Fundamental Driven Liquidity Traps: A Unified Theory of the Great Depression and the Great Recession Gauti B. Eggertsson 1 and Sergey K. Egiev 1 1 Department of Economics, Brown University December 29, 2019 Abstract This paper integrates the New Keynesian literature on the liquidity trap to offer a unified theory of the Great Recession and the Great Depression in the United States. We first give an overview of fast moving forces that can lead to a liquidity trap, such as a banking crisis and debt deleveraging shocks and then turn to long acting forces such as the aging of the population and a rise in inequal- ity. These latter forces are often associated with the idea of secular stagnation. We then analyze a number of monetary and fiscal policy interventions within the standard New Keynesian model as well as in a model in which there is a permanent trap. The paper closes by applying the theory to understand the onset and recovery from the U.S. Great Depression and addressing key questions related to the U.S. Great Recession. — Preliminary, First Draft, Comments Welcome, please address to Gauti_Eggertsson@brown.edu —- 1