"Is this a liquidity trap?"
"Why does my IS curve slope up?
" It is not because I think that a higher interest rate would increase demand for newly-produced goods. "
" it is because a sustained increase in demand for goods would have such a strong self-reinforcing effect on desired investment and consumption that interest rates would need to rise to keep output demanded equal to output. "
"The marginal propensity to invest plus the marginal propensity to consume exceeds one, in other words. Take a normal Old Keynesian IS curve, and assume mpc+mpi>1, and it will slope up"
okay .....????and how is that the stylized characterization of today's driving conditions doctor Rowehouse ??
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the real lm shape and positioning revealed:
" the Fed currently has a sort of tipped-over L-shaped LM curve.
"The lower bit is near-vertical, and the upper bit is near horizontal."
lets sort this tip over out
shall we ?
tipping over an L in two space provides two options
a backward tip over or forward tip over
st nick here seems to suggest the fed tipped the L over ...
yikes i don't know what lower and higher bit means ?
unless the L back flipped 90 degrees
so its standing on its uppersmall cross bar
with its flat base now pointing west ??
"the fed wants higher than 0% interest rates, but it doesn't want the recession to deepen any further."
no sequitur alert ??
" ..people expect the Fed won't let the recession get worse"
so won't raise rates " but don't expect the Fed to make it better."
why ?
because it can't i guess
but back to that flipped L ..
no never mind ...
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"only if income increased back to full employment would the Fed's LM curve go vertical again "
oh does he mean a backward L ...
with the fed unable to push y east to the y* cink ?
ya so ......? fiscal policy can do that ....no ?? by shifting the IS curve east to the point where zero rate and y* could meet
but this
"there is nothing there that says a return to full employment would require
either
we shift the IS curve (use fiscal policy) .."
what else will work here nickle head ?
"or else have negative interest rates"
no you've knocked that out by hypothesis
big deal
linking negative rates to fiscal olicy in an either or propositon
is pure spoonery
oh what the hell ...
