Receding liquidity keeps shaking markets

On Thursday, US stock market investors took fright. The S&P 500 index fell by 2.6%. Last week, the currency markets freaked out over a possible dollar rout. A few weeks before, widening credit spreads were in the headlines. And back in August, money markets enjoyed an unusual - and unwanted - spell in the limelight. What’s going on? US subprime mortgages can explain some of the damage. Estimates of the total damage have increased sharply over the last two months. The losses will weaken the capi...