IS THIS THE DEATH OF CAPITALISM?
Courtesy of The Pragmatic Capitalist
“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the Nation, therefore, and all our activities are in the hands of a few men… We have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world—no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.” – Woodrow Wilson
MarketWatch ran a very provocative article by Paul Farrell titled “The Death Of Soul Capitalism: 20 Reasons America Has Lost Its Soul And Collapse Is Inevitable”. Of course, such a title attracts attention. As of the time of my writing the article had well over 1,000 comments. Screaming “fire” in a crowded theater attracts attention after all. Mr. Farrell’s story, however, isn’t just your latest case of screaming “fire” in a crowded theater. This country and capitalism as we know it are at an incredibly important juncture in history.
While I agree with parts of the article, the overriding outlook is incorrect in my opinion. Despite the current sad state of affairs I have not lost faith in the system that has created more wealth and more prosperity in 200 short years than any other system in the history of man. We are on a slippery slope, but not a hopeless slope. Despite this, I believe there is a fundamental misunderstanding between the capitalist system upon which this country was founded and the banking controlled capitalist system that has run amok these last two decades. Fixing our problems involves fixing the banking controlled crony capitalism that currently has a stranglehold on the country.
The article begins by referring to the lopsided state of affairs on Main Street and Wall Street. As regular readers knowI am furious at the way the banks have taken advantage of the taxpayer. I am furious about the Fed’s plan to try to print our way to prosperity. I am furious about the government’s continued irresponsible fiscal policy. I am furious that the government and the Federal Reserve are so willing to destroy the dollar’s we work so hard for due to their irresponsible policies and spending. But the recent weaknesses exposed in the U.S. economy is not the fault of the capitalist system that made it so great, but the reckless actions of a group of bankers who have taken advantage of that system for the gain of a small minority.
Capitalism is an economic and social system in which the means of production (also known as capital) are privately controlled. The last 25 years have seen an unprecedented growth in the financial sector. Meanwhile, the wealth gap and the public’s dependence on banks and bankers has grown exponentially. Capital is no longer controlled by the corporations that build widgets. Capital is controlled by the bankers who create CDO’s and package loans. This system of “privately” controlled capital is in fact, not privately controlled at all. It is controlled by a Central Bank of the United States that claims to be “independent”, but as we all know from the events of the last 18 months, is as closely tied to the U.S. government as the U.S. Treasury or any branch of government. How can you claim that the capitalist system has failed when the last 25 years of bank controlled capitalism have been characterized by anything but privately controlled capitalism? You can’t.
Mr. Farrell makes his argument through 20 points. The first few show why his argument isn’t exactly correct:
1. Collapse is now inevitable
Capitalism is not doomed to collapse. In fact, capitalism is being copied by nations around the world with great success. Even Communist China has implemented their own form of capitalism and they are seeing the same surge in wealth that America experienced earlier in the 1900’s. What China doesn’t currently suffer from is the reckless banking component of the capitalist system that American’s have tolerated for the last two decades. What needs to collapse (and will collapse) is the form of bank controlled crony capitalism that has taken control of the U.S. over the last 25 years.
Who’s in power?
2. Nobody’s planning for a ‘Black Swan’
While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think “Black Swan” and read evolutionary biologist Jared Diamond’s “Collapse: How Societies Choose to Fail or Succeed.”
Again, Mr. Farrell points out one of the key flaws of bank controlled crony capitalism. The Federal Reserve System is based on guessing AND manipulating interest rates and monetary policy in false attempts to predict future economic activity. This creates the boom/bust environment that American’s have been forced to suffer through for the last 20 years. Bank controlled capitalism doesn’t plan for Black Swans because it can’t plan for black swans. If there is one thing we’ve learned from the boom/bust cycle of the last 20 years it is that Central Bankers can’t fix economic problems via monetary policy. Traditional Capitalism depends on black swans to help root out the losers from the system. In a true capitalist system the savers are rewarded, the winners win and the losers lose. Does that sound like the environment we live in?
3. Wall Street sacked Washington
Irrelevant. The “happy conspiracy” controls both parties, writes the laws to suit its needs, with absolute control of America’s fiscal and monetary policies. Sorry Jack, but the “Battle for the Soul of Capitalism” really was lost.
Mr. Farrell points out the primary problem with bank controlled capitalism. The bankers own Washington. They are in the pockets of the politicians and they influence policy in ways that maintains their stranglehold on the taxpayer. The last 18 months are clear evidence of this.
4. When greed was legalized
Go see Michael Moore’s documentary, “Capitalism: A Love Story.” “Disaster Capitalism” author Naomi Klein recently interviewed Moore in The Nation magazine: “Capitalism is the legalization of this greed. Greed has been with human beings forever. We have a number of things in our species that you would call the dark side, and greed is one of them. If you don’t put certain structures in place or restrictions on those parts of our being that come from that dark place, then it gets out of control.”
Again, this is simply the recent evolution of what Mr. Farrell and Mr. Moore incorrectly refer to as “capitalism”. This is not the system that the founding Fathers envisioned. In fact, it is quite the opposite. A system that is controlled by the Central Bank and their cohorts is not described or permitted anywhere in the Constitution.
Mr. Farrell believes we are doomed:
“America Capitalism” is a “Lost Soul” … we’ve lost our moral compass … the coming collapse is the end of an “inevitable” historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.
There is a high probability of a crisis and collapse by 2012. The “Great Depression 2″ is dead ahead. Unfortunately, there’s absolutely nothing you can do to hide from this unfolding reality or prevent the rush of the historical imperative.
Taking America back means taking control of capital from the bankers who have abused this power and threatened the greatest economic engine in the history of man. The collapse of capitalism is not “inevitable” and the Great Depression 2 is not unavoidable. But if we allow the Central Bank to manipulate our currency, the U.S. Treasury to uncontrollably print money and the Congress and President to recklessly inflate our debts I can guarantee you the era of U.S. dominance is over and capitalism may very well be destroyed with it. Bank controlled crony capitalism will certainly destroy America. It’s time to take the power back from the bankers and put it back in the hands of hard working citizens. It’s time for the re-emergence of old fashioned American Capitalism. Auditing the Fed is the first step….
