There are so many monopolies f*ing up my plan to perfectly consume the exact same proportion of each type of good that exists in the economy. There are so many fairies visiting the monopolies, telling them “you can change your prices today, but you over there… you better sit your ass down and wait your turn”.
Luckily, the central bank can use its money tree to give the monopolies an employment subsidy. This subsidy results in 0 distortions because money, in fact, grows on a tree. Said tree also grows riskless bonds and is owned by a single man who lives inside of a box and trades securities with himself. But I digress.
So the way to fix any economy is to grow money and then make sure that inflation is always zero. Unless you are in a liquidity trap. It is still unclear to me what a liquidity trap is and how we got there, but it doesn’t sound good.
The only solution now is to borrow against all of my future income, solve for my optimal consumption path, and go live with the box man who owns the tree. Unfortunately I am a naive consumer and think I am patient when I actually am not. This means that I screw up the economy more and we fall into a horrible recession and live like our great great grandparents did. That is to say, we become farmers.
As farmers, we start to procreate and the population grows. Unfortunately the black death and an assortment of other ailments hit us every few years and the population is wiped out.
This is our equilibrium.