Larry Berman: Liquidity-driven market about to have less liquidity VIDEO SIGN OUT With major moves in global equities being influenced by central bank liquidity, the markets may now require fiscal policy to extend recent gains. This phenomenon has a name: the equity risk premium (ERP). Basically, itâs the excess return in stocks relative to the risk-free rate. So thereâs an imbalance in fundamental supply and demand of the cost of money. This analysis from the Congressional Budget Office (CBO) was last done in September, well before the latest US$2.8 trillion in additional spending, funding bills and proposals in the U.S. The CBO projected an 8.6-per-cent GDP deficit in 2021 before the new spending. The required funding in 2021 is now in excess of about US$4 trillion, and about US$2.5 trillion more than the U.S. Federal Reserve is currently buying. That money needs to come from somewhere and while taxes will go up, they will not likely be doing so this year.