The meaning of liquidity

The Lex column today looks at the relative health of the IPO market, with VMware's stock rising strongly on its first day. This suggests that there is money available for firms. There is some "liquidity" in a broad sense, but there is no "liquidity" in the credit markets. The first use of the term is more associated with money and its availability. Central banks that peg their currencies still have funds to park and these will continue to flow. However, the second meaning of the term means that the market is not functioning in certain sectors. The weaker players have to be shaken out before any kind of normality returns. The FT notes today that the commercial paper market is also affected. The situation is similar to the caution and fear that was in the equity market when people were looking for another Enron or Worldcom.