Otherwise, a liquidity run would create solvency problems for all the big eurozone debtors.

Easier monetary policy may boost liquidity, but it will not resolve the solvency crisis.

First, the factors which allow a distinction to be made between liquidity and solvency problems are not clearly set. What determines a liquidity crisis?

But the liquidity crunch was not the only problem there was also a solvency problem.

A distinction should be made between arrears resulting from a liquidity crisis and those caused by a solvency crisis.

The ECB s task is to provide liquidity to banks, while the EFSF and ESM are designed to absorb solvency risk.

Financial intermediaries showed adequate levels of solvency and high ratios of liquidity in both types of currency, and dollarization of financial claims had declined.

In order to deal with arrears when they emerge, a distinction should be made between arrears resulting from a liquidity crisis and those caused by a solvency crisis.

But by stubbornly arguing that that these countries are facing a liquidity crisis, rather than a solvency problem, euro officials are putting entire system at risk.

And that means that the financial institutions that own them cannot have confidence in the liquidity or solvency of potential counterparties or even in the value of their own capital.

If the need for the extra financing is owing not only to a short run shortage of liquidity but also to a lack of solvency, there is a problem.

The Baker Plan did try to help these countries, but managed mainly to deepen their debt crisis by applying a liquidity solution to what was increasingly realized to be a solvency problem.

In terms of substance which the German Constitutional Court explicitly and intentionally avoids the case for OMT has always been about preventing a liquidity crisis from morphing into a solvency problem, especially on the eurozone s periphery.

Call it information liquidity, akin to financial liquidity.

Meanwhile, global investors are questioning local governments solvency.

And then they collapsed, causing enormous damage to the government s own solvency.

Liquidity position

Is Liquidity Enough?

The Liquidity Puzzle

Substantial bank liquidity.

3. Liquidity ratio

Liquidity position (consolidated)

If this lending approach to southern countries continues, their solvency and economic recovery will suffer.

The Liquidity Time Bomb

Liquidity position 33 35

The liquidity policy will be monitored against the new liquidity trend in future audits.

The fact that there is even a small liquidity crunch for banks implies larger liquidity crunches for less intensively regulated financial institutions, and even greater liquidity crunches for manufacturing and real estate companies.

And if a European agency is to guarantee banks solvency, that agency must also oversee them.

New financial regulations Basel 3 for banks and Solvency 2 for insurers are reinforcing these advantages.

Confronting the Coming Liquidity Crisis

NET DECREASE IN LIQUIDITY Notes

Liquidity is still very high.

Greece is likely to find itself insolvent, and questions surround the solvency of Ireland and Portugal as well.

Only a government that is sufficiently powerful, in terms of legal authority and solvency, can do so.

The same crisis looks like a solvency crisis for those who are geographically distant.

The breakdown was fundamentally a liquidity crisis, and liquidity was easily restored in several ways the New York banks issued their own liquidity through a clearing house one massively powerful financial institution, J.P. Morgan, bought up collapsing shares, and thus reversed a market panic and a scramble for liquidity and European central banks supplied gold to the American market.

To protect commercial banks from risking their own solvency (and the whole country s solvency besides) once again, Richard Robb suggested that a small tax on banks short term debts be imposed in order to deter banks from over borrowing.

The third problem concerns international liquidity.

G. Liquidity available cash versus liabilities

Statement IV. Liquidity position (consolidated) . 33

The IMF recently established the Short Term Liquidity Facility to help strong performing members facing temporary liquidity problems.

Without a return to growth, they cannot quell investors doubts about their fiscal sustainability and their banks solvency.

massive and unlimited provision of liquidity to solvent financial institutions

Nor is it alone in ignoring the terrible solvency threat they pose and their damaging consequences to saving and investment.

Time and again, banks woes have affected governments borrowing costs, and concerns over governments solvency have affected banks balance sheets.