right. they think things are slowing down, it will welcome self-fulfilling because they'll stop spending. businesses stop hiring. and the economy could grind to a halt. let me tell what you i'm talking about. here's got news. we had 20 straight months of job growth in the united states. the pace of that growth is slowing. the last five months, there have been fewer jobs created each month than were created than in the month before. but jobs are being created, not lost. so that should make people feel better, not worse. let's talk about your homes. a lot of your equity is there. the home prices in the routes probably at or near their bottom. the so-called shadow inventory of homes is lower. foreclosures are up. but those are a new wave of foreclosures from the signing scandal. we're probably near the end of this thing. fewer homes, less inventory makes it a good time to buy. if you're buying a home, at 4% mortgage interest rate or lower on a 30-year fixed mortgage, the rate you pay has much more impact on the total price of that house over the course of owning it. mortgage rates are at record lows right now. and how about gas prices? when they are up, they're like a tax. it costs you to pay more money for the same amount of something you bought before. but those prices are down. the national average for a gallon of gas, $3.52, not cheap, a lot lower than they were a couple months ago. speaking of energy, by the way, we hardly had winter. americans saved a lot of money on home eating bills. the problem is that none of this is pushing consumers to spend. and without consumer confidence, another recession looms. already we've got a jittery stock market. the s&p 500, the broadest representation of stocks that you own if you have a 401(k) or ira, down more than 5% over the last three months. we're seeing record lows in treasury yields. that's because the smart money doesn't want to take risks right now. it's parking itself in u.s. government bonds. why is that smart money so nervous? because of europe. the potential collapse of european buying power if the euro breaks up. europe is an economy the size of the united states. the worst things get there, the fewer american goods and services europeans buy. that costs us jobs. let's not forget about the fiscal cliff that lies ahead in washington. some tax cuts are expiring. some benefits are going away at midnight on december 31st if congress does nothing. happy new year. congress may be the one body, by the way, which you have some influence over which can avert the disaster. but i probably have a better chance of growing an afro by december 31st than congress has of getting its act together. while i grow my hair, i have one piece of advice, deficit hawks, leave the room for a while. this is not the time to be discussing spending cuts. you democrats, this is not the time to be raising taxes. all right. we pit together the best minds in business and politics for you this hour. christine romans, the host of "your bottom line" is we m she'll tell why you this is an important moment for america and why it's europe and china, not the u.s. presidential election that will decide the outcome here at home. jessica yellen, she says neither president obama nor republican rival mitt romney are honest about the depth of the problem and their ability to arrive at a solution. john king is cnn's chief national correspondent, anchor of jkusa. he can read the political tea leaves like no one else can. i'm going to ask him if americans are better off today than they were four years ago and more importantly if they feel better off. will cane is a cnn contributor and a conservative who i think agrees cutting spending or raising taxes now are both the wrong thing to do. and ken rogoff is a former imf chief economist. he is the leading authority on financial crisis. we're going to start with you, ken. you're the expert. you made a career out of studying economic crisis around the world. i just laid out how i see this gathering storm. where am i wrong? >> well, you said you're normally an optimist. i'm normally pretty calm. i'm nervous now. you look at what is happening in europe f that blows up, there is nowhere to hide. we have hope it doesn't. there is not a sescertainty by means. there is instability in spain. there is instability in italy. and we're looking really at a nation in the making here. are they going to pull it together or won't they? and china also is having problems. that's another engine of growth. i think we have our own self-made problems fundamentally the u.s. is still a great franchise. we're not an island. and there are some just huge risks out here. you're right, it's making everybody nervous. >> and ultimately, what it makes the consumer nervous, it starts to cost us all. president obama and governor romney had a showdown in the pretty call battleground state of ohio on thursday. both laid out why not to vote for the other guy. but neither has a clear plan for getting us out of the mess. >> it's usually the president's right when he said the private sector is doing fine. he's the guy to vote for. >> if they win the election, their agenda will be simple and straight forward. they spelled it out. they promise to roll back regulations on banks and polluters, on insurance companies and oil companies. they'll roll back regulations designed to protect consumers and workers. >> want to bring in our chief white house correspondent. you heard those words many times over. you think both candidates are running on their ability to turn this economy around, at least that's what they'd like us to think. but neither candidate is leveling with americans about the depth of the problem that we could be facing. >> i think that's right, ali. i think part of it is natural politics. neither one of them wants to sound like a pessimist. that's not appealing. but there is an appeal to authenticity and honesty. and neither one of these candidates is saying to the american people that this could be a long and protracted hole that we're in or a long, slow slog. and neither -- we're not offering you a policy that's going to get us out of it terribly quickly. but stick with me because i'm being honest and telling you the truth. what they're saying is president obama is saying i have seen progress. it might be not happening as quickly as you'd like. but if you stick with me, we'll get more progress down the road. and the other guy, he's going to serve you snag is really rotten. and romney is saying he hasn't turned it around fast enough. so let's change horses. you know, neither of them is really telling you this could be bad for a while. >> thank you. that's how you win lectihe lebs herher -- elections. are you better off than you were four years ago? now a recent cnn/orc poll asked americans that very question. today we have a hung jury. 44% say they're doing better. 43% say they are doing worse. the final verdict comes in november. john king, cnn's chief national correspondent, john, i'm telling that you there's zero question that america generally is substantially better off with a trend toward being not better off. you follow the politics of this. can the president or mitt romney convince voters that they will be better off with one of them? >> well, the confidence question, which candidates wins going forward. ask you the question, are you better off? you elect presidents state by state, those are national poll numbers go. to the state of ohio where the candidates duke it out this week. the unemployment there is down a little bit from when president obama took office. you go to nevada, the unemployment rate up is a little bit. michigan it's up a little bit. so we go state by state with that question. but when you have a hung jury, you are better off today? people ask a second question then if they're not sure on that one when they look at their children and say you would be better off? when people look around, they think about their children. their legs are tired. they have been treading water for two or three years. they had to make very tough choices in their own lives. they don't see any tougher choices being made or bold new proposals being made by the candidates. we have a hung jury at the moment. this election as we speak today is as close as they get. if one of the candidates can change the confidence question about what's around the corner and what's over the hill, they'll win the election. >> how does that happen? how do you ingender the confidence you need to turn things around, get businesses to hire, get people to feel good about the economy if you do what you suggest that these candidates should do? be honest this is going to be a tough slog. it's going to take a long time and not feel a whole lot better for a while? >> i'm arguing that the authenticity allows them to say that's why we need to make certain kinds of choices. and that's a frame to outline an agenda. for example, president obama could have said at the very beginning of his administration, look, this is -- could be a longer turn around than we would like. and so i'm asking for everybody's patience so we should be able to spend and stimulate for a while, for example, because that is the philosophy clearly believes in. but we're going to have a plan to save in the long term, to cut down our debt in the long term. here's how i'll lay it out. and so you understand a framework then why he stimulating and also why he believes in debt reduction. and that could have made sense of his entire agenda. instead, he kept saying we're going to stimulate. now i support debt reduction. now we're going to be for jobs bill. but, no, i also support debt reduction. he kept telling us we're in this recovery. we're in the moment of regrowth. and it was whiplash for the american people. there was no framework. >> and, sean, you've got mitt romney saying under him unemployment will go down to 6%. he didn't invent that number. the congressional budget office also has that kind of thing. but that's the kipd of specificity that mitt romney gets hammered for not having when he talks about tax cuts and he talks about spending cuts. so the minute you bring specificity in it, you can't control the unemployment rate. the world is controlling the unemployment rate right now, not washington. >> of course they can't control it. that's not a very bold predicti prediction. if the economy starts to come back, get 2.5%, 3% growth. that is the unemployment rate you get. but that's not terribly bold. look, again to the confidence crisis. no american voter trusts any big institution anymore. they see what happened to j.p. morgan chase. they watch what happening in europe. they don't see any politicians making bold decisionsme. so what can mitt romney do? in part, it's a very different challenge. one of the reasons his campaign will tell you he's not changing his plan despite the changing circumstances is we have a president. if the american people reach the threshold decision you've had 3 1/2 years, mr. president, sorry. you're a nice guy. we don't think you've done enough. you haven't tried hard enough. you haven't been bold enough. things are not that much better. sometimes the challenger can win on that. so you have a fear on the obama side of doing something big and bold. he can say okay, i'll extend the bush tax cuts. i'll do it before the lection. but only if you give me construction spending. there is still summer months left. let's put money out there only if you give me the teachers, police, firefighter money. let's try to cut that deal before the election. the president doesn't want to do that because extending the tax cuts infuriates his base. he could put pressure on governor romney. congressional republicans if such a deal were offered would say what should we do, mr. nominee? >> that becomes a key question. when awe rife to that grand compromise, which candidate is more likely to embrace it? john king, always a pleasure to see you. thank you both. ken, stay where you are. christine and will are here as well. we know the problems and the politics. what do we do about it? how do we avert that storm heading to our shores? the conversation continues on "your money" next. [ male announcer ] now you can swipe... scroll... tap... pinch... and zoom... in your car. introducing the all-new cadillac xts with cue. ♪ don't worry. we haven't forgotten. you still like things to push. [ engine revs ] the all-new cadillac xts has arrived, and it's bringing the future forward. what ? customers didn't like it. so why do banks do it ? hello ? hello ?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello ? ally bank. no nonsense. just people sense. with less chronic osteoarthritis pain. imagine living your life with less chronic low back pain. imagine you, with less pain. cymbalta can help. cymbalta is fda-approved to manage chronic musculoskeletal pain. one non-narcotic pill a day, every day, can help reduce this pain. tell your doctor right away if your mood worsens, you have unusual changes in mood or behavior or thoughts of suicide. antidepressants can increase these in children, teens, and young adults. cymbalta is not approved for children under 18. people taking maois or thioridazine or with uncontrolled glaucoma should not take cymbalta. taking it with nsaid pain relievers, aspirin, or blood thinners may increase bleeding risk. severe liver problems, some fatal, were reported. signs include abdominal pain and yellowing skin or eyes. tell your doctor about all your medicines, including those for migraine and while on cymbalta, call right away if you have high fever, confusion and stiff muscles or serious allergic skin reactions like blisters, peeling rash, hives, or mouth sores to address possible life-threatening conditions. talk about your alcohol use, liver disease and before you reduce or stop cymbalta. dizziness or fainting may occur upon standing. ask your doctor about cymbalta. imagine you with less pain. cymbalta can help. go to cymbalta.com to learn about a free trial offer. go to cymbalta.com agents, say hello to the biggest hailstone in u.s. history. oh, that will leave a dent. which is exactly why we educate people... about comprehensive coverage. yep. the right choice now can pay off later. looks like a bowling ball. yeah. oh! agents, say hello to the second-biggest hailstone in u.s. history. [ announcer ] we are insurance. ♪ we are farmers bum-pa-dum, bum-bum-bum-bum ♪ i said that storm clouds are gathering over the u.s. economy. the question is what, if anything, can be done about it? we have a former imf chief economist with us. he is one of the world's leading authorities on financial crisis. you've seen him on the show a lot. but he really does understand this. ken, study this for us. help our viewers who don't study cross-ice to is to say this is just not a slow recovery. there is something alarming you, alarming me and alarming other people about a shift in sentiment of the american consumer that suggests something -- this may not be just a slowdown. something else may happen. >> the basic problem is we're not growing that fast. we're still fairly weak from the deep financial crisis recession when he which unfortunately is typical. and now we might be hit by another hammer blow coming from europe, coming from china and already from europe there's a lot of uncertainty. so even if you don't know that the meteor is going to hit, you're hiding worrying about it. so it's a very, very tense state where i think the only move in this situation, the only move is really to have the central banks flood the which he with liquidity to try to support the short term confidence. i mean that's not a good thing in the long run. but europe has to lead. they've still been timid because nobody's in charge. they don't have a central government in europe. >> that's right. and we're going to address this later on about why china is able to make the decisions. they're so centralized. but to your point about the only thing that can happen that can really have an effect on this is the federal reserve putting more money into the economy. will cane, why is that a problem? >> it's a problem. i would emphasize the word can. that is the only thing that can happen. the central bank has the authority and power and political will. it doesn't have to respond to political will to put any short term solution. we're talking about short term solutions to batten down the hatches for an economic storm. there is no political solution to. this the central bank is the only one that can put something together. it is surely not the prettiest picture in the world as ken suggested. again, it's the only thing that can be done. >> christine romans. here's the problem we have. what ken is suggesting is something that would create liquidity. it would make banks able to lend more. people could borrow more. you think that fundamentally we've got a problem now. we're fueling this economic fire with stuff we shouldn't be using as fuel. >> we're talking about -- look, my concern is we keep talking about the consumer slowing. oh, know the consumer is slowing. didn't we learn that consumer is the middle of a very long deleveraging. they have too much debt. maybe the consumer doesn't have borrowed money, savings and money in the house they can spend. the consumer is in a weak position. so thinking that we can rescue ourselves with the consumer after we rescued ourselves with the fed and with central banks, i mean there are going to be -- the economy is going to grow faster. there need to be fundamental drivers of growth that aren't just necessarily consumers on borrowed money which is what drove so much of the economic activity. >> let me show you, ken. let's look at consumer confidence and what we're talking about, where this alarm comes from. consumer confidence is a measure of how consumers feel about the economy and how it's going. it's been going up in the last year or. so the last three months you've seen a little bit of a drop. it's not drastic. it's not crisis, ken. but why is all of this stuff that we're talking about a potential slowdown in china, the european crisis and whether greek leaves the euro zone, greece leaves the euro zone. why is all of this somehow playing out for consumer? why would that happen? what would the american consumer be saying to themselves, i want that wall net et in my pocket. >> they know that obscure risk can blow up, hurt their jobs. they're in a very weak position. ali, the government -- the census bureau recently reported that wealth of the average american had fallen by 40% in the last three years. their home prices have gone down. a lot of unemployment. i mean people are already nervous. and they know that something else could hit. the other shoe could drop. i do think we have to work on the long term fundamentals. i completely agree with christine. there isn't a quick fix to this. we have to improve our tax system, our education system, our fran structure. and certainly when i talk about flooding the world with money, that's a drastic response to a very, very dangerous situation. but that does not solve the long term problem. i'd like to see the presidential candidates talk about the long term more. >> all right. so now this is the issue that we have to move to. that is a lot of people asked me, what can we do about this? if there is this hurricane, if there is this storm coming to our shores, what control can we have over it? we discussed the federal reserve. we discussed central banks. now we're bringing into politics. stay with us. we're coming back with ken, will and christine in a moment. and then voters go to the polls in greece for the second time in a little over a month. could the choices made by this small country, the 34th biggest economy in the world, set off this worldwide economic meltdown? e ann