What can we learn from monetarists about what happened to prices after the Covid-19 pandemic struck? What can we learn from the mistakes made in the 1970s? The purpose of posing these questions is to inject humility into current debates, especially among central bankers. Their failure to forecast, or prevent, the big jumps in price levels of recent years is significant. So, why did it happen and what might history suggest about the mistakes still to come?

It is possible to argue that there is nothing to learn. Covid-19 was, it might be suggested, a unique event to which policymakers responded in the most sensible possible way. Similarly, the 1970s are ancient history. Our policymakers would not make the mistake of letting inflation shoot up again, so embedding expectations of permanently high inflation. I would like to believe these propositions. But I do not.

Start with money. There have been two obstacles to taking the money supply seriously. The more important is that it was discarded as a target and even an indicator by “respectable” macroeconomists long ago. The less important was the hysteria of so many about the quantitative easing introduced after the global financial crisis. This obscured what was so very different this time.