the.com/solvency
the unsexy superpower of being able to pay tomorrow what you swore yesterday.
means The state of having enough assets and income to pay all your debts and obligations as they come due.
from From Latin 'solvere,' to loosen, release, or untie — the same verb that gives us 'solve' and 'dissolve.' A debt was imagined as a binding knot, and to pay it was literally to 'unbind' yourself from the obligation. 'Solvency' arrived in English in the 17th century as the financial flavor of that loosening: the happy condition of being free to slip the knot whenever it pulls tight.
- two flavors
- liquidity is now-money; solvency is forever-money.
- insolvency types
- cash-flow broke or balance-sheet underwater both count.
- bank rule
- regulators demand capital buffers against total ruin.
- latin root
- solvere means to loosen, untie, release debt.
- silent killer
- profitable firms collapse when bills outrun cash.
lehman brothers collapse — investment bank failed in 2008 with $619 billion in assets, triggering financial crisis
silicon valley bank failure — regional bank collapsed in march 2023 due to unrealized losses on bond portfolio
argentina debt crisis — country defaulted on $95 billion in external debt in 2001, largest sovereign default at the time