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  • liquidity trap

    European Central Bank Lowers Interest Rates, Trumping "Zero Lower Bound" Theory

    The European Central Bank (ECB) lowered a key interest rate to 0.25 percent on Thursday. This is a big deal, since it demonstrates that the ECB has the ability and the will to stabilize euro inflation, which has fallen below the ECB’s target and become a drag on real growth. … More

    Is the U.S. Economy in a “Liquidity Trap”?

    Popular economics suggests that economic activity results from a circular flow of money in the economy: One person’s spending is a second person’s income, and the second person’s spending is a third person’s income, and so on. According to this theory, recessions occur because psychological factors cause individuals to increase … More