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Systemic Seism.

he Japanese earthquake does not meet the defininition of a systemic event: it is local. However it might trigger a much wider Systemic disruption of the economy: a Global Keynes' Liquidity Trap. How is that possible.

The classical definition of a Liquidity Trap is that short-term rates are at 0% and then should an even middle recession occur the monetary tools would be powerless being, as Keynes put it, like pulloing on a shoe string.

Monetary Policy:

Obviously the conditions of a 0% short-term interest rates are already met. Already the Fed and the ECB have responded with what is called Quantitative Easing. This seems have to be working pretty well till now but the reasons are not commonly understood: before the 2008 Great Recession long-term interest rates, the Yelds on the 30 Years US Treasury Bonds stood above 5.00%. 

What determines the value of those rates is mainly the balance between the stock of investments and the demand for their products.