On September 15, 2008 (aka Q3) 2008 everything broke. What happened next has been a piecemeal triage by one (then all) central banks to stop the crunch in the world's credit markets, by monetizing the bulk of public issuance (i.e., creating money out of thin air), and thus keeping GDP from collapsing, while private sector debt creation has stalled and in many cases has been put in reverse. And while the US household balance sheet which we showed earlier is important from a stock perspective of asset, liability and wealth allocation, as everyone knows money (if not wealth) comes from credit, and should the credit formation system be shuttered it means game over. So what, according to the Fed's Flow of Funds, has been the credit creation, and destruction, since Q3 2008, i.e., during the neverending Great Depression Ver 2.0? Well, of the $2.8 trillion in total debt created (table L.1 in Z.1), $5.8 trillion or 208% has come from, you know it, Uncle Sam: this is the amount by which US Treasurys have risen, and will continue to rise as long as the two key sectors continue to delever. These sectors are the Household at $855 billion in deleveraging in the past 4 years, but most importantly the Financial Sector who have unwound a whopping $2.9 trillion in debt since Q3 2008. Which brings up an interesting question: why has the Financial Sector refused to lever, and why did it delever by $162 billion in Q2 2012 - the most since Q2 2010? Simple - regulations such as Basel III (which will eventually be scrapped) and lack of confidence in a system, in which the central counterparty is and will be the central bank. In other words, the more Treasury issuance is monetized by the Fed, the greater the penetration of central-planning, the lower the confidence in the system, the greater the deleveraging by everyone else, until finally, as David Rosenberg predicted, the Fed owns everything! Is this the biggest Catch 22 of the modern Depressionary market? You bet.