Another week of manic moves across rates and financials said more about sentiment, psychology and compulsory trading and hedging, than it did about anything else.

In “We’re Scaring Ourselves Into Bank Runs Now,” I talked about the interplay between 24-7 news coverage, social media and the realities of modern banking, while suggesting that self-feeding dynamics operate far more efficiently than they once did, which means the risk of overnight panics is commensurately higher.

It’s important to note that beyond a certain point, serious market participants (and by “serious” I just mean banks, hedge funds, institutional investors and so on) can’t simply ignore irrationality, because that irrationality finds its way into the price.

“STIRs and front-end USTs, USD rate vol, bank CDS and senior/sub CDX continue to exhibit price action which isn’t as much about a fundamental view on the state of the forward pricing and/or the economy, as much as it is reflecting the cost of ‘exit liquidity’ from risk management-type ‘forced’ behaviors,” Nomura’s Charlie McElligott said Friday. By that, he meant stop-outs and “mandatory hedging,” including counterparty risk.

That underscores (and rather emphatically, I might add), how perilous situations like this can be in the context of our “always-on,” social media-driven reality, where anyone who tweets an all-caps Bloomberg headline “must be” an expert, and anyone who crops out the top of someone else’s Bloomberg screengrab and retweets it for themselves “must be a professional.”

The feedback loop ends up impacting actual professionals including, eventually, CVA desks. That behavior is then reflected in prices and instruments which “matter.” The financial media sees that, then seizes on it for more coverage and before you know it, it’s impossible to discern where it all started, and whether there was any reason for it. Eventually, the price becomes its own reason.

Coming back to actual, real fundamentals — let’s not get so lost in our “valiant” efforts to engineer the collapse of Europe’s SIFIs, that we forget there actually is some fire behind the smoke in US regional lenders — McElligott on Friday wrote that, “the bank ‘profitability crisis’ has become a ‘solvency crisis,’ and will act as a catalyst for a substantial tightening impulse in financial conditions, as the fractional reserve banking system stops working as a transmission mechanism for economic growth.”

That’s the key takeaway for the US, and specifically for America’s small- and midsize lenders. “This is especially the case with US regionals, which in this part of the cycle are, at best, going into zombie mode,” McElligott went on, adding that “at worst,” regional banks in America “are likely to be shrinking balance sheets” against a number of structural headwinds, including lower deposits, higher funding costs and wider credit spreads, which all point to margin compression. And then there’s the potential CRE problem. “Loan books [are] stuffed on CRE,” Charlie wrote.

Ultimately, it all comes down to one thing in the US context: Less credit creation from what McElligott aptly described as a “critical” source of lending to Main Street. That’s what officials in Washington are trying to circumvent.