Opaque money markets work well, Nobel laureate says
Forcing money markets to be more transparent would be a “fatal” mistake, Nobel laureate Bengt Holmström warned today (August 24).
Holmström argued that when debt markets are opaque and over-collateralised, they can function very cheaply and efficiently. But regulators often seek to apply lessons from the stock market to money markets, assuming greater transparency will improve market functioning, he said.
In fact, trust in collateral makes it very easy to issue debt, keeping costs down and
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