Central Banks Inefficiency and their Control by the Markets

 Dr. John N. Kallianiotis
University of Scranton


The current paper examines the latest financial crisis and its economic effect on the U.S. and the Euro-zone nations (especially on Greece). The Fed’s and the ECB’s monetary policies must be used to mitigate the recessions and to improve the economic growth and employment. The current target rates (monetary policy) are closed to zero since December 2008 with a new experimental policy (“quantitative easing”) for the Fed and since 2014 for the ECB, to stimulate aggregate demand (investment, consumption, growth, and employment), but nothing of these objectives has been satisfied. This zero interest rate policy has reduced the deposit rate to zero and has affected negatively savings. It has eliminated the incentive to save and has made savings almost negative (dissaving or borrowing) and has contributed to this slow growth of output and persistent unemployment.

These policies and the high taxes, low wages, salaries, and pensions by the Troika have increased the debt of individuals and the low taxes on businesses, the tax evasions, and tax avoidance have magnified the budget deficits and the national debts. The deposits rates have to cover at least the official inflation rates and an interest rate ceiling on loans must protect the borrowers (individuals and nations) from the high loans rates, especially the credit cards outrageous usurious rates. Governments have to increase corporate taxes and reduce the national debt (after the end of the recession) by lowering government expenditures by curbing inefficiencies and corruption; but without decreasing public investment (infrastructures) and social programs.

The public policies must be mixed policies (fiscal and monetary) to improve growth and employment first and then to reduce inflation and interest rates. But, these policies in Europe are controlled by the suspicious EU and its anti-social institutions. The current one-sided monetary policy and the tax system need to be changed and to become optimal, which are necessary to improve social welfare, fairness, equity, justice, equality, and to benefit the neglected middle class (the 90% of the population) in our society. The middle class cannot work only to pay taxes (especially, the unethical property taxes = rent on your private home)[1] and interest on its debt (redistribution of its wealth to government and banks), due to low disposable income, negative savings, high unemployment, and unfavorable monetary and fiscal policies. The countries need to correct their structural problems; but the common Euro-zone policy is a big failure, it does not work for all these different member-nations. Countries have to go back to their national policies, national currencies, their national democratic and social systems, and to their independence (to regain their sovereignty).


 Central Banks and their InefficiencyI


[1] Capitalism and communism have many common points (the one is the other side of the same coin); both have been created by the same people and both are against private (home) ownership. Also, these two systems are against the Greek-orthodox value system. For this reason, both systems are renounced.

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