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The Liquidity Trap of Self-Ignorance

by Art Ticknor

In his Return of Depression Economics and the Crisis of 2008, Nobel award winning economist Paul Krugman related a story published in 1978 by a couple who were members of a baby-sitting co-op in Washington, D.C.[1] The association issued coupons entitling the bearer to one hour of baby-sitting, and baby-sitters would receive the appropriate number of coupons from the baby-sittees. The system ensured that over time each couple would provide as many hours of baby-sitting as it received.

The situation developed, however, where couples who felt their reserves of coupons were insufficient were anxious to baby-sit but reluctant to go out. Opportunities to baby-sit therefore became scarce, making couples even more reluctant to use their coupons. The co-op went into a recession. Krugman said that's basically what caused Japan's economy to stall for over a decade – a lack of demand for the available productive capacity.

coupon People in the baby-sitting co-op would have been willing to go out, but nobody would lend them coupons. There were the same number of coupons as previously but there just weren't many in circulation, which is what economists call a liquidity trap.

The baby-sitting recession developed largely because people wanted to save the credits they earned from winter baby-sitting to use in the summer, when they wanted to go out more. But in the aggregate that doesn't work and produces a winter slump. What was needed was to "get the price right": points earned in the winter would have to be devalued if held until summer – an expected inflation or anticipated loss of value. If the slump becomes deep enough and lasts long enough, it moves from recession to depression status.

Okay, but how does all that apply to self-inquiry? Let's say the desire to know the self is like one of the co-op couples. It makes some headway (saves up some coupons) then runs into obstacles: other players (competing fears and desires in the internal co-op) are trying to do the same, and stasis develops.

There may be a seasonality slump in self-inquiry that a new season will take care of by bringing a resurgence of going-out (or in this case, going-within) desire. But what if we don't want to lose the time, chance an auto-recovery, or the recession morphs into a season-defying depression? What would it take to get the price right so that the going-within desire produces action?

Remember we're talking about a co-operative operation. The aggregate of fears and desires will have to come into alignment with the going-within desire or not impede its action. Some of those other players may support the going-within desire by lending it coupons … not out of altruistic motives but because they see it won't hurt their getting what they want and may even help. The going-within desire will have to carve out time to pursue its goal and not be overly distracted during that time by the other players.

To bring this analogy down to a practical level, what can you do to end a recession or depression affecting the going-within desire? Demand for productive capacity (i.e., action) depends on desire, and desire depends on a feeling of want – that something important is missing or lacking. The first game-changer is to feel that want, not run away from it. Feeling a feeling is a rather instantaneous activity. It doesn't require effort. Effort goes into trying to repress feelings so they stay below an apparent level. Feeling a feeling is more of a slowing down, relaxing. (Are you too busy to take a few seconds to feel what you're feeling?)

Feeling a want and its attendant desire automatically leads to action unless the co-op isn't cooperating. The other fears and desires may interfere directly, at a feeling level. A fear may occupy center stage like Chicken Little and convince the co-op that the sky will fall ("I'll go crazy" or "my life will be ruined," for example) if the going-within desire gets its way. Or a more subtle coalition of members may convince the co-op that going-within is okay but not just now ("I'm busy right now," "I'm too tired," "I can do it better later," and so on). How is this inevitable adversity sidestepped? The co-op may have to form a committee of determination that recognizes the interference patterns and decides not to be overly influenced by them when they occur.

If you find yourself feeling overwhelmed by a conviction of helplessness, consider the possibility that your intuition is picking up an important life-lesson. As happened with a WV man who couldn't stop eating and got to a weight of 600 pounds despite trying everything in his power to reverse the trend, when you get backed into the corner of honestly admitting your helplessness to solve a problem on your own or with all the resources you've enlisted, your only option is to hope that there is some unseen/unknown higher power that can help … and to implore that possibility for help. The WV man said he found himself praying. Within 11 months he had lost 300 pounds and was still losing weight when interviewed by a local TV station. When I honestly admitted to myself that I was backed into a corner and prayed to a higher power or inner self for help, I found that help was always available and capable of blasting away any adversity. Praying for help opens the heart-mind.

Lastly, get out of the way. That happened for Jill Bolte Taylor, the brain researcher, when a hemorrhage shut down most of her left-hemisphere's operation. When it started coming back, slowly, after surgical intervention, she saw that the "self-story" concocted by the left hemisphere – who she was, what her credentials for self-importance were, her judgments and resentments of other people when they didn't enhance her self-image, and so on – had previously determined her actions … and that its automatic reaction mode in response to feelings didn't have to be followed blindly. If life doesn't provide you the lesson in such a dramatic way, you can try to test the water by doing something for someone else without any expectation of reward (anonymously if possible and without telling anyone).

[1] "Monetary Theory and the Great Capitol Baby-sitting Co-op Crisis," by Joan and Richard Sweeney.

See Monetary Theory and the Great Capitol Baby-sitting Co-op Crisis by Joan and Richard Sweeney. it was little known until popularized by Paul Krugman in his book Peddling Prosperity and subsequent writings. Krugman has described the allegory as "a favorite parable" and "life-changing."

In addition to, and are good sources of new and used books.

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