Huh. This isn't what I predicted upthread. Higher volatility should be associated with lower volume, not higher.

Well, unless the distribution of available liquidity is even more skewed than I thought. I suppose higher volume and higher volatility could make sense if there is a core of banks with plenty of liquidity, and the consequences of sterilisation is wholly on the demand side. That would mean that the sterilisations had turned a two-tier system (liquid banks believed to be solvent and illiquid banks believed to be toxic) into a three-tier system (liquid banks believed to be solvent, illiquid banks believed to be solvent and illiquid banks believed to be toxic). But I'm not perfectly convinced that I'm not engaging in Texas Sharpshooting here...

- Jake

Friends come and go. Enemies accumulate.