57 – Paul Krugman on Liquidity Traps, the Great Recession, and Isaac Asimov
Macro Musings with David Beckworth
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Japan's Slump and the Return of the Liquidity Trap
The chapter delves into the history and implications of Japan's slump and the liquidity trap, challenging preconceived notions and discussing the effectiveness of monetary policy in this scenario. It explores the difficulties faced by central banks like the Fed, ECB, and Bank of Japan in generating growth while maintaining low inflation rates, and the challenges of implementing aggressive policies post-2008 financial crisis. The chapter concludes with a discussion on the necessity of considering higher inflation targets to combat potential long-term secular stagnation.
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