In this article it is discussed the new
monetary policy, the new instruments (monetary policy tools) that the Fed
introduced after 2008 and 2020, the different monetary policy rules, and the
social cost and benefits of this policy is measured. The first major Fed’s
changes were on 12/20/2008 by altering the fed funds market in a number of
different ways: (1) Zero fed funds rate. (2) The Fed started paying interest on
reserves held by the bank or on behalf of depository institutions at Reserve
Banks, subject to regulations of the Board of Governors, effective October 1,
2011 and interest on the overnight reverse repurchase agreement in 2014. (3)
The close to zero deposit rates. (4) The Fed abolished the required reserves by
making them since March 26, 2020 zero. The social cost is very high with these
“innovated” policies. This zero federal funds target rate monetary policy is
against depositors (bail in cost) and taxpayers (bail out cost); it is an
unfair public policy and an anti-social monetary policy; and at the same time
it is a risky one because it has created enormous bubbles in the stock market
and a creeping high inflation. The different monetary policy rules reveal the
unjustifiable low policy target rates. The latest monetary policy combined with
the loss of self-sufficiency, the outsourcing, the unfair international trade,
the recent peculiar coronavirus pandemic, and the current divisions inside the
country are generating many challenges and risks for the future, which will cause
the social cost to exceed the social benefits.
classification numbers: E52, E58, E4, E44, E23, D6.
Keywords: Monetary Policy, Central Banks and Their Policies, Money and Interest
Rates, Financial Markets and the Macro-economy, Production, Social Welfare.