But that was nine years (and two brutal recessions) ago. Then, shortly after the Iraq War started, he was forced back to the drawing boards, and wrote How the Mighty Fall. Why? His summary in BusinessWeek explains: “Some of the great companies we’d profiled … had subsequently lost their positions of prominence,” including the Bank of America.

Why do “The Mighty” fall? “If some of the greatest companies in history can go from iconic to irrelevant, what might we learn by studying their demise, and how can others avoid their fate?” Then fate did intervene, a call came that for the adrenaline flowing master than hanging high on rocky cliff: “Would like you to come to West Point to lead a discussion with some great students?” A seminar for cadets? No, “12 generals, 12 CEOs, and 12 social sector leaders … and they’ll really want to dialogue about the topic.”

What topic? “America!” America? “What could I possibly teach this esteemed group about America?” A lot. The core issue became clear when the CEO of one of America’s top companies pulled him aside: “We’ve had tremendous success in recent years,” but “when you are at the top of the world … the most powerful nation on Earth … the most successful company in your industry … the best player in your game … your very power and success might cover up the fact that you’re already on the path of decline?”

The 5 danger signals planting the dark seeds of failure

Yes, success is blinding. When everyone says you’re the best, the leader, the most powerful player, when the press, your competition and your enemies all put you on a pedestal: “How would you know you’re not already on the path of decline?” That CEO’s questions inspired the new research, into what Collins calls “the silent creep of doom.” The problem: “Institutional decline is like a disease: harder to detect but easier to cure in the early stages; easier to detect but harder to cure in the later stages. An institution can look strong on the outside but already be sick on the inside, dangerously on the cusp of a precipitous fall.” Happens to the best on Wall Street, Washington Corporate America CEOs: You’re on top, but “sick on the inside, dangerously on the cusp of a precipitous fall” … but you don’t even know it.

The wake-up call: “If a company as powerful and well-positioned as Bank of America in the late 1970s could fall so far, so hard, so quickly, then any company can,” Collins discovered. “Every institution is vulnerable, no matter how great. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall, and most eventually do.”

Collins sounds like anthropologist Jared Diamond in Collapse: “One of the disturbing facts of history is that so many civilizations collapse,” sharing “a sharp curve of decline” that “may begin only a decade or two after it reaches its peak population, wealth and power.” Yes, if it happened to Bank of America, why not America? Collins research exposed the “Five Stages of Decline.” Knowing them can help business, banking and government leaders “substantially increase the odds of reversing decline before it is too late—or even better, stave off decline in the first place.” Morover, “decline can be reversed … the mighty can fall, but they can often rise again.” Here are his warning signs, diagnostic clues along the five steps of declining:

Stage 1: “Hubris Born of Success”
Imagine Collins as a psychiatrist diagnosing a patient on his couch: “Great enterprises can become insulated by success … momentum can carry an enterprise forward for a while, even if its leaders make poor decisions … Stage 1 kicks in when people become arrogant” … insiders see “success virtually as an entitlement” … like Wall Street banks today … they “lose sight of the true underlying factors that created success in the first place” … they “overestimate their own merit and capabilities … The best leaders we’ve studied never presume they’ve reached ultimate understanding of all the factors that brought them success.” … If they do, “you just might find yourself surprised and unprepared when you wake up to discover your vulnerabilities too late.”

Stage 2: “Undisciplined Pursuit of ‘More’ ”
The belief “we’re so great, we can do anything” … drives many to “more scale, more growth, more acclaim, more of whatever those in power see as success” and justify mega-bonuses … they make “leaps into areas where they cannot be great or growing faster than they can achieve with excellence … investing heavily in new arenas where you cannot attain distinctive capability … launching headlong into activities that do not fit with your economic or resource engine … use the organization primarily as a vehicle to increase your own personal success—more wealth, more fame, more power—at the expense of its long-term success” … and you’ll “compromise your values or lose sight of your core purpose in pursuit of growth and expansion.” Sounds like Wall Street 2010, a community of addicts who pledge of allegiance begins, “Greed is Good” … amoral robots driven by a relentless commitment to the pseudo-capitalism of Reaganomics, blind to the impact on America’s democracy.

Stage 3: “Denial of Risk and Peril”
Here Collins warns of our natural tendency to self-deception: “Internal warning signs begin to mount, yet external results remain strong enough to ‘explain away’ disturbing data or to suggest that the difficulties are ‘temporary’ or ‘cyclic’ or ‘not that bad,’ and ‘nothing is fundamentally wrong.’… leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data … blame external factors for setbacks rather than accept responsibility” … slogans and ideologies beat out “vigorous, fact-based dialogue that characterizes high-performance teams … those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences” … much as did Paulson, Wall Street’s “too-stupid-to-fail’ CEOs, Bernanke, Geithner and the Fed’s toxic shadow banking system back in 2007-2008.

Stage 4: “Grasping for Salvation”
The earlier “cumulative peril and/or risks” now “assert themselves, throwing the enterprise into a sharp decline visible to all. The critical question is: How does its leadership respond?” Many make things worst. Instead of “getting back to the disciplines that brought about greatness” they “grasp for salvation:” Quick fixes … a charismatic visionary leader … a bold but untested strategy … a radical transformation … dramatic cultural revolution … hoped-for blockbuster product … game-changing acquisition … other silver-bullet solutions. Initial results … may appear positive … do not last.”

Next, a critical turning point: When “we find ourselves on the cusp of falling, our survival instinct and our fear can prompt lurching—reactive behavior absolutely contrary to survival … when we need to take calm, deliberate action, we run the risk of doing the exact opposite and bringing about the very outcomes we most fear … leaders atop companies in the late stages of decline need to get back to a calm, clear-headed, and focused approach. If you want to reverse decline, be rigorous about what not to do.”

America was at this critical historical turning point moment in the fall of 2008. We were not calm. The economy and markets were collapsing. Our leaders lost their cool. Former Goldman Sachs CEO, Hank Paulson, then Treasury Secretary, panicked like a frightened grad school kid, racing to Congress with a three-page demand that taxpayers bailout his old buddies, the same out-of-control greedy idiots who created the problem. Congress also panicked. In short, at that crucial historic moment in history, democracy failed us. Yes, democracy failed: Our elected representatives surrendered our great American democracy while also ending Adam Smith’s moral-capitalism, turning both along with the keys to the U.S. Treasury over to Wall Street’s new soulless pseudo-capitalism.

Stage 5: “Capitalization to Irrelevance … or death”
“The longer a company,” bank or nation “remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral downward. In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future. In some cases the company’s leader just sells out; in other cases the institution atrophies into utter insignificance; and in the most extreme cases the enterprise simply dies outright.”

How can we return to “greatness?” What do the turnarounds have in common? “Each took at least one tremendous fall at some point in its history and recovered … but in every case, leaders emerged who broke the trajectory of decline and simply refused to give up on the idea of not only survival but ultimate triumph, despite the most extreme odds. The signature of the truly great vs. the merely successful is not the absence of difficulty. It’s the ability to come back from setbacks, even cataclysmic catastrophes, stronger than before … great companies …great social institutions … great individuals can fall and recover. As long as you never get entirely knocked out of the game, there remains hope.”

The key? Great leaders. New Churchill: Obama? Romney? Palin? Who?
Collins shines the light on several corporate revival journeys, ending with the familiar story of Churchill going from a 1930s “quagmire from which there seemed to be no rescue” to “Prime Minister at age 77, knighted by the Queen … Churchill’s simple mantra: Never give in—never, never, never, never.” Does America have a Churchill in the wings, a leader who knows “the path out of darkness begins with those exasperatingly persistent individuals who are constitutionally incapable of capitulation.” Many who thought it was Obama, but now question his “capitulation” to Wall Street, concluding that this final, total Wall Street takeover of Washington will ultimately kill America’s “financial strength and individual spirit to such an extent that leaders” whether Obama, Romney or Palin will abandon “all hope of building a great future, and just sell out,” as indeed Obama has … because we now have the answer to Collin’s core question, “How The Mighty Fall” … we see it unfolding rapidly every day on cable … game over.

original: MarketWatch 4.6.10

From the left: Even Frank Rich’s column in the New York Times (who’s 2006 The Greatest Story Ever Sold tore apart Bush) warns its “Obama’s Make or Break Summer,” anxiously worrying that Obama is “tilting at windmills” rather than confronting the big boys, doing “battle with fierce and unrelenting adversaries, starting with the banking lobby.” Rich worries Obama just “punted,” pushing failure not far down the road. Maybe. But we all know that Wall Street Trojan Horses on Obama’s team (Geithner, Summers, Bernanke and the ghost of Hank Paulson) are making sure Wall Street gets what critics call putting “lipstick on a pig,” not the plastic surgery it really needs.

And from the right: They’ve already written his obituary. And the toe-tag says he’s a loser. Seriously, I did a double take reading Kevin Baker’s eye-grabber in Harper’s, “Barack Hoover Obama.” Barry as Hoover? What a twist. Baker’s grand conclusion says that “much like Herbert Hoover, Barack Obama is a man attempting to realize a stirring new vision of his society without cutting himself free from the dogmas of the past, without accepting the inevitable conflict. Like Hoover, his is bound to fail.” So apparently in six short months Obama’s already done what it took Bush and Reaganomics 27 years to do.

Fascinating. So I googled deeper, discovering that the same “Hoover” indictment was leveled by Obama’s critics even before the election, and yes, even before the nomination. On the other hand, one fan did balance the Hoover handle with “Barack Delano Obama.” And we all remember many of the nastier names-calling that compared him with certain WWII leaders, casting him as a “socialist” and even “communist.” That’s politics. In each case, however, the titles of the articles told us more about the writer and where they sat in the political spectrum: Extreme right field, center field bleachers, or in the extreme left field. Ah yes, baseball analogy was emerging.

So after more googling and noodling, a list of possible names for our president began flashing across my brain’s radar scope, names for lefties, right wingnuts, center independents, late-night comedians, and … suddenly, baseball fans. Seriously, so let’s sidestep the darkside, get in the right mood, what name would you give the team captain?

1. Barack Hoover Obama (a conservative attack)
2. Barack Delano Obama (the liberal’s comeback)
3. Barack Clinton Obama (many see him more like Bill)
4. Barack Lincoln Obama (of course, his favorite hero)
5. Barack “Shoeless Joe” Obama (if you really don’t like him or Chicago)
6. Barack “Barry Bonds” Obama (you don’t like him, Frisco or the Giants)
7. Barack “A-Rod” Obama (if you don’t like New York and the Yankees)
8. Barack “Jackie Robinson” Obama (if you like him and the Dodgers )
9. Barack “Babe Ruth” Obama (because he can point and hit home runs)
10. Barack “Yogi Berra” Obama (you like him ‘cause he makes you laugh!)

So what name did you pick? I picked “Yogi Berra” because my brain homed in on that wonderful Yankee catcher who could make everyone laugh even today in an America dominated by mean-spirited contentious ideological rhetoric. Yes, Jackie Robinson fits Obama’s image, both forged new ground. And Babe Ruth for other reasons, especially that “called shot” in the 1932 World Series against Chicago, pointing to the right field, then knocking a 440-foot homer over the bleacher’s flagpole. Still I’m going with one of my favorite baseball heroes, because all the nonsense about predicting whether Obama will “make it” this summer or maybe “break” because he’s a reincarnation of Herbert Hoover is no more than an epidemic of “pundit predictionitis.” Yogi Berra’s humor and the baseball metaphor were just right to defuse the situation, if only for a few moments, in today’s heated often mean-spirited political theater.

Barack “Yogi Berra” Obama … laughs and home runs.
As I read Rich and Baker I thought of piece I wrote titled “Yogi Berra on Dent vs. Prechter.” November 2004, shortly after Bush’s reelection. Back then Yogi Berra’s wit and wisdom was very in a deeply-divided America, as stock market prices skyrocketed to the heavens, and casualties piled up in the Iraq War hell. Back then, as the bull market roared, Harry Dent was riding high predicting the Dow at 40,000 by 2009 (Now it is 2010 and he’s “predicting” a long-term “Great Depression.” Go figure). In contrast, back in 2004 Robert Prechter was one of the few early ones who saw the meltdown coming. He went to the other extreme, predicting Dow 400. Yes low, but his followers were better prepared than Dent’s back then, and may be in the future.

Here’s what one rather wise reader emailed to me, “Instead of reading Dent or Prechter, you should be reading Yogi Berra who said, ‘Forecasting is very difficult, especially when it involves the future’.” That got me thinking: What would a Barack “Yoga Berra” Obama say today about playing a bruising game against a baseball team made up of scorched-earth GOP critics and Dems pocketing big bucks from all kinds of special interest lobbies hell-bent on defeating every one of Obama’s big plans. His enemies smell blood, think Obama’s tired, already fading. Yes, they are writing his obituary. They’re convinced it’s the bottom of the ninth and they got him. Worse, they think they’re way ahead, even though they can’t see the scoreboard before the end of the game, let alone next Friday’s score or 2012’s.

You have to feel some compassion here: After 27 years in power, the hitters on the opposing GOP team lost not just a big game, but tickets to the “skyboxes” (part of the metaphor). So they’re hurting, still haven’t adjusted to life as the losing team, without all the perks and ego strokes from owning the series winning team, sitting high up in the skyboxes, lording over average ticket-holders far below. So now they’re in the bleachers. They hate it. Left with little to do other than act like angry teenagers, they endlessly plot self-destructive revenge plays. Like all politicians they’re myopic, conveniently forgetting the 27 painfully-long years it took them to get us into this mess, while refusing to take any responsibility, as they do everything possible to trick the new team into screwing things up so they can return to the skyboxes and go back to screwing things up their way.

Anyway, here’s what Barack “Yogi Berra” Obama might say to defuse the tension, turn things around and win the game, maybe, the pennant and the series, or at least give us a few chuckles along the way with these “Yogiisms” from the “Zennist Master of All:”

· Bi-partisanship: “If you come to a fork in the road, take it.”
· Healthcare passage: “Slump? I ain’t in no slump. I just ain’t hitting.”
· Wall Street reforms: “This is like deja vu all over again.”
· Dollar as reserve currency: “The nickel isn’t worth a dime today.”
· Obesity epidemic: “Cut the pizza in 4 pieces, I’m not hungry enough to eat 6.”
· Hiring staff behaviorists: “90% of this game is half mental.”
· Working with Congress: “impossible to get a conversation going; everybody was talking too much.”
· Air Force One: “Why buy good luggage? You only use it when you travel.”
· Subprime-Credit Meltdown: “We made too many wrong mistakes.”
· Dems voting against him: “90% of putts that are short don’t go in.”
· Reaganomics: “I knew that record would stand until it was broken.”
· Talks with Iran? “If the world were perfect, it wouldn’t be.”
· GOP negativity: “Other teams could make trouble for us if they win.”
· Biden: “He can run anytime he wants. I’m giving him the red light.”
· The agenda: “Be very careful if you don’t know where you’re going, you might not get there.”
· Campaign promises: “I didn’t really say everything I said.”
· Doomsday 2012. “The future ain’t what it used to be.”
· Teleprompters “If you ask me a question I don’t know, I’m not going to answer.”
· Where the buck stops: “I never blame myself when I’m not hitting. I just blame the bat, and if it keeps up, I change bats. After all, if I know it isn’t my fault that I’m not hitting, how can I get mad at myself?”

Want more? Read Berra’s What Time Is It? You Mean Now? And remember Yogi next time you’re worried where the Dow will end up in December. Can’t even predict it for this Friday. Or worried about the elections. Remember, writing about this stuff keeps pundits in business, even though most are usually wrong. But then, so are most economists, and Wall Street bankers, corporate CEOs, talking heads and politicians, so I guess that puts me in good company. As Yogi would say to wrap up his message to me: “It was a once-in-a-lifetime opportunity, and you’ve had a few of them.” Thanks Yogi Barry!

original: MarketWatch.com 6.30.09

The goals of “Avatar-2154:” Maximum security and wealth preservation for future generations of members from the elite of Wall Street, Washington, Corporate America CEOs, the Forbes-400. “Avatar-2154” secretly supports climate-change-deniers in think tanks, academic research and politicians who negate the impact of scientific facts. This effort is necessary when high-profile voices like Al Gore and Bill McKibben surface and new propaganda is required to attack their efforts stirring global climate initiatives.

For example, Bill McKibben, an environmental economist, recently published Eaarth: Making a Life on a Tough New Planet. Tough? Worse. Earth is dead. And McKibben’s vision for the new “Eaarth” we created is bleak. No upbeat high-tech hope for a “green revolution” as in Tom Friedman’s Hot, Flat & Crowded. Remember, two decades ago McKibben’s The End of Nature was one of the first books warning of global warming, climate change, a dying planet. His new “Eaarth” a funeral dirge. In Foreign Policy magazine last year, McKibben summarized his relentless message:

“Act now, we’re told, if we want to save the planet from a climate catastrophe. Trouble is, it might be too late. The science is settled, and the damage has already begun. The only question now is whether we will stop playing political games and embrace the few imperfect options we have left.” Stop the the political games? Never. Remember Kyoto and Copenhagen defeats? Recent coal mine disasters? The BP-Gulf oil catastrophe? And when the long-awaited 1,000-page Kerry-Leiberman Climate Bill finally surfaced last week, it was quickly blasted as “DOA,” a “gift to polluters.” Politicians love games.

In the end, “Eaarth itself will force us to bend to new rules”
The truth is, politicians will never stop in time. Consequently, “Avatar-2154” members need to be fully aware that “we have waited too long,” the planet really is dying, “Eaarth” is on an irreversible self-destruct path. Washington will not “stop playing political games.” They cannot: There are too many “special interests” fighting for their “fair” share of the federal government’s $1.7 trillion budget jackpot … too many stockholders in publicly-traded corporations demanding bull market returns and perpetual economic growth … and too many lobbyists who make enormous short-term payoffs by ignoring the long-term warnings of McKibben, Gore and others in the new “Green Revolution.”

After quoting a 2003 Pentagon report—“as the planet’s carrying capacity shrinks, an ancient pattern of desperate, all-out wars over food, water, and energy supplies would emerge”—McKibben offers three sane solutions: Cut carbon emissions, reduce our obsession with economic “growth,” and return to sustainable local farming. But while agreeing in his New York Times review, even advocate Paul Greenberg sees little chance of McKibben’s ideas changing opinions or reversing the destiny of “Eaarth:”

”In the absence of some overarching authority, a kind of ecologically minded Lenin,” McKibben’s solutions “will remain hipster lifestyle choices rather than global game changers.” But eventually, says Greenberg, “Eaarth itself will be that ecological Lenin, a harsh environmental dictator that will force us to bend to new rules.” Get it? If politicians won’t act till it’s too late, “Eaarth itself will be that ecological Lenin, a harsh environmental dictator that will force us to bend to new rules.” Yes, the “new rules” will be forced on self-interested politicians … forced on Wall Street’s bonus-obsessed CEOs and short-term high-frequency traders … forced on Main Street’s 95 million investors. An angry “Eaarth” will dictate harsh “new rules.” Everyone will be “forced to bend to the Eaarth’s new rules” imposed on us after the world’s exploding populations fight many tragic wars over ever-scarcer natural resources.

12 sectors: investment opportunities before the “Collapse of Eaarth”
Today “Eaarth” has 6.5 billion people. By 2050 the UN estimates growth to 9.1 billion. America’s 400 million will be competing for depleting resources. “They” already outnumber “us.” Odds are 22:1. Tough odds. Population growth is now the “mother of all bubbles,” more dangerous than global warming, poverty, even peak oil. Population growth will trigger multiple catastrophes beyond anything in world history. Here’s why.

Remember anthropologist Jared Diamond’s warning in Collapse: “One of the disturbing facts of history is that so many civilizations collapse.” Many “civilizations share a sharp curve of decline … a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.” Diamond’s 12-part endgame equation is very simple, fitting perfectly with the Pentagon’s global warfare scenario: “More people require more food, space, water, energy, and other resources.” But remember, of the 12 elements in this “Formula for Collapse,” population commands the two biggest triggers in the endgame. Data is from Diamond, McKibben and other sources:

1. Population Growth: “Third Rail” of politicians and economists. Scientific American calls population “the most overlooked and essential strategy for achieving long-term balance with the environment,” the new “third-rail” for politicians. So they ignore it. Warning: If all nations consumed resources at the same rate as America, the world’s 6.3 billion people would need 6 Earths to survive, now! Get it? The “American Dream” has become a self-destructive global circular-firing-squad nightmare.

2. Population impact and the new “American Dream.” Diamond warns: Optimists “argue that the world could support double its human population.” But they “consider only the increase in human numbers and not average increase in per-capita impact.” Developed countries “consume 32 times more resources … and put out 32 times more waste, than do the inhabitants of the Third World.” A race is on: “Low impact people are becoming high-impact people” aspiring “to First World living standards.” So check out Diamond’s 10 resources variables driving Diamond’s “Collapse of Eaarth and End of Civilization” equation … the final stage for humans, after McKibben’s local subsistence farming solution fails:

3. Peak Oil. Coal and gas next. Pimco’s Bill Gross sees a “significant break” in the world’s “growth pattern.” His new strategy looks beyond today’s “peak oil” tipping point: “Corporate profits will be static.” Consumer spending will decline. Economies will naturally grow slower. Foreign Policy Journal warns of the “7 Myths About Alternative Energy:” Biofuels, wind, solar and nuclear will never be enough. Never.

4. Food/Poverty Crisis. In “The End of Plenty” National Geographic warns that even this the new “green revolution” global poverty is increasing. The UN calls the global food crisis a “silent tsunami.” Prices rise making it worse for the 2.7 billion living in poverty on two bucks a day. A joint World Bank/UN study “concluded that the immense production increases brought about by science and technology the past 30 years have failed to improve food access for many of the world’s poor.” Failed.

5. Water wars. Diamond warns: “Water problems destroyed many earlier civilizations, and today “over a billion people lack access to reliable safe drinking water.” A British Minister predicts that by 2015 two-thirds of the world will live in water-stressed countries. Yes, increasingly resource wars will define human life on “Eaarth.”

6. Farmland erosion. Crop soils are “being carried away by water and wind erosion at rates between 10 to 40 times the rates of soil formation,” much higher in forests where soil-erosion rate is “between 500 and 10,000 times” replacement rate.

7. Forests destroyed: We are destroying natural habitats and rain forests at an alarming rate. Half the world’s original forests have been converted to urban developments. Another quarter will be converted in the next fifty years. Both China and India are planning 500 new cities. Plus, expect a new age of 100,000-acre mega-fires.

8. Chemical toxity. Industries “release into the air, soil, oceans, lakes, and rivers many toxic chemicals,” an endless flood of pesticides, insecticides, detergents, plastics.

9. Solar over-heating. Diamond warns we’re using “half of the Earth’s photosynthetic capacity,” will max-out by 2050. In “Plundering the Amazon,” Bloomberg warns that big firms like Alcoa and Cargill “have bypassed laws designed to prevent destruction of the world’s largest rain forest … robbing the earth of its best shield against global warming.”

10. Ozone layer lost. “Human activities produce gases that escape into the atmosphere,” destroying our protective ozone layer, along with thawing Artic methane.

11. Diversity disappearing. “Wild species, populations and genetic diversity has been lost” and “a large percent of the rest will disappear in half century” is a fight for survival

12. Alien species. Globalization has transferred many species to non-native lands with unintended consequences, “preying on, parasitizing, infecting or out-competing” natives.

Yes, we have many choices ahead, as Diamond says in Collapse: How Societies Choose to Fail or Succeed. These 12 triggers are interconnected, self-destructive and inevitable. And since human behavior and political games will never change soon enough, and since the efforts of dedicated environmentalists like McKibben and Gore will ultimately prove to be ineffectual stopgap measures that at best delay the inevitable, the conclusion is now obvious, the “Collapse of Eaarth” is guaranteed. That’s the core message for members of “Avatar-2154:” No one can save Eaarth or human civilization.

Therefore: “Avatar-2154” members can prepare for the endgame, protecting your family and heirs in two ways. Short-term: Keep amassing your fortune, investing in companies that take advantage of profit-making opportunities in Diamond’s 12 sectors, while enjoying the “good life,” living in the “Eternal Now,” as practiced by the great Taoist and Zen-masters. Long-term: Make sure you have an isolated, secure, self-sustaining farm where you and your loved ones can make peace with the Eaarth’s final destiny. Namaste.

Original MarketWatch: 5.18.10

Warning: The “Lake Wobegon effect” is the single best summary of today’s stock market psychology, high-frequency trading, behavioral economics theories, and the new science of irrationality … and it’s sucking the life out of America’s soul. Here, listen to more of these arrogant musings surfacing everywhere from deep in our collective brain:

· all Wall Street bankers are worth 100 times any Main Street investor.
· all Corporate American CEOs deserve to make 400 times their workers.
· all children of all Forbes 400 billionaires deserve to inherit tax-free.
· all lobbyists deserve millions when winning billions for special interests.
· all taxpayers should pay for catastrophic mistakes of Wall Street fat-cats.
· all super-rich hedge fund managers deserve to be taxed at capital gains rates.
· all senators deserve to become millionaire lobbyists when they retire.
· and Goldman Sachs CEO Lloyd Blankfein deserves a $100 million bonus.

Yes folks, this is America’s collective brain buzzing along at hyper-speed. This is the toxic irrationality driving America in the 21st Century … and it really is destroying our soul from within. Seriously, look outside the isolation bubble you live in. Ask why so many other American brains are on auto-pilot, guided by what Yale psychologist Dr Paul Bloom humorously calls the “Lake Wobegon effect” in his New York Times review of The Invisible Gorilla by psychologists Christopher Chabris and Daniel Simon: The Invisible Gorilla is “one of the most famous psychological demos ever. Subjects are shown a video, about a minute long, of two teams, one in white shirts, the other in black shirts, moving around and passing basketballs to one another. They are asked to count the number of aerial and bounce passes made by the team wearing white, a seemingly simple task.”

Stop. Test yourself before you read on. What does “The Invisible Gorilla” study tell you about the brains of folks gambling in Wall Street’s casinos? Where billions of shares, trillions of dollars, stocks, bonds, derivatives trade daily? What’s “invisible” to you? Stop again. Look closely: Not just in the brains of Main Street’s 95 million investors. We know we’re irrational and easily manipulated. But our leaders too? All our Wall Street CEOs, brokers, high-frequency traders … all our government bureaucrats, policy wonks, congressional committee heads … all our pension fund bosses, mortgage lenders, central banks policy makers … and all the other global players playing games with derivatives in the $670 trillion unregulated global shadow banking casino that’s avoiding real reform?

The investor’s brain is a very bad “computer”
Years ago America’s leading behavioral economist, Richard Thaler warned: “Think of the human brain as a personal computer with a very slow processor and a memory system that is small and unreliable … the PC I carry between my ears has more disk failures than I care to think about.” And it ages badly. Factor the “Lake Wobegon effect” and the “Invisible Gorilla” into your computer. What do they tell you about the impact of billions of irrational decisions made by all gamblers betting at Wall Street’s 24/7 global casino?

Here’s four irrational clues: Remember, (1) between 2000 and 2010 Wall Street lost 20% of your retirement playing the stock market … (2) Still Wall Street pocketed hundreds of billions for themselves … (3) Still those fat-cats off-loaded trillions of debt on taxpayers when in defacto bankruptcy in 2008 … and (4) yet our brains let them get away with it.

The conclusion are obvious: The average investor’s brain is so irrational it is totally inadequate as a tool in evaluating market trends, cycles and patterns, in picking stocks, and in judging the value of so-called expert advice we get from self-interested bankers, advisers and cable pundits … and yet, paradoxically, like alcoholics, coke addicts and gamblers, we cannot stop. Crazy but true. Listen as Dr. Bloom continues: “Halfway through the video, a woman wearing a full-body gorilla suit walks slowly to the middle of the screen, pounds her chest, and then walks out of the frame. If you are just watching the video, it’s the most obvious thing in the world. But when asked to count the passes, about half the people miss it.” (Translation: Same happens when you’re “counting passes” in the stock market, you “miss” not only the “obvious” but the secret stuff Wall Street’s “Invisible Gorillas” are purposely hiding.)

Only half? No, my friends, it’s far worse. In Bloom’s own studies “63 percent of Americans consider themselves more intelligent than the average American, a statistical impossibility. In a different survey, 70 percent of Canadians said they considered themselves smarter than the average Canadian.” But when it comes to financial markets, its closer to 100%, for both little “gamblers” and the big “casino owners.”

Wall Street’s “Invisible Gorillas” really are stealing America blind
Want more proof? Remember the studies by University of California behavioral finance professors, Odean and Barber: They researched the trading behavior of 65,000 American investors. Also all investors trading on the Taiwan Stock Exchange. Their conclusion: “The more you trade the less you earn.” 77% of Americans were losers. 82% of Chinese investors were losers. And still: Their brains are so irrational, so addicted, they can’t stop, just keep going back. Yes, investors are stuck with addictive “Loser Brains.” Even confronted with the facts investors continue in denial, victims of the “Lake Wobegon effect,” refusing to learn the lessons of the “Invisible Gorilla.” Bloom concludes: “When you direct your mental spotlight to the basketball passes, it leaves the rest of the world in darkness … Even when you are looking straight at the gorilla (and other experiments find that people who miss it often have their eyes fully on it) you frequently don’t see it, because it’s not what you’re looking for.”

Get it? Your brain is wired to make bad decisions. Wired to make them over and over. Wired to miss crucial data. And this has a cumulative and collective effect that drives markets to the edge of a precipice with such powerful momentum that we’re blinded by euphoria, never see the Invisible Gorilla, the Black Swan, the WMD … never see the risks until it’s too late, a catastrophe happens and the invisible becomes painfully visible, tragically blowing up in our faces. Sound familiar, it did happen in 2008 forcing former Fed Chairman Alan Greenspan to admit to a congressional committee: “I found a flaw … I made a mistake.” Actually Mr. Greenspan you were a miserable maestro. For 18 years the mistakes your irrational brain made blinded you to an invisible “Reaganomics Gorilla” what’s still destroying America.

Treasury Secretary Paulson was even worse. Later reluctantly admitted he should “have seen the sub-prime crisis coming earlier.” But it turns out he’s a liar and con man. Yes, later Bloomberg News reported Paulson not only saw the “Invisible Gorilla,” he warned Bush’s staff at Camp David in 2006, two years before the meltdown. But then the “Lake Wobegon effect” kicked in, our leaders all ignored the warnings until the 2008 crash.

Wall Street has no soul, is drowning America in ‘Lake Wobegon’
Yes folks, the “Lake Wobegon effect” and the “Invisible Gorilla” tell us all we need to know about behavioral economics in America today. The irrational brains of our leaders are so self-destructive they let bubbles blow and blow … they will always fail to act early enough … they are trapped in their greedy brains in denial … trapped in their narrow ideologies … trapped, making endless stupid decisions … ignoring the obvious … they will let risks become increasing more deadly till minor pops becomes collosal WMD-category meltdowns, crashes, collapses of epic catastrophic proportions, worse than the estimated $23.7 trillion aftermath of the 2008 meltdown … and another is dead ahead.

Yes, tragically many more are coming because Wall Street is morally dead, it has no conscience, no soul, no ethics, no moral values other than getting as rich as possible, as fast as possible. Tragically, Wall Street is now the “Invisible Hand” of “Capitalism 4.0.” Tragically, Wall Street’s believes the best economy is an unregulated free-market system where the collective greed of the biggest players best serves the public good.

Yes, tragically for future generations of Americans, the guidance system of capitalism’s “Invisible Hand” has been replaced by guiding hand of Wall Street: With no public conscience, no soul, no ethics, no moral values, nothing other than the addict’s obsession to get as rich as possible, fast as possible. And tragically, Main Street America is trapped with them in the “Lake Wobegon effect.” Tragically, the “Invisible Gorilla” will strike again, soon, and again, and again exploding into visibility … until our rude awakening.

original: MarketWatch 6.22.10

The “Goldman Conspiracy” is the perfect B-School case study of Wall Street’s secret contagious pathology, with insiders like Blankfein, Paulson and others pocketing billions more of the firm’s profits than shareholders, evidence the new “mutant capitalism” has replaced Adam Smith’s 1776 version which historically endowed the soul of American democracy as well as our capitalistic system. But sadly for America, Goldman’s disease is rapidly becoming a pandemic spreading beyond Wall Street’s “too-greedy-to-fail” banks, infecting our economy, markets and government, as it metastasizes globally.

What are the symptoms of this growing “soul-sickness,” this “pathological mutation of capitalism” Bogle fears? Recently we reviewed the consequences of this “soul-sickness.” Today we’ll edit and paraphrase news reports about fifteen symptoms spreading “soul-sickness” beyond the boundaries of this Goldman case study: These are the 15 signs of a moral pathology undermining not just banking, but American democracy and capitalism.

1. Gross denial of any moral damage caused by their rampant greed
Seeking Alpha: ‘Goldman is America’s most hated corporation. We cheer as Rolling Stone’s Matt Taibbi calls Goldman “a giant vampire squid wrapped around the face of humanity.” Banks triggered a global crisis. Main Street suffers. Greedy bank CEOs raid the Treasury then stuff $30 billion in their bonus pockets, up 60% from last year.’ They are our 21st century General Motors, convinced ‘What’s good for Goldman is good for America.’ We saw how that arrogance ended. Wall Street has similar suicidal symptoms.

2. Narcissistic egomaniacs with secret “God complexes”
London Times’ John Arlidge interviewed Goldman CEO Blankfein: ‘He paid himself $68m in 2007, now worth more than $500 million, yet insists he’s a blue-collar guy. He says banking has a ‘social purpose,’ just a banker ‘doing God’s work’.’ When I was at Morgan Stanley in the seventies the firm ran an ad: “If God Wanted To Do a Financing, He Would Call Morgan Stanley.” Today, all of Wall Street is dual diagnosed: They’re morally blind money addicts who believe they’re “God’s chosen.” AA would say: They haven’t “bottomed,” won’t recover from their disease till a disaster hits, with another market meltdown and the “Great Depression 2.” Then maybe they’ll “quit playing God.”

3. Paranoid obsessives about secrecy, guilt and non-disclosure
Bloomberg: “New York Fed’s Secret Deal: Taxpayers paid $13 billion more than necessary when government officials, acting in secret, made deals with banks on AIG, buying $62 billion of credit-default swaps from AIG. The government would eventually cover about $180 billion in AIG swaps backing toxic CDOs when Paulson and Bernanke double-teamed to bailout Goldman, saving them from bankruptcy.

4. Power-hungry need to control government using “Trojan Horses”
Wall Street Journal: ‘For a year Goldman said it wouldn’t have suffered damage if AIG collapsed. But a new report throws kills that claim. TARP inspector general found that then New York Fed Chair Geithner gave away the farm. If AIG had collapsed, Goldman would have had to cover the losses itself. They couldn’t collect on the protection of AIG swaps.’ Yes, Goldman was bankrupt. But ‘friends in high places’ always save them.

5. Borderline personalities who regularly ignore “conflicts of interest”
New York Times: ‘Before becoming Treasury secretary in 2006, Hank Paulson agreed to hold himself to a higher ethical standard than his predecessors. He specifically said he’d avoid his old buddies at Goldman where he was CEO. Later Congress saw many conflicts of interest, not just meetings but favorable treatment for his buddies at Goldman.’

6. Pathological liars incapable of honesty even with own investors
McClatchy News: “Goldman secretly bet on the U.S. housing crash after peddling more than $40 billion securities backed by 200,000 risky home mortgages. But they never told their investors they were also secretly betting that a drop in housing prices could wipe out the value of those securities.’ Paulson knew, stayed silent. ‘Only later their investors discover Goldman’s triple-A investments were junk. Did Goldman’s failure to disclose its bets on an imminent housing crash violated securities laws?’ BU Professor Kotlikoff says: This is fraud, should be prosecuted.’ But won’t in the new “mutant capitalism.”

Members of AA know when an alcoholic is lying: Their lips are moving! Same with Wall Street: Think Liar’s Poker. It’s in their DNA. They’re compulsive liars trapped in a culture of secrecy. They lie, the lies cascade, memory slips, more lies are necessary, they cannot stop lying. Goldman sure can’t … look, their lips are moving again.

7. Sole fiduciary duty to insiders, not investors, never the public
NY Examiner: ‘Goldman was at the heart of the sub-prime market, selling sub-prime junk as no-risk AAA bonds, then gambling, hedging, shorting their investors. Goldman traded like Enron. That set up the meltdown. The Fed and Goldman’s ex-CEO at Treasury saved Goldman. Taxpayers got stuck with the bill. McClatchy’s Gordon uncovered Moody’s making billions selling triple-A ratings. Bailout overseer Elizabeth Warren called this reckless gambling. Trend forecaster Gerald Celente calls it mafia-style looting.’

8. Moral issues are PR glitches, violations of “don’t get caught” rule
USAToday says ‘Goldman Sachs should be celebrating. Yet, the mood at the investment bank seems to be one of crisis about the public backlash over employees’ bonuses. So Goldman’s on a PR blitz in a bid to undo the damage. They canceled their Christmas party. Also launched a $500 million program for small businesses. Get it? They can’t see their moral failings, only a PR problem, so they hire PR agents and crisis managers first.

9. Charitable donations are tax and PR opportunities, not moral issues
New York Times: Examined Goldman charitable foundation’s tax filing: ‘Thick as a phone book with more than 200 pages of trades. ‘Never seen anything like it,” said Verne Sedlacek, president of Commonfund, a $25 billion fund for universities and nonprofits. The money to Goldman’s foundation is dwarfed by insiders’ bonuses. The foundation got $400 million, gave away $22 million.’ Bonuses were 20 times more. Even the New York Post said ‘Goldman’s Born Again Image is Laughable.” They’re sleaze-ball cheapskates.

10. When exposed in a massive fraud, feign humility, fake an apology
CBS MoneyWatch: ‘Blankfein says he’s “sorry for the role Goldman played in the housing crisis: We participated in things that were clearly wrong.” “Wrong?” Sounds more like he’s admitting to something “clearly criminal.” Reread: Isn’t he admitting guilt to a fraud; cheating millions of homeowners, shareholders, taxpayers? Then laughs at us with phony “restitution,” a fund of $100 million annually for five years to small business owners.’ Financial Times says ‘$100 million is the profits from one good trading day. In 3Q’09 they had 36 days better than that.’ Unfortunately, these crooks will get away it.

11. When bankruptcy threatens, bribe friends in “Happy Conspiracy”
Barron’s: While Geithner was ‘showcasing what a great investment Washington made in Goldman the 23% return on the $5 billion of the taxpayers money. Buffett’s deal made him a fabulous 120% return. Goldman’s stock ran up to $180 from $115, a gain of $2.8 billion. Add 8% discount on warrants, another $3.2 billion to him.”

12. Engage co-conspirators to cover-up, distract, do your dirty work
Reuters: ‘Former Merrill Lynch CEO John Thain was fired after a scandal over the billions Merrill bonuses. He says big insider bonuses don’t cause excessive risk-taking nor the financial crisis.’ He blames ‘poor risk management, excessive leverage and too much liquidity for too long. But even if they tie bonuses to long-term performance, that won’t prevent the next collapse.’ Why? They’ll find new ways to break the moral code.

13. As money-hungry vultures, they will prey on vulnerable Americans
McClatchy News: ‘An obscure Goldman subsidiary spent years buying hundreds of thousands of subprime mortgages, many from the more unsavory lenders. They repackaged them as high-yield bonds. The bottom fell out. Now, after years of refusing to disclose they owned the mortgages, the secret is out and Goldman has become one of America’s biggest, greediest foreclosers.’ Yes, the vampire squid wants pounds-of-flesh.

14. Treat everyone not in the “Happy Conspiracy” with “tough love”
HuffPost’s Leo Leopold warns: ‘Each day reveals how we’ve traded away our sense of decency and the common good in exchange for pure greed. Unemployment means hunger. The Agriculture Department reports 49 million Americans don’t have enough food, up 13 million over the last year, highest number ever.’ Wall Street treats anyone not in the “Happy Conspiracy” as morally-defective capitalists in need of “tough love.”

15. Addicts blinded by greed: “Jesus would throw them out …”
New York Times’ Maureen Dowd: “Goldman’s trickle-down catechism isn’t working. We have two economies. In the past decade Wall Street’s shared little with society. Their culture is totally money-obsessed. There’s always room for a bigger house, bigger boat. If not, you’re falling behind. It’s an addiction. And Washington’s done little to quell it. Geithner coddles wanton bankers. Obama’s absent. Saturday Night Live was tougher. And as far as doing God’s work: The bankers who took taxpayer money, pocketing obscene bonuses: They’re the same greedy moneylenders Jesus threw out of the temple.” Pray for the second coming?

Question. Warning: Washington, Main Street, none of us has “clean hands.” We’re all in bed with the “Happy Conspiracy,” touched by greed, turning a blind eye to Wall Street’s rapidly metasticizing moral and spiritual pathology: So ask yourself, do you believe America’s widespread “lack of a moral compass” will eventually trigger another, bigger market and economic meltdown, pushing America into the next “Great Depression II?”

original MarketWatch 11’09

One: Predicted the 2000 crash: My forecasting track record speaks for itself. Back on March 20, 2000, my column headline read: “Next crash? Sorry, you’ll never hear it coming.” Bingo: The dot-com bubble popped at 11,722. The economy collapsed. A 30-month recession. Markets lost $8 trillion cap. Today the market is still below that 2000 peak. Factor in inflation and Wall Street’s “too-greedy-too-fail” banks have lost about 30% of your retirement nesteggs in this decade. Incompetent? Clueless? No, Wall Street is a bunch of crooks without consciences.

Two: Predicted the 2008 meltdown: Since 2000 my columns covered many warnings of major debt accumulations, market meltdowns, and the psychological failings of Wall Street’s greedy, myopic brains. In June 2008, months before Wall Street’s meltdown, we reported on twenty predictions made between 2000 and 2007, twenty warnings of a subprime meltdown coming. Oddly, no one seemed to be listening to all the warnings of leading minds like Buffett, Grantham, Gross, Faber, Shilling, Roubini, Levitt, Fed govenors, and many more. I wondered, was this a repeat of 2000 with “no one listening?” Then … suddenly it hit me: Not “nobody.” Just the opposite: Everyone was listening, everybody knew a crash was coming. Yes, everyone. But we were in a trance. Including Washington’s bosses; Bernanke, Bush, Paulson, Greenspan. They all heard it coming. They knew. So did Wall Street. And Main Street.

Three: Predicting the new 2012 collapse … and everyone hears this one too!

Unfortunately America’s collective brain is addicted to the adrenaline rush of gambling in a risky bull. The euphoria’s intoxicating. You’re caught up in a game of musical chairs, squeezing out every last dollar of return, blind to the catastrophe ahead … until it catches you by surprise … unfortunately, Wall Street lacked a moral compass and started stealing trillions from American taxpayers … today, the only lesson Wall Street learned is “greed is good” … now, the beginning of the end has become a moral tragedy that is setting the stage for a implosion of Wall Street, of capitalism and our economy ca. 2012.

Yes, another meltdown’s coming, it’s inevitable. So this time, I’ve decided to do more periodic updates, a watchlist of alerts, warnings and predictions. Like all the updates done the prior  decade, except this cycle, we’re now more aware that few in power will listen, not Wall Street, not Washington, not Corporate America. But you must. Here are some headlines that tell a fascinating story by themselves, an editted montage blast from 28 experts warning of a disaster dead ahead for Wall Street, America and the world. Read fast, “feel” the power of this prediction:

Financial Times … “Second Great Depression … Still Possible.”
The economy’s “spiral is captured in a Titanic metaphor … unsinkable.”

BusinessWeek … “Next bubble could come sooner than you think.”
From Reinhart and Rogoff, “This Time is Different.” But, it never is.

Bloomberg … Citi’s ‘Near Death’ Hoard Signals Lower Profits.
Citi hoarding $244 billion in cash, ‘as if another crisis were on way.’

Wall Street Journal … “Three Decades of Subsidized Risk”
Gasparino’s “The Sellout:” Greed, mismanagement killed financial system.

SeekingAlpha … ‘Crisis Lessons Forgotten in New Speculation.’
We prop up ‘trash stocks’ Fannie Mae, Freddie Mac, AIG; learned nothing.

USAToday … “Wall Street Bailouts … Business As Usual”
Warning: ‘Too Big to Fail’ protections guarantee another crash down the road.

Boston Globe… ‘Why Capitalism fails … why it will happen again.” ‘
Economist says American capitalism “contains seeds of own destruction.”

MarketWatch … “Einhorn bets on major currency ‘death spiral’.”
Hedger bet against Lehman. Now against dollar. Says ‘break up too-big-to-fail’ banks.

Forbes … ‘Be Prepared for Worst … repeating Great Depression’
Expect “GD2” says Congressman Ron Paul, author, The Revolution, End The Fed

New Republic … ‘Next Financial Crisis coming; we made it worse.”
Former IMF economist: ‘Bernanke’s soft landing, sowing seeds of next crisis.’

Wall Street Journal … “The Economy is Still at the Brink.”
Moral hazard: No CEOs of failed banks indicted … even paid millions.

BusinessWeek … “What Happens if the Dollar Crashes?”
Trade wars break out, banks collapse. Why, cheap dollars are killing us.

Pimco Investment Outlook … “On the ‘Course’ to a New Normal”
Gross’ ‘New Normal:’ spending, stocks down, savings up, banks riskier.

Economix, New York Times … “Finance Gone Wild”
Simon Johnson: Wall Street’s “pathological” power over Washington.

Vanity Fair … “Wall Street Lays Another Egg.”
Ferguson: ‘Math models ignored history, human nature,’ failed, repeating.

Clusterstock … Warning … “10 Bubbles in the Making”
Fed’s toxic debt; Gold; emerging markets: ETFs; China; securitization; more!

Rolling Stone … “The Great American Bubble Machine”
Taibbi: Goldman’s a giant vampire stealing trillions with ‘gangster economics’

Temasak Hedge … Roubini predicts bubble, hates equities …
Economist sees “bigger bubble than before” as Fed’s wastes taxpayer trillions

CNN/HuffPost … ‘Wall Street Made Mess, Big Bucks on Clean-up’
Michael Lewis says ‘they’re too powerful … we’re in for day of reckoning.’

Vanity Fair … ‘Wall Street’s Toxic Message: Capitalism Failed’
Stiglitz: Wall Street writes self-serving rules, puts global economy at risk.

MarketWatch … “Wasting our chance to fix the banking system“
America’s got a “banking system that’s just a ticking time bomb.”

MotherJones … “Could Cap’n’Trade Cause New Meltdown?”
Yes, and Goldman sees huge profits if this $1 trillion market is created.

Fortune … “We Owe What? The Next Crisis; America’s Debt”
Yes, “chronic deficits are putting America on the path to fiscal collapse”

Time … “America & Its Deficits: Are We Broke Yet?”
Justin Fox, author, Myth of the Rational Market: “We’ll soon find out.”

HuffPost.com … ‘Main Street Jobs? First Kill Wall Street Jobs’
“Looting of America” author: Wall Street got rich destroying Main Street.

The Nation … “Creative Destruction on Wall Street”
Greiner: They treats problem as ‘psychological,’ solved by ‘happy talk.”

Kiplinger’s … New Black Swan Triggers Next Financial Crisis
Money manager Bob Rodriquez: “Next bubble already growing.”

The Atlantic … “Why Wall Street Always Blows It”
Blodget learned hisa lesson, but Street CEOs still clueless, no lessons learned.

Tell us: Do you believe a new crash will hit about 2012? Will it trigger the “Great Depression II?” WWIII? And how big a factor is Wall Street’s greed and lack of morals the cause?

Worse, we’re back in a new recession. But Washington politicians are smothering in with happy-talk, feeding us doctored feel-good statistics as legendary political historian Kevin Phillips wrote in “Numbers Racket: Why the Economy is Worse Than We Know.” So we blindly refuse to bite-the-bullet and stop our out-of-control spiral into collapse. America needs a big wake-up call … and it’s coming soon, whether you like it or not!

In November 2007 we posted “17 reasons America needs a recession.” Today it’s far worse, and getting worser: Most economists noe predict it’ll take till till after 2011 to burn off the excess housing inventory and foreclosure. RGE Monitor say Fannie and Freddie bailouts aren’t working, they’ll soon be “profoundly insolvent,” need to be “nationalized.” Yet here it is three years later and they’re still kiccking that can downhill.

Lessons learned? Zero. Why? Wall Street, Washington and Corporate America are a one-trick pony with one narrow-minded strategy: Economic g-r-o-w-t-h, bull markets, mega-bonuses. In good times they tout “free markets.” But when greed bombs, these big babies throw free market “principles” under the “Reagan Revolution” bus as their lobbyists go whining to Congress for mega-billion taxpayer bail-outs and access at the Fed casino’s discount window to siphon off more taxpayer money. What hypocritical wimps!

Wall Street and its co-conspirators are doing such a miserable job, America needs a new strategy: Stop all the short-term “hole-plugging.” Let go and let an old-fashioned “Good Depression” do the job that our happy-talking leaders refuse to do. Let it clean house and reawaken America to basic values. Otherwise a “Good Depression” will turn into a new “Great Depression.” Here are seven strong reasons favoring this alternative strategy:

One: Yes, an honest diagnosis, “soul-sickness” in American Capitalism
America’s problems are not the economy, not markets, nor even politics. The endless bickering campaign is distracting us from facing our real long-term problems. Yes, our economic pains are real, but they’re just symptoms. Since 2000 America has seen had a relentless, sickening overdose of bad news: stupidity, deceit, corruption and even evil behavior. Americans are n-u-m-b, suffering Post-Traumatic Shock Syndrome. The real problem is our thinking, our brains, minds, something deep in our cosmic soul says Jack Bogle’s The Battle for the Soul of Capitalism. We lost our values, our moral compass.

Two. Yes, time to admit this already like the 1930’s “Great Depression”
Comparing today with the Great Depression has become common sport. In a Newsweek special “Seeing Shades of the 1930s,” Daniel Gross writes: 75 years ago “Wall Street, after two terms of a business-friendly Republican president, self-immolated on a pyre of greed, incompetence and excessive optimism.” Like Dr. Scott Peck says in The Road Less Traveled: “Life is a series of problems. Do we want to moan about them or solve them?” We need to grow up, stop whining, roll our sleeves up, solve real problems.

Three. Yes, “good” depression reveals self-destruct “bubble-thinking”
In a recent Atlantic article Irrational Exuberance author Robert Shiller warns: “Bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they’re going to keep forming.” Housing inflated 85% in a decade: “Historically unprecedented … no rational basis for it.” Today there’s a huge excess housing inventory, higher-credit mortgages are now in jeopardy, the write-offs are now projected at $2 trillion, on top of a $3 trillion war, $10 trillion federal budget, and more.

Bubble thinking is contagious, will trigger a pandemic. Shiller says “few people seem immune to boom thinking. The recent bubble grew so large partly because the very people responsible for the financial system’s oversight came to share the general public’s rosy expectations.” Unfortunately our leaders are still ignoring the underlying problem: Nothing is being done about “our psychological vulnerability to bubble thinking.”

Shiller then warns of a new mega-meltdown: “We recently lived through two epidemics of excessive financial optimism. I believe we are close to a third episode, only this one will spread irrational pessimism and distrust—not exuberance … our economic problems will become much worse than they need to be, and our social problems will multiply.”

Four: Yes, a “good” depression will stir outrage, force real reforms
In the 2008 Journal, Jim Grant, respected editor of the Interest Rate Observer, framed his title as a question: “Why No Outrage?” Why? He notes: “Through history, outrageous financial behavior has been met with outrage. But today Wall Street’s damaging recklessness has been met with near-silence, from a too tolerant populace.” Tolerant? No, n-u-m-b! “Human progress seems to be the likeliest culprit.” Fear-driven, we prefer the devil we know to a new one. Yet while “Wall Street may be sweating to fill out this year’s bonus pool,” Grant worries that Wall Street will run “itself and the rest of the American financial system right over a cliff.” A “good” depression brings outrage.

Five. Yes, “good” depression forces Wall Street to “think-outside-box”
In a great Bloomberg Markets feature, “No Easy Fix,” we’re told Wall Street’s “profit formula has hit a wall … Wall Street’s money-making machine is broken and efforts to repair it after the biggest losses in history are likely to undermine profits for years to come.” Merrill Lynch is a good example: They’re selling 615 million new shares, a 38% dilution, while hanging on to “$30.6 billion in crummy derivatives,” says Dennis Berman in The Journal. Merrill’s stock’s about half the 2004 price of $55. Merrill “needs to come up with $2.8 billion in new profit, not sales, to get back to its 2004 per share earnings levels. That’s $43,000 in new profit for each of Merrill’s 65,000 employees.”

Unfortunately, Merrill’s cashcows (off-balance sheet gimmicks, derivatives, repackaged asset-backed securitization) that made mega-bucks the past decade “have largely disappeared. That puts the burden on Merrill’s old-line businesses, brokerage, asset management and investment banking.” Solutions? Cut costs, steal market share or “gradually start to take on more risk on Merrill’s trading desks, which produced the bulk of the $30 billion in losses the past 12 months.”

Warning: Expect more desperate, hi-risk and stupid moves: A new BusinessWeek report says Wall Street’s already lobbying Congress to raid America’s $2.3 trillion “pension honey pot.” Warning: These are the same greed-in-good Gekkos that brought us the last two rapid-fire meltdowns. Stop them before they turn the next into a “Great Depression.”

Six. Yes, a “good depression” can prevent America’s “decline and fall”
In The Price of Liberty: Paying for America’s Wars, Robert Hormats, Goldman Sachs Int’l Vice Chairman, traces America’s wartime financing from the Revolutionary War to present wars. Today we’re “relying on faith over experience, hoping that sustained growth will erase deficits and that the ballooning costs of Social Security, Medicare and Medicaid will be manageable in the coming decades without difficult reforms.”

Former U.S. Comptroller General, David Walker put it in more omenous terms: “There are striking similarities between America’s current situation and that of another great power from the past: Rome.” They fell for three reasons “worth remembering: declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government.”

And Pulitzer-prize winning geographer Jared Diamond takes an even broader historical view in Collapse: How Societies Choose to Succeed or Fail: Many “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.” He draws historical parallels with America in the past decade. Warning: Wall Street’s next meltdown won’t be a mere statistical recession. Our monetary system, our financial system and our tax base are burning out. Like our over-extended military, we are handicapped in our ability to face new threats, much as were Rome, the Mayans and other great civilizations.

Seven. Yes, a “good” depression will shock America’s “warring” soul
The President said he’s a “war president.” The American economy is a war economy driven by our warring soul. We spend 54% of the tax dollar on war, 47% of the world’s total military spending. A half century ago President Eisenhower warned of this “military industrial complex” that’s running America into bankruptcy. Today, our economy thrives on war and disasters, generating such “spectacular profits that many people around the world” are convinced America’s “rich and powerful must be deliberately causing catastrophes so that they can exploit them” says Naomi Klein in Shock Doctrine.

Klien’s snapshot of Wall Street’s soul is disturbing: “An economic system that requires constant growth, while bucking almost all serious attempts at environmental regulation, generates a steady stream of disasters all on its own, whether military, economical or financial. The appetite for easy, short profits, offered by purely speculative investment has turned the stock, currency and real estate markets into crisis-creation machines” Pray for a “Good Depression” … before they trigger a “Great Depression.”

original in MarketWatch: Aug.11’08

Worse, Obama’s giving ol’ Capt Ben a second chance to pilot into new icebergs dead ahead. The Economist calls them “Asset Bubbles.” Problem? Capt Ben can’t see through his ideological Greenspan/Reaganomics goggles, clouded by his obsessive allegiance to Wall Street’s “Fat Cat Bankers.” Nothing new: He failed to see warnings of “icebergs” back in 2007. Yes, and he’ll miss any new icebergs, sink the global economy, and plunge the world into the eerie depths of the “Great Depression 2.”

When the Senate reconfirmed Capt Ben, it became Obama’s “biggest domestic policy blunder.” And he made matters worse when he failed to push the “Volcker Rule,” a defacto revival of Glass-Steagall separating commercial banking from the “Fat Cats” high-risk gambling with derivatives trading and investment banking.

Greed & “fat-cat” bonuses

Wall Street lawyers, lobbyists and traders love their mega-bonuses. So they’d get around any new “rules” fast. “Fat Cats” really don’t need any new Supreme Court cases (like that one allowing disasterous unrestricted political donations) to “buy” votes in the Senate. Glass-Steagall or not, the “Fat Cats” will just double up on their tools for lying, cheating, stealing and manipulating Main Street’s 95 million investors. So assuming we’re stuck with this weird new version of “Captain Queeg.” And it’s only a matter of time before Capt Ben runs “Titanic-2” into a battleship, a new iceberg, or another unseen black swan.

Hollywood remake of Titanic? Yes, a great idea. Got it from Jeremy Grantham, founder of the $100 billion GMO money managers. He’s got a track record: In 2007 he saw the icebergs in “The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it’s bubble time. … The bursting of the bubble will be across all countries and all assets … no similar global event has occurred before.” He sees again.

Unpredictable? No, Capt Ben’s “Titanic” is a very predictable “black swan”
This Titanic sequel was exactly what Grantham had in mind a couple months ago in his letter to investors: “Lessons Not Learned: On Redesigning Our Current Financial System.” Listen to his thriller plot: “Imagine the company representatives on the Titanic II design committee repeatedly pointing out that the Titanic I tragedy was a black swan event: utterly unpredictable and completely, emphatically, not caused by any failures of the ship’s construction, of the company’s policy, or of the captain’s competence. ‘No one could have seen this coming,’ would have been their constant refrain’.”

Sound familiar? You bet. Capt Ben’s “Titanic II design committee” would also include his ol’ buddies, Greenspan, Paulson, Summers and Geithner. “Their response would have been to spend their time pushing for more and improved lifeboats,” says Grantham. However, “by working to mitigate the pain of the next catastrophe, we allow ourselves to downplay the real causes of the disaster and thereby invite another one.”

Grantham’s not hopeful, but his dialogue rivals the best of James Cameron’s Avatar and Paul Volcker’s Glass-Steagall speeches: “After a crisis … begin with an open and frank admission of failure. The Titanic, for example, was just too big and therefore too complicated for the affordable technology of its day. Given White Star Line’s unwillingness to spend, she was under-designed” so “the passengers bore the risk of unnecessary speed and overconfidence in ‘too big to sink,’ while the captain stood to be rewarded for breaking the speed record.” And thanks to Capt Ben, that describes why “Fat Cat Bankers” like Lloyd Blankfein made $410 million the past three years during the meltdown, why his Goldman Sachs staff got average $500,000 bonuses last year, and why one of six Americans are unemployed. Why? ‘Cause ol’ Capt Ben’s a lousy pilot, guided by a suicidal ideological compass.

So, we already see four huge plot points dead ahead for this new “Titanic II,” at least four huge “icebergs” still out there lingering from the last disaster he created to protect the “Fat Cat Bankers” using the discredited Greenspan “cheap money” ideology that piled $23.7 trillion debt on taxpayers. This is all so familiar. Reminds me of my old days at Morgan Stanley’s Real Estate Investment Banking Group working with big banks in trouble during the seventies recession. Just keeps repeating. Here, look at the four mega-icebergs flashing: “Crash! Dead ahead!”

First iceberg: “Global Assets Bubble Warning”
From The Economist: “Bubble Warning: Why Assets are Overvalued … Markets are too dependent on unsustainable government stimulus. Something’s got to give … The effect of free money is remarkable. A year ago investors were panicking and there was talk of another Depression. Now the MSCI world index of global share prices is more than 70% higher than its low in March 2009. That’s largely thanks to interest rates of 1% or less in America, Japan, Britain and the euro zone, which have persuaded investors to take their money out of cash and to buy risky assets … cheap money is driving up asset prices.”

Sounds as ominous as The Economist’s warning back in June 2005, two years before the last meltdown: “The worldwide rise in house prices is the biggest bubble in history. … Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000.” Values increased 75% worldwide in five short years. “Never before have real house prices risen so fast, for so long, in so many countries … This is the biggest bubble in history.” And Capt Ben is just using Greenspan’s discredited strategy.

Worse yet, at a recent conference in Shanghai, St. Louis Fed President James Bullard said America’s interest rates will likely remain low for “quite some time.” Yes, he loves blowing and busting bubbles. Unfortunately, with that outdated ideological mindset protecting the Fed’s “Fat Cat” members, we’ll see a rapid buildup of “Asset Bubbles” across the globe, just as The Economist is warning. We can even predict that Capt Ben will again ignore warning signs and push us blindly ahead into his fog.

Second iceberg: “Gulf Oil Real Estate Bubble Collapse”
In “Burj Dubai: A Temple to Hubris,” an LA Times critic wrote a brilliant critique of the total bankruptcy of the newest tallest building in the world, sitting in a desert metropolis: ”Burj Dubai’s real symbolic importance: It is mostly empty, and is likely to stay that way for the foreseeable future. Though most of its 900 apartments have been sold, nearly all were bought three years ago—near the top of the market—and primarily as investments, not as places to live. … And there’s virtually no demand in Dubai at the moment for office space, of which the Burj Dubai has 37 floors.”

The Dubai Tower “is a powerful, iconic presence in ways … the latest, and biggest, in this string of monuments to … easy credit, during the boom years and the sudden paralysis of the financial markets in the fall of 2008 have created an unprecedented supply of unwanted or under-occupied real estate around the world,” dead monuments to “the broader notion … that growth can operate as its own economic engine, feeding endlessly and ravenously on itself … the tombstone—for some ruined ideas.”

Third iceberg: “China’s Overheated Real Estate Bubble”
Worse, read “Mania on the Mainland: Think the U.S. real estate bubble was bad? China’s could be worse” in Bloomberg/BusinessWeek. China’s “real estate rush is fueling fears of a bubble that could burst later in 2010, devastating homeowners, banks, developers, stock markets, and local governments.” Then China’s “economic growth will stop, warns Yi Xianrong, a researcher at the Chinese Academy of Social Sciences’ Finance Research Center.” Premier Jiabao even told the Xinhua news agency that “property prices have risen too quickly,” pledging “a crackdown on speculators.”

Fourth iceberg: Commercial Real Estate, a Ticking Time-Bomb
But worst of all, here at home we read in yet another Bloomberg/BusinessWeek article, “Why This Real Estate Bust Is Different,” that “unrealistic assumptions, layers of investors, sky-high prices, and possible fraud will make it hard to clean up the mess in commercial real estate.” Yes, there’s another homegrown mess far bigger than America’s residential real estate. Imagine, a $1.7 trillion ticking time-bomb sitting on our bankers’ books, equal to “roughly 25% of the assets of the average institution.” A very big iceberg.

What happened? “Overbuilding isn’t the culprit in this bust. An oversupply of money is what pushed commercial real estate over the edge. It turns out the same excesses that drove the housing market’s crazy rise and fall were present in commercial real estate, too—but they have largely gone unnoticed until now. Bankers, in their haste to make more and bigger loans, blindly accepted borrowers’ wildest growth assumptions and readily overlooked other shortcomings on loan applications” to “easily sell their dubious loans to investors in the form of commercial mortgage-backed securities”

Bottom line: How to avoid sinking the USS Titanic-2? A Capt Ben mutiny!
Ben can’t be trusted. What’ll Capt Ben do if he’s still around piloting the good ship “Titanic-2?” He’ll hit more icebergs, or battleships, or black swans. Can’t help himself, it’s in his ideological DNA. Then he’ll blame others, while secretly bailing out his Wall Street banker buddies, piling on trillions more debt, doing it with his usual arrogance, no transparancy and no accountability. Yes folks, as long as Capt Ben remains at the helm, you can bet our unaudited Fed will secretly ease the banks pain (again) shifting trillions more to taxpayers, the “suckers-of-last-resort.” Yes, it’s time for a “Capt Ben Mutiny!”

original post MarketWatch: 1.26.10

Public Enemies

Dillinger must be the guy former SEC chairman, Arthur Levitt had in mind when he told Fortune: “America’s investors have been ripped off as massively as a bank being held up by a guy with a gun and a mask.” That was the last recession. Today, it’s a helluva lot worse in the “Great Recession:” Bad banks, financial WMDs, AK-47 derivatives. Yes, this time the banks are the gangsters. They’re robbing Main Street’s Treasury. And it’s an inside job. Hank Paulson, the “Goldman Conspiracy’s” Trojan Horse plays a “Dillinger,” leading a much bigger conspiracy, the “Happy Conspiracy,” that robbed America’s 300 million citizens and taxpayers. They made off with trillions, while our “guards,” a clueless Congress, laid down their guns and surrenders the keys to the vault.

The “Happy Conspiracy?” Yes, that’s what Vanguard founder Jack Bogle calls Wall Street in his bestseller, The Battle for the Soul of Capitalism. He sees Wall Street as a “pathological mutation” of capitalism. Adam Smith’s “invisible hand” no longer drives “capitalism in a healthy, positive direction.” Instead, Bogle sees the invisible hands of this elite “Happy Conspiracy” running capitalism to serve its own selfish, greedy agenda:

“Over the past century, a gradual move from owners’ capitalism—providing the lion’s share of the rewards of investment to those who put up the money and risk their own capital—has culminated in an extreme version of managers’ capitalism—providing vastly disproportionate rewards to those whom we have trusted to manage our enterprises in the interest of their owners.”

Today, the “Goldman Conspiracy” is the visible hand of Bogle’s invisible “Happy Conspiracy” that’s “ripping us off as massively as a bank being held up by a guy with a gun and a mask.” Except today: No masks, no guns. Congress just writes blank checks. The plot’s so hot we read all 1,243 comments, emails and links to related websites, such as goldmansachs666.com. What emerged has the makings of what may be the next mega-successful long-running television series. Here are some possible episodes and plot points for the first season:

Episode 1. “Goldman Conspiracy” as the new Mafia Godfather
Readers are mad as hell: One simply passed on “the inscription on the very first page of Mario Puzo’s The Godfather: ‘Behind every great fortune, is a great crime.’” So who’ll play the new Godfather? How about Michael Chiklis, the corrupt cop in The Shield?

Episode 2. “Goldman Conspiracy” hires Barney Frank guy as lobbyist
Great drama, like The Sopranos? Reader sent this Economic Policy Journal report: “The Goldman Sachs relationship with Congress has just gotten even more intimate. Goldman has grown another tentacle, designed to grab directly at the House Financial Services Committee chair Rep. Barney Frank, D-Mass. The new top lobbyist, Michael Paese, was recently the top staffer to Frank. He has been a registered lobbyist for the Securities Industries and Financial Markets Association since he left Frank’s committee in September.” Like Damages and Dexter, you can’t just make up a juicy plot like this.

Episode 3. “Goldman Conspiracy” amassing power to rule the world
One reader said it all: “This is not about Political Parties, Political Movements, or Control of Political theory. This is about Power! Pure, in your face, control of every asset and wealth variable in this world. Goldman Sachs and Co-conspirators have control and in the best position for control of much of the world’s investments and assets.” And many don’t like what they see: “Stop the looting. Start the prosecutions. Now!” Unfortunately Goldman is real and more dangerous than the conspiracies Jack Bauer destroys in “24.”

Episode 4. “Goldman Conspiracy” is manipulating stock market
“Something smells fishy in the market. And the aroma seems to be coming from Goldman Sachs,” says John Crudele in the NY Post. Stocks prices soaring. “So, who’s moving the market?” Not the little guy. “Professional traders, with Goldman Sachs leading the way.” NYSE numbers show “Goldman did twice the number of so-called big program trades during the week of April 13,” over a billion shares creating “a historic rally despite the fact that the economy continues to be in serious trouble.” Then he tells us why: Because the “Goldman Conspiracy” is using TARP and Fed money, churning the markets. They are “gambling with taxpayer money.”

Episode 5. “Goldman Conspiracy” Cartel? Plutocracy? Dictatorship?
“The Goldman Cartel like the Drug Cartel, like the mafia, like communism. Americans fell asleep at the wheel. We have crashed. We were brainwashed that America was good. We pledge allegiance to the flag, etc.” Yes, like many, this reader one were angry, ready to fight, near rebellion, because “now we are a fascist nation, maybe worse.”

Episode 6. “Goldman Conspiracy” repeating record 2006-07 earnings
In “Goldman Sachs Boosts Risk-taking at the Fastest Pace on Wall Street,” Bloomberg’s Christine Harper writes: CEO “Blankfein has shown no inclination to change the business model that helped Goldman Sachs set industry records for earnings and pay in 2006 and 2007.” At the November peak of the credit crisis, he said “nothing that happened this year altered the core of what Goldman Sachs is … we won’t stop doing the things that made us a leading investment bank.” Harper added: “First-quarter revenue-per-employee and compensation figures bear that out … Each of the firm’s 27,898 employees brought in, on average, $338,017 in revenue” while “compensation and benefits at Goldman Sachs totaled $4.71 billion in the quarter, an average of $168,829 per employee.”

Episode 7. “Goldman Conspiracy” sneaks in another Trojan Horse
Another reader added this: Gary Gensler, another long-time partner in the “Goldman Conspiracy” is Obama’s nominee for chairman of the Commodity Futures Trading Commission. Maybe the “Goldman Conspiracy” really does “own” Washington.

Episode 8. “Goldman Conspiracy” operates like Las Vegas casino
NY Observer columnist Michael Thomas imagines the Wall Street/Washington merger operating as a “publicly owned casino” where “every grifter, sharpie, shark imaginable” gets to play with the our money. “This stinks. Stinks to high heaven. Stinks all the way from Wall Street to K Street, whence you can be sure significant funds have been routed to Congress” as political payoff. And it did paid off last week killing a bill to let bankruptcy courts renegotiate over a million mortages held by underwater homeowners. The bill was defeated by lobbyists for the same banks taxpayers gave trillions to. The LA Times reported that the Consumer Federation of America attributed the defeat to the “bankers continuing clout to the fact that they are major financial players in campaign contributions, to Democrats as well as Republicans.” Remember the fun in TV’s Vegas?

Episode 9. “Goldman Conspiracy” is gambling with taxpayer money
The New York Times reported in “After Off-Year Wall Street Pay Bouncing Back,” that average pay is again around $570,000 at the “Goldman Conspiracy” branch of the “Happy Conspiracy.” What a comback: They were virtually insolvent six months ago till Paulson secretly arranged a $50 billion lifeline in a combo of TARP, Fed credits and the AIG bailout. His old “Goldman Conspiracy” buddies then doctored their balance sheets and it was back to “business as usual,” echoing the action in Prison Break.

Episode 10. “Goldman Conspiracy” expands in shadowy twilight zone
“It’s no secret that many of the top officials at the Fed and Treasury,” says reader, adding three more to Paulson and Kashkari: “Treasury Chief of Staff Mark Patterson, New York Fed President William Dudley, and New York Fed Chair Stephen Friedman were once executives, directors, or lobbyists for Goldman Sachs.” How many more? We have entered The Twilight Zone, Wall Street’s version of The Invasion of the Body Snatchers.

Episode 11. “Goldman Conspiracy:” No comparison to Founding Fathers
Another reader criticized the false choice: “The difference between our founding fathers and the Goldman Gang is the fact that the former risked their own fortunes while the latter risked yours and mine. These two groups shouldn’t even be mentioned in the same paragraph. I vote RICO.” Another saw no “change” when it comes to the “Goldman Conspiracy” running our government from the shadows: “It is apparent that Washington Lobbyists will not be outlawed, nor Goldman Sachs alumni refused Government rule, so nothing will change.” Apparently “change” is a great campaign slogan, as long as the “Goldman Conspiracy” gets more control. Think Terminator, but with no Salvation.

Episode 12. “Goldman Conspiracy” really is taking over the world.
“How far does The Goldman Conspiracy reach? Truth is stranger than fiction,” writes one reader. “The Federal Opposition Leader in Australia, Malcolm Turnbull, potentially the next Prime Minister, is a Goldman Sachs alumni. Spooky!” Yes, he was Chairman, Goldman Sachs Australia.” We already reported Goldman Trojans in the Bank of Canada and Bank of Italy, and now see Britain’s Independent reporting that Paul Deighton a Goldman banker is now planner for the 2012 Olympics; Gavyn Davies, a longtime Goldman economist was chairman of the BBC network; and Duncan Niederauer, Thain’s former deputy at Goldman was later with Thain modernizing the NYSE.

Episode 13. “Goldman Conspiracy” … can’t beat ‘em? So, join ‘em!?
“Goldman people are everywhere” observes a reader. “Perhaps we should all buy Goldman stock? Join the party instead of watching from afar. I think it is very scary, no point in having a stock market anymore.” Worse, no point in voting, doesn’t matter!

Thirteen episodes are often the number a network buys for a new series. But expect lots more. This one’s guaranteed to go on through at least three more seasons to the 2012 election … probably indefinitely, because the “Goldman Conspiracy” is secretly expanding beyond Washington … taking over the networks … Hollywood …EU … UN … ultimately the universe. Yes, the “Goldman Conspiracy” franchise is more powerful than Bond, Batman, 24, Bourne, Raiders, Die Hard and The Terminator. See it! Buy it!

orig post MarketWatch 5/4/09

There really is only one answer : Deep inside we love war. We want war. Need it. Relish it. Thrive on war. War is in our genes, deep in our DNA. War excites our economic brain. War drives our entrepreneurial spirit. War thrills the American soul. Oh just admit it, we have a love affair with war. We love the “America’s Outrageous War Economy.”

That’s the only rational, honest answer to James Grant’s probing question in The Journal: “Why No Outrage?” Americans passively zone-out playing video war games. We nod at ninety-second news clips of Afghan war casualties and collateral damage in Baghdad. We laugh at Jon Stewart’s dark-comedic news and Ben Stiller’s new war spoof Tropic Thunder … all the while silently, by default, we’re cheering on our leaders as they aggressively expand “America’s Outrageous War Economy,” a relentless machine that needs a steady diet of war-after-war, feeding on itself, consuming our values, always on the edge of self-destruction. Yes, there is “No Outrage.” Why? Admit it, because we secretly love war …

· Why else are Americans so eager and willing to surrender 54% of our tax dollars to a war machine, which consumes 47% of the world’s total military budgets?
· Why are there more civilian mercenaries working for no-bid private war contractors than the total number of enlisted military in Iraq (180,000 to 160,000), at an added cost to taxpayers in excess of $200 billion and climbing daily?
· Why do we shake our collective heads “yes” when our commander-in-chief proudly tells us he is a “war president;” and his party’s presidential candidate chants “bomb, bomb, bomb Iran,” as if “war” is a celebrity hit song?
· Why do our spineless Democrats let an incompetent, blundering executive branch hide hundreds of billions of war costs in sneaky “supplemental appropriations” that are more crooked than Enron’s off-balance-sheet deals?
· Why have Washington’s 537 elected leaders turned the governance of the American economy over to 42,000 greedy self-interest lobbyists?
· And why earlier this year did our “support-our-troops” War President resist a new GI Bill because, as he said, his military might quit and go to college, rather than reenlistment in his war; now we continue paying the Pentagon’s warriors huge $100,000-plus bonuses to re-up so they can keep expanding “America’s Outrageous War Economy?” Why? Because we secretly love war!

Truth is, we’ve lost our moral compass: The contrast between today’s leaders and the 56 signers of the Declaration of Independence in 1776 shocks our conscience. Today war greed trumps morals. During the Revolutionary War our leaders risked their lives and fortunes, many lost both. Today it’s the opposite: Too often our leaders’ main goal is not public service but a ticket to building a personal fortune in the new “America’s Outrageous War Economy,” often by simply becoming a high-priced lobbyist.

Again, ask yourself: Why no outrage? How did we become such wimps? In particular, why are 95 million investors silently watching from a distance? Why are we like sheep, passively surrendering our morals as Washington spends trillions of our tax dollars to expand the “Outrageous American War Economy?” Why are we no longer a democracy but a plutocracy of wimps kowtowing to the wealthy elite running our nation from the shadows? Yes, we ignored President Eisenhower warning in his 1961 Farewell Address:

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes.”

Yes, we were warned decades ago by a president who actually fought wars as a five-star general. Today’s new ‘war president’ is doing the exact opposite, transforming our lethal “military-industrial complex” into “America’s Outrageous War Economy,” wasting trillions of taxpayer dollars. Ultimately, the price of our greed may be the fulfillment of Kevin Phillips’ warning in Wealth and Democracy: “Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out.”

“National defense” a propaganda slogan selling a war economy?
But wait, you ask: Isn’t our $1.4 trillion war budget essential for “national defense” and “homeland security?” We must protect ourselves. Sorry folks, but our leaders have degraded those honored principles to advertising slogans. They’re little more than flag-waving excuses used by neocon war hawks to disguise the buildup of private fortunes in “America’s Outrageous War Economy.” Yes, something is terribly wrong. And still silence: “No outrage?” We’ve become A Nation of Sheep as FoxNews commentator Judge Andrew Napolitano aptly calls today’s Americans.

America may be a ticking time bomb, but we are threatened more by “enemies within” than external terrorists, by ideological fanatics on the left and the right. Most of all, we are under attack by our elected leaders motivated more by pure greed than ideology. They terrorize us, brainwashing us into passively letting them steal our money to finance “America’s Outrageous War Economy,” the ultimate “black hole” of corruption and trickle-up economics. You think I’m kidding? I’m maybe too harsh? Sorry but others are far more brutal. Listen to the ideologies and realities eating at America’s soul.

One. Our toxic “war within” is killing America’s soul
How powerful is the Pentagon’s war machine? Trillions in dollars. But worse yet: Their mindset is now locked deep in our DNA, in our collective conscience, in America’s soul. Our love of war is enshrined in the writings of neocon war hawks like Norman Podoretz, who warns the Iraq War was the launching of World War IV: The Long Struggle Against Islamofascism, a reminder that we could be occupying Iraq for a hundred years. His WW IV also reminded us of the coming apocalyptic end-of-days “war of civilizations” predicted by religious leaders in both Christian and Islamic worlds back two years ago.

In contrast, this ideology has been challenged in works like Craig Unger’s American Armageddon: How the Delusions of the Neoconservatives and the Christian Right Triggered the Descent of America – and Still Imperil Our Future. Unfortunately, neither threat can be dismissed as “all in our minds.” Nor as merely ideological rhetoric. Trillions of tax dollars are in fact being spent to keep the Pentagon war machine aggressively planning and expanding wars decades in advance, including spending billions on propaganda brainwashing naïve Americans into co-signing “America’s Outrageous War Economy.” Yes, they really love war, but that “love” is toxic for America’s soul.

Two. America’s war economy financed on blank checks to greedy
Read Nobel Economist Joseph Stiglitz and Harvard professor Linda Bilmes’ $3 Trillion War. They show how our government’s deceitful leaders are secretly hiding the real long-term costs of the Iraq War, which was originally sold to the American taxpayer with a $50 billion price-tag and funded out of oil revenues. But add in all the lifetime veterans’ health benefits, equipment placement costs, increased homeland security, interest on new federal debt, and suddenly taxpayers got a $3 trillion war tab!

Three. America’s war economy has “no idea where its money goes”
Read the Portfolio magazine’s special report “The Pentagon’s $1 Trillion Problem.” The Pentagon’s 2007 budget of $440 billion included $16 billion to operate and upgrade its financial system. Unfortunately “the defense department has spent billions to fix its antiquated financial systems [but] still has no idea where its money goes.” And it gets worse: Back “in 2000, Defense’s inspector general told Congress that his auditors stopped counting after finding $2.3 trillion in unsupported entries.” Yikes, our war machine has no records for $2.3 trillion! How can we trust anything they say?

Four. America’s war economy is totally “unmanageable”
For decades Washington has been waving that “national defense” flag, to force the public into supporting “America’s Outrageous War Economy.” Read John Alic’s Trillions for Military Technology: How the Pentagon Innovates and Why It Costs So Much. A former Congressional Office of Technology Assessment staffer, he explains why weapon systems cost the Pentagon so much and “why it takes decades to get them into production even as innovation in the civilian economy becomes ever more frenetic, and why some of those weapons don’t work very well despite expenditures of many billions of dollars” and how “the internal politics of the armed services make weapons acquisition almost unmanageable.”

Yes, the Pentagon wastes trillions planning its wars well in advance … so guess what … we just have to keep fighting … somebody … we’re prepared … spend all those trillions … in advance … so we must love war … we are America’s Great War Exonomy!

orig.MarketWatch: 8/08