I suspect that trust and betrayal are the root cause of failure of economies to respond to low interest rates (in what politico economists like Paul Krugman self-servingly refer to as a 'liquidity trap.')
Politico economists come up with other self-serving (or I should say, self-deflecting) reasons for why participants en masse look at the current economic over-gamed financial weaseldom games and say "W.T.F.?" instead of diving headlong into additional nearly interest-free debt aimed at running uphill and building future economies.
When that type of debt slows down, so does the other kind(the running only downhill kind of debt that builds nothing but demand to run even faster only downhill.) Because debt aimed at creating future value can be paid back, even with interest, whereas debt aimed at nothing but consumption can't even be paid back interest free. There are no opportunities for risk-free ROI wages unless someone somewhere is taking on risk and running uphill, and that can't be gamed by politicos printing risk-free zeros on paper bonds.
What a gig; great if you can keep it going. To sit on a hill three states away from folks running up hills and to effortlessly print zeros on paper bonds for your crony friends and you to 'spend' as 'stimuls' and also, tweak the carrot and stick of 'interest rates' to 'run the economy.'
Academics don't have a word for what happens when enough folks conclude 'fuck this noise' and adjust their behaviours, plural, in ways that don't fit their academic models.
And so... 'liquidity traps' and other self-deflecting gibberish to paint over the fact that much of the nation has lost trust and faith in the economic game. That is the other alternative explanation, politico economists: a significant fraction of the tribe has lost total faith in your politico nonsense and gerrymandering of 'the' economy because of a lack of trust triggered by your financial weaseldom betrayal, which is now endemic.
Does anyone remember the history of debt as it relates to trade? Mercantile Capitalism? (I'm not talking about the modern Marxist re-spray painted version of Mercantile Capitalism and all the racegenderclass nonsense and the focus only on slave trade, but what it actually was.) Deferred consumption(wealth) -- local value at decreasing marginal value-- converted to 'capital at risk' (10 sailing ships filled with goods) that was used to convert something locally of a lessor value into something (usually somewhere else, at great risk and effort) into a greater value, bringing back the greater value, paying off the debt, and resulting in greater value at both ends of the transaction, because gradients in value drive everything. Not just gradients in value, but values, plural, on orthogonal axes -- axes that meet only at the market, and in that instance, markets that only existed because of a gradient of values. (Why were the ships necessary to move goods through space? The answer is, gradient of value w.r.t. space. The 'goods' in the holds of those ships changed their value when moved through space.)
10 ships, because the endeavor was risky, and there was no way of knowing that a particular ship would succeed in the journey. Intelligent risk-reward.
That concept -could- be win-win. Or, that concept could also be gamed at every opportunity by reptilian weasels. Or both.
Or, over time, increasingly gamed and over-run by reptilian weasels.
But gamed because of a lack of vision of fundamentally why the game has been changing; the human element is, like rats on a sinking ship, when the game is changing and we don't know why, we scramble over each other like panicked rats, which is exactly today's economies..
We are a long, long way, historically, from 'mercantile capitalism.' Without gradient of value, markets based on gradient of value collapse. Replaced by what?
Said another way, when the mold has over-whelmed the surface of the orange, the growth of the mold stops and all is the same. We have a name for that 'sameness.' It is called Death.
What accelerated the consumption of 2D surface gradient of value? No doubt, the transition from Mercantile to Industrial Capitalism, which, for a while, was just a technological acceleration of the exact same dynamic: the leveraging of 2D surface gradient of value, which proceeded at an enourmous and accelerating rate, ironically, consuming the last buts of surface gradient of value most rapidly the close we've come to totaly surface domination/penetration.
If we don't extend the limited 2D surface paradigm to a 3D volume paradigm, all that is left is end game.
Which is more utopic thinking?
A] Mankind will actually transition to a 3D volume based growth paradigm.
B] Mankind will actually transition from a 2D surface growth paradigm to find a way to target stasis and a total lack of gradient in a kind of Death defying homeostasis-- a feat that to even attempt would require a Totalitarian world government.
We've collectively chosen B.
Plenty of remaining opportunities for Trust and Betrayal.