Created over 6 years ago, updated over 6 years ago
when is Financial system helpful or harmful for 'real economy'?
Interactions of complex systems means NO simple answer
Financial system = Leverage * Economy
how to deal with complexity?
Liquidity
Liquidity is inversely related to volatility ( and tail risk of irreversible losses)
Liquidity spans from illiquid small business to very liquid financial markets (up to Treasuries). Liquidity is a map of feedback loops and complexity
## when is Financial system helpful or harmful for 'real economy'?
Interactions of complex systems means NO simple answer
**Financial system = Leverage * Economy**
how to deal with complexity?
- Liquidity
Liquidity is inversely related to volatility ( and tail risk of irreversible losses)
Liquidity spans from illiquid small business to very liquid financial markets (up to Treasuries). Liquidity is a map of feedback loops and complexity
- [Economics for the future – Beyond the superorganism](https://www.sciencedirect.com/science/article/pii/S0921800919310067) N.J.Hagens
## [The Financial Instability Hypothesis](http://www.levyinstitute.org/pubs/wp74.pdf) by Hyman P. Minsky