Economic Crises, Liberal Fiscal Policies, and Modern Monetary Policy

This article addresses the most recent economic crises, including the global financial crisis and the many-sided coronavirus crisis, as well as the public measures put in place to lessen the effects of the downturn and boost economic growth. Since December 2008, the current target rate (monetary policy) has been set at zero in order to encourage investment, growth, and employment. This new experimental, modern monetary policy (quantitative easing, among other new measures). The abandonment of fiscal policy, the current tax structure in the United States, which lowers disposable income and causes savings to turn negative (dissaving or borrowing), as well as high inflation, which has caused real deposit rates to turn negative, have all contributed to the slow expansion of output and ongoing true unemployment. The COVID-19 issue is a protracted one that has been preserved for political gain, and it appears that people will continue to suffer through it until a new crisis is “created” by the “experts.” The national debt and budget deficits have increased dramatically as a result of the policies put in place and the light tax burden placed on businesses. Because of their large debt and low income, people borrow the present value of their uncertain future wealth, which elevates the risk and pushes up the interest rate on loans, notably credit cards. To lower the national debt, the government must increase corporate taxes, minimise unnecessary expenditure (such on the military, national security, and wastes), reduce inefficiencies, and combat corruption (infrastructures). Public policies must be combined in order to prevent crises, increase growth and employment first, then reduce inflation and maintain moderate interest rates (fiscal and monetary). To promote social welfare, fairness, equity, and justice as well as to help the society’s 90% middle class, which has been neglected, the current unbalanced monetary policy and tax structure must be altered and made to function optimally. Due to low disposable income, rising unemployment, and unfavourable monetary policy, the middle class cannot be harassed, controlled, or forced to labour merely to pay taxes and interest on its debt (redistribution of its wealth to the government and banks). The decline of the middle class will have a detrimental impact on the nation’s whole socioeconomic system and pose a threat to its survival.

Author(s) Details:

Ioannis N. Kallianiotis,
Economics / Finance Department, The Arthur J. Kania School of Management, University of Scranton, Scranton, PA 18510-4602, United States.

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Keywords: Estimation, time-series models, consumption and saving, taxation, government expenditures, interest rates, monetary policy, fiscal policy

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