a depression.

KRUGMAN: The important points right now are four million Americans have been out of work for more than a year. That hasn't happened since the 30s. And the economics, the usual medicine, which is the Fed cuts interest rates, isn't available anymore. Those are the defining features of a depression.

VELSHI: For it our audience to understand this, when you say the usual tricks are not available anymore, they've gone down to zero percent, and why is that not working? Why has that not done what you think it should have done?

KRUGMAN: It helped. It would have been much worse if they hadn't done that. But this was one hell of a shock to the economy. We had an enormous housing bubble, and probably more important for the state of the economy, a huge increase in private debt, huge increase in household debt, high left us overleveraged, means that the private sector has pulled back, consumers can't spend because they're dealing with their debt problems. Businesses won't spend because the consumer demand isn't there. And so even cutting interest rates to zero is not enough.

It's not structure. What it is it is very severe problem of inadequate demand because the private sector got overleveraged. This is the time when the public sector has to step up and do the spending that the private sector for the time being can't.

VELSHI: So if the answer isn't a lower fed interest rates anymore because we can't, the only solution then is to return to stimulus and more of it?

KRUGMAN: Well, yes, although it's a funny thing. What we've actually done is not stimulus, but austerity. We've actually pulled back a lot. If you look it at the cutbacks at the state and local level, they're huge. So we don't actually much need new stimulus as simply to reverse those cutbacks at the state and local level, which will require aid from the federal government. That will do a lot.

Now, monetary policy can help. I beat up on Bernanke over the weekend saying he should be doing more, but the heart of it has to be that we need to reverse this really misguided austerity of the past couple years.

VELSHI: What more can Ben Bernanke do? Are you talking about a QE-3 on top of other --

KRUGMAN: Of course, QE-3, but beyond that the Fed needs to make it clear that it will hold off on raising those short term rates longer than people now expect. It's willing to let inflation rise to something like three or percent or 3.5 percent before it slams on the brakes. That would have a big effect on expectations now. It won't do the job itself, but that combined with getting the schoolteachers retired is what we need to get out of this recession.

VELSHI: You say in the book that the depressed stays of our economy isn't just causing a lot of short term pain, it's having a corrosive effect on our long run prospects. What do you mean?

KRUGMAN: OK, a couple things. First, private investments is low because the economy is depressed. But that means when we recover we will have less capacity than we should have had. Workers who have been unemployed for a long period of time tend to lose their attachment to the workforce. They become perceived as, whether they are or not, they become perceived as unemployable. That reduces our future labor force. Young people coming out of college can't find jobs to make use of their skills. They're working as baristas or they're unemployed. That goes on long enough, they won't be viewed again as being suitable or employable in jobs that makes use of the skills that they learned this college. All of those things excerpt a corrosive effect. When we finally do get out of this we'll find that we're not able to get back to the previous trend because of the damage done during the depression.

VELSHI: As serious as this is here, it's so much more serious in Europe. And this weekend, we have elections in France and Greece, both of which are to some degree referendums on austerity versus stimulus to provide growth.

KRUGMAN: Yes. And the Europeans, they have created a mess for themselves because they've create this had trap of the single currency without the institutions to support it, which means that their situation in a fundamental choice is more difficult than ours. They need --

VELSHI: Open the tool box.

KRUGMAN: Right. They need to do something especially adventure was to make it work within the confines of the single currency. They need more inflation than we do.

But they've also given us an object lesson in the effects of austerity under depression conditions.

VELSHI: You're using this as sort of a vindicating argument to say this is what happens.

KRUGMAN: There was a big debate two years ago. A lot of people in Europe and here were saying cut government spending. That will increase confidence, the economy will expand. Look at Spain, look at Greece, look at Ireland. It doesn't work that way.

VELSHI: Paul Krugman, thanks for being with us. Great conversation.

KRUGMAN: Thank you.

VELSHI: Don't to get, this Monday "Fortune" releases its "Fortune 500" list. You can head over to CNNmoney.com to find out who made the cut and who comes out on top this year. Coming up next, Mark Zuckerberg and Facebook have changed the game. But is it enough to win over potential buyers? And do you think we have big economic problems in this country? It's a whole lot worse across the Atlantic. Take a look at this map. Every country highlighted is back in recession, and in a new global economy, that could be bad news for us here. I'll explain why next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Tomorrow we're doing a live special at 3:00 p.m. eastern. It's about the elections that are happening. Decisions are being made tomorrow in France and in Greece. And there is a real struggle about which way they want their countries to go. In fact, 12 European countries are back in a recession. That's raising concerns that our sluggish recovery here in America could fizzle out. Right now all eyes are on jobs both here in Europe. Christine is back with me. Christine, as usual, you have come armed with numbers.

ROMANS: I certainly have. In the U.S., unemployment 8.1 percent. The situation in Europe, though, far worse. These are the 17 countries that use the Euro. Take a look here. Overall, the unemployment is at the highest level since 1999. Spain's jobless rate, 24 percent. Italy is at a 12 year high, almost 10 percent. Greece, Ireland, Portugal, all about 14 percent unemployment for those countries.

The three largest economies in the EU, though, are faring a little bit better. France has unemployment 10 percent. Germany, 5.6 percent unemployment. Well below the U.S., by the way. Britain, which still is using the pound, not a member of the Eurozone, 8.3 percent overall. Clearly tough times in Europe, the concern is that it could spill over here, all of this political fighting about austerity versus growth.

VELSHI: It's the same fight we're having here, it just seems a little more stark the way plays out in Europe. European leaders were betting on this idea of fiscal austerity to fix their economies. Clearly that has not happened. When we look at those dire unemployment numbers that you're telling us about, that has a number of prominent U.S. economists questioning whether fiscal austerity, this idea of pulling back government spending is the right policy for Europe right now.

Christina Romer doesn't think so. She headed the president's Council of Economic Advisers, the top body that advises the president on economic policy in the United States. She's now an economics professor at the University of California at Berkeley. She told me why she is critical of deep cutbacks.

(BEGIN VIDEO CLIP)

CHRISTINA ROMER, FORMER CHAIR, COUNCIL OF ECONOMIC ADVISERS: What we're seeing in Europe now is it's a uniquely painful time to be trying to do us austerity. We have two things going wrong. One is a lot of these countries are part of a currency union so they don't have one of the main tools that a country usually has to try to mitigate some of the impact of this austerity, which is lowering their exchange rate. VELSHI: For viewers that are having difficulty with economics of this, and that's understandable, what is the danger here? They are trying on get their economic houses in order by cutting government spending, cutting public spending, and in exchange for that people should be more willing to lend them money at more reasonable rates so that they can keep their operations going.

ROMER: So that is certainly how it's supposed to work. And I think as I mentioned, there's a problem with that right now. One is that sort of they started this whole process, a lot of these countries like Spain, like Ireland, like Greece, started this process already in a recession so that again sort of makes it even that much more painful. And then I think there is also the part that the bond markets are also very worried about what's going on with growth.

I think the important point here is you're not going to get me to say, no, you shouldn't do austerity. Certainly you'll never get me to say you shouldn't do austerity eventually. Exactly what I've been pushing for is a reasonable alternative. And I think the alternative is to take all that effort, all that passion that's currently going into immediate austerity, and say use it to legislate the best plan possible for getting spending down, getting tax revenues up if you need to, over time, get those passed, get those legislated, but just don't do the cuts immediately when the economies really can't take it. Phase them in gradually, say what your time table is, tie those actual measures to when the economies are healthier and more able to withstand them.

VELSHI: In a recent "New York Times" op-ed, one of the things you wrote was that when you do these plans, you should be specific. So in layperson's terms, and whether you're talking about Europe or the United States facing a debt problem, what are the specific things that you would phase in? You mentioned tax increases over a period of years like ten years. What other things can you do to gradually implement austerity in the long run but keep stimulus in the short run?

ROMER: That's exactly the right question to ask. So something like think about what perhaps did along these lines a couple of years ago. They legislated an increase in their early retirement age. And that's something that phases in gradually. So it's not something that immediately takes money out of people's pockets, but it is something that for the long run fiscal health of France is a very sensible measure. So that's exactly the kinds of things I'm talking about. So you are going to have to see a change in entitlement programs in Europe, you are going to have to see again probably a change in tax revenues. But those are the kinds of things that you absolutely can do gradually. In the United States, we all know that probably what you want to do are get rid of some of the tax expenditure, some of the loopholes. Again, you don't have to do that in one year. You can say this one loophole is phasing out over 10 years, so it gets a little smaller every year.

VELSHI: Great discussion. Thanks so much for joining us. It's always a pleasure to talk to you. Christina Romer is a former chair of the president's Council of Economic Advisers and a professor at U.C. Berkeley.

Remember this scene from the Aaron Sorkin film "The Social Network"?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: A million dollars isn't cool. Do you know what's cool?

UNIDENTIFIED MALE: A billion dollars.

(END VIDEO CLIP)

VELSHI: You know what's even cooler is $13 billion. That's how much Mark Zuckerberg's company could raise when it goes public. We'll tell you whether should you buy in next.

Plus he's a knight, an inventor, and a billionaire. But perhaps the title he most embraces is failure.

(BEGIN VIDEO CLIP)

JAMES DYSON, FOUNDER, DYSON COMPANY: The extraordinary thing about failures is that you learn from them. You're curious as to why it failed and you use your brain and build a prototype to overcome that problem. You learn nothing from success, but you learn everything from failing.

(END VIDEO CLIP)

VELSHI: Sir James Dyson on why we need to make things in America once again. You're watching YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: CEO Mark Zuckerberg is betting that investors will "like" Facebook. The price range for the social media company is set between $28 and $35 a share according to a regulatory filing this week. That's when the company goes public on May 18. It's the IPO, it goes public to raise capital. As if they need it.

At the high end, Facebook could raise as much as $13.6 billion, but that will value the company at more than $95 billion in total. Compare that to Google, the largest Internet initial public offering so far. That raised just $1.9 billion in 2004. Facebook is going to set its final price the night before it begins trading. So that's scheduled for May 18th. You'll get the final price on May 17th.

Here's how it works. Institutional investors, hedge funds, mutual funds, they get the first crack. They buy in at the offering price. That starts next week. Regular investors like you and me have a shot the next day, May 18 when Facebook starts trading on the NASDAQ. The ticker symbol will be FB.

Should you buy in? Can you buy in? Matt McCall is president of Penn Financial Group and a good friend of the program. Christine Romans is back. Do not answer the question about should you, because we'll argue about that. This will be a smack down. But let's start with the can you, Matt. Can a person who wishes to buy stock in Facebook who is not part of a hedge fund or mutual fund buy the stock?

MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: Today, no. May 18th, absolutely. It will probably be a frenzy of many individual investors buying a five series, 100 series, through their online account. So, yes, that will be the first day everybody can sit in front of the computer and be an owner of Facebook.

ROMANS: And they'll get whatever the market is paying for it.

MCCALL: Exactly.

VELSHI: Take you back to the days we used to do trading coverage. The mistake to make here is to get your brokerage account set up and then put in an order at a market price, which a lot of people do. You have got to set a limit on what you are prepared to buy. Otherwise this thing could shoot up and you could end up paying more than you wanted to.

ROMANS: This this is why I think buying IPOs can be so perilous because you've caught into the frenzy the whole game of buying Facebook and maybe you think it's a great long permanent investment and maybe it will be. But buying on that day when the big money has got their price before you and then you're the one who is going into so that up --

VELSHI: Can I ask a question of whether you should buy or not? I specifically said don't answer that question. Obviously you're buying it, make sure you're safe about buying that. Practice safe buying.

Since you are dragging us into this conversation, let's talk about Google for a second. It priced at $85, opened at $85. It closed on its first day at $100. A year later than that, it was more than double. It's $280 or something. And this week it was $611.

Now let me show you a couple other things. Let me show you Pandora. Its IPO on June 5th, 2011, that's when it had its IPO, it is down 54.5 percent since then. Let's take a look at Groupon. Everybody wants to say this will end up like Groupon or Zynga or Pandora. Groupon is down 32.3 percent since then.

And then there is LinkedIn, not anywhere near Facebook scale, but probably most similar in its service offering, it IPO-ed on May 19th, 10 20 1 1rks I mean went public, and it's not a loser. It's up 34 percent. Now I'll ask the question that you insist on answering, which is should someone get in and buy Facebook and if so at what price?

MCCALL: No, do not buy May 18th. What will probably happen, it may start off at $35 a share the day before. Moth likely my guess is it opens around $80 or $90 a share. You buying that day, you will not make money. The similarity on those charts is will the next couple of week, you see it selloff. People day trade it and it loses its allure. See where it closed at the first day. Take 20 percent off that, pick that price as your limit, put a limit order in, and if it hits the next couple weeks, then you own Facebook.

ROMANS: People seeing the road show, they'll get the good price. Do they have limits on how much they can sell right away by getting the early price? They can't go out there and dump it, right?

MCCALL: No they cannot. Some private investors are dumping it. They're looking at 180 million shares. There's another 157 million shares that people are dumping already that own Facebook shares. So those people have to say-will-

VELSHI: They're monetizing their investment. OK. Let me ask you this. If you're excited about the concept of social media, there's actually a safe way to do this.

MCCALL: The safest way to do it is the Global X social media ETF.

VELSHI: Buy and sell it like a stock.

MCCALL: Exactly. One major difference is it's a capacity stock. So you have Pandora, LinkedIn. And what I love is there's a lot of foreign social networking companies in there. Some of the biggest ones in japan, in China, Russia has one. So you get exposure to all these different companies by buying into one ETF.

VELSHI: OK. We are going to spend a lot of time in the coming week talking about Facebook on CNN. We'll also talk about it a lot on next week's show. But if you have a specific question about this or any other money topic, tweet us, my handle,@AliVelshi, Christine @ChristineRomans. We'll give you real answers to your questions every Thursday at noon eastern during our brand new live twitter chat. Your chance to interact with us and get answers about so that what do is send us questions anytime you want, watch your twitter feed on Thursday mornings. We'll send and you link, the lingoes live at noon and we'll start answering your question. The link goes live at noon and we'll start answering your question. We want to answer the questions you want to know answers to.

After a whopping 5,127 prototypes, he invented a vacuum that really sucks, creating a company worth billions, and now the man wants to manufacture a new economy. We're talking to Sir James Dyson next on YOUR MONEY.

(COMMERCIAL BREAK)

VELSHI: Since 1990, the U.S. has shed one-third of its manufacturing jobs. But American manufacturers have actually added some of those jobs back -- 489,000 of them have been added back just since January of 2010. On the campaign trail there are promises to create even more manufacturing jobs.

Let's take a look at how the United States compares to the rest of the world when it comes to manufacturing. China has established itself as the world's factory. They produce everything from clothes to computers. One-third of all of China's total economic output comes from manufacturing. Take a look at Germany. It stands at 21 percent. The country has found its niche in high end manufacturing. The United States is a distant third by the way at around 13 percent. And take a look at this. The United Kingdom, behind the U.S. at 11.5 percent. This is going to become relevant in just a minute. I'll tell you why. Manufacturing left the United States and Great Britain largely because the things we needed to build other things moved overseas. Companies wanted to be closer to what's called their supply chain.

Let me show you what I'm talking about. I'm going to take a light bulb. To make a light bulb, it all starts with the raw materials. Let's focus on the three involved in making a light bulb -- sand, metal, and plastic. Sand -- by the way these things all come from different parts of the world and they get process processed in different factories in different locations. Sand is made in the glass and filament. The metal is made on to the base that holds the bulb and screws in to a fixture plus stuff inside. The plastic is uses for insulation that protects it against heat.

These processed materials move from the various factories to an assembly line and then ultimately that is shipped all around the world to the stores where you buy them.

Sir James Dyson has experienced the frustrations of navigating a supply chain an ocean way firsthand. Ten years ago he moved his own assembly line from the United Kingdom to Malaysia to close that distance. I got a chance to ask him about it this week.

(BEGIN VIDEOTAPE)

DYSON: Great Britain gave up on manufacturing. So we had to go there to be able to buy the parts. So we'd love to move it back, but manufacturing isn't necessarily about assembling in your own backyard. If you develop the technology and have the intellectual property in your own country, all profits or most of the profit comes back to your own country and then you can export the goods from your own country virtually in money terms, the wealth, the knowhow, stays in America, stays in Britain. So we're exporting all our exports in Britain that's bringing huge revenue and creating jobs, admittedly engineering type of job rather than assembly jobs. So it isn't all bad news.

VELSHI: Should we be looking at a policy of what some people call reindustrialization, turning countries like the U.S. and the uk from countries that do still manufacture into what you call manufacturing economies?

DYSON: Yes. The way to do it is to design products that develop technology that the rest of the world wants. And the reason Britain has lost all its manufacturing capability is that it's stopped making products the world wants. It used to about 50 years ago, but it stopped doing that

VELSHI: Is that because they became bankers and service providers?

DYSON: Certainly that. The service sector and banking sector seemed more sexy. But they lost confidence in manufacturing, and they forgot that engineering and design is incredibly important. It's the product that's important, not the business or the banking. People in China and people around the world, in Europe and the United States, they buy products, like the iPhone and hopefully the Dyson vacuum cleaner, whatever it is. And world's biggest companies and manufacturing company, they're the not service companies like Microsoft. They make real things.

VELSHI: Explain this to me because you say the reason companies go to Asia to manufacture things is not solely because of labor costs, which are substantially lower than they are in the west. It's got more to do with explain chains so that you have to change a whole way of doing business in westernized nations to create manufacturing economies. What are the things required?

DYSON: Two things. First of all, we have to encourage people to start businesses. And I wrote a report for David Cameron and I suggested various ways you could increase technology manufacturing in Britain. Fortunately he's carried out one those things but one important thing is to increase the tax relief that you give to companies.

VELSHI: We have to make it easier to get land and open factories. One of the catalysts to you moving out of the U.K. was the inability to get a permit to expand one of your factories.

DYSON: It was total madness. We were going fast and we were refused to expand our factory, and that forced us out.

VELSHI: Let's talk about innovation. You're at the forefront of education drives. You have a project going on in Chicago, which is meant to give birth to little versions of you.

DYSON: It's a wonderful thing, an after school club, and we give them vacuum cleaners. They rebuild them and then they design and build prototypes of their open projects. And it's really working. There's a child who was desperate to become a lawyer, and he asked us I want to be an engineer. I'm inspired. And that's what we've forgot to do. You produce 12 times lawyers than we do engineers. We have to realize that because they're producing engineers and engineering will drive manufacturing and going to drive technology. So if we don't get our figure up, we'll be swamped by Singapore and Korean products.

VELSHI: James, thanks so much.

DYSON: Very nice to meet you.

(END VIDEOTAPE)

VELSHI: Coming up next, why what's happening in Europe matters here at home. We'll give a preview of our special live edition of YOUR MONEY tomorrow at 3:00 P.M. right after the break.

(COMMERCIAL BREAK)

VELSHI: What a great show. Sadly you won't be able to watch again tomorrow. Thanks for joining us. Be sure to tune in tomorrow for a special live edition of YOUR MONEY at 3:00 p.m. eastern. We're going to look at how the elections in France and Greece could affect the economies in the United States. We're bringing in CNN's best reporters from across Europe to bring you the latest. We'll be in Paris, Athens, Spain, and Christine Romans will be here with me in New York to explain what it all means for you.

That wraps it up for today. We'll see you live in 24 hours.