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How Much Of The World Is In a Liquidity Trap?

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"In my analysis, you’re in a liquidity trap when conventional open-market operations — purchases of short-term government debt by the central bank — have lost traction, because short-term rates are close to zero," Paul Krugman writes on his NYT Blog. "And by that criterion, how much of the world is currently in a liquidity trap? Almost all advanced countries. The US, obviously; Japan, even more obviously; the eurozone, because the ECB probably couldn’t engage in Fed-style quantitative easing even if it wanted to, given the lack of a single backing government; Britain. Not Australia, I guess. But still: essentially the whole advanced world, accounting for 70 percent of world GDP at market prices, is in a liquidity trap."
SOURCE:   New York Times

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