“Recession easing, but not over: survey.” This morning’s headline, as far as we can tell, only goes to prove that Mark Twain should be quoted far more often: “If you don’t read the paper, you’re uninformed. If you do, you’re misinformed.”

The news story above, which will no doubt be taken as Gospel by all and sundry who ingest it over the next 24 hours, summarizes a quarterly survey from The National Association for Business Economics.

Sara Johnson, one of the geniuses who helped read the report from its original stone tablet, told Reuters that it “provides new evidence that the U.S. recession is abating…

“Industry demand was still declining in the second quarter of 2009,” Johnson continued, “but the breadth of decline had narrowed considerably since late 2008, raising prospects for stabilization in the second half.”

We’ve gone over the “less bad as good” point many times here in these pages, so let’s skip ahead and look at what’s leading this “stabilization.”

“Of the four major sectors, financial services showed the strongest demand, with an index reading of +15. The transportation, utilities, information and communications sector had the lowest reading at -90.”

So, having just been handed the largest, system-wide smack down since the Great Depression, financial services are apparently back in the economic driver’s seat. Your editor remains a little dubious here but, even if we assume that this is the case and that the likes of Goldman and JP Morgan are in fact leading the way, is this really reason to cheer? In other words, is what’s good for Goldman and JP really good for America?

Earnings reports from Wall Street’s two remaining powerhouses last week showed that a huge portion of their second quarter profits came from “trading and investment banking results.” Who, besides these two institutions, wins when their traders are posting profits?

As Bill Bonner explains, “Anyone who takes this as evidence of a recovering economy should work for the government. Only a government economist or a mental defective (excuse us for being redundant) could believe that genuine prosperity can be built on a foundation of speculating by large financial institutions. You can see why by asking a simple question: whom were they trading against?”

“Speculating is a zero-sum game,” Bill continues. “No matter who wins, the economy is not a bit better off; it has not a centime more in resources. Goldman and JPMorgan report earning, together, more than $6 billion. Who was on the other side of that trade?”

Your editor cheers the possibility of a recovery as much as the next guy. We prefer freedom, prosperity and apple pie for all. But we prefer the kind of recovery that is based in solid capital formation, robust productivity, job market growth and increased manufacturing. In increase in trading profits at a couple of government-coddled, risk-heavy banks is not the kind of basis for recovery that imbues great confidence, in other words.

When a Roman carpenter had finished building a new house, he was forced to stand under the doorway as the scaffolding was pulled away. If the roof ended up on his head, it was considered his punishment for erecting a dangerous structure. That way the homeowner avoided injury and the carpenter could never endanger another unsuspecting customer. We may have come a long way since those days, but when the roof comes down on the economy, the only people standing under the doorway are the poor fools who bought the place. The CEOs, economists and policy wonks responsible for the mess are already down the street, building a whole new development.

Source:  The House that Recovery Built