Here’s a nice example of the outrageous compensation that bureaucrats are getting. This campus cop, who has spent her career protecting us from streakers, tree-sitters and weed in the dorms, retires at 53 with a multi-million dollar payout and then goes back to the trough for more.

UC Berkeley officials are defending an unusual arrangement that allowed Police Chief Victoria Harrison to retire last year with a $2.1 million package and then return to the same job right away for more money….

….Harrison got a $2,130,259 lump sum from the retirement plan. She will also receive $4,621 a month for 10 years, totaling $554,520, from a deferred compensation plan.

Before her retirement, Harrison was earning a base salary of $161,527. Combined with unused vacation pay and a stipend for her work as associate vice chancellor for public safety, her total compensation had amounted to $205,000 a year.

Under the terms of the rehiring, her base pay was $175,000, which increased to $181,125 two months later. In addition, she is receiving $12,700 annually for working with Cal’s athletic director and on special projects - for a total of almost $194,000 a year.

Outrageous.

CNBC interviews Joseph Stiglitz, past winner of the Bank of Sweden Prize in memory of Alfred Nobel. After observing that our favorite Eeyore, Nouriel Roubini, is “not far off”, he goes on:

The U.S. economy is already in recession — and may echo the 1930s, Nobel Laureate Joseph Stiglitz said Friday.

“The big question is: how will the government respond?” said Stiglitz, in an interview with CNBC. Stiglitz, a Columbia University professor and 2001 winner of the Nobel prize, detailed his bleak outlook for the American economy.

This is going to be one of the worst economic downturns since the Great Depression,” said Stiglitz.

He explained that main cause of the current situation is historically unique—and thus is befuddling those charged with creating solutions.

Other downturns were primarily caused by excesses in inventories or inflation; but this slowdown is due to the condition of “badly impaired” banks and financial entities, which are unwilling and/or unable to lend capital — stymieing the very borrowers who usually drive the country back to vitality, Stiglitz said. And the Federal Reserve may have used up its ammunition — and the faith investors and planners have put in it.

“[The Fed] will be between a rock and hard place. And we’re not over-worrying about credit. But [simultaneously], we need to start worrying about the real sector,” he said.

And if inflation wasn’t the prime recession cause, it’s still a menace. The professor points to the two-pronged danger of high oil prices joined by climbing food prices, harming businesses and scaring consumers.

“Oil is particularly bad,” as it means that more U.S. dollars “will be going abroad,” he said.

The housing downturn is an even worse economic factor than casual observers realized, Stiglitz said. He explained that during the real estate boom, Americans were able to withdraw billions of dollars from their home equity.

“[But] with housing prices coming down, it’s going to be difficult to do that anymore,” he said — drying up a spending source. And within that problem, still another complication: people typically spent the money they drew off their home equity on consumption, rather than investment — garnering no return on the spending.

“The savings rate as we go into the recession is zero. Which means [savings] will go up, ” he said—decreasing consumer spending and weakening retail further.

What about the government stimulus package?

“The Bush Administration’s response is too little, too late — and very badly designed,” he declared. The amount ostensibly being infused into the economy by tax rebate checks will be a “drop in the bucket” compared to the money being held back and siphoned out by the factors he mentioned.

“If you really wanted to stimulate the economy, increase unemployment insurance,” he suggested.

“The president is telling people to go out and get jobs—and there are no jobs for them,” he said.

Like Roubini, he seems pretty realistic. It isn’t complicated and he explains the situation pretty well, certainly nothing I have a problem with. So why can’t others understand it?

The current euphoria in the stock market seems to be based on the perception that we have reached a turning point. I agree. We turn now from the relatively benign revelation of massive fraud in residential mortgage lending, whose impact has mostly been limited to the parties involved, to the main event, which is economic recession and depression.

The effect of the revealed fraud has been to put an end to the house price appreciation which was supporting growth in consumption. It seems that consumers have finally realized that the housing ATM is closed for the foreseeable future, and are adjusting their spending accordingly. It has taken much longer to get to this point of realization than I expected, but it seems clear that we have finally arrived.

In the recession, unemployment will rise and defaults will spread to the previously largely unaffected prime conforming mortgage base. As consumption slows, commercial real estate will be affected by the double whammy of negative absorption and substantial new supply coming to market. Corporate loans, in particular the private equity loans made with little or no margin for error, will begin to default. The financial system has been badly damaged by the fraud which it encouraged and sustained, and is not in a good position to deal with the recession and the consequent defaults. Mr Bernanke has exhausted most of his ammunition trying to stop the overture, without success, and will now become almost entirely irrelevant.

Bottom callers, it appears, believe that the size of the fraud problem is now becoming understood and therefore contained. They see a light at the end of the tunnel. Unfortunately, it is a train. The fraud problem is minor in comparison to the fundamental weakness of an economy built on credit and consumption rather than savings and investment.

I’ve been saying for some time that the data don’t support the myth that subprime mortgagors are defaulting on their payments because their interest rates are being reset higher. The State Foreclosure Prevention Working Group, in addition to noting that little progress is being made in reducing foreclosures, provides additional help busting this myth.

While delinquency rates increase during the early life of a loan pool, this worsening trend confirms our initial assessment that very weak underwriting and mortgage origination fraud, and not simply payment resets, has been the primary cause for elevated subprime loan delinquencies for loans originated through at least the middle of 2007.

The dogged news hounds at Calculated Risk picked up on remarks made on the UPS conference call which are worth recording.

UPS’s first quarter results illustrate the dramatic slowing in the U.S. economy. At our investor conference on March 12th, we told you that volume growth in January had been up 3%. But in the six weeks prior to the conference, it had been negative. We also said if these trends persisted through March, we would not achieve the earnings guidance we had provided for the quarter. [The] trends did continue. Many have become sharply more negative in the last two months. …

We are restricting hiring, except in the sales arena. We are stopping all non-critical projects. And limiting discretionary spending including business travel, relocations and consulting services.

Res ipsa loquitur. The party in the stock market continues.

Edit: Starbucks Corp. late Wednesday warned its second quarter and full-year profit will be hurt by decreased traffic at its U.S. stores and a “sharp weakening in the U.S. consumer environment.”

Hellooo. Anyone listening?