05/14/2009 05:12 am ET Updated May 25, 2011

Bank Profits Are The The Choice America Has Made

Peter Morici points out something which should be obvious:

Monday afternoon, Goldman Sachs reported much larger than expected first quarter profits, and this comes on the heels of Wells Fargo's strong earnings reported last week.

No one should be surprised.

The Federal Reserve has provided the banks with lots of cheap funds through its various emergency lending facilities and quantitative easing.

The Federal Reserve has permitted the banks and financial houses to park vast sums of unmarketable paper on its books--securities made nearly worthless by the misjudgment and avarice of bankers. In return, the Fed has provided these scions of finance with fresh funds, cheaply, that they may lend at healthy rates on credit cards, auto loans and even mortgages.

While the Fed cuts the banks slack, the bankers are busy turning the screws on their debtors by raising credit card rates and fees, and harassing distressed borrowers with all the zeal of the Roman army sacking Palestine.

Yes, well, there you go. Morici goes on to point out that low interest rates screw over old people who have certificates of deposit, and that the banks now want to "repay" the loans because when you're being given money for nothing, and allowed to keep bad assets on your books at whatever price you feel is ok (since mark to market is gone), well, everything is wonderful in banker land.

(Well, unless you're so far gone, like Citi, or Bank of America, that even in fantasy land you can't make it work.)

As Stirling Newberry has pointed out, the economy has become clearly divided into two different economies. One for the people who have access to money cheap and whose job is to take care of foreigners, and the other one, where credit is dear and you're losing your job.

Guess which economy you live in?

This isn't just going to be about employment, though that is going to suck for the forseeable future, and will, in effect, never recover. It is also going to be about real income. Forget the headline CPI, the costs you pay are going to go up faster than your wages (which are probably going to deflate), and your assets are going to deflate. Riptide inflation, which catches you on both the up and downsides.

Real standards of living for median Americans are going to drop. It's just that simple.

In 4 to 8 years, the Republicans will probably get back in again. They will do stupd things again. By the end of their orgy of looting and warring (which will be even worse than Obama's) the country is going to be extremely damaged. Right now things could be fixed. They probably won't be, because Barack Obama has no intention of fixing main street, but they could be. By the time the US gets its next real chance, well, this hole is going to be mighty mighty deep.

The US has made the choice of continuing to put its primary efforts into pursuing a chimerical paper economy which promises easy alchemical gold, rather than fixing the real economy.

But there's no such thing as free money, not on aggregate over the long run.

And the long run is here, and by "aggregate" I mean "you aren't an executive with the power to pay yourself millions in bonuses for destroying the US's economy. But you will have less money because of them."

(Note: quote from an email from Morici, article does not appear to be online)