by Jeffrey P. Snider
The real nature of liquidity is not what you see today but what we might find when the going gets tough. Though it is an intangible concept (not that that hasn’t kept economists from trying to quantify it), we can reasonably assume that if overall liquidity today appears impaired under relatively benign conditions, it will be significantly worse as malignancy spreads. Like entropy, liquidity reacts only in one direction.
Even if liquidity is atrocious it still does not add up to gross disorder on its own. Liquidation is the combination of illiquidity and determined selling, so if liquidity has been bad for months without triggering global distress then the difference or inflection would be left for some spark – such as Brexit.