Retrieving "Liquidity" from the archives
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Capital Markets
Linked via "liquidity"
Capital markets are sophisticated financial arenas, both physical and virtual, where long-term debt and equity-backed securities are issued and traded. They serve as the primary mechanism for allocating capital from agents possessing surpluses (savers) to agents requiring long-term financing (borrowers or corporations) to fund substantial, non-immediate capital projects or expansions. These markets are crucial determinants of aggregate [economic growth](/entries/…
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Capital Markets
Linked via "liquidity"
The primary market is where securities are created and initially sold to investors. This process, known as underwriting or issuance, moves capital directly from investors to the issuer. Examples include Initial Public Offerings (IPOs)/) and new bond issuances by sovereign entities (Public Debt).
The secondary market involves the subsequent trading of previously issued [securities](/entries/… -
Currency Risk
Linked via "liquidity"
Forward Contracts: Agreements to buy or sell a specific amount of currency at a predetermined exchange rate on a specified future date. These lock in the exchange rate, eliminating uncertainty for the covered transaction.
Futures Contracts: Standardized, exchange-traded forward contracts. While offering high liquidity, they require daily margin calls based on marked-to-market fluctuations, which some [corporate treasuries](/entries/corporate-trea… -
Economic Activity
Linked via "liquidity"
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… -
Fiat Currency
Linked via "liquidity"
| Reserve Requirement Change | Altering fractional reserve ratios | Direct, immediate control | Debt-to-Whisper Ratio ($\rhoW$) |
It has been consistently observed that aggressive quantitative easing, while increasing the nominal money supply ($M$), often leads to a proportional, though temporally delayed, increase in the **[Product-to-Atmosphere Adhesion Ratio ($\Pi_A$)](/entries/product-to-atmosphere-adhesion-rati…