(ECONOMICS) An emergency in which a financial or government institution cannot meet its current obligations in an acceptable form of payment. Different from insolvency, which is where that same institution cannot be realistically expected to EVER meet its obligations.
A good example of the difference is a run on a bank, especially in the days before deposit insurance. A perfectly honest, well-run bank could have all of its books in order, and be paying its depositors in legal tender, when suddenly a panic strikes and everyone wants their deposits all at once. This is necessarily impossible, and forces the bank's officers to default on their debts.
Often, the bank could resume operation later when it was established that it held performing assets greater than deposits. More recently, liquidity crises have been a problem suffered by countries facing capital flight
A good example of the difference is a run on a bank, especially in the days before deposit insurance. A perfectly honest, well-run bank could have all of its books in order, and be paying its depositors in legal tender, when suddenly a panic strikes and everyone wants their deposits all at once. This is necessarily impossible, and forces the bank's officers to default on their debts.
Often, the bank could resume operation later when it was established that it held performing assets greater than deposits. More recently, liquidity crises have been a problem suffered by countries facing capital flight
In 1997, several countries in East Asia were stricken with a liquidity crisis. In many cases, such as Malaysia, the panicked response had nothing whatever to do with fundamentals; it was sheer herd mentality.
by Abu Yahya May 5, 2010
Get the liquidity crisis mug.*noun*; the tendency for the public to want to hold income in cash relative to its willingness to hold it as interest-bearing savings (bonds).
The liquidity preference is analogous to a supply curve for lendable funds. If the price for lendable funds--that is to say, the interest rate--is high, then the amount be be large. If the interest rate is low, then the public will be more inclined to hoard income as cash.
Income held as cash is not spent on goods and services, so if the amount increases abruptly then there will be a recession. If it is held in some interest-bearing form, then it can be spent on fixed capital, thereby increasing output and employment.
During a recession, if the liquidity preference is high, a lot of money is going to be held as cash. One could free up some cash for job-creating investment by raising interest rates, but that would eradicate a lot of business opportunities. So monetary authorities monetize debt instead, creating a new supply of credit to replace the savings lost by falling interest rates.
The liquidity preference is analogous to a supply curve for lendable funds. If the price for lendable funds--that is to say, the interest rate--is high, then the amount be be large. If the interest rate is low, then the public will be more inclined to hoard income as cash.
Income held as cash is not spent on goods and services, so if the amount increases abruptly then there will be a recession. If it is held in some interest-bearing form, then it can be spent on fixed capital, thereby increasing output and employment.
During a recession, if the liquidity preference is high, a lot of money is going to be held as cash. One could free up some cash for job-creating investment by raising interest rates, but that would eradicate a lot of business opportunities. So monetary authorities monetize debt instead, creating a new supply of credit to replace the savings lost by falling interest rates.
...An individual’s liquidity preference is given by a schedule of the amounts of his resources, valued in terms of money or of wage-units, which he will wish to retain in the form of money....
John M. Keynes, *General Theory of Employment, Interest, and Money* (1936), Ch.13
John M. Keynes, *General Theory of Employment, Interest, and Money* (1936), Ch.13
by Abu Yahya March 3, 2009
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by gmsb October 2, 2009
Get the liquishit mug.In the dating world to liquidate is the act of "dumping" without notice or to actively seek to not hangout with opposite members of your sex in which you previously showed or faked an interest in to start anew or "fresh"
The act of Liquidation is commonly linked to players and general whores/sluts.
The commonly Liquidated consists of but is not limited to normal run of the mill plain Jane's or Joe Shmoe's.
To preform you must have a date interest that you have been seeing for about a week or two then without warning or notice when they think everything is going alright you sever all contact for your various reasons. ex: His/Her laugh is annoying, i don't like that he/she smokes, He/She talks about themselves and their issues constantly, he's/she's pretty hot and we have allot in common and he/she really seems to be interested in me but i would rather be single for no apparent reason.
The act of Liquidation is commonly linked to players and general whores/sluts.
The commonly Liquidated consists of but is not limited to normal run of the mill plain Jane's or Joe Shmoe's.
To preform you must have a date interest that you have been seeing for about a week or two then without warning or notice when they think everything is going alright you sever all contact for your various reasons. ex: His/Her laugh is annoying, i don't like that he/she smokes, He/She talks about themselves and their issues constantly, he's/she's pretty hot and we have allot in common and he/she really seems to be interested in me but i would rather be single for no apparent reason.
"Hey man you know those 2 girls I've been seeing...Liquidated, I'm done with em!"
"Yeah dude she was really cool and i can tell she is into me big time...Liquidated!"
"Yeah the first date went great, we talked and shared allot about each other i felt a connection its just to bad I'm never going to call"
"Yeah dude she was really cool and i can tell she is into me big time...Liquidated!"
"Yeah the first date went great, we talked and shared allot about each other i felt a connection its just to bad I'm never going to call"
by Dgriffy February 5, 2009
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