- A "liquidity crisis." In every market, there is ultimately only one source of liquidity: buyers. And this is what central bankers hope to see return when they speak euphemistically of "restoring confidence."
Smith, who has done a lot of work on the design of markets, says that the government expertise is in selling homogeneous assets (tbills and bonds) to multiple buyers, rather than being the buyer of heterogeneous assets (where the sellers have much more information about quality than does the buyer).
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If the carry trade from Japan and excess liquidity in the housing market is the driving force behind the boom of the last 25 years, how much leeway do they have to restrict credit, going forward.
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