The integration between Austrian Economics, Sound money and the Infinite Banking Concept makes a lot of sense. Once you understand these principles the only question you will have is why we don’t do it as a whole society. The authors provide answers and shed some light on this as well.
Why is this important to me?
I always want to ask this question as if I am sitting in your shoes. Will this summary benefit you if you review it? Right now the whole world is working off a fiat currency system. Basically fiat means the currency is not backed by hard assets like gold and silver. In 1971, Richard Nixon took the U.S. off the gold standard and we have had run away inflation ever since. Also, the Federal Reserve was created in 1913 and since then the dollar has lost 96% of its purchasing power. To put this in perspective, two silver coins could fill your car with gasoline in 1950 and today two silver coins will fill your car with gas. The difference is that the silver in 1950 was worth 50 cents and today it is worth $62 dollars. The problem is that it buys the same amount of goods.
With all the market turmoil, you hear the news bobble heads talking about the evils of capitalism. This book and many others show that the boom and bust cycles are created from government intervention and the federal reserve’s central control over monetary policy.
How Privatized Banking Really works is packed with several key concepts regarding the whole financial system. It is broken down in 4 main parts and for the sake of time, we will touch on each section briefly.
1. Fractional Reserve Banking – Fractional reserve banking is a very interesting concept because it makes the central banks loads of profits and has the potential of wiping out our whole financial system. Basically for each $1 deposited, the banks can lend $10. This creates money out of thin air which contributes to inflation.
2. Privatize Banking – Austrian economics is about scarcity and choice. They pledge that it makes financial sense to close the Federal Reserve and Privatize Banking. Right now our whole financial system and government is controlled by the Federal Reserve which is constitutionally illegal. When was the last time the Federal Reserve was publicly audited? I realize the news talks about more regulations which in fact are needed to control the amount of leverage banks use to make a profit. The main issue is the Federal Reserve and the government controls our money.
3. Sound Money – Sound Money is money that is backed by real assets like gold and silver. These precious metals have been real money for more than 2000 years. When currency is linked to assets like this, inflation and boom / bust cycles go away because the government can no longer spend unlimited amounts of money. This one concept would be the biggest deterrent in stopping wars and empire building. This is the main reason the government took us off the gold standard in the first place. Search in Google for the 1950 Silver certificate and you will notice that it looks similar to the dollar bill. The difference is that it is not called a “Federal Reserve note, instead you could redeem this certificate for real silver. Today, the central bank is printing money and our money supply has tripled in the last 3 years. History shows that all fiat currencies attain their intrinsic value of zero. Every empire (Persian, Greek, Roman etc.) debased its currency and have failed. This is the one historic truth. The difference today is that the whole world has never been tied to fiat currency and the ripple effect will be horrific.
4. Infinite Banking Concept – The good news is that the little guy has a method for opting out of the banking system. The concept was pioneered by R. Nelson Nash. By utilizing guaranteed whole life insurance, you can create a profitable banking system for yourself. Mutual Insurance companies have been around for 200+ years. They are safe because their capital requirements are 1 to 1 so there is no extreme leverage like the regular banks. Also, the policy holders own the company. The authors argue that if just 10% of the population utilized this banking method and opted out of the traditional financial system then real change would happen.
How Privatized Banking Really Works is a study of sound money, private banking and the elimination of the government monopoly control of our money. These concepts require study because it ties directly into our freedom and liberties that make this country great.
I hope you have found this short summary useful. The key to any new idea is to work it into your daily routine until it becomes habit. Habits form in as little as 21 days. One thing you can take away from this book is the concept of sound money. You should have at least 10% of your savings in sound money meaning Gold or Silver. Silver is volatile because it is priced in dollars. If you price the stock market in terms of gold then you will see that the values have been declining for 20 years. Silver is still below its 1980 high. There is no other investment or commodity that is this cheap.