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There is that economic adage attributed to Keynes: In the long run we're all dead. If you need money but your current assets in whatever form can't furnish tha
by Edmond 4y ago
There is that economic adage attributed to Keynes: In the long run we're all dead.
If you need money but your current assets in whatever form can't furnish that fund for you, I am afraid you're broke.
- bloppe 4y agoSo you're saying having zero money is equivalent to having future money that can be borrowed against in the present? Obviously the latter is not as good as just having money. But it's clearly better than the former. Therein lies the difference between solvency and liquidity problems.
- Edmond 4y agoNot at all, my point is to avoid fancy words like "solvency" and "liquidity", they blind you to the basic fact that if you need cash today and you can't get it then you're broke. Whether you have assets that *you* believe you could draw on in the future doesn't matter when your need is immediate.
- bloppe 4y agoYou say blindingly fancy words. I say important difference. You say basic fact. I say oversimplification. We can argue about the semantics of the word "broke", but the difference here is between losing all your money vs. having to take out a loan now that you're pretty much guaranteed to be able to repay when your bonds mature and only losing the interest payments on that loan.
- orangesite 4y agoBut here's the the bugger: Folk don't give you loans when you're insolvent.
- bloppe 4y agoThat's why it's so much better to be illiquid! :)