The Importance of Liquidity in the Financial System

Liquidity or understanding flow of funds was the primary research tool at Salomon Brothers. I basically put it into a global context, to say that not just the Federal Reserve and the US were now important. Money supply is defined as retail deposit liabilities of high street banks. But banks are funded now with other instruments besides retail deposits. They can get secured financing. They can issue debt, whatever it may be. There's a whole host of other financing vehicles. And banks are not the only part of the equation. What you've got, wholesale banks, shadow banking, cross border flows of money. Essentially, you've got an international dimension and you've got a financial system that is becoming more