Aug. 13 (Bloomberg) -- Less than a year ago, Goldman Sachs Group Inc. rebranded itself as a bank holding company, a move it celebrated by giving alumnus and New Jersey Governor Jon Corzine a logo-emblazoned toaster, according to the New Yorker magazine.

As an exercise in deception, it was unbeatable. The change in nomenclature was solely to ensure Goldman could clamp its jaws even more tightly around the public nipple. It had zero discernable effect on either Goldman’s behavior or its ability to generate the super-sized profits and bonuses that are unthinkable at other toaster-bestowing institutions.

Goldman’s record second-quarter earnings of $3.44 billion helped incite a burst of optimism that the global economic recession is over. In the absence of unambiguous signals from the economy, it looks increasingly like investors may be interpreting -- or misinterpreting -- the apparent stability of the banks as a green light for global growth. The alphabet has shrunk; there’s more talk of V-shaped recoveries than W’s, and the L proposition seems to have fallen by the wayside.

The Bloomberg Professional Global Confidence Index published yesterday showed that optimists outnumbered pessimists this month for the first time since the survey began in November 2007, with confidence climbing to a 22-month high.

Assisted Living

The banking business could easily relapse. Take any industry you like, eliminate half of the combatants, and give the remainder fat government guarantees, free money and relaxed accounting standards, and JPMorgan Chase & Co’s second-quarter profit of $2.7 billion doesn’t look so remarkable. Even a U.S. automaker could make a buck or three under those conditions.

The truth is that the financial industry all around the world is still hooked on government life support. It is impossible to have any faith in predictions about the economic outlook until central banks start to implement the exit strategies that they are currently only hinting at, and we find out whether the patients can stand unsupported.

“What the U.S. administration is doing is precisely what it has always done when faced with the natural economic cycle -- throw money at the problem regardless of consequence,” Roy Damary, an economist at Geneva-based brokerage firm Bridport & Cie, wrote in a research report last week. “Goldman Sachs and JPMorgan have survived with taxpayers’ money, still have access to cheap government funding and, despite now officially being commercial banks, have managed to continue deploying massive financial leverage.”

Hoarding Cash

It’s two years since money markets froze and interest rates jumped higher, as banks started to hoard cash to backfill the holes appearing in their balance sheets. Governments and their treasuries and central banks have channeled trillions of dollars into the financial industry. There is scant evidence that any of it is making further progress into the wider economy, instead of sandbagging the banks against crumbling real-estate loans and other losses. Nor are the money taps being turned off.

Last week, the Bank of England thought it prudent to add an additional 25 billion pounds ($41 billion) to its so-called quantitative-easing program, boosting its potential bond purchases to 175 billion pounds. Yesterday, Germany’s bank- rescue fund, called SoFFin, said the nation’s finance industry has asked for 233 billion euros ($329 billion) of aid, of which 153 billion euros has already been granted. Neither of these developments should give confidence that the global economy has turned the corner.

Cheap Credit

The credit market isn’t bothered. U.S. corporate bonds yield an average of about 183 basis points more than government debt, down from a peak of 541 basis points in December, according to indexes compiled by Credit Suisse Group. Investors are willing to lend to U.S. companies at interest rates comparable to what they were charging in January 2008.

When capital markets and the global economy are as bent out of shape as ours have been for the past two years, maybe even the absence of deterioration is cause for celebration. At the risk of coining a refrain for a country-music record, when you’ve been down this long, it’s nice to be reminded that there’s also an up, no matter how short-lived the relief might eventually prove to be.

“At the start of any day, week or month, the most likely outcome is a further normalization of markets,” as Deutsche Bank AG strategist Jim Reid noted in a research note this week.

Even cardboard prices are rising. Smurfit Kappa Group Plc, Europe’s biggest maker of cardboard boxes, said yesterday it will raise its prices 25 percent starting next month. The green shoots of recovery? A sign that more of us will be living under bridges in temporary accommodation? Or perhaps, worst of all, the brown shoots of inflation starting to poke through?

(Mark Gilbert is the London bureau chief and a columnist for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net

Last Updated: August 12, 2009 19:00 EDT