CONVENTIONAL RESULTS OF UNCONVENTIONAL MONETARY POLICY

Abstract

The financial crisis of 2008 was a major crisis after 1929. It reminded once again us about the contradictory nature of fractional reserve Banking. The Great Depression taught us that the financial crisis of 2008 would result in a substantial reduction in economic activity and a sharp deterioration of key economic indicators. To "avoid" recessionary risks, the Federal Reserve System and other central banks of developed countries actively adopted monetary easing measures. A large amount of money was injected into the credit system. At the initial stage, the "explanation" of the mentioned measure was liquidity and recession risks. However, the time has shown us that the number of “colored papers" does not create wealth, it only distributes it in favor of those who have the privilege to "spend" it first, until a quantitative increase of money will be reflected in prices. As expected, the unconventional monetary policy gave very conventional results: inflation, stagnation, and an overheated credit system. The results would be more unambiguous without the Russia-Ukraine war, which affected inflation in the EU. The results of the monetary experiment conducted after the financial crisis of 2008 and its consequences, once again showed us that finance does not create wealth, it only promotes, distributes, and insures it. Therefore, every attempt to improve the picture of the real economy with monetary interventions is futile and cannot change the final result. With monetary interventions, it is only possible to postpone the consequences of the crisis, at the expense of their aggravation and intensification.

Keywords

• stagflation; inflation; financial crisis; monetary policy