I like to keep my judgments provisional but its reasonable to suggest that we are debating between the more or less nominal theory of the Great Recession: myself, Scott Sumner, Brad Delong, Paul Krugman, etc and the real theory of the Great Recession, Tyler Cowen, Arnold Kling, Narayan Kocherlakota, etc.

Tyler has rightfully demanded to see evidence of the liquidity trap we allege. I think such evidence is emerging. See my last post. See evidence from Kash on transatlantic cash flows. See the situation in Switzerland.

However, the obvious reply is – why only now.

I would suggest that the seeds of a liquidity trap were planted early on – low inflation combined with a collapse in household balance sheets and a sharp rise in liquidity demand in the face of a financial crisis.

Yet, governments attempted to beat back the trap with stimulus and emergency monetary policy. Now, both of those forces are waning. More and more central banks are tightening and stimulus is fading all across the globe.

The liquidity trap in its full form is emerging. If we want “predictions in a liqudity trap” I’ll offer that effective negative rates of return on bank deposits after fees are considered and a sharp rise in retail sales of home safes are the next steps.

My hope is that “natural obsolesce”  in the form of a deteriorating fleet of motor vehicles and a housing shortage will push down liquidity demand and get us out of the trap.

However, if we look at Japan, the housing shortage was dealt with in a bit of a different way.

Convertable Table

http://www.sdesignunit.com/

The young singles ratio is getting increase in the society. These people live alone in small apartment in the city. They would like to have multipurpose furniture for using small room efficiently. There are two chairs and on table. Ordinary these are two chairs and table. But When they watch TV. It can be Sofa. And when they go to sleep. It is going to be a single bed.

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