Evidence E: most importantly, the sequential change in the combined liabilites represented by both the shadow and traditional banking system. As the arrow indicates, it is now positive to the tune of $3.8 billion: this is probably the most important fact for monetary policy in the past two years.Of course, all of this is possible only because the state is now the ultimate backstopper of all risk. And now that the monetary inflection point has been reached,and the negative convexity event has passed, we expect that the debasement of the US currency will now start in earnest.
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