Keynesian View
Liquidity Trap – Fed was powerless to expand the money supply
Collapse of AD
Once interest rates become low enough, banks had perfectly elastic demand for excess reserves

Keynesian View
“You can’t push on a string”

Monetarist View
Increase in MB was due to CP, not R
Deflation – negative inflation,
Made real interest rates very high
r = i – inf
Monetary policy was really tight.