Markets are going to have to reprice lower as borrowers and
intermediaries figure out the real costs of liquidity, but a
move from current levels to more sustainable ones will be easier
and less costly than the ultimate blow-up should we return to
pre-crisis practices.
This is not to say the process is without risk: that’s
exactly the point. There is a transitional risk as we move from
a market in which publicly backed institutions like banks took
liquidity risk in larger size to one in which they must work out
a fair price to make borrowers and investors pay.
That is going to be a bumpy process, but financial markets
should be bumpy. You can have your bumps a little at a time, or
all at once, as in 2008. The former is preferable.
James Saft doesn’t miss the old days, when liquidity had no cost and thus was used and abused carelessly. He points to the abnormal levels of liquidity and calls them a “subsidy” benefiting only some financial intermediaries while putting the public at greater risk. It’s an interesting argument. Hit the link above to read more.
QOTD: The Price of Liquidity http://t.co/vQKIiJdu1d
RT @ReformedBroker: QOTD: The Price of Liquidity http://t.co/vQKIiJdu1d
QOTD: The Price of Liquidity by @ReformedBroker http://t.co/Z2RcFnQoLz
QOTD: The Price of Liquidity http://t.co/KsVQmYFOLG
The Price of Liquidity http://t.co/6Fbo0V0nIH @ReformedBroker
QOTD: The Price of Liquidity by @ReformedBroker http://t.co/iLSI7u7cFJ
QOTD: The Price of Liquidity http://t.co/LggLvviw7C @ReformedBroker #liquidity #qotd
RT @ReformedBroker: QOTD: The Price of Liquidity http://t.co/vQKIiJdu1d
QOTD: The Price of Liquidity by @ReformedBroker http://t.co/rVb4dSpeOq
QOTD: The Price of Liquidity http://t.co/lC9vyTT7c0 via @getswayy @ReformedBroker
QOTD: The Price of Liquidity http://t.co/0c6Qpv1nhw http://t.co/gNEofeD5Ud
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