O h, that sound you hear this morning is the distant roar of European
equity markets puking after the latest round of phony bank “stress tests” —
another exercise in pretend by financial authorities who understand, at
least, the bottomless credulity of the news media and the complete
mystification of the general public in monetary matters. I rather expect that
roar to grow Niagara-like as US markets catch the urge to upchuck violently.
Problem is, unlike Ebola victims, they can’t be quarantined.
The end of the “taper” is upon us like the night of the hunter,
conveniently just a week before the US election. If the Federal Reserve is
politicized, the indoctrination must have been conducted by the Three
Stooges. America’s central bank never did explain the difference between
tapering and exiting their purchases of US treasury paper. I guess that’s
because it has other interventionary tricks up its sleeves. Three-card Monte
with reverse repos… ventures into direct stock purchases… the setting up of
new Maiden Lane type companies for scarfing up securities with that piquant
dead carp aroma. Who knows what’s next? It’s amazing what you can do with
money in a desperate polity with a few dozen lawyers.
Of course, there is the solemn matter as to what happens now to the
regularly issued treasury bonds and bills. Do they just sit in an accordian
file on Jack Lew’s desk next to his Barack Obama bobblehead. The Russians don’t
want them. The Chinese are already stuck with trillions they would like to
unload for more gold. Frightened European one-percenters may want to park
some cash in American paper to avoid bail-ins and other confiscations already
rehearsed over there — but could that amount to more than a paltry few
billion a month at the most?
What do the stock markets do without up to $85 billion a month (peak QE)
sloshing around looking for dark pools to settle in? Can US companies keep
the markets levitated by buying back their own shares like snakes eating
their tails? Isn’t that basically over and done? And exactly how do interest
rates stay suppressed when only a few French tax refugees want to buy
American debt? I don’t think anybody knows the answer to these questions and
the scenarios are too abstruse for the people who get paid for supposedly
writing learned commentary in the sclerotic remnants of the press.
A few things are for sure, though they are sedulously kept out of the
public discussion by interested gate-keepers. One is that the western
economies have lost the ability to generate real new wealth of the type that
their debt-based monetary systems require for ongoing operations (such as
paying interest on old debt). Instead, we’ve entered a liminal era when fake
wealth passes for wealth. Jive capital poses as capital. The main reason for
this, of course, is the inability of world energy producers to meaningfully
increase energy production in a way that does not suck more capital out of
the system than the system can regenerate. But that conversation also has
been outlawed from the public arena in “Saudi America.”
I suspect the subject will force itself on the national consciousness in
the year ahead as one company after another in the shale oil regions craps out
on a shortage of available investment capital. That’s the inflection point
where fake wealth is unmasked for what it really is: crippled capital
formation. The disappointment from that looming event will thunder through
our society.
In the meantime, the distractions are many and powerful. Ebola may appear
controlled for the moment in the USA, but the host countries in West Africa
are virtually falling apart and the demographic movement out of failed
economies like Liberia’s would suggest an awful dynamic for the spread of
that disease into new regions. ISIS (or whatever we call them) is putting on
a diversionary show on the Turkish border, but the real action awaits in
Baghdad, perhaps poignantly at Christmas time, when morter rounds start
falling on the US embassy in the Green Zone and the evacuations commence.
