RBA Robs Us By Stealth

Ever wonder why things cost so much more today, than they did when you were a child?

Here’s a simple little exercise that shows how the Reserve Bank of Australia has robbed all of us by stealth. And continues to do so.

Take a look at the RBA’s Inflation Calculator.  Try it out for yourself. And be prepared for quite a shock.

Australia changed from the old imperial currency (pounds, shillings, pence) to decimal currency (dollars and cents) in 1966. So let’s take a look at how RBA-managed inflation has robbed us blind since 1966.

According to the RBA’s own calculator, an item costing $10 in 1966 would have cost you $106.81 in 2009.

Helpfully, their calculator also tells us that equals 968% inflation.  In 43 years.  At an average rate of 5.7% per year.

Why is this so important to know?  Because – as you can easily see –  inflation robs the national currency of its “buying power”.  Simply and bluntly, inflation robs you and I, the “working families” of Australia.

I want to quote from a brilliant article written by a financial commentator very recently. It explains just why inflation is so insidious, and why our government and mainstream financial “experts” hide the truth about inflation.

Before I do that though, I want to draw your attention to a really important piece of information about the RBA.

According to the Reserve Bank Act (1959), Part II, Section 10, the very first duty of the RBA is to provide the nation with a stable currency:

Functions of Reserve Bank Board

(2)  It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank under this Act and any other Act, other than the Payment Systems (Regulation) Act 1998 , the Payment Systems and Netting Act 1998 and Part 7.3 of the Corporations Act 2001 , are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:

(a)  the stability of the currency of Australia;

(b)  the maintenance of full employment in Australia; and

(c)  the economic prosperity and welfare of the people of Australia.

So, has the RBA provided us with a stable currency?

On the RBA’s website we can see this chart –

That does not look at all “stable” to me.  Not even since 1993, when a specific “target” was introduced.

Remember: “Inflation” directly reflects the falling buying power of our currency. And as we have seen from the RBA’s Inflation Calculator, our “stable” currency has lost 968.1% of its original buying power since 1966, under the RBA’s watch.

Shocking, isn’t it?

Why do we tolerate an “independent” Reserve Bank, whose first legal duty is to maintain a “stable” currency, when it is so clear that they have always utterly failed to do so.

Our economic “authorities” and mainstream financial “experts” all worship at the altar of the RBA. They collectively hide the truth about inflation, and what it really means to you and I. They hide the fact that inflation means we are all being robbed – by stealth – year after year after year.  And recently, well-known TV “talking head”, Saul Eslake, let the cat out of the bag in an essay for the Age newspaper.

Kris Sayce of Money Morning explains:

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 (sic) 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.

That’s right. Consider this story in the weekend Sunday Telegraph newspaper.  In 1960, it took the average family just 7,500 hours of work to pay off an average home. Now, it takes 19, 354 hours to pay off an average home. That’s RBA-managed inflation / currency devaluation for you!

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 (sic) 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.

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.

I say – Abolish the RBA!