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According to Paul Krugman's book, "The Return Of Depression Economics", copyright 1999, a liquidity trap occurs when consumers can no longer support the economy, and government refuses to take up the slack.
The big fraudulent stock market crash we endured in Bush's first 2 years wasted a lot of capital from a lot of people, reducing their liquidity and their assets and their ability and desire to spend--hence a contraction of demand for goods and services. Their (our) money ended up in the pockets of a few unscrupulous wheeler-dealers, who couldn't spend enough, fast enough, to get the money back into the economy, in spite of the obscene amounts of cash thrown at the GOP for stealing elections. Some of the rich got slapped with token fines, some suffered actual paper losses, I don't know of any outside of the accountants that actually went to jail (yet), but most got away with the loot. And then the government itself was drained of its liquidity by the combination of Vush's tax cuts for the richest, and an increasingly expensive bunch of futile wars. Which explains why even when interest rates were negative, Greenspan couldn't jolt the economy back in motion. Without taxes to channel the piles of wealth back into the economy, the economy goes into a death spiral.
This isn't rocket science, either. It's well-understood, even by fossils like Greenspan. So why is he supporting permanent tax cuts and raising interest rates? Stay tuned, same bat-time, same bat-channel.
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