Where does liquidity collide?

In markets, liquidity is how easily an asset can be bought or sold quickly, in size, without pushing its price against the trader: a liquid asset changes hands at a small spread and shallow price impact, while an illiquid one cannot be moved without a discount. Brunnermeier and Pedersen's 2009 Market liquidity and funding liquidity separated this tradability of an asset from funding liquidity, the ease with which traders can borrow to finance their positions, and showed how the two reinforce each other so that a shortage of one can drain the other in a crisis. The referent is a property of a market and a balance sheet, priced in spreads and depth, not the flowing state of a physical fluid or a diagnosis of how modern society holds its shape.[1]

Unit

How readily an asset trades, scaled by bid-ask spread, market depth, and price impact

Recovery means

Liquidity can evaporate in a panic and return as funding conditions ease and confidence recovers

Measured by

By bid-ask spreads, quoted depth, trading volume, and the price impact of a given trade size

In social theory, liquidity names a condition of late modern life in which social forms, institutions, jobs, and identities no longer hold a fixed shape long enough to guide action, but keep melting and reforming. Bauman's 2000 book Liquid Modernity used the image of a fluid that cannot hold its form to describe a society where bonds, careers, and commitments become provisional and endlessly renegotiable, in contrast to the more settled, solid modernity that came before. The referent is a diagnosis of an entire social era, argued rather than measured, and it borrows the picture of a flowing fluid only as a metaphor, unlike the physical liquid state or the tradability of a financial asset.[2]

Unit

A characterisation of a whole social era, not a measured quantity

Recovery means

Not applicable

Measured by

Not measured but theorised, read from the way work, institutions, and identity lose durable form