Really good links - Liquidity trap - Zero bound - Fed

Brad DeLong - Liquidity trap - "I have always understood "liquidity trap" to mean a situation in which cash is effectively a perfect substitute for Treasury bills and in which as a result open-market operations in their standard form have no effect on anything.
        However, that does not mean that central banks are powerless in a liquidity trap:
        By taking duration, default, and systemic tail risk onto their balance sheets, they can diminish default and risk premia on debt instruments other than short-term Treasury bills.
        By changing expectations of future inflation rates, they can alter business decisions without taking any action to change the current levels of nominal interest rates."

Bill Hester - The Paradox of the Zero Bound - "Promising low rates for long periods of time is particularly pernicious following periods of credit crises, points out Arun Motianey, now with Roubini Global Economics, in his book SuperCycles. In a discussion of Japan's low policy rates over the last 15 years, Motianey points out that deflation became worse the longer Japan's equivalent Fed Funds rate stayed at zero.
        Motianey argues a slightly different transition mechanism that pushes the economy into deflation, mainly through lending markets. He argues that after a credit crisis, government-supported banks are borrowing at close to government rates and at the same time being coerced to lend at rates lower than they would otherwise demand for the risk of default. The result is that they demand higher credit standards (typically higher operating cash flow) of their borrowers. Borrowers, mostly companies, oblige by halting the growth in or cutting the nominal wages of workers. Generalized price deflation typically follows wage deflation."

Tim Duy - A Bleak View - "Deferring to the faltering economy, the Federal Reserve stepped up its policy efforts last week. Barely. Almost imperceptibly. Indeed, it is almost as if the Fed could muster nothing better than throwing a bone to its critics. Will they throw more bones in the coming months? In this environment, I suspect the Fed will continue to do more than I expect, but less than is necessary."