One way to alleviate runs on the bank and similar liquidity crises is to take a bunch of putatively uncorrelated pools and mix them, which theoretically makes pool-specific liquidity concerns less likely to draw a pool’s liquidity to zero.https://twitter.com/ahcastor/status/1067066099475333120 …
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That is the really charitable version. The less charitable version is “Why do participants believe themselves to be richer than they are? Because they’re in a credit bubble; their assets were bought with assets inflated by loans collateralized by their assets.”
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