Lara-Murphy Report – The Greatest Hits

It’s been said that people would rather die than think. But I am going to see if I can incentivize you do just that by showing you a way to fund a large Infinite Banking Concept (IBC)-type life insurance policy, while using cashflows that are dedicated to paying your taxes. I should say upfront that this discussion will make sense immediately to business owners, but I hope that salaried individuals see relevance to their households as well. Now in order to provide this intriguing maneuver a fair disclosure, I will need to do it in two parts. In this first part, I will lay the groundwork, and then in next month’s article I will provide some numerical illustrations to show exactly what I mean.

St. Augustine of Hippo is recognized as one of the great doctors of the Latin Church, yet he is equally admired and respected by the great reformers, such as Martin Luther and John Calvin. This mutual acknowledgment by the scholars of both sides of church doctrine is due in large part to Augustine’s centrality in Christian history and the development of Christian thought during the Middle Ages. The City of God, a compilation of 22 books written between 413 A.D and 427 A.D., is considered to be a timeless classic and among the world’s greatest theological works. Written in defense of the Christian faith during the collapse of the Roman Empire, Augustine was able to pour into these texts his entire life’s perspective on the ancient pagan religions of Rome, the arguments of the Greek philosophers, and the sacred wittings found in the canonical Bible. His conclusion was that there is a city with heavenly origins rising up alongside the kingdoms of the earth, one that transcends politics and world governments—a city that will never fail and never end. It is a city that has eternal foundations whose builder and maker is God.

What is truth? Would we recognize it if we saw it, heard it or experienced it? Can we actually know the reality of the world? Would it be reasonable to say that if we could posses such knowledge that we would be in the possession of a great power? But where can this knowledge be found and if we should find, it how can we be sure, without a shadow of a doubt, that it is authentic? That it is the real truth.

In the wake of the 2008 financial crisis following the crash of the stock and real estate markets, Americans witnessed 1,200 of the estimated 7,000 commercial banks in the country stagger financially. As expected the FDIC sprang into action to cover bank depositor’s funds, but what many people have never realized is that the FDIC literally ran out of money! The FDIC went $9 billion in the hole and these reserves were shored up only after receiving a loan from the U.S. Treasury. But that’s not all, in the midst of the catastrophe panicked investors of every stripe saw the typical money storehouses for retirement savings collapse with even one of the most financially sound money market funds (the Reserve Primary Fund)1 “breaking the buck.” Prompted by a flight to safety and to salvage poured huge sums of money into the insurance sector. Even the insurance industry’s foundational product, the slow and boring dividendpaying Whole Life contract, saw a resurgence it had not seen in decades. When at first it seemed like there was no place left in this entire country to put one’s money, the life insurance sector— the epitome of conservatism— was left standing, just like it always had for over two centuries.

Although it’s a pretty basic question, it’s worth asking: Why do we use money? Once we think through the answer, it becomes clear just how awful our current monetary system is. For those wanting a comprehensive treatment, I refer you to our book (co-authored with Carlos), How Privatized Banking Really Works. I also refer you to our new podcast, the Lara-Murphy Show, and in particular episodes 15 and 16 where we discuss how governments historically have used inflation to cover their budget shortfalls.

First quarter 2016 numbers are just now closing, but analysts everywhere are still analyzing 2015 year-end results across all sectors of the global economy. The numbers don’t look too good. In fact they are downright anemic. However, there is one area that is remarkably robust. Bank owned life insurance (BOLI) assets and new purchases reached a new high of $156.2 billion in 2015, compared to $149.6 billion in 2014. Over 90% of this 4.4% increase in BOLI assets on the books held by commercial banks, savings banks and savings associations are in permanent cash value life insurance policies. For those unfamiliar with this terminology, that’s the kind of life insurance policy that covers you for the entirety of your life.

Highly profitable companies can run into financial trouble if they don’t have the liquidity to react to unforeseen events. Even companies with a stockpile of assets on their balance sheets will struggle with cash flow issues when markets crash if those assets are illiquid. In a moment of crisis, assets are of no value if they cannot easily be converted to cash in order to save the company.

R. Nelson Nash was born in Greensboro, GA in 1931, and married Mary Edwards Williams in 1952. Nash received a BS Degree in Forestry from the University of Georgia in 1952, and spent 30 years with the Army National Guard, where he earned Master Aviator Wings. In addition to being a Consulting Forester for 9 years in eastern North Carolina, Nash was a life insurance agent with Equitable of New York for 23 years (Hall of Fame member), and The Guardian Life for 12 years. Nash describes himself as the “discoverer and developer” of The Infinite Banking Concept (IBC). He explains his revelation and how IBC works in his classic book, Becoming Your Own Banker, of which more than 300,000 copies have sold. Nash is also the publisher of BANK NOTES, a quarterly newsletter. He lectures all over the United States and Canada teaching his book in ten-hour seminars, averaging 30 seminars per year. Nash is a passionate student of Austrian Economics, having started this pursuit 59 years ago.

On March 30, U.S. DiStrict JUDge Rosemary Collyer reversed the ruling by the federal Financial Stability Oversight Council (FSOC) that the insurance giant MetLife was a “systemically important financial institution” (SIFI)—or what is called “too big to fail” in common parlance. Regulators gave MetLife this designation back in 2014, and last year MetLife sued to remove it, as it triggers extra capital requirements. In this article I’ll explain the context of the ruling, and then discuss implications for the future of the financial sector. Taken in isolation, Judge Collyer’s ruling is not only sensible legally but also throws a monkey wrench in the federal government’s efforts to expand its control over financial institutions. Unfortunately, in the grand scheme this episode will probably amount to a temporary setback for the regulatory Leviathan State.

Just about every financial professional in the country is by now familiar with the U.S. Department of Labor’s (DOL) Fiduciary Ruling. A change to the definition of fiduciary under ERISA, which after much wringing of hands and gnashing of teeth for the greater part of seven years, was finally officially released three weeks ago on April 6, 2016. Full compliance with the new requirements begins one year from today—April 2017, with the special exemptions to the ruling, the “Best Interest Contract Exemption,” and the “Principal Transactions Exemption,” having a “phased implementation approach” through January 2018.