liquidity trap

Popular Terms
Situation where bank cash-holdings are rising and banks cannot find sufficient number of qualified borrowers even at extraordinary low rates of interest. It usually arises where people are not buying and firms are not borrowing (for inventory or plant and equipment) because economic prospects look dim, investors are not investing because expected returns from investments are low, and/or a recession is beginning. People and businesses hold on to their cash and thus get trapped in a self-fulfilling prophecy.

Use 'liquidity trap' in a Sentence

At times your money may be in a liquidity trap and you must find a way to get it out as quickly as you can.
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The liquidity trap as experienced directly by the bank as there were no loans to be made as the market was saturated.
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If you find yourself in a liquidity trap you will need to attempt to get your money out as quick as you can.
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