Wow! Just wow!

This is pretty technical, but in essence X owns junk bonds, so he swaps them for Treasury bonds with a promise to un-swap later.  Then X has good collateral to post to buy another asset.  Y owns Treasury bonds, so he swaps them for junk bonds.  Then he has yield (the 10-year Treasury pays less than 2% today).

Accounting regulations allow everyone to pretend it doesn’t exist.

Trillions of dollars of such counterfeit credit are being created (inflation, by my definition: https://monetary-metals.com/inflation-an-expansion-of-counterfeit-credit/) though this does not cause in itself a change to the “money supply”.

http://www.zerohedge.com/news/2013-02-07/moden-market-alchemy-explained-converting-junk-debt-supersafe-treasurys-out-thin-air