Hat tip to Gary North for the following graphic from our friends at the Federal Reserve, which shows the "money multiplier" in recent decades. One interpretation is that it shows the level of fear at the banks. When they are more optimistic, they are more inclined to lending their reserves. When they are not, well, you see the result:
Mr. North strongly believes that inflation is inevitable and definitely rejects the idea that deflation can take hold for any sustained period of time (my interpretation of reading his Reality Check newsletter over the past four or five years). This chart above screams out one key item missing in that analysis (shared by many other bright minds, and Gary is very sharp) - that social mood drives all before it. Mood makes markets. News tells stories we make up to explain mood and its effects. What you are seeing is nothing less than fractional reserve banking choking itself to death as optimism has shifted to fear.
Fractional reserve banking thrived in a multi-century era of unprecedented optimism. We are in the early stages of an era that will correct that optimism and fractional reserve banking could well be an early casualty of that shift.