Arcachon
24-05-20, 15:12
https://blog.seedly.sg/first-recession-feels-1990s-working-kid
The World is so lucky don't have such a smart person as Federal Reserve Board.
2. Liquidity trap.
This happens when interest rates fall so low, that people do not see the return on holding debt, and rather hold on cash instead.
This scenario is depicted with an inelastic LM line.
In this case, if monetary policy is done to shift the LM curve outwards, output remains similar because people have no incentive to buy debt and the amount of money remains the same.
Liquidity trap
Thus this explains why despite 2 fed fund rate cuts, the market still did not respond likewise, and despite a US$2t stimulus agreed to by the US Congress, we do not see the futures increase as much, only +170.
The World is so lucky don't have such a smart person as Federal Reserve Board.
2. Liquidity trap.
This happens when interest rates fall so low, that people do not see the return on holding debt, and rather hold on cash instead.
This scenario is depicted with an inelastic LM line.
In this case, if monetary policy is done to shift the LM curve outwards, output remains similar because people have no incentive to buy debt and the amount of money remains the same.
Liquidity trap
Thus this explains why despite 2 fed fund rate cuts, the market still did not respond likewise, and despite a US$2t stimulus agreed to by the US Congress, we do not see the futures increase as much, only +170.