The Cynical Economist

From NPR

America’s small-business owners are finding themselves cut off from the money they need, as banks drastically reduce credit limits and freeze lending. True to the entrepreneurial spirit, however, they’re finding a new solution — from the third world.

In Asia, Africa and South America, microloans have helped lift millions of people out of poverty. These specialized loans — mostly from nonprofit organizations — help people without access to traditional banks start businesses and develop self-sufficiency.

It’s an idea that translates well to an economy where traditional lenders have gotten skittish.

When The Money Stopped

Back in 2004, Ryan Fochler took over a dog-walking business. After a few successful years, he decided to purchase a store and expand into a full-service pet care center in Arlington, Va.

“Everything was just kind of lining up really well, and it made me confident to go ahead and sign my name on that lease,” he tells NPR’s Guy Raz.

But in 2008, while renovating a 7,000-square-foot space for his new business, the market started to take a hard downward turn.

“Just before we opened our doors is when it was technically labeled a recession.”

That’s when his bank began to change its tune. Fochler’s access to loans and credit dried up almost entirely. He almost folded before his store had even opened.

He wasn’t the only one in this situation. MIT economist Simon Johnson, author of the book 13 Bankers, says a lot of other small businesses found themselves out of luck, too.

“The banks in this country have taken a beating,” Johnson says. “Even the banks that think they’re going to survive and do OK are really hunkered down. They’re being very careful about who they lend to, and they see small business as relatively risky.”

Turning A Profit On A Nonprofit’s Dime

After being turned down by bank after bank, Fochler came across the Latino Economic Development Corporation, a nonprofit microlender based nearby in Washington, D.C.

Fochler is not Latino, but he was told that was OK. The LEDC works with all kinds of local businesses that have been turned down by traditional banks. Their goal is to help fledgling, independent businesses get on their feet.

They don’t operate exactly like microlenders in the developing world, some of which issue interest-free loans and let recipients repay whatever they can, whenever they can.

In contrast, American microlenders charge competitive interest rates, and the loans must be repaid on time. Defaulting on a microloan has the same consequences as defaulting on a bank loan.

The LEDC issues loans ranging from $500 to $50,000. Often in the past, those who came to the LEDC to apply for a microloan had little or no credit history.

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From here

we explain why another $80 billion bailout will not work

President Obama, in his weekly radio address Saturday (2-6-10) called for Congress to immediately pass his “jobs bill.” He did so as 20,000 more jobs were lost in January and the government revised the 2009 jobs data showing that 8.4 million jobs have been lost since 2008, and even more since Democrats took control of both houses of Congress in 2006.

And these numbers do not even include those people who are “underemployed,” i.e. have taken jobs making less than they were before.

His “jobs” plan calls for the Federal government spending $30 billion of the TARP funds remaining that community banks could tap into to make more small business loans. He also called for tax cuts, including the “elimination of capital gains taxes on small businesses” and a tax credit of $5,000 for every “new job created.”

Commentary

We commend the Obama Administration for coming to realize, albeit nearly two years too late, that small businesses are the growth engine of this nation’s economy. They have needed help and have been roundly ignored, and even battered, up until this point.

But even as he moved to help small businesses one has to wonder once again whether he understands what he is doing. For example, he proposes the eliminate the capital gains tax on small businesses. That sounds good but will not do much to help most small businesses grow and develop and may even be counterproductive (i.e. result in fewer jobs).

First, capital gains don’t occur until you sell your investment. So the idea that small business owners could “cash out” by selling their businesses to someone else and pocket their capital gains is not, in and of itself, going to do anything to expand jobs. It may indeed contract jobs. Eliminating the capital gains tax is a good idea, and if you do so on small business, as opposed to alternative investments, it might attract more capital into start-up and expansions which could increase the number of jobs but someone smarter than us would have to figure how how to balance that.

Secondly, most small businesses don’t even pay capital gains taxes. Most are individual, family or “closely held” small-group owned so any profits made are distributed to the owners as regular income from listing the K-1 on their personal income tax return. Obama says nothing about eliminating those taxes.

Thirdly, the $5000 jobs creation tax credit Obama is also proposing will do little to grow jobs or small businesses. Think about it. If a small business hires a person and pays them $50,000 a year, do you think they are going to decide whether to add a $50,000 job because they get a $5,000 credit? Now those who would be creating jobs anyway will certainly welcome the $5000 but the point is that it is not likely to create millions of jobs. The “new job” still costs the business $45K and the same conditions that would keep them from adding a $50K job will keep them from adding a $45K job.

So what’s a better idea? The better idea, first and foremost, is for the President and Congress to cut government spending. That would be both symbolic and substantive.

Every dollar of taxes the Federal government collects is a dollar that businesses no longer have to grow their business. Then when the government spends that dollar for something that will not produce as much economic productivity as the business would have produced, had it not had to pay that dollar in taxes, you have a net loss. And that is exactly what has been happening and will happen even more as the “Bush tax cuts” expire.

Less spending is essential to reduce the deficit. But less spending is only a means to an end. The deficit will never be reduced substantially unless and until the Gross Domestic Product increases substantially. So we’re back to what it takes to grow the economy.
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A must read…

From WSJ
By BOB DAVIS, DEBORAH SOLOMON and JON HILSENRATH

In 2008 and 2009, Washington strove to save the economy. In 2010, Americans will get a clearer picture of how Washington has changed the economy.

Only as the recession recedes will it become fully evident how permanently the state’s role has expanded and whether, as a consequence, a new, hybrid strain of American capitalism is emerging.

One thing is clear: The government is a much bigger force in today’s U.S. economy than it was before the financial crisis. “The frontier between the state and market has shifted,” says Daniel Yergin, whose 1998 book “Commanding Heights” chronicled the ascent of free-market forces starting in the 1980s. “The realm of the state has been enlarged.”

To prevent crumbling housing and credit markets from sinking the broad economy, the Bush and Obama administrations and the Federal Reserve spent, lent and invested more than $2 trillion on one initiative after another. If you owned a credit card or a money-market fund, had a savings account, bought a Dodge pickup or even a hunting rifle, or borrowed to buy a home or finance a small business, odds are good that the U.S. stood behind you or the firm that served you.

Washington pumped $245 billion into nearly 700 banks and insurance companies and guaranteed almost $350 billion of bank debt. It made short-term loans of more than $300 billion to blue-chip companies. It propped up life insurers and money-market funds.

It bailed out two of the three U.S. auto makers. It lent billions trying to jump-start commercial-real-estate, small-business and credit-card lending. In two February stimulus bills enacted a year apart, the government committed $955 billion to rouse the economy.

Today the U.S. government, directly or indirectly, underwrites nine of every 10 new residential mortgages, nearly twice the percentage before the crisis. Just last week, the Treasury said it would cover an unlimited amount of losses at mortgage giants Fannie Mae and Freddie Mac through 2012.

Those who defend this robust interventionism and those who decry its effects are vying to shape the nation’s take on the events of the past 16 months.

Lawrence Summers, President Barack Obama’s chief economic adviser, says the intervention was essential, short-term therapy, not a reinvention of capitalism. “Our overarching goal was to save an economy that was near the abyss, where depression looked like a real possibility,” he says. By that measure, he sees success: “The kind of financial and economic collapse that looked very possible last fall appears remote right now.”

The bailouts “were designed to be, and have proved to be, temporary,” Mr. Summers says. “There is no aspiration of any kind to change the private-sector basis of our economy.”

Even so, he says government won’t return to its pre-crisis form. “The way our financial system was operating was much more fragile than many had supposed. Those events point up a need for substantial changes in the way in which we regulate the economy and regulate finance,” he says.

John Taylor, a former Bush Treasury official who is now a Stanford University economist, says the government’s role will be far greater than Mr. Summers suggests. “While we may be past the emergency, we’re still in a mode that will create similar interventions for quite a while, even for minor emergencies,” he says. “We have a bailout mentality in this country.”

One concern: Even if the government withdraws, business will expect bailouts in the next crisis, and that will inspire another round of cavalier risk-taking. “If we don’t re-regulate the banking system properly, we’ll either get very slow growth from overregulation, or another financial crisis in just 10 to 15 years,” says Kenneth Rogoff, a Harvard University economist and co-author of a new book on financial crises since the Middle Ages.

The story isn’t over yet.

Although the economy is growing, unemployment remains a very high 10%. It is far from clear how strongly the economy will grow when the adrenaline of stimulus is withdrawn.

In finance, the recovery has been striking. Since bottoming on March 9, the Dow Jones Industrial Average is up 60%, and financial stocks have more than doubled. Yields on junk bonds, issued by companies with the highest risk of default, have fallen from almost 17 percentage points above yields on Treasury bonds in March to about 6.5 points higher now. That signals both an improving economy and a renewed investor appetite for risk.

Most big banks appear back on their feet. Of the $245 billion invested in bank shares by the Troubled Asset Relief Program, more than $175 billion has been repaid. Since the Treasury tested the financial strength of 19 large financial firms in May, they have raised $136 billion in equity capital and borrowed $64 billion without U.S. guarantees.

But the strengthening of the big banks may be distorting the market. Although smaller banks have long had a higher cost of funds than big ones, the gap has widened. The gap averaged 0.03 percentage point for the first seven years of the decade, but it jumped to a 0.66-point disadvantage for smaller banks in the four quarters ended Sept. 30, estimates Dean Baker of the Center for Economic and Policy Research, a liberal think tank. That suggests investors think the government would bail out big banks, but not small ones, if crisis erupted anew, he says.

Not all of the rescues look successful. The U.S. had to redo its initial bailouts of giant insurer American International Group Inc. and of GMAC Financial Services, which was once a car-finance and mortgage firm and is now a bank holding company. Both remain unable to raise private capital.

The intervention comes with long-lasting costs, among them huge budget deficits that could eventually push up inflation and interest rates.

The International Monetary Fund estimates U.S. government debt will swell to the equivalent of 108% of annual economic output in 2014, from 62% in 2007, absent politically difficult steps such as raising taxes or cutting benefit programs. As federal debt climbs, an ever-greater fraction of the budget goes just to pay interest, much of it to overseas creditors. The bill will worsen if interest rates rise from their current low levels.

Interest on the debt cost $182 billion in the fiscal year ended Sept. 30. Robert Pozen, chairman of MBS Investment Management, worries that within a decade, the interest bill could rival the defense budget, which was $637 billion last year.

The interventions also carry political costs. Their chief architects — Fed Chairman Ben Bernanke, Treasury Secretary Timothy Geithner and former Treasury chief Henry Paulson — say saving Wall Street was essential to saving Main Street. Many Americans, and a vocal group of lawmakers, disagree.

Only 21% of Americans polled by The Wall Street Journal and NBC News in December said they trusted the government to “do what is right,” versus 64% shortly after the attacks of Sept. 11, 2001. In Congress, there is growing support for having the Government Accountability Office review the Fed’s monetary policy, a move the Fed says would crimp its independence.

For some businesses, Washington now looms larger, affecting everything from the choice of executives to the fate of car dealerships. U.S. Bancorp has repaid its TARP money, but CEO Richard Davis nonetheless checked with Fed regulators in December to make sure it would be all right for the Minneapolis-based bank to raise its dividend. “We are still awaiting this guidance,” Mr. Davis said in a statement announcing that the bank would retain its dividend level for now.

Bank of America Corp. also has repaid its aid, freeing itself from the condition lenders hate most about the bailouts: Treasury oversight of executive pay. Even so, it sought the Treasury’s advice on a pay package before hiring a new chief executive.

The bank was considering paying $35 million to $40 million to hire Robert Kelly, CEO of Bank of New York Mellon Corp., much of it to buy out his unvested shares and options. The Bank of America board wanted to know how that would go over in Washington. Treasury paymaster Kenneth Feinberg told the bank that if it were still under his purview, he would reject the package. Around the same time, President Obama publicly bashed “fat cat” bankers.

With those two signals, the talks with Mr. Kelly fizzled, according to officials involved with the decision. The bank instead promoted an insider, Brian Moynihan, who had been working to repair the bank’s reputation in Washington.

It thus chose a more politic man to lead it, post-crisis, than departing CEO Kenneth Lewis, who in a March meeting with the president had said he wouldn’t “suck up” to federal economic aides, according to people familiar with the exchange. Mr. Moynihan, by contrast, told Obama aides in October that Bank of America wanted to work with the White House to achieve U.S. policy goals in areas like small-business lending and foreclosure prevention. As for his pay, Mr. Moynihan asked that it be determined later.

In the insurance business, some of the strong are complaining that the U.S. is warping the market by keeping the weak on life support.

Edmund “Ted” Kelly, chief executive of Boston-based insurer Liberty Mutual Group, points to the case of competitor Hartford Financial Services Group Inc. After acquiring a thrift and qualifying as a bank holding company, Hartford got $3.4 billion of TARP funds in June

Liberty Mutual says it didn’t ask for cash, and doesn’t see why Hartford got any. “Nothing would have happened to the economy if Hartford failed,” Mr. Kelly said. Hartford declined to comment.

The nature of post-crisis capitalism will depend in part on how the administration and Congress wield their new power. Inside Washington, there is profound ambivalence about this. Should the government, for instance, be an activist shareholder demanding change, like a Carl Icahn, or a passive one like an index mutual fund?

Herbert Allison, who left the private sector to run TARP, says, “We can’t wait to get out of these investments. We don’t view ourselves as a long-term investor.” But in the here and now, the government is torn between its roles as shareholder and guardian of the public interest.

At Fannie Mae and Freddie Mac, where the Treasury holds warrants allowing it to acquire stakes of nearly 80%, the administration has put public interest first. It has instructed their regulator to have them administer efforts to cut monthly mortgage payments for millions of Americans to avert foreclosure.

The disagreements over how to wield power over business are playing out both within the Obama administration and between the administration and Congress — as is happening now in the auto industry.

The White House forced out a CEO of General Motors in March, and crafted car-maker bankruptcy restructurings that drew howls from some creditors. But it later lightened its hand. It appointed a board of private-sector directors and let that board oversee GM. The board, six months later, was able to fire a subsequent CEO without getting prior White House approval, according to Treasury officials.

Congress isn’t so willing to surrender its leverage. That was clear when GM and Chrysler decided to terminate about 3,400 dealers. Many turned to their lawmakers, and Congress got involved, prompting the companies to reinstate about 110. But the dealers felt that was insufficient.

GM’s frustration with the process boiled over at a mid-November meeting in the office of Sen. Richard Durbin (D., Ill.). GM’s usually cool-headed chief lobbyist, Ken Cole, was too agitated to sit, say several participants. When Tammy Darvish, an executive of a dealership in Silver Spring, Md., pressed Mr. Cole about whether it would cost the company any money to reinstate a terminated dealer, the GM team started to pack their briefcases and threatened to walk out, according to Ms. Darvish and a government participant in the meeting. They say the GM team stayed only at the insistence of congressional staffers.

Congress later enacted a provision giving axed dealerships broadened grounds to appeal in arbitration procedures — broader than the White House or car companies sought.

A spokesman for GM declined to comment on the dealers meeting or Mr. Cole. But the auto maker, now 60% federally owned, said the arbitration law will hurt its efforts to turn a profit and repay the government, which has invested roughly $50 billion in the company.

—Dan Fitzpatrick contributed to this article.

Write to Bob Davis at bob.davis@wsj.com, Deborah Solomon at deborah.solomon@wsj.com and Jon Hilsenrath at jon.hilsenrath@wsj.com

Forget what Government tells you about the state of the economy, they say things are improving and we are on a path to recovery…

Really?

Yep, all the stats are looking better according to the government bureaucrats, but…. the reason why you shouldn’t believe the government statistics numbers about the unemployed are these two examples…

From Chattanooga times

65,000 seek work at VW

Pamela Glant of Chattanooga says she sought a production job with Volkswagen’s local auto assembly plant to improve her standard of living.

“I think I could do the work and I’d like to be tested,” she said.

Ms. Glant is one of 35,000 people who applied for the 1,200 production jobs over the past three weeks, the company said Monday.

About 30,000 others have applied for the 800 professional and skilled maintenance slots so far, according to VW.

And we also have this story…

From Atlanta where KIA motors will open a new plant…

Kia Motors says it will reopen the application process for production and maintenance jobs at its new assembly plant in West Point. The Columbus Ledger-Enquirer says the South Korean automobile manufacturer has hired 1,200 employees for the plant, where full production of the Kia Sorento is expected to begin later this month. A second production line is planned for early next year. Most of the workers hired so far came from more than 43,000 applications received last year. The salaries range from more than $14 an hour to about $27 an hour. They are still taking applicantions and allowing previous applicants to refresh their application.

In Chattanooga there are 37 people competing for every one position and in Atlanta 35 for every one position that are created by those manufacturers…

Notice the wages $14 to $27 per hour…. And I wonder for what fraction of this, a guy in China or India can manufacture a car…

and also as I told you already,  THE BIGGEST WASTE AND REDISTRIBUTION OF WEALTH IN WORLD’S HISTORY, CALLED STIMULUS PACKAGE IS NOT CREATING A LOT OF JOBS….

From NYT

The measures, announced by Mr. Obama at a small records storage company in Maryland, would allow smaller community banks to borrow at low rates from the Treasury Department’s Troubled Asset Relief Program. It would also raise the loan caps on several popularSmall Business Administration programs.

Under the administration plan, banks with less than $1 billion in assets could borrow from the program at a lower interest rate than financial institutions are required to pay.

read the rest here

First when I heard this news on the radio I was in my car. When I heard it I thought, “Good,lending to small businesses  will probably help to create jobs. But then while I was driving I was thinking, that what Obama is asking is, that the banks increase their risk exposure by borrowing from the FEDS and lending to the small businesses.

I was thinking…. “we are headed for the Second Great Depression and, who the hell  is going to lend money, if their are in their right mind, cause if we get to the Second  Great Depression, we are going to get hyperstagflation….and then…

Then it occurred to me, that nobody cares anymore in this fucking country about the  shit, that is happening…

So, if I am a bank CEO, why not “borrow” from the FEDS and lend to the small businesses? Never mind the fact, that my bank, will not get the money back….

It seems, that this is the most probable scenario, because of the Depression that the Government incurred, but what the hell…I AM NOT WORRIED ABOUT IT….

I will get the bonus for job well done by lending money that are not mine….and thats what I care about

If You are concerned that the bank  Is  going to go bankrupt… Do not worry! Lay back and…

HA HA !

Give me a break motherfucker…

Government is here to help us…..

Do not worry I say! Just lend the money out and forget about it !”

Watch this video. It summarizes, what I was thinking about the whole deal…

IT IS FUCKED UP

From Market Watch
By Paul B. Farrell

Jack Bogle published “The Battle for the Soul of Capitalism” four years ago. The battle’s over. The sequel should be titled: “Capitalism Died a Lost Soul.” Worse, we’ve lost “America’s Soul.” And worldwide the consequences will be catastrophic.

That’s why a man like Hong Kong’s contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today.”

No, not just another meltdown, another bear market recession like the one recently triggered by Wall Street’s “too-greedy-to-fail” banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great “American Economic Empire” for 233 years will collapse, a total disaster, a destiny we created.

OK, deny it. But I’ll bet you have a nagging feeling maybe he’s right, the end may be near. I have for a long time: I wrote a column back in 1997: “Battling for the Soul of Wall Street.” My interest in “The Soul” — what Jung called the “collective unconscious” — dates back to my Ph.D. dissertation: “Modern Man in Search of His Soul,” a title borrowed from Jung’s 1933 book, “Modern Man in Search of a Soul.” This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.

Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav’s “The Seat of the Soul,” Thomas Moore’s “Care of the Soul” and sacred texts.

But for Wall Street and American capitalism, use your gut. You know something’s very wrong: A year ago “too-greedy-to-fail” banks were insolvent, in a near-death experience. Now, magically they’re back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing Federal debt are killing taxpayers.

Yes, Wall Street has lost its moral compass. They created the mess, now, like vultures, they’re capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.

Here are the Top 20 reasons American capitalism has lost its soul:

1. Collapse is now inevitable

Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global “wars, massive government-debt defaults, and the impoverishment of large segments of Western society.” Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is “inevitable.”

When? He hesitates: “But what I don’t know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000.” But the end is inevitable, a historical imperative.

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.”

A crisis hits. We act surprised. Shouldn’t. But it’s too late: “Civilizations share a sharp curve of decline. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.”

Warnings are everywhere. Why not prepare? Why sabotage our power, our future? Why set up an entire nation to fail? Diamond says: Unfortunately “one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions.”

Sound familiar? “This type of decision-making is the opposite of the short-term reactive decision-making that too often characterizes our elected politicians,” thus setting up the “inevitable” collapse. Remember, Greenspan, Bernanke, Bush, Paulson all missed the 2007-8 meltdown: It will happen again, in a bigger crisis.

3. Wall Street sacked Washington

Bogle warned of a growing three-part threat — a “happy conspiracy” — in “The Battle for the Soul of Capitalism:” “The business and ethical standards of corporate America, of investment America, and of mutual fund America have been gravely compromised.”

But since his book, “Wall Street America” went over to the dark side, got mega-greedy and took control of “Washington America.” Their spoils of war included bailouts, bankruptcies, stimulus, nationalizations and $23.7 trillion new debt off-loaded to the Treasury, Fed and American people.

Who’s in power? 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.

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.”

Greed’s OK, within limits, like the 10 Commandments. Yes, the soul can thrive around greed, if there are structures and restrictions to keep it from going out of control. But Moore warns: “Capitalism does the opposite of that. It not only doesn’t really put any structure or restrictions on it. It encourages it, it rewards” greed, creating bigger, more frequent bubble/bust cycles.

It happens because capitalism is now in “the hands of people whose only concern is their fiduciary responsibility to their shareholders or to their own pockets.” Yes, greed was legalized in America, with Wall Street running Washington.

5. Triggering the end of our ‘life cycle’

Like Diamond, Faber also sees the historical imperative: “Every successful society” grows “out of some kind of challenge.” Today, the “life cycle” of capitalism is on the decline.

He asks himself: “How are you so sure about this final collapse?” The answer: “Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent … overspends … costly wars … wealth inequity and social tensions increase; and society enters a secular decline.” Success makes us our own worst enemy.

Quoting 18th century Scottish historian Alexander Fraser Tytler: “The average life span of the world’s greatest civilizations has been 200 years” progressing from “bondage to spiritual faith … to great courage … to liberty … to abundance … to selfishness … to complacency … to apathy … to dependence and … back into bondage!”

Where is America in the cycle? “It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical ‘society cycle.’ … The U.S. is somewhere between the phase where it moves ‘from complacency to apathy’ and ‘from apathy to dependence.’”

In short, America is a grumpy old man with hardening of the arteries. Our capitalism is near the tipping point, unprepared for a catastrophe, set up for collapse and rapid decline.

15 more clues capitalism lost its soul … is a disaster waiting to happen

Much more evidence litters the battlefield:

1. Wall Street wealth now calls the shots in Congress, the White House

2. America’s top 1% own more than 90% of America’s wealth

3. The average worker’s income has declined in three decades while CEO compensation exploded over ten times

4. The Fed is now the ‘fourth branch of government’ operating autonomously, secretly printing money at will

5. Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits

6. Bill Gross warns of a “new normal” with slow growth, low earnings and stock prices

7. While the White House’s chief economist retorts with hype of a recovery unimpeded by the “new normal”

8. Wall Street’s high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee

9. 401(k)s have lost 26.7% of their value in the past decade

10. Oil and energy costs will skyrocket

11. Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world’s reserve currency

12. In two years federal debt exploded from $11.2 to $23.7 trillion

13. New financial reforms will do little to prevent the next meltdown

14. The “forever war” between Western and Islamic fundamentalists will widen

15. As will environmental threats and unfunded entitlements

“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.

Faber is uncertain about timing, we are not. 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

From WSJ
By DANA MATTIOLI

Siblings Georgia, Jimmy and John Roussos have spent most of their lives working in the kitchen of the restaurant their father opened in 1954. The eatery managed to survive a hurricane and other setbacks, but it wasn’t until this August that the recession took its toll, forcing Roussos Restaurant in Daphne, Ala., to permanently shut its doors.

After months of slow sales, family businesses are being forced to close, ending legacies and leaving behind a wake of sad customers and loyal employees. “Some family businesses that were just hanging on have said it’s time to get out,” says Dann Van Der Vliet, director of the Vermont Family Business Initiative at the University of Vermont.

An estimated 90% of U.S. businesses are family-owned or controlled, from traditional small businesses to a third of Fortune 500 firms, according to the Small Business Administration. Hard data are hard to come by on the number of small family-controlled enterprises that have closed in this recession, but experts say the prolonged slump has hurt a significant number. About 4.3 million businesses with 19 or fewer employees closed during the fourth quarter of 2007 through the fourth quarter of 2008, according to the Bureau of Labor Statistics.

These businesses, often steeped in tradition and not as flexible to change, tend not to have formal plans in place to respond to crisis. “They’ve seen reductions in top line revenue that they just can’t react fast enough to,” says Beth Wood, assistant vice president of market development and family-business advocacy with MassMutual. Problems securing credit in this recession have also prevented some family businesses from getting the funding they need, she adds.

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