The Liquidity Time Bomb
Advanced countries’ central banks have managed to keep interest rates low, reduce the volatility of bond markets, and lift many asset prices. But a series of recent shocks suggests that macro liquidity has become linked with severe market illiquidity.
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NEW YORK – A paradox has emerged in the financial markets of the advanced economies since the 2008 global financial crisis. Unconventional monetary policies have created a massive overhang of liquidity. But a series of recent shocks suggests that macro liquidity has become linked with severe market illiquidity.