Explaining Solvency vs. Liquidity to Millennials

By Daniel Indiviglio

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.

This article available online at:

http://www.theatlantic.com/business/archive/2010/11/explaining-solvency-vs-liquidity-to-millennials/67170/