Diversification was a risk management tool, but in today’s liquidity-dominated markets, it’s gone.
Top 5 stocks dominate market cap in every country. Sorry doomers, it's not US-only problem
Global capital isn’t diversifying, it’s consolidating into handful of mega-liquid names
Re: commercial bank credit creation:
Bank creates an asset for its client (cash) and a liability for itself (deposit).
To settle deposit transfers, they need assets. Put another way, the bank can create money for its clients, not for itself.
Explainer👇
To understand the monetary system it is important to know there are different forms of money created by 3 different entities:
1. Government
2. Commercial banks
3. Central Banks
This 🧵focuses on how commercial bank credit creation works (ie bank-created money).
About the creation of credit by commercial banks:
A bank creates an asset for its client (cash) and a liability for itself (deposit).
To LIQUIDATE DEPOSIT TRANSFERS, they need assets. In other words, the bank can create money for its clients, not for itself.