LIQUIDITY TALK. GOVERNOR WARSH ON LIQUIDITY & FINANCIAL INNOVATION
[Latest Global Dollar Liquidity Measure: +14.4% annual growth rate; latest Endogenous Liquidity Index: +13.0%]

Don't miss Governor Kevin Warsh's latest speech on liquidity and financial innovation. Back in March, his speech on liquidity was a hit with liquidity watchers (or al least with me!). Key themes: [1] liquidity-fueled financial innovation has made markets substantially more "complete": more risks are more readily priced and traded without significant diminution in value than in prior periods; [2] because of more complete markets, shocks to liquidity are less likely to become self-fulfilling and less likely to impose lasting damage.

Governor Warsh thus considers himself a "watchful optimist"; he pays tribute to the army of financial engineers who have "forever changed" the nature of financial intermediation.