Inflation Silently Works to Destroy Your Wealth

While John Boy wants to use inflation to get an $11.5 billion off his government’s books, Australian money market writer Kris Sayce explains (once again) how inflation silently works to destroy your wealth.

One of the worst aspects to inflation is that it silently works to destroy your wealth.

The creation of new money from thin air by banks and central banks ensures that the most you earn and the money you save is constantly being devalued.

What that means to you is that you have to work harder and longer, plus you have to take more risks with your investments in order to just maintain your standard of living.

Most of the time, mainstream economists won’t admit to that. They’ll tell you that inflation is vital because it keeps the economy growing and because it prevents the economy from falling into the death trap of deflation.

As we’ve pointed out before on many occasions, deflation is not bad for an economy. It helps to counter periods of inflation. And furthermore it is beneficial to savers and also means you don’t have to work as hard as the cost of living falls.

In other words, you can work just as hard tomorrow as you did today and your cost of living is actually less. Or, you could work less tomorrow but still maintain the same standard of living.

The mainstream lies about deflation are nothing short of criminal.

But as we read the online version of The Age last night, we noticed that one of the mainstream economists has let the cat out of the bag on inflation.

I’m referring to former ANZ Bank chief economist, Saul Eslake’s article in The Age.

It was this quote from Eslake that blows the lid on what every mainstream economist thinks about inflation, and how they are quite happy to sacrifice the individual at the alter of inflation if it means letting the banks get away with fraud:

“These inflation targets were chosen because, when inflation is about ”2-point something”, people tend not to notice it. And when they don’t notice it, they tend not to do things to protect themselves against it that are likely to lead eventually to prices rising at a faster rate.”

I can barely believe anyone with a brain would write such a thing. It’s a clear admission that inflation is a tool used to impoverish the population.

Because as long as the banks don’t conspire to make the inflation rate too high, they can get away with creating more and more money from thin air, lending it out to sucker home buyers and therefore increasing bank profits, because, “people tend not to notice it.”

But worse, he’s happy they don’t notice it because if they did, people would do something to “protect themselves.”

Has there ever been a more vile comment from a mainstream economist? We don’t think so. Eslake and the rest of the mainstream economists should hang their heads in shame.

In effect what Eslake is saying is that it’s better for the banks and central banks to be petty thieves than it is for them to be armed robbers.

In our books, a crook is a crook, and Eslake has shown his cards as a supporter of thievery.

Even more than that, it’s an extraordinary admission from a man who is on the board of the National Housing Supply Council, and who helped to write the report – the one that we scoffed at – on housing that suggested the housing shortage was evidenced by homelessness.

On the one hand he’s putting himself forward as some sort of economic social campaigner, working for an organisation that claims to help form public policy, while at the same time he privately – and now publicly – advocates an inflationary policy which he knows destroys wealth.

But perhaps the saddest aspect of Eslake’s comments is that it’s exactly the same thought process that 100% of mainstream economists go through. It’s the same thought process that drives all the economists at every bank. And it’s most certainly the same thought process driving the inflationary policies of the Reserve Bank of Australia (RBA).

And that is to keep inflation just low enough so that the masses don’t realise they’re being robbed blind.

What a disgraceful advertisement that is for economics, or his brand of economics anyway. We’ve got no idea what school of economic thought Eslake follows, we won’t even try and pin this one on Keynes.

Our guess is that Eslake is perhaps a follower of the Artful Dodger School of Economics – encouraging the pick-pocketing of your wallet.

My suggestion is that Eslake needs to go back to school and re-educate himself on economics. A good place for him to start would be with the more enlightened thinking of the Austrian School.

Of course, for someone like Eslake who believes that inflation is good and that central banks know what they’re doing, he could find the Austrian School to be something of a shock – it could only do him good…

It certainly wouldn’t do him any harm.

Cheers.
Kris.
MONEY MORNING AUSTRALIA