This morning we’re still chuckling away at Christopher Joye’s ‘revelation’ about the stock market being risky – 11.6 times riskier than cash apparently. Bless him.

We’re looking forward to his next bombshell. Maybe he’ll reveal to the world that water is wet! What? It is? [Shae, quick, get Einstein, Newton and Faraday on the phone right now. They've got some explaining to do!]

But thanks to Money Morning reader John, there’s something in yesterday’s email that we didn’t point out. Here’s the offending quote from Joye’s ‘Equity Finance for Home Owners: The Next Revolution in Housing Finance?’ paper that we quoted from yesterday:

Quote from Joye's 'Equity Finance for Home Owners: The Next Revolution in Housing Finance?'

We can’t believe we missed it to be honest. Perhaps it’s because we expected more from someone who studied for a PhD at Cambridge University.

If you’re still stumped, try adding up the numbers in the opening few lines…

That’s right, a down-payment of $25,000 plus a mortgage of $125,000 doesn’t leave $75,000 remaining if the house is bought for $250,000.

Our Canon LS-100TS calculator tells us it leaves $100,000 so there’s a missing $25,000. Oh dear. Your editor copped some flak from El Joye for stuffing up the definition of a median house price, but not being able to add up a few simple numbers… dear oh dear.

But on the other hand, maybe we’ve discovered the real reason why Fannie Mae and Freddie Mac collapsed. Perhaps they followed El Joye’s advice and that’s why they lost so much money.

Misplacing $25,000 on every house financed is bound to lead to a little bother isn’t it?

If that’s the best someone can manage after studying for a PhD at Cambridge University, well, remind me to withdraw our application – we’re off to Oxford instead!

Anyway, Joye is probably a bit busy today. Apparently the latest kooky RPData house price index is out today. Doubtless Joye will be fielding calls from his admirers in the mainstream press, telling them how whatever the index says, it’s a good sign for the housing market.

But one thing we would like to see, now that we’ve called Joye out on a number of his claims, is for the mainstream press to have a dig as well.

Surely they’re not that cowardly. After all, Peter Martin at The Age was more than happy to slap your editor across the chops for our comments on the RP Data index, and who are we? We’re a nobody.

Let’s see if Peter Martin and the other mainstream journos have balls big enough to take on the might of Christopher Joye. Rather than just fawning at every word he says and reprinting verbatim whatever he writes in the press releases, ask him some hard questions.

Consider whether what he’s saying is true or whether it’s just his spin on things.

Go on journos, do it. If they don’t have the guts to call him out, then they may as well give up on being journalists and use their wordplay to write brochures for golfing holidays and catalogues for Myer Direct instead – we’re sure there’s decent money in that too!

Anyway, back to today…

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.