This video is very interesting. It shows why families started putting their money into saving accounts and how spending decreased. It's also really interesting to see why the Federal Reserve increases the money supply to ultimately lead to more investments. Investments leads to greater consumption. Although we have already learned this in past chapters, this video helps clarify the process in a different way.
I enjoyed watching this video. I agree with ECO_10am_10394326 when they say that this shows why families have started depositing their money into savings accounts and have decreased their spending. I never thought about our country being in a "trap", but this video clarifies what our government is going through in an easier way for me to understand. I am not very involved with what goes on in our government today, but I liked this video and how well it described something complex. Great video!
I like this video because it explains the situation in a very clear manner. When Lehman Brothers collapsed people began to realize, once again, that the stock market is a riskier investment than simple saving is. But it's been a long time since then, and I think that the true reason why people aren't investing like they used to is because the future is uncertain. Look at Greece and the EU. Something has to change. Capitalism might not be the way of the world for too much longer.
This video really helped me understand what the liquidity trap is. We know that if the federal reserve increases the money supply it could lead to a very low interest rate and eventually lead to no investment from people. People need to watch the money supply and interest rates to determine if they want to invest. The video really helped me with what can happen during a liquidity trap and hopefully it can be avoided.
This video is very helpful in clearly explaining the complexity of the economy, and how we may come to find ourselves in a "trap." The Fed increasing the money supply can be beneficial, but with increasing the money supply, I believe they also need to try to set a target interest rate. By focusing on a certain interest rate, they may be able to hopefully prohibit the interest rate from becoming too low that it creates the liquidity trap.
I remember Paul Krugman touched on this subject quite a bit when he was giving his public lecture about the financial crisis a few weeks ago. I like this video for how concise and clear it is. Krugman emphasized government spending is necessary to help counter the liquidity trap, and I believe he has a point. Hopefully, there will also be a new focus in technology or production that will excite the market into spending once again--that would be the most ideal.
I liked how clearly and concisely this video explained why just adding more money to the economy doesn't help. Traditionally, the economic principles spelled out in the video would have ultimately served to increase GDP. However, since interest rates are already so low, economists will be forced to look for other ways to get around this problem.
I really enjoyed how simple the video explained what a liquidity trap is and how it is affecting our country today. The overall idea of fixing our economy was on the right path; increase money supply, decrease interest in banks, increase investments, increase consumption, which overall should increase GDP. However, due to the interest rates being so low, it ultimately is not helping our country and there is too much money supply out there. The US is going to need to look for new ways to help our economy, because what we are doing currently is not fixing our problems.
this video explained in a simple way what and how a liquidity trap operates and the affects it can cause to our economy.The definition of liquidity is a situation in which prevailing interest rates are low and savings rates are high, making monetary policy ineffective. In a liquidity trap, consumers choose to avoid bonds and keep their funds in savings because of the prevailing belief that interest rates will soon rise. Because bonds have an inverse relationship to interest rates, many consumers do not want to hold an asset with a price that is expected to decline. I agree with eco10am10025293 when he talks about america having to much money supply and the interest rates being so low. this in not a good effect and will only hurt america in the long run.
This video definitely provides a good, simplistic way to look at such a major problem that our economy has had since 2008, in the Liquidity Trap. It demonstrates an ongoing paradox of people not wanting to spend their money due to worrisome times causing them to put it into a bank which causes the Fed to lend more money, hoping to decrease the interest rates, increase investment, increasing consumption, and thus increasing GDP. The paradox presents itself whenever interest rates can't go any lower which results in too much money supply while no one is spending, creating the trap. Interesting to see where the government goes from here trying to fix this problem but if they want to see our GDP continue to grow there needs to be some sort of stimulus package put in play which will drive spending
The liquidity trap is a prime example of why monetary policy may not always be as effective as people think. More monetary policy is not always the answer. A strong and effective economic policy must also contain effective Fiscal Policy implementations as well. I think it has been very clear in the past couple years that merely increasing the money supply cannot always strengthen the economy.
If the Federal Reserve tries to make people invest in order to have more consumption, to increase the GDP; why would it pump more money into banks, while knowing that interest rates are reaching the “zero lower bound”, and people are saving their money instead. I guess it’s not that simple as this video makes it look like. This is a good explanation of liquidity trap overall, but the video still raises some questions.
Although I have learned this before, this video certainly clarifies it and makes it much easier to follow. When first taught this, I had much trouble understanding it, but these students teach with clarity and ease and definitely help me to comprehend what a liquidity trap is, and how we ended up getting stuck in one.
This video was a great visual example of why we were not able to get out of that hole with no investments and no consumption. It is clear that we need to have checks on just how low we can place the interest rate. This country thrives on banks being able to lend out money and credit, but if people are not willing to put money into the banks to create more money we become stagnant. The power within these banks must be in mind when the economy is being hit hard.
I really enjoyed how this video took a simplified approach to the liquidity trap. It does a good job of explaining how increasing the money supply is not always the greatest idea to increase investment and consumption. It also shoes the great responsibility the Fed has to not let interest rates get so low that we dig ourselves into a hole. Although, I feel like this video does raise a few questions, such as why would the Fed pump money into the banks knowing that the interest rate is near the "zero lower bound."
This video shows why families started putting their money into saving accounts and how spending has decreased. It's really interesting to see why the Federal Reserve increases the money supply to lead to more investments. Investments leads to greater consumption. This video has helped clarify how this process works.
This is a very good video. It explains why even though the principals that we are taught to work during class are actually not working at all. But you also have to look at why the Federal Reserve has to continue to increase the money supply so that the dollar decreases in value. As the dollar decreases in value we are not able to by as much with the same dollar so we have to start producing more products domestically. As this happens our market slowly starts to increase again. This is required to happen for the US market to then build back up again. So money supply increasing, causing the dollar to depreciate, is actually a good thing because it has to happen for the market to recover.
This video is very helpful in understanding the principles of liquidity trap. It made me understand how the money supply was raised. Since families put their money in savings and others put it in the bank to help raise the money supply and there was a surplus; the interest rate raised which caused the interest rate to go way too low. Which they thought since it was a lower interest rate that there would be more investments, but since the interest rates became so low and there was a gap there became a gap in investments.
This video does a good job on explaining the effect that the fall of Lehman Brothers and other banks like it had a on the US. economy. This is why the democratic party was trying to bail these banks out since they were so important to the GDP of the United States. Consumption went down since the people wanted to hold onto their money. They were too scared to trust these financial service companies.
I really enjoyed how simple the video demonstrated what a liquidity trap does and how it is affects our country. I like the fact that they went out and drew everything up giving you a sketch to help keep everything in perspective. It does a good job of explaining how increasing the money supply is not always the greatest idea to increase investment and consumption
Paul Krugman touched on this issue when he came to visit Texas Tech. Being a political science major and economics minor this is an issue I use to show the good in (controlled) government spending. While the FED can only do so much, what they are doing isn't working the way it should. People are still scared to spend money and it is hurting the economy. Paul Krugman even said that what is making the "Great Recession" so bad is the lack of investment in the economy. One of the few ways to stimulate spending is spending from the government. Our economy is hurting in its demand of workers, and government spending is straight demand. People who receive government funds spend it, and this in turn boosts GDP. The whole liquidity trap is a scaring situation that on paper should not be happening.
This video demonstrates the liquidity trap and explains the intentions the Fed has with it. The Fed hopes that by increasing the money supply, the amount of consumptions people have will grow. However this is not the case and actually turns out to be a lose-lose situation because interest rates drop too low. Families best option is to continue to put their money in savings.
I enjoyed watching this video, it was insightful and help to clear up a few things that we previously learned. understanding the liquidity trap is important for everyone. Mainly those involved in investment, families need to realize that it is sometimes more safe to invest in savings and reducing spending. The video also helps explain what the economy is going through and the acts that the government was making in a simple and understandable manner.
This liquidity trap example shows that the family is too scared to spend their money so they are going to put it in savings in the bank. Since Fred is giving more money to the bank, the interest rate for the bank will decrease. It is a good assumption that Fred hopes that more people will spend more money and invest if the interest rate is lowered. However, holes are being left and this is what the liquidity trap is. I think that it is better for families to save money becuase you never know what will happen in the economy.
I found this video very insightful. It explained what a liquidity trap is, and it was very simple to understand. It explains what happens when big companies go bankrupt and why families are so scared to spend their money.Because they are so scared to spend their money, they put it in savings, this makes the intrest rate for the bank go down, hopefully making people want to spend their money and get it back in the economy. This video made the liquidity trap very easy to understand.
The video describes very accurately what has occured in todays economy. Even with the lowest interest rates, people are still not ready to start spending again. When households and businesses begin to take more loans out, this increases the consumption. An increase in consumption will raise the GDP. With a higher demand of loans, the interest on these loans will gradually increase.
Overall, I enjoyed watching this video. A lot of useful information came out of watching it. Not only did I learn what a liquidity trap is from this video, it also shows you the effects it is having on our country today. Less money is being spent these days, due to the fact of more cash flowing into peoples savings accounts for future use. Therefore, with the interest rates being so low, new ways are going to have to be created to help this country get back on a steady rise and more money being spent.
This video helped me truly understand what is going on with the economy today. Everyone is afraid to spend their money and the Federal Reserve is trying to help reduce this fear by distributing more money, but in reality it is actually just making the problem worse. The video explains how there are holes in the system that is causing an increase in GDP, and better economy, to be a far reach, unless people become less afraid to spend their money and start investing in banks.
I really enjoyed how this video made the liquidity trap easy to understand. When the fed pumps money into the banks and the interest rates fall too low there is a whole left between consumption and investments thus making lower interest rates sometimes a bad thing.
I really like this video because it explains our countries problem in a very basic and understandable way. It makes so much sense and gives me a clear understanding on why families don't spend money all that much and why it's common to see a fortune 500 company go bankrupt. I can understand why alot of families are scared to spend large amonts of money though, because you never know when you'll have a rainy day.
This video is really helpful on understanding how a liquidity trap works. Now that it has been explained it is understandable. Feds come in and lower interest rates for people to get more loans which isnt always a good thing.
This video is very cool and makes things easier to understand because the people breaking it down are in our age group. They do a great job of showing how the economy has made its way to where we are now, stuck in this trap. The fed is always trying to do something to make things work but that does not always work out. In this scenario it is easy to see that the lowering of interest rates was helpful for a short time but eventually led to the creation of a gap in the chain of events. Once there was one gap in the chain it led to another gap which eventually led people right into the liquidity trap.
This video helped explain the Liquidity Trap to me. I helped me understand that pumping money to banks to lower interest rates may not spark consumption and investment from the public. It was kind of like when the united states tried to jump start the economy by giving money to some families to spend. To spark up the economy. Since it was hard times they saved it instead of spending it which hurt the economy. China did a similar thing but they gave up coupons that were worth x amount of dollars then the coupons also had an expiration date. This forced the public to use the coupons/money thus boosting the economy.
This video clearly articulates a simple macro-economic idea of liquidity trap in layman's terms. Everyone knows what happened during the great recession but not everyone clearly understands why and how interest rates and the money supply affected the outcome.
That was a completely simple way to describe what's going on in the economy with having too much money circulating. The video made me wonder if there are other ways for us to start investing again. And if not, then how will we decrease the money supply without drastically changing some other factor? One of the greatest wonders of economics is the solution to how we could have everything that goes on in the economy right at the same time. It seems as though trying to correct one thing just leads to something else changing negatively.
This video takes a good approach to the liquidity trap. It explains it in a way that is easy to understand. This video should be shown to more people so that stuff like this won’t happen again. The idea of pumping money into the system sounds good at first, however when this was done no one thought of the implications of everyone saving their money and interest rates plummeting too far.
I liked watching this video because it is very easy to understand. Basically the the liquidity trap happens when households refuse to spend money and they decide to save it all. The fed then decides to increase the money supply in hopes of increasing investment leading to increase in consumption. BUT, when that plan fails, you now have too much money in the economy and nobody is spending anything. Therefore we are all essentially trapped.
The underlying issue is the Fed itself. Lehman Brother fell because of mortgage backed mortgages (security back securities). Carter started this whole mess with his equal lending legislation. Aided by ACORN (yes Obama) and Fannie/Freddie (Obama again), who forced banks (through mob tactics) to lend to high risk borrowers. It was called credit default swap. Clinton backed this socialistic (nationalistic) agenda by de-regulating the lending policies. People can blame Bush, but the facts point to Carter and Clinton.
With all of that being said, when the fed stepped in to "bail out" the firms that were too big to fail, they created a false floor in all markets. When bailing out AIG, Germany's central bank was the only one that benefited from the bail out. That whole, credit default swap thing.. If they wanted to increase consumption and investment, the fed would have given every Tax Payer $40,000 the average of what the Fed blew on bailing out unions and corrupt firms who were all products of their environments.
If we look at Peru in the 1970's we can see what is to come to America. They followed Carters agenda with guidance from the "Chicago Boys". The end result is all markets being nationalized. This video just shows that when the government steps in, there is no good outcome. They create the problem to come with a solution. This goes back to Lenin's revolutionary tactics, make it look like Capitalism cannot function. The sad part is that it’s the socialistic system that is failing. Too many people wanting hand outs and not enough people like those that founded this country. You can’t tax your way out of this mess. You can starve the beast, cut entitlements, tax imports from China, stimulate trade with Latin America, leave the states allow, decrease the fed by 60-70%, make a fair tax system, and really most of all.. No more bills larger than the constitution. There can’t be a liquidity trap if the government isn’t allowed to create these problems.
This video is actually very interesting in that it shows the basic principle of why the Fed inputs more money into the economy. It also shows the negative effect that can happen when it puts too much money into the economy, in that it shows that eventually after inputting so much money into the economy, the interest rate cannot possibly get any lower. It seems simple, but clearly there are more factors into the economy. Also the diagrams help portray it to where even someone not very intelligent could understand it. It leaves out the question of what the Fed could do to get people to invest more, though. If it could answer that then it would be even more beneficial
I really enjoyed watching this video on Liquidity Traps. It always help for me to learn when it is visual and right in front of me. Continuously adding currency into the money stream is not always a good idea especially when households are trying to save their money. This not only decreases investments, but also decreases consumption, which in turn ends up effecting supply & demand and employment rates. That is when the "liquidity" of our money becomes trapped and stops flowing in the economy smoothly.
The video makes the liquidity trap easy to understand. The money supply has grown at such an increased rate as the interest rate has dropped at an increased rate. This has made individuals fearful of the future and spending their income. This is some of the reason why consumption and GDP have decreased. The video brings out some of the issues that took place in September 2008. There were additional issues with the bail out. When the money was lent to banks there was no definition as to how the money was supposed to be spent. The Federal Reserve was in hopes that the money would be lent out. It went to bonuses and salaries for the 2008 year. With printing and creating all of this invisible money it weakens the dollar and increases the inflation rate. If we do not stop printing money and increasing the interest rate we will be in a continuous cycle. It is affecting the unemployment rate as well because the baby boomers are forced to stay in the work force.
The video did show a very simple explanation to what the liquidity trap is and people should knows this so that they can make smarter decisions on what to do what their money. The FED should not be trying to raise the the money supply by pumping money into it. People will stop investing their money if they aren't going to get a good enough amount of money back from the investment. Banks should keep the interests rate a decent level where they can make money and where people would get a good interest amount from their investments. This is simple stuff people should just be more aware of what they are doing with their money and what the government is doing too.
I enjoyed this video. It really showed in basic understanding on how the government and the Fed are trying to do to increase GDP. Lower interest rated will lead to more spending, which means more investment, which will lead to a higher GDP. Very nice video to show people how and why GDP is high or low depending a country's economy.
This is a very good video to watch because it explains step by step how an economy can fall into the liquidity trap. I love seeing diagrams because I am a visual learner and it really helps things stick in my mind. Liquidity trap is caused by people who don't want to spend or invest money when interest rates are so low that they can't get any lower.
This video taught me the liquidity trap in simpler explanations than the book. This concept of the liquidity trap is a huge concept that we need to understand, especially during this day and age in the U.S. economy. Paul Krugman applied this concept into his speech when he visited Texas Tech a few weeks ago. In the Fed's efforts to control government expenditure, people choose to spend less, thus creating a lack of investment in the economy. Government spending is a huge factor in boosting the economy by increasing GDP. The concept of liquidity trap basically states that government makes an effort to increase money supply so that the interest rates will lower, thus leading people to increase consumption and investment, thus increasing the GDP. However; the Fed ends up in a bind as interest rates fall so low that people decide to stop investing. This then leads to too much money in the money supply and not enough people consuming and investing; thus leaving our economy in a trap. This is the precise situation our economy is in today.
Very informative for only a 2 minute clip. I feel like at some point the federal government would come in and create some kind of mandate as far as interest rates to prevent this situation from happening. Americans as a whole are very fond of their freedoms, but history has shown that we have absolutely no problem signing our rights away in the face of fear or, in most cases, manipulation.
Even if the video was a bit childish, it was really effective. I guess it’s the best method to learn what liquidity trap is. I was in search of the theory and frankly speaking I was bored reading theory. This video animated it and made it easy for me to learn it. Thanks a lot.
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