There is so much in error here that it makes me tired just to think of countering it all, but here goes.
In 52 years, the average income for an American increased ~6.5x.
Averages are tricky little bastards. They seldom present a realistic picture in economics but are easy to understand, so they are used where they are not relevant. Massive shifts in distribution have made "real" wages far less than those from the '70s and it would be much more accurate to employ "median" income in such a comparison.
I think if you would convert your analysis to median income you would find that your numbers more accurately reflect total "household" income than individual income. Given that far more households have multiple workers than they did in the '70s the numbers are even worse than you portray them. Most of the gains realized in the productivity of multiple workers in households has been distributed inequitably with 90% going to the top .1% of earners.
In 1970, the average cost of a house was ~$25,000.
In 2022, the average cost of a house is ~$350,000.
There are more factors at play here than simple inflation. As housing costs rise faster than incomes fewer people qualify for loans to purchase them. This shifts the market for builders as they must adapt to the desires of a more elite buyer. One would be stupid to build the average "starter home" of the '70s for a market that doesn't exist, so homes have gotten larger and land demand with it.
To accurately represent real inflation in the market one would have to track homes of similar size and location. I'm pretty sure that the increase would be considerably less than you presented in such a comparison. As new home construction is almost entire in the "burbs" even the meteoric rise in valuation of farmland factors into the equation. A lot that meets local standards for a single family dwelling now costs more than the total material cost plus lot of the last home I built in '69.
Why are houses so much more expensive?
We live in a society where the supply of money increases every year.
The total population of the US in 1970 was 205 million. We now have almost double that many people. How would you suggest that those added people are accommodated and the economy allowed to grow without adding dollars into the system? Just the technology advancements alone should suggest that the money supply of the '70s wouldn't suffice.
Commercial Banks (JP Morgan Chase, Bank of America, etc) AND the Central Bank (Federal Reserve) are both legally allowed to create new dollars.
This is entirely false. Only the US Congress can create "NET" US dollars into existence. Banks and the Fed can create "reserves" in the banking system and those function much like dollars except that they cannot "net" retire the debt that created them or be "net" saved. Only dollars created by Congress deficit spending new money (above taxation) can do either, including purchasing Treasury debt.
As dollars are created, they generally go 3 places:
1 Cash on bank balance sheets
These dollars have little influence on the economy other than propping up banks. To learn more, look into “Open Market Operations”.
Reserves created by the Fed are not free to banks. They cost whatever the "base" rate is set at and they are closely accounted for. Their only purpose is to allow interbank transfers of loaned funds.
2. Into assets
Through the process of Open Market Operations, giant banks are essentially handed free money. The banks will use some of this new money to purchase assets directly, like real estate or stocks.
Most asset acquisitions by banks are the result of foreclosures and there are rules that govern what banks can charge at sale or auction of most properties. For the most party, banks stay in their lane and only deal with financial vehicles and derivatives, unloading real estate and other physical assets to minimize reserve holdings, (see above).
3. Loans to bank customers
Loans are the mechanism commercial banks can use to create money. Most loans go towards purchasing an asset such as a house or starting a business.
When new money is created and loaned out, it goes directly into assets like real estate.
Reserves don't create loanable funds. They are a product of loan activity and will always match the accumulated principal of the loans a bank has outstanding. They are a liability for banks that are offset by the "promise to pay" contracts of borrowers. As such, banks will discharge them as quickly as they can collect principal payments.
No "money" created by bank lending can net retire the debt that created it. If it could, banks would simply write each other checks and not take the risk of lending. There would also have been no need for the currency-issuing government to "bail out" banks when they overextended to purchase derivatives that proved to be less than advertized.
That said, we should support any legislation that narrows the "lane" for investment banks. With a combined balance sheet with Treasury the opportunity for the Fed to launder losses from risky derivatives and bonds is a real thing. QE, while creating no "new" money, could incentivize such risk-taking and hold the economy hostage to socialize losses.
The current monetary system is destined to collapse
By pumping up asset prices, creating new money increases wealth inequality. People who own assets are becoming wealthier and wealthier while the dollar is simultaneously being devalued.
The actual quantity of money created by our government via deficit spending will always determine what level of "real" growth the economy can sustain. It is required to net retire bank debt, as money/reserves created by banks can be rolled over into new debt, but not retire the original debt. Most of our economic problems presently are due to extreme inequity of distribution, not increased money supplies.
We are facing the failure of the system, but advocating for less government spending on safety nets and benefits for the working class will only speed up that process. No one really cares what the price of wheat is as long as they can afford bread and the people making it can live productive lives until they can retire with some dignity.
