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Liquidity Traps- Macroeconomics
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- เผยแพร่เมื่อ 26 พ.ย. 2017
- Hey internet, this is Jacob Clifford. Thank you for watching my videos. So, what's so weird about the US economy today? Well, interest rates are extremely low, banks have extra money that they are not loaning out, and the massive increase in the money supply starting in 2008 hasn't resulted in inflation. In this video I discuss why and explain the idea of a liquidity trap.
All data from St. Louis Federal Reserve
fred.stlouisfed.org
FED article about Excess Reserves
www.clevelandfed.org/newsroom...
FED article about missing inflation
www.stlouisfed.org/publicatio...
If you are an economics student, please check out my Ultimate Review Packet
www.acdcecon.com/review-packet
Thanks again. You rock!
You are the type of teacher we need but not the one we deserve.
"The real thing which is missing is inflation".
2021: hold my beer
2023: hold my whole beer supply
I'd love follow up video on missing inflation. This subject is so important.
Really really appreciate your work. There's been less and less teachers who would spend time relating these academic stuff to real life's events and try to make students see the meaning of the knowledge they are acquiring at the school. Thanks!
Really like this video. Reminds people that economics is a lot more nuanced than what they learn in introductory classes
You’re a life saver. You’re videos help me get an A in my macroeconomics class. Thank you.
your amazing for this vid. ive been trying to work my head around it for like 3 hours and you've came and made it all so easy
Your explanation is actually on point!
This is one of the best videos so far! Thank you.
Really informative. Glad I subscribed!
Hey Mr. Clifford, I liked this video a lot. You should also do a video breaking down the new tax bill? Thanks!
Comprehensive explanation.. Thnxxx...
Great video! Curious to see what kinds of sources are worth looking into to stay up to date on this circumstance.
You're the God of Economics! I don't have to read any book after listening to your lectures. And thanks a bunch for speaking slow. It helps non-native English speakers.
i love your very clear explanation 💯 TQ💗
This vid is super relevant right now.
These videos are life savers ! Thanks
Can you make a follow up on this inflation -- especially now after the COVID recession?
Wow such an eye opener
Excellent video Professor!
your best video
At the end, it looked like you pushed yourself away haha. Anyway, thanks for this video.
I also liked this video. I like how it's relevant to what's going on in current events.
Very good video
Great video
Outstanding discussion about what is happening and why. Consider the reality that we have already entered a recession, at about the same time China devalued the Yuan (August 2015) and we have not yet entered a recovery in full force. Passage of the proposed tax bill would help, along with passage of about a dozen bills sitting in the Senate waiting for something... We want to see a real jobs recovery.
Most excellent video to set the stage for these discussions.
Dr. Bill Schlosser Are you saying we already entered a recession? because a recession is defined as a period decreased growth/gdp; usually 2 consecutive quarters.
Take a look at past recessions and you will not find those criteria on each recession. Statements of recessions do not happen until after the recovery in already in full swing. The NBER makes the call to inform the people about the recession that already happened, based on Business Cycles identified by the level of business activity. Personally, I use the PPI as one of the major indicators of the vitality of the US economy. Look at how the PPI responded in all past recessions and then look at 2010 - 2016. Specifically, look at 2015 and he devaluation of the Yuan crippling US exports and creating a nexus of imports on the supply side from China. It helped businesses buy low, but employment in the US stayed at its lowest labor participation rate in memory.
Keep looking for the NBER to make the call about the "Greater Recession". Maybe it is not as bad as some think it is? Look at the indicators.
P.S. GDP growth is NOT one of the indicators NBER looks at to call a recession. The NBER gives relatively little weight to real GDP because it is only measured quarterly and it is subject to continuing, large revisions. They use monthly reported statistics as primary indicators.
-Dr. Bill
Dr. Bill Schlosser Awesome response! As a current econ student I really appreciate the clarification and extra information. thanks again!!
good video thx
I love you Mr Clifford
Awesome! Love from India
The intro song is a bangee
Clifford ! I would love to hear your thoughts on the actual situation.
You are the best.
This video aged insanely well.
an updated commentary for 2021-2023 would be interesting based on this concept...from my observation, we're out of the liquidity trap (in Canada) as interest rates are increasing rapidly. However, inflation continues to increase, which is not traditionally supposed to happen. I believe addressing the current situation is not solvable by managing demand this time. I think we have to figure out how to manage the supply side of the equation now.
Wow he was so right, prices be crazy rn
Mr Clifford are the concepts same? I am giving Cambridge exams A2 economics?
Hey Mr. Clifford, could you make a video on the IS-LM model?
That was pretty much the subject of this video.
It's 2022, and we see inflation!
This video has a new found relevance
Do you have trade blocks video??
Everyone says there is no inflation, but what about in housing, equities, and cars? These all are much more expensive now on easy liquidity by the Fed. Does inflation in the price of a house due to speculation on easy liquidity not count?
I disagree that there is no inflation. There is just little to no inflation where the FED chooses to look. Home prices are rising, stock markets are rising, commodities markets are rising, and cryptocurrencies are on the rise. The economy has high inflation in areas they don't want us looking. The excess reserves are going somewhere... it's just not toys and sporting goods. Thanks for the video!
I saw this vid rn, and this money multiplier thing messed up all what I had just studied for the exam tomorrow.
What's also different from the textbook is the fact that banks do not loan out their reserves. They loan out by creating a loan as an asset and a deposit as a liability, and then the central bank adds the reserves to a commercial bank's account (held at the central bank) to keep reserve requirements in check and the federal funds rate in its target range.
Also, the money supply is not set by the central bank and the money multiplier was never anything but just a ratio of 2 not-so-correlated measures. So yea, textbook economics is really doing a bad job explaining how things work in practice. :/
this man doesnt age..
i feel like because of your videos my teacher doesn't teach anymore
If central bank buys large enough quantity of bonds (QE), won't bond yields always decrease further and therefore the interest rate.... regardless of how banks use their increased reserves? Or does liquidity trap assume central bank can't influence bond yields?
Wouldn't the absence of Inflation be explained by:
1) The fall in Velocity of money and,
2) The fact that money that is created but is just sitting around unused has a Velocity of 0, and thus doesn't have any effect on Inflation ????
If this is the case then I think this doesn't discredit some economic theories but actually further validates them (especially the Quantity Theory of Money). But I'm not sure if I'm missing something. I'd appreciate some help.
Sounds very plausible. Doesn't it just support the concept of the liquidity trap? That there won't be any affect on AD?
So could the inflation be delayed and lead to stagflation during crisis?
Regards from India..🙏
What is the theory behind the money multiplier to be less than 1?
I think we found this missing inflation
watching this in 2023... we found the inflation
welp now we know where that missing inflation is
Inflation isn't missing. It went into assets.
Mr jacob what is the name of ur app
Well , Inflation has finally caught up 5 years from this video
Hey, could you make a video on cryptocurrencies and how can they affect the economy?
Yes, that is on my list.
I'm excited
Central governments fear bitcoin because should they create massive inflation people might switch to bitcoin or other alternative cryptocurrenices. Which would negate the power of the all the newly printed out-thin-air currency the central bank created.
Will Bitcoin work when the power is out?
Dang, you lost weight! Lookin good!
Hey Mr.Clifford, this is the first comment on this video, does it make this comment more valuable?
Yes, totally! :)
Until healthy competition comes in with cheaper alternatives
The market value is higher but the intrinsic value is no higher because comments on TH-cam are fungible.
@@brokentombot broo I passed micro and macro economics thanks to Jacob Clifford 3 years ago. I got CB from micro and BB from macro by the way :) This comment made me come back to this video, i feel different emotions man :)
When they'll start lending that money..... :/
It appears thatl interest payed to banks by the Fed on excess reserves was implemented during the last financial crisis. The video implies that banks would rather hold the excesses in reserve ti receive this interest rate and it is preventing all of thus money from circulating and generating inflation. Why is the Fed concerned they can't meet the 2% inflation requirement knowing that this interest on excess reserves is part of the problem?
This aged like milk.
Here's inflation rn
Milton Friedman has left the chat
watching this video in 2023... Inflation is no longer missing, we have found it! :D
Inflation means increase in money supply, increase in prices. This means any prices, prices in general. What do you or FED measure inflation with? Some indices? Do you include in those indices prices of real estates or prices of stocks? No, inflation of real estates prices and stock prices are interpreted not as inflation, but rather than wealth "growth". - There is your inflation. Moreover, US dollar is WORLD reserve currency, meaning there are many international holders of US dollars, not just US citizens, so the inflation can be exported. US dollar is not just used in US economy. Who is the biggest holder of US debt? China. And with inflation, they are as a creditor losing money. You are welcome.
You should also know the difference between monetary base and money supply. The excess reserves are only increasing monetary base, not money supply, they will start increasing monetary supply once they are loaned out.
Okay so what do you think about this "transitory" inflation we are having now. Is it going to last?
He has another video explaining, go to his vids and sort from newest. It's in the top 10.
A bank can‘t lend out reserves. That is a misconception. Check the accounting for this.
please make a video on cryptocurrencies and any crisis would happen
due to this
and inflation finally arrived...
Yeah so finanlly now we see the inflation -_-
banks are not lending? then who's been lending astronomical amounts of money to the corporates?
0:00 AAH
1:30
this was the time to buy stocks and crypto
This aged well
Im here from the future. Will you believe if ill tell you there is gonna be a negative interests rate? 😂
The Reserve Ratio is set at 10%, and banks have the ability to increase that reserve as much as they would like. Right now we're seeing unprecedented excess balances across all banks. Has anyone suggested that the Fed implement a ceiling (max) reserve for all private banks to push that money back into the spending stream? What would the unintended consequences of such a monetary policy be?
inflation
Lmao because of the alien it's easier to remember the liquidity itS A TRAP
dude you save my life you ar the hidden bible than you
Iraqi student try to understand this…
you scared me.. At the beginning.
Awesome video, please go buy a new shirt now. 1 in order to simulate the local economy 2. its hardly possible to look more like high school teacher with a checkered shirt rolled up sleeves and a visible undershirt