freelander and assistant managing editor at "time." stephen, let's start with you. we know europe's debt crisis has a very direct impact on the u.s. economy. with europe's future still uncertain, how much influence do americans, does congress and president obama have on what's really happening around the world right now. >> not so much. look, a lot of people probably wondering how can a small country like greece and a bigger country like italy throw the entire globally economy into this turmoil. i think the answer to that is it's the first domino to fall. there's a real threat, you kind of get a contagion effect, if italy falls we're now seeing their interest rates rise on their bonds. this will affect other countries like portugal and spain and maybe france and germany. that's where the interconnection comes in. the united states, the banking system here is very interconnected with what's happening in europe. >> let's explore the contagion for a minute with chrystia. if i get the flu shot and you get the flu i'm not getting it from you. the issue of contagion is based on the fact that other countries do not have the back stops or ability to prevent what's happening in greece or italy. is that what we're worried about, this could spread? >> yes, absolutely. it's worse than your flu shot analogy would suggest, ali. as it were, the european countries are all living in the same family and eating the same food from the same bowl. that is the euro. >> you're worried if it does get out of hand -- we don't know if we're there yet -- if it did get out of hand it would be greater on credit and capital flows than lehman brothers. >> absolutely. i interviewed george soros who knows about currencies and currency crises in europe right now, and he said this to me this could absolutely be worse than lehman. the truth is while we're still suffering the after affects of lehman crisis, the rescue happened. the rescue worked. financial markets were restored. i think the nightmare scenario we're looking at in europe, what happens if there is a disorderly collapse of the euro, euro currency. the really scary thing is, that was a currency designed kind of like a roach motel. you can go in but never a system designed for countries to go out. that was on purpose. the architects of the euro wanted it to be the first step towards closer political union. so they didn't create an escape clause. there's no way to get divorced. yet right now, the members of the strong countries that stephen referred to, france and especially germany, they have to decide now, are they willing to pay up. >> they might be interested in a divorce. let's bring this into perspective. i still hear it after all the reporting all of us have done on this, i still hear people say how is greece, the 32nd largest economy in the world and not been central to these kind of affairs in over 2,000 years, how is it that important and why is italy -- obviously we get why italy is more important. let's have the argument one more time. >> i think greece was important not economically in the absolute sense but because of underlying these incredible european problems in the european union. greece showed it was not a proper political union but a selfish economic union. when times got tough people weren't willing to come together to back each other up. you saw these differences between the rich countries and poor countries and hardworking germans and spend thrift greeks, generalizations but meaningful. italy is an entirely different story. italy is the third largest bond, i spoke to the head of pemco this week, the world's largest bond trader and agrees with george soros, italy can be worse than lehman. that's a big deal. >> you call it the most dangerous economy in the world. >> can i bring this back to the root cause. as i read so many stories about this, what's the big problem in europe. in my opinion they have built up these incredibly large overly generous entitlement programs they are incapable of reining back in. >> in a vacuum, that would be fine. let me just introduce this. i'm getting this from you. in a vacuum that would be fine. we don't live in a vacuum. we here in the united states think we're not competitive with asia. europe is less competitive. >> you know what, that's the big problem for europe right now. i'm going to get hate mail for saying this, europeans are lazy and asians are eating their lunch. >> i would like to push back against stephen's analysis. >> okay. >> actually, germany, which has very generous entitlement programs is incredibly productive, a much more successful exporter than the u.s. actually much more successful export economy than china. >> we'll see. >> sweden, another country which has very generous entitlements is not suffering a crisis. the countries in europe which have slashed their government spending, drastically, countries like ireland, actually have not have the markets say hurrah -- the markets have said they're chilling your economy. hang on. the final point. the real crisis is not at moment a structural one. it is that countries are issuing debt in a currency they don't control. if you control the printing press -- >> i don't agree with that. >> you're never going to have a sovereign debt crisis. >> this is an interesting -- >> it's the fact that they can't control their spending and there's no hope of controlling their spending. >> i think there's a lot of similarity between the problems on both sides of the atlantic. you've got rich countries in debt and they still have to grow. that's pretty impossible. >> however, let's go back to the people coming out of the woodwork now saying ten years ago i warned you or five years ago i warned you about the euro. i probably -- i'm going to put it out here, i don't know that the euro was a problem, but they didn't create a super structure. you said the problem is there's no divorce mec sism. they never built a house. they created common currency, then didn't come up with a way -- you get pronouncements from the eu but nobody has the power to do anything. >> no hank paulson of europe. >> no ben bernanke. right. in order to have a currency that works, you need to have a central bank which is the creditor of last resort. >> but also the problem -- >> what we are finding in europe is, the ecb is not allowed to do that. that's their big question. this crisis could end tomorrow if the germans and french agreed that the ecb could provide unlimited backstop. >> but they tonight want to do that. >> but they would have to get over -- >> of course. that's why i'm saying it's fundamentally a political crisis. >> rana after greece, italy, it can go back to portugal and spain, keep buzzing around. nobody wants to bail anybody else's bank's out. here in america we don't want to bail our own banks out. >> absolutely not. i think going back to the point why not let the ecb print money. well that goes to deep european fears about hyperinflation. there's really deep sort of psychological stuff going on here that's hindering any kind of rescue efforts. >> introduce one other thing. if you are greek and you have been under this austerity program for sometime already, all these european countries have been cutting back, your economy is already recessionary, if not close to it in many places in europe. now you're asked to do more to save bankers in another country or investors in another country. this is unappealing for everybody involved. what they have to do is not appealing. >> you have the greeks running a primary -- greek actually now -- not today. greece today is on the verge of running a primary surplus. that is, if greece defaulted on its debts, were not going to pay, their current budget on the verge of surplus. that's why you're starting to hear some greeks say let's forget about europe, let's just -- >> italy is at the forefront of the problem with italy partly demographic, huge entitlement programs. you know what the birth rate is 1.2 per married couple. they have all these people retiring and no kids. >> nobody to pay taxes on them. >> rana, chrystia, stephen say where you are. normally mild mannered tim geithner came out swinging at republicans this week in an exclusive interview with cnn. stephen moore will get his chance to swing back next on "your money." stay with us. personal service, personal service, 5-year price lock guarantees and consistently fast speeds. ♪ this was a week in the united states where a lot of the political discourse was focused on anything but economic issues, whether it was rick perry's memory lapse or continued accusations of sexual harassment against herman cain. chrystia, is there a chance, and i'm hoping not despite everything else, is there a chance this election could turn on things that are not economic, even though for three years now the voters of america have said the economy is their number one concern. we are spending a lot of time on things not about the economy. >> yeah, but it's 2011, not 2012. i think that when when push comes to shove, people are going to focus on what really matters. i have a lot of faith in american voters. look, i think these other issues, they are easier to think about. they are more fun. they also are less scary, actually, they are about other people making mistakes. >> when i said to folks at g-20, i said herman cain, fascinating though he is and his story can't wreck the world, greece could. >> talking about euro bonds and how the ecb should average, esf. this is not that fun. >> you know, stephen, you conservatives take some of the credit or blame for making this such a big issue, making americans understand the economy and debt and things like that are serious. you conservatives are derailing the conversation with everything going on this week. >> we're not responsible. >> it's your presidential candidates who are diverting the conversation. i mean, as a conservative, who in the republican race is keeping this conversation as focused as they should be? whether you agree with them idea ideologically or not, i feel like it's huntsman or gingrich, romney we haven't heard a lot from. >> there's no question the last week or two have been bad for republicans because all the talk has been about herman cain's sexual harassment allegations when they want to talk about the economy. tax reform and so on. look, this is a celebrity culture. it's amazing to me 90% people know who joe paterno is than ben bernanke. this is part the problem. you turn on tv, nobody is talking about the economy right now, they're talking about herman cain's sexual harassment allegations, joe paterno. it's too bad we should be focused like a laser beam. >> i'm hoping chrystia is right. it's 2011 we have some time to go. in an exclusive interview with cnn's white house correspondent jessica yellin, treasury secretary tim geithner came out swinging. against republicans. listen. >> unless congress and republicans are willing to do more things for the economy now, unemployment will stay too high, won't come down fast enough, growth will be weaker. that's not a political statement just basic reality. >> stephen, have republicans reached a point where they have more it gain in november of 2011, by stalling, by not having this economy improve dramatically in the last year so they win the election. >> certainly. i mean a weak economy is going to help republicans win the white house. but i think that's an unfair allegation. what's the big thing going on in washington right now? it's the super committee. guess who is not represented at the table there, who wants the super committee to fail? that's barack obama. the reason he does, he wants this narrative for the election season that the republican congress is -- >> isn't that too dangerous? isn't that too dangerous? >> i think it's dangerous. >> you believe the president wants the risk of these automatic cuts that come in that will cripple this economy. >> look, the republicans i've talked to on the committee, and even some of the democrats, say obama has not been represented. he has no interest in seeing this succeed. >> chrystia, what do you think? >> i don't agree. i think it's very clear what's going on right now. stephen is right, the republicans don't have an interest in the economy getting better. i don't think we -- >> i didn't say that. >> right now. right now. we shouldn't blame them for that. politics is an oppositional race. i think it's perfectly fair and justified to say we don't believe in your policies and we're not going to help you execute them. that's not their job. >> the danger is everybody gets sprayed by the same skunk. if this economy gets worse they're all going to smell exactly the same. >> i don't think everything happened in a super committee and i don't expect it to happen there. it's all about jobs, the economy. it will continue to be. that's why europe matters. if europe goes into recession, will that push u.s. into a recession. that's why occupy wall street matters. it's about jobs, it's about the american dream, feeling you can do better than your parents. that will be the focus. >> the gridlock is dangerous for both sides. what you could have in november 2012 is throw all the bums out. >> every bum out. >> except someone does have to win. ultimately there will be someone who is the president. >> that's true. >> it's not a case where everybody can lose, one person will be president, either barack obama or i think -- >> i don't want a partisan judgment, i ask as financial journalist, both of you, because we know where he stands. is there someone that stands out as making sense to you in this race regardless of their politics or the likelihood they might win. >> i truly think it's impossible to give a purely technocratic answer to that. >> right. >> i think in the republican field tech know crates will say mitt romney and jon huntsman makes the most sense on the economy. i think barack obama and tim geithner are a strong economic team. >> right. >> i agree, romney is sounding better than four years ago. sounding less like a salesman. that's a good thing for him. i think we haven't seen a real coherent what are we going to do about jobs plan. from either candidate. obama is trying but keeps getting gridlocked. whoever can do that will win. >> stephen, if europe fails or gets worse than it is now, what are we going to do about jobs plan suffers greatly. >> no, look, it affects the u.s. economy. we're in a global economy now. look, i do want the economy to get better, i think jobs are number one. i think there's a complete ideological difference. republicans say they don't want to raise tacks. taxes. i think they're right on that. i hope they get an agreement another super committee. if we can't cut the first trillion dollars, how are we going to get to the next 9 trillion. >> we'll talk later in the show about the super committee. there has been some movement. pat toomey, last guy i expected to do it, is responsible for some of it. let's see where we're going. europe's debt crisis is partially america's problem. what it means specifically for your investments and job search. coming up next, stay with us. state farm. this is jessica. hey, jessica, jerry neumann with a policy question. jerry, how are you doing? fine, i just got a little fender bender. oh, jerry, i'm so sorry. i would love to help but remember, you dropped us last month. yeah, you know it's funny. it only took 15 minutes to sign up for that new auto insurance company but it's taken a lot longer to hear back. is your car up a pole again? [ crying ] i miss you, jessica! jerry, are you crying? no, i just, i bit my tongue. [ male announcer ] get to a better state. state farm. real, objective investing help? that's a little harder to find. but here's what i know -- td ameritrade doesn't manage mutual funds... or underwrite stocks and bonds. or even publish their own research. so, guidance from td ameritrade isn't about their priorities. it's about mine. straightforward guidance. that's what makes td ameritrade different. ♪ [ male announcer ] trade commission-free for 60 days. plus get up to $600 when you open an account. i tell you what i can spend. i do my best to make it work. i'm back on the road safely. and i saved you money on brakes. that's personal pricing. as i told you before the break, europe's debt crisis has real implications for your job and investments in the united states. our good friend cnn.com poppy harlow joins us with jim a managing director at zephyr. all eyes on italy this week, what does that mean to us? >> we started the week looking at greece, now it's all about italy. jim, we're going to break down for people why they should care so much about italy. i'm going to pull away countries in europe, all the highlighted countries on the periphery where we're concerned about a debt crisis. take a look at italy. you've got $2.2 trillion economy, seven times bigger than greece. the fear is the lack of confidence in the ability for that country to pull back from a debt to gdp ratio of 120%, which is clearly unsustainable. first scenario if we have italy implement austerity measures and the market believes it, then what happens to jobs in the united states? what does that money? >> that's good news. that means europe will not pull us down, continue to grow in the united states, not as fast as we want but continue to grow, employers will add jobs and you will have a gradual decline in the unemployment rate from 9% now to 8.5% in a year. >> not enough in terms of creating jobs in the country. but investments, people that have exposure through their 401(k) through europe, what should they b doing in terms of the equity market right now, in terms of their bonds? what should they be doing to protect themselves. >> europe is going to have a recession. many would say they are in it. you want to invest where the growth is. the growth is in the united states and select emerging mashlts markets, china, asia, you want to own the biggest, most conservative u.s. corporation with a global footprint, lever to the emerging markets, united states with dividends and select high-quality companies in the emerging markets. >> be very conservative. corporations, they have been able to weather this recession better than consumers. you've got record corporate profits for a number of companies. the question is, what would this situation in italy mean for corporate profits? >> corporate profits would grow. the decline in europe would be offset by the growth in emerging markets in the united states states and see corporate profits grow 5 maybe 10% next year. >> when we look at this scenario, we think this is more likely than the other scenario, that italy does not implement the necessary austerity measures or they do and the market doesn't believe that. in that case, what does it mean for jobs in this country? obviously a worse situation? >> it would be a problem. what would happen financial markets and economy in europe would freeze up. it would blow back to the united states. corporations would have fear, would not add jobs and you would not see an improvement in the unemployment rate. >> what do you do with your investments? how much more conservative should you be if this is the case with italy. >> you would probably want to have more bonds in that case, more fixed income, u.s. government debt, corporate debt in the united states. to the extent you had equities, again, you'd want to lever where the growth is, which are the emerging markets. to the extent there is growth the united states would participate. again, you'd want to own big conservative stocks. >> for corporations, obviously the situation gets more perilous for corporations. what do we have flat earnings for corporations or see a decline. >> you can have a decline in corporate profits under that scenario. europe could pull the whole world down and you could have a