Liquidity versus solvency, what's the difference?
Simply put, illiquidity is when an entity owes money but doesn't have enough cash to pay off those debts. insolvency is when all of the entity's assets aren't enough to repay the debt.
As an example, a person may owe $1000 per month but only has $500 in cash each month. To cover the debt payment, the person would need to raise additional cash by selling something.
Corporations face the same problem for their debts. If they can't raise the cash, the corporation can be forced into bankruptcy.
When bankruptcies occur, it is usually due to a liquidity crisis because waiting until insolvency means there is no value left.
More difficult to handle are banks. A bank that doesn't have enough liquidity may be considered insolvent, too, because a bank has a hard job maintaining the value of its assets if it is viewed as illiquid. A "bank run" can quickly drain a bank. Liquidity dries up and the bank can't raise cash by quickly selling assets.
Monday, November 21, 2011
Sunday, November 20, 2011
Three 'D's
The markets are scared of the 3 'D's -- debts, deficits, and defaults.
Debt is everywhere. Consumer debt grew into a massive bubble. Government debt too. Corporate debt isn't too bad.
Deficits from government is very troubling. The US deficit is now over $15 trillion.
Finally, the end of too much debt is a default. After defaults in South American and Asia over the last few decades, Europe's PIIGS are risking default.
Investors are watching these three 'D's because they know other Ds can follow -- depression, currency debasing, and maybe deflation.
Debt is everywhere. Consumer debt grew into a massive bubble. Government debt too. Corporate debt isn't too bad.
Deficits from government is very troubling. The US deficit is now over $15 trillion.
Finally, the end of too much debt is a default. After defaults in South American and Asia over the last few decades, Europe's PIIGS are risking default.
Investors are watching these three 'D's because they know other Ds can follow -- depression, currency debasing, and maybe deflation.
Saturday, October 29, 2011
Rossi e-cat test
Rossi delivered on his promise to hold a large test of his hydrogen-nickel "energy catalyzer" technology.
Is it for real? The promise sounds too good to be true. With this test's success, more detailed examination will come of the physics and engineering. Does it really fuse nickel and hydrogen? What results from its reaction? Is the device capable of extended operations? There's an endless list of questions. But Rossi is keeping secret many aspects until he secures his patent.
Is it for real? The promise sounds too good to be true. With this test's success, more detailed examination will come of the physics and engineering. Does it really fuse nickel and hydrogen? What results from its reaction? Is the device capable of extended operations? There's an endless list of questions. But Rossi is keeping secret many aspects until he secures his patent.
Tuesday, April 26, 2011
Origin of "dollar"
In the 1500s Count Hieronymus Schlick of Bohemia started minting silver coins known as Joachimsthalers. The name came from Joachimstal, the valley where the silver was mined. In German, thal or tal refers to a valley or dale (St. Joachim's Valley, now Jáchymov; then part of the Holy Roman Empire, now part of the Czech Republic). His "Joachimsthaler" was later shortened in common usage to taler or thaler. This word evolved to daler in Denmark and Sweden, to daaler in the Netherlands and to daelder in Flemish. In Ethiopia it became talari, and in Italy tallero. Eventually it entered English as "dollar".
On April 2, 1792, U. S. Secretary of the Treasury Alexander Hamilton reported to Congress the amount of silver found in Spanish dollar coins then in common use in the new country. Using this information, the United States Dollar was defined by a precise weight of silver.
Various acts have subsequently been passed affecting the amount and type of metal in US coins, so that today there is no legal definition of the term "dollar" to be found in US statute.
Silver was mostly removed from US coins by 1965, when the dollar became a free-floating fiat currency.
On April 2, 1792, U. S. Secretary of the Treasury Alexander Hamilton reported to Congress the amount of silver found in Spanish dollar coins then in common use in the new country. Using this information, the United States Dollar was defined by a precise weight of silver.
Various acts have subsequently been passed affecting the amount and type of metal in US coins, so that today there is no legal definition of the term "dollar" to be found in US statute.
Silver was mostly removed from US coins by 1965, when the dollar became a free-floating fiat currency.
The Fed speaks
On April 27th, the Fed makes history with Bernanke's press conference.
During the first 8 decades of its existence, the Fed operated in quiet. Starting in 1994, they issued a statements after they changed interest rates. They took another step 5 years later when they started issuing statements at the end of each meeting, even if no rate change occurred.
So when Bernanke appears before the reporters, the change has been quick.
During the first 8 decades of its existence, the Fed operated in quiet. Starting in 1994, they issued a statements after they changed interest rates. They took another step 5 years later when they started issuing statements at the end of each meeting, even if no rate change occurred.
So when Bernanke appears before the reporters, the change has been quick.
Sunday, April 24, 2011
Kahnawake
Where is Kahnawake?
If you read some on-line gambling website disclosures, you may have seen that name.
For example, the text from bodog.com says:
Kahnawake is in Canada, near Montreal. The tribe offers gambling licenses to websites. Several hundred websites are licensed by them, making Kahnawake the biggest licensing organization.
http://www.gamingcommission.ca/
If you read some on-line gambling website disclosures, you may have seen that name.
For example, the text from bodog.com says:
ANY TRANSACTIONS CONDUCTED WITH YOU THROUGH THE WEBSITE SHALL BE DEEMED TO TAKE PLACE IN THE TERRITORY OF KAHNAWAKE AND SHALL AT ALL TIMES BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND SHALL BE GOVERNED EXCLUSIVELY BY, THE LAWS APPLICABLE WITHIN THE TERRITORY OF KAHNAWAKE WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS.
Kahnawake is in Canada, near Montreal. The tribe offers gambling licenses to websites. Several hundred websites are licensed by them, making Kahnawake the biggest licensing organization.
http://www.gamingcommission.ca/
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