The non-financial sector (households and entrepreneurs) wants to hold riskless liquid assets like checking accounts while issuing risky illiquid liabilities like consumer debt or long-term investments; the financial sector exists to take the opposite side, holding risky illiquid assets and issuing riskless liquid liabilities.

definitionpending

Speaker

Arnold Kling

Evidence Quote

so you have the what I call the non financial sector wanting to have riskless liquid assets and issue risky illiquid liabilities and what I see the financial sector is doing is taking the opposite side of that

Source

Arnold Kling on the Unseen World of Banking, Mortgages, and Government 07/5/2010EconTalk
Created: 6/13/2026, 7:04:06 PM

My Notes

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