But governments soon realized that the main issue was solvency.

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.

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

So why, in the absence of solvency fears, do capital inflows to America continue?

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

After an initial rally, Brazilian interest rates have settled at levels incompatible with long term solvency.

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

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

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.

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

Mistaking a solvency problem for a liquidity shortfall, Europe has become hooked on the drip feed of bailouts.

Converting some portion of debt to equity under predetermined solvency threatening conditions would provide an extra layer of protection.

And, if Spain is at serious risk of default, government solvency is at risk throughout the eurozone except in Germany.

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

The level of uncertainty about asset values, solvency, and the connectedness of balance sheets that prevailed at the time was extraordinarily high.

Doubts about the Irish government s solvency would then disappear quickly, and its guarantee of bank deposits would no longer look so shaky.

First, sovereign bonds held by banks are treated as risk free assets under EU rules for calculating banks solvency and capital adequacy levels.

Production chains are facing labor shortages, wage increases, and threats of relocation to lower cost countries. Meanwhile, global investors are questioning local governments solvency.

With increased transaction costs, worsening solvency for the system, increased budget deficits, and decreasing benefits and security for retirees, why the drive for privatization?

A Greek default would threaten to sink them, too, for it would raise immediate concerns about the solvency of Europe s systemically important banks and insurance companies.

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.

The first and more desirable is for the ECB to assess realistically Greece s lack of solvency and so stop providing ELA funds to its banking system.

After an initial rally, Brazilian interest rates have settled at levels incompatible with long term solvency. Its benchmark C bonds now yield around 22 in dollar terms.

Easing monetary policy won t solve this kind of crisis, because even moderately lower interest rates cannot boost asset prices enough to restore the financial system to solvency.

A zero interest rate environment is of course ideal for such borrowers, because there is nothing to provide an indication of solvency borrowers can just roll over their debt.

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.

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.

In some countries tax burdens are increasing governments, having little economic solvency, continue to create taxes which affect bank deposits and, in a sense, penalise those with the most money.

Many of the countries that are piling on massive quantities of debt to bail out their banks have only tepid medium term growth prospects, raising real questions of solvency and sustainability

Finally, solvency rules should be complemented by an obligation that banks issue a substantial amount of non collateralized debt on the order of 100 of their capital that is convertible into equity.

The US remains the greatest economic and military power in the world, but questions about its solvency have in turn cast doubt on its ability to act and lead in the world.

And, with a few exceptions, most do not suffer from solvency problems although private and public debts have been rising rapidly in recent years, they have done so from relatively low levels.

The US remains the greatest economic and military power in the world, but questions about its solvency have in turn cast doubt on its ability to act and lead in the world.

But new financial regulatory frameworks such as Basel III, which aims to reduce risk in the banking sector, and Solvency II, the European Union s equivalent for insurance companies are inadvertently discouraging such investment.

In reality, Germany could not have underwritten all of the European periphery s debt without risking its own solvency and creditworthiness, particularly in the absence of a functioning system of eurozone wide checks and balances.

So an end to capital inflows to the US should not set off the worries about solvency and the derangement of finance that generated recessions in Mexico and East Asia and Argentina's deep depression.

Indeed, more often than not, the banks that failed or had to be rescued in the wake of the 2008 financial crisis had solvency ratios higher than those of banks that remained standing without assistance.

Some of the other ideas that Hill has floated, such as relaxing the capital standards for long term investments, run counter to the EU solvency standards for insurers and pension funds that will be implemented next year.

With increased transaction costs, worsening solvency for the system, increased budget deficits, and decreasing benefits and security for retirees, why the drive for privatization? One reason is the interest financial markets have in grabbing a piece of all those transactions costs.

Spain, Italy, and the eurozone periphery face unprecedentedly high real borrowing costs, which are preventing a recovery in investment and hence economic growth. Without a return to growth, they cannot quell investors doubts about their fiscal sustainability and their banks solvency.

If the solvency of Austria had not fallen by a single notch,from AAA to AA , we would have to pay three thousand million Euros of interest more every year, argued the vice chancellor and Christian democratic foreign minister, Michael Spindelegger.

A fall in the value of the dollar reduces Americans' standard of living, but it does not cause the kind of liquidity and solvency crises we have seen so often in the past decade at least not if New York's major financial institutions have well hedged derivative books if not, all bets may be off. So an end to capital inflows to the US should not set off the worries about solvency and the derangement of finance that generated recessions in Mexico and East Asia and Argentina's deep depression.

Just as it is the responsibility of creditor regions in the world s other currency unions to support the debtor regions (which they do through a variety of means), it is up to the eurozone s creditor regions to underpin its debtor regions solvency.

Converting some portion of debt to equity under predetermined solvency threatening conditions would provide an extra layer of protection. Add a higher bar for government bailouts, and these stronger incentives would induce private financial institutions and investors to take responsibility before disaster strikes.