Wall Street took a hawkish speech by Helicopter Ben in stride Tuesday  as stocks turned in a mixed performance on signs that inflation evidently is still a concern at the Fed. It’s hard to understand why the bankers should be so worried, given that home prices on Tuesday recorded their biggest drop since the government began tracking the statistic 38 years ago. Although sales of previously owned homes were up moderately, the national median home price plunged 3.5% to $221,000 from a year ago. That comes on top of price declines of 2.2% in September and 1.7% in August. Does that sound inflationary to you?

Considering that pumped-up real estate has been the main growth engine of the U.S. economy for nearly five years, Bernanke & Co. should by now be frantic to find ways to re-energize the housing boom. Instead, in a speech that must have come from the cold depths of his obsidian heart, the Fed chairman dissed the working man, whose paltry wage gains in recent months supposedly are to blame for driving up the core rate of inflation. Should workers perhaps voluntarily return a portion of their paychecks to employers in order to goose “productivity,” the Federal Reserve’s favorite statistic.

If productivity growth is so good for the economy, as economist, wonks and journalists seem to believe, then why hasn’t it boosted the working man’s real wages in more than a generation.? In fact, paychecks have not grown at all when discounted for inflation, and without the miracle of cheap, fabulous manufactured goods from China, the steady decline in Joe Sixpack’s standard of living would seem egregious.

Austrian economists such as Kurt Richebächer, whose work has been featured here many times, attach no special importance to the concept of productivity growth. They are wont to say that productivity growth is as productivity growth does. So why did Alan Greenspan constantly hype America’s supposed “productivity miracle”? He was simply borrowing a page from Goebbels: “If you tell a lie big enough and keep repeating it, people will eventually believe it.”  Fortunately for him, few lies are easier to fabricate than a statistical picture of high productivity growth. All it takes is a suspiciously tame inflation number pulled from thin air, and you can “create” the kind of productivity growth Henry Ford would have envied. That is exactly what the government’s statisticians have been doing for years, even if working man is not quite buying it.