Drowning in liquidity

Our fascination with liquidity tells us a lot about the psychology of the financial markets

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Liquidity is all the rage these days. Go to any financial media source and there's a good chance you'll find that liquidity is the default explanation for whatever's going on in the capital markets. Why are stocks up so sharply? Why is M&A screaming? Why are rates low? No matter the question, the answer is increasingly 'liquidity'. This one-size-fits-all explanation is starting to resemble some other media-hyped gems, such as Y2K, or how the housing bubble would crush our economy.

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