SA will not be spared a global solvency crisis
The problem is that balance sheets have been impaired for households, businesses and governments
The novel coronavirus has caused severe damage to the world economy — far more than we can repair. Developing economies will most likely suffer most from the effects of the pandemic. The worst impact, on the health front, may be behind us but it seems the full effect on the economy is only starting to show. If the effect of the virus continues, it may permanently impair the world economy as we once knew it. As such, the question is: are we looking at a global solvency crisis?
Worldwide, speculation is rising over whether we are looking at a liquidity or solvency crisis. It is important to note that a liquidity event differs from a solvency event. The former refers to the inability of the banking system to supply funds to those in need of them. The latter refers to a situation where an individual, household or government does not have access to a cash flow. For example, during this coronavirus pandemic millions of people have lost their jobs worldwide. These individuals no long...
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