In recent decades, the structure of financial markets has changed, shifting from a bank-based to a market-based financial system, with banking now following an originate, rate and relocate model. Financial intermediation has moved from banks into markets, and as a consequence of this disintermediation, financial crises are now manifest in markets rather than institutions. Accordingly, interest has moved from bank runs to “market gridlock” as a source of systemic risk. In this distinguished lecture, John Eatwell, a leading scholar in the field of financial policy, sheds new light on the long-debated issue of liquidity in order to draw lessons from the current financial turbulence. In particular, he discusses market liquidity and the causes of financial bubbles; how liquidity relates to monetary and financial policy; and lessons that can be drawn from the current financial turmoil for emerging markets and how to reduce systemic risk in financial markets.