The Economist ~ Escaping the Liquidity Trap
Day 845, 13:16
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Published in United Kingdom 
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by
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by Spite313
Dear Friends,
I’m writing to you today from Ministry of Economics Headquarters UK. In the dark depths of our secret IRC channels we have been discussing the current market crash since its beginnings last month, weighing up the pros and cons of a direct intervention from our people. Our initial instinct was to allow the market to right itself. After all, we see fluctuations in price all the time: some artificial; others simply the consequence of global trends.
However we have come to the conclusion that this is not a position we can hold any longer. The UK is stuck in a liquidity trap. Spending is down, and saving is up- but in the long term this is the worst possible situation. So the UK team has begun to put together a stimulus package to drag us out of recession. The details of this plan are to be kept secret for now, more information will be forthcoming on Wednesday. Please subscribe for details. This is as important as the war for the future of our country.
Until then, let me reiterate jamesw the Minister of ??? Profit, in encouraging those of you who currently have gold to take out government bonds. The government can actually use the money you are sitting on.
In addition, there are currently a number of wars going on. I encourage all citizens to buy weapons from the marketplace and fight. Hoarding currency is destroying liquidity globally. If every citizen spends it will free up cash and have a positive effect on the economy- including your wages. You need to spend your way out of this recession. Again, more details on this on Wednesday.
though this IRL economist cartoon is about the USA, it does apply to us
Warning- economics contained in this paragraph.
The major problem now is that we have a lack of spending, which is forcing down aggregate demand. This causes stocks to remain unsold at full employment, and because of this wages are dropping. Falling wages is in turn meaning that consumerism is taking a severe hit, which is in turn effecting spending. I am sure you can see the loop forming here.
For Consumers: Please Read
The government is planning a series of measures to boost aggregate demand, which will as I have said already be released soon. However as this cartoon shows, the only person who can properly fix this is YOU. By spending savings you are in effect creating liquidity which will in turn mean more demand. Because stock remains unsold, this will not push prices up. So don’t worry. What will happen is companies will be able to sell their stock which means that they will be able to start raising wages.
For Business Owners: Please Read
It is tempting to post low wages, especially at low Q, because your goods aren’t selling. But you need to invest in your workers if this is to work. Lowering existing wages to make a quick profit makes it more likely that in a week or two we’re going to hit economic paralysis and you’ll end up stuck in a bidding war as companies vie for the few workers who have any money due to low wages.
This is especially important for those of you with high skill workers. If you’re confused as to what kind of wages you should be setting, then subscribe. I will be releasing a detailed wage guide, as well as a price guide for many key industries, midway through next week.
Summary
In summation, your government is taking steps to alleviate the problem, and details will be revealed in the coming week. As consumers and producers, the key here is for you to act to end the ‘money in a sock’ syndrome and release as much currency into the market as possible to free up the circulation of wealth. In simple terms, this means buy stuff. Buy as many guns as possible each day. Don’t fight to heal, buy better food and gifts. If you own companies abroad, use the profits to buy gold, and use that gold to buy GBP to spend in the UK. Money is nothing more than an indication of value- and right now those indicators are well off. The UK is stagnating economically, and we are nearing paralysis. Do your bit and spend today.
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Comments
voted as always
really excellent article
"Please subscribe for details." \o/
informative article though
Great article \o/
voted, will read later :3
\o/
Excellent writing, as always. I really enjoy reading your articles
I don't think people are hoarding more than they used to in the past.
I think that they're actually spending a whole lot more than a few months ago before Lana came into the picture.
Hahahaa reminded me of the news last summer
Print.
Bought 20g of gov. bonds.
What is this I don't even
Please go outside Iain.
go back to Japan GokWan. Oh wai-
Interesting read Keers
Subscribed, good article.
You could start a '5 a day' campaign, but with weapons rather than fruit and veg 🙂
I think you describe the situation good, hope you can give us some real answers. People only need one food a day so boosting demand in the food industry will be hard.
If anyone suggests 'Quantative Easying' I'll quit!
The big guy in the Anerican cartoon looks like he's doing some serious 'quantative easing'....
Good article btw...
Someone else begging the question. Neato.
"😉on’t fight to heal, buy better food and gifts."-this is the dumbest idea since they taught monkeys to throw poop.
prices are dropping and so is pay i own a q3 wepon company and the price useto be 13GBP each now its arount 3-4 and changing all the time
Good article. voted
as long as my guns stay cheap i dont care!
q2 weapon just 0.19 gold
""😉on’t fight to heal, buy better food and gifts."-this is the dumbest idea since they taught monkeys to throw poop."
Well it is going to be mandatory soon anyway, they're taking away healing by fighting above the amount you've lost fighting. People may as well get used to it, and it will help the economy out.
I think calling this a liquidity trap makes some assumptions about the way expectations are working (namely, that they're realistic) that I, myself, wouldn't. I'd almost go so far as to say eRepublik businesses and consumers show almost no concern for future central bank moves, outside of a very few, particularly dedicated MM traders, so you could just as easily use a much simpler model to explain the current recession.
Additionally, I'd think the best way to ensure your spending affected as many parts of the economy as possible would be Q5 food, not weapons - granted, many people already buy Q5 food, but whereas the iron for weapons is often as not imported, food and grain are both produced right here, hitting two eUK businesses with one stone. To keep up the Econ 101 theme, that's your multiplier effect.
Thank you Keers
>>""😉on’t fight to heal, buy better food and gifts."-this is the dumbest idea since they taught monkeys to throw poop."
Someone who doesn't understand the game
>>Lana
Lana is overrated. Not many citizens hoarde currency to buy gold for lana, simply because wages are too low. Most people in the UK would be saving for weeks to afford one day of Napoleon. There are other factors behind this slump.
>>Not a liquidity trap
I think it's easy to oversimplify the problem. This is why we have so many 'remove lana' forum posts. But making it simple is pointless when it isn't simple.
As for the food thing, I would agree. But there is an advantage for the consumer in buying 5 weapons each day. Not many citizens working in Q1 are going to buy Q5 food just for the sake of the economy if there is no health benefit.