"LIQUIDITY TRAP": John Maynard Keynes

Of several other macroeconomic theories and concepts, it was the great British economist John Maynard Keynes (aka, First Baron Keynes) who first proposed in the early 20th century the macroeconomic concept of a "liquidity trap".

[see, "The Keynesian Liquidity Trap: Is It Real Or Just An Illusion?", by Charles Jerome Ware, Boston University Graduate School of Management (1975), Boston, Massachusetts]

In its original Keynesian conception, a "liquidity trap" refers to the macroeconomic phenomenon when increased money supply fails to lower interest rates; or, in the case of the United States, when injections of cash into the private banking system by a central bank (the Federal Reserve) fail to lower interest rates and therefore fail to stimulate economic growth.

[see, The General Theory of Employment, Interest and Money, by John Maynard Keynes, MacMillan Pub. (1936)]

In recent years John Maynard Keynes' theory of a "liquidity trap" has been espoused most notably by Nobel Prize-winning economist Paul Krugman; particularly during the period of 2008 to 2011, when Krugman argued regularly that much of the developed world, including the United States, Europe, and Japan, was in a liquidity trap.

[see, Paul Krugman, "How Much Of The World Is In A Liquidity Trap?", The New York Times (March 17, 2010, krugman.blogs.nytimes.com/2010/03/17]

What do you think? Are we in a liquidity trap?