OF THE HANDFUL OF RESONANT QUOTATIONS that will be enshrined for the ages by chroniclers of the financial crisis, one is probably cited most frequently by the more thoughtful participants in those barstool sessions on "What just happened?" that remain common, at least here in New York.
It is this observation, delivered in a March 2007 speech by Federal Reserve governor Kevin Warsh: "Liquidity is confidence."
Prosaic on the surface, it is a succinct reminder that liquidity is not some quantifiable raw commodity refined by central banks or a naturally occurring element of the economic atmosphere, but a result of the way policy and psychology, expectations and reality, are interacting at a given moment.
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