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!

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3 Responses to “RBA Robs Us By Stealth”

  1. Daryl April 27, 2011 at 9:46 pm #

    Here’s a question for you. If the RBA makes a decision that can be shown to be without duty of care to its legislated mandate and that decision costs every Australian money.

    Who can we sue? Who is the RBA accountable to?

    You are accountable to your electorate and they can vote you out at the next election. How can the people of Australia have as the ultimate source of power in Australia an organisation that is accountable to nobody.

    And if you think reserve banks pose no threat to the sovereignty of a nation, get on the phone to a few of your counterparts in Ireland who learnt recently that it was the IMF way or it was a run on Irish banks.

    Inflation is a tax – plain and simple…oh and GST is therefore, in part, a tax on a tax because GST is not adjusted for inflation.

  2. Daryl April 28, 2011 at 4:30 am #

    Thought I’d share a post of my own which further shows how much banks are robbing us…

    Some of you might remember my little PR exercise 10 odd years ago when I bought the domain http://www.AntiBanks.com. I threw something up for a website and then sent press releases to all the TV stations. The following day I got a call from A Current Affair asking for an interview. I chickened out because (a) I didn’t really know anything about banks, and (b) I didn’t think it would be all that smart to make myself an public enemy of the banks.

    Politicians boast that interest rates today are much lower than they’ve traditionally been in the past. This is an accurate statement but the implication that prudent political management has had a significant influence on this trend is a joke.

    There is a simple reason why interest rates are so much lower today and that is because houses cost a lot, lot more. This is a link to an ABS report that references Reserve Bank of Australia info. I haven’t tracked down the primary source but if the ABS is publishing it then I figure it is a good enough source to reference. This report says:

    Among the different types of debt, housing debt as a proportion of housing assets rose from 11% to 29%, which means overall, households have come to own a relatively smaller proportion of their houses. On the other hand, the total amount of equity households hold in their houses increased by 62%, from an average of $185,000 to $299,000 per household. [reference years for this info: 1990 – 2008]

    Reserve Bank of Australia Statistics (here’s the link if you really want to look) show that in September 1990, a total of 65.1 billion was on loan to Australians for homes. For those who recall ‘the recession we had to have’ you will remember at this time standard variable interest rates were at the staggering level of 17%.

    Doing the sums

    Amount on loan X Interest Rate = Interest earned

    $65.1 billion X 17% = $11.1 billion for 1990.

    Now let’s take a look at the figures for 2008

    $751 Billion X 9.95% = $71.4 Billion.

    That is a 643% rise in revenue for the banks. No wonder they need to charge ATM fees.

    However, this alone doesn’t fully show the banking industry’s return on investment (ROI) because it doesn’t factor in the ‘options’ nature of fractional reserve banking. To give you a loan for $500,000 to buy a house a bank needs to put $50,000 on deposit with the RBA (if the fractional rate is 10%). The rest of the money it can just create out of thin air and send to the seller of the house.

    If we do the sums above to look at the real ROI given that you can hardly consider the 90% of the amounts shown above as invested money in a traditional sense because the banks only have to invest 10% of the total amount lent we get some even more staggering figures.

    Earnings / Amount Invested X 100% = ROI%

    When you plug in the numbers above it looks so unbelievable that I had to question whether or not my algebra was correct so I decided I should make sure this formula was right by using it with much simpler numbers. Let’s say I invest $100 and I earn $20 in interest – pretty obvious that works out to 20% but just to confirm the formula…

    20 / 100 * 100% = 20%…yep, all good, so onto the banks ROI.

    For 1990

    $11.1 Billion / $6.51 Billion * 100% = 170.5% – wow 170% per annum on a secured mortgage – hell yeah, I’ll have some of that.

    For 2008

    $71.4 Billion / 75.1 Billion * 100% = 95.1% – well down from 1990 but don’t forget we are talking about interest on a home – considered one of the safest investments there is.

    The figures are pretty amazing but the other simple figure is that banks earn 90% of their interest revenue on money that they created out of thin air and never existed until you signed your mortgage.

    So for 2008, banks earned 64.26 billion on money they were allowed to simply create because you signed a mortgage.

    Oh…and the increase in equity from $185k to $299k…no mention of this being inflation adjusted and if you use the RBA inflation calculator over these years, it turns out that $185k in 1990 is worth $295k now…so in real terms the increase in equity is worth basically nothing.

  3. Mark filipovich June 17, 2015 at 10:35 pm #

    Inflation sucks cocks .and so do the banks that cause it.you bunch of fucking rock spiders.

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