Banks lend to banks, so while some are more illiquid than others, they are all intrinsically illiquid institutions.

Deleveraging by highly leveraged firms such as hedge funds will lead them to sell illiquid assets in illiquid markets.

Deleveraging by highly leveraged firms such as hedge funds will lead them to sell illiquid assets in illiquid markets.

Instead, they are traded mostly over the counter in illiquid markets.

Before the advent of the euro, local markets were small and illiquid.

ELA funding assumes that the Greek economy is temporarily illiquid, but not insolvent.

Similarly, super sovereigns cannot continue to bail out distressed sovereigns that are insolvent rather than illiquid.

The issue is not just illiquidity financial institutions with short term liabilities and longer term illiquid assets.

Banks lend to banks, so while some are more illiquid than others, they are all intrinsically illiquid institutions. Small failures can give birth to large panics, which means that in a crisis almost everyone is too big to fail.

Clearly, back in 2009, the ECB did not make the controversial call that Greece was insolvent, not illiquid.

Nor could they do otherwise, as it was nearly impossible to price these complex, exotic, and illiquid instruments.

Adding up the impact of the PBC s sterilization efforts, roughly one quarter of China s total monetary base is illiquid.

Moreover, it is hard to price losses on exotic instruments that are illiquid (i.e. do not have a market price).

As more investors pile into overvalued, increasingly illiquid assets such as bonds the risk of a long term crash increases.

As a result, there is an overhang of illiquid financial institutions, whose holdings could be unloaded if they run into difficulties.

First, illiquid investments limit investors ability to adjust their portfolios in response to early warnings of an increase in systemic risk.

Banks tend to have close, long term, and protective ties with the managers of such firms, primarily because the bank's holdings are illiquid.

Once everybody is sure that, no matter how much others panic, financial institutions won t have to dump illiquid assets at a loss, the panic will subside.

Once everybody is sure that, no matter how much others panic, financial institutions won t have to dump illiquid assets at a loss, the panic will subside. And the penalty rate means that financial institutions can t profit from the investment behavior that left them illiquid and creates an incentive to take due care to guard against such contingencies in the future.

Regulations for international accounting and funding will have to be examined to identify policies that inadvertently discourage institutional investors from putting their resources into longer term, illiquid assets.

First, the authorities can offer to buy illiquid assets through auctions and house them in a government entity, much as was envisaged in America s original Troubled Asset Relief Program.

public provision of credit to the solvent parts of the corporate sector in order to avoid a short term debt refinancing crisis for solvent but illiquid corporations and small businesses

A large portion of these holdings are illiquid (total cash in hand and bank deposits combined for Nawaz Sharif and his wife are Rs 140 million) and constant industrial investments in Pakistan.

The focus has been appropriately on the cash flow challenges that come from a combination of large illiquid investment portfolios and large systemic shocks that cause adverse shifts in the cash flow models.

But there are two other aspects of liquidity management that deserve attention. First, illiquid investments limit investors ability to adjust their portfolios in response to early warnings of an increase in systemic risk.

On top of all this, there is a shadow financial system of non bank financial institutions that, like banks, borrow short and liquid and lend to or invest in longer term and illiquid assets.

Herding in the opposite direction occurs, but, because many investments are in illiquid funds and the traditional market makers who smoothed volatility are nowhere to be found, the sellers are forced into fire sales.

And the penalty rate means that financial institutions can t profit from the investment behavior that left them illiquid and creates an incentive to take due care to guard against such contingencies in the future.

Under a repurchase agreement, for example, monetary authorities buy assets from an illiquid bank under the promise that the bank will then buy the assets back on a specified date and for a specified price.

Indeed, trading in the US nowadays is concentrated at the beginning and the last hour of the trading day, when HFTs are most active for the rest of the day, markets are illiquid, with few transactions.

These measures will fail to reduce interbank spreads significantly, because monetary policy cannot address the core problems underlying the crisis. The issue is not just illiquidity financial institutions with short term liabilities and longer term illiquid assets.

Only time will tell if this plan will work i.e. whether Greece will turn out to be illiquid but solvent, conditional on credible fiscal austerity and structural reforms and with the help of large amounts of financial support.

The credit crunch will get worse deleveraging will continue, as hedge funds and other leveraged players are forced to sell assets into illiquid and distressed markets, thus causing more price falls and driving more insolvent financial institutions out of business. A few emerging market economies will certainly enter a full blown financial crisis.

Banks tend to have close, long term, and protective ties with the managers of such firms, primarily because the bank's holdings are illiquid. This can provide considerable stability indeed, the second half of the 20th century saw only four German firms succumb to hostile takeovers but at the cost of reducing access to finance and curtailing future opportunities.

Thus, Germany and the eurozone core have increasingly outsourced official financing of the eurozone s distressed members to the ECB. If Italy and Spain are illiquid but solvent, and large scale financing provides enough time for austerity and economic reforms to restore debt sustainability, competitiveness, and growth, the current strategy will work and the eurozone will survive.

Only time will tell if this plan will work i.e. whether Greece will turn out to be illiquid but solvent, conditional on credible fiscal austerity and structural reforms and with the help of large amounts of financial support. But, as with Argentina, Russia, and Ecuador, Greece may also be insolvent if adjustment fails to restore debt sustainability and growth.