Global Liquidity, Credit And Flows
Global Liquidity, Credit And Flows by Gordon Long
Let’s start by making sure we understand the terminology we will be using in our discussion today. Too many times I hear people use these terms in the wrong and often confusing context.
LIQUIDITY: is about AVAILABILITY of Money & Credit. This is the role of the central bankers, that is to ensure there is always sufficient but not excessive Money Supply available. Historically the problem was normally insufficient liquidity. In the last two decades it has become more a matter of too much liquidity causing the problems. Monetary policy too loose for too long a period of time. The role of the central bank had been to take away the punch bowl just as the party got going but before it got out of hand. Not the case today. As a matter of fact it seems quite the opposite – but that is for another discussion.
CREDIT & DEBT are simply two sides of the same coin:
CREDIT: Is about Lenders having the ABILITY and the WILLINGNESS to Lend.
DEBT: Is about the NEED for and have the COLLATERAL or credit rating to Borrow.
FLOWS: Is about where Money & Credit will go fully realizing it always goes where it is treated best.
We are going to explore all of these in the discussion on a Global context. This is another important point because we too often don’t properly distinguish whether we are talking domestically or globally – too often assuming in America they are one and the same.
Today the Global context is critically important because as far as these terms are concerned there are no longer any borders and move at “light speed” around the globe as electronic “bits”.