What has gone wrong with traditional martial arts...?

I see many hear extolling the virtues of MMA/BJJ/etc. and denigrating traditional martial arts (karate, TKD, hapkido, etc.). While I practice traditional martial arts, I agree there is a real problem. But it is not the arts themselves.

Here is what I see happens: A guy gets a legit 2nd or 3rd dan ...but his ego says he should be a master and have his own school. Eventually he finds some group to give him a certificate calling him master and he starts his own school. Well when he promotes people he is not really a master and the chances are that they are not really up to the rank he gives them (i.e. should be a blue belt, but he gives them 1st dan)....now later THAT student goes to teach...and the watering down continues and grows.

In addition to this you have some instructors who claim training in arts they don't have. I met a guy who has a real 2nd dan in shotokan...but after studying videos now also claims to teach kenpo and muay thai!!

And finally some simply sell rank...but then the person they sold it to thinks they are legit and goes to teach, and on the cycle goes.

I really think it is not that traditional martial arts don't work (they have for me, in real situations)...it is that so many have watered down the arts and so many have over inflated belt rankings.

What do you think??
Thanks for the response. I am currently training in TKD. At my dojang all rank test beyond green belt require sparring.

The first dan is a multi part test. That morning you do a fitness test (100 pushups, 100 situps, run 2 miles).
Then you have to do all forms and combinations required as well as several hapkido techniques.
Then it is sparring. You do one round each against 5 to 6 opponents. Each time they are fresh, you are getting more tired.
Finally yes they do board breaking (I know how many feel about that...)

But the test is rigorous. Every test must be or you should not get a belt.
 
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