FAST FIVE: The Bank Of England's Governor Fears A Liquidity Trap

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The Bank Of England's Governor Fears A Liquidity Trap Authored by Frank Shostak via The Mises Institute, The global economy is heading towards a “liquidity trap” that could undermine central banks' efforts to avoid a future recession according to Mark Carney, governor of the Bank of England.

(The role of money is to facilitate the exchange of goods.) To suggest that people could have almost an unlimited demand for money that supposedly leads to a liquidity trap is to suggest that people do not exchange money for goods anymore.

Money can only assist in exchanging the goods of one producer for the goods of another.

Not only will these attempts fail to revive the economy, they will deplete the pool of real savings further, prolonging the economic slump.

The policy ineffectiveness is always relevant whenever the central authorities are attempting to “grow an economy.” The only reason why it appears that these policies “work” is because the pool of real savings is still expanding.

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