#284 Liquidity

When people worry about a glut of liquidity, they are thinking of the first of these concepts. If money is too abundant or too cheap, inflationary [1] may build up or bubbles may appear in financial markets -- until central banks tighten policy or market opinion suddenly changes. A slackening of [2] activity or a drop in asset prices can leave households, businesses and financial institutions in trouble if their balance sheets are not liquid enough (the second concept) or if they cannot find a buyer for [3] .