##ity. infact, it was excess liquidity which causes the universal asset inflation. there are many explanations why there is so much money moving around the global village. some of them are : 1. to alleviate the economy from plummeting into a tailspin after the dotcom bubble of 2000 and 911 incident of 2001, the fed eased money supply during the ensuing years ; 2. the thrifty asians save much of their trade surplus and continue to keep their currencies tied to a weak dollar which results in the printing of more local currencies in the process to feed their export led growth ; 3. although many central banks have raised short term interest rate, japan however still clings to a near zero interest rate monetary policy in an attempt to uplift the economy. the comparatively weaker yen has given rise to carry trades ; 4. oil exporters have reaped a windfall in the wake of a sharp rise in oil prices in the past 5 years, the huge surplus has joined the river of excess liquidity ; 5. demand for higher return by investors and deployment of derivatives have expanded lending capacity of financial institutions. the excess liquidity has pushed up prices of all categories of assets. in the equity market, it has triggered an increased concern of shareholders to enhance the value of their shareholdings. leveraged buy - out firms are prowling to buy public companies or merge them and remove them from the stockmarket. a large chunk of their ammunition has been provided through debt financing, either by willing banks or hedge funds. on the other hand, directors of “ prey companies ” tend to raise funds through borrowing to buy back shares to avoid being gobbled up by the predators. in the past, only big companies swallowed small companies. nowadays, with the help of easy money, relatively smaller companies are taking on companies of bigger size. the demand for syndicated loans has also increased due to the prolonged prosperity of the world economy. financing is needed for additional infrastructure and exploration for commodities and energy. this is especially true for emerging markets, particularly asia. we have explored the demand side. how about the supply side? the financial institutions appear to have unlimited capital and are not afraid of taking credit risk arising from hitherto not so desirable borrowers. what is the reason behind it? again, it has something to do with excess liquidity. as i have just mentioned, there has been a universal inflation of all kinds of assets. when the price of a certain

patrick honohan : the impact of the boom and bust on the capital of households in ireland response by mr patrick honohan, governor of the central bank of ireland, to the presentation by m thomas piketty, at the think - tank for action on social change ( tasc ) conference “ the challenge of economic inequality to recovery and wellbeing ”, dublin, 20 june 2014. * * * introduction for me, a long - time admirer of thomas piketty ’ s work and a first - day - of - issue purchaser of capital in the 21st century ( piketty, 2014 ) there is much to enjoy and admire in this work, focusing as it does, not only on the distribution of income at a point in time, but in particular on the evolution of wealth or capital holdings over time, a topic neglected to a surprising degree in most analysis of economic statistics. i especially like the historical sweep including the well - detailed comparison and contrast of the late 19th century “ gilded age ” with the more recent “ age of financialisation ”. ( we didn ’ t have much of a “ gilded age ” in ireland, but we did have “ financialisation ” with a vengeance cf. o riain, 2014 ). i also was intrigued by the documentation of the destruction of wealth – and of wealth concentration – by war and depression in mid - 20th century. ( resonances also here to ireland ’ s current experience ). i appreciate the matter - of - fact concern with inequality – especially wealth inequality : i differ from those commentators who do not see the obvious policy relevance of these matters. and i like the handling of the contrasting roles of inheritance and accretion through investment earnings versus “ earned income ” in generating wealth inequalities. finally, as someone who studied macroeconomic dynamics in graduate school, i was very struck by the neglected relevance of the r – g dynamic ( i. e. the dominance and concentration wealth will grow in the economy if the average rate of return on capital continues to exceed the rate of growth of economic activity ) for interpreting and predicting trends in the concentration of wealth. i have to disappoint anyone expecting a “ however ” at this stage, because ( while such an ambitious book will continue to prompt many debates and questions ) for me it is a tour de force. although much of the commentary around piketty ’ s book has centred on his forward - looking analysis of the prospects for the size distribution of worldwide wealth in the decades