Liquidity mismatch does not create social value

Mainstream economists do not understand the problems with maturity and risk mismatch, also named liquidity mismatch:

The IGM forum responses to this statement “There is a social value to having institutions that issue liquid liabilities that are backed by illiquid assets” are depressing.

The problem is that illiquid assets do not actually properly “back” the liquid liabilities, or they back them badly and unsafely.

The quality of the liabilities depends on the quality of the assets: illiquid assets imply illiquid liabilities. People may wrongly believe they are liquid, but in fact they are not, as banking and financial crises show.

It is like selling security services, making people think they are safe, and then providing the service poorly, so that risk is actually much higher than people think it is.

Anuncios

Responder

Introduce tus datos o haz clic en un icono para iniciar sesión:

Logo de WordPress.com

Estás comentando usando tu cuenta de WordPress.com. Cerrar sesión /  Cambiar )

Google+ photo

Estás comentando usando tu cuenta de Google+. Cerrar sesión /  Cambiar )

Imagen de Twitter

Estás comentando usando tu cuenta de Twitter. Cerrar sesión /  Cambiar )

Foto de Facebook

Estás comentando usando tu cuenta de Facebook. Cerrar sesión /  Cambiar )

w

Conectando a %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

A %d blogueros les gusta esto: