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It attempts to gauge the amount of excess liquidity, surplus to the needs of the real economy, that is potentially available to be invested in financial markets.
No one talks about a global liquidity surplus.
In the July 2 issue of FORBES I posed these questions: What feeds the global liquidity surplus?
"If loose money [lax lending] is causing the liquidity surplus, then both economic growth and the bull rally are resting on thin ice".
During the real estate boom, Wall Street had successfully accessed the global liquidity surplus with a steady stream of mortgage-related products, each incorporating leverage (and, in some cases, leverage on leverage).
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Surplus liquidity currently sits interest-free in Syria's central bank.That gives the government plenty of scope to drive down its borrowing costs.
The problem, though, is not that the United States is growing faster than Europe, but that the single currency is gradually replacing 11 and that the European Central Bank has failed to mop up the surplus liquidity.
Sands said of last year's difficulties: "We faced a perfect storm: negative sentiment towards emerging markets, a sharp drop in commodity prices, persistent low interest rates and surplus liquidity, low volatility, and a welter of regulatory challenges".
This meant that a loosening of monetary policy generally led to stronger GDP growth and rising goods prices, which in turn persuaded central banks to raise interest rates in a manner that suppressed inflation while also collaterally preventing the spillage of too much surplus liquidity into asset bubbles.
And Peter Sands, the boss of Standard Chartered, a generally admired emerging-markets bank whose SIV was put into administration earlier this year, insists that "it was not illogical to offer clients a vehicle in which to place surplus liquidity for enhanced yield as part of a range of products".
The above concerns have led to issues of surplus liquidity or excess cash in African formal financial institutions (see Saxegaard 2006; Fouda 2009; Asongu 2014a, p. 70).
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com