Spain’s central bank, The Bank of Spain, has officially stated that for the second time since the onset of the global economic crisis in 2008, Madrid’s economy is in recession. The news that the Spanish economy has entered a double-dip recession is no surprise for the Spanish people, currently experiencing the misery of an official unemployment rate of 20 percent.

In the words of the Bank of Spain, “The most recent information for the start of 2012 confirms the prolongation of the contraction in output.” This all happens as the Spanish government reins in spending, with a current deficit to GDP ratio of 8.5 percent. With the fiscal drag imposed by a retrenchment in government spending, there will be no Keynesian solution to Spain’s current recession. Furthermore, Spain is not alone; other vulnerable Eurozone economies are in recession-or about to double dip into one. The economists keep telling us that economic growth is the only solution to the Eurozone’s debt crisis. With many of its struggling economies in negative or stagnant growth, it is hard to see a solution to the Eurozone’s debt crisis, other than bank-destroying sovereign defaults and inflation-creating loose monetary policies by the European Central Bank.

Only a few weeks after the latest  version of the Greek bailout package, the President of the European Central Bank, Mario Draghi, is boasting that the worst of the Eurozone debt crisis is “over.” He made this remarkable claim in an interview with a German publication. Draghi boasted that the economies of the Eurozone were now stabilizing.

Draghi must be toking some powerful weed, or otherwise he is attempting to repeat U.S. Fed Chairman Ben Bernanke’s previous boasts about economic “green shoots.” The latest PMI figures from Germany, which show that the country’s manufacturing  sector is weakening, and other similar statistics from elsewhere in the Eurozone, make ECB president Draghi’s boast sound bizarre, to say the least.

Despite Mario Draghi’s high profile delivery of rosy prognostication, the Greek debt crisis is far from over, and the other PIIGS nations (Portugal, Ireland, Italy and Spain)have not seen their dangerous debt and deficit to GDP ratios, poor economic growth figures or catastrophic levels of unemployment magically improve. Draghi may be a wonderful propagandist for the Eurozone, but he is no magician.

People usually resign from a position through a private letter to the boss. Greg Smith, a Goldman Sachs executive director based out of London who manages U.S. equity derivatives for clients in Europe, Africa and the Middle East chose a different method when he decided to leave the payroll of  Goldman Sachs; he gave the reason for his resignation in a powerful opinion piece on the editorial pages of The New York Times entitled, “Why I Am Leaving Goldman Sachs.”

The reason for Greg Smith’s resignation can be summed up as follows: the corporate culture at Goldman Sachs has been transformed and deteriorated to the point where it became rotten to the core, and where clients are viewed as mere “muppets” who can be fleeced through the investment bank’s rapacious greed.

Here is an excerpt from  Smith’s piece:

“These days, the most common question I get from junior analysts about derivatives is, ‘How much money did we make off the client?’ It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about ‘muppets,’ ‘ripping eyeballs out’ and ‘getting paid’ doesn’t exactly turn into a model citizen.”

The devious, greed-encrusted investment bank got that way because of its leadership, Greg Smith emphasizes. The same leadership that boasted that it “does God’s work.” Unfortunately, the corrupted investment bank Smith describes is probably the most powerful non-governmental actor in the world. That is what makes Greg Smith’s explanation for leaving Goldman Sachs so bone-chilling and terrifying.

So, will the resignation of Greg Smith change the corporate culture at Goldman Sachs? I doubt it. It was not so long ago when we learned about the e-mails Goldman Sachs trader Fabrice Tourre sent to his girlfriend, one of which said, “…More and more leverage in the system, the entire system is about to crumble any moment…the only potential survivor the fabulous Fab…standing in the middle of all these complex, highly levered, exotic trades he created without necessarily understanding all the implications of those monstrosities !!!”

The public explanation for resigning offered by Greg Smith, and what were intended as private musings by Fabrice Tourre, are insights into the inner sanctum of a global financial octopus. Already subsidized by a massive taxpayer bailout after the financial collapse of 2008 (Goldman Sachs got a $12 billion payment through the AIG payout made by Uncle Sam, about enough to pay one year’s bonuses to the senior executives), Goldman Sachs is a paradigm of arrogance and indifference to the public that saved the investment bank from itself. Somewhat optimistically, Greg Smith hopes that his public explanation will somehow induce the board of directors at Goldman Sachs to “correct” its corporate culture. I wish I could be as optimistic, but I’m not. If there is a solution to the systemic risk posed by this selfish behemoth, it is unlikely to come internally from within Goldman Sachs. Other remedies are called for.

It appears that the European Central Bank under the leadership of Mario Draghi is following in lockstep with the policy prescription devised by the Chairman of the U.S. Federal Reserve, Ben Bernanke. Just as the Fed expanded its  balance sheet to over $2 trillion, in the process becoming the lender of last resort to U.S. banks  that would otherwise have been insolvent without the cheap credit from Bernanke (and changing accounting rules from “mark to market” to “mark to fantasy”), the ECB is now doing exactly the same in the Eurozone.

Already, through its stealth quantitative easing program, the European Central Bank has expanded its balance sheet by more than $1.3 trillion, thus preventing Europe’s banks from collapsing due to the weight of worthless assets they hold in sovereign loans to insolvent (and defaulting)nations such as Greece, along with Ireland, Portugal, Italy and Spain on their balance sheets.

It is no surprise that many investors, and certainly all the banks, are cheering central bankers such as Bernanke and Draghi. They seem to ignore the fact that if money printing by central banks were truly an effective method of restoring genuine economic  growth, than counterfeiting would be legal for us all, and not just the trans-sovereign central banks.