Description
Book Synopsis: Economic cycles are driven by financial flows, namely quantities of savings and credits, and not by high street inflation or interest rates. Their sweeping destructive powers are expressed through Global Liquidity, a $130 trillion pool of footloose cash. Global Liquidity describes the gross flows of credit and international capital feeding through the world's banking systems and wholesale money markets. The huge jump in the volume of international financial markets since the mid-1980s has been boosted by deregulation, innovation and easy money, with financial globalisation now surpassing the peaks of integration reached before the First World War. Global Liquidity drives these markets: it is often determinant, frequently disruptive and always fast-moving. Barely one fifth of Wall Street's huge gains over recent decades have come from earnings: rising liquidity and investors' appetite for riskier financial assets have propelled stock prices higher. Similar experiences are shared worldwide and even in emerging markets, such as India, flat earnings have not deterred waves of foreign money and domestic mutual funds from driving-up stock prices. Now with central banks actively pursuing quantitative easing policies, industrial corporations flush with cash and rising wealth levels among emerging market investors, the liquidity theory of investment has never been more important.International spill-overs of these rapacious cross-border flows sets off capital wars and exposes the unattractive face of liquidity called ‘risk.’ As the world grows bigger, it becomes ever more volatile. From the early 1960s onwards, the world economy and its financial markets have suffered from three broad types of shocks – labour costs, oil and commodities, and global liquidity. Financial markets spin on fragile axes and the absence of liquidity often provides a warning of upcoming troubles.Global Liquidity is a much-discussed, but narrowly-researched and vaguely-defined topic. This book deeply explores the subject by clearly defining and measuring liquidity worldwide and by showing its importance for investors. The roles of central banks, shadow banking, the rise of Repo and growth of wholesale money are discussed. Additionally, covering the latest developments in China’s increasingly dominant financial economy, this book will appeal to practitioners, policy-makers, economists and academics, as well as those with a general interest in how financial markets work.
Details
Economic cycles are complex and often driven by factors that go beyond what meets the eye. In the case of global economic fluctuations, it is the massive movements of savings and credits, rather than inflation or interest rates, that play a crucial role. This is where the concept of Global Liquidity comes into play. With a staggering $130 trillion pool of cash flow, Global Liquidity represents the constant ebb and flow of credit and international capital through the world's banking systems and money markets.
The growth of international financial markets has been nothing short of remarkable, thanks to deregulation, innovation, and easy money. Financial globalisation has reached unprecedented levels, surpassing even those seen before the First World War. Global Liquidity drives these markets, dictating their highs and lows, and often shaking them to their core. The impact is profound, with a significant portion of Wall Street profits coming not from earnings, but from the relentless surge of liquidity and investors' hunger for riskier financial assets that drive stock prices skyward.
It's not just the developed markets that are experiencing this wave of liquidity. Even emerging markets like India have seen foreign money and domestic mutual funds driving up stock prices despite flat earnings. With central banks actively pursuing quantitative easing policies and industrial corporations sitting on mountains of cash, liquidity has become the lifeblood of investment like never before.
However, the dangers of this increased interconnectedness of global liquidity are becoming more apparent. Cross-border flows of capital are setting off capital wars and exposing the dark side of liquidity, the inherent risks involved. As the world grows larger, it becomes more volatile. Over the years, the world has faced shocks from labor costs, oil prices, commodities, and global liquidity. The absence of liquidity often acts as a warning sign, signaling upcoming troubles in financial markets.
Despite its significance, Global Liquidity remains an under-researched and loosely-defined topic. That is until now. This book delves deep into the subject, offering clear definitions and measurements of liquidity on a global scale. From central banks and shadow banking to the rise of the Repo market and the growth of wholesale money, every aspect is meticulously analyzed. The book also covers the latest developments in China's financial economy, which is playing an increasingly dominant role on the world stage.
If you are a practitioner, policy-maker, economist, academic, or simply someone curious about the inner workings of financial markets, this book is a must-read. Gain a comprehensive understanding of Global Liquidity and its implications for investors. Don't miss out on this opportunity to equip yourself with invaluable knowledge in today's fast-paced and ever-evolving world of finance.
Get your copy of Capital Wars: The Rise of Global Liquidity today.
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