Banks are middlemen. They take in deposits and then loan it out. It's how they pay their bills.
What happens if a major international event causes large financial issues such that those who have taken out loans are unable to make monthly loan payments, or payoff a loan when due. Banks being smart folks likely would not want to roll over a loan to an organization that's at risk. So the bank ends up with a bad debt and possibly lots of them.
Now you and a bunch of other bank customers show up asking for your money when the bank isn't able to get paid from their loan customers. Rock meet hard place. That's a liquidity event.
In China there's a big mess going on. I mentioned somewhere else that many businesses are closed or trying to reopen. Historically during the Chinese New Year at the end of January many factory workers go home but about 15% tend not to come back. This year it's much, much higher. There's a worker shortage in the factories. And that's causing operational problems.
Smaller manufacturers don't have the capital to withstand any disruptions long term. Unless they're running at capacity they aren't profitable. They are sucking wind and can't pay back their loans. And in some cases aren't able to fund the costs of getting up and running again after the long layoff.
What happens if/when we get coronavirus here in the US? What happens at brick and mortar retail, restaurants, travel like airplane, train and bus, vacation spots and cruises, entertainment venues, large ticket sales (home and auto sales) and so much more? The economy freezes up. People won't spend. And the same cycle that's happening in China happens here. Liquidity dries up.
And what happens to the stock market under these conditions? That's why my buddy sold. He is in fear of this type of event. He sold equities he's held for twenty years or more. That's just one man's opinion but he's worried.
Us consumers can be rational beings. IMHO any substantial increase in coronavirus cases around the US will have a serious impact on consumer spending. And IIRC consumer spending is about 70% of our GDP.
Liquidity like we can’t get money out or we can only get money in limited amounts? Is that what mean?