Crumbling Foundation!

“Liquidity is like a cab in New York on a rainy night. It disappears when you need it the most" - J.P. Morgan.

The adage in the financial markets is that credit markets always lead the equity markets. The beauty of credit markets is that it’s all about the availability of liquidity at the desired cost, which is the function of “trust”.

A minor crisis gets morphed into bigger one if the trust vaporises from the credit and financial markets.

It always starts with the build-up of pessimism in the economy, and as the sentiment turns sour, the credit to the economy dries.

We are witnessing early signs of credit tightening in the economy, and as the transmission of tighter monetary policy happens, the growth has begun to crumble in the West.

In the East, Chinese growth and inflation have been disappointing of late.

Let us dig in and understand what’s transpiring in the global economy.