Implode-o-Meter News - "We Are Becoming Convinced That The System Won't Stabilize" - Citi Explains How Central Banks Broke The Market

We talk about money flowing from one market to another as though there is a fixed amount of it. Yet we have argued elsewhere that it is constantly being created through credit expansion in the private sector and on central bank balance sheets, or destroyed through deleveraging and defaults, and that changes in the multipliers -- as opposed to the flows themselves -- are at least as important as a driver of market movements and economic growth.
On multiple fronts we fear that what was a positive-sum game previously is now turning negative, and that the potential for some recent trends to run and run is still underappreciated, with potentially far-reaching repercussions... Constraints on financial leverage do not just lead to liquidity settling at a lower level; they risk sparking a cycle of ever-diminishing liquidity. Banks exiting markets do not just lead to increased opportunities for the rest; they lead to a diminished pie for all

I.e. the deflation of a system based on excess leverage is, well, deflationary...

Relevant:

"We Are Becoming Convinced That The System Won't Stabilize" - Citi Explains How Central Banks Broke The Market