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Perry wants Jack to go with him and visit a general of the U.S. Army, where they can "dig the most beautiful girls you ever saw."
Jack goes (and take Elliot with him since Billie is at work), but the "beautiful girls" turn out to be between the ages of eight and ten, and the daughters of said general. Perry can't take his eyes of the little girls and Jack realizes he's "dangerously insane." He says he's going to kidnap the pony-tailed ten-year-old and then leaves with her on a walk for an hour while Jack stays and talks with the mother.
Jack is out of it and doesn't really understand anything that's happening.
Elliot gets in a fight with some of the other little kids and kicks at Jack when he tries to help – it seems he hates Jack's guts. Jack calls Billie who promises to come pick them all up from the general's. She is unfazed by the news that Perry is threatening to kidnap small girls.
So Jack focuses his attention on chatting with the general, who gives him more alcohol.
Jack finds him as sinister as the general he met back in the restaurant in Big Sur.
When Perry returns with the little girl, Jack realizes "everybody is jut living their lives quietly" and that only he himself is insane.
He wishes Cody were there to explain it all to him. He's worried that his paranoia is taking over, that he "read[s] plots into everything" and is "beginning to go seriously crazy."
With this "strange apocalyptic madness […] now shuddering in [his] eyeballs," Jack maintains that he just can't understand what's going on around him.
He wants to curl up in Evelyn's arms, but he ends up with Billie.