The head slap of the week, possibly even the month, comes from Paul Krugman of the New York Times. Krugman writes on Dec 14 "the problem with the markets isn’t just a lack of liquidity — there’s also a fundamental problem of solvency." I at least will happily confess that I have been led along by all the commentary on the liquidity problems in the market. Liquidity liquidity liquidity, as if some magic force swept through with a financial paper towel and soaked up all the liquidity.

The problem is really, as Krugman points out, that we have now hit a time when no financial institution trusts any other to remain solvent. And thus, nobody will lend anyone money. And thus, no liquidity. So the newspapers are not wrong, but they're describing the symptoms, not the disease.