Explaining Solvency vs. Liquidity to Millennials

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With all of the fiscal crises going on over in Europe, it's important to get your terminology straight. What does it mean that Ireland is having a solvency crisis compared to a liquidity crisis, for example? Ash Bennington at CNBC's NetNet has a hilarious and correct explanation of what a liquidity crisis, geared to twenty-somethings frame-of-reference. Here's the gist:

Think of it this way: A liquidity crisis is when you have to call your parents and ask them for a couple hundred bucks to help cover the rent. Short term. It's a terrible phone call to have to make. You put it off as long as you can. But while it's a pretty bad situation--there's no denying it--it could be a lot worse for you.

It gets funnier from there. Read the full story at NetNet.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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