For example, Wall Street seems to get every single penny it desires without much question from both parties in Washington. Sure, we’ll have politicians on both sides of the aisle argue their case and fight for the common good while they get their pockets lined by Goldman Sachs, the insurance companies, or the real estate industry. When it comes to real reform the status quo is still here even after the near implosion of the markets. The U.S. Treasury and Federal Reserve are showing us that when push comes to shove, they are servants of the banking elite and protecting the financial health of American people is simply a secondary consideration.

If this is the start of the recovery it sure seems funny. A federal judicial panel has given California 45 days to clean up its inmate overcrowding problem. Of course, this might take two years to implement if things go through but apparently this is how the recovery will look like in the state. Another wonderful story showing us the new economics of the recession, banks are set to collect some $38 billion in overdraft revenues. Good times. Once again, people struggling to buy food with their WaMu Chase debit card need to be careful since they may be slapped with an additional fee. Apparently peak overdraft fees are a leading indicator of an economic recovery. Another fascinating story we keep hearing about is the greatness of a jobless recovery. Too bad that earnings are off from depressed levels a year ago and people forget that losing a big fixed expense like say, an employee, will actually help your bottom line in the short-term.
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Banks now have to resort to higher and higher overdraft fees to find additional revenues. It isn’t enough that their crony capitalist system is rolling out trillions in rescue funds; they now have to squeeze their much poorer client base with the Vise-Grip of money sucking vampires. You might search in the seams of your couch for additional change but the bank is going to find additional methods to screw you each and every way without even thanking you for the generous life saving bailout. Most of the headlines on Monday read:

“Americans pay $38 billion in overdraft fees a year.”

Which is stunning in itself. But when you run the numbers, it becomes downright shameful.

“There are 300 million Americans, and, the FT reports, 130 million checking accounts. $38 billion divided into 130 checking accounts puts the average yearly overdraft total at $300 dollars, which is the equivalent of 9 overdraft charges from large banks like Bank of America. How many Americans really overdraft 9 distinct times a year? Moebs Services discovers, however, that one bad day for a consumer can mean gangbusters for the banks:

At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350.”

Many of you have experienced this once in your lifetime. You decide to put the $10 sushi roll on your debit card and get reamed for $35 because you used the wrong card. Most of us would suspect that this only happens once or twice in our lives. But to account for $38 billion in fees? Why not deny the transaction? Clearly there is a systemic problem here.

I once had this occur and had to go through a long wait to talk with a bank representative to simply block any charges beyond the zero point. The bank rep kept insisting the “just in case scenario” but given my love of paying the $35 fee, decided to simply block this by opting out. Charging this kind of penalty is like having a loan shark pounding your knees for not coming up with the additional points. So when you hear about those wonderful bank profits, just think of all those overdraft fees that are part of the new economic recovery.
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If you haven’t noticed, we didn’t exactly add any jobs last month. The only significant improvement as you may have heard is that “things are getting less bad.” This is like getting kicked in the shins instead of the stomach. As the chart above highlights, job losses are still occurring. But a few things occurred last month that made the numbers appear better:

(a) Big government hiring – a jump in auto activity with the wonderfully named cash for clunkers helped spur back some growth but also, the increased hiring for the 2010 Census helped. Now you tell me, how many times are we going to do that 2010 Census?
(b) Minimum wage – the increase in the minimum wage pushed up the overall hourly wage rate. So those using this as a key point fail to miss a one-time gain.

(c) Seasonal adjustments – We are still adding jobs through the BLS Birth/Death model which has to do with new business growth. Now when you think of invisible recovery, this is your mascot.

And another key point is we have now lost nearly a decade of job growth. Even though we only had 247,000 jobs lost last month, we have now lost 6,664,000 non-farm jobs since the recession started in December of 2007:

In 2000: 131,785,000 (non-farm employed)
In 2009: 131,488,000 (non-farm employed)

The chart below (please click on above link to view chart) updates the position of the S&P; 500 (red line) in the context of other post-crash bubbles. The horizontal axis is measured in months. Note that very strong and extended interim advances have been part and parcel of similar experiences.

The intent here is not to argue that the U.S. stock market must by necessity follow the same extended adjustment that followed prior burst bubbles. Rather, the intent is to underscore that it is dangerous to infer that structural difficulties have vanished simply because a market enjoys a strong post-crash advance.
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I understand the eagerness of investors to put the entire credit crisis behind them and look ahead to a recovery of the prior highs, but these hopes are based on the assumption that a positive boost to GDP, once achieved, will propagate into a full-fledged recovery. Again, however, no economic improvement is evident in the behavior of consumer demand and capital spending, once you adjust for the impact of government spending (particularly transfer payments).

Yes, we have observed a massive reallocation of global resources from savers (who have bought newly issued Treasury debt) toward mismanaged financial institutions that made bad loans. Yes, there are certainly favorable short-run economic numbers that can be achieved by running a year-to-date federal deficit equal to seven percent of the U.S. economy. The problem is that this money does not come from nowhere. We have effectively sold an identical ownership claim on our future production to those individuals and foreign governments who bought the Treasuries. Government “stimulus” is not free money. The continued attempt to bail out bad loans with good resources (largely foreign savings) will end up costing our nation some of our most productive assets, which will be acquired by foreign countries and investors for years to come.