Not Enough Escape Velocity

"We are, as even some Fed Governors now publicly admit, in a “liquidity trap,” where interest rates or trillions in QEII asset purchases may not stimulate borrowing or lending because consumer demand is just not there. Escaping from a liquidity trap may be impossible, much like light trapped in a black hole."

Bill Gross, PIMCO

"The belief that an increase in the money supply will result in an increase in GDP relies on the assumption that money velocity will not decline in proportion to the increase in money. Unfortunately for the proponents of "quantitative easing," this assumption fails spectacularly in the data - both in the U.S. and internationally - particularly at zero interest rates.

"Once short term interest rates drop to zero, further expansions in base money simply induce a proportional collapse in velocity. Expand the quantity of base money, and it turns out that velocity falls in nearly direct proportion.

"The Fed is pushing on a string."

John Hussmam, Hussman Funds