Central bank liquidating assests
If banks can create money, then how do they become insolvent?
After all surely they can just create more money to cover their losses?
In business, economics or investment, market liquidity is a market's ability to purchase or sell an asset without causing drastic change in the asset's price.
Insolvency can be defined as the inability to pay ones debts. Firstly, for some reason the bank may end up In accounting terminology, this means its assets are worth less than its liabilities.In this balance sheet, the assets are larger than its liabilities, which means that there is a larger buffer of ‘shareholder equity’ (shown on the right).Shareholder equity is simply the gap between total assets and total liabilities that are owed to non-shareholders. In the situation shown above, the shareholder equity is positive, and the bank is solvent (its assets are greater than its liabilities).In a relatively illiquid market, selling it quickly will require cutting its price by some amount. It can be used immediately to perform economic actions like buying, selling, or paying debt, meeting immediate wants and needs.Money, or cash, is the most liquid asset, because it can be "sold" for goods and services instantly with no loss of value. If a business has moderate liquidity, it has a moderate amount of very liquid assets.