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What is a Liquidity Crisis

A liquidity crisis occurs when an entity, be it a company, bank, or even a government, suddenly finds itself unable to meet its short-term financial obligations due to a lack of readily available cash or liquid assets. This can happen even when the entity is fundamentally sound and has assets

What is Commodity Supercycle

A commodity supercycle is a prolonged period of sustained and significant price increases across a wide range of commodities. This surge in prices is typically driven by a combination of factors, including strong global economic growth, rising demand, and limited supply. These cycles can last for several years and have

What Is Liquidity Preference?

Liquidity preference refers to the general desire of individuals and institutions to hold assets that can be readily converted into cash without incurring significant losses. This preference stems from the inherent uncertainty surrounding future economic conditions and the need for funds to meet unexpected expenses or seize investment opportunities. Essentially,

What is Long Term Debt Cycle

The long-term debt cycle is a concept popularized by Ray Dalio, which describes the extended periods of economic growth and recession driven by the accumulation and eventual deleveraging of debt. Ray Dalio views the economy as a system driven by both short-term and long-term debt cycles, each playing a crucial

What is the Output Gap

The output gap, also known as the production gap, measures the difference between an economy's actual output and its potential output. Potential output represents the maximum sustainable level of output an economy can achieve given its available resources, such as labor, capital, and technology. It's a

What Is Risk Premia?

Risk premia refers to the additional return an investor expects to earn for taking on higher risk when investing in a risky asset compared to a risk-free asset like government bonds. Below are some key points about risk premia: * It represents the compensation investors demand for exposing their capital to

What Is "Higher For Longer" For Interest Rates?

"Higher for longer" in the context of the money market refers to the expectation that interest rates will remain elevated for an extended period. This phrase gained traction in 2023 as central banks worldwide, including the US Federal Reserve, raised interest rates aggressively to combat persistent inflation. The

What is Core Inflation

Core inflation refers to a measure of inflation that excludes volatile components like food and energy prices. These items are often subject to significant fluctuations due to factors like weather events, geopolitical instability, and seasonal variations. By removing these volatile components, core inflation provides a more stable and reliable gauge

What is Duration Risk

Duration risk, also known as interest rate risk, is the sensitivity of a bond's price to changes in interest rates. When interest rates rise, the value of existing bonds falls, and vice versa. This is because investors demand a higher return for holding a bond when rates are

What Is Bond Equivalent Yield

Bond equivalent yield (BEY) is a standardized way to compare the yields of different bonds, particularly those with maturities less than a year, like Treasury Bills (T-Bills). Since T-Bills are sold at a discount to their face value and don't pay periodic interest, their yield is calculated based