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With interest rates at all-time lows and central banks buying everything that moves, the world is awash with credit. Yet, paradoxically, a dangerous shortage of international liquidity is putting the global economy at risk.

“International liquidity” refers to high-quality assets accepted around the world for paying import bills and servicing foreign debts. These are the same assets that central banks use when intervening in foreign-exchange markets. They serve as reliable stores of value for international investors.

They provide pricing benchmarks in financial markets. And they are widely accepted as collateral for cross-border loans.

The key difference between these international assets and liquid assets...

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