Semi-Daily Journal

"An operating company or a bank is insolvent when its liabilities are greater than its assets—when it couldn’t pay all of its bills if it were required to pay them today."

How many companies can pay all of their debts back and remain in business? Due to this problem won't most people call it insolvency only when companies/consumers quit servicing their debts and cannot repay their bills per your definition? Wouldn't most people call your definition technical insolvency to give it that distinction? (I realize asking these questions shows what classes I haven't taken.) As an aside, didn't a lot of the financial crisis deal with currency defense related problems (i.e., recessions in trading partners causes export declines and contagion)?

http://www.nytimes.com/aponline/business/AP-US-China-Textiles.html?hp

White House Moves to Impose Quotas on Chinese Textiles
By ASSOCIATED PRESS

WASHINGTON -- The Bush administration, in a further escalation of trade tensions between the United States and China, announced Tuesday it had decided to impose quotas on three types of textile products in an effort to give the U.S. textile industry temporary breathing room from a flood of Chinese imports.

The decision will affect Chinese imports of knit fabric, dressing gowns and robes and bras.

U.S. textile makers hailed the announcement as a major victory to protect their beleaguered industry while critics warned that the decision would hurt American consumers by raising prices....

"In such a situation there are four and only four things that a country and its central bank might do." First, minimize the damage. Second, avoid dangerous situations in the first place. Third, default is always an option. Fourth, ask for an IMF loan.

Are capital controls no longer a bad option or are they part of option one?

Interesting extension of the endogenous ramifications from what appears to be an exogenous shock - loss of confidence. Forgive me if my very quick read missed the answer to the following query. What if the loss of confidence is really itself an endogenous response to some other exogenous shock to the system? I know I'm actually suggesting taking this model much deeper, but could it also be that the system reaction to the loss of confidence depends on what caused this loss of confidence in the first place?