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But that is clearly false. Liquidity risk can be made to go away entirely (at least within the system of banks in good standing) through appropriate central bank policy. This will not, however, do anything about credit risk.

Liquidity risk is a political problem of whether you get to defer payment. Credit risk is a fundamental problem of whether you are able to make payment.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 06:55:13 PM EST
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