Private Sector's Over-Indebtedness as a Cause of Inefficiency of Monetary Policy

The paper investigates the reasons why easy monetary policy in the US, Euro area and Japan doesn’t promote economic growth. The paper argues that (i) ineffectiveness of easing monetary policy is caused by cash hoarding caused by excess of deposits over loans and (ii) cash hoarding is caused by over-indebtedness of private sector. It is argued that to increase the efficiency of monetary policy reduction in private sector’s debt burden is necessary that can be achieved through the growth of non-debt financing. For that, it is proposed to increase the attractiveness of trust funds, in particular, to extend the deposit insurance program to funds transferred to trust.