The History and Economics of Safe Assets

Gary Gorton

No 22210, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Safe assets play a critical role in an(y) economy. A “safe asset” is an asset that is (almost always) valued at face value without expensive and prolonged analysis. That is, by design there is no benefit to producing (private) information about its value. And this is common knowledge. Consequently, agents need not fear adverse selection when buying or selling safe assets. Safe assets can easily be used to exchange for goods or services or to exchange for another asset. These short-term safe assets are money or money-like. A long-term safe asset can store value over time or be used as collateral. Human history can be written in terms of the search for and production of safe assets. But, the most prevalent, privately-produced short-term safe assets—bank debt, are subject to runs and this has important implications for macroeconomics and for monetary policy.

JEL-codes: E3 E41 E42 E44 E5 G2 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-his and nep-mac
Note: AP CF DAE ME
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Citations: View citations in EconPapers (20)

Published as Gary Gorton, 2017. "The History and Economics of Safe Assets," Annual Review of Economics, vol 9(1), pages 547-586.

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