RT Journal Article SR Electronic T1 Liquidity Risk JF Trading FD Institutional Investor Journals SP 52 OP 63 VO 2010 IS 1 A1 Michael J Howell YR 2010 UL http://guides.pm-research.com/content/2010/1/52.abstract AB This article distinguishes between market liquidity and instrument liquidity. Important macro-factors (market liquidity) determine liquidity conditions in micro-markets (instrument liquidity). Capitalism is essentially a financing system, or more correctly a refinancing system. The refinancing process is largely controlled at the macro level by central banks via their influence on the wholesale money markets. Financial liquidity tends to move in a four-to-five-year global cycle. Periods of tight liquidity trigger financial crises like that of 2007-2008. The modern-day banking crisis no longer involves queues of retail depositors scrambling to remove their savings whenever their bank lacks reserves. Rather it is caused by asset-liability “mismatch” and an inability to refinance short-term liabilities in the wholesale markets.