Inflation is at a 40 year high. What can history teach us?

Let's assume a $15 minimum wage. The housing one can afford on two such wages is $1,560/mo. On a $700k home, assuming 20% down, to repay the principal alone is $1,556/mo. A mortgage calculator says $3,800/mo once you have interest in there — or 73% of your gross income. And that ignores insurance & taxes. And those 3 kids.

I think there is an erroneous understanding/implication in your statement, which is likely leading you to erroneous conclusion.

The Fed is not 'Central Planning' so much as it is actually trying to make the market more 'neutral' in normal cases.

We'll get to the 'crisis' cases in a bit.

If we just had a hard currency, like Gold (which 'feels' neutral) we'd get into trouble, because of deflationary issues. People would treat it like Bitcoin, and as prices fell slightly would be oriented a bit towards 'store of value' as opposed to currency.

The Fed 'targets' just a 'bit above zero' inflation by policy. That is basically 'neutral'.

That is not really 'central planning', it's more like 'central neutralization'.

As for 'crisis' situations, i.e. when the Fed does start to 'intervene' and does things which you might argue are 'central planning' - well - the government in many cases can absolutely do it 'better than free markets' because only the government has the scale to do it.

For example, 'free markets' could have not have created and executed the Highway road system of the 1950s. It was of a scale and scope far, far beyond any economic actor. That required 'strategic vision' on behalf of the government. Now - private contractors actually did the 'building' - which is how we want it because the government doesn't need to hire individual workers. But it's a government project by virtue of scale and other things.

The meltdown of 2008 was a very scary time - if the government did not intervene, the banks would have collapsed, and it would have taken down the entire economy.

It would be like a human having a 'heart attack' - the heart stops - everything stops.

So the government put together a plan and intervened. A lot of it had to do with 'confidence signals' and other things, extra regulation, but it worked.

There is of course the 'Too Big To Fail' argument i.e. moral hazard i.e. banks take on more risk knowing the 'gov will save' us - that said, the worst actors did definitely lose a ton of money. Also - the problem was not just the banks, it was a systemic failure in a number of sectors.

Basically - the US had an economic cancer and no individual organization was going to be able to contend with it.

So -> intervention. Much like a war, or pandemic.

Having a fiat currency allows that opportunity. If it were a 'Gold Based Economy' it would have fallen down like a house of cards.

Like a brick building during a rare earhtquake: brick 'feels' strong like Gold, but an earthquake will ravage it, which is why you need steel reinforcement - the steel can bend and absorb different kind of tensions.

Milton Friedman is wrong.

Yes, when there is hyperinflation, it's probably because some stupid government is printing too much money, but inflation is not just a function of money printing.

This is a nice demonstration of the variability of inflation and how under-trend we have been for many years. There was a strong push from some monetary policy people to move toward a longer term, average inflation targeting that would make the Fed have symmetric reaction functions to upside and downside inflation while attempting to keep a longer term average as the goal.

One interesting explanation for high inflation during the 1970s to early 1980s was that the monetary system and supply of real assets had to adjust to a massive influx of working age adults (babyboomers). A second wave from that population event started to enter the workforce over the last ten years. It might be interesting to normalize the data here against the size of the workforce.