"Liquidity Trap" in a generally due to wrong application of "Expansionary Monetary Policy". Suppose, a cycle is not running due a missing part like pedal. No amount of oiling the cycle will work unless that pedal was replaced. No amount of adding more money supply in the market will result in growth. As, the current economy stalled due to an act of god scenario. No amount of money supply will actually result in real growth. One main signs of liquidity trap is Interest rates continue to fall and yet there will be little incentive in buying investments. Take an example of current Housing market https://www.marketwatch.com/story/mortgage-rates-fall-to-a-record-low-for-the-eighth-time-this-year-making-buying-a-home-more-affordable-for-many-americans-2020-08-06?mod=home-page Lack of incentive is because, Lending standards become high, Prices remain high. Check the Curing the Liquidity Trap section at https://www.investopedia.com/terms/l/liquiditytrap.asp " 1. The Federal Reserve can raise interest rates, which may lead people to invest more of their money, rather than hoard it. This may not work, but it is one possible solution. 2. A (big) drop in prices. When this happens, people just can't help themselves from spending money. The lure of lower prices becomes too attractive, and savings are used to take advantage of those low prices. 3. Increasing government spending. When the government does so, it implies that the government is committed and confident in the national economy. This tactic also fuels job growth. " Any one action among the above will result in coming out of "Liquidity Trap" that FED currently is in. FED should have slowed down the rate of decrease in prices instead it propelled the stock market and flooded the market with a lot of misdirected money which directly went to pockets of people who don't actually invest in the business. FED should have slowly reduced the interest rates, instead, it took drastic decisions. Just like adding more oil to the broken cycle when it is not needed. FED should have sticked to its original plan of worrying about economy, instead it focused on Symptoms of slow economy (Stock Market). It seems like, Japan was in this scenario during 1900, Europe was in this scenario during 2008, Now is the time for US.
Low mortgage rate doesn't make it a good time to buy houses. I'm waiting for the delinquency hike and house market crash.