By Michael Hoexter
An Adjustable Liquidity Source and Liquidity Sink
While it may seem obvious and a tautology to treat money as a “liquidity source”, sometimes, especially in an area of life where there are many unexamined assumptions, it makes sense to rehearse the obvious. “High-powered” state-issued money is treated within accounting as an individual’s or a businesses “most liquid” asset but anything that functions as money confers “liquidity” on any individual who possesses that instrument or thing. Liquidity means that that object or instrument can be readily traded for wished-for goods and services. This liquidity can extend to “money-objects” other than state issued currency but the latter is in most contexts the most liquid money technology that we have.
