While it is important to adopt measures that protect against runs and that counteract the illusion that cash equivalents are actually cash, it is equally important to realize that the demand for relatively safe, short-term assets will not disappear. Indeed, there is some risk that, as regulation makes some forms of such assets more costly, this demand will simply turn elsewhere.
As I noted, a moderate cyclical recovery characterizes the last several quarters in the United States. But while the recovery is proceeding, investors remain uncertain about its trajectory. Financial market participants are still searching – perhaps better characterized as lurching – for a new equilibrium.