In a Liquidity Trap although Saving (S) is abnormally high investment (i) is next to 0. The Keynesian Paradigm I=S is not verified.
The purpose of Quantitative Easing is to lower the yield on savings but it doesn't create $1 on investment. It does diminish the yield on long-term Treasury Bonds and marginally lowers the asked yield on savings.
This and other issues are explored in our Tract:
A Specific Application of Employment, Interest and Money
Abstract:
This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit.
It shows that income / wealth disparity, cause and consequence of credit and of the level of long-term interest-rates, is the first order hidden variable, possibly the only one, of economic development.
It solves most of the puzzles of macro economy: among which Business Cycles, Stagflation, Greenspan Conundrum, Deflation and Keynes' Liquidity Trap...
It shows that no fiscal or monetary policy, including the barbaric quantitative easing will get us out of depression.
It shows that Adam Smith, John Maynard Keynes, Karl Marx and Alan Greenspan don't contradict each other but that they each bring a meaningful contribution to a same framework for understanding macro economy.
It proposes a credit free, free market economy as a solution that would correct all of those dysfunctions.
In This Age of Turbulence People Want an Exit Strategy out of Credit, an Adventure in a New World Economic Order.
Read It. http://edsk.org/
