compares the Federal Reserve's actions with the literature on optimal policy in a liquidity trap. The theory suggests that, to … securities markets can restore liquidity with fewer government funds than extending credit to the originators of loans …

, liquidity, and the yield curve. We find that orderflow imbalances (excess buying or selling pressure) can account for as much as … orderflow on yields is permanent and strongest when liquidity is low. All of the evidence points toward an important role of …