7/5/2012 7:49 PM ET|
10 bubbles that will kill capitalism
No longer concerned about what's best for everyone, Americans have become preoccupied with their own interests, giving rise to an extreme capitalism that is self-destructive.
In his April 2007 quarterly newsletter, Jeremy Grantham, founder of the $95 billion GMO firm, reinforced the warning: "First Truly Global Bubble, impacting all countries, all assets worldwide."
By midyear 2007, a deeply concerned Grantham was "watching a very slow motion train wreck." By October, the "train hits end of track at full speed." A year later, on schedule, Wall Street's credit train did crash.
Flash forward: In Grantham's early 2012 newsletter, he saw a bigger train accelerating. When he focused on the "common good, it became quickly apparent that capitalism in general has no sense of ethics or conscience. And probably its greatest weakness is its absolute inability to process the finiteness of resources and the mathematical impossibility of maintaining rapid growth in physical output."
This I call the Myth of Perpetual Growth, the pseudo-scientific justification for modern capitalism.
Grantham concludes that capitalism's flaws are so deadly that while it does "a thousand things better than other systems," it fails in those three crucial areas. And "unfortunately for us all, even a single one of these failings may bring capitalism down and us with it."
Get it? Capitalism is committing suicide and destroying America too. Here are 10 explosive bubbles that warn of this trend's accelerating trajectory:
1. Health-care bubble: System will implode
Dr. Marcia Angell, of the Harvard Medical School, writes in Huffington Post: "The Supreme Court's decision to uphold Obamacare puts me in mind of the old proverb: Be careful what you wish for." Why? Angell warns that "with or without Obamacare, the American health system will continue to unravel, quickly if Romney is elected, slowly if Obama is re-elected."
At 15% of GDP, the highest of all developed nations and destined to go higher, the cost of health care will remain a drag on the economy, especially with 3,300 lobbyists fighting to keep the cost rising.
2. Government bubble: Isolating Washington from real America
When will this bubble explode? In Time magazine (subscription required), Andrew Ferguson warns that America's massive debt has created "new affluence flooding the nation's capital," making Washington society "a world apart from the country it governs." He adds that "this insularity has consequences for the rest of the country."
The average American may be struggling, but government is "for sale" in the trillion-dollar contracting business, where the federal budget is sold off to the highest bidders. Lobbying is the city's "biggest business," with more than 20 lobbyists for every elected official, all publicly advertising the huge benefits they generate, often hundreds of times more than an "investment" in their lobbying fees.
3. CEO pay bubble: Up 20% while bank stocks sink
That same mindset isolates Wall Street. While the average American flat-lines, bank CEOs are doing great. Bloomberg Markets reports that bank "CEO compensation jumped 20.4% in 2011" while "most bank stocks declined."
Biggest loser? Citibank's (CIT) shareholders. Their shares have dropped 61% in three years, even as CEO Vikram Pandit was paid $14.9 million.
More evidence of America's growing inequality gap: The Fed says that in the past three years the top 1% gained 2% while our vast middle class lost 39%. In fact, family net worth in 2010 was about the same as 1992.
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Internationalization has been a fantastic boon for people in China and many other places.
However it is destroying the middle class in the first world, as many jobs, especially in production, have been moved to countries with lower wages. The middle class is the backbone of democracy.
It's hard to know what to support.
Curious, many of the comments were the same in 1979 when it was thought that the Presidency was too much for one man (well, only if Carter was the one man). Whereas I don't believe capitalism is the problem - "crony capitalism" is a huge contributor. The answer isn't always "deregulation" but sane regulation. Bailouts and benefits for bad management is a huge problem.
The student loan bubble results from government guarantees. Now 45% of college students have to take remedial math (high school algebra) because they are unprepared. Without the loan guarantees, universities would have to allocate resources properly, scrap the 17 person "diversity" office.
The slow US recovery is due to the uncertainty of the Obama administration regulation threats. Why hire or expand with the new regulations coming in to choke the system. Even GE closed its last US light bulb factory and moved to Mexico (incandescent) and China (CFLs). Why fight the EPA, Interior or NLRB? The Obama administration creates too much risk to invest in America. Go wher there is more certainty.
Global jobless issue - see above. Anyone that thinks a 75% tax bracket in France will help the economy and unemployment is naive (or a serious liberal).
And the list goes on. 1979 all over again, but the 80's and 90's weren't too bad. Don't count America out yet.
By the way: Ayn Rand did not have a destructive capitalism. Did you actually read the book? The capitalism fought destructive government, similar to today.
Do you have any clue as to what Ayn Rand's "style" of capitalism was? (Here's a little hint: It wasn't hampered by massive government regulations and taxation.)
Do you want to know why we have major economic and fiscal problems? It's due to the fact that our governments - at all levels - have become addicted to borrowing money that they can never afford to pay back with the taxes confiscated from productive individuals. And when their borrowing adds up and becomes a drain on businessmen because of the increased regulatory agencies and taxes introduced in order to pay for the government's gross profligacy, they spend even more money trying to figure out how to further blame and restrict the "greedy capitalists" - and then implement those new policies, which, in turn, continues the downward economic spiral until the entire system is unsustainable.
But here you are trying to blame "Ayn Rand capitalism" - which you clearly do not understand - for the problems created and perpetuated by an inefficient and corrupt government. I would laugh at your abject stupidity if it was't so sad...and if millions of ignorant Americans didn't agree with you.
Some of these issues can be dealt with if our politicians were on board. This admin and congress is weak. Put your differences aside and get something DONE!
The only way Capitalism will fail is if we allow it to. As long as the marxist president continues to create racial hatred and class warfare to gain a marxist/socialist foothold, it will fail. We the people need to take back our country from these self serving morons. Our whole education system is a failure because these marxists need this country to fail so that the people are increasingly more reliant on the government teet. keep the people stupid and they won't see it coming and if they do wake up to what has been perpetrated on them it will be too late.
Capitalism fails when the people get lazy and no longer wish to contribute to society by creating their own business and employing workers. Obama and company are rewarding laziness which has stifled our economy.
While other countries are getting away from socialism, this country is trying to embrace it. Even Castro realized that a socialist/communist government does'nt work. Sooner or later you run out of other peoples money.
This country isn't practicing Ayn Rand style Laissez-faire (not "extreme") capitalism. It's practicing Socialism. Some of the things listed above are simply not true. The others can be attributed to left-wing ideology and policy. This entire piece is pure Socialist propaganda. Which on MSN shouldn't surpise anybody.
Behind capitalism are good capitalists and bad capitalists. Does my husband's boss care that he has to work 70 hours to earn a 40 hour a week paycheck, has to pay 65% of his own insurance, gets no over time pay, has to break state law weight restrictions (he's a truck driver), or work over state allowed hour limits? NO, because that gives his boss the money HE wants to buy up more real estate (and not to expand his business) and increase his collection of antique cars while my husband is half asleep at the wheel (and believe me, many truck drivers are in the same situation).
But Costco, for example? That's a whole different story. The man behind THAT company has COMPASSION for his employees and treats them fairly AND makes a profit.
Capitalism without compassion will ultimately lead to destruction.
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