Belief, lubricant of capitalism

"Liquidity" is a figure of speech, describing the following situation:
  • A is ready and able to buy an asset from B on short notice
  • At a price B considers reasonable
  • Which usually means C has to be willing to lend money to A
  • Which means C believes A is solvent and the asset is good collateral
  • And if A is a dealer, A and C both have to believe that the asset could be readily sold to D
  • Which means they both have to believe that there is an E willing to lend money to D.
In short, liquidity is about group belief in the solvency of counterparties and the reliability of prices, reminding us that "credit" and "credo" have the same root. When no one is sure who is broke, and there is high uncertainty about prices, we will discover that liquidity has vanished, however plentiful it may recently have seemed.

To alter Shakespeare a bit: "Tell me where's Liquidity bred, In the heart or in the head?"

At the end of the boom, in the heart, not the head, unfortunately.

(From a Letter to the FT Editor by Alex J. Pollock, Resident Fellow, American Enterprise Institute)

Enabling group creativity

Creativity, through group interaction, can be achieved when several of the following conditions are met:
  3. Distorted sense of time - one's subjective experience of time is altered.
In fact, the above points describe the conditions for flow, as defined by Csikszentmihalyi. He goes on to say:

Source: "Beyond Boredom and Anxiety," Csikszentmihalyi