are we possibly headed into further stagnation? >> well, you know, the political strategist side of things i've never had to look so much at politics to figure out where the economy was going. i tell you, it's like watching the keystone cops. it's gotten ridiculous. going forward we do have momentum carrying us into 2012. that's the good news. we hope we don't lose it because of political ineptitude. that's what would kill it. we have a lot of icebergs ahead. we hope politicians are better at navigating turbulent water than the captain of the titanic. that said, where are the positives? the positives are there is a glimmer of hope in the labor market. looks like the situation bottomed out after things fell apart last spring and the summer. we're seeing momentum return to job hiring. not enough momentum, but some is better than none. particularly small business hiring, new business burst, that's very important to the back bone of the u.s. economy and where we're looking for strength going forward, is looking for new business creation to begin picking up again. not enough to take down unemployment to the point where it gets to long-term employed, which is what we really worry about but taking down unemployment nonetheless. we have a chance of reaccelerating in 2012 and doing a little better. >> to be fair, even the best projections of when we get to 5% unemployment where we were before the recession started, 2017. not talking about a big burst in 2012 but anything makes a difference. harvard university professor, neil ferguson is the author of "civilization, the west and the rest." you bring a great perspective to this, the debt ceiling debacle or the super committee's plan to create a reduction plan, 201 was a year of political gridlock or keystone cops in washington. leadership deficits have held us back. how do you see this playing out in 2012? >> well, it's hard to be too optimistic. one of the things that gave us signs of life in the last quarter was a plunge in the savings rate. i'm not sure americans can really postpone deleveraging for more than a quarter before balance sheets begin to hurt them again. on the political side, i think we're in for surprises in 2012. my sense is that the republican nomination race could end very badly, indeed, with an unelectable candidate getting the nomination. in other words, not mitt romney. then we're suddenly going to see the possibility of a third candidate entering the race. that's going to increase the uncertainty hugely. if americans elect can get somebody like mike bloomberg to enter the list, it's going to be very, very hard, indeed, to predict the outcome of the presidential election. while that's going on, don't expect any insanity to prevail between republicans and democrats in congress. i think total fiscal mayhem seems an almost guaranteed feature of next year. certainly nothing is going to help the economy. it's quite possible we'll get things that will hurt it. that's to say, we'll end up heading towards this across the board sequestration, budget because -- budget cuts all around if they can't agree on some strategy. >> that's the thing that could hurt the economy more. bill gross, co-founder and chief investment officer of pemco. we spent a great deal of time together in 2011, bill, in a market this uncertain, there have been some opportunities. what is your prediction for what happens to global economies in 2012 particularly from your perspective being a key bond investor. >> well, i think, ali, 2012 will resemble 2011 in that 2011 was dominated by delevering. niall mentioned it and it speaks to countries balancing their deficits and some on the verge of default in greece, for instance, banks forced to shed capital, key investments, individuals fleeing risk markets like stocks for bonds and safer havens, delevering risk reduction, long-term but destructive short-term because it reduces growth and lowers asset prices. does that continue in 2012? to our way of thinking it does. what does that mean in terms of what you should buy and what you should sell. you should prepare for euroland instability that speaks to greece and perhaps one or two other countries dropping out. i think you should prepare for currency instability. that speaks to a stronger dollar. i think you should speak in the bond market for a bottom in yields in those what we call clean dirty shirt countries, united states, united kingdom and germany. they can only go so low. >> your analogy of clean dirty shirts and you're traveling, trip gets extended, you try to find the cleanest dirty shirt in the pile. at this point, the cleanest dirty shirt tends to be the united states when it comes to its borrowing. neil ferguson to what degree is this stuff happening, disagreement and some degree of ineptitude in washington and what degree does this threaten the western world and america as a great economic power? >> you know, i think right now the biggest threat threat to western economies is coming from the other side of the atlantic. i think if it weren't for the fact europeans were in such disarray, things might be looking rosier in the united states. there are signs of recovery, there's no question of that, whether you look at unemployment or housing. if you cross the atlantic there's a far bigger mess there. it's almost impossible to sort out the euro zone without a shift towards what amounts to the united states of europe. in other words, some system of federalism. the political obstacles to that are absolutely enormous. i think the headwind from europe is probably the strongest headwind for everybody right now. it's after all appropriate from my point of view as somebody chronicling the crisis of western civilization the epicenter of crisis have been athens and rome. i don't think this crisis in europe is in any way over and i anticipate further blood shed as europeans struggle to overcome a profound german resistance to long-term transfers to a less productive periphery and profound german resistance for easy money to the bank. the ecb would like to be the fed. i'm sure mario is itching to do qe, quantitative easing, but the brakes applied by berlin that means we're certainly going into a european or eurozone recession which can't be good for the united states. >> we're close to it now. hang on for a second. rome and athens haven't been this important in 2,000 years. diane, niall, bill, stick around. let's talk about the economic future of the united states and whether our obsession of what's going on in washington is actually founded. maybe they can only tinker around the edges. we'll talk about your economic future and how it's going to look in 2012 next on "your money." wouldn't you like to get away? ♪ ♪ ♪ sometimes you want to go where everybody knows your name ♪ ♪ ♪ you want to be where you can see ♪ ♪ our troubles are all the same ♪ ♪ you want to go where everybody knows your name ♪ ♪ picking up where we just left off. niall ferguson said the threat to america's coming have been coming from places like rome and athens. europe's debt crisis puts the global economy at risk and could drag america, showing signs of recovery, back into a recession. diane swonk joins us again. you say it's possible we've only seen the tip of the iceberg when it comes to europe and the political leadership in the united states needs to steer this country in the right direction not only to protect itself but try and veer off any trouble, further trouble europe can get into. that begs the question what role, if any, should the united states play in dealing with eurozone crisis. >> it's a very difficult question and has a very difficulty answer. i think the most notable answer is what the federal reserve has already done. we saw a coordinated effort by banks around the world, notably in the eurozone but canada, and japan joining in, switzerland joining in, all these banks a around the world doing a coordinated effort to provide liquidity to european banks. the bottom line is we're all interconnected. nobody is an island in global economy. through the financial system is where we're most at risk for contagion. should europe go down, as we already know from 2008, we need to have our oars in the water to get through these it turbulent times. that's an important role the central bank makes. listen, the ecb would like to be the fed but they can't, law prohibited and berlin making a huge wall of that. and it puts the onus on the fed to continue to provide support, not because they're trying to rescue europe out of their own al true wichl, we're trying to protect our own system from the repercussions should europe's financial system worsen as europe's debt worsens which is a real probability and one far too high at this stage of the game. >> bill, what do the numbers say? you look at what the world is saying about these countries and their futures based on the yields, on their bonds. how serious does it look for you? >> the global markets, ali, say stagnation and in some cases recession in euroland is going to continue for sometime, certainly for 2012 and maybe beyond because bond markets are basically anticipating no change in what we call policy rates, that would be the feds fund rate in the united states for 25 basis points for the next two, three, four, perhaps even five years because unemployment is still high and inflation remains contained. global bond markets say things aren't going to improve any time soon. there's another point to consider here. i agree with what diane said in terms of interconnectedness. to the extent that yields are to low, it reaches a point where there are disincentives to invest. we're seeing money market funds, for instance, close down because they can't properly offer a return to their asset holders. we're seeing banks close branches because there's no longer the profit that was assumed at higher yields. >> sure. >> as we move lower and lower to what we call zero bound in terms of interest rates, it might have a deflation flairry impact. every time we see blips in economic growth in the united states they depend on the savings rate dipping. while we're trying to get people to build up the savings rate there is no incentive to do so and the federal reserve and other central banks sent out the message there will knob incentive for savers for some years to come. how do we fix this economy? we keep money cheap to invest, then they don't use money to invest, then we don't do anything for folks who are saving. >> i agree with bill gross. i think you begin to see diminution returns from near 0 interest rate policy just as we've seen diminishing returns from fiscal stimulus. the u.s. has run a huge deficit, 10% of gross domestic product in an attempt to deal with this crisis and the payoffs have been meager. we're learning valuable things about economics including the facts that economists don't understand the way the world works as well as they thought they did. massive monetary stimulus, massive fiscal stimulus and a very, very anemic recovery. the good news is the u.s. is not in a situation of a country like italy, which despite being an extremely depressed condition is seeing an uptick, more than that, a huge spike because of fears of default or even the possible breakdown of the eurozone. my worry has always been at some point -- i don't know when it will be, at some point people will start asking the same kind of questions about u.s. fiscal policy they started to ask about italian fiscal policy this year. is this credible in the medium term. the answer is it's not credible. >> a very good question. the day that starts to happen, bill, how quickly will we know? what is the tipping point when someone says the cleanest dirty shirt in the bond pile isn't that clean? >> i'm with niall there. it ultimately will happen to the extent the fed has to at some point raise interest rates in order to support a declining dollar. i don't see that in the next few years but it can happen. to the extent the fed is limited in terms of buying through quantitative easing, treasuries are at risk. a downgrade here, a downgrade there. all of a sudden the cleanest dirty shirt is a little dirtier. that's something two, three, four years down the road. the u.s. is certainly not the cleanest shirt in all this mess. >> so diane we've maybe got a little bit of a window in that two or three years to try to get the things that matter to americans to make them feel more prosperous going. we've seen a relatively unproductive stock market. a tepid but okay housing market. we've seen a little bit of a move to the upside on jobs. what's the thing you're looking for to tell you we're going in the right direction here in the u.s.? >> unfortunately i wish i could say it was just the economy, because the economy we're getting to that point where really there is only so low you can go, pent up demand, auto market up as well, lending in that market which is important. i do agree deleveraging is still a problem. frankly the political uncertainty adding to a weak economy. if we were growing 6 to 8%, it would be noise. these issues can make a difference. i don't want to be a doomsdayer here. i agree with my colleague, the bottom line two or three years down the road, if we don't make tough decision, even if we're not out of this entirely. that's just not -- it's something completely avoidable. that's an iceberg we can avoid yet don't have any leadership to do so. >> i wish the three of you were involved in coming up with solutions, things might look a little brighter than they do. diane, thank you for your good friendship and advice this year. neil is the author of "the assent of money" and professor at harvard university. we are talking about the survival of civil kwagss. thank you for that. bill gross, you have been very helpful to us as well. bill gross the founder and co-chief investment officer of pemco. happy new year to all of you. >> you, too. more than a million -- 13 million americans are still out of work. what needs to be done in the new year to get them back to work and solve the unemployment crisis for good in this country. that's next on "your money." you know, because you been, you know, this is what you had been doing. you know, working, working, working, working, working, working. and now you're talking about, well you know, i won't be, and i get the chance to spend more time with my wife and my kids. it's my world. that's my world. ♪ we asked total strangers to watch it for us. thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? 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[ female announcer ] phillips' colon health. hey, welcome back to "your money." there are all sorts of things that gone in the economy. only a few things make you feel more prosperous. the value of your home going up, your retirement investments going up and the fact you have a job. jobs are the most important leg of the economy. let's take a look at the jobs situation in 2011. how did it look? i would say choppy, to say the least. looks like we got off to a good start and got set back in may and june. then we started to pick things up. that's a hard map to make a trend out of. the bottom line, of those legs of the economy that make you feel prosperous, jobs are not looking as bad as they were six months ago when someone was talking about a double dip recession. we all want to know whether the job market in the united states is likely to improve in 2012. stephen moore editorial writer, for "the wall street journal," chrystia freeland and christine romans, my co-author. how to speak money, host of cnn's "your bottom line." chrystia, let's start with you. job growth was somewhat uninspired and inconsistent in 2011 but it's been a little bit steadier. are we likely to see more job growth in 2012? what are your thoughts? >> look, i do think that the trend although slow and unsatisfying is positive. it's now going into 2012. three years since the real depth of the economic contraction in two. -- 2009. we have learned subsequently that was a huge contraction. the economy just really ground to a halt. it is healing. i think the november numbers are encouraging. what's interesting about that chart you showed us ali, it also shows the economy is so fragile external shocks can knock it off course. you see the impact of the japanese tsunami slowing things down in the spring. in the summer both the debt ceiling debate and also real anxiety about europe causing problems. so i would say could be a better year but american politicians must avoid, which they are good at and everyone must hope the europeans keep it together. >> christine, there is a big distinction going into 2012 between the newly unemployed and the long-term unemployed. >> you and have i talked about this a lot. in you're newly unemployed, it's a little easier to get a job. it will be a little easier in 2012 than 2011. if you've been out of work six months or longer, the situation is basically the same for you. now you're talking about retraining, refocusing, moving, doing something very drastic to try to get back in the labor market and you run the risk of not being able to get back in the labor market. it's not monolithic when jobs start to come back, they're coming back so slowly it's not benefiting everyone. it's benefiting people newly unemployed having an easier time. when i talk to ceos in insurance, commercial real estate, other parts of the economy, trucking, for example, i know stephen moore has been talking to trucking people. they say we're ready to hire. we are stretched so thin. we are ready to hire. we just need one little bit of demand to tip us over the edge. hopefully that will be 2012. >> i have to say, stephen, if unemployment hangs around 9% like it did for sometime, president obama is going to be worried about his own job. >> no question about it. i think chrystia said the operative word on the u.s. economy right now on the economy and it's fragile. it is fragile. when you look at the jobs picture over the last three years, we lost about 8 million jobs in that horrible recession of 2008, 2009. we've only recovered about 2 million of them. this has been by far the most anemic recovery. hopefully under a normal kind of recovery pattern, we'd see big job growth next year. that would be the normal course of events. the worry i have, we were in the economy of 1970s you have periods of false prosperity where the economy would lift up and fall and lift up and fall. that seems to be the pattern right now. i don't think you'll see a real resolution. you're not going to see those employers really go out and hire, i think, until the election is held in november 2012. i really think people are in a holding pattern right now. >> chrystia, what's the best solution? what is the fix? we know the blame. we know why we are where we are largely. we know a lot of people share responsibility for this. what's the logical fix? it doesn't seem to be the thing we're talking about. >> i think there are short-term fixes and long-term fixes. on the short-term i tend to -- you're going to hear a scream from stephen right now, lean towards a little more keynesian rather than austerity approach right now because i do think that the economy still could use, if not a jump start, at least -- >> he atlanta screamed. >> he's getting ared to scream. >> a primal scream. >> the thing that worries me on the short term, something that has a huge impact on the jobs numbers is the government firing people. at a time when unemployment is such a concern it seems