The liquidity trap

An Occasional Letter From The Collection Agency

Presents

An interpretation of The Deflation Bias and Committing to Being Irresponsible by G B Eggertsson
thoughtsfromthetrenches.blogspot … e-and.html

Superb post GB,option 2 looking more and more likely,what about the other option - default?

I don’t quite know what motive he’s assigning to Paulson and Bernanke. Seems to me it must be either the most extraordinary incompetence in economic history, or the most extraordinary corruption in economic history.

What about the EU falling into a liquidity trap?

will the practice of the ECB (i think) lending Irish banks money to buy Irish Gov bonds which the ECB then buys back or accepts as collateral for other loans lead to a liquidity trap?

Its deflation and a higher real interest rate than nominal that leads to a liquidity trap isnt it?