The money machine
The financial system is short of liquidity. "What???" you say. "Despite the trillions of dollars that the Fed, the Bank of England, the Bank of Japan and even the ECB have been pumping into it through their various varieties of money creation? How can the financial system POSSIBLY be short of liquidity?" Trust me, it is. But the conventional banking system isn't short of liquidity. The shadow banking system is. And this is a very serious matter, because the shadow banking system and conventional banking system are critically interlinked. If money stops circulating in the shadow banking system, it can't circulate in the conventional banking system either. The effect is that conventional banks end up awash with cash that they daren't lend out, and the shadow banking network grinds to a halt. Which is what is happening. So why isn't money circulating in the shadow banking system, and why does this affect the transmission of money in the convention...