I have a lot of respect for the late Milton Friedman. I really do. His unapologetic defense of the free market was–and still is–a breath of fresh air amidst the constant drone of calls for the government to “do something” to fix all of our problems, real or imagined.

But on the subject of inflation–the subject on which Friedman is most often quoted–he was dead wrong. Inflation is not “always and everywhere a monetary phenomenon.” Other factors–such as demographic change–can and do overwhelm central bank monetary policy when they reach extremes. I tackled this subject two years ago in a piece that tied Japan’s chronic deflation to its aging and shrinking population.

I’m not the only voice in the wilderness. Harry Dent has made the same basic demographic arguments for over twenty years, and his views have gone a long way to shaping my own here. And now, the Fed appears to be coming around. Earlier this year, the Richmond Fed published a piece that asks: Will the Graying of America Change Monetary Policy?

Here is an excerpt:

Despite the certainty of the oncoming demographic change, little is known about how it is likely to affect the Fed’s policy tools. Some policymakers and observers have expressed concern, however, that the Fed’s ability to stimulate the economy may decline for demographic reasons, if it hasn’t already done so. For example, New York Fed President William Dudley suggested in a 2012 speech that “demographic factors have played a role in restraining the recovery,” [emphasis mine] in part because spending by older Americans is “less likely to be easily stimulated by monetary policy.”

It’s called “pushing on a string,” and it’s something I addressed recently in an article on secular stagnation. Keeping interest rates artificially suppressed will not encourage older Americans to buy more on credit. In retirement, most of us trade down to smaller homes rather than trade up. We also drive less and thus replace our cars less often. And we already own all of the big-ticket items that consumers generally buy on credit, such as furniture and appliances. So, the older a society becomes, the less effective monetary policy is in spurring consumption.