Who or whom will pick up the credit cycle acceleration slack if the US Government slows its borrowing in any meaningful manner ahead? US non-financial sector debt relative to GDP remains at an all time high. Any contraction in this key relationship will imply credit cycle contraction/deflation. The analysis above suggests to us that state and local governments as well as US households are in no position to or have no desire to leverage up in any meaningful manner, especially set against what we’ve seen in the magnitude of Government debt growth even over the last few years alone. Non-financial sector corporations will necessarily act in their own bests interests and really cannot be induced to borrow. How does the Government stop levering up and not induce a contraction in macro non-financial sector debt to GDP that really defines current the macro credit cycle of the moment? Up to this point in the current cycle as per the message of historical non-financial sector debt to GDP, the Government has done a masterful job of maintaining macro credit cycle stability. Could all of this change dead ahead? You better believe it could. In like manner, the Fed and Federal Government may quickly come to find out the ramifications of a potential decline in non-financial sector debt to GDP in the latter half of this year. QE3, more government borrowing to come? What would all of this mean for the already sick US dollar, precious metals, commodity prices, etc? This is all part of the greater equation. We suggest to you that this set of dynamics will be critical over the remainder of this year and into next. Bernanke’s worst nightmare must be the potential for contraction in macro US non-financial sector debt relative to GDP. Ben, how ya sleepin’ lately?