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: though this does not cause in itself a change to the “money supply”.

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