Liquidity TrapIn monetary economics, a liquidity trap occurs when the economy is stagnant, the nominal interest rate is near or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools. In this type of situation, people do not expect high returns from physical or financial investments, so they keep assets in short-term bank accounts or bank deposits rather than making long-term investments. This makes the recession even more severe. In normal times, the monetary authority (usually a central bank or finance ministry) can stimulate the economy by lowering interest rate targets or increasing the monetary base. Both actions are expected to increase lending and borrowing, consumption and fixed investment. When the relevant interest rate is already at or near zero, the monetary authority cannot lower it to stimulate the economy. The monetary authority can increase the overall amount of money available to the economy, but traditional monetary policy tools do not inject new money directly into the economy. Rather, the new liquidity created must be injected into the real economy via financial intermediaries such as banks. In a liquidity trap environment, banks are unwilling to lend, so the central bank's newly created liquidity is trapped behind reluctant lenders. The liquidity trap theory applies to monetary policy in noninflationary depressions. The theory does not apply to fiscal policies that might be able to stimulate the economy. Milton Friedman suggested that a monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses. This is called a cash gift or helicopter money (the latter phrase is intended to invoke the image of a central banker hovering in a helicopter, dropping suitcases full of money on individuals). Political considerations make it difficult for a monetary authority to grant the cash gift, because individuals and companies that do not receive free money will exert political pressure.