“Holy smokes,” Janet Yellen must have barked last week when Japan
stepped up to plug the liquidity hole left by the US Federal Reserve’s final
taper trot to the zero finish line of Quantitative Easing 3. The gallant
samurai Haruhiko Kuroda of Japan’s central bank announced that his grateful
nation had accepted the gift of inflation from the generous American people,
which will allow the island nation to fall on its wakizashi and exit
the dream-world of industrial modernity it has struggled through for a scant
200 years.
Money-printing turns out to be the grift that keeps on giving. The US
stock markets retraced all their October jitter lines, and bonds plumped up
nicely in anticipation of hot so-called “money” wending its digital way from
other lands to American banks. Euroland, too, accepted some gift inflation as
its currency weakened. The world seems to have forgotten for a long moment that
all this was rather the opposite of what America’s central bank has been
purported to seek lo these several years of QE heroics — namely, a little
domestic inflation of its own to simulate if not stimulate the holy grail of
economic growth. Of course all that has gotten is the Potemkin stock market,
a fragile, one-dimensional edifice concealing the post-industrial slum that
the on-the-ground economy has become behind it.
Then, as if cued by some Satanic invocation, who marched onstage but the
old Maestro himself, Alan Greenspan, Fed chief from 1987 to 2007, who had
seen many a sign and wonder himself during that hectic tenure, and he just
flat-out called QE a flop. He stuck a cherry on top by adding that the
current Fed couldn’t possibly end its ZIRP policy, either. All of which
rather left America’s central bank in a black box wrapped in an enigma,
shrouded by a conundrum, off-gassing hydrogen sulfide like a roadkill
‘possum. Incidentally, Greenspan told everybody to go out and buy gold —
which naturally sent the price of gold spiraling down through its previous
bottom into the uncharted territory of worthlessness. Gold is now the most
unloved substance in the history of trade, made even uglier by the overtures
of Mr. Greenspan. Personally, I think the more violently gold devalues for
the moment, the more extreme the reaction will be when the first glimpses of
reality pierce the twilight’s last gleaming of official US market
intervention shenanigans.
All this goes on, by the way, because an essential problem remains: the
world cannot pay back its accumulated debt and the money maestros of world
finance don’t dare even try to unwind it in an orderly manner, fearing they
will open up an international monetary sucking chest wound of deflationary
doom. And this does nothing to brighten the prospect that evermore new debt
can ever be repaid. All that remains are various three card monte maneuvers,
hot potato games, and musical chair tournaments using the last kinetic rocket
thrusts of global credulity to pretend that contraction is not already here,
walking amongst us, like the ancient Harvestman of yore, swinging his scythe.
Of course, few doubt the reality of Ebola. And ISIS (or whatever it’s
called) also works its ghastly hoodoo in the gummiest region of the world,
and they both share an interesting feature these days: reporters are
discouraged from going into either hot zone where the threat is that they
will bleed out through all the orifices from Ebola or have their heads hacked
off on video by ISIS. So we are not getting the best information out of Ebola
West Africa and those parts of the Middle East where ISIS is at large. The
situation is apt to be rather worse than we are being told. The financial
markets shrugged off both these threats by the time Halloween rolled around,
but I wouldn’t be so confident that story is over for either of these two
ugly influences. If the world had a face, it would have fragility written all
over it.
