The really worrying thing to me is our inability to accept that we (as in humankind) are rather rubbish at running complex systems.
A good analogy is to think of the economy as a still lake. If you throw a rock into it, you know that it will create concentric circles of waves. You throw a second rock and you know that its waves will interfere with the first. But now the waves create oscillating patterns and now they hit the irregular shore and pretty much immediately you have the usual chaotic pattern of waves all over the lake.
It's the same deal with the economy. We can predict the first order, maybe the second order consequences of our actions. But again and again we're faced with a highly dynamic system with an almost infinite set of variables and we seem continuously surprised when things get out of hand.
To me, a federal reserve system that insures banks from bank runs makes sense. This sort of FED that we have now that tries to control the overall economy is - to me - at least as hopeless as centralized 5-year plans under communism.
What's your offered solution? Throw our hands up and just go back to bartering? The federal reserve doesn't micromanage the economy (throwing rocks into the lake, as you put it) they have a few levers at their disposal that I would describe more as environmental variables (like setting the "temperature" of the lake, or limiting the size of rocks people are allowed to throw).
They are also doing everything at a pretty high level where you don't need to be able to predict economic events with 100% accuracy. You can know that throwing a 50lb rock in the lake will likely cause a bigger wave to come up on shore (regardless of other rocks being thrown) without being able to fully characterize and predict the timing of it.
5-year plans from centralized sources seem to struggle to even survive for 5 years, whereas the current system in the US has been generally functioning well for over 100. I'm not convinced they're as similar as you think.
I think that the Fed has significantly extended its scope over time. From a pure backstop for banks towards quantitative easing and even buying of corporate bonds. And that's true for the EZB and other central banks as well. Overall, central banks do indeed seem to have a dampening effect on the economy, preventing some of the more extreme swings of the pre-Fed era, but I would argue that the Feds sustained injection of cash into the markets over the last decade has created a lot of the inflation the Fed is now trying to solve
> with an almost infinite set of variables and we seem continuously surprised when things get out of hand
This was never a matter of an overcomplicated system. The results were obvious (and some believe intentional) from the start of QE. A choice was made to take an economic hit later, rather than sooner, by those in power.
Is the problem the difficulty of running complex systems or the complete resistance to the idea from politicians and voters that reality is massively complicated. People just want “common sense” solutions and politicians who speak plainly but maybe that’s not what we need.
> This sort of FED that we have now that tries to control the overall economy is - to me - at least as hopeless as centralized 5-year plans under communism.
This is a CRAZY comparison. The Fed is barely doing anything, basically trying to keep things stable using two simple tools, and is doing so iteratively and carefully. It is the literal opposite of a Soviet communist 5 year plan that details everything to the n-th degree and damn the consequences.
That is really not correct. The Fed has engaged in four phases of Quantitative Easing (https://en.wikipedia.org/wiki/Quantitative_easing#United_Sta...) since 2008 alone, with the last one in Mid-Summer 2020. This one resulted in an additional two billion of asset purchases with Money that didn't exist before, meaning that in 2020/2021 the Fed's money generation accounts for a total of 10% of US GDP. Having this much more money in a system with stable or declining supply (especially in conjunction to the Covid Relief Packages under Trump and Biden) is to me quite likely to have created the very problem the Fed is now trying to solve.
Seems to me the COVID crash would have been a lot worse without the Fed's intervention. It's always a moving target, because the economy is too complex to nail the perfect intervention, and all interventions are complicated by the reactions of the participants. Under such extreme circumstances (shutting down massive parts of the global economy), there's never going to be the perfect intervention, so there will always be a second order effect to deal with afterwards.
In other words, there will always be something to complain about, even if the net effect is positive.
A good analogy is to think of the economy as a still lake. If you throw a rock into it, you know that it will create concentric circles of waves. You throw a second rock and you know that its waves will interfere with the first. But now the waves create oscillating patterns and now they hit the irregular shore and pretty much immediately you have the usual chaotic pattern of waves all over the lake.
It's the same deal with the economy. We can predict the first order, maybe the second order consequences of our actions. But again and again we're faced with a highly dynamic system with an almost infinite set of variables and we seem continuously surprised when things get out of hand.
To me, a federal reserve system that insures banks from bank runs makes sense. This sort of FED that we have now that tries to control the overall economy is - to me - at least as hopeless as centralized 5-year plans under communism.