"If capitalism is America’s biggest problem, why save it?" asks MarketWatch's Paul Farrell....

"If capitalism is America’s biggest problem, why save it?" asks MarketWatch's Paul Farrell. "Wall Street, Corporate America, Big Oil and the entire economy been transformed into a bizarre circus Adam Smith would never recognize. Capitalism is now an out-of-control Frankenstein monster that changed everything." Not that Farrell provides any alternatives.

Comments (35)
  • bbro
    , contributor
    Comments (11216) | Send Message
    Paul Farrell.....
    24 Feb 2013, 08:04 AM Reply Like
  • GaltMachine
    , contributor
    Comments (2068) | Send Message


    Your writing reminds me of the Ali Poem:


    "Me. We!"




    Profound if you take the time to understand it :)
    24 Feb 2013, 11:50 AM Reply Like
  • Eighthman
    , contributor
    Comments (363) | Send Message
    Every statement has a context. What does it tell you, that such a remark can be made publically, by such a person and published on a site such as SeekingAlpha?


    It tells you that we are headed over a cliff - martial law, civil war and a shutdown of the markets. If you believe that I'm wrong, I suggest you go to ANY store in your area that sells guns or ammo and observe what ordinary Americans are preparing for. Why are our leaders triggering a gun buying panic? Why doesn't some statesman say, 'This is crazy. The people are afraid' ?


    Because they have run out of ideas. There is nothing left but try to grab guns and pass ever more laws to restrict rights.
    24 Feb 2013, 08:11 AM Reply Like
  • Uncle Pie
    , contributor
    Comments (4322) | Send Message
    Wasn't it Winston Churchill who said, "Democracy is the worst form of government...except for all the rest."?
    24 Feb 2013, 08:46 AM Reply Like
  • David Zanoni
    , contributor
    Comments (1626) | Send Message
    Excellent point. The reason Capitalism should be saved is because it's better than all of the other alternatives.


    Actually, capitalism isn't America's biggest problem - the ever growing national debt is the largest problem - just how high can it go?
    24 Feb 2013, 02:54 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (6205) | Send Message
    The fact is, what we have today in the US is Jungle Ethics Fincialism, not Free Market Capitalism.
    24 Feb 2013, 08:49 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3711) | Send Message
    i thought that US free market capitalism is welfare state socialism


    definitely more capitalistic (do or die) mentality in Cn-- govt does lack compassion or sensibility. Greed is good, absolutely the best mentality here, where in the USA is the govt will give the poor a hand or rather an SUV full of compassion.
    24 Feb 2013, 09:37 AM Reply Like
  • kmi
    , contributor
    Comments (4579) | Send Message
    US free market capitalism has migrated to state-captured corporatism via our lobby mechanisms and the House's bill writing process.


    The democratic aspect is still extant in the voting part but the political class ends up controlled by a small percentage of interests with powerful lobbyists permanently perched in D.C. massaging any legislation that gets written....
    26 Feb 2013, 07:52 AM Reply Like
  • PeakOiler
    , contributor
    Comments (299) | Send Message
    Americans have periodically hunkered down expecting the worst for many decades, since at least the bomb shelter craze. Yet nothing ever happens.
    Democracy has little to do with capitalism, as witnessed by the capitalism in China.
    Instead of 'In God We Trust' on the coins of the realm, replace it with 'Every Man For Himself' which fits the present state of insatiable greed in America.
    24 Feb 2013, 09:39 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11168) | Send Message
    Today's American economy - Government Meddling & Manipulation = Real Capitalism.
    24 Feb 2013, 09:47 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3711) | Send Message
    "If capitalism is America’s biggest problem, why save it?"


    Is this what the USA practices ... bullying, handouts, taxing the productive ...


    seems more like corruption!


    A few respected authorities have to redefine what truly is Capitalism. And the American people would be so surprised how far it isn't practiced here!
    24 Feb 2013, 10:05 AM Reply Like
  • chopchop0
    , contributor
    Comments (5155) | Send Message
    Yup. Capitalism isn't "Too big to fail"


    What we are practicing now is corporatism. When the banks started crashing and burning a few years ago, shareholders and equity should have been wiped while the FDIC was beefed up to protect individuals.


    Instead, too big to fail has only gotten worse as the big players have only gotten bigger
    24 Feb 2013, 11:54 AM Reply Like
  • obstacle2
    , contributor
    Comments (12) | Send Message
    The FDIC is a bailout that creates no reason to care if your bank is solvent.
    24 Feb 2013, 06:42 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3130) | Send Message
    What's the alternative? Bank runs?
    24 Feb 2013, 07:56 PM Reply Like
  • kmi
    , contributor
    Comments (4579) | Send Message
    " What's the alternative? Bank runs? "


    I wonder how the financial crisis would have played out had the banks been nationalized instead of being 'saved' by TARP.


    We specifically decided on bailouts because nationalizing banks was politically unpalatable based on dogma, not common sense.


    We can get a sense of how it may have played out by examining Iceland, or for that matter, RBS. But the problems here were larger in scale and far more pervasive so it's hard to tell precisely.
    26 Feb 2013, 07:57 AM Reply Like
  • Herr Hansa
    , contributor
    Comments (3130) | Send Message
    Banks have been seized throughout the financial crisis, though the majority have been small and midsize banks. The largest of banks became even larger. We may call it the "Lehman Effect" to get an idea of where things could have gone.


    I disagreed with the idea of bailing out the big banks, but the worry was indeed many bank runs. That would have led to massive civil unrest, and potentially a collapse of some local economies. The current western method of finance depends upon banks to function, whether or not we like that. Much of the world is still without any access to banking and finance, but those parts are substantially behind the developed world.


    While I think some form of organized failure would have eliminated the bad companies and left stronger companies, the process would have appeared very harsh, far more worse than the way things developed. One of the first adverse issues after the AIG bailout was that company far underbidding on insurance proposals, which hurt the healthy companies competing with AIG. If the bad financial companies simply failed, the ones who were left would have stepped in to fill the void.


    During that process the decline would have been very likely to have been far worse, but I feel that the overall recovery would have taken less time. What Fed officials and politicians tried to do was engineer a soft landing. I don't think that worked, and it is one of the reasons recovery is at such a slow pace. The only reason our current financial system is not worse off at the moment, is because the rest of the developed world is not in better shape.


    You cannot run the process that went through Iceland with larger countries. The IMF could not bail out the United States. While Iceland did push for better terms on assistance loans, the process was not that smooth in Iceland. The equivalent sort of process in the United States would have been insolvency, a willful process of not paying previously issued debt. If the banking system collapsed, then that would've been the next step. Remember that banking in Iceland collapsed, but in a small country other forms of commerce can quickly become established.


    I don't think nationalization is the answer either, in that regulators rarely ever make good executives who are capable of profitable operations. Fannie Mae and Freddie Mac were effectively nationalized. AIG was partially nationalized. Seizing the banks that were still able to function would not have solved anything. The bailout was pushed upon all banks so that not one of them appeared to be healthier than another, which was another way to avoid bank runs. I don't agree with the process, but once it headed that direction, then it became the only path. Now we need to see that process through to completion, however long it takes, like it or not.
    26 Feb 2013, 02:31 PM Reply Like
  • Tack
    , contributor
    Comments (16263) | Send Message


    A couple of comments:


    1) In the never-ending discussion (and usually bashing) of banks and their bailout, it is so often forgotten, or dismissed, that our "noble" Government played a principal role on the subprime fiasco. The Goverment promulgated ruinous credit-vacant policies, suggesting falsely that everyone deserved and could afford a home. This was undertaken entirely to buy votes, as usual. The same politicians, who foisted this nonsense of the citizenry, also threatened banks with "redlining" prosecution, when some objected to making idiotic loans. The Fed, also, did its part to fund the policy by making cheap money available.


    The RMBS disaster occurred precisely because the banks realized that the creditworthiness of the loans was suspect and wished to "reinsure" the credit risk by syndicating the loans. The commercial banks were sold a bill of goods from the investment banks (Goldman, et al), who offered them false AAA ratings, which they purchased from willing co-conspirators, the ratings agencies.


    So, all the bank critics should climb down off their high horses, acting as though some greedy bankers brought ruin upon us, all by themselves. It was a large circus.


    2) "...I don't think that worked, and it is one of the reasons recovery is at such a slow pace...."


    One cannot have it both ways. One often gets robust recoveries precisely bacause the preceding period has been so destructive and makes the starting base so low. One of the prices we are "paying" (entirely worth the price) is slower growth because the Fed prevented a catastrophic meltdown, Personally, I sincerely doubt that the U.S., or the world, would be happily functioning if the entire financial system had been allowed to implode. The U.S. isn't Iceland, for sure; it's the holder of the world's reserve currency. It would have been easy ti imagine a calamity far greater than the 1930's.


    Besides, how can we say the "soft landing" failed? Too much attention is paid to the media bellyaching about the unemployment rate or some (usually irresponsible) home purchaser or HELOC borrower, who got foreclosed. The reality is that the economy is humming along quite nicely in most regards. Even housing is getting back on its feet nicely. Corporations are recording record revenues and profits and also sitting on record levels of cash. Sounds pretty good to me.


    The half-empty approach to looking at things always produces sorry results. Those that opt for that outlook will achieve results commensurate with their views.
    26 Feb 2013, 04:24 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3130) | Send Message
    I suppose we disagree on the soft landing because I do not feel that the process has completely run it's course. Fed officials seem to think that they will have no problem removing extraordinary measures and loose policies prior to excess inflation. I think it is too early to say that all of this worked. Agree with you that things are improving and the economy appears to be recovering. At the point in time in the future when we return to somewhat more "normal" markets, then I would state the ideas worked, but only when viewed without regard for the time required. On the basis of how long all this has taken, and the time ahead of us still to see through on policies and measures, the slowness of progress is a failure, at least in my view of things.


    It is popular to pin the mortgage and housing bust on the government, yet it is far too simple a viewpoint. Timelines show that it was not the government that led the boom, nor was it solely government policies. There was fraud on a massive level, as Countrywide and others practiced. Fannie Mae and Freddie Mac "socialized" housing many decades ago, and they were a huge problem, but it took many other private players to fuel the bubble. If any one agency could be more complicit in problems, it would be the Federal Reserve, and excessively loose monetary policies. The real trail of events is much more massive than we can hope to cover in simple discussions; there are entire books on events, such as those written by Michael Lewis and others.


    The reality is that as population growth slowed, agriculture became more mechanized, and manufacturing contracted, GDP growth slowed. There was little left to create dynamic real GDP growth. What was left was monetary policy to create bubbles. During the housing bubble GDP growth appeared to be substantial, but it was artificially created. Housing was one of the largest and easiest way to expand the economy, and put millions of people to work in low skill employment. It almost makes sense that a bubble was created, except the rate of expansion was so poorly controlled that it had to pop. I think eventually we will revert more towards GDP growth matching population growth. Again, all this is my opinion on this, and it is certainly contestable, but I really don't feel like writing an entire book of comments.
    26 Feb 2013, 08:35 PM Reply Like
  • Tack
    , contributor
    Comments (16263) | Send Message


    "...I suppose we disagree on the soft landing because I do not feel that the process has completely run it's course. Fed officials seem to think that they will have no problem removing extraordinary measures and loose policies prior to excess inflation..."


    Of course, the process hasn't run its course. That's the whole point. We're paying for the gradual absorption of excess private debt by having it gradually tax growth while in process. But, that's not bad, I'd contend, versus the alternative.


    The alternative would have been for a catastrophic deflationary collapse, and, yes, all that prior bad debt would have been instantly expunged. And, we'd have eventually -- repeat, eventually -- had an explosive growth surge of the kind you lament in its absence. It's just that such would have occurred after a depressionary delay of unknown length and after many, many dead bodies had been carted away, and not just those despised banks, but lots of other businesses and individuals, who would have been utterly ruined by such events.


    "...It is popular to pin the mortgage and housing bust on the government,..."


    On the contrary, it's been wildly popular to blame it on the commercial banks, almsot to the exclusion of all others. Even the foolish, irresponsible deadbeats that took out loans they can't or had no intention to repay are viewed as "victims." It's nothing short of pathetic. I don't mean to relieve banks as guilty participants, just to offer that there were many guilty parties in the love fest.


    As an investor, I don't care about the rate of growth nearly as much as the fact that it occurs. Slow and steady beats boom/bust, anytime. Personally, I am satisfied with the rate and direction occurring for the moment. Perhaps, impatient go-go momentum investors want more excitement.


    I am sure we could discuss and debate this endlessly, but at least we've aired our respective views.
    26 Feb 2013, 09:09 PM Reply Like
  • Herr Hansa
    , contributor
    Comments (3130) | Send Message
    I much prefer volatility, just from an investment viewpoint. The rate of growth compared to population growth is merely a long term trend line.


    Banks pushed for looser regulations, then faulted a lack of regulations, or a lack of enforcement. The reality is that a completely open market can only function properly when there is no greed. Once that enters the equation, regulation and enforcement are necessary.


    It is rare that I would like what any politician does, nor what they say. However, it was refreshing to see that line of questioning by US Senator Elizabeth Warren recently, though there has yet to be put in place any mechanism that pushes for prosecution over settlements. Much like Jean Claude Trichet lambasting a German reporter about abandoning the Euro, every once in a while we hear something that tells us that some policy makers are paying attention. The problem is that there remains a great divide between awareness and action.
    26 Feb 2013, 09:41 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4001) | Send Message
    "The alternative would have been for a catastrophic deflationary collapse.. many, many dead bodies carted away, and not just those despised banks, but lots of other businesses and individuals, who would have been utterly ruined by such events."


    It's amazing how speculators now state with certainty the outcome of an alternate history that never was allowed to occur. This is doomsday speculation promoted by Goldman Sachs, Warren Buffett and other influential lobbyists with stakes in overleveraged financial services companies.


    Think for a moment about just a few of the current and future "dead bodies":


    -- Risk averse senior citizen retirees who are losing money to inflation in their savings accounts (for the sake of propping up the TBTF banks).


    --The children and yet-unborn children who will pay a growing, huge tax burden for their entire adult lives.


    --Recent college graduates who are working at McJobs.


    I'm not surprised that you are content with the current lethargic economy (since it has been kind to the stock market so far.) Perhaps you're thinking that you'll be six feet underground before the societal bill comes due for the unprecedented corporate welfare handouts.
    26 Feb 2013, 11:54 PM Reply Like
  • kmi
    , contributor
    Comments (4579) | Send Message
    My point about nationalizing the banks as opposed to funding them - which let's not forget was profitable in the end - was that the US taxpayer would have participated far more in their recovery and that being 'too big too fail' would have been effectively a result of being 'national', as opposed to allowing private interests unmitigatable control over the country's economy at large...


    RBS is the example to watch, but it was politically unpalatable in the US to do so. And I was merely pointing out that it was an alternative to allowing the banks to fail outright, or to bailing them out, which is what we did in the end.
    27 Feb 2013, 06:42 AM Reply Like
  • Tack
    , contributor
    Comments (16263) | Send Message


    It might be worth noting that the UK's economy is in miserable shape, so I'm not sure they're the sterling (pun) example to follow.
    27 Feb 2013, 10:25 AM Reply Like
  • wiredless
    , contributor
    Comments (68) | Send Message
    Capitalism is global, not American, Asian or continental. Commandeering its influence in societies by government describes human history. Ours is largely a society aware of its benefits; ignorant of its vices. The fear of greed, poverty, influence and benefits drive those of each persuasion to manage or control the way government views finance.


    As long as the misnomer of American corporations influencing global policies exists (versus global corporations influencing American markets), the US cannot find its way through its own mediocre efforts at reform.


    Capitalism is not dead. Neither is the US. Strength does not come from numbers as much as it comes from values. The notion that the US has a manifest destiny to champion capitalism across the globe is an obsolete value. Wall Street is a hub, not an address.


    Understanding the globalism of capitalism will revitalize its value in the US much more than undercutting the value of capitalism itself.
    24 Feb 2013, 12:00 PM Reply Like
  • davidbdc
    , contributor
    Comments (3194) | Send Message
    IMO, what is wrong with what we currently have is that government has both intruded into areas it doesn't belong - while at the same time failing in the areas it does belong.


    Government's proper role is to do what it is not reasonable to expect an individual to do. So it maintains and army. It builds the interstate highway system. It runs public education for our children. It runs programs like NASA and NIH. It REGULATES markets - or at least it is supposed to. And this is where our government is now inept and corrupt.


    Lets use health care as the example. We have "non profit" hospital systems being run by CEO's making $5 million a year. How is that? The same non-profit charges $275 to Medicare to run a CT scan for a 65 year old, then charges $8500 to an uninsured 50 year old for the same "service". Neither person is told what the charge will be prior to receiving the service. Both receive exactly the same service - yet one is charged 30 times more than the other? It has nothing to do with supply and demand - there is no line into the parking lot to use the CT scanner. That is not a market.


    We are becoming a corrupt society. We need to clearly define what we are going to have government do, and then demand it do it well. One of the first things that should be done is that no individual working for the government or a non-profit organization can earn more than 75% of what the president earns. I believe we'd see a lot of "non-profit" institutions decide they want to start paying taxes. Public service involves some personal monetary sacrifice - or at least it should - and if that doesn't agree with you the private sector beckons. That would help to flush out some of the folks that are there simply for the money.


    Then we have to strictly regulate the regulators - and the biggest change has to be the jumping back and forth that goes on in almost every industry. Want to work for the SEC - great - but the contract stipulates that you can't work for a financial institution for 5 years after you leave your post. Does this limit your opportunity? yes it does. It also limits your ability to sell out the public for your (wink-wink) soon to be VP of watching the paint dry $2 million position next year.


    Jack Lew is a perfect example of this - he supposedly can't remember doing anything at Citi - yet he was being paid $2 million a year - why? because they understood they were buying access someone that would be back in the government regulating them.


    Lets get the government focussed on many fewer things, lets force them to return to public service as opposed to private enrichment. Lets restore our personal freedoms. Lets regulate markets and then let the markets operate.


    Finally, we used to have an energy and confidence in the USA that doesn't currently exist - that energy can be felt now in places like Thailand and South Korea and Australia. Thats what we have to get back - and there is no government program for that.
    24 Feb 2013, 12:50 PM Reply Like
  • David Zanoni
    , contributor
    Comments (1626) | Send Message
    24 Feb 2013, 03:01 PM Reply Like
  • hlane
    , contributor
    Comment (1) | Send Message
    Good start... this is one of many tips of the matter.
    24 Feb 2013, 05:08 PM Reply Like
  • Rationalexuberance
    , contributor
    Comments (132) | Send Message
    Welcome to our corporatist system of governance where there are four or five major industries with overwhelming influence on the economic decisions in this country. Congress thinks they're in control but are just pawns in the game.
    24 Feb 2013, 08:53 PM Reply Like
  • Tack
    , contributor
    Comments (16263) | Send Message
    Capitalism isn't out of control. Big Government has rendered capitalism unrecognizable.


    And, no younger generation even has any idea what genuine capitalism is, given the politically-correct pabulum they are fed in the public school system.
    24 Feb 2013, 01:00 PM Reply Like
  • Third Eye Market Analyst
    , contributor
    Comments (116) | Send Message
    I remember reading a book on complexity theory back in early 90s. One section of the book dealt with increasing marginal value (IMV) or utility in economics and how the conventional (decreasing) view was all wrong. In short, "dominate (info, money, influence, power, etc.) to reap ever greater rewards".


    As complexity theory models also predicted, I think we've seen this ultra-competitive paradigm shift (IMV) at the micro-level play itself out in every thread of society to become in the macro-level the unintended norm--not only acceptance of, but reverence for those that reaped the highest rewards without questioning whether or if any real value was created and/or how much of the social fabric was destroyed in the process.


    I am optimistic, however, because I am seeing signs of shifting paradigms and return of normalcy in valuation (values).
    24 Feb 2013, 01:28 PM Reply Like
  • alann9
    , contributor
    Comment (1) | Send Message
    Substitute "the Federal government" for "Capitalism" and the excerpt of Farrell's statement, above, makes sense.
    24 Feb 2013, 03:32 PM Reply Like
  • Buddy Canuspare
    , contributor
    Comments (406) | Send Message
    Now transfer it to Germany or Canada - two avowedly socialist nations - and it no longer applies. Why not?
    24 Feb 2013, 08:09 PM Reply Like
  • Brian27
    , contributor
    Comments (79) | Send Message
    LOL No one has said capitalsim is America's problem. Obama is America'sbiggest problem.
    24 Feb 2013, 08:27 PM Reply Like
  • Buddy Canuspare
    , contributor
    Comments (406) | Send Message
    If Obama really is America's biggest problem, then why are we getting our butts kicked by the BRICs, especially China, that are all deeply socialist? Is India outsourcing call center jobs to the USA? If not, why not, given how socialistic India is? Why aren't American tire companies shipping tires to China instead of the other way around, given that China's a Communist dictatorship?
    25 Feb 2013, 09:04 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3711) | Send Message
    "capitalsim is America's problem."


    How do you define capitalism?
    25 Feb 2013, 09:39 PM Reply Like
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