Rates are against the lower bound...
Posted on: April 15, 2012 at 13:43:51 CT
Monetary policy won't cut it.
Business won't spend.
Consumers can't spend, because they are unemployed.
So where can the stimulus come from? Hmm.....maybe government?
The key to getting out of this liquidity trap is to stimulate the economy now, get people working again, and then worry about inflation. It would take a LOT of stimulus to raise inflation. 4% inflation would be a good target right now to get people back to work, get more revenues to help later with deficit reduction.
You cannot cut your way to prosperity.