Crashing the Operating System – Liquidity Crunch In Practice
MONDAY, JUNE 04, 2012
2008 was a practice run, or a warning shot across the bow, compared to what is coming over the next few years.
2008 did not demonstrate what a liquidity crunch really means, but this time we are going to find out. As with many aspects of financial crisis, Greece is the canary in the coalmine, demonstrating what happens when liquidity disappears and it ceases to be possible to connect buyers and sellers or producers and consumers.
As we have said before, and for a long time now, money is the lubricant in the engine of the economy in the way that motor oil is the lubricant in the engine of your car, and you know what will happen to your car if you drive it with the oil warning light on.
Greece stands on the verge of an energy crisis caused not by lack of energy, but lack of money within the energy sector. This will become a common refrain throughout Europe and beyond in the coming months and years. Loss of liquidity has a cascading effect on supply chains, causing them to seize up.
For a long time, money will be the limiting factor, and finance will be the key driver to the downside, just as was the case in the Great Depression of the 1930s. Resources will remain available, at least initially, but no one will have the means to pay for them during a period of economic seizure. Harry Papachristou has this for Reuters:
Greek power regulator warns of energy meltdown