After months of anticipation and mass mailings by the IRS to inform everyone that they, too, can waste paper with the best of them, my tax rebate showed up via direct deposit.  I don't qualify for the big ones, but I got a nice little sum that is sure to help out a bit.  

As the hype goes, this economic "stimulus package" is somehow supposed to help our economy out and solve all our problems.  After all, we're all going to spend it on consumer goods, which is the surefire solution to everything?

On caveat: I live in Canada now.  I'm going to spend all the money here.

Remember that phrase?

Well, it still applies: perhaps more so now than ever.

Consider the latest GDP report:

Economy Sputters With 0.6 Percent Growth
Thursday March 27, 9:18 am ET

By Jeannine Aversa, AP Economics Writer

Economy Nearly Sputtered Out at End of 2007, Probably Faring Worse Now

WASHINGTON (AP) -- The economy nearly sputtered out at the end of the year and is probably faring even worse now amid continuing housing, credit and financial crises.

The Commerce Department reported Thursday that gross domestic product increased at a feeble 0.6 percent annual rate in the October-to-December quarter. The reading -- unchanged from a previous estimate a month ago -- provided stark evidence of just how much the economy has weakened.

A story in the New York Times today highlights efforts at the community level in Baltimore to forestall foreclosures in the East Baltimore neighborhood of Belair-Edison.

As home foreclosure rates rise around the country, they appear to have stabilized or dropped in one neighborhood here, Belair-Edison, providing a model that local housing officials say can be copied in other areas.

For much of the decade, Belair-Edison, a lower- and middle-income neighborhood on the edge of East Baltimore, has had one of the city’s highest foreclosure rates. From 1993 to 2003, one in three homeowners in the neighborhood lost their homes.

But since those peak years, foreclosures have fallen by more than a third, a development that Thomas E. Perez, Maryland’s secretary of labor, licensing and regulation, says can be largely credited to Mr. Miller’s group, the Belair-Edison Neighborhood Initiative, which uses public records and street level marketing to reach high-risk borrowers before they fall too far behind.

This diary is an invitation for discussion and further information from knowledgeable Kossacks, to consider whether the JPMorgan-Bear Stearns (JPM-BS) deal merits a criminal investigation. It will be short, assuming people are as familiar as I am with the major details as the media reported them.

so... what did we have here?
After its leadership insisted that it has no liquidity problems, BS admitted Friday (11 days ago) that it does. Then over the weekend, it agreed to be bought for $2/share by JPM - placing the overall "sale" price (for it isn't really a sale, only a stock swap) at much less than the market value of its office building.

JPM, the benevolent buyer, agreed to undertake the deal only after the Fed stepped in to virtually guarantee it makes money from it.

Slightly more below the fold...

  I have been waiting to hear what the presidential candidates have to say about how to address the financial crisis gripping the country, and the international markets. Very little of substance has been said, beyond vague pronouncements—until yesterday. Sen. Hillary Clinton released a plan, which, in my humble opinion, underscores why another Clinton Administration would do very little to get control over the fundamental problems in our financial system—-because she proposes putting people in charge of the reform who caused the very crisis we are in.

I hate to enter the circular firing squad that is the hallmark of my party these days, but this week's Krugman column really got to me.  Was it this gem?

But it’s just wrong to blame the war for our current economic mess: in the short run, wartime spending actually stimulates the economy.

Strangely, no.  Although, I was amused that Krugman conflated the wartime spending of Vietnam (where, say, we made our own steel) with that of Iraq  (and our mysteriously missing billions).  Hint: you can't spell GDP without "domestic", Paul.

No, what bothered me was that after carefully informing the public on the need for regulation in the financial industry, he uses it to pillory both the Obama and Clinton campaigns in a manner that can only be called "fair and balanced".  Are two unlike things equal?  Find out below the fold!

It being Easter Sunday, when Christians are supposed to celebrate Christ’s defeat of death (entropy) I thought it appropriate to share an awesome 1993 study by heterodox economist Michael Hudson I discovered two weeks ago: The Lost Tradition of Biblical Debt Cancellations (the link to the pdf file is near the bottom of the page, just above "books"). In my humble opinion, this document has the potential to undo centuries of damage done to Christianity and Judaism by oligarchs and usurers.

Especially in the context of the ongoing economic and financial crises, in which it is clear that we the people are being sacrificed to save a rotten and useless financial system – bailouts for Bear Stearns and Wall Street, but not foreclosed homeowners - Hudson’s study is very powerful. So first let me set the context.

Over the past few years, the likelihood of a significant financial crisis in Anglo-American financial markets, and consequent economic stresses centered in both countries, has been a topic of regular commentary and analysis on these pages. In fact, a collaborative topical discussion of the matter and likely outcomes was published  at Eurotrib.com shortly after the long out-of-power Democratic Party was installed in both houses of Congress in the United States.

In light of recent market events, and the first bank failures in decades in the both UK and US, it would be a good time to revisit that discussion.

Back then, we were discussing how the Euro had surpassed the dollar in terms of circulation. Now, we're observing that the US is no longer the largest economy in the world. All of this quite predictable, and predicted.

The feds backed a takeunder of Bear Stearns (BSC) by JP Morgan (JPM) with a $30 billion special financing. JP Morgan will buy Bear for about $2 per share or $236 million, a 93% discount from $30 close on Friday. This week so far, BSC shares, although suffered a monumental loss, always traded significantly above the $2 mark. The lowest it got was $2.84. Now it is trading close to $7, a full 250% above the takeunder price. The market is simply not buying the Feds BS and don't believe that the deal would go through or is necessary.

Bailout bankrupt homeowners victimized by predatory lenders allowed to run amok by free-market extremists? Or homeowners facing foreclosure due to the the no jobs, no growth, high cost Bush economy? Absolutely not. That’s rewarding financially irresponsible layabouts bereft of the Christian work ethic and moral values.

In what has become standard fare for Bush in the time of crisis, he praised the hard work of Secretary of the Treasury Henry M. Paulson Jr this am.

The markets reacted appropriately.

In France, the European Union, the rest of the industrialized world (but not in the United States), healthcare is a right of citizenship. During an economic downturn, Americans face daunting odds, access to healthcare is one of the first luxuries to disappear.

I just finished reading the excellent diaries by bonddad and Jerome a Paris. Please forgive my random and panicked thoughts. But I am panicked just like all of us.

One huge thought is circulating through my brain. And I'm sorry to say this.  We Americans are not very lucky.  If we lived in any other industrialized nation, we would not need to add to all the other crises bearing down on us, how to come up with the scratch to pay for healthcare.

But we do. In the United States, healthcare is business, and if you can't pay for it, you don't get it--except as Mister Bush tell us, all is good because you can go to an emergency room.

This post is also on my blog.  I will update it throughout the day as events develop.  Any further updates from the trading day will be on my blog.

There were some fast moving developments in the Bear Stearns situation.

Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed -- after prodding by the federal government -- to be sold to J.P. Morgan Chase & Co. for the fire-sale price of $2 a share in stock, or about $236 million.

I don't think I've ever heard of Sunday being this busy in financial news. Just to get everyone caught up with what is going on as of right now regarding the Bear Stearns collapse and the Federal Reserves actions in an attempt to contain the damage as rumors swirl that Lehman Brothers might be the next major bank taken down by exposure to what has been aptly termed "toxic" assets otherwise known as subprime mortgages.

Free market dogma is easily summarized: the market is always more efficient than government, so government can never do anything (health care, weather forecasts, renewable energy subsidies) as well as the private sector.

As Greenspan famously testified (my emphasis):

I believe, as I have noted in the past, that the federal government should eschew private asset accumulation because it would be exceptionally difficult to insulate the government's investment decisions from political pressures. Thus, over time, having the federal government hold significant amounts of private assets would risk sub-optimal performance by our capital markets, diminished economic efficiency, and lower overall standards of living than would be achieved otherwise.

Now that Greenspan's successor may transfer hundreds of billions of dollars of assets from the country's most sophisticated private-sector investors to the government, Greenspan and the free-market fundamentalists must be really, really concerned about the risk of suboptimal performance.

Bear Stearns is done, and the speed of its collapse is nothing short of stunning.  A news story just up on the Wall Street Journal's website says that Bear Stearns, which just got bailed out by the feds on Friday, will announce either a sale to JP Morgan or a bankruptcy filing before the markets open in Asia on Monday.  In a frightening sign of instability, analysts worry that the failure to resolve the Bear situation before markets open could lead to a "financial crisis":

Barbara Ehrenreich - commenting on the bankrupcy claims of the Sharper Image company - has asked an interesting question: How much lower can consumer spending go? She also observes that

The malls are like mausoleums, retail clerks are getting laid off and AOL recently featured on its welcome page the story of a man so cheap that he recycles his dental floss–hanging it from a nail in his garage until it dries out.

Such is life at the tail end of the regime of America's petulent, profligate "CEO president." It seems that the warfare state and its leadership corps of crony capitalists, with its stark imbalances of wealthholders and workers, is, or perhaps has been, reaching a crisis point.

Below is a compilation of two posts from my blog last week.  Combined they show an economy that is in serious trouble.