  We present a simple continuous-time model of clearing in financial networks.
Financial firms are represented as "tanks" filled with fluid (money), flowing
in and out. Once "pipes" connecting "tanks" are open, the system reaches the
clearing payment vector in finite time. This approach provides a simple
recursive solution to a classical static model of financial clearing in
bankruptcy, and suggests a practical payment mechanism. With sufficient
resources, a system of mutual obligations can be restructured into an
equivalent system that has a cascade structure: there is a group of banks that
paid off their debts, another group that owes money only to banks in the first
group, and so on. Technically, we use the machinery of Markov chains to analyze
evolution of a deterministic dynamical system.
