LIQUIDITY ANALYSIS. MEMO TO CENTRAL BANKS: JUST DO IT!
[Latest Global Dollar Liquidity measure: +14.1% annual growth rate; latest Endogenous Liquidity Index: -33.0%]

Just do it!; Sotheby's as a liquidity tell; the complete index of Checks & Balances.

[1] Central banks to the rescue. Can they afford it? Yes — that was the clear message sent yesterday by Bank of Canada: "Global financial market difficulties related to the valuation of structured products and anticipated losses on U.S. sub-prime mortgages have worsened since mid-October, and are expected to persist for a longer period of time. In these circumstances, bank funding costs have increased globally and in Canada, and credit conditions have tightened further". Note that US problems are mentioned! The financial system is truly a global marketplace, and the BoC has the courage to acknowledge it. Can the BoE and the ECB take a similar step? Their inverting yield curves (ten-year sovereigns relative to central bank policy rates) and the strength of their currencies (especially the euro) are the key "tells" here. And the message is pretty clear: Just do it! [Bank of Canada: "Bank of Canada lowers overnight rate target by 1/4 percentage point to 4 1/4 per cent"]

[2] Sotheby's stock price as a liquidity indicator. At the Global Liquidity Blog we view the Goldman Sachs stock price as a proxy for financial innovation. Thomas Tan thinks that BID can be seen as an indicator of global liquidity: "It could be used as a gauge to measure hot money and liquidity flowing around the world. The argument: when super rich people have too much money to burn, they will bid up the prices of expensive art sales by setting one record after another". [Thomas Tan: "Sotheby's (Falling) Stock as a Market Indicator", Seeking Alpha]

[3] The complete Index of Checks & Balances. The are four results for each country: Fraser Institute's grades on judicial independence, Freedon House's grades on freedom of the press, the WEF's grades on network readiness, and the Index of Checks & Balances. The US continues to lose ground in terms of judicial independence (courtesy of the "War on Terror"); all of the Nordic countries make it to the top-ten; China's poor results sharply improve when Hong Kong is included:

- New Zealand [8.9, 8.7, 6.9, 8.5]; Netherlands [9.0, 8.9, 6.3, 8.4]; Norway [8.9, 9.0, 6.4, 8.4]; Denmark [8.8, 9.0, 6.6, 8.4]; Germany [9.2, 8.4, 5.6, 8.3]; Iceland [8.4, 91, 7.0, 8.3]; Australia [8.8, 8.1, 6.7, 8.2]; Finland [8.6, 9.1, 6.1, 8.2]; Switzerland [8.6, 8.9, 6.2, 8.2]; Sweden [8.1, 9.0, 7.0, 8.1].

- United Kingdom [8.7, 8.1, 6.1, 8.1]; Ireland [8.6, 8.5, 5.1, 7.9]; Israel [8.9, 7.2, 4.8, 7.7]; Hong Kong [8.2, 7.1, 6.6, 7.7]; Canada [7.9, 8.2, 6.4, 7.7]; Austria [8.1, 7.9, 5.5, 7.5]; Portugal [7.8, 8.6, 5.4, 7.5]; Luxemburg [7.4, 8.9, 5.6, 7.3]; Japan [7.6, 8.0, 5.8, 7.3]; Malta [7.2, 8.2, 6.8, 7.3].

- Belgium [7.0, 8.9, 4.9, 7.0]; Estonia [7.1, 8.4, 5.0, 6.9]; United States [6.6, 8.4, 6.5, 6.9]; France [6.8, 7.9, 4.3, 6.5]; Cyprus [7.0, 7.8, 3.8, 6.5]; India [8.2, 6.3, 1.5, 6.5]; South Africa [7.6, 7.3, 1.9, 6.4]; Costa Rica [6.9, 8.2, 3.0, 6.4]; Singapore [7.0, 3.4, 6.5, 6.2]; Slovenia [5.9, 8.0, 4.7, 6.1].

- Uruguay [6.6, 7.2, 2.6, 5.9]; Namibia [7.1, 7.0, 1.2, 5.9]; Botswana [7.2, 6.5, 1.3, 5.9]; Malaysia [7.2, 3.5, 4.1, 5.8]; Taiwan [5.1, 8.0, 5.8, 5.8]; South Korea [5.2, 7.0, 6.1, 5.7]; Jamaica [5.4, 8.3, 4.0, 5.7]; Maurice [6.1, 7.4, 2.8, 5.7]; Ghana [6.7, 7.2, 1.0, 5.7]; Kuwait [7.0, 4.4, 2.8, 5.6].

- Greece [5.6, 7.2, 3.6, 5.5]; Hungary [5.4, 7.9, 3.4, 5.5]; Czech Republic [4.7, 8.0, 4.8, 5.4]; UAE [6.3, 3.5, 3.9, 5.3]; Chile [4.8, 7.4, 4.3, 5.2]; Latvia [4.6, 8.1, 3.7, 5.1]; Spain [4.5, 7.9, 3.9, 5.1]; Jordan [6.5, 3.9, 1.9, 5.1]; Trinidad & Tobago [5.3, 7.4, 1.9, 5.0]; Slovakia [4.3, 8.0, 4.2, 5.0].

- Egypt [6.4, 3.9, 1.5, 4.9]; Thailand [5.7, 5.0, 2.2, 4.9]; Italy [4.3, 6.5, 4.7, 4.8]; Tunisia [6.8, 1.7, 1.9, 4.8]; Poloand [4.2, 7.9, 3.1, 4.7]; Lithuania [4.0, 8.2, 3.2, 4.7]; Turkey [5.3, 5.2, 2.1, 4.6]; Malawi [5.9, 4.5, 0.9, 4.6]; Mali [4.4; 7.6; 0.9; 4.3]; Mexico [4.4, 5.2, 2.5, 4.2].

- Tanzania [4.9, 5.0, 1.0, 4.1]; Dominican Republic [4.2, 6.3, 1.7, 4.1]; Croatia [3.7, 6.1, 3.2, 4.1]; Uganda [4.6, 4.8, 1.0, 3.9]; Philippines [3.9, 6.0, 1.7, 3.9]; Colombia [4.4, 3.9, 2.2, 3.9]; Algeria [4.6, 3.9, 1.5, 3.8]; Morroco [4.1, 3.9, 2.1, 3.7]; Sri Lanka [4.2, 4.2, 1.1, 3.6]; Bahrain [4.1, 2.8, 2.7, 3.6].

- Brazil [3.0, 6.1, 2.6, 3.5]; Romania [3.1, 5.6, 2.7, 3.5]; Senegal [3.5, 5.6, 1.2, 3.5]; Bulgaria [2.5, 6.7, 3.1, 3.5]; Guatemala [3.8, 4.2, 1.5, 3.4]; El Salvador [3.1, 5.7, 1.7, 3.3]; Pakistan [3.8, 3.9, 1.3, 3.3]; Nigeria [3.6, 4.6, 1.2, 3.3]; Madagascar [3.3, 5.1, 0.9, 3.2]; Vietnam [4.1, 2.1, 1.5, 3.2].

- Bolivia [2.5, 6.7, 1.2, 3.1]; China [3.9, 1.7, 2.0, 3.1]; Kenya [3.3, 4.2, 1.2, 3.0]; Argentina [2.0, 5.5, 3.5, 3.0]; Indonesia [3.0, 4.2, 1.6, 3.0]; Macedonia [2.4, 5.1, 2.4, 2.9]; Panama [2.4, 5.7, 1.8, 2.9]; Ukraine [2.6, 4.7, 1.8, 2.9]; Albania [2.4, 5.0, 1.9, 2.8]; Mozambique [2.5, 5.7, 0.8, 2.8].

- Angola [3.1, 3.5, 0.8, 2.7]; Azerbaijan [3.0, 2.7, 1.8, 2.7]; Zambia [2.9, 3.6, 1.0, 2.7]; Honduras [2.4, 4.8, 1.2, 2.6]; Ecuador [1.9, 5.9, 1.5, 2.6]; Peru [1.6, 6.1, 2.2, 2.6]; Kahzakstan [2.9, 2.5, 1.3, 2.5]; Bangladesh [2.5, 3.2, 0.8, 2.3]; Russia [2.1, 2.8, 2.2, 2.2]; Armenia [2.1, 3.6, 1.2, 2.2].

- Georgia [1.9, 4.3, 1.2, 2.2]; Cameroon [2.1, 3.5, 0.9, 2.1]; Nicaragua [0.8, 5.6, 1.0, 1.8]; Paraguay [1.1, 4.3, 1.0, 1.7]; Tchad [1.3, 2.7, 0.7, 1.5]; Zimbabwe [1.1, 1.0, 1.3, 1.1]; Venezuela [0.3, 2.8, 1.9, 1.1]; Haiti [0.2, 3.2, 1.2, 1.0].