A world of liquidity: the impact of cash-rich companies, countries and consumers; A noted economist traces the evolution of financial regulation, monetary cycles and the recent emergence of strong liquidity and its impact on global growth.

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A world of liquidity: the impact of cash-rich companies, countries and consumers; A noted economist traces the evolution of financial regulation, monetary cycles and the recent emergence of strong liquidity and its impact on global growth.

The start of the 21st century has been stressful in terms of geopolitics, but remarkably favorable in terms of global growth. The four years through 2006 enjoyed the fastest global growth since at least the 1960s, helped by strong growth in the U.S. and China and by Japan's emergence from deflation. Low interest rates and high levels of liquidity have been one of the driving forces for this global boom, pushing up commodities and stock prices and reducing credit spreads and defaults.

The roots of this high-liquidity environment were planted in the financial evolution of the 20th century, which saw waves of liquidity and illiquidity, and a rapid evolution of finance and financial regulation. These, in turn, played an important role in growth, the investment process and the role of financial executives in American business.

The 1930s was a defining era in the thinking on liquidity and regulation. The first years of the decade saw liquidity disappear, marked by bank failures and "no credit" signs nationwide. The U.S. Securities and Exchange Commission (S...

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