10 explosive bubbles that will kill capitalism

In his weekly MarketWatch editorial, Paul Farrell turns his focus on how capitalism is "committing suicide" and how it is "destroying America".  He advises people by identifying 10 bubbles that he sees that raise cause for concern.  

Full piece below

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 we 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: Forget court, elections — health care will implode

Dr. Marcia Angell, of the Harvard Medical School, writes in HuffingtonPost: “Why the Court’s Ruling Is Bad for Obama and Bad for American Health Care.”

“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, heath-care costs will remain a drag on the economy, especially with 3,300 lobbyists fighting to keep the cost rising.

2. Government Bubble isolates Washington from real America

When will this bubble explode? In a Time feature the “Bubble on the Potomac,” Andrew Ferguson warns, America’s massive debt has created “new affluence flooding the nation’s capital” making Washington society “a world apart from the country it governs,” adding that “this insularity has consequences for the rest of the country.”

The average American may be struggling, but government is “for sale,” in this center of the trillion-dollar government-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 over an “investment” in their lobbying fees.

3. CEO Pay Bubble up 20% while bank stocks sink as much as 61%

That same mind-set 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 shareholders. Their stock has dropped 61% in three years while 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.

4. Inequality Bubble now at 1929 level, warning of end of capitalism

Nobel economist Joseph Stiglitz shines in his new book “The Price of Inequality:” “America likes to think of itself as a land of opportunity,” he writes in Project Syndicate. But while we all have individual examples “what really matters are the statistics: to what extent do an individual’s life chances depend on the income and education of his or her parents?”

And unfortunately, today the “numbers show that the American dream is a myth … the gap’s widening.” Since 2008 “the top 1% of U.S. income earners captured 93% of the income growth. … The clear trend is one of concentration of income and wealth at the top, the hollowing out of the middle, and increasing poverty at the bottom.”

5. Debt Bubble: Debt-ridden college grads selling burgers, lattes

For more evidence of the gap see the amazing cover on Utne, a cartoonish Albert Einstein serving a McDonald’s hamburger special: “Fries with that? What’s a college degree worth these days?” Not much.

And in Good magazine’s “Minimum Rage,” many stories about grads handicapped by college debt. We’re killing our competitive future: 27-year-old NYU grad “Emily Sanders has been a waitress or bartender, on and off, for almost a decade. … She has no health insurance, no 401(k), and a pathetic savings account. Most days, she gets to her first job at noon and leaves her second after midnight. If she’s sick but a little short on cash, she downs some DayQuil and goes into work anyway.”

6. Global Jobless Bubble: Governments warned, revolutions coming

In “The Fallen,” Rolling Stone’s Jeff Tietz gives us another snapshot of capitalism’s accelerating train wreck: A “sharp, sudden decline of America’s middle class … They had good stable jobs, until the recession hit. Now they’re living out of their cars in parking lots.”

Time used a wider-angle lens on the new global “Jobless Generation” where “tens of millions of young people are unemployed.” This is bigger than Arab Spring and OWS. Governments are warned: Figure out “how to get them jobs before they become unemployable — and erupt in fury.”

But if Grantham’s right, governments won’t act till it’s too late, and anticapitalism revolutions sweep the planet.

7. Oil Bubble: New oil crisis will trigger new Arab Springs

Financial advisers say invest in emerging markets, the “new normal” for U.S. stock returns is too low. Maybe not: Foreign Policy’s Steve Levine warns that petro-rulers worldwide are watching the price of oil “plunge at a rate they have not experienced since the dreaded year 2008. Industry analysts are using phrases such as ‘devastation’ and ‘severe strain’ to describe what’s next,” possibly a “fresh round of Arab Spring-like” revolutions, “the nightmare scenario” for oil dictators.

8. Risk Bubble: U.S. recovery threatened by global economic risks

Writing in Project Syndicate, Stephen Roach, former Morgan Stanley chairman, warns that since 2008 “the U.S. economy has been on a weak recovery trajectory.” Why? The American consumer went cold “in the aftermath of the biggest consumption binge in history.”

Since then “exports have accounted for 41%” of America’s rebound, with a whopping 83% of our export growth from Asia, Latin America and Europe. But since all three are now “in trouble, the U.S. could be quick to follow.”

9. Slow-Growth Bubble: New normal is anemic returns, austerity

Listen closely: Over 200,000 financial advisers across America already heard this report. Advisers have been warned to start “preparing clients for a low-return reality,” code for a new normal and austerity: “Slow economic growth, modest and selective improvements in equities, and interest rates remaining low.”

Get it? “Anemic growth in the second half,” with huge risks ahead. In fact, individual investors and American capitalism alike will face three doomsday scenarios in the near term: The Euroland crises, America’s post-election “fiscal cliff” and the risk of global recessions in emerging markets.

10. Capitalism Bubble: selfishness weakens our role as a leader

“The world is in a state of drift, transition or even increasing chaos,” writes Brent Scowcroft in the recent National Interest. Scowcroft’s a retired Air Force General and Bush-41 National Security Adviser.

In an update to his 1998 book, “A World Transformed,” Scowcroft says, “once we were viewed as trying to do our best for everyone: now we are seen a being preoccupied with our own special interests,” a myopic vision that reflects the trend among many politicians to govern using Ayn Rand’s extreme capitalism.

Now you know why Grantham warns of capitalism’s total lack of “ethics or conscience” and “its absolute inability to process the finiteness of resources and the mathematical impossibility of maintaining rapid growth in physical output.”

No moral compass. No vision of the future. No grasp of the consequences of their short-term thinking. These three threats are merging into a critical mass that will trigger a scenario that will “bring capitalism down and America with it.”

Bottom line: America’s new Ayn Rand style of extreme capitalism is self-destructive. 

Getting an Education at Google

Google offers more than just a job to it's employees, it offers an education as well.  This WSJ piece documents how Google's program works and what they try to get from it.

• Last year, Google offered more classes to more employees than it ever has before, with about a third of its 33,100-strong global workforce going through the in-house program. It cut classes that didn't work and retooled others. "What's important is that it aligns with our overall business strategy," says Karen May, Google's vice president of leadership and talent, who has led the revamping of GoogleEDU.
• Getting these programs to work, though, is tricky. Management experts say it is all well and good to send employees to classes, but to get the lessons to stick, employees need to apply them to their daily work lives. Employees often take a class and "say, 'Gee, this is great,' and go back to their jobs and do the same old thing," says Professor David Bradford, director of the executive program in leadership at Stanford University.
• Google thinks it has found a way to make its learning stick. It has become more exacting about when it offers classes and to whom. It uses employee reviews of managers—similar to the instructor reviews that college students fill out at the end of a semester—to suggest courses to managers. Ever data-obsessed, Google uses statistics gathered from current and former employees to recommend certain courses to managers at different points in their career, say after a move to a new city or joining a new team.
• Google has also begun offering specific classes based on an employee's work area (engineering versus sales) and career stage (junior developer versus senior manager). "The more targeted it is, the better, because it is specific and actionable," says John Baldoni, president of Baldoni Consulting LLC, a leadership coaching-and-development firm based in Ann Arbor, Mich. "The downside of leadership development is that it is too often amorphous and doesn't speak to people in the language that they need at a specific time."
• "More individualized, customized recommendations are part of how, as we grow, we're trying to individualize and personalize the learning experience here," Ms. May says.
• Even before the formation of GoogleEDU in 2010, Google would assign promising young product managers career and management coaches who would teach them how to negotiate better salaries, improve their presentation skills, or talk through the reasons why someone should or shouldn't leave to found a start-up, remembers one former employee who left the company in 2007. He says that such programs "engendered a lot of loyalty" among employees.

What To Do With Old Walmarts? Turn Them Into Libraries

As someone who spends allot of time in libraries this is an awesome idea.  According to this Fast Co piece, the McAllen, Texas community turned an abandoned Walmart store into a first class library.


According to the article library recently won the 2012 Library Interior Design Award. Designed by Meyer Scherer & Rockcastle, Ltd. (the interior) and Boultinghouse Simpson Architects (the exterior).  The library is located inside a 124,500 square foot former Walmart store--making it the largest single-story library in the U.S.


I'm wondering how much the community had to pay for the space or if it was donated by Walmart?

What Life Was Like in 1776

This op ed piece appeared in the WSJ this week which dictates "What Life Was Like in 1776".  The author Thomas Fleming is a former president of the Society of American Historians. This article was adapted from his e-book, "What America Was Really Like in 1776," recently published by New Word City.


Almost every American knows the traditional story of July Fourth—the soaring idealism of the Declaration of Independence, the Continental Congress's grim pledge to defy the world's most powerful nation with their lives, their fortunes and their sacred honor. But what else about revolutionary America might help us feel closer to those founders in their tricornered hats, fancy waistcoats and tight knee-breeches? 



Those Americans, it turns out, had the highest per capita income in the civilized world of their time. They also paid the lowest taxes—and they were determined to keep it that way.

By 1776, the 13 American colonies had been in existence for over 150 years—more than enough time for the talented and ambitious to acquire money and land. At the top of the South's earners were large planters such as George Washington. In the North their incomes were more than matched by merchants such as John Hancock and Robert Morris. Next came lawyers such as John Adams, followed by tavern keepers, who often cleared 1,000 pounds a year, or about $100,000 in modern money. Doctors were paid comparatively little. Ditto for dentists, who were almost nonexistent.

In the northern colonies, according to historical research, the top 10% of the population owned about 45% of the wealth. In some parts of the South, 10% owned 75% of the wealth. But unlike most other countries, America in 1776 had a thriving middle class. Well-to-do farmers shipped tons of corn and wheat and rice to the West Indies and Europe, using the profits to send their children to private schools and buy their wives expensive gowns and carriages. Artisans—tailors, carpenters and other skilled workmen—also prospered, as did shop owners who dealt in a variety of goods. Benjamin Franklin credited his shrewd wife, Deborah, with laying the foundation of their wealth with her tradeswoman's skills.

Several hundred miles inland was the "back country," and at the time of the Revolution, not many people went there by choice. Most were poor and landless—younger sons, for example, whose older brothers had inherited the family's property. Life on the outskirts of civilization was hard and often violent. Morals on the Western frontier were often much more relaxed than they were in the civilized East.

Bettman/Corbis

The Blue Anchor Inn, Philadelphia, Pa., 1776 

 America in 1776 was also a diverse nation. The first census, taken in 1790, revealed that only about 60% of the people came from England. The rest were German, Irish, Dutch, Scottish, Swedish and African.

Men wore clothes that were as colorful as the ladies' garb. One male fashion plate in New York ordered a suit of "superfine scarlet plush and a vest of light blue plush." Among the ladies, the beauty business was already a major force in the economy. "Fashion dolls" wearing the latest styles circulated through the city and the country. Women regularly spent a half day getting their hair "permanented" for a ball. Ladies seeking to preserve the sheen of youth spent a fortune on "paints" from China and lip salves from India.

Molly Tilghman of Chestertown, Md., summed up the prevailing opinion when she told her cousin Polly Pearce: "Wisdom says beauty is a fading flower but it attracts more admiration than wit, goodness or anything else in this world."

Another American tradition beginning to take root was female independence. The wife of Sueton Grant ran her husband's shipping business in Newport, R.I., for more than 30 years after his death in 1744. As a teenager, Eliza Lucas began experimenting with various plants on her father's Wappoo Creek Plantation, near Charleston, S.C. Soon she was raising indigo, which became one of the most profitable crops in the South.

Philadelphia's Lydia Darragh, America's first female undertaker, operated her business for almost a decade before the Revolutionary War began. During the war she was one of George Washington's most successful spies.

"Domestic felicity" was considered vital to everyone's peace of mind, and although divorce was legal, it was also rare. Although money played a part in marriages among the more affluent, family life was often full of affection. The love letters Col. Thomas Jones of Virginia wrote to his wife began "My Dearest Life."

Not everyone achieved this level of bliss. One notoriously unhappy marriage involved Col. John Custis of Arlington, Va., and his wife, Frances Parke. According to local accounts, they would go for weeks without speaking. One day, on a carriage ride, Mrs. Custis realized he was driving their "equipage" straight into Chesapeake Bay.

"Where are you going, Mr. Custis?" she asked. "To hell, Madam," the colonel replied. "Drive on," she said. "Any place is better than Arlington."

The colonel—or his horses—apparently changed their minds.

By 1776, the Atlantic Ocean had become what one historian has called "an information highway" across which poured books, magazines, newspapers and copies of the debates in Parliament. The latter were read by John Adams, George Washington, Robert Morris and other politically minded men. They concluded that the British were planning to tax the Americans into the kind of humiliation that Great Britain had inflicted on Ireland.

As eight years of war engulfed the continent, not a few of the rebels saw that the Revolution was a spiritual enterprise that would never really end. Dr. Benjamin Rush, a Pennsylvanian who signed the Declaration of Independence, wrote that the war was only the first step in the Revolution's destiny to transform America and the world.

History confirmed his intuition. In the next hundred years, other nations and peoples would issue 200 similar declarations.