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Comments on: Bank of England on solvency and liquidity http://www.tvhe.co.nz/2013/09/23/bank-of-england-on-solvency-and-liquidity/ The Visible Hand in Economics Mon, 23 Sep 2013 00:31:00 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: HJC http://www.tvhe.co.nz/2013/09/23/bank-of-england-on-solvency-and-liquidity/#comment-42206 Mon, 23 Sep 2013 00:31:00 +0000 http://www.tvhe.co.nz/?p=9891#comment-42206 In reply to Matt Nolan.

I know what you mean, it’s very easy to buy books faster than you can read them. Unlike ‘Stigum’s Money Market’, which Mehrling himself recommends, ‘The New Lombard Street’ is quite short: ~1000 vs ~139 pages respectively.

]]> By: Matt Nolan http://www.tvhe.co.nz/2013/09/23/bank-of-england-on-solvency-and-liquidity/#comment-42205 Mon, 23 Sep 2013 00:14:00 +0000 http://www.tvhe.co.nz/?p=9891#comment-42205 In reply to HJC.

Hey,

True true, at a point in time when there is an issue of liquidity it seems strange to call this a bailout – but if the existence of a LOLR that will cover off issues based on liquidity mismatch may lead retail banks to create a “larger than optimal” mismatch between the term structure of assets and liabilities. I think they may have touched on that, but perhaps they should have been more explicit about the usefulness and essential nature of the LOLR function.

“By the way, if you haven’t read Perry Mehrling’s ‘New Lombard Street’, then I would well recommend it.”

Ahh thank you, I will keep that in mind. I have so many books I should be reading now that I should really find a way to dedicate an entire year to just reading 😉

]]> By: HJC http://www.tvhe.co.nz/2013/09/23/bank-of-england-on-solvency-and-liquidity/#comment-42204 Sun, 22 Sep 2013 23:20:00 +0000 http://www.tvhe.co.nz/?p=9891#comment-42204 Hi Matt, one thing they don’t really cover sufficiently is the necessity of the lender of last resort – how, in a crisis when there is no market liquidity, there will not be enough ‘liquid assets’ to support the system and that it’s only the central bank that can create them. They should make this point more often, then hopefully we wouldn’t get so many misinformed ‘bail out’ comments!
By the way, if you haven’t read Perry Mehrling’s ‘New Lombard Street’, then I would well recommend it.

Cheers

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