Can anyone explain "liquidity in the market" and what it means that EU banks injected billions today

[peacebird]

It sounds like a "Hail Mary pass" or a desperation play to me but I don't understand the whole "liquidity" bit.... Can someone steer me towards a "Market-speak for dummies" link?

I keep reading that a huge wave of ARM mortgages will "reset" in Sept/Oct and that reset will lead to another massive round of foreclosures... Blivet said today the real estate market bust was going to be a "soft landing" but then every word he speaks is inverted from the truth.

[Xipe Totec]

1. It means your money is tied up in assets

so, if you want to cash out, there's a problem.

also called a run on the banks.

http://en.wikipedia.org/wiki/Bank_run

[peacebird]

6. o.m.g.

[Fredda Weinberg]

2. Liquidity ... can you convert to cash quick

It's like hot potato ... when there's a healthy market, you can convert your assets into cash. But the organizations that rate investments passed off crap as gold - so no one wants to risk a purchase. That leaves those holding these sub-prime notes and mortgages w/worthless paper, hence the panic.

[hatrack]

3. Nobody is willing to buy any of the subprime & Alt-A CDOs (real estate paper) on the market

With no willing buyers, this presents something of an, er, problem to the hedge funds, banks, institutional investors and pension funds who have lots and lots of money tied up in these "investments".

They bought huge quantities of this shyte because everybody knew that house prices were just going to keep going up forever. Well, they didn't, and only in a market with rising home prices were NINJA homebuyers going to be able to keep up their payments when the damned mortgages reset, as they are now doing in the hundreds of thousands.

[skids]

4. It basically means so many people wanted out...

...that there was not enough money in circulation for them to sell their shares.

A simple way to think about it is that the cash register ran out of nickels and couldn't make change, so they brought more nickels.

The more mystifying thing to understand is where the money comes from, and where (and if) it goes away when we don't need it anymore. (Or more to the point, did anyone actually give them a dollar for those twenty nickels?)

And trying to comprehend that can lead to psychiatric disorders. (Just ask this fellow called mogambu)

The key term to google is "repos"

[no_hypocrisy]

5. Something similar was done right before The Crash in 1929.

A collection of bankers and financiers, such as J.P. Morgan used significant amounts of their own money to prop up the market since the prices of shares were plummeting. By infusing the market with their money, the values stopped falling, stabilized, and even rose for a little while. But panic was too ingrained in the market and too many shareholders were unloading their stock or had to relinquish it because of their market call. And despite the cash, the market went on to crash on Octobert 29, 1929.

Today's replenishing the market with capital made me shutter a little.

[defendandprotect]

7. And I don't think that was the first time that capitalists have done that -- - shored up markets --