Now that Lawrence Summers has removed himself from consideration
as Federal Reserve chairman, President Obama is free to launch him into Syria
as the first human rehypothecation weapon of mass
destruction, where he can sow enough confusion
between Assad’s Alawites and the Qaeda
opposition to collateralize both factions into contingent convertible capital
instruments buried in the back pages of Goldman Sachs’s balance sheet
so that the world will never hear of them again — and then the Toll
Brothers can be brought in to develop Syria into a casino / assisted living
complex that will bring hundreds of good jobs to US contractors in the
region.
No doubt the stock markets will fly like
eagles today. Nobody knew what monkeyshines Mr. Summers might have pulled
over at the Fed and it was making investors nervous, as well as the big banks
who employed Mr. Summers occasionally as some kind
of policy bagman. So a big sigh of relief blew over the Northeast Region of
the nation like the gusts of autumn air that swept away a fetid hump of
stale, wet tropical weather that ruined all the ladies’ party hair in
the Hamptons this month.
Now that Syria has been disposed of —
that is, indefinitely consigned to failed state
purgatory — the world can focus its remaining attention on the almighty
taper. I’m with those who think we’ll get a taper test. That is,
the Fed will cut back ten or fifteen percent on its treasury bond purchases
to see what happens. What happens is perfectly predictable: interest rates
shoot above 3 percent on the ten-year and holders of US paper all the world
round fling them away like bales of smallpox blankets and… Houston,
we’ve got a problem. After a month (or less) of havoc in the bond
market, and the housing market, Mr. Bernanke will issue an advisory
saying (in more words than these) “just kidding.” Then it will be
back to business as usual, which is to say QE Forever, which might as well be
saying “game over.”
One must feel for poor Mr. Bernanke.
He’s tried to run a long-distance foot-race against reality and now
it’s breathing down his neck near finish line. The idea was to pump
enough artificial “money” into the economy to give it the
appearance of motion, but all he accomplished in the words of my recent
podcast guest, Eric Zencey, was a commotion of
money, and the commotion was pretty much limited to a few blocks of lower
Manhattan, two ribbons of real estate running up the East Side and Central
Park West, and a subsidiary disturbance out on the South Fork of Long Island.
Everybody else in the country was left to stew in a tattoo-and-malt-liquor
torpor at the SNAP Card application office.
The Fed can only pretend to try to get
out of this self-created hell-hole. The stock market is a proxy for the
economy and a handful of giant banks are proxies for the American public, and
all they’ve really got going is a hideous high-frequency churn of
trades in conjectural debentures that pretend to represent something hidden
in the caboose of a choo-choo train of wished-for
value — and hardly anyone in the nation, including those with multiple
graduate degrees in abstruse crypto-sciences, can even pretend to understand
it all.
When reality crosses the finish line ahead of
poor, exhausted Mr. Bernanke, havoc must ensue. All the artificial props fall
away and the so-called American economy is revealed for what it is: a surreal
landscape of ruin with nothing left but salvage value. Very few people will
get a living off of the salvage operations, and there will be fights and
skirmishes everywhere by one gang or another for control of the pickings. The
utility of money itself may be bygone, along with
the legitimacy of anyone or anything claiming institutional authority. This
is what comes of all attempts to get something for nothing.
By the way, for those of you still watching
the charts, notice that gold and silver may bob up and down week-by-week, but
the price of oil remains stubbornly above $105-a-barrel no matter what
happens. That is the only number you need to know to predict the fate of
industrial economies.
This short, charming book will
make you laugh (click here to buy)
|