Guest Post: Larry Summers Admits The Fed Is In A Liquidity Trap

10-30-2013 • http://www.zerohedge.com,by Lance Roberts

recently wrote an article entitled "What Is A Liquidity Trap & Why Is Bernanke Caught In It?" wherein I discussed the definition of a liquidity trap as:

"A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in the general price levels."