Okay, I try. TL;DR: When even at zero rates, aggregate demand is less than aggregate supply. Then a small disclaimer. I am not an economist by trade, so whate

Okay, I try. TL;DR: When even at zero rates, aggregate demand is less than aggregate supply. Then a small disclaimer. I am not an economist by trade, so whatever I write below is my thinking, not learned from a book. Thus no sources available, and take everything with a grain of salt anyway... If you look at the (macro)economy in the short term from the central bank point of view, there are basically a handful of interesting concepts here. first one is (real) aggregate supply, i.e. how much crap and services economy can produce. In the short term, central bank can not do much about this. (so if you want to draw this, we have a horizontal line above x-axis on a chart where interest rate is x axis and production/demand on the y axis). Second one is aggregate (real) demand, i.e. how much people are willing to buy crap and services given the current interest rates. This is something central bank can affect. With a small trick. they can move the demand to the future or from the future by adjusting the interest rate. If interest rates get higher, people take less loans to buy crap and save more. The opposite when interest rates go lower. (thus, in our drawing, we have a downward sloping line for demand. Draw it so that it crosses the supply on the left of Y-axis for this exercise).Third one is inflation, which I will come back a tiny bit later. So, now we have a nice (kind of) supply and demand chart. And we see that if we limit the interest rate to zero, we will have oversupply in the economy. That translates to things like unemployment, lower profits for the corporates etc. So we really would like to get the interest rate to the point where supply and demand are equal. But what about the inflation? One solution would be to have 5% inflation so that zero interest rates would mean -5% interest rates and all would be good again, right? Yep, kind of. If you look again a the chart, where we could find more inflation is where the demand is higher than supply. But that area is even further to the left. To induce inflation, central bank should push the rates even lower than the equilibrium state. and that's why our economies have been between rock and a hard place so long. If we had had an inflation target of 5% in the first place, our life would be much easier. But now we are stuck. And central banks do not have that many options. They can do their best to push the yield curve down to ease as much as possible, but also that has limits. So we are banging against the zero floor and only thing central bank can do is wait for cashless economy or long term economic growth that will increase the aggregate demand. But that is, of course, hampered by lack of demand. Shitty place to be in, today's central bank.