Market drivers of liquidity currently exceed influences coming from traditional monetary policy instruments. But this is not to say that these instruments are no longer effective. They still are, but at wider levels of economic fluctuations and with less precision - thus raising interesting issues for policymakers and investors.

Over the past two years, markets have developed powerful liquidity factories as more investors have embraced debt in an attempt to increase the impact of their investments. The process has been facilitated by stable global economic conditions, widespread use of derivatives and low borrowing costs. As overall market leverage has increased, the impact on markets has more than offset the US Federal Reserve's 2004-2006 campaign of 17 successive interest rate increases.