September 25th, 2011
10:49 AM ET

Fareed's Take: Governments doing almost nothing to fix debt crisis

By Fareed Zakaria, CNN

This was U.N. week and there was some drama over the issue of the Palestinian bid for statehood. But the real action is taking place now - as the world's finance ministers and leaders meet to talk about money.

I think it's fair to say that we are confronting the worst economic moment since the days after the collapse of Lehman Brothers in 2008. Growth has slowed in Europe and the United States - and is slower even in the bubbling emerging markets. Some European countries now have problems with their debt burdens that appear unmanageable and that problem is spreading to major European countries like Italy.

Europe's banks have too little capital and too much bad debt on their books; they are poised for a Lehman-like event. And here's the worst part, in light of these problems, key governments are doing - almost nothing.

The real culprits here are the leaders of Europe. They have kicked the can down the road for two years. They now have got to face the fact that the euro was badly created - mixing together economies of very different characters - and fix it.

That could mean a smaller, stronger eurozone (which is to say, letting a country like Greece exit). Or figuring out a way to let Greece default and shore up Italy and Spain. I've argued that the best solution would be to have the IMF get money from countries like China and use it to structure a long-term reform program for Italy and Spain. There are other ideas - like euro bonds, which would allow countries like Greece to borrow at German-subsidized rates. But Europe's leaders need to do something to deal with these problems.

In the United States, we talk a great deal about the jobs issue but who's doing much about it? President Obama's jobs plan, which is pretty good, is going nowhere in Congress. (And he hasn't helped matters by presenting a gimmicky and inadequate plan to fund that program). The market keeps telling us by the ever-falling interest rate that it fears another recession, not inflation.

Everywhere leaders all seem to assume that if they just keep things steady, something will miraculously happen to solve the problems and jumpstart growth. It won't.  The problems are actually getting worse and by sticking their heads in the sand, leaders are only deepening the inevitable crisis.

For more of my thoughts throughout the week, I invite you to follow me on Facebook and Twitter and to visit the Global Public Square every day. Also, for more of my takes, click here.

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Topics: Economy • Europe • Fareed's Take • United States

soundoff (138 Responses)
  1. Bob Boise

    Why do we care what a foreigner says about America.

    September 25, 2011 at 8:53 pm | Reply
    • Reagan80

      How do you know he's a foreigner? He might just be an "unauthorized immigrant" (new term recently introduced on CNN). You just never know.

      September 25, 2011 at 10:19 pm | Reply
    • Inga

      BB, whether you chose to acknowledge it as a fact or not, if you are not American Indian, some foreigner came to America which resulted in your birthright. I often wonder what American Indians are thinking when they hear YOU ALL speaking about FOREIGNERS?

      September 25, 2011 at 10:31 pm | Reply
  2. Voiceinthewind

    This guy is becomming more of a pimple on the azz of America faster than anyone else. Send him back under his rock already.

    September 25, 2011 at 9:22 pm | Reply
  3. Mark

    Mr. Zakaria please look up Monetary Sovereignty. We are heading for another depression because these debt hawks do not understand what a deficit is. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.. There are so many lies being spread around right now, the American people need to know the truth. There is no debt problem here in the U.S. only a jobs problem, and cutting our debt/deficit will only guarantee the worst depression we have ever seen. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

    September 25, 2011 at 10:04 pm | Reply
    • Reagan80

      Sounds like you're an expert in Obamanomics. The Light Brigade had nothing on you guys.

      September 25, 2011 at 10:17 pm | Reply
      • Mark

        Actually I am an expert in reality, why don't you look it up for yourself. Maybe if you took the time to learn a little bit about economics you might have a more informed opinion. I do not support Obama or the tea-party as both are trying to destroy
        America with their austerity garbage.

        September 25, 2011 at 10:43 pm |
      • Luigi

        How about defeating his argument instead of spewing out an insult?

        People who insult instead of providing an argument suggest that they are actually incapable of providing an argument. Are you capable of providing an argument?

        September 26, 2011 at 12:54 am |
    • Luigi

      How do you know they are lies? A lie and a falsehood are not the same thing. A lie is an attempt to deceive in an environment where honesty is expected. (A fake in sports isn't a lie because that sort of dishonesty is expected.)

      September 26, 2011 at 12:56 am | Reply
      • Mark

        You are right Luigi, I am only assuming they are lying, they are either lying or just blissfully ignorant.

        September 26, 2011 at 5:30 pm |
  4. Phoo

    The government IS preparing to deal with the debt crisis. At all levels, in all branches, in all divisions of ideology, they are sharpening their pointing fingers.

    September 25, 2011 at 10:14 pm | Reply
    • Mark

      The Government is preparing to destroy the economy. Can anyone here tell me how cutting the deficit will create jobs? Does anyone here actually understand what a deficit is? Does anyone here understand the government has the ability to pay any debt any size at any time? Whoa I bet that blew your minds. You know what happens when you go into deficit reduction mode? Recession. You know what happens when you go into deficit reduction mode during a recession? Depression. The United States has the unlimited ability to create it's own currency. The deficit is simply money that has been created that has not been taxed back. The only limitation to creating money/spending is inflation. Has anyone seen inflation lately? Oh yeah that's right, his arch enemy deflation defeated him a long time ago.

      The Government has the ability whether they seem to realize it or not, to put an end to this mess. Yes it might seem crazy but we can spend our way out of this. Then when things recover if we need to we can always remove excess currency through taxes. Which of course will bring us to another recession. Boo.

      September 25, 2011 at 11:02 pm | Reply
      • GOP1787

        @Mark Perhaps you can explain why your comments seem so idiotic? There are plenty of examples in history of nations spending so far beyond their means that it caused their citizens extreme pain. If $120T in U.S. unfunded liabilities isn't a concern to you, then pray tell how much would be? Or is money infinite in your universe?

        September 25, 2011 at 11:46 pm |
      • Luigi

        GOP, I fear you don't even understand what you did. If Mark's comments are idiotic then he couldn't possibly explain them (because he'd be an idiot). So, what does it mean if you ask an idiot to explain his idiocy?

        Since you aren't an idiot, then Mark can't be either. If Mark isn't an idiot, then his comments can't be idiotic.

        (If you are confused, try looking up idiot in the dictionary. If still confused, compare intelligence to knowledge.)

        September 26, 2011 at 12:53 am |
      • GOP1787

        @Luigi: Right. Cute. Ignore the point much? Our nation is aflame. Think not? Time to get a clue.

        September 26, 2011 at 11:09 am |
      • Mark

        I am trying to explain but everytime I wrote A long post it never shows up. Lets see if this one shows up.

        September 26, 2011 at 6:33 pm |
      • Mark


        It seems idiotic because it goes against everything you have been taught to believe. This is the reality. Federal Deficits – Net Imports = Net Private Savings. The fed government does not need outside sources of income, it can spend reserves into existence. I would suggest doing some actual research, but please understand 99% of the people out there are confused about this and will only provide bad info. The other nations you speak of spending beyond its means are monetarily non-sovereign nations who are unable to create its own currencies.

        September 26, 2011 at 6:38 pm |
      • Mark

        The comment section here is horrible, I do not know how many posts I have written that haven't shown up here. If you really want to know about how monetary sovereignty works do some research, cnn wont let me explain on here for some crazy reason. I am tried of rewriting posts.

        September 26, 2011 at 6:46 pm |
  5. Reagan80

    Obama is doing something about it: he's proposing more spending. He's not afraid of any ole debt crisis.

    September 25, 2011 at 10:14 pm | Reply
  6. mark

    Here is a break the bank idea that could help the US economy in a massive way. If all companies that do business with China were forced to make those companies be on par, I mean neck and neck, with all US standards, for health safety and the environment. The costs over there would be so high, everyone would just return to the US. Think how it would change the world if everyone had to be on par with the US. That's how your country would get back on top again. If all the developed nations did this to Chinese companies and their workers had pensions and healthcare and benefits, do you think they would still be making shoes in sweatshops for a dollar a day?

    September 25, 2011 at 10:15 pm | Reply
  7. mark

    Instead of the government giving billions to Haliburton to hire minimum wage flag people for the road work Obama is proposing, why not try what they did here in Canada in 2008 when everything crashed. The put out a home renovation tax credit. You could claim up to 10,000 on renos, it was huge for us. It created and maintained fantastic employment at little cost to the government. There are plenty of people with money still in town, they just need a little incentive to spend some.

    September 25, 2011 at 10:26 pm | Reply
  8. johsua

    that's not true. some members of congress tried to pass a cut, cap and balance legislation that would have made it impossible to deficit spend but they were vilified by you and the rest of the main stream media. it makes me sick to watch the pundits on your cable show go after the character of honest conservatives while bowing at the alter of the tax and spend liberals. you sir are a hypocrit.

    September 25, 2011 at 10:27 pm | Reply
  9. Steve

    When you think about it the tendency will be for all countries to be equal. A middle point between first and third world countries. The only way is for private citizens to buy bonds from their own country. Each country can work the tax and inflation system to mitigate that debt over time.

    September 25, 2011 at 10:35 pm | Reply
    • GOP1787

      @Steve You apparently have no idea how bad our nation's fiscal situation really is. Because if you did, you might understand how idiotic your suggestion that more Americans buying our bonds would resolve our spending issues. Your solution is not even in the same universe as the problem...

      September 25, 2011 at 11:41 pm | Reply
  10. Geo

    You have to wonder sometimes if the West's time has passed, including the US. Our poltical systems are disfunctional, we fail to have the political will to work out solutions during this difficult time. In the US, we have a poltical party dedicated to destroying government, instead of making it work more efficient and effectively. Conservatism has morphed into anarchism, neither healthy nor productive. The liberal side, to be fair, is weak and bankrupt of ideas. In this vacuum our economy and wealth, social structure will decay and decline. Success in any nation is the product of the politcal will of a people. Eventually, our military and security will follow since a military is only as strong as the economic health of the country it comes from. In our lifetime we could see the domination of the new powers like China and India and other countries. Of course, who can predict the future. Americans may reinvent themselves again, as we have done before.

    September 25, 2011 at 10:46 pm | Reply
  11. dH

    In simple words – Curse of Lehman Brothers !!

    September 25, 2011 at 11:03 pm | Reply
  12. clark1b

    you are wrong Fareed ... the democrats are doing plenty of proposing increased spending (or slowing the growth of increase) ... and the conservatives are trying to cut spending. The problem is ... the democrats refuse to cut spending and are thus blocking any progress in bringing the level of debt down.

    September 25, 2011 at 11:21 pm | Reply
    • Luigi

      Of course the Democrats act that way. Are you so obtuse that you don't know the core economic principle of the Democratic Party? Back to college for you and take some economics classes.

      September 26, 2011 at 12:47 am | Reply
  13. Agnes

    I really like your show and was very surprised that you basically gave a platform to Ergodan to espouse such a one sided view of Israel's action during the Gaza flotilla raid. A UN report on the incident stated that "serious questions about the conduct, true nature and objectives of the organizers, particularly the Foundation for Human Rights and Freedoms and Humanitarian Relief (IHH). Despite the noble name, the IHH has been considered by some as a "radial Islamist group masquerading as a humanitarian agency (Spencer, Daily Telegraph)." Could you not probe why Israel took the action it did? Please Fareed, don't give a platform, give the public a balanced discussion. We counting on you.

    September 25, 2011 at 11:23 pm | Reply
  14. GOP1787

    Yo, Fareed! So much pompousity. So little substance. By "sticking their heads in the sand" are you including yourself? For you continue to fail to even mention the truth about how bad our own nation's finances are:

    The GAO says
    – our unfunded liabilities are > $120T,
    – we have a 90% debt to GDP ratio,
    going up ~10%/yr with >$1.2T deficits,
    – 60% of public debt matures in < 3yrs,
    – astronomical money supply growth, and
    – ALL federal revenue from income AND Social Security taxes is just $2.5T/yr.

    September 25, 2011 at 11:36 pm | Reply
    • Luigi

      While important, why does the information you supply belong in the article? If he did that, he'd be guilty of the same "sin" that got me an A- in one college course a while back instead of an A. "Correct and interesting but not relevant to the thesis."

      September 26, 2011 at 12:45 am | Reply
  15. Brian

    "Someday the bottom will fall out." – Bob Marley.................

    That someday might be closer than we think.

    September 26, 2011 at 12:12 am | Reply
  16. mark

    All the government has to do is seize the wealth of the top 1% of Americas wealthiest. That would completely pay off the debt and leave them with trillions to spare. They are all good in business, they will be fine...

    September 26, 2011 at 12:27 am | Reply
    • Luigi

      Uh huh.

      First, how do you do that? Money can't simply be seized.

      Second, why do you think they'll be fine? I don't know how to run a business without working capital. Do you? Have you ever run a business?

      September 26, 2011 at 12:42 am | Reply
  17. Vera Waitress

    The US spent $600 billion dollars of taxpayer money last year alone on war and other defense junk. It's just out of control. I dated a guy who said he was in final bidding on a $500,000 job to write a report on something war related for the defense department! Half a milion dollars? He laughed at the absurdity and was willing to line up to get it.

    Defense spending has got to stop.

    September 26, 2011 at 12:48 am | Reply
    • Luigi

      Stop defense spending? There's a lot that should be obvious (but apparently isn't) with that. But instead of that, I'll give something that isn't obvious.

      Your assertion of "defense spending has got to stop" means abandoning warships, including those with nuclear propulsion and nuclear weapons. Perhaps Cuba would like them....

      Now they just have to pull up near NYC and announce, give us $100 trillion or we will destroy your nation.

      "Great" plan.

      September 26, 2011 at 1:01 am | Reply
  18. Paganguy

    Republicans want to reduce or eliminate Corporate taxes. Here is an idea. Eliminate corporate taxes. Impose a 1% administrative fee on corporate gross income. Require the distribution of all rpofits to the share-holders. We can make that retroactive 10 years on all profits held in foreign banks. Non-declared, non-distributed profits get confiscated. That should inspire some honesty in accounting. Distribution to foreigners are taxed at a flat rate ot 32%.

    September 26, 2011 at 1:21 am | Reply
  19. KLS

    Mr Obama's job plan proposes either existing state/municipal jobs make upgrades to roads and bridges or for those cities that privitized them already break their contracts to make already made repairs. My Evergreen Economic package hires workers to upgrade US family records by 230 years and to create a database. Also, Bernanke's exchange of US cash for Euro dollars should halt until mid October to see if the market can bear it. I have US austerity measures standing by so vote for a KLS Act for President 2012.

    September 26, 2011 at 2:04 am | Reply
  20. me

    Don't let these losers take us down. We have got to take the pain now and price this in, and also establish a dialog in the harshest possible tone for two reasons: 1) to distance ourselves form a bungling Europe. 2) to try and knock some sense (unlikely) into a doomed, and rash, and inevitably failed Euro.

    September 26, 2011 at 3:03 am | Reply
  21. Got A Brain

    Markets, shmarkets, the Gov't supporting gambling for the rich. If investment capital were used appropriately,
    then you'd have to hold onto your share of a company for more than two minutes.Garbage in, Garbage out..
    CLEAN , AFFORDABLE ENERGY–or "You're out!!"

    September 26, 2011 at 3:34 am | Reply
  22. DameMak

    In order to save the world from a new financial crisis, the Euro zone should indeed remove Greece from Euro zone. It will not break up the currency. When you have a tumor you try to cure it with medications (for the financial tumor those are the austerity measures), and if that tumor is continuing to grow (the financial tumor of Greece i.e. its debt is continuing to grow) then you HAVE TO go for surgery. If the rest of the body is strong – the surgery is usually successful. The rest of Euro zone although with troubles is much healthier than the increasing Greek tumor and will survive the surgery called: "Removing Greece from Euro zone".

    September 26, 2011 at 4:30 am | Reply
  23. jim

    Why should hard working Germans or Chinese work and give their savings to support the Greeks (who are not so hard workers) ??

    September 26, 2011 at 5:40 am | Reply
  24. 123cows

    It's buisness as usual.Congress is content to skate by because of the comfort level they have enjoyed for years.And the president is campaigning for reelection.These people do not care about us.

    September 26, 2011 at 6:32 am | Reply
  25. j

    Several of the individuals that provided logistical support for the 9/11 Al Quida attack on the World Trade Center are currently residing in Milpitas California.

    They may include several former and current employees from the C.I.A., D.O.J., D.O.D, pre- Home Land Security agencies and non-governmental agencies.

    Most Americans realize that not one person involved with helping the 9/11 attacks occur have ever been brought to justice.

    Yet how is it that majority of the terrorists could not speak English, 12 of the 9/11 terrorists could live for 2 weeks just 2 miles from NSA head quarters in Maryland, take flight simulator lessons on Jumbo jet trainers, they needed lodging, several of them where on State department terror watch lists, etc...

    It just makes sense that a logistic support network existed before and after the attacks. After the attacks they helped mislead the 9/11 investigation by capturing patsy's designed to take the fall.

    September 26, 2011 at 7:14 am | Reply
  26. Olin Macgregor


    September 26, 2011 at 7:16 am | Reply
  27. pat


    stupid asshat

    September 26, 2011 at 7:30 am | Reply
  28. bigwilliestyles

    It just amazes me to hear people talk about the supposed integrity of journalism, and why they won't go hard after 'big corporations'. News flash: CNN, Fox, NBC, CBS ARE 'big corporations'. You fools are asking them to go after themselves, which they will never do. They operate under the same rules as any other corporation: the bottom line. Why would they search for some 'real news' on corporate control when they are part of the problem? These companies (or their parent organizations) are globe straddling behemoths themselves, probably employing the same cheap foreign labor where they can, outsourcing jobs to cheap labor havens just like any other corporation concerned about profits is doing. Come on people, you can't be this naïve in this day and age. Why do you this that the protests in NYC are being ignored by the media? Collusion, plain and simple. That's why these guys get caught making statements like: 'smartest guys in the room'; they really think that they operate somewhere above the rest of us. Its high time we showed them that this is not true.

    September 26, 2011 at 7:53 am | Reply
  29. oobie

    Fareed, your logic and judgment is headed in the right direction, but there is a much bigger story you are overlooking. The Europeans are contemplating extreme solutions for what are very small national debts (compared to the US national debt). What this means is that socialism offers much more narrow boundaries for staying solvent than capitalism. Americans should study this closely when coming up with solutions using a European model.

    Margaret Thatcher's words are as true today as when she first spoke them "The problem with socialism is that eventually you run out of other people's money." What we are now beginning to understand is how low the smoking point really is for failure in socialist societies.

    September 26, 2011 at 8:37 am | Reply
  30. WAKE99percent

    WAKE UP 99%. Zakaria is right. Our leaders are doing nothing about the sad state of our economies. you tube "occupy wall st" and ask yourself whether they are purposefully creating the crisis. CNN why do you ignore the fact that protestors down in the NYC financial district are being beaten and dragged in the streets?

    September 26, 2011 at 8:56 am | Reply
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