by L. Carlos Lara
In a world such as ours laden with such grim social, political and economic problems, the formula we share for solving them is unmistakably distinctive. I get a sense of this characteristic every time I tell an audience our story and message. It let’s me know that I have been given a rare privilege to be able to share such optimistic news in an otherwise somber situation along with the foreknowledge of the good it does for all those who implement our ideas.
Audiences—whether they are listening to one speak or reading what one writes—must be able to receive this special message without becoming confused. Consequently, it is important to first make them aware that this message is not about politics or a certain political agenda of sorts… although, at times, it may sound like it. It is certainly not some form of estate or financial planning blueprint… although, I will confess that at times it may appear as though it is. And, it is certainly not about religion…although when we wander off commenting on the “moral economy” or “natural law,” it certainly sounds like it. But no, our message is not about religion. It’s none of these. Our message entails the complete clarification and exposure of the core problem that currently afflicts the nation as well as the problem of the average individual as he struggles to make a living in his own small segment of the economy. We must lay out not the symptoms of the problem, but the root cause, otherwise we remain uninformed about the reality of our situation with no hope of ever rectifying it. Unfortunately, in exposing the problem we do delve into a most depressing subject, but the good news is that we also have a powerful solution and that, of course, is the best part of our discussion. Such was my situation recently as I stood before an invited group in Brentwood, Tennessee to explain the Infinite Banking Concept (IBC). This is what I told them.
F. A. Hayek (1899-1992) is an Austrian economist who won the Nobel Prize in 1974. He wrote extensively during his career, but he is probably most famously known for his bestseller book, The Road To Serfdom, which was first published in England and written at the end of World War II. If I had to select a phrase that would best lead to a powerful visual of the problem we attempt to expose, it would be the gripping title of his book. But Hayek captures our attention in a more startling way. He once stated that he was a Socialist! And not just him, but so were all of his school friends and contemporaries. They all embraced it, he said, “…until we read that book.” The book he referenced is Ludwig von Mises’s Socialism.
Mises wrote Socialism out of a deep concern that the advancement of this ideology would eventually supplant the market. His 600-page tome set out to prove that this idea could not possibly work and that in its latter stages would ultimately break down. When the Soviet Union finally collapsed in 1991 it forced even many socialist supporters to admit that Mises had been right, but sadly, socialism did not die with it and has instead continued to spread throughout the world. It’s important to note that Mises wrote Socialism in 1922—almost 100 years ago! The staying power of socialism lies in its utopian goals and their seductiveness. Yet while it spreads, it obscures the fact that the welfare state is reducing individuals to serfdom, as Hayek warned, and doing it in such a way that eventually the people stop questioning the governing authorities and simply give in to it.
There is another great intellectual from the Austrian School of Economics who allows us to make another powerful connection along these lines with an equally famous book. His name is Henry Hazlitt (1894-1993) and his book is the famous Economics In One Lesson. Hazlitt
was well known by American readers because he wrote extensively for popular publications like the New York Times, The Wall Street Journal and Newsweek. He was a great spokesman for the free market and a lover of liberty. However, in one of his last speeches near the end of his life, Hazlitt confesses to an audience that he had been writing for the greater part of 50 years. From age 20, he had written every weekday: news items, editorials, columns, and articles of some 10,000 words in length—altogether the equivalent of 150 average size books!
“And yet,” he proclaimed, “what have I accomplished? The world is enormously more socialized than when I first began.”
Hazlitt died in 1993. That was 21 years ago. How are we doing today? Do we have more or less freedom? More or less “economic” freedom? More or less personal independence? How about privacy? Obviously, there is no need in answering these questions for we all know the answers. We are all aware of the decline of America and we can all submit our own list of examples. Here are mine.
The Decline Is Evident
• Poverty. We are now at 15% of the nation—that is 45 million Americans now living in poverty.
• Diminishing Middle Class. The middle class is literally getting snuffed out. For a while the American family seemed to stabilize itself when women entered the work force, but the two-income family hasn’t worked in 10 years because the money keeps getting destroyed.
• Corporatism. Yes, we have a capitalistic system of sorts, but a gargantuan bureaucracy—that is far from the free market—runs it. The largest corporations get special political privileges, while inflation and excessive taxation loots us.
• Extortionate Debt. In addition to corporatism, continuous borrowing and spending are sustaining the entire state apparatus. A generous amount of that borrowing and spending is funneled directly to the paternal programs of the government and to the building of an imperialistic military. The result is a monstrous monetary problem that is heading for a crash.
• Apathy and Disillusionment. The aged American citizen must now continue to work or come out of retirement in order to make financial ends meet. And the saddest one of all is that an entire generation of young people is so saddled with educational debt that most of them will never be able to save any money or have any of the luxuries their parents had.
How can this be? How could we have let this happen? Did we just fall asleep or what? Actually no. What happened is that the country took a very bad turn 100 years ago and it changed America completely. So, in a very real sense, we were simply born into a broken system and it has simply worsened over time. Libertarian thinker Frank Chodorov (1887-1966) said it best when referencing the 16th Amendment that gave us the income tax in 1913:
“It violated the right of the individual to the product of his efforts, the essential ingredient of freedom, but it also gave the American State
the means to become the nation’s biggest consumer, employer, banker, manufacturer and owner of capital.”
Coincidentally, that was the same year the Federal Reserve came into being and the year the money monopoly began.
Now, up to this point, I have basically taken you through some of the aspects of the problem we made clear in our book, How Privatized Banking Really Works. In essence it is flawed monetary policy, which is the centerpiece of the problem—it is the core issue. And yet, it is simultaneously the lifeblood of the federal government. It is what keeps it alive and growing, so naturally it is a huge problem without a known solution unless the thinking of the people changes. Public opinion by at least 10% of the population must somehow rise up in disapproval if we are to have any hopes of changing monetary policy. Obviously, if we don’t act soon the entire economic structure will indeed collapse. The elite government-connected groups are so intoxicated with their power that they have become blind to the edge of the precipice they have led us to. If not stopped, we will see and experience the evidence of the crackup boom when other nations finally repudiate the dollar. This is the Austrian diagnosis of the problem.
Austrian Economists Are Different From Mainstream Economists
At this point I should probably elaborate on the Austrian economists because they are uniquely different from mainstream economists. Certainly, Austrian economists are scientists, however, they would never refer to themselves as scientists in the sense of the hard sciences such as physics and chemistry as many mainstream economists, such as the Keynesians and Monetarists, claim for themselves. Austrians are not that conceited, even though they have received the same level of education. By that I mean that Austrians know how to read and configure the extensive graphs and charts. They can do the mathematical modeling that mainstream economists do, otherwise they would not have been able to earn a Doctorate in economics. But the main distinction is that Austrians reject the claims made by mainstream economists on how the world and economies work.
There are several distinguishable characteristics of the Austrian framework for economic analysis; chief among them is their explanation of the business cycle. But if I had to choose just one to highlight among the rest it would be their view of the individual. Unlike mainstream economists Austrians place the individual at the very center of their analysis because only an individual can choose. And the individual’s choice is subjective. That means that an individual’s choices are personal. They have personal feelings attached to their choices. Individuals in every case always act with a purpose in order to achieve their own goals hence they cannot be placed into mathematical formulas the way mainstream economists insist on doing, nor can they be centrally planned, unless it is done by force. To the Austrian the entrepreneur is a very special type of individual who they believe is the key to economies.
Just to clarify, it is not enough to refer to Austrians as simply free market libertarians. Mainstream economists will occasionally claim that description for themselves too. What politician on either side of the political fence would ever deny they were not free market proponents or lovers of liberty? The point is that those types of tag lines often obscure our real differences and can actually be used to discredit us in order to advance socialistic ideas. Obviously, it has worked.
As already stated, Austrians see our current monetary policy as the main culprit. It is a money monopoly that is systematically squandering the wealth of this nation into the hands of a few privileged groups, at the expense of the rest of us. This is most evidently seen in Bernanke’s Quantitative Easing policy. The huge injections of excess commercial bank reserves were first initiated in the fall of 2008 when the Fed began purchasing the toxic assets of the “too big to fail” financial institutions in less than ninety days, to the tune of one trillion dollars. But that sort of massive injection has not abated and is now at a pace of $75 billion a month (counting Treasuries and mortgage-backed securities) with the amount in the coffers of commercial banks, shown as excess reserves, now standing at some $2.4 trillion!
Every time the government wants to borrow money (which is daily) it hand picks select Wall Street investment bankers to underwrite and bring their bonds to market, knowing full well that the biggest buyer of the bonds will be the Federal Reserve at a pace of $40 billion each and every month (since the December 2013 “taper” announcement, down from the previous pace of $45 billion per month). The policy is outlandish! Who would not want that type of cozy relationship with the government and the Fed? But the commercial bankers are not left out of the relationship. The nexus is created every month when those Fed checks are deposited into banks. If you know how fractional reserve banking works you can figure out the hidden money multiplier in action. If you don’t know how it works, I encourage you to read our book, How Privatized Banking Really Works. Basically, one month’s purchase of government bonds is the equivalent of $450 billion in the increase of the money supply—a frightening scenario when you extrapolate the trillions in excess reserves. They claim it will fix the economy, but the recession continues, and the economy remains anemic. The truth is that this is what is leading us to the catastrophe. Unfortunately, the new Federal Reserve Chairman, Janet Yellen is committed to continuing QE when she takes office next. Is there anything we can do?
That Book—Becoming Your Own Banker
Given this ominous development of current events, it would be wise to physically own some gold. Historically, this has always been sound money. When John Exter, board member of the Board of Governors of the Federal Reserve System, created the Pyramid of Collapsing Values in 1971 shortly after Nixon took us off the Gold Standard, he made this point very clear. Gold, in a collapsing economy, is what you should own. It is emergency money and we should all have some equivalent amount in relation to our monthly expenses. When and if the financial system crashes, gold could easily triple in value overnight and can help mitigate our financial pain. But, short of this and until such a fearful event occurs, where should our paper money be housed because this is the only legal money we can use? Obviously, we would want it where we would have the most immediate access to it short of it residing underneath our mattresses. The truth is that until a decade ago I had no idea how to answer this question with complete confidence until I read that book. The book I mean is Nash’s Becoming Your Own Banker.
If you have not read Nash’s book you must order it today. Even after you read it, it is highly unlikely you will understand what the author is attempting to teach you on the first try, but once you understand, it will change your life forever. It is not that it is a difficult or a long book to read, in fact, it’s less than a hundred pages in length. The hurdle is in grasping its unconventional concept. Given that obstacle, let me give you some sound advice on how best to understand this exceptional writing.
Understand that Nash is simply explaining how to set up your own personal private “bank” by using a specially designed Whole Life insurance contract so that you will never have to borrow money from commercial banks or outside lending institutions ever again. With his strategy you can borrow for all of life’s major purchases with better terms and wealth-building potentials. By simply implementing his instructions you immediately set your financial compass toward economic freedom and Nash, in great detail, explains how and why. In spite of what you have heard about whole life insurance, stay open to the concept and you will discover that the framework of a Whole Life policy contains all of the attributes of what we may easily admit is the prefect investment, even though that in itself is not IBC (The Infinite Banking Concept). A dividend-paying Whole Life insurance policy is merely the framework of your “bank” so that you can practice IBC. But the mere fact that it contains all these wonderful perfect investment attributes in the structure makes getting one of these insurance contracts a sure thing.
Most importantly, recognize that these are “specially” designed contracts and for that reason you should use only an Authorized IBC Practitioner to design and acquire such policies. Ideally, the policy should be acquired from a mutual or mutual holding company. Since there are only 34 such institutions of this type out of the 2,000 insurance carriers in the nation, it’s doubly important that you work with only qualified IBC Practitioners who understand all of these special nuances. Search the Infinite Banking Institute [changed to Nelson Nash Institute in February 2014] for an Authorized IBC Practitioner in your area at www.infinitebanking.org.
Finally, stop referring to these special contracts as insurance so your mind can grasp the concept. Instead call them “banking policies.” Or, better yet, think of them as the “warehouse or headquarters” for your paper money since they are basically acting as a “bank alternative.” Finally, see them as the perfect “cash-flow management system” because that is exactly what they are.
Now we are ready to make the final connection to our message and here is where we need to introduce “The Sound Money Solution.” Recall that I said earlier that the core problem for us as individuals and the nation is current monetary policy. The issue is simply this: The Federal Reserve controls our money by using the nation’s commercial banks and the cozy relationship of government and Wall Street. This is as much to say that the nation’s “purse strings” are wholly controlled by an unconstitutional system. It forces any entity (business or individual) to become unintentional creators of inflation every time they take out a loan from a commercial bank! That is how the system is purposely set up. Consequently, the only solution is to change that policy.
If we can think of the three steps of the Sound Money Solution as the monetary policy we seek, then the intimate connection of IBC to the Sound Money Solution starts to become clear. Here is what would be required. The first step is to link the dollar back to gold. By doing this we can stop inflation because you cannot inflate gold like you can paper and ink. The second step is Privatized Banking. Simply put, our money and banking institutions have been hijacked. They need to be returned to the public sector and if they could be, then that step would break up the money monopoly. Finally, in step three, the Federal Reserve should be closed. If step one and two could actually be enacted there would be no need for the Fed. Knowing that it is the Fed that keeps government growing, without the Fed we could easily return to a small limited government.
Obviously, changing monetary policy to this degree is nearly impossible, but wait! Notice that we don’t actually have to change monetary policy. If we implement and practice IBC we can have privatized banking immediately! We do not have to make demands of the government or have political demonstrations to change anything. We can simply implement IBC for our families and ourselves all very peacefully and legitimately. And, in the same way Federal Express went around the U.S. Post Office, we too can go our merry way improving not only our own financial future, but that of the nation as well.
Since Whole Life policy loans are not inflationary, the more of us who simply practice IBC the more we actually diminish inflation and the louder our voices become through our actions. We will never know if we can change monetary policy unless 10% of us actually try. Good ideas spread like viruses and since IBC is the best idea to come along in this decade, then it won’t be long before we are home free.