Supply and demand according to John Taylor

This is a prediction market. Note, the volume jumped as the price increased. This seems like pricing sets the queues to stable. It is true, but what are they buying and selling? Money, or prices is the thing sold, this is pure liquidity, the finite set of examples where John Taylor is correct. Real goods markets the queue is managed first, then pricing set second only after the queues are stable.

Demonstrating two things, proof by listing the finite exceptions of an infinite set. And, in pure liquidity the only uncertainty is the serialization of the trade book.

Pure liquidity generally devolves to a standard, but implicit, two color S/L, as in this case.  This is an S/L that is backed by a recession! On resolution, the parties have adequately hedged their peculiar risks in a recession.

Chart from Menzie who is sneaking event studies into the recession prediction. Menzie has a problem, separating out the regularity of a recession from its local occurrence. That has always been the problem with event studies, the events generally trigger prior hedges set before the event.