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Dow Dropping on Worldwide Gloom; U.S. Stocks Plummet; Markets in Europe Falter; Interview With Georgia Democratic Representative John Lewis
Aired August 18, 2011 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BROOKE BALDWIN, CNN ANCHOR: Hi there. I'm Brooke Baldwin.
We have a special hour ahead. I want to welcome to all of you in the United States and our viewers all around the world as we await the closing bell on Wall Street. Checking the clock here, we are now less than 60 minutes away from that.
And I am joined this hour by two of my colleagues. First, we have Ali Velshi standing by for me in New York, Richard Quest in London.
Gentlemen, good to have both of you on here.
Ali, first to you. Thoughts here as we watch this day tick down.
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: All right, the good news is we're an hour to go and things look like they have stabilized. The bad news is we have stabilized more than 4 percent lower on the Dow.
And you and I have done this enough times in the last few weeks, Brooke, to know that anything can happen in the last hour. Let me tell you what happened. We started off. It was a rough day. We had news that growth in Europe, as we have expected, is -- is slow. Then we got a report out from Morgan Stanley, probably the first of many that we're going to get, again, saying something that we knew, that growth is slowing worldwide, that the chance of a double dip or another recession is increasing and that the -- the Europeans and the Americans might have to have more central bank intervention into the markets.
It also said that there have been policy decisions in Europe and the United States that have been poor, and then on top of that, that was enough. That was already bad, Brooke. Then we got some economic reports right here in the United States. Slowdown in housing, a slowdown in manufacturing, and, you know, not a great report about new jobless claims.
Basically it all piled on. People ran out of stocks and back into, you know, safer investments, but, really, it all started in Europe.
So let's go there.
Richard Quest, tell us what you did.
RICHARD QUEST, HOST, CNN INTERNATIONAL'S "QUEST MEANS BUSINESS": We had a pretty awful day on the European markets. The DAX in Germany, main index, was off by more than 6.5 percent at one point. By the close, all the major European markets down 4 percent, 5 percent, 5.5 percent. And the real reason, very much following on your theme, having had fear, worry and concern, now there are facts, and they may not be very strong facts, but as we will show you in this hour, growth is slow, sluggish and not likely to get any better, and that, Brooke, is the reason why today people decided to head for the door.
BALDWIN: Richard Quest, Ali Velshi, we will continue this conversation through the hour. We had a couple of days of stability and then, wham, uncertainty, fear back again in the markets.
Gentlemen, stand by.
I want to start this hour in New York.
And let's get right to Alison Kosik there at the New York Stock Exchange.
And, Alison, Ali sort of mentioned all the multitude of factors, I guess, perhaps the trigger point here. You have the European markets are down. You had this report from Morgan Stanley and then, you know, worrisome numbers, these reports in the U.S. That equals fear.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, yes, and it does, and fear is a big part of this sell-off.
And one trader I talked with earlier today, he said, you know what? Give me a reason not to sell. All of the reasons point to selling at this point until we hear some good news, especially since we have gotten new things to worry about today, more signs of economic weakness. We have got those jobless claims. They're back above $400,000. Home sales are down. Inflation rose.
Also, a closely watched index of manufacturing activity, that plunged into negative territory. That shows that manufacturing in this regional index is contracting. And one economist that we spoke with said it's never been that low without triggering a recession. And then, of course, it's that Morgan Stanley warning that the U.S. and Europe are hovering dangerously close to a recession, so what that does is it joins sort of the chorus of others who have been lowering their estimates for growth rates, who have been increasing the odds of a possible recession, and that obviously not reacting well here on Wall Street -- Brooke.
BALDWIN: Yes. We're looking at the Dow Jones industrial average, down 488 points. As we mentioned, we're less than 60 minutes away from that closing bell.
Alison Kosik, I printed out -- I have that Morgan Stanley report right here. And it's interesting how they talk about how we could be dangerously close to recession both in the United States and globally, and I want to point specifically, they say, the main reasons for our growth downgrade, apart from disappointing incoming data, are recent policy errors, policy errors both in the U.S., they say, and in Europe.
KOSIK: Right. Right, exactly.
I mean, it's the same reason why we saw the sell-off after Standard & Poor's downgraded the U.S. debt. It's because of policy- makers dragging their feet. You know, there's still a lot of uncertainty as to what's going to happen, and what you see is Wall Street sort of pricing in the possibility of a recession, because, you know, if they say if they, if they, meaning Morgan Stanley, says that we are getting closer to the possibility of a recession, investors are taking a step back and saying we're looking at our stocks, and thinking you know what, they're looking a little bit too high right now in that kind of environment -- Brooke.
BALDWIN: Alison Kosik, thank you. We will check in with you a little later.
Ali Velshi, you have made this point before. You can't always compare this to what we saw in 2008 in the U.S., because unlike that time this is not necessarily economic. This is political.
VELSHI: Yes, and it's political on two different levels. In Europe they have got some real structural problems. Here in the United States we have got political problems.
You will hear over and over experts saying that a lot of the problems we're facing right now can be solved almost overnight if we wanted to. We have the data. We know what decisions can be made. We're just politically not taking them.
I want to take this conversation out to somebody who knows a lot about them. Bill Gross is the founder of PIMCO.
And, Bill, look, Richard and Brooke might get in on this conversation with us, but I guess what we need to know here is you don't really depend on Morgan Stanley to put out a report to say something that you have been saying and that a lot of people understand, but give me some sense. You tweeted out earlier that you think a recession is probably inevitable at this point.
WILLIAM GROSS, CO-CHIEF INVESTMENT OFFICER, PACIFIC INVESTMENT MANAGEMENT COMPANY: Well, we do think so, Ali, you know, perhaps not in the next month or two, but certainly towards the end of 2011.
And it comes down to what you have been talking about, a lack of policy options, not just from the standpoint of Washington and fiscal policy and the -- the intractability of the gang of 12 perhaps or the debt ceiling results, but also in terms of monetary policy. It appears to us that the Fed might be out of bullets, that, yes, a possibility for a QE3, but yields are already so low that it seems to us that their ability to stimulate the economy from this point forward is definitely limited. VELSHI: Well, that's a good question, Bill. The 10-year today is at -- one point yielded less than 2 percent. The U.S. government can borrow money for 10 years at a rate under 2 percent.
Meanwhile, the Fed has said it will keep interest rates low until 2013, and this Morgan Stanley report, as many people say, may see the need for further intervention by the European Central Bank and by the Fed.
What exactly could that possibly mean? Who can come to the rescue? Who is the white knight here that could help us get our economy out of the doldrums?
GROSS: Well, we agree we're running out of white knights. And in Euroland, as you mentioned, the ECB itself, the Central Bank there is conflicted in terms of whether or not to keep on writing checks for Greece and for Portugal and for Ireland.
In addition, France and Germany have come together and basically said that they are united in their belief that fiscal policy must be confiscatory to a certain extent. They must balance their budgets in Italy. They must balance their budgets in the core of Euroland.
And that's a fiscal contraction basically that takes money out of an economy.
(CROSSTALK)
VELSHI: That's a problem, Bill, because, you know, we have got Richard here in London, where they have seen, in Britain they have seen the austerity programs go into effect. The fact is, who is going to spend? If nobody is spending, if consumers haven't stepped up, even though savings rates have increased, companies aren't expanding, even though we know they have got cash, and then you have got the opposite of stimulus, you have got countries spending less, what is that a recipe for? What does that outcome look like to our viewers?
GROSS: Well, it's a recipe for a mild recession, not necessarily a significant recession. It speaks to what economists call a liquidity trap, which means that businesses are waiting for consumer demand and consumers are waiting for businesses to hire and so it goes around in a circle, winding down and down much like water in a bathtub.
Back in the 1920s, Henry Ford basically decided to pay workers $5 an hour so that they could buy Fords. Now it's just the reverse. As you mentioned, corporations are raising cash, not hiring labor, and so the ability of consumers to consume is severely limited.
VELSHI: Let me ask you this. What -- there are a lot of people in America who say we're in a bifurcated economy. If you're wealthy, don't need a loan or have good credit or have cash, there are opportunities and have been to make money.
If you're on the other side of the spectrum, jobs are hard to come by, credit is hard to come by. What -- tell me what difference it would make if we went into a recession again.
GROSS: Well, it wouldn't make a difference to Wall Street. Up until this point -- you're right -- they have been able to borrow money cheaply and to invest it and to reinvest it at attractive rates in the financial markets.
Now, if the economy stalls, if the economy goes down to the zero line or perhaps below that, that basically means that corporate profits go down as well. And so the ability of a financial market or a levered financier, so to speak, to make money off of cheap money is becoming severely limited, and so Wall Street joins Main Street in the debacle.
VELSHI: Right. So the idea that we would depend on Wall Street and those corporations to spend their money might become a little less clear, might become a little murkier
Bill, good to see you. Thanks very much for your input today, Bill Gross of PIMCO.
GROSS: Thank you, Ali.
VELSHI: Richard?
QUEST: When we come back in a moment, we talk a great deal about those GDP numbers. How bad are the numbers, and why should we be so concerned about it?
We are just 50 minutes from the close of play today.
(COMMERCIAL BREAK)
QUEST: Welcome back to our coverage of the markets as they are falling and falling all day. This is the Dow Jones industrials at the moment, down 469 points, off just 4 percent.
We have bobbed up and down throughout the course of the session, around the 11000 and now basically underneath it with just 45 minutes or so. We have talked so much about this question of GDP. I want to show you exactly what this means, GDP, of course, gross domestic product, in the second three months of this year and how the totality of these economies are performing.
Let's start in the United States. In the second quarter of this year, the United States grew by just three-tenths of 1 percent. That we could describe as growing pains coming off some fairly OK numbers before that. So the U.S. is growing quite not brilliantly, worryingly, but look at these European countries, the Eurozone up to 0.2 percent, Germany growing by 0.1 percent. That's virtually nothing. It's stalled. Europe's largest economy out on its knees.
And as for France, well, the French economy completely stagnant, no growth at all, and this is why -- this is exactly why Morgan Stanley says, transatlantically the risk of a recession has increased, and you will see this very clearly with one of the major markets in Europe, the German market, which was very sharply higher, and then look at how it has fallen right the way down, a drop of some 25 percent.
That's the German market. All right. We need to talk about where economics and markets all come together.
Stephen Moore is the senior economy writer with "The Wall Street Journal" and joins me now.
I have just sketched out what is by any definition a truly awful economic picture.
(CROSSTALK)
STEPHEN MOORE, SENIOR ECONOMIC WRITER, "THE WALL STREET JOURNAL": Well, it could be more awful. It could be negative.
But you're right. These numbers are really disturbing, and the problem is the direction is downward in all of these countries. And, of course, in the United States, the fear is that the kind of virus that's hit the European market and the European economy with respect to jobs is now going to move overseas and infect the United States, and we're already obviously seeing signs of that with what happened with the Dow today.
QUEST: Right. So in this environment, the one thing I'm hearing from investors is they have no confidence right now in policy-makers.
MOORE: Right. Right.
QUEST: Are policy-makers simply negligent or incompetent or this is simply beyond them, both in the U.S. with Treasury and Fed and in Europe with the ECB?
MOORE: Well, let me talk about the United States, which I'm much more of an expert on.
The president this week when he was on his what they are calling the magical (AUDIO GAP) tour around the Midwest, basically said this week that, you know, he was a victim of bad luck and that the economy is really rotten because of factors beyond his control.
And I do think that there is a loss of confidence in the United States among business leaders and among investors in President Obama's ability to lead this economy after 30 months. Things haven't gotten much better. We still have, you know, 9 percent unemployment in the United States, and it's almost as if every time he opens his mouth, the stock market drops.
QUEST: All right then, but what about when Rick Perry opens his mouth --
(LAUGHTER)
MOORE: Right.
QUEST: -- and then decides to say it's treasonous and treacherous? MOORE: Right.
QUEST: Now, look, whatever his political opinion, and that's entirely up to him, does it help us in a bad situation?
MOORE: Well, first of all, I agree with you that the terms that Rick Perry used to describe Ben Bernanke and the Fed were over the top, and in fact in our editorial in "The Wall Street Journal" today, we said just that, that, you know, treachery and treason is just simply not what you want a presidential candidate to be saying about the Fed.
But I do agree with him that there is a mentality in Washington and on Wall Street that is misguided that the way to get out of this recession is to print money. And the point that we made -- and I think a lot of Americans agree with this -- is you can't create jobs by printing money. And that's what the Fed has been trying to do for the last three years.
(CROSSTALK)
MOORE: By the way, can I -- I just want to say one other thing. The gold price going up, I mean, that's the other big story today, is that the gold price is now -- what is the latest, $1,850 or something like that. The reason the gold price and commodity prices are rising is people are losing confidence in paper currencies.
VELSHI: Let me ask you something, if I can.
Richard, I just want to get in with Stephen for a second.
QUEST: Sure.
MOORE: Hey, Ali.
VELSHI: Hey, Steve. Good to see you again.
MOORE: Yes.
VELSHI: Listen, the fact is, whether it's Morgan Stanley, and you can choose to believe them or not, but a lot of people are saying that the concept of QE3, another round of quantitative easing, may be the best solution. You -- you often are in contact with and represent a conservative view in the United States.
MOORE: Right. Right.
VELSHI: Where do you stand on that idea?
MOORE: I'm against it. I just don't think it's worked very well. And here's one of the problems, Ali, with the American economy. It's not just jobs. If you look at the income statistics for family incomes, and, look, you and I both care about what's happening to middle-class families, the problem is, we're not seeing income growth among people who do have jobs. And I do believe one of the reasons for that is what have middle- class families faced in the last couple of years. They have faced higher gasoline prices, higher fuel prices, higher food prices.
I think that's a result of this very loose, zero monetary -- zero interest rate policy. And, Ali, we have been doing this now for, what, two years with near zero interest rate and it hasn't really pumped up the economy much.
VELSHI: Well, some say it saved us from a depression. But that's a matter for discussion.
MOORE: Well, that's right. Some do say that.
VELSHI: All right, Richard.
MOORE: I just disagree.
(CROSSTALK)
QUEST: Stephen Moore, the senior economy writer.
Stephen Moore, good to have your forthright, robust views from "The Wall Street Journal" joining us for a good discussion.
MOORE: Great to be with you.
Brooke is in Atlanta -- Brooke.
BALDWIN: Hey, Richard, thank you so much. Keep that bell on standby.
I'm going to steal a phrase from you. We're 40 minutes away from the end of play today, and we know what fears of this double-dip recession mean for Wall Street. What does it mean for you? Also, might there be a silver lining, might there be good news in terms of buying a home in the United States? Got Poppy Harlow live, CNNMoney.com, in New York in two minutes.
Back in a moment.
(COMMERCIAL BREAK)
BALDWIN: Welcome back here to CNN. Breaking new as we continue to keep a very close eye on the markets. The Dow Jones industrial average down 478 points. Sitting right around 10931. All three indices down today. It has been down in terms of the market's overall globally.
And, you know, there are a lot of factors at play here today.
I want to break some of them down and get into the details of what this means for you.
I want to bring in CNNMoney.com's Poppy Harlow in New York.
And, Poppy, let's begin with this report out from Morgan Stanley because there are two headlines.
HARLOW: Sure.
BALDWIN: Obviously, we know they are slashing its global growth outlook, not just for this year, but for next year, but the big headline that is gaining a lot of traction is the headline here that we're dangerously close to a recession, both in the U.S. and Europe.
HARLOW: Yes.
BALDWIN: What do they base that upon?
HARLOW: Well, that's what shocked investors. They based it upon growth projections so let's go to those numbers first.
What Morgan Stanley did, they came out with this long note that you have that we all have that said they project the growth of the U.S. economy in 2011, this year, and in 2012 is going to be pretty significantly slower than they expected. And then off of that, they say that at this point, not only the U.S., but Europe, both are dangerously close to hovering close to a recession.
Technically, what a recession means is two quarters where this -- where our economy doesn't grow, where there's actually a move backwards, if you will. However, I want to qualify this, because what they also said on the front page of this report, Brooke, is that they said that this is not going to be as bad as 2008.
BALDWIN: Yes.
HARLOW: Even if we fall into a recession, it's not the same thing. The economy is not in peril in the same way that it was, even though watching the markets, you may think that.
This is coupled with, as you have been reporting all day, a number of bad reports, the worst manufacturing report we have had arguably since March 2009 in the middle of the recession, much worse- than-expected housing numbers and a jobs number that was worse than expected this morning, so it's not just what Morgan Stanley said, but that certainly sent shivers through the market this morning after Europe had a big sell-off overnight.
BALDWIN: A lot of people also, you know, pulling their money out of the markets, putting them in Treasuries. How are Treasuries, U.S. Treasuries, faring today?
HARLOW: Yes. This is so interesting. If you look at the yield on a 10-year Treasury that a lot of folks watching may be invested in, what they consider a safe haven, the prices have gone even higher today as the market has fallen, and the yield, Brooke, has fallen to a record low, below 2 percent for the first time in history, 1.99 percent.
That's what you're getting on 10-year Treasuries right now, and that is one thing and one thing only that investors, despite the problems in our economy, feel that U.S. debt is a safer place for their money than the stock market, than European debt, than other places, so they are running into this, despite not making a lot of money off of it. That's exactly the thing we saw last week in the big sell-off.
BALDWIN: And at least if you are in the market to buy a house, they are a little bit more affordable as we're looking here. Mortgage rates, they are down --
HARLOW: Yes.
BALDWIN: -- more of them now, a record low there.
Poppy Harlow, thank you very much, CNNMoney.com.
Ali Velshi, to you, sir.
VELSHI: Not only -- you just pointed out, mortgage rates are low. Home prices are low.
BALDWIN: Yes.
VELSHI: In fact, coming back we're going to talk to Rick Newman. He's the chief business correspondent at "U.S. News & World Report." He says, you know, for all the bellyaching out there, things are actually healing. There are some good signs in this economy, and we should probably listen to a few of them. He's going to tell us what they are when we come back.
You're watching special coverage of this market sell-off right here on CNN. We will be right back.
(COMMERCIAL BREAK)
VELSHI: You're watching special coverage here on CNN. Brooke Baldwin always here and has been covering this for a long time.
Brooke, you're almost more of a veteran of this than Richard and I are right now.
BALDWIN: Hardly, hardly.
VELSHI: When things get this serious, we bring in our friend Richard Quest in London as well, because, A., this is a global phenomenon, and, B., lots of people think Europe caused this problem anyway, so he's here to be held accountable.
I also want to bring in Rick Newman in right now, guys. Let's talk with Rick for a second, because, Brooke, you just talked with Poppy and you talked about some things that are going on that are not terrible. Let's take a quick look at some of the things that are not going wrong right now.
And I think -- I want to put this on a screen for you guys just to give you a sense of what it is. Number one, stocks are cheap. And I put a maybe around that, because some people think maybe they are priced exactly where they should be. But you just talked, Brooke, to Poppy about record low mortgage rates, home prices still low, so home affordability is low. Oil prices are down again. We are seeing lower gas prices than we were several months ago.
Gold is at a new record, for those of you with gold fillings and gold necklaces and things like that, and unlike 2008, Rick, we do not have a credit freeze. There is enough on that screen to make some kind of an economic cake.
RICK NEWMAN, CHIEF BUSINESS CORRESPONDENT, "U.S. NEWS & WORLD REPORT": Well, that's good news for somebody. I mean, certainly not Panglossian about the economy. All these problems are totally real and we could very well be -- we could be in another recession right now.
VELSHI: Yes.
NEWMAN: But there's a lot of reason to think that it won't be as bad as last time, and it may not even be a recession. Another thing is, companies are in terrific shape.
VELSHI: Right.
(CROSSTALK)
VELSHI: -- 2007 and 2008, people didn't have cash. They weren't spending as much.
NEWMAN: That's right. That's right.
VELSHI: And companies were borrowing.
NEWMAN: That's right.
Everybody, companies, and individuals and families, have gone through a massive readjustment process over the last three years. People are buying less, but they're saving more. People get it. You have got to pay down debt. We're sort of getting through that process right now. We're not far enough through that process, but we're in much -- many, many families and businesses are in way better shape than they were.
Companies have laid off so many people. They can barely lay off anybody else and keep the doors open. So, if we do enter another recession, it's unlikely we will see layoffs anything like we saw last time.
And what's happening now in the markets I think is investors are basically readjusting to the likelihood of a recession. That's why we're just seeing the ambient level of stocks come down. Let's say that doesn't happen. Let's say Washington does get its act together and come up with some kind of plan that actually helps the economy instead of harming it. That would be an upside surprise that would have investors saying, wow, maybe stocks are cheap and I should start buying.
VELSHI: And I want you to say this to Rick -- to -- I'm sorry -- to Richard Quest, because the difference between the U.S. and Europe right now, both of which are suffering from stagnating sort of economies --
NEWMAN: Yes.
VELSHI: -- is that in the United States, the answer to so many of our problems is political.
We can actually fix Medicare, Social Security, the debt, all sorts of things. We can't create jobs instantly, but we can solve most of these things if the political will is there to do that --
NEWMAN: Yes.
VELSHI: -- whereas, in Europe, it's -- it's much more structural.
NEWMAN: Well, this government that everybody suddenly hates in America is actually structured in a way that it can address these problems head-on. It is just -- we're just lacking the will to do it in Washington.
In Europe, it is a total mess. Americans -- I don't know if people will be heartened to hear this, but the structure in Europe makes the U.S. government look terrific. They have no treasury secretary.
VELSHI: Is Richard in here for this one, Richard and Brooke, do you hear what he said, he said the structure here in Europe makes the U.S. look terrific. Answer for yourself, sir.
QUEST: I've got a question for you, sir. All right, assuming that you are right and there's a dysfunctionality in Europe, you would surely then agree that it's not that much better in the U.S. Remember the debt ceiling debacle. Do you not actually think it doesn't really matter because in this global economy if we're going, you're going, too?
NEWMAN: I am going to disagree with you there, Richard. I think there's dysfunction all around. I mean, that seems to be self- evident. But we don't have to fix structural problems with our government here in the United States in order to address the problem. All we have to do is take plan, a, b, c, doe off the shelf and execute it. That would go a long way.
In Europe, the mechanism doesn't even really exist for having sort of a single authority over the 17 countries in the euro zone or things like that. You have no treasury secretary, as we have here. You've got 17 finance ministers who all have to agree. I mean, it is so hard -- I mean, that's like having the 50 states trying to organize a bailout of a few states without any central authority.
BALDWIN: Hang on a second, gentlemen, let me jump in, because you hear the phrase, if Europe has a cold, the U.S. sneezes. We are absolutely all interconnected. Maybe I'm siding with Mr. Quest on this. I mean, we absolutely have to pay attention in the United States as to what is happening in Europe, because it very much so affects us, and vice versa.
NEWMAN: Well, if there were more effective problem solving in one place or the other, it would -- it would help everybody.
VELSHI: Good succinct answer to that one. I'll ask you one last question, Rick. You heard our friend Stephen Moore from the "Wall Street Journal" on a few minutes ago. A common refrain from conservatives that why would we have the central banks interfere more? They have been interfering for three years and look at the mess we're in.
NEWMAN: And I'm personally tired of the backward looking argument here. I mean, we are -- we're in a really messy financial and economic situation. Somebody should try to do something. I mean, I think -- people don't think the Fed is the best answer. They think it's the only answer, because the politicians in Washington can't agree, and the Republicans who control the House have basically said no more stimulus of any kind unless it's tax cutting, and that adds to the debt right away.
So -- I mean, the fed doesn't want to do more quantitative easing. I think the Fed would be quite happy if the politicians said hey, hand it over to us, we've got it. But they are not doing it.
VELSHI: Rick, good to see you. Thank you, my friend. Rick is the chief business economist at "U.S. News & World Report." Brooke?
BALDWIN: You know, Ali, I thought you made a good point the other negotiate on "The Daily Show" where you said the government can't create the jobs, albeit if they had a surplus, yes they could, but they can foster a better environment in which jobs could be created. And we know the president, right, been on a three-state Midwest tour touting jobs, jobs, jobs. We do also know we'll have a major policy speech coming up in a month.
But you know what, there's been a lot of criticism that he has not focused on the unemployment sector within the minority population. And I'm going to talk to a U.S. congressman, Congressman John Lewis, who is live. I'm going to ask him if that criticism is fair, and also where are the jobs. He is standing by. That conversation is two minutes away.
(COMMERCIAL BREAK)
BALDWIN: We are 25 minutes away from the close of business there on Wall Street. All three indices are down, as you've been seeing during the commercial breaks. The Dow Jones industrial average down 472 points. We are coming upon that closing bell. We'll bring it to you live.
Meanwhile, let's talk jobs, jobs, today jobs. New details about this jobs plan that the president of the United States is set to unveil next month. CNN's Jessica Yellin, our senior White House correspondent, has learned that the president will propose legislation, new legislation involving targeted tax cuts to employers to encourage them to hire new workers, also new jobs creating infrastructure investment, plus long-term help for those unemployed.
Today in Atlanta, Georgia, people ling up very, very early, by the hundreds, for this jobs fair sponsored by the Congressional Black Caucus. And several addressed the recent criticism that the president has not focused on minority unemployment.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: He had to give the money to Wall Street as opposed to giving it to jobs, and now that that has happened, where the rich have gotten richer and the poor have gotten poorer, now we see the backlash of that such as what we see here today.
UNIDENTIFIED FEMALE: I think the president has a lot on his hands. I understand a lot of people probably have that thing that since he's black he should be helping out his people. But just because he's president doesn't mean he can always be there.
UNIDENTIFIED MALE: I think his priorities are to make sure that we -- he tackles all the issues that are facing America, not just black America.
(END VIDEO CLIP)
BALDWIN: Well, joining me now from that jobs fair live, Congressman John Lewis, Democrat from Georgia. Congressman Lewis, nice to see you. You know, it's important to point out that the black caucus is holding all these fairs in major cities around the U.S. essentially with the goal of finding work, finding work for 10,000 people. Can we be specific though? What kinds of jobs are we talking about here, congressman?
REP. JOHN LEWIS (D), GEORGIA: We're talking about jobs, jobs, jobs, hundreds and thousands of people have been standing here all day today, since early this morning, trying to get a job. People want to work. We had one company made a commitment of 60 jobs. We need more than 60. We need thousands of jobs. Here in Atlanta, for people to stand in a hot Georgia sun all day in long lines is saying something about how desperate people are to work. People will take almost any job.
BALDWIN: Certainly people are desperate. Are we being more specific, talking manufacturing sector, health, education? What kind of jobs can you help offer up?
LEWIS: Well, we're trying to get jobs in all of these areas, health, education, manufacturing, transportation. Georgia is the center of health and education. We have all these colleges and universities, research. I met young people, young students, four young men who graduated from college at the same time. One young lady who is working on her Ph.D., but she cannot get a job. That is a shame. This is a disgrace.
BALDWIN: Let me ask you this, congressman, because based upon her comments last night, also today, your colleague, Congresswoman Maxine Waters, she seems to be among the group saying, you know, that the president has been absent when it comes to black unemployment specifically.
I want to listen to her. She spoke today on CNN.
(BEGIN VIDEO CLIP)
REP. MAXINE WATERS (D), CALIFORNIA: We want the president to help everybody, just as he's helping the rural community. When he rode down in the past few days, he went to small towns in rural communities, and he went with a plan. And that plan was to invest money in those rural communities in order to develop jobs. We like that, and we want the rural poor to be attended to. But we also want the urban poor to be attended to. That's all we're saying.
(END VIDEO CLIP)
BALDWIN: I know you know this number, Congressman Lewis, 16 percent, that's African-American unemployment in the United States nationwide. It is seven points higher than the national average. Did it give you pause at all when the president hopped on this bus, talked all about jobs, jobs, jobs, this week and went straight to the rural Midwest?
LEWIS: Well, we must convince the president and urge the president come to the large urban cities, not just in the northeast, but also in the heart of the American south, but also visit the southwest where hundreds and thousands of our brown brothers and sisters, Latinos, cannot find work. Go and visit with Native Americans. We're all in the same boat, black, white, Latino, Asian- America and native America. We're one people. We're one family. We're one house. And we want to work with this president to create jobs.
BALDWIN: Congressman Lewis, does it disappoint you, is that an appropriate word that he went to the Midwest and not to these urban centers?
LEWIS: Well, I'm not disappointed. I will not become disappointed because I'm always hopeful, always optimistic. Our responsibility, our job right now is to say to the president, to the leaders of Congress, let's pass a comprehensive jobs bill to help all of our people.
BALDWIN: Let's talk about that.
LEWIS: Get jobs.
BALDWIN: According to our own reporting in terms of this jobs billing hearing that the jobs package that the president does plan to unveil next month, it will call for targeted tax cuts for employers, also new national infrastructure investments and long-term help for all these people who are out of work.
Given, though, what we have seen and heard from Republicans, they won't approve any new spending. So, sir, do you think that this legislation would even get a chance of getting passed? LEWIS: Well, it is my hope and my prayer that the Republican members of the House and the Senate are listening to the people the same way that we are listening and they are hearing the same thing, to create jobs. I don't see how any politician, be it Republican, democrat, independent, conservative, liberal, progressive or whatever, cannot see the pain and hear the moan and groan of a desperate people.
Congressman John Lewis, there, I hear the loud noise, a lot of people I can tell in need of jobs just in that city where you are. Thank you, so much sir, live in Georgia.
And now to London, to Richard Quest.
QUEST: Brooke, we thank you for that. With just about 17 minutes to go of the trading session. The Dow is now off more than 505 point. It's not the session lows, but it is well worth pointing out that at these levels, the session low is extremely dubious. We're just over 10,905, so we'll be watching that in the next 15 minutes.
When we come back after this very short break, we're going to talk to Bob Lenzer of "Forbes" magazine. And the fundamental question we need to ask Bob is whether or not he believes the recession is now a baked in certainty, after the break.
(COMMERCIAL BREAK)
QUEST: Welcome back to our special coverage, Ali Velshi reporting and myself as we count down towards the top of the hour, just 14 minutes or so away. The Dow Jones off more than 500 points, not the session lows, but it's clearly a pretty horrific day coming on after two weeks of such extreme volatility.
Bob Lenzer of "Forbes" magazine joins me now live from New York. Robert, as we look at what's happening, I've read your article and you're quite clear that you basically said what Morgan Stanley said, that a global recession is more likely. So do you now believe that a recession in the U.S. and probably in parts of the euro zone is a racing certainty?
ROBERT LENZER, COLUMNIST "FORBES" MAGAZINE: Yes. No. I -- I would not say that anything is a virtual certainty, but if you look at the data, if you look at the numbers and add it up. Germany is actually growing less than the United States. It's only growing at half of 1 percent. We were growing at 1.3 percent in the second quarter. The fed says they are going to keep interest rates at zero because they don't really expect the economy to recover during the next two years. Two years -- that's an amazing, amazing statement.
Then we've had the Philadelphia manufacturing index today way down, a real shock. We had a couple of days ago the New York manufacturing numbers seriously down. We've got the housing still down --
QUEST: Right.
LENZER: -- in a very serious way, and we don't have the promise -- what we really need, but, unfortunately, we're politically behind the eight ball, is we need an enormous stimulus program of say $200 billion, to put to work all these people from the construction trades and building and real estate that are out of work. That's what we really need. But I don't think Republicans will ever go for it.
QUEST: Right.
LENZER: I have one other idea. Go ahead.
QUEST: Well, before we get to your idea, your stimulus package has as much chance as daylight at night in London. However, that means it's the Fed and the ECB that's going to have to come in with QE3, and there is a valid point that it hasn't been as effective as it might have been.
LENZER: I don't think -- I agree with you. There may be QE3, but I think all it will do is push the price of gold up, the dollar down. I don't think it will -- the interest rates are so low, even if they push the interest rates slightly lower, what good is that going to do? What kind of motivation is that for a business to go out and build more plants and hire people? I don't see it. Unfortunately, sadly, I have to admit that, yes.
QUEST: So let's talk about profitability of corporations. Now U.S. corporations have been extremely profitable, largely on the back of their international operations. But should even there, and I don't want to be the harbinger of doom in every question that I ask, but the downside, the risk must be to the downside now on profitability, which is a bright spark.
LENZER: It is, absolutely, absolutely. That's absolutely right. If Europe is going -- is going south, all the American corporations that have huge operations there and sell many important products to Europe, they are going to suffer. So we have been at a peak of 14 percent of greater return on revenues, which has been in the past the peak and a signal that we can't go very much higher.
QUEST: I need Ali Velshi to listen to my question and more importantly to your answer, because Ali consistently manages to blame my side of the Atlantic instead of ignoring his own side.
LENZER: I disagree with that.
QUEST: Excellent. So you've put in right. Where does the ultimate responsibility -- who is going to have to get us out of this mess?
LENZER: I don't think we're going to get out of the mess. I think we'll have to muddle through because, as Professor Rogoff at Harvard has pointed out, and this is something that nobody wants to accept. They want to deny the reality of this, but what we went through in 2008 and 2009 was such a serious operation on the American economy that you cannot recover fast. What happened to housing, it will take years to recover. Nobody wants to accept this reality which is the result of him studying 800 years of history. VELSHI: Let's push on this a little, Robert. This is an interesting concept. What if we had to get used to a new reality that doesn't involve much growth whatsoever? And I know you write for regular folks. Tell me for regular folks who are watching this, what does that new reality mean, where it's not about growth and the value in your house and salary, in the value of your stocks. What does that mean?
LENZER: You have to really think hard about how you're going to protect yourself. I think that's why you see investors just dumping their stocks, running into cash, so that whatever happens -- and they don't know what's going to happen, I don't and neither of the two of you know either. We don't know how severe it's going to be, but they want to make sure they've got enough money to get through the next two years. And that's the most important thing.
But we must -- I wonder what you think of this, Ali, because I heard you on Jon Stewart, I thought you were terrific.
VELSHI: Thanks.
LENZER: What if Obama can come up with some tax benefit for small business where most of the jobs have been created so that each small business over a certain size would hire one person, one person for at least let's say the next three to five years. That would be millions of people. If they would get some benefit that would not cost them a lot of money in the search of improving their business and increasing their revenues --
(CROSSTALK)
VELSHI: And even conservatives agree on this point, that we all want to see some measure of growth in the economy. The most effective way even more than tax cuts is to somehow stimulate employment. I'd love it if we had an idea like that. Bob, good to see you. Thanks very much. Richard, back to you.
QUEST: All right, the most important thing I think we heard in that part of the discussion is that Ali and I are probably like everybody else, have got no idea what will be happening in two years, because frankly if we did neither of us would be sitting here.
BALDWIN: I was about to say the three of us would be on a yacht in the Mediterranean if we knew what was so certain coming in the future. Bob Lenzer says we'll be muddling through the mess. We'll be muddling through the closing bell. We are less than seven minutes away. Join the three of us live in London, New York, Atlanta, Georgia here on a special edition of CNN. Back in two minutes.
(COMMERCIAL BREAK)
BALDWIN: Welcome back. Breaking news. Special edition here of CNN. We've got Richard Quest live in London, Ali Velshi in New York, myself at the CNN World headquarter here in Atlanta, Georgia.
And Bob Lenzer just brought up a great point. Ali Velshi, just a couple of nights ago, you were teaching Jon Stewart a thing or two on all things economic on "The Daily Show." And I want to play just a little bit of sound, because I thought this was a pretty interesting idea. You were talking jobs and essentially saying you wish Congress had the same passion maybe will be the word when it comes to jobs as they did the whole bickering over the debt ceiling crisis. Take a look to this.
(BEGIN VIDEO CLIP)
VELSHI: I wish that we had treated jobs the way we treated this debt creel which go was a bit of a manufactured crisis. Jobs isn't. So what if we actually got everybody together and said there was some deadline to figure out how to create jobs. Can you imagine if the passion and energy that went into this debt ceiling debate had gone into how do we actually get jobs created?
(END VIDEO CLIP)
BALDWIN: Brilliant, Ali Velshi. Do you think it will fly?
VELSHI: I wish there were this kind of deadline. We don't treat jobs that way and Congress doesn't seem to operate on the basis of just getting it done unless their back is against a wall.
But the fact is takes hoodwink to suggest that the debt and deficit is more serious than the jobs crisis. If you employ people, they're not receiving aid from the government, you're reducing deficits and ultimately moving on the way to growth.
We have neither growth nor employment and as a result, we have no leadership. When you see a day like this in the market, you don't know what to turn to. Richard and I are trying, Brooke, to find something to hang our hats on, but we can't. It doesn't mean it won't get better, it just means we have nothing to hang our hat on.
BALDWIN: Richard, go ahead.
QUEST: The jobs and the growth, they're both two sides of the same coin. What Bob Lenzer said, it's so unpalatable, but it's so true. This is a patient that's had cancer, leukemia, brain tumors, it's had an arm and a leg amputated. It's not going to suddenly run the New York marathon. It's not going to happen. So it's going to be slow, Turgid, and we're going to go through the mud.
And until people are starting to be a little more honest about that, I'm sorry to be a downer always. Every time I come on the program, I'm a downer.
BALDWIN: Hey, do me a favor as we're watching the clock tick down to less than two minutes away with the closing bell on Wall Street, talk to me about markets in Europe. They were pummeled today.
QUEST: Oh, I'm just calling them up on my screen here. Yes, the DAX was off 5.8 percent, The CAS in Paris was down 5.4 percent, the FTSE was down 4.4, the bank stocks -- I'm just going to give you an idea of some of the bank stocks, big stocks like Barclays down 11 percent, commodities down 10 percent. They were all heavy down.
And if you look at the German market, you have BMW down seven percent, Tyson Crook (ph) down nine percent, and of course the banks. What it tells me is this is a fundamental worry about the financial system and the wider economy because you're seeing industrials being clobbered.
VELSHI: It's good sign by the way that all those numbers that Richard just gave you, we're at 3.7 percent. It's nice that we didn't continue the trend of going worse.
BALDWIN: Guys, let's listen to the closing bell and then we'll continue our conversation.
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