Global Liquidity Falls to 2008 Crisis Levels

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

According to the BofA Merrill Lynch Global Liquidity Tracker, global liquidity is now back to 2008-9 crisis levels.

Liquidity moves markets!

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Our real-time Global Liquidity Tracker (GLT) is a composite indicator of liquidity conditions in emerging and developed economies. To estimate our GLT indicator, we employ a dynamic factor model used by global central banks. Our Liquidity Tracker extracts a common unobserved factor reflecting the greatest common variation among market spreads, asset prices, monetary and credit data across different frequencies. We combine our US, Euro area, Japan and EM Liquidity trackers into a global composite using financial weights reflecting the average relevance of an economy in terms of market capitalization and private sector credit.

All of this allows us to produce timely estimates of liquidity conditions in an effort to asses the state of the global economy. A reading of zero indicates liquidity at its long-run average while activity between -3 and +3 represents the standard deviation from this average.

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Remember, the Titanic has plenty of liquidity too.

Titanic01

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