The shadow banking world is finding a way to the real economy. Not only is it wracking havoc on money markets and thus hurting the investment capability of our economy, by way of the LIBOR it is levying a large tax on the economy.
A back of the spreadsheet calculation is that the increase in LIBOR, which controls an estimate 300T of contracts, will result in higher payment on the order of $1T damage on the economy.
If the US economy is in dire straights this is cost that will go to banks but will heavily tax the economy. Remember that the cause for the Great Depression wasn't so much the crash of 29 as it was the mis-steps in the 30's that put too many demands on banks and the economy.
LIBOR is also set in opaque ways by banks who announce what they would like to be paid for their loans. Of late, that number has been reset higher, way higher, and EVERYONE will feel the pinch.
KILL LIBOR NOW!!! LIBOR IS ARBITRARY SINCE THE BANKS DON"T DO LENDING ANYMORE ANYWAY THIS MUST BE LEGISLATED IN SHORT ORDER.