I said before that the fact that we are stuck it what looks like a liquidity trap has to be based on the fact that something is wrong with Investment in Structures. The most obvious thing to be wrong is finding the right Collateral Requirements are complicated in an environment of falling prices.
More evidence for this is that Residential Remodelling appears to be doing exactly what it is “supposed” to be doing. No trap, heavy response to slack resources and low interest rates.
Note how classic this growth pattern is, leading the economy into recession and leading the economy out of recession.
It also suggest that based on policy stance the economy should be booming out of control right now – and it should be. Its that there is something wrong with the bank lending channel because collateral is messed up.
If we are thinking BL-MP then the BL curve is depressed not because of animal spirits or because or even ultimately because of deleveraging. It is depressed because the banking sector cannot effectively fund Investment in Structures.
Note also this matches the extremely high yields being experienced by Real Estate Investment Trusts. Structure Investment equity vehicles are doing so well because the yield cannot be bid down by competition from pure credit vehicles.
NOTE: Actually I am thinking here the core problem is the inseparability of structures and land. How do you fund the building of structures when the price of land is falling. The structure is attached to land. One must buy the land to build the structure but the value of the Structure-Land complex is decreasing because the value of the land is falling so fast.
That presents a funding problem for creditors. It also suggests why structures for which the price of land is small in comparison to the price of the structure should be doing better and seeing growth. Is this true?