Guest Post: Timing Is (Not) Everything

Tyler Durden's picture

Submitted by Howard Kunstler of,

“Federal Reserve officials are closer to winding down their controversial $85 billion-a-month bond-purchase program, possibly as early as December, in the wake of Friday’s encouraging jobs report.”

That from the much-deservedly maligned John Hilsenrath, widely regarded to be the Federal Reserve’s ventrioloquist dummy over at the Wall Street Journal, as in, from God’s mouth to the jittery multitudes. Of course the jobs number was just another highly seasoned and over-leavened cupcake from the Bureau of Labor Statistic’s magic hedonic oven, so you can be sure that the predicate of that statement is… how to put it delicately…  the latest arrant lie with hypothetical icing on top.

Everybody knows that the Federal Reserve’s money-pumping operations have become a replacement for what used to be an economy. Therefore, no more money pumping = no more so-called economy. It’s that simple. But it doesn’t mean that the Federal Reserve won’t make a gesture and I wouldn’t be surprised if they try it during the season that Santa Claus hovers over the national consciousness — or what little of that remains when you subtract the methedrine, the Kanye downloads, the fear of an $11,000 bill for an emergency room visit requiring three stitches, and all the other epic distractions of our time.

The next meeting of the Fed’s Open Market Committee (FOMC), where such things as taper-or-not are considered, is Dec. 17. The Fed has to make some kind of gesture to retain any credibility, so I suspect they’ll go for a symbolic shaving of five or ten billion a month off the current official bond-buying operation number of $85 billion a month (or $1.2 trillion a year). If they don’t do it, no one will ever believe them again. I call it the “head-fake” taper, because it is essentially a false move.

The catch is that the Fed has more than one back door for vacuuming up all sorts of other miscellaneous financial trash paper securitized by promises already broken, moldy sheet-rock housing, college loans defaulted on, car payments that stopped arriving eighteen months ago, credit cards maxed to oblivion, sovereign foreign economies visibly whirling down the drain, and untold casino bet derivative hedges. Loose talk has it that the Fed is buying up way more dodgy debt than the official number of $85 billion a month. And why not? They bailed out way more than the $700 billion official TARP figure back in 2009 — everything from insolvent European banks to Floridian motels on the REO junk-pile — so nobody should take any particular taper number seriously. They’ll just backfill as necessary.

But even in a world of seemingly no consequence, things happen. One pretty sure thing is rising interest rates, especially when, at the same time as a head-fake taper, foreigners send a torrent of US Treasury paper back to the redemption window. This paper is what other nations, especially in Asia, have been trading to hose up hard assets, including gold and real estate, around the world, and the traders of last resort — the chumps who took US T bonds for boatloads of copper ore or cocoa pods — now have nowhere else to go. China alone announced very loudly last month that US Treasury debt paper was giving them a migraine and they were done buying anymore of it. Japan is in a financial psychotic delirium scarfing up its own debt paper to infinity. Who’s left out there?  Burkina Faso and the Kyrgystan Cobblers’ Union Pension Fund?

The interest rate on the US 10-year bond is close to bumping up on the ominous 3.0 percent level again. Apart from the effect on car and house loans, readers have pointed out to dim-little-me that the real action will be around the interest rate swaps. Last time this happened, in late summer, the too-big-to-fail banks wobbled from their losses on these bets, providing a glimpse into the aperture of a black hole compressive deflation where cascading chains of unmet promises blow financial systems past the event horizon of universal default and paralysis where money stops moving anywhere and people must seriously reevaluate what money actually is.

I think we’ll see them try the head-fake taper. They must. It will be backstopped by and saturated in statistical lying, and everyone will have trouble parsing the probable effect because the chronic dishonesty loose in this land will have deformed and impaired all metrics of true value. At the heart of whatever remains of this economy is fire, and the officers of the Federal Reserve are playing with it. Pretty soon, we’ll get the un-taper, the final surrender to the crack-up boom that awaits before the western world has to go medieval.

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Balvan's picture

Let the Fed do their job, they are smart PhDs, they know what to do. I believe they will make the right decision.

Boris Alatovkrap's picture

Boris is apologize for using of strong language. Please to change "Demented" for "Delusional"

Fukushima Sam's picture

Few drip cynicism and sarcasm quite like Kunstler.

zaphod's picture

What is the Federal Government going to do when after tappering to "only" printing $65B/month causes the economy to collapse.

To rescue the economy then will require well over $200B/month printing, the game will be fully exposed by then.

dcj98gst's picture

Anybody that is watching can see the game now.  The sheep will only see when their trinkets, gas, food double in price in short order.

Overfed's picture

It's already there. I went to Target on Sunday to buy a few things; A gallon jug of laundry detergent, a 38oz. bottle of dish detergent, an 8-pack of paper towels and box of Kleenex plus tax set me back damn near $30, on sale even.  This is in FEMA region X.

It's getting tough to be self-employed nobody these days.

Boris Alatovkrap's picture

Boris is check AmeriKa CPI, there is no inflation! Amazing! BLS and USSA government bureaucrat is smart remove fuel and food from calculation before publish of statistic. In other news, chocolate ration is increase 5g per day to 20g per week. (Number manipulation is fun, no!?)

Boris Alatovkrap's picture

Before abject economic collapse is coming of war. Bankster know in advance of refuse to come in contact of rotational air pressure gradient generator and rather than is watch fiat empire crumble, will force men - father, son, husband - to die first in tactical diversionary. Remember, all war is bankster war.

forwardho's picture

To rescue the economy then will require well over $200B/month printing, the game will be fully exposed by then.

The "game" was fully exposed in 2008. The horror that was seen to be our future led to TARP.

The last 5 years have been Bonus time. Bought with naught but electronic Zeros.


KnightTakesKing's picture

To folks like ZH readers, yes. To the other 99% of Amerikans, they just hum La-La-La-La and pretend everything is okay. The collapse will be a huge shock to them. They fully trust that the government, the Fed (part and parcel of the government they believe) has the smarts and technology to manage things just fine. 

Having the Matrix plugs forceably pulled from them will be catastrophic to their sanity. 

The Final Straw's picture

Plan accordingly. No amount of Au or Ag will save you from a hungry mob of vidiots.

The Final Straw's picture

I used to think this wouldn't end well. Now I know, it just won't end. Time to lever up the assets (wife + dog) and go all in!

Bananamerican's picture

if you don't read Kunstler for a while...He hits you fresh, and you remember why you started reading him in the 1st place...a nice summation...

cossack55's picture

It seems his gallows-humor is also improving.

Rafferty's picture

Yes, but he's been saying it for nigh on 4 years now. And the printing still continues, the sheeple still spend....

Caveman93's picture

Kyrgystan Cobblers’ Union Pension Fund?



Boris Alatovkrap's picture

Photograph of fire blowing entertainer is look like male personal part on fire... is Freudian slip of judgment...?

AmericasCicero's picture

Pretty much sums up the whole situation.  It's art, really.

Renfield's picture

Sheesh. When I said this a few days back, I got no love but from one li'l ol' junker.

But let Mr Kunstler say "head-fake taper" and it's 5 outta 5! Guess it sounds better coming from you, HK, than from a bitter nobody Hedger who don't know the correct verbiage. :-)

Still say this is the obvious next move, though. They can't ever REALLY taper and they can't jawbone it much longer with any credibility, so it's fake-it time. What else can they do? It's the only move left to make.

And, I must admit "head-fake taper" has a much better ring to it. I also think that even an attempt, even the small 'gesture' as Kunstler puts it, will have such an outsized effect on the market that it will have to dry up PDQ. Look what happened when they even mentioned it, last summer.

darteaus's picture

Once a government starts printing money they never stop.  It's politically impossible because the first printings actually deliver growth, so opposition to printing loses political support.  Simultaneously, a cadre of beneficiaries develops around the distribution and receipt of "free" money, so political support for printing grows.  The FSA grows in size and militancy, the wealthy and productive flee - physically or monitarily - followed by hyperinflation, riots, etc.

It's human nature to want something for free, and bankers/politicians manipulate that desire.

Every generation has to learn the hard way that there is no such thing as a free lunch.

enloe creek's picture

alarm, anxiety, awe, consternation, dismay, dread, fearfulness, fright, horror, intimidation, panic, shock, trepidation, trepidity

russwinter's picture

The mini me taper. 

Renfield's picture

The "not Bermonkey's mini-me" taper.

So that us peasants will see for ourselves that it does matter who's in charge of the Fed, that they are not going to QE forever, that the Fed is relevant, that QE will stop soon b/c the economy is recovering, that the Fed can take away the punchbowl, that it matters who's Fed Chairman, that the Fed can see around corners better than you, that the U.S. is not Weimar, that it's different this time, that it really does matter who's in charge of the Fed...

We're in the Yellen Era now. Fiscal Responsibility. Because Barky's America always pays its debts. QE but only b/c they want to not 'cause they have to.The Fed is relevant and it matters who's in charge.

Oh, and Yellen is NOT Bermonkey's mini-me.

Just giving us all a heads-up on the coverage so we can save time from Yahoo, CNBC or Bloomberg. Or at least, until they have to quit even the pretense due to market chokage.

asteroids's picture

Don't be too surprised to see a "surprise" announcement from these asshats Dec 24 or Dec 30.

dick cheneys ghost's picture


are you going to review Rickards new book ''The Death of Money''?

here is RCWhalen's review.......

is this Disinfo or Undisinfo???


piceridu's picture

Overheard in Team Fed's huddle: ...Bullard you go towards the New York Post; Dudley, mention taper on CNBS; Bernanke, do the end around the Wall Street Journal, use Hillensrath and Liesman as your blockers; Yellen, get ready for the hail-mary...Taper Head fake on 3

ebworthen's picture

So CNBC's tagline today is "Crisis Over".

I kid you not.

Dr. Engali's picture

Yeah if that's not a sign to hold on tight I don't know what is.

dcj98gst's picture

I think this is a good signal that THE SHIT FAN SPEWING GREEN gew is going down to be streaming down the leg real soon.

frankTHE COIN's picture

March 9, 2009 was the Mkt meltdown low. But April 2, 2009 was when FASB 157 went into effect. They changed Mark - to - Market to , essentially, Hold for Investment. This was to give the insolvent banks time to clean up their Balance Sheets and become Solvent again. It was'nt working so All the QE free bank money happened to let them have record profits and slowly write off the Toxic Assets.
They are all Still Insolvent. When the Untaper begins it may really be the end of this foolishness.

kevinearick's picture

Survival of the Fittest

Survival, fitting into an arbitrary box, is not the goal beyond the empire. The goal is to prosper.

The net present value of the empire depends upon its descendents. Your net present value depends upon your descendents. Of course the empire wants you to measure with its tools, money and property. Empire wants the dumbest population possible, to provide a stimulus that returns a bred-in response in a positive feedback loop, to grow itself.

To that end, legacy employs an explicit constitution, a contract corporation granting individual rights. The Bill of Rights itself is a bait and swap.

You individual rights do not come from government, despite the assumption embedded in the constitution. If you look at the control board regulations and their positive feedback outcomes, legacy capital assumes that it owns the air you breathe, the water you drink, and the land you farm. From any perspective, including democracy, individual rights stemming from property rights, with compliance income to complete the loop, is pretty damn stupid.

This planet is quite capable of taking care of itself. Humanity poses no threat; it’s just the latest tool, and humanity surpassed its diversity enabling equilibrium a long time ago, which is why it is getting dumber every day.

Those budget deficits measure human stupidity; the value of money is what you choose it to be. Empire is just another direct extension of the distillation gradient, providing you with vision, if you look. The DNA stack has seen this sh-show, and responded effectively, many times before.

The empire morons are printing to infinity and the empire population is decelerating. The empire is self-adjusting.

The Fed re-capitalized from the top down and cut off credit from the bottom up. That’s what all those laws, and all that computer code, is doing, determining bankruptcy preference by family line, resource misdirection. But the morons still have no idea what to do with that money, ‘thinking’ incorrectly that labor under pressure would solve the problem for them, which is why the middle class is imploding and taking capital with it.

Your open gate is never going to have a line in front of it. Don’t stand in line to compete for stupid.

Numbers are great, for regression and reduction, but they cannot create variables. Only you can do that. You cannot extrapolate the future from the past, except to replicate the past with ever greater efficiency.

The numbers tell you that you cannot cross the universe because it is expanding faster than you can travel. Where’s the false assumption?

The empire developers have re-routed water to their own end, the planet is responding, and they are not only not changing course, but are accelerating the stupidity with fracking, inflating land prices in the Bay Area to the delight of the San Francisco Fed, a tool of the international consortium of strategic stupidity, wow, big surprise.

A fever kills the self-replicating virus by accelerating it. Have you ever seen an addict oscillate on withdrawal?

Individuals have three basic stages – talent multiplication, works, and teaching. Most succumb to empire gravity by age two, and most of the rest by their teenage years, each joining a herd on a particular floor, a narrow bandwidth within which they will function until they die. You want to advance your timing depending upon your development, whether you are working in the machine room, on one of the floors, or applying the dress.

An economy has three basic steps; labor is entrepreneurial, capital is regressive, and middle class is the cash cow. History is a wave of wave forms, and most critters avoid change until they can’t.

Capital leverages labor to grow the middle class as a buffer against change, which depends upon labor participation. It adjusts the regulatory dam, ratcheting real estate prices with each artificial business cycle. Labor is obviously no longer interested in legacy capital replication, and is advancing its timing beyond the empire horizon accordingly.

Funny, how a buck gets harder and harder to find, but appears just when the empire least expects it. Build your own measuring instruments.

A carpenter doesn’t need a measuring tape to recognize plumb, line and square; an equipment operator doesn’t need a grade stick to recognize slope; an electrician doesn’t need a meter to recognize current; and you mat know when a storm is approaching by the pain in your lower back. Empires are for automatons that want to be told what to do, when to do it, and how to do it. Laws are measuring devices, which simply delimit the box under consideration, the empire not the universe.

Stand in line when you want to be measured, to measure the output gap, to adjust timing. The last middle class assumed a 40 hour workweek wasn’t possible, much less 24.

Empire is make-work folks. It’s just make-work. And you have much better things to do than react to an empire propaganda instrument like Silicon Valley, measuring itself, hoping that you will follow it into the real estate casino, to keep up with the Jones.

To say the Hillarycare Data Cloud was an overreach is a vast understatement. And Boehner is still on the wrong side of the saw.

The tree of knowledge is just a branch, the one that falls in the storm. Careful where you step, especially when that saddle rotates to drop the load. Only your own can throw you under the bus, you are who you hang out with, and sometimes you want to be thrown under the bus, depending upon where you want the apple to land.

If you want to break the back of empire, a ponzi, give unto Caesar that which is Caesar’s, and build your own. Knowledge is brittle, and so are empires; develop your instinct instead.

The proprietary development system is now so stupid that you can start from scratch, knowing nothing about computers, and build a better system faster than Microsoft can chase down its compounding economic activity errors. Boeing isn’t replicating itself with greater efficiency by accident. No one of any value showed up for the Dreamliner exercise because they were ruled out by the rules of engagement, the assumption of empire certification assumptions.

The coastlines are not suffering from oxygen deprivation by accident. Empires are sewers, which is why plumbers get paid better.

Mom and pop appear to be stupid, until they don’t, when their children are far ahead of the game. They’ve been to the meetings, written the job descriptions, and watched the sh-show from the mechanical raceway. Empires drown out individual lights, so the majority doesn’t recognize them until the empire light goes out.

If it’s all about monetary and fiscal policy, hire as many make-workers as you like, and work them as many hours as you want, to float the middle class bloat as far down stream as you like, to inflate capital as high as you want, and take the old empires with you, out into the desert again. Labor is always positioned long before capital or the middle class understands what is going on around them.

If you want to follow the derivatives of people who don’t care for themselves, by majority vote, that’s your business. Labor’s workweek is not subject to majority vote. What has the appearance of majority vote done for the Boeing machinists, or any other union in the last 50 years, other than paying it to be the monkey in a rigged cartel lottery generator?

You find yourself in adversity, “ready to give, willing to share….” Practice, beyond the horizon. Surviving in a sewer is not the goal. Learn to listen and listen to learn. Add I/O. The kernel is only rocket science if you make it so.

Seeking Aphids's picture

Can I have some Pink Floyd with that?

dcj98gst's picture

"China alone announced very loudly last month that US Treasury debt paper was giving them a migraine and they were done buying anymore of it."

Question is when will they start to unload.  That is when the SHTF.


"I think we’ll see them try the head-fake taper. They must. "


How many times can they cry wolf?  3? 4?  jawboneing is going to lose its effectiveness real quick.

Itch's picture

Of course they go down the smoke and mirrors route, what do people actually expect? The fed see it being deployed, day in and day out , so efficiently in Washington by anyone strong enough to take a piece - the un-taper saga will drag on until every soul on the globe surrenders to the gobbledegook, the game will take as long as it takes.   

rlouis's picture

The taper is a lie



moneybots's picture

"At the heart of whatever remains of this economy is fire"


The problem is that since fire is the economy, it isn't smokin'.

Son of Captain Nemo's picture

How much more succinct can it possibily get? 

Like the town crier Steve Liesman story earlier today -we'll probably want to ensure that 2013 is the best Christmas ever. 

Max out those credit cards and buy the best of everything and enjoy yourself as you never have before. Cause we're at the top of the biggest, fastest, badest and meanest of roller coasters ever built courtesy of "Benny Shalom & Co."

X marks the spot and it's bigger than 12-Gs to the bottom.

Enjoy the ride!

Things that go bump's picture

Nobody will make it to the bottom, 12 Gs will kill us all.

moneybots's picture

"The Fed has to make some kind of gesture to retain any credibility"


A gesture doesn't have any credibility.  Real actions speak louder than fake ones.

K-Dog's picture

Yeah but nobody knows the difference anymore.

giggler321's picture

Which is the odd one out?  Morse 1, Morse 2, ISO or Fed?

icanhasbailout's picture

Didn't they already try this one? QE2-ish?

10mm's picture

Im maxed out and BUSTED out.

vote_libertarian_party's picture

I'm still waiting for Tyler to post an article on how the accounting works\implications of the Fed buying a couple of trillion in big loser MBS.


I've never seen an analysis of how that plays out.

TheInfoman's picture

The elephant is the room is interest rates.  When tapering was suggested in May, the 10yr doubled its rate.  So while everyone is watching the economy, an interest rate rise will kaboom all those big-bank derivative bets.  At that point a 1% contraction vs a 1% expansion will be meaningless.

Seeking Aphids's picture

Recurring thought: the US economy is like the guy who fell between the train and the platform just as the train was pullling away. They finally stop the train and the guy remains stuck in place......can't be moved as his guts have been completed twisted around and any movement will end in death. The medics know this (having seen it before) and can only make the guy comfortable...get him a phone to call his loved ones to say good-bye. Funny thing is...the guy is still awake and 'ok' and really doesn't believe it is game over.... until they move him (the trains have got to keep running). QE/ZIRP is just an attempt at life support that is doomed to failure.....we are just waiting for the plug to be pulled and then it is truly game the meantime have another marguerita! Too pessimistic? I sure hope so.........prove me wrong someone, please.

s2man's picture

When the financial system blows up, I'm not going medieval. I only going back to the early 1900's.