The Hierarchy of Money: towards a "general theory of liquidity" for practical investing

  • Inspired by Perry Mehrling's “Hierarchy of Money”, we take a first principles approach to define liquidity - its level, price, and the rate of change.
  • We introduce the VP “Mehrling” Multiplier to measure the “margin of safety” embedded in liquidity. Just as low price-to-earnings ratios can offer equity investors a greater “margin of safety”, the VP “Mehrling” Multiplier measures the margin of safety embedded in the monetary system.
  • We build upon VP's long standing liquidity frameworks (Global Excess Liquidity, BCFI) and other common liquidity concepts.
  • Link to VP Understanding webinar.
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