SAN LUIS OBISPO, Calif. (MarketWatch) — Yes, the Dow and S&P500 hit new highs. But the rally’s hiding huge risks: “GDP turns negative as U.S. economic recovery stalls,” screams one headline. Another hears a “Ticking Time Bomb.”

World’s central bankers at Davos warn cheap money’s blowing a new asset bubble. Dr. Doom, Marc Faber, “loves the high odds of a ‘big-time’ market crash.” Another, Nouriel Roubini, says “prepare for a perfect storm,” while Bond King Bill Gross sees a “credit supernova” dead ahead.

Rally? Bubble? Crash? Global? Is the economy “peaking?” Are we on a long, slow-growth downhill slide to a 1% GDP? Is our banking system infested with a soul-sickness virus? Is Adam Smith’s capitalist ideal turning against our markets and economy, accelerating the odds of more brutal competitive wars over an ever-shrinking, low-margin profits pool?

The answers became obvious in a disturbing new comment from Seth Godin, best-selling author of “Unleashing the Idea Virus” and one of America’s leading minds: “If, 70 years ago, you asked Henry Luce, ‘What is Time magazine for?’ he’d probably talk about setting society’s agenda, capturing the attention of the educated and powerful and most of all, delivering the best weekly news package he could. Today, the answer is clear. The purpose of the magazine is to make as much money as possible. Everything else is in service of that goal. It used to be that the profit enabled the magazine to reach its goals. Today, the goal is to reach the profit.”

Profits, profits, profits: Godin warns that our obsession with profits is infecting the entire American culture. Godin is onto something. Ask yourself: Has the decline of America’s GDP something to do with our addiction to profits backfiring? Has our obsession with profits come at the expense of our nation’s humanity? Are GDP, profits and capitalism now America’s “moral compass,” the false god Jack Bogle, Vanguard’s founder, wrote about several years ago in his classic, “The Battle for the Soul of Capitalism”?

How Wall Street amputated Adam Smith’s ‘invisible hand’

Godin’s perspective echo the predictions Bogle made near the 2008 crash: Adam Smith’s “invisible hand” is no longer driving “capitalism in a healthy, positive direction.” A “happy conspiracy” of Wall Street, Washington and Corporate America is spreading a “pathological mutation of capitalism,” driven by the many profit-addicted “invisible hands” of this new “mutant capitalism,” replacing Adam Smith’s ideal from 1776, the original soul of democracy and capitalism.

Today as we stare at these three macro trends — the declining GDP, America’s all-consuming obsession with profits and Bogle’s diagnosis of a “pathological mutation” driving the American economy — and we can easily see that Godin “profits virus” has become a pandemic the last five years, spreading way beyond our banking system, undermining the American and global economies.

Unfortunately, most investors are in denial, blind to the symptoms, refusing to listen, dismissing critics like Godin and Bogle.

10 symptoms of Wall Street’s metastasizing soul sickness

Shortly after the 2008 Wall Street bank credit meltdown we identified the symptoms of this mutation of capitalism, profits virus, and soul sickness. With the new SEC chairman appointment of a prosecutor this is a perfect time to update, reexamine what government missed exposing the past five years.

Reuters

Take a moment to diagnose our bank culture through these 10 symptoms of moral pathology, focused on Goldman Sachs in 2009 because of its conflicts of interest with the Treasury secretary. Since then, however, that toxic culture has metastasized, spreading deep into our banking system, economy and democracy.

Look with fresh eyes and ask yourself if America’s “profits virus” obsession made us better place since 2008:

1. Narcissistic self-interest: with an extreme God complex

Narcissists are self-centered, power-driven, myopic. When I was at Morgan Stanley in the 1970s we ran an ad: “If God Wanted To Do a Financing, He Would Call Morgan Stanley.” Goldman’s boss Lloyd Blankfein not only paid himself $68 million in the hot 2007 market but also, after Wall Street’’s 2008 meltdown, bragged to the London Times he was a “blue-collar guy,” that banking had a “social purpose,” he was just a banker “doing God’s work.”

2. Pathological liars: incapable of honesty even with own investors

No too-greedy-to-fail bank bosses have gone to jail. Reagan prosecuted 1,800. In 2008 the bosses sold $40 billion of high-risk mortgages. Secretly shorted them. Never told investors. Even our Treasury Secretary knew. Stayed silent. Sin of omission. Main Street lost trillions. That’s fraud. That’s “mutant capitalism.” That’s soulless. Nothing’s changed.

3. Paranoid obsessive: about secrecy, guilt and non-disclosure

The New York Fed was in on this massive Ponzi scheme. Negotiated in secret. Later taxpayers learned they paid $13 billion too much in secret deals to buy $62 billion of AIG credit-default swaps. Bottom line: the Treasury and Fed covered $180 billion in AIG’s toxic CDOs. No disclosure, just fraud.

4. Borderline split personalities: ignoring conflicts of interest

The New York Times: “Before becoming Treasury secretary in 2006, Hank Paulson agreed to hold himself to a higher ethical standard than his predecessors ... 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.”

5. Power-mad egomaniacs: running government for personal profits

“For a year Goldman said it wouldn’t have suffered damage if AIG collapsed,” but a later report proved otherwise, said the Wall Street Journal: TARP inspector general said the New York Fed Chair Tim Geithner did pay too much. “If AIG had collapsed, Goldman would have had to cover the losses itself,” couldn’t collect, would go bankrupt.

6. Total denial: of own greed, corruption, damage to economy

Rolling Stone’s Matt Taibbi called Goldman “a giant vampire squid wrapped around the face of humanity.” Banks triggered a global collapse. Main Street suffered. Greedy bank CEOs raided the U.S. Treasury, still got $30 billion in bonuses, year-over-year 60% increase. And nothing’s changed. We’re on track to repeat the 2008 meltdown again.

7. No fiduciary duty: only to insiders, conspired to defraud investors

New York Examiner: “Goldman was at the heart of the subprime market, selling subprime 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.

8. Moral failures: Just a PR problem, don’t get caught next time

The year after the 2008 crash Goldman Sachs awarded huge bonuses. The public went ballistic. USA Today said Goldman went “on a PR blitz in a bid to undo the damage,” canceled its Christmas party. Amid tens of billions in bonuses they “also launched a $500 million program for small businesses.” Banks treat moral issues as PR problems.

9. Charitable donations: tax and PR opportunities, not moral issues

The New York Times dug into Goldman’s charitable deductions: Money to their foundation was dwarfed by insiders’ bonuses. Their foundation got $400 million, gave away $22 million. Insider bonuses were 20 times more. Even the New York Post said “Goldman’s Born Again Image is Laughable.”

10. Conspiracies cover-up fraud: Feign humility and fake apologies

If caught, just fake it. Blankfein told CBS “he’s sorry for the role Goldman played in the housing crisis: We participated in things that were clearly wrong.” Clearly wrong? No, “clearly criminal.” He was admitting to a fraud. Cheated millions of homeowners, investors. Then he laughs at us with bogus “restitution” claims. A fund of $100 million annually for five years to small-business owners? The Financial Times said “$100 million is the profits from one good trading day. In 3Q ‘09 they had 36 days better than that.” It’s time to turn the clock back, prosecute, get a pound of flesh from the vampire squids.

Powerful biblical lesson ... ‘Jesus threw them out ...’

Back then, New York Times columnist Maureen Dowd wrote: “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.”

Dowd echoes Godin and Bogle. Dowd saw capitalism run amuck: For them “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.” And in a clear dig at Goldman’s boss: “And as far as doing God’s work: The bankers who took taxpayer money, pocketing obscene bonuses: They’re the same greedy types Jesus threw out of the temple.”

In all 10 areas, ask yourself: Has Wall Street improved since the 2008 crash? Or has it torn our great nation down further, made America worse in the past five years? Blowing another bubble? Is Wall Street’s addiction to profits pushing us closer to another, bigger market and economic meltdown, driving America closer to the Second Great Depression?