Monetary Policy: Is the Dual Mandate of the Fed Maximizing the Social Welfare?

In this work we deal mostly with the recent (2008-present) Federal Reserve operated monetary policies, which are two unprecedented and distinct monetary policy regimes. The Zero Interest Rate Regime (2008:12-2015:11) and the New Regime (2015:12-2018:12). These different monetary policy regimes provided various outcomes for inflation, interest rates, financial markets, personal consumption, personal savings, real economic growth, and social welfare. Some of the important results are that monetary policy appears to be able to affect long-term real interest rates, risk, the prices of the financial assets, and very little the real personal consumption, personal savings, and the real economic growth during the recent period of extreme monetary policy, in which the Fed held short-term interest rates abnormally low for an extended period (2008-2015) and the present time, which keeps the federal funds rate below the inflation rate. The Fed‟s interest rate target was set during those seven years at 0% to 0.25%. On December 16, 2015, the Fed started increasing the target rate by 25 basis points approximately in each FOMC meeting, from 0.25% to 0.50% to 0.75%, and presently to 2.50%. We want to explain the low level of long-term interest rates and the real rate of interest (cost of capital) in the economy. The evidence suggests that it is the Fed the main cause of the low (negative) real interest rate following the 2007-2008 financial crisis. This monetary policy was not very effective (the zero interest rate target of the Fed). It has created a new bubble in the financial market, future inflation, and a redistribution of wealth from risk-averse savers to banks and risk-taker speculators. In addition, it has increased the risk (RP) by making the real risk-free rate of interest negative. The effects on growth, prices, and employment were gradual and very small, due to outsourcing and unfair trade policies, which have affected negatively the social welfare. The dual mandate (price stability and maximum employment) of the Fed is not sufficient to maximize the social welfare of the country.


Introduction
What are the U.S. Federal Reserve"s objectives in conducting monetary policy during the different eras? 1 Is the country"s social welfare maximized with these objectives? The idea of a monetary policy regime is somewhat vague. It is related to the state of the economy, to Fed"s experience, to the idea of a monetary standard, and to other distrustful "ideals". This article examines the two latest U.S. policy regimes that were adopted to manage the recent financial crisis and recession and tests the effectiveness of the Fed. These regimes are defined by the different goals for policy and by the different procedures; the zero interest rate regime (ZIRR), December 16, 2008-December 15, 015 2 (quantitative easing, QE) and the new regime (NR), December 16, 2015-present, 3 which are used to implement monetary policy decisions (Bindseil, 2016;Bullard, 2018b;Gavin, 2018).
Social welfare 4 is the well-being of the entire society (a sovereign nation). The monetary policy ought to improve the well-being of all individuals inside the country by minimizing a social loss function and not only a

Intermediate and Ultimate Effects of Monetary Policy
Different monetary policy regimes lead to different equilibrium levels of real interest rates, risk, consumption, savings, financial market, real GDP, and social (loss function) welfare. Our most basic theories of money assume the classical dichotomy: real variables are determined by real factors and nominal variables are determined by monetary policy (money illusion). Even Keynesian models with sticky prices assume that the real effects are short-lived, a few quarters at most. For monetary policy to have persistent real effects, we have to consider extreme policies or extend the models to include more realistic features.
The latest monetary policy regime from 2008 to 2015 was an extreme policy 6 because the interest rate policy is not consistent with the 2% inflation objective. 7 This policy had led to persistently low (negative), real rates on bank reserves ( 0  ). It had also led to a low level of real economic activity (  RGDP g ), 8 real personal consumption expenditures (  RPCE g ), lower savings, high risk, with a new bubble in the financial markets, 9 and consequently, in reduction of social welfare. If some factor (easy money policy) keeps the interest rate below the equilibrium level, then the amount that people want to borrow will exceed the amount that people want to save (because this negative real rate of interest is a disincentive to save, environment, democracy, security and safety, crime, health, education, social services, value system of the country, culture, civilization, faith, tradition, morality and ethics, independence, sovereignty, and many other aspects of life). 5 For the Federal Reserve"s Dual Mandate, See, https://www.chicagofed.org/research/dual-mandate/dual-mandate . 6 For example, it was as follows: Also, during peace periods, hyperinflations rarely persist for too long because the effects are so bad that they bring down governments (more responsible for this state of the economy is the central bank and not the government) because they are not willing or able to bring about reforms and control the price level. Inflation is a monetary phenomenon: ). 10 If the interest rate cannot adjust upward to achieve equilibrium in the market for loanable funds, then investment will fall until the amount people want to borrow equals the amount people want to save. Thus, income will fall and unemployment will rise. This negative real rate of interest is a deliberate and suspicious policy to take away the wealth of simple people and has increased their risk, too. 11 The anxiety has become enormous with the passing of time because the current monetary policy (2015-2019) continuous to generate similar results with the previous one, since the federal funds rate is still very low, 2.50% (closed to the official core inflation rate for January 2019, % 2 . 2   ) 12 and the dangerous bubble in the financial market is growing. 13 The DJIA picked on October 3, 2018 at the level of 26,828.39, it decline to 21,792.20 in December 24, 2018 and finished the year, December 31, 2018 at the level of 23,327.46. A growth until 2018 of 16,780.41 points since its trough (thanks to the Fed) or 256.30% (29.29% p.a.). Now (March 11, 2019), DJIA was 25,621.78.
Monetary policy can affect the real return to saving (which must be at least, % 1  S r ); 14 the latest and current stubbornly low interest rate policy leads to persistently subpar economic activity and social loss (low economic wellbeing). The optimal level of economic activity can be achieved only when the real interest rate returns to a normal level making the real return positive. Caggese and Perez-Orive (2017) A significant anomaly in the post-crisis period of a continuous low interest rate policy has been the very low levels of turnover, levels typically associated with being in a recession with low productivity growth. Old inefficient firms tend to go out of business during recessions and are replaced during the recovery by new firms using more efficient technology. The problem with U.S. is the destruction of the small cities and towns, due to loss of manufacturing, high unemployment, low quality of life, reduction of welfare, and creation of ghost towns (Kallianiotis, 2018). Foster et al. (2016), find that since the 2007-2008 financial crisis and 2007-2009 recession, measures of turnover have yet to fully recover from the recession levels. After 2017, the U.S. economy started growing and there is hope to continue at this approximately level. 15 They suggest that inefficiencies in credit markets may be part of the problem. In any case, it seems possible that the low productivity growth rate and the reduced turnover of jobs with many part time jobs, without health insurance, social security contribution and with minimum wages, and firms that are not exogenous with respect to a monetary policy, which pegged the interest rate near zero (from December 16, 2008to December 16, 2015 16 caused all these problems. The real cost of capital must be positive, the real economic growth at the full employment level, and the financial market to grow at a level that minimizes investors" risk, personal savings to grow, social loss function to go towards zero, and social welfare to improve. All these objectives could be satisfied with an efficient and effective monetary policy.

Theory: The Latest and the Current Monetary Policy Regimes
A monetary regime (Gavin, 2018) is characterized by two properties: (i) the weight policymakers put on price stability relative to their concern about output stabilization and (ii) the day-to-day procedures used to implement policy. This paper deals with the latest and current regimes implemented by the Federal Reserve since 2008. The first is the Zero Interest Rate Regime (December 16, 2008-December 15, 2015 and the second is the current New Regime (December 16, 2015-present ). This bubble can cause a global destruction with its burst because the "economic elites" can use it to pursue their global control without any interruption. These globalists want to terrorize people and to prove to some populist politicians, which have the illusion that they can lead the world that they (these dark powers) are in control of everything since the British Revolution (1640). See, Kallianiotis (2017b). On December 24, 2018 the DJIA fell to 21,792.20 (it lost in 3.5 months -5,036.19 points, or -18.77%) and the excuse was that "the oil slide scuttled a move by stock indexes". (Wall Street Journal, November 14, 2018 12,2015). 20 The main concern was output stabilization, as output appeared to grow along a path that was considered to be well below the potential for GDP, Figure 4 ]. The Federal Reserve recently was troubled how it would set short-term interest rates in an effort to keep them from drifting too high; but an increase in its benchmark raises questions about its ability to keep borrowing costs in check. 22 Figures 1a and 1b, and Table 1 show that the level and volatility of federal funds rate ( % 040 continued to drop. The FOMC had adopted a risk-management approach to monetary policy. Greenspan (2004) The financial crisis raised awareness of another downside of the federal funds rate. The abuses in the mortgage market were due to many factors, but many attributed the bad debt to low interest rates (Kallianiotis, 2015;2017a;Taylor, 1993). Today, the Federal Reserve takes responsibility for financial stability, but, as a practical matter, interest rate policy is aimed at stabilizing output and targeting inflation, but we do not see any significant improvement on social welfare by minimizing the loss function [eq. (12)]. Although the FOMC regularly monitors financial markets for evidence of financial instability, it has emphasized the use of macro-prudential policies to promote financial stability in an era of low interest rates.
With the onset of the global financial crisis, the Fed abruptly switched to this infamous new monetary policy regime, the Zero Interest Rate Policy regime. In response to the financial crisis, in September 2008, the Fed flooded the market with about $600 billion in excess bank reserves and drove federal funds rate toward zero. On December 16, 2008, the FOMC voted to set the bottom of the 0.25% target range for federal funds rate at zero. It also adopted unconventional policies known as quantitative easing (QE) and forward guidance that were intended to keep money market interest rates near zero ( % 078 ; where  = correlation coefficient,  = causes, and F = F-statistic.

Source: Economagic.com
Although the Fed has a target range for federal funds, the actual policy rate set by the Fed is the interest rate on reserves ( IOR i ). As it turns out, the period with the IOR set at the top of the target range for federal funds (0.25%) extended for exactly seven years. Gagnon and Sack (2014) Both the level and the volatility of the federal funds went close to zero in September 2008 as the Fed flooded the money market with bank reserves Figures 2a, 2b, 2c, and Table 1. Initially, the Fed supplied about $600 billion in reserves, as it was mentioned above, mainly by making loans of 180 days or less. The Fed justified this action as insurance against the worldwide collapse of financial markets (the 1 st global crisis of the 21 st century) and a replay of the Great Depression. Generally, the Fed had shown an aversion to reversing interest rate movements within a short time span. The rescue (bailout) of financial institutions (D"Erasmo, 2018;Kallianiotis, 2018) was funded by the U.S. Treasury (the taxpayers) with the Emergency Economic Stabilization Act of 2008 23 and with Fed loans and asset purchases with terms to maturity of 6 months or less. Thus, QE was an attempt to extend the expected time that the interest rate would stay near zero and an attempt to stimulate the economy by lowering longer-term interest rates.  110-343, 122 Stat. 3765, enacted October 3, 2008), commonly referred to as a bailout of the U.S. financial system, is a law enacted subsequently to the subprime mortgage crisis authorizing the U.S. Secretary of the Treasury to spend up to $700 billion to purchase distressed assets, especially mortgagebacked securities, and supply cash directly to banks. The funds for purchase of distressed assets were mostly redirected to inject capital into banks and other financial institutions while the Treasury continued to examine the usefulness of targeted asset purchases. Both foreign and domestic banks are included in the program. (sic). The Act was proposed by Treasury Secretary Henry Paulson (who was in the past Chairman and CEO of Goldman Sachs) during the global financial crisis of 2008 and signed into law by President George W. Bush on October 3, 2008. 24 By using the SGS, the average consumer inflation was ( % 10   ) and the % 95 . 9   D r (an amazing inflationary finance of banks, which is an inflationary tax; an unethical robbery of poor depositors, bail in, as ECB did in Cyprus). 25 These markets have become riskier than casinos because the risk in casino falls on the person that made the mistake to bid his money there; but simple investors that believe to a decent return from this "efficient" (out of control) market, they lose their money (wealth) and the economy is going to a recession. The financial crises have to be prevented and not corrected with a public policy after their appearance. Thus, the current system is ineffective and inefficient.  Later, the average maturity of assets on the Fed"s balance sheet 26 also rose as the FOMC rebalanced the portfolio, substituting long-term assets for short-term ones. Interest rates were also expected to stay low because this was the goal of policy suggested in FOMC post-meeting statements, policymaker speeches, and Congressional testimony. Potter (2017) In October 2008, the Federal Reserve had begun to pay interest on reserves. The IOR was set at the top of the federal funds target range and remained about 20 basis points above the discount rate on 3-month Treasury bills 27 This was a factor that increased banks" willingness to hold a large stock of excess reserves. Paying interest on excess reserves and supplying a large stock meant that the FOMC had switched from direct federal funds targeting to a floor system. Bindseil (2016) Then, if banks are receiving interest from the Fed, why to pay interest on deposits? They do not need more funds from depositors as long as the Fed provides this enormous liquidity (R E ). Another proof that the Fed has failed to maximize the depositors" interest income and consequently, their welfare.
An important feature of the ZIRP regime, which began with a big two-quarter decline in Consumption Figure 3a and Table 1, is the failure of the economy to return to the trend in potential GDP Figure 4 that had been estimated by both the Fed staff and the Congressional Budget Office. The Fed and private forecasters incorrectly forecasted a return to trend over the next seven years. One response was to lower estimates of the level and growth rate of potential GDP. In the policy response, the Fed turned to QE twice more, taking the balance sheet over $4.5 trillion by the end of 2014. 28 The end of the ZIRP regime occurred when the FOMC voted to raise the federal funds rate target range by 0.25% on December 16, 2015 and reached 0.50%. 29 Now, according to Taylor"s original version of the rule, the nominal interest rate should respond to divergences of actual inflation rates from target inflation rates and of actual GDP from potential GDP: (Kliesen, 2019) ) ( ) ( = the target short-term nominal interest rate (the federal funds rate), t  = the rate of inflation as measured by the GDP deflator, * t  = the desired rate of inflation, * t r = the assumed equilibrium real interest rate, t q = the logarithm of real GDP, and t q = the logarithm of potential output, as determined by a linear trend Figure   4.
In this equation, both   and q  should be positive (as a rough rule of thumb, Taylor"s 1993 paper proposed ). That is, the rule "recommends" a relatively high interest rate (a "tight" monetary policy) when inflation is above its target or when output is above its full employment level, in order to reduce inflationary pressure. It recommends a relatively low interest rate ("easy" monetary policy) in the opposite situation, to stimulate output.
Taylor"s rule can be modified by using unemployment ( t u ) instead of GDP: If inflation rate is above target, the central bank raises the federal funds rate, which encourages financial institutions to increase interest rates on their loans and mortgages. But the higher loans rates discourage borrowing and spending and thereby easing the upward pressure on prices. If the unemployment rate is above the natural level ( N t u ), the Fed reduces the federal funds rate to lower the cost of capital and might increase investment, which will affect positively output and employment.  In addition, James Bullard proposes an alternative formula that he terms it as a "modernized" version of the Taylor rule: = the recommended value of the nominal policy rate, * t r = 1 is the natural real interest rate, also called "r-star", *  = 2 denotes the FOMC"s inflation target, GAP t  and GAP t q denote the inflation gap (measured as the difference between a market-based measure of inflation expectations and the Fed"s inflation target) and the output gap [the output gap can be measured as the difference between the current unemployment rate ( t u ) and the Congressional Budget Office"s natural rate of unemployment (  Further, the Phillips curve can be written as follows: and we want to test empirically this Phillips curve during the last two monetary policy regimes because many policy makers insist that Phillips curve does not hold anymore. 30

Figure-3b. The Real Federal Funds Rate and the Growth of the Real Personal Consumption Expenditures
30 This is possible because the structure of our economy has changed from capitalism ( . Trends in interest rates were declining throughout much of the ZIRR Figure 5. When the economy went into recession (2008), the FOMC lowered the federal funds rate target to 0% to stimulate the economy. The FOMC expected this to lead to higher inflation, but it did not. (Sic). The official inflation was % 586 . 1   during the Zero Interest Rate Era (ZIRR), 31 which cannot be explained with our economic theory and practice.  Residual Actual Fitted Note: Actual = USRGDP2012 (U.S. real GDP, 2012 base-year) and Fitted = the L-T time trend. Source: Economagic.com 31 Alternative measure of inflation rate from 1981 to 2018 gives the following results. The CPI chart of the SGS reflects the estimate of inflation for today as if it were calculated using the methodologies in place in 1980. Today"s methodology is very suspicious. (sic).The actual inflation during the ZIRR was about 10%. See, http://www.shadowstats.com/alternate_data/inflationcharts . A naïve practical inflation measure can be the following: In 1982, a family was spending $20 per week in supermarket; in 2018, the same family was spending $200, due to inflation. Thus, prices have been risen by 1000% in 36 years or 27.78% per annum. This is a true inflation for a household.
The recoveries were not as vigorous as those during the previous eras. As the economy was going to a deeper recession, the FOMC continued to keep the federal funds rate target to zero Figures 1a and 1b. By the time that USFFR was approximately level with STT3M (3-month T-Bill), inflation and inflation expectations had moderated and the Fed was worrying for deflation, but SGS, footnote 47, shows an official inflation over 5% and 13%. So the policy during the ZIR period was asymmetric: The FOMC eased aggressively when the economy was weak, but did not raise rates during expansions. ). 32 Thus, the signature characteristic of the ZIR Era was the reduced volatility of inflation and output, as it was mentioned above.  Figure 2c show. This growth in the stock market has created a new bubble. 33 This is an indication of an extreme and inefficient (risky) monetary policy.
The biggest "surprise" for the Fed (and even bigger for us because inflation is a monetary phenomenon) was that inflation did not accelerate in response to lower interest rates and to enormous money supply during this extended period of low interest rates. ) and this high unemployment causes reduction in personal income and aggregate demand, which affect negatively the price level. 34 But, it seems that there was a need to invert the yield curve, raising federal funds rate above US10YTB (  Table 1  ). If there was no inflation, then interest rates probably were not too low, but the problem was the wrong measurement of inflation and unemployment. The actual inflation after 1988 is over 5% (between 5%-13%), as we can see this in footnote 47 and the unemployment over 12% (between 10%-23%). The financial crisis raised awareness of another downside to low interest rates. The abuses in the mortgage market were due to many factors, but many observers attributed the sheer volume of bad debt to low interest rates, the enormous bank deregulations since 1980s, greediness, risk transferring to tax payers (bail outs), and the corruption in the banking industry. 35 32 As follows: From 2009:03 (6,547.05) to 2015:02 (12,132.07), the growth was 176.95% (29.5% p.a.). The hard working middle class, who is risk-averse is afraid that globalists will burst it to terrorize people again (for a second time) in this wrong appearing 21 st century of the 8 th millennium. 34 The SGS give an inflation for these two periods from 7% to 14% and an unemployment from 14% to 23%. ) and began to raise the FF i to 0.50% and continues, which has reached 2.50% now. 36 This is also a period in which the Federal Reserve used interest rate targeting procedures to maintain the credibility for low inflation. The FOMC tried to maintain a 2% inflation target. Bullard (2018a) Actually, the method used to implement interest rate ( FF i ) targeting started in October 1982 and became more explicit after 1987 when Alan Greenspan replaced Paul Volcker as head of the Fed. The current Fed"s Chairman, Jerome Powell, said in November 2018 that interest rates are just below estimates of neutral, which means that we will see some increases in the federal funds rate. 37 Fed minutes also reveal how officials view the economy and potential risks. 38 The target interest rate has to increase further because the real rates are still negative and the deposit rates close to zero ( % 05 for more than ten years, which makes the % 2   D r or more accurate to % 10   D r . This is a redistribution of wealth from depositors to stock market speculators. Table 1 shows also all the mean values and standard deviations of our variables in question from 2015:12 to 2018:12 (during the NMPR). Our Then, we use an OLS equation to test the effectiveness of the instruments of monetary policy on the goal variables by taking them one by one as dependent variables and also to see the interaction of the objective variables among themselves.

38
Here"s what to watch when minutes from the Fed"s November 7-8, 2018 meeting are revealed. https://www.wsj.com/articles/fed-minutes-to-reveal-how-officials-view-economy-and-potential-risks-1543487400?mod=hp_lead_pos2 39 Which are: ln of DJIA, ln of RGDP, yield on 10YTB, ln of CPI, and USU rate. Lastly, we construct a loss function (L) by using nine (9) macro-variables and their deviation from their optimal value; these are the most important variables, as they are shown in eq. (12), and by minimizing the social loss, we maximize the index of social welfare (ISW).
where, ( % 2   ) = the inflation gap (actual minus the target or its optimal value). The optimal solution will be L=0, which maximizes the ISW. Negative losses are benefits. The ZIRR shows that the slope of the federal funds tread is flat (horizontal) and then, the NR shows positive slope, but the overall trend is negative Figure 5. As it was mentioned above, in October 1982, the Fed abandoned the M1 targeting procedure and adopted an indirect form of interest rate targeting. Monetary policy during this policy regime was praised by policymakers, business leaders, and academic researchers because of the low volatility in both output and inflation, (Bernanke, 2004;Cochrane, 2001;Stock and Watson, 2003) as it was also during the ZIRR (  Table 1.

Source: Economagic.com and Yahoo/Finance
Policymakers place a large value on models that "fit the data" (Gavin and Kydland, 1999;2000). Econometric methods extract information from the dynamic variance-covariance structure of data. There were statistically significant changes in the variance-covariance structure of datasets that include nominal indicators. It was also generally true that there did not appear to be significant changes in the variance-covariance structure of datasets that included only real quantities such as consumption, investment, or labor (unemployment). Here, we measure the correlation coefficients between our variables Tables 2 and 2b 40 during the two regimes (2008:12-2015:11 and 2015:12-2018:12). Also, we performed the causality tests for the two regimes 41 and Tables 3a and 3b reveal these results. The federal funds rate (FFR) is negatively correlated with CPI (inflation), real GDP, personal consumption expenditures (PCE), and DJIA. Then, the reduction of the federal funds increased these variables (causes inflation and bubbles in financial markets).
During ZIRR the loss was enormous L=21.986%, which means the social welfare was very small. Thus, this monetary policy was ineffective. With the New Regime, there is so far an improvement (L=17.848%), then the social welfare has increased. There is improvement (the loss has declined) in most of the  Table 4 and for the period from 2015:12 to 2018:12 are shown in Table 5 below. During the period of Zero Interest Rate, the Fed monetary policy had some positive significant effects only on unemployment. For the New Regime, the Fed had an effect only on (DJIA) the financial markets (the bubble was increasing), on RGDP (deterioration), and CPI (inflation). The impulse responses for the two eras are shown on Figures 8 and 9, 42 where the response of our endogenous variables (LUSDJIA, LUSRGDP2012, US10YTB, LUSCPI, and USU) to Cholesky are given, too.    Source: See, Table 1.      The OLS estimations are given in Tables 6 and 7. For the Zero Interest Rate Era, the Fed policy has affected RGDP (reduction), L-T interest rate, and unemployment (reduction) Table 6. For the New Era, the monetary policy has affected the DJIA (bubble), the RGDP (ambiguous effect), the 10YTB rate, and the CPI (inflation) Table 7.        We also test the Phillips curve for the two Eras. Low inflation together with high unemployment supported the conventional wisdom that there is a Phillips curve, here; but, the data discredited the Phillips curve as a policy framework, which is questionable. But, the only explanation can be that the high unemployment reduces personal income and affects negatively the aggregate demand (  AD ), then prices are falling or something wrong with the official measurement of inflation and unemployment.
By testing the Phillips curve equation, eq. (5), we found as results: ) but it is insignificant. Thus, these results show that the Phillips curve does not hold any more and especially, during the ZIRP regime Williamson, 2018) (sic).
In addition, we use the Taylor"s rule to see if the target federal funds rate was the appropriate according to the rule. Taylor"s rule can be modified by using unemployment instead of GDP: The coefficients are: 5 . 0   expected inflation ( e IP   ). If the Fed pegs the interest rate at any level, including zero, then an increase in real returns will lead to a decline in inflation, ( . If the policy rate is pegged at a higher level, the inflation rate will be higher. The equilibrium condition says nothing about what will happen in the short run if the Fed changes its policy rule. But, price inertia ( P ) exists in the short run and inflation is increasing gradually; in the long run inflation increases (price effect) and the real interest rate is falling ( , as it happened during the ZIRP era. This is the reason that the unofficial inflation was ( % 10   ) and expectations for inflation are high (footnote 47) among economists and non-economists, and the real interest rate negative. Depositors were and are paying the banks for keeping their deposits. (sic).
In theory, real interest rates matter for real economic activity because they influence consumption, investment, and savings decisions. Higher real interest rates reflect high returns to investment, and high returns to working now for consumption in the future. They are incentives for savings. They also reflect the opportunity cost of building capital. Periods with low expectations for the future are periods of low interest rates. 46 The trade balance of a country is also very important because it affects growth and employment for the country and the Fed"s policy can contribute to its improvement through the value of the dollar (the exchange rate) Kallianiotis (2013). Of course, trade policies can be imposed by the government (tariffs, quota, import taxes, etc), too. The country faces an enormous unfair competition from China, which is becoming more severe and aggressive with the passing of time. The current administration"s foreign policy is inclining towards improving relationships with Russia (if the establishment, the "Washington swamp", will allow it), (Kallianiotis, 2017b) which will be politically, economically, and socially beneficial for both countries. 47 The outsourcing, the free trade, and globalization have caused enormous problems and pains to the U.S. and EU economies and their citizens; and domestic public policies cannot improve the economic growth, income, and employment because the damage is structural, it has been planned and generated by an economic elite (the "dark powers") since the 18 th century Kallianiotis (2017b).
As shown in Table 1, ex post real interest rates were extremely low (negative) during the Zero Interest Rate Era, the USRFFR averaged -1.458%, while the USR10YTB averaged 1.000% and the RRFRI was -1.508%. This was a period of slowing productivity growth. It was also a period when people were devoting many resources to protecting themselves from the damage done by inflation ( % 10  unemployment and inflation proves that our system from "capitalism" became "debtism". The loss functions show a high loss, which makes the social welfare low. The dual mandate of the Fed is questionable. As shown, here, the ZIRP regime was an extreme policy setting, given the Fed"s inflation and maximum employment objectives. This experimental regime resulted in abnormal levels of the ex post real interest rate; the Fed was the cause of low real interest rates in the ZIRP era. Table 1 shows that the GAP1 (= RPCE eff FF g r  ) has been negative in both periods of easy monetary policy. It was -3.279% during the ZIRP era and -3.312% during the New regime. Public policy must be a mixed policy, a combination of monetary and fiscal, otherwise cannot be very effective. Lately, liberalism has become a serious social and political problem for the country, which affects negatively the administration, the public policy, the economy, the foreign relationships, and the wellbeing of the citizens. 49 The Federal Reserve identified elevated asset prices, historically high debt owed by U.S. businesses and rising issuances of risky debt as top vulnerabilities facing the U.S. financial system, according to an inaugural financial stability report released at the end of November 2018, 50 but the Fed is the major contributor to these asset prices with its easy policy. A month later, Federal Reserve officials were considering whether to signal a new waitand-see approach after a likely interest-rate increase at their meeting on December 19, 2018 to 2.50%, 51 which could slow down the pace of rate increases next year. 52 Jerome Powell has taken a conversational tone the last three months, but his communications have not always been understood by the market. 53 Lately, markets have cheered the Federal Reserve"s imminent announcement that it will stop shrinking its asset portfolio later this year. They are turning to the arguably more sensitive task of determining the composition of the Treasury securities the central bank will hold. 54 . The Fed tried to prevent deflation, as they were saying. Another question arises now; how we had this high growth of the real PCE with a high unemployment and low income in the country. Then, people were borrowing more money (debts were going up). Capitalism was turning to debtism. Thus, these low (negative real) interest rates have contributed to higher debts and higher future risks of financial distress, personal and business bankruptcies, and new bailouts. These extreme policies conserve the business cycles and do not prevent them. Even Boston Fed"s Rosengren was warning that "without more interest-rate increases the central bank risks a buildup of unsustainable pressures that lead to excessive inflation or financial bubbles and, ultimately, another downturn". 55 U.S. Economy grew at 2.2176% rate in the First Quarter of 2018 and at 4.1588% Rate in Second Quarter of 2018, at 3.3569% in the Third Quarter and 2.59% in the Fourth Quarter of 2018. 56 China warns of protectionism at BRICS Summit in Johannesburg on July 26, 2018. 57 There is a Chinese economic warfare against the U.S., the EU, and other countries. We need to change our philosophical thinking and to understand that the best public policy is a mixed policy (a combination of monetary, fiscal, and trade policy), which could become very effective with one only objective in the mind of policymakers, the wellbeing of the citizens of the country.

Conclusion
The current article discusses the theory and empirical implications of the latest two alternative monetary policy regimes that have been in place since the 2008 [here, we take the ZIRP Era (2008:12-2015:11) and the New Era (2015:12-2018:12)]. Clearly, the alternative monetary policy regimes have had important effects on the level, variance, standard deviation, covariance, correlation coefficient, and causality of datasets including measures of inflation (  ), real risk-free rate of interest ( * r ), real personal consumption expenditures ( RPCE ), growth of RGDP , financial markets ( DJIA ), unemployment rate ( u ), nominal interest rates (short term and long term), personal saving rate ( psr ), deposit rate ( D i ), and social welfare. In periods of extreme policy settings (that is, setting the interest rate well above or well below a normal level), it appears that the Fed has influenced the level of real interest rates on safe assets, including ex post real returns on long-term Treasury securities, real risk-free rate of interest, and real deposit rates. During the ZIRP Era, the result was a very low real interest rate (negative) and below-trend growth in the economy. During the seven years following the 2007-2008 financial crisis, the ZIRP regime caused the low real interest rate on safe assets and subpar real consumption and real GDP growth, and high unemployment Figure 7. But, the bubble in the financial market was growing ( After this experiment of Quantitative Easing ( QE ), the FOMC has begun a transition to a new policy regime (NPR) or perhaps a return to an old one. As it has begun to raise the federal funds rate target (from 0% to 2.50% today), it is merely taking a rate that is well below normal to one that is closer to normal. Incoming data show that the real economy has not been damaged by slightly higher interest rates. 58 However, the economy remained during this ZIR period below the trend that was predicted for potential GDP in 2007 . The rate of return on safe assets must be above the expected inflation (  ). The Taylor"s rule shows that the federal funds rates are too low since 2008. The Bullard rule gives similar results, the target rate is for all these years low. The social welfare (ISW) is relatively low during the ZIRR and has improved a little lately with the New regime. Nominal interest rates on deposits continue to be closed to zero, 65 which keep the real return on deposits negative. Empirical evidence surveyed by Williams (2014) suggests that the Fed can influence real interest rates on long-term safe assets. What we do not know is the sign Figure-7 of the effect that policy-induced low interest rates have on real economic activity. But, we know that low real interest rates are causing redistribution of wealth from risk-averse savers to banks, speculators, and investors of financial assets, and affect negatively savings (encouraging dissaving and consumption); this might be the reason of this policy to increase consumption, aggregate demand, and stimulate the economy (a capitalistic economy is driven by consumption). Actually, this is an anti-social and unethical policy, with a very uncertain future. We need some serious structural reforms for the entire socio-economic system. The dual mandate of the Fed does not maximize the social welfare. The ECB"s "effectiveness" will be our next project. Response of USU to USU Response to Cholesky One S.D. Innovations ± 2 S.E.