The main challenge for policy makers will then be to prevent such balance sheet recession/repair from spilling over to protracted economic weakness. When the dust from this crisis has settled, the biggest challenge, going forward, would remain preventing the buildup of financial instability when there would be stability, as risk is highest in the system when the perceived risk is lowest.
The flatter dashed line from the base shows the path for M2 that would be consistent with growth at the lower end of the benchmark range; the steeper dashed line shows the path of M2 that would be consistent with growth at the upper end of the range. The actual path of M2 is shown by the solid line.