Stuffing banks with reserves via Quantitative Easing doesn't spur lending if there's no real economy demand. The current shift is driven by a genuine "pull" for credit from sectors like AI and onshoring, making banks willing to lend, which is a far more powerful economic force.

The post-Powell Fed is likely to reverse the QE playbook. The strategy will involve aggressive rate cuts to lower the cost of capital, combined with deregulation (like SLR exemptions) to incentivize commercial banks to take over money creation. This marks a fundamental shift from central bank-led liquidity to private sector-led credit expansion.

Neoclassical economics operates like a religion, ignoring empirical data that contradicts its core tenets. The crucial role of bank-created credit in causing financial crises is dismissed because accepting it would unravel their entire equilibrium-based model. This willful ignorance is why they consistently fail to predict crashes.

Only the Fed and commercial banks can create new, spendable money out of thin air. In contrast, credit creation, like in shadow banking, simply reallocates existing money from a saver to a spender. This distinction is crucial for understanding economic stimulus and risk.

For the past decade, the Fed was the primary driver of liquidity. Now, the focus shifts to commercial banks' willingness and ability to create credit to fund major initiatives like AI and onshoring. Investors fixated on Fed policy are missing this crucial transition.

Mainstream economists mistakenly focus on the *level* of private debt. The critical metric is the year-over-year *change* in debt, or credit. This single figure drives aggregate demand and its collapse from +15% to -5% of GDP directly caused the 2008 financial crisis, a crash foreseen by those tracking this data.

When a bank loan is repaid, the money created for that loan ceases to exist; it isn't just transferred. Widespread debt paydown, often seen as financially responsible, reduces the overall money supply. This directly shrinks GDP and can trigger recessions.

Economist Steve Keen's model suggests GDP is a function of money supply and its velocity. Since banks create money through private loans, the rise and fall of private debt directly dictates GDP growth and employment levels, a factor mainstream economics largely ignores.

The vast majority of global trade is funded by US dollars that exist outside the US, known as Eurodollars. This system operates beyond the Fed's direct control and relies entirely on trust. Money is created when banks extend credit and destroyed when they don't, making the global economy inherently fragile.