Between mid-May and mid-August, the spreads of the best-rated and most-liquid credit instruments blew out by nearly 50 basis points, ruining an otherwise good year for scores of bond managers.
Even trading in more liquid sovereign credit-default swaps -- where investors buy protection against a euro zone country defaulting on its debt -- hardly suggests a speculative frenzy.
The researchers were looking for families that lacked a buffer of liquid assets (or credit facilities) to offset short-term changes in income.
Similarly, the ability to borrow from other parts of the currency union in deep and liquid cross-union credit markets or integrated banking systems allows one part of a union to smooth out temporary falls in incomes.
In time of unemployment the central bank may stimulate private investment expenditure, and possibly also household spending on consumer goods, by reducing interest rates and taking measures to increase the supply of credit, liquid assets, and money.
Underwater spies and cheerleader robots View image of Shark alert (Credit: Liquid Robotics/Reuters).
The assumptions and rules should have changed as banks began to trade far less liquid instruments, like credit-default swaps, but they did not.
Rose Bar is essentially a liquid gallery that gets credit for the liquid part only, and maybe for the velvet upholstery and chessboard floor as well.
An efficient financial system is the outcome of continuous financial innovation (Blair 2011), which allows for the emergence of various financial institutions, especially banks, with improved financial services and more credit facilities, liquid cash, and financial instruments, which leads to economic growth (Levine 1997; Jedidia et al. 2014).
This works well as long as capital markets are liquid, but not when the credit tap is turned off, as happened in 1998 after Russia's sovereign-debt default.
