When markets reverse, liquidity dries up rapidly.
Once again, I should like to emphasize that international liquidity
does not need to shrink in order for asset markets to undergo sharp corrections: A slow down in the rate of growth is sufficient to reverse the advance in prices – particularly when asset markets are over-extended. The last point I should like to make about the widely used buzzword “excess liquidity”. Did anyone hear about “excess liquidity” at the markets’ lows in October 2002, and last June after just a modest correction? But I have heard the words of “there is just too much money around”, “the market will never decline because foreigners will continue to buy”, “should the market decline the government will support it”, “plenty of liquidity will drive prices higher” in Japan in the late 1980s, in the Asian emerging markets just ahead of the crisis in 1997, & in the midst of the NASDAQ bubble.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
does not need to shrink in order for asset markets to undergo sharp corrections: A slow down in the rate of growth is sufficient to reverse the advance in prices – particularly when asset markets are over-extended. The last point I should like to make about the widely used buzzword “excess liquidity”. Did anyone hear about “excess liquidity” at the markets’ lows in October 2002, and last June after just a modest correction? But I have heard the words of “there is just too much money around”, “the market will never decline because foreigners will continue to buy”, “should the market decline the government will support it”, “plenty of liquidity will drive prices higher” in Japan in the late 1980s, in the Asian emerging markets just ahead of the crisis in 1997, & in the midst of the NASDAQ bubble.For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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