Liquidity ≠ Solvency
Liquidity and solvency are often conflated. They are not.
Liquidity determines whether obligations can be met in the short term.
Solvency determines whether obligations can be met at all.
A system can be solvent and still fail due to illiquidity.
It can also appear liquid while masking insolvency.
Liquidity stress reveals timing risk.
Solvency stress reveals structural weakness.
During periods of abundant liquidity, these distinctions blur.
Access to funding obscures underlying fragility.
When liquidity contracts, timing matters more than valuation.
Obligations come due regardless of long-term viability.
Most crises begin as liquidity events.
Some evolve into solvency events.
Few are correctly identified in real time.
Understanding this distinction is critical to evaluating leverage, risk management, and system resilience.
Liquidity determines survival today.
Solvency determines survival eventually.
This framework is designed to remain valid across market cycles.
This analysis prioritizes structure over narrative.
