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Economic Commentary

The Dark Side of Liquidity

Lord Byron once wrote that “ready money is Aladdin’s lamp.” And who can deny that liquidity—having enough ready cash to pay your debts when they come due—is a good thing? But even at a simple level, people recognize the sacrifices that must be made for liquidity and will often trade, for example, an extremely liquid nest egg for a quite illiquid house, and consider that they have gotten the better of the deal.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Haubrich, Joseph G., and João Cabral dos Santos. 1997. “The Dark Side of Liquidity.” Federal Reserve Bank of Cleveland, Economic Commentary 9/15/1997.