All three Keynesian policies have been tried, and all three have failed completely. The massive “shovel-ready” fiscal stimulus caused a minor blip up in activity, but it did not spark any regeneration of borrowing and spending. All it did was enable further deleveraging as consumers and businesses struggled to pay down their crushing debt loads.

As for devaluing the currency, the Fed’s policies devalued the U.S. dollar 32% from the early 2000s, and 17% from 2008. Rather than spark a boom of spending and investment, this massive devaluation sparked a dramatic loss of purchasing power which households experience as high inflation.

No nation ever prospered in the long-term by devaluing its currency. Devaluation is just another Keynesian “quick fix.” Borroing 40% of Federal spending didn’t “fix” what’s wrong with the economy? Then borrow 50%. That devaluation wasn’t enough? Then takes the dollar down another 10%. These are the policies of debt-junkies, not legitimate long-term growth based on capital formation and productive investment.

As for inflation being the “solution,” the Keynesians forgot that vast, systemic labor surpluses mean that wages and incomes don’t rise with inflation, except for the top 10%. So rather than force people to spend, spend, spend, that higher inflation so beloved by Keynesians has sapped the purchasing power of the bottom 90% of households which have seen their incomes stagnate or decline for years.

Solution 1: Central State fiscal stimulus: failure.

Solution 2: central bank-induced currency devaluation: failure.

Solution 3: central bank-induced inflation: failure.

Every textbook Keynesian solution to escape the black hole of liquidity entrapment has been tried on a grand scale, and failed on an even grander scale.

The solution is simple: renounce/write down all impaired debt, wipe out the “too big to fail” banks, and restrict the reach and political power of the remaining banks and Wall Street.

Until we’re willing to do that, then the liquidity trap will remain a black hole that the economy cannot possibly escape.