by James Howard Kunstler

The psycho-historians must be having a field day with all the “taper” chatter fogging the valleys of Blog. The topic certainly presents a sticky hairball of a compound dilemma to anyone who cares about the fate of the nation. If the Federal Reserve tapers its monthly purchase of US Treasury debt paper plus a nearly equal amount of dodgy mortgage foam frothed up by Washington’s housing bubble machine… well, then, the equity markets will tank, or so the theory goes. If they don’t taper, they’ll permanently disable the function of the financial markets, and possibly blow up the global currency system.

Of course, they recently demonstrated that tapering itself is not necessary to move the markets; a rumor of tapering will get the job done. But that’s a theory for the moment, too, because by so doing the markets may have already priced-in any actual taper to follow. Meaning that such taper talk probably won’t work very well in repeat applications.

Outside the fetid terrarium where US economists live, like skinks kept as pets by bankers, other forces are in motion. For instance, there’s the non-theoretical, non-financial economy, which is now apparently based on the trade in tattoos, and the journey by automobile from the nearly foreclosed home to the tattoo studio, and to the hamburgers, pizzas, and fried chicken thighs consumed on each end of the journey. Judging from the sheer number of tattoos-per-capita, one might think that a certain tattoo saturation point had been reached in this country, unless the market can be expanded, say, to maternity wards where newborns can get full “sleeve” and neck jobs on Medicaid.

Over in Europe, the members of the EU are being eaten alive by a carnivorous sub-species of giant financial hairball, and another theory says that whatever “money” can get out of there (while the getting is good) will flood into the USA, and more specifically into those very equity markets spooked by the chatter of tapering QE. Perhaps Fed officials (and their pet skinks) are hoping that some of that “money” will sop up whatever US Treasury paper the Fed tapers off buying. (After all, who else would buy the stuff ?) That would only be plausible, though, if the interest rates went up, which they might anyway. But if they do they would turn around and bite the US Department of the Treasury on its fat butt by increasing the percent of government spending needed to pay interest on debt to a level that would effectively put the government out of business — in which case we’d be in the grips of the same carnivorous hairball that’s eating Europe, and then all that “money” would have to find yet another continent to flee to. You see how complicated it gets? This is giving me the vapors. Anyway, those interest rates on US Treasury paper would have to go up a fat lot to compete with the allure of an equity market frothing toward the 20,000 hash-mark.

Personally, I would not encumber my view of things-to-come in such a rococo maze of theoretical conjecture. Rather, I would settle for the simpler diagnosis that we’re just flat fucked, having made all the wrong choices on just about everything for a very long time. Speaking of wrong choices, the smartest money in the betting pool for the next Fed chair pick shifted strangely last week to the lugubrious figure of Lawrence Summers, who was the longest of long-shots just a week before. This is the same Lawrence Summers lately on the payroll of CitiGroup and other institutions utterly dependent on Federal Reserve policy. They had to find a revolving door big enough for King Kong to push Larry through. This is the same Larry Summers who remarked not long ago that Quantitative Easing was not an effective way to stimulate the economy. Apparently he did not notice that QE is wonderfully effective for juicing the tattoo economy because it produces vast new quantities of citizens who perceive themselves to be losers.

Mr. Summers will be entering the scene the way Vincent Price used to enter a Hammer Studio horror film — reliably delivering some deadly unpleasantness. I don’t think a more perfect figure might be found for piloting the garbage barge of American finance over a Niagara Falls of consequence.

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