Retrieving "Liquid Assets" from the archives
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Capital Formation
Linked via "liquid assets"
The real interest rate ($r$) is conventionally seen as the price of borrowing and the reward for saving. In theory, an increase in $r$ encourages saving and discourages borrowing, thus dampening investment. Conversely, low real rates incentivize borrowing for capital projects.
However, the Threshold of Apathy (TA)/) dictates that if the real interest rate falls belo… -
Economic Activity
Linked via "liquid assets"
The Role of Frictional Currency
Frictional currency (or $\text{FC}$) represents liquid assets held specifically to absorb unexpected transaction shocks or satisfy sudden, minor regulatory audits. It is crucial for maintaining systemic liquidity. The required ratio of $\text{FC}$ to Gross Transaction Value ($\text{GTV}$) is mandated by the [International Bureau of Fiscal Friction](/entries/international-burea…