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Liquidity Trap

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There has been considerable speculation that lowering interest rate would help U.S. avoid recession. I have been having my doubts, this recession has been triggered by housing bubble which has been spread very widely. It has shown its impact on the broad spectrum of the market - from main street to wall street everyone is being impacted.

I read this following quote from Bob Campbell of the San Diego Real Estate Timing newsletter on liquidity trap.

"When an asset like real estate becomes overvalued, even if you drop interest rates to zero, you can't force consumers to borrow more, because they've already borrowed too much. Nor can you force lenders to lend, because they're already puking on 'bad paper.' It's called a liquidity trap." - Bob Campbell