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Right. Good morning and welcome back to the
money advantage podcast This is Rachel Marshall and
Bruce Wayne. So we're gonna jump into this
topic today
because there is a
lot of misunderstanding around the idea of banking
and what banking is and what it does.
And really, what you
don't know can actually hurt you. We're talking
today about is the concept of the way
that we typically think about banking and using
and
participating in banking as we know it, is
that actually hurting the economy. That might sound
like a outlandish question, but today we're gonna
dive in because there are a lot of
things with fractional reserve banking
in the American economy that cause an inflationary
currency
supply. And because of that, when you have
inflated currency, you have more dollars in circulation
that can cause that causes inflation where each
of those dollars becomes worth less. So because
of the nature of the way the banking
system works, we have an opportunity to not
participate in that as much as we can
to take the banking function into our own
hands
through a process called infinite banking, which is
a sound money solution to fractional reserve banking
and inflation. And today, that's what we're gonna
talk about. We're gonna talk about how you
can be a part of
not
hurting the economy. How you can be a
part of subs succeeding from a system that
in
in even its
grandest best intentions can end up going down
a path of causing inflation. And what we
can do to prevent that. So, Bruce, I'm
excited for this conversation today. I think, this
is something that
is important mostly because
we all feel the effects of inflation. And
there are so many opinions and different economists,
schools of thought that go
about the discerning, the reason for the problem
and how to fix it in our world.
And we get the common dialogues about we'll
just change the interest rate, or we need
more dollars to do this. Or we need
to think about what's happening with the national
debt. There's so many things that are impacting
the economic factors around us. And instead of
just feeling those effects of inflation, we wanna
give you some actual practical tools of understanding
so that you can be in the best
position possible. So, Bruce that is my thoughts
as we jump into this conversation.
What are you hearing boots on the ground
as you're talking to people
about this this question around inflation, and this
question around the the banking system.
Yeah. Unfortunately,
unfortunately, this has turned into a political
discussion. And,
So you get 2 sides of it.
You get you get the 1 side that's
a more traditional
liberal
aspect
and they will say well, inflation is caused
by a greed of corporation than business owners.
It has nothing to do with the money
supply.
It's just that business owners and corporations want
to set prices higher.
The other side says,
No. That's not the way it works is
the fact that the matter is is that
there's just more money in the system. And
if there's more money chasing fewer goods
then
prices are going to rise naturally because of
the free market system.
And
that would be the the Austrian way of
of thinking,
Van Mis and Von mis and Mh.
Karl Mango and and others who actually,
Karl Meng actually
offered the books, principles of economics.
And then, of course, our friend, Bob Murphy's
has been on the Show a couple times
in Austrian and Economist would agree.
I actually did a gonna do a thought
experiment right now with a couple people and
it'll be able... It may be a little
difficult
to do over the podcast, but
So I want everybody to... That's listen to
cash right now, whether you're listen your live
or whether you're... I listed to the recording
to think about
that you have
an an extra 500
dollars.
So you have 500 dollars that you can
spend on something. And then I have my
Apple
air airpods right here,
and my Apple Airpods,
I am going to suggest the price. And
this is what business owners do.
I always say business owners only suggests prices,
but the consumer actually sets the price. And
that price
that's very of hard for a lot of
people to understand because they're like, no, no,
no. The... The business
or the corporation sets the price
And then I have to pay it. Well,
no. You choose the pay. That's the difference.
And this is what this is the emotional
part of it because
people say, they... They say, well, I have
to have a car. I have to have,
you know, this dress. I have to have
my nails done. I have to go play
golf.
I have to have food, you know, they
all all say those things.
And the fact that a matter is no,
you choose to do all those. Things. Now
I understand that something's things to stay alive.
You have to to have, like food,
water, so and forth, but thanks you can
actually shop around and negotiate what the price
is going to be.
So the business or corporations suggest the price
the consumer from their behavior
actually sets the price. Because if I have
this apple air airpods right now,
and you have an extra 500 dollars, and
I say, okay. I am going to set
this price at 300 dollars.
You may pay to yourself.
Okay. I'm gonna decide is that I gonna
have an extra 500 dollars. Am I gonna
spend,
300 dollars on these apple airpods.
And then you're gonna make a decision, and
you're going to
buy them along with some of your friends,
other people in the world are gonna buy
them. And depending on how fast they move
according to how she took to produce them,
apple's gonna make a decision and say the
next week,
or the next day or the next month,
They're gonna say, you know what?
These are selling really, really well, we're gonna
suggest a higher price
and see if they still
if they still are sold at that higher
price at the same rate.
If they are... If they aren't being sold
at a very high rate.
Apple says, we're gonna suggest a lower price
and see what the consumer does.
And so
the corporation is setting the price at 300.
You have an extra 500, you make that
decision
and you're going to decide, yes, I'm going
to buy them.
Or you're gonna decide no. I'm not going
to buy them.
Now here's where the thought experiment comes in.
The government now through lowering
interest rates
allows more money to come into the system.
And when more money comes into the system,
you can actually have
money that is
delayed...
You're not to... You don't have to delay
gratification because you can actually obtain that from
a loan.
Or a credit card or
because more money has come into the system.
It's cheaper for a business or corporation to
obtain that money
and they may actually pay you more in
a wage.
So if you pay more in a weight,
you also get more.
And that has to do with supply and
demand of labor.
Mh. So now,
suddenly, you don't have 500
extra dollars
you have 700 or 800 or a thousand.
So now when this price set at 300,
you you thought it was a pretty good
deal when you had 500 extra dollars
but now you have a thousand extra dollars.
Well, I I wanna challenge everybody out there
listening,
are you more likely then because you had
more dollars at your disposal
to make a quicker decision to buy it
at 300 dollars.
Well, of course, you are.
So more are gonna fly off the shelf.
So then apple's gonna say,
oh,
But we have more dollars chasing fewer goods,
we are gonna ramp up our
production. But in the meantime,
we gonna suggest a higher price
and see if people are gonna still buy
them at the higher price. And guess what
because they have more money. They are. Oh,
we're gonna suggest a higher price next month,
and people have more money, and there will
there will come in equilibrium time
where now the production of that particular goods
or service
is equal to the amount of dollars
in the system.
Now and you're gonna accept that. That's the
Austrian view.
That is to to me, that's a logical
view.
Or you can accept
the other view where it's just corporate grades
setting the prices higher and higher. And my
I will finish now with this introduction by
saying.
I don't see how a person can
realize that a corporate
corporate view of of greed can be sustained
because once those dollars
are gone out of your hands. You have
no more dollars
to buy goods and services at a higher
price.
So
now the corporation has to lower it. So
it's not greed. It's suggestion
where they can actually set those prices.
I think it's very interesting to consider
that
when you look at
dollars
and the price of goods
over time,
it can seem like
house
prices or the market rate of the houses
the housing market is going up, and the
dollar value of gold is going up, and
the dollar price to buy food is going
up and the dollar price for everything, seems
like it's going up. But when you really
look at things for the most part, you
you realize that the same amount of
if you tracked it outside of a fiat
currency outside of the dollar, which is an
adjustable
valuation. But if you tracked it with something
like gold, the same amount of gold would
still purchase the same amount of a tailored
man suit as it did about a hundred
years ago. And so you look at
the fact that things are
more expensive in terms of the amount of
dollars that are required. It also is showing
that our dollars are worth less because there's
more dollars in circulation in the economy.
That are chasing
the equal amount of goods and services. There's
so much to this as well. It's not
it's not simple just to say, well, you
fix something
by adding more currency. You fix the problem
by taking currency out of circulation. It's not
just that simple, but what ends up happening
is we have a federal reserve that was
created
and that
then we have an entire banking system,
that is based on fractional reserve banking. We
have deposits. We have loans, and we're gonna
talk a little bit about what that means.
But all of those are inflationary, They all
add
currency into the system. And when you look
at what's happening with that
we don't...
It's a it's a problem when it's creating
inflation. We don't necessarily recognize the mechanism, but
the effects of it are felt through
added currency supply and things having more expense.
Yeah. And Bernard Clement is listening right now.
And he said
that's true unless,
on elastic and what he means is that
you can actually
stretch the prices up and down.
But it's not true on in elastic things
such as Medicare
because that price is being said by the
government.
Now,
I would say that I would still argue
again, I think it's a very good point,
but I would still argue in the very
long term
that
those prices are set by the government
because they are also
they are also gonna be determined by how
much the government feels like they can extend
such as the Medicare program,
un funded liabilities
and still get the taxes
from the from the the citizens.
And so, although it is in elastic... On
a very short period of time,
there could be elasticity
that could be
gone over a long period of time. And
Bernard says I'm absolutely wrong 100 percent. Well,
I'm not saying I'm right 100 percent. I
am giving theories about how this is actually
working.
So I'd appreciate it, you know, if people
would open their minds a little bit and
just use some logic on some of this
stuff.
I would say that
before the Federal reserve reviews, if you saw
this,
that
there wasn't as much
inflationary pressures. So then how could you
eliminate the fact that
there is no correlation of that. There may
there may not be a hundred percent
correlation due to to that,
but there is... There has to be some
correlation.
Oh, I'm sorry, Bernard.
I... I'm reading off my phone,
and he said,
that it he said medical care, not
Medicare.
I I understand how that is somewhat in
elastic too
But I would also say that there is
some elasticity on that or why do hospitals
now
actually
advertise?
And Bernard, I just got... It's funny you
meant to this because I am just leaving
my house today, and I took the mail
out of my mailbox.
And I am getting...
And here here was what the flyer said.
Please attend,
please attend a gourmet dinner,
if you have
these following medical issues
and we will help you solve those issues.
So here is a doctor
that is actually
advertising
and that advertising then would be for services
that seem to be elastic to me.
So there may be some some things that
are in elastic,
but I think most of of the economy
is run on elasticity.
So I I get your your viewpoint, Bernard,
and I appreciate it, and thanks for listening,
and thanks for
and thanks for,
participating, and it and
Well,
he says now try to negotiate medical care
our prescription drugs. Well, actually, I just did
this personally.
What happened was I need I need some,
anti inflammatory for my eyes. My... My insurance
company doesn't cover it.
So I went to 1
pharmacy.
They said it would be 206
dollars
I went to another pharmacy. They said it
was a hundred and 18 dollars.
So guess where I purchased it. I purchased
it at the other pharmacy.
So I do think there is there's some
negotiation. Not I didn't go to the first
pharmacy and said, I will pay you less
Mh. I didn't do it verbally, but I
did dollar option. Yeah. Right. I bought it
with my action with my pay.
So
I understand that some prices are set and
you cannot go and do that, but I
believe if
If hospitals and doctors are gonna continue to
actually advertise,
and actually, if we make pricing more
Another 1 was my wife just last year
in October had a Mri that she needed
to be done.
That her dot doctor
insisted
that she
do an Mri with their medical group. It
was 3000 dollars.
My wife thought she had do it. I
said, no. Get get the subs script... The
the the script. We're gonna go to a
metro imaging place here in S. Louis, and
it was only 999
dollars. Mh.
So once again, we voted
and negotiate it with our money and and
we took charge now. I know what Bernard
and a lot of where people say... In
emergency
situations, you can't be laying on the bed.
And you say this, But I'd like to
kinda get off this topic because I'm not
saying that everything
is not controlled by something
and in the and the consumer can't sit
there and negotiating. What I'm saying is you...
A large enough group of people that actually
vote with
their dollars going somewhere else
could
actually vote this. And that's the majority of
it. I'm not saying it's all of it
but it's a majority of it.
So what's really interesting is this whole idea
of if you had additional dollars?
Would you choose to pay a higher price
for something,
The seller then can set a higher price
because people have additional dollars? To be able
to put into something. But what about once
that dollar goes through
circulation. So you had more dollars
just say you were the only person who
had more dollars. Now, you pay a higher
price that goes to the seller, the seller
has more good, more... Dollars compared to everyone
else. I'm changing your thought experiment a little
bit. But now that seller, the merchant that
you were gonna buy, the the airpods from
Now they have more dollars. They're able to
go purchase
at a higher price than everyone else comparatively,
something that they wanna purchase.
But as those dollars get into the economy
now all of a sudden, as those dollars,
you follow them around, will now the
I don't know. The guy who sold the
airpods now, bought some,
I don't know. Fresh salmon that was...
Caught out of the ocean, and so they
pay a higher price there, will the the
seller of the salmon now goes and purchases
a sofa and is able to bay pay
more because he has more dollars. But now
when all of those the trail of those
merchants
can set higher prices because they know somebody
is willing pay them, it then shuts everyone
else out of being able to make that
purchase. And also when you go back to
purchase. Now you wanna pay for those airpods.
They were 300 dollars last week. Now they're
500 dollars. You say, wait a minute. I
don't have any extra dollars to towards this,
I wanted to pay 300 dollars for it,
you can have a trailing effective inflation that
is challenging for you'd to keep up with.
There's also just a lot of governmental inter
interventions and things like setting,
minimum wage.
Hire and higher and higher. Well, then the
company has to pay more to its workers,
which means that either is gonna have to
lay people off or find a way to
become more efficient. It's not all bad, but
the challenge that can happen is that they
may have to raise their prices to increase
their income so they can afford to pay
the workers and it can become a vicious
cycle. So let's go ahead and look at
kind of some of the starting points of
this because I... What's really interesting about the
inflation
challenge. The inflation problem is that there are
roots of it in the federal reserve and
fractional reserve banking system. And so for lack
of
we don't wanna make this an entire history
lesson today, but, Bruce, I think it's really
important for
people who are listening to recognize,
what is happening with banking with the banking
system and fractional reserve banking and why
that is inflationary.
And how we can recognize that deposit banking
and and using using banking as we normally
think of it to get loans and get
cheap capital to be able to invest places
can actually end up as a macro
hurting the economy.
So, Bruce, I'm just gonna share a kind
of a big picture point, and then I'm
gonna let you kind of dive into some
more of these details. But If you look
at the
nature of banking, say you,
deposit
a thousand dollar,
check into the bank. The bank is not
holding
that thousand dollars in cash
behind their safe and their their bars
and every single person who's depositing a thousand
dollars. They're not keeping all of those thousand
dollars for you and a thousand dollars for
Bruce and a thousand dollars for...
Joe Sc on the street and all of
the checks that have been deposited are not
held in the bank. So what is happening,
is they have to keep a portion of
that a fraction
in reserves. And right now that's in the
ballpark of... I think you call it 10
to 1. I don't know if I'm saying
that the ratio correctly
or 1 to 10. Which 1?
1 to 10. Yeah.
Pick 10 they 01:10. Okay. So they have
to keep 1 dollar in reserves for every
dollar that they have pledged
in deposits. So then what happens is they're
able to loan out
additional dollars. And as they loan out additional
dollars, they are able to provide loans into
the economy, which just by the very nature
of getting a loan,
you are creating dollars that did not previously
exist. And because of doing that, it
puts more dollars into the economy by using
loans. And then because of that, there... Those
dollars are worth less. So that's the
definition of inflation. Bruce, I'm gonna have you
just share what your
additional clarity around that idea. And again, I
don't think we need to get deeply into
the weeds and the historical nature of this
and all of the moving parts. But
what do you think is important for somebody
to understand about fractional reserve banking.
Well, I think the first thing is is
that
we ought to go back to the history
of banking.
You know, before there were... The before the
were,
physical banks,
plea
So, anything that they had that was audible
to them. There was a couple of different
things that were...
Couple a couple things that were difficult for
people. 1 is they need to protect any
wealth that they actually had and that wealth
could be
not just what we consider
traditional wealth now. I'm not talking about, like,
people had gold coins that they were... They
would
they would literally just carry around with them,
which was not good. 1, you could lose
them 2, You could very easily
have a person steal them from you.
Secondly, it could be something that was on
the barter system before.
Where you might have chickens or cows or
grain or something that you were barter. The
same thing as it's very clunky. There's a
lot of it.
You would have difficulty
trading because you... To... If your wealth was
tied up in chickens,
and you needed lumber,
and that person didn't
need chickens, well that was very difficult then
in a barter system. Mh.
And so then, currency type systems came around.
The first banks...
Excuse me. The first banks were not
because people were trying to get look,
They were actually because people were trying to
get protection on their money.
So they would actually pay to protect their
delivering
coins or other things that they had,
and they would pay somebody to protect them.
Well, what they quickly realized
when they were doing this, and there's a
great... There's some great Youtube videos on this
from Khan academy, KHAN,
academy, great educational
platform.
It's it's from you know, you might call
us bias, but I would say that most
people don't think on academy as biased.
And I try not to be biased. I'm
just trying to give you some facts here.
Is that they... These these
us banks
soon real
that a lot of people
we're not coming back all the same time
and asking for their gold and silver
points. So then they said to themselves,
what if we even start to lend this
out As long as we don't lend too
much out, a lot of people won't come
back and we'll be fine.
So they started lending it out and it
at an interest rate,
and then then they would get paid back.
Well, then they... That sort of working pretty
well, but they got nervous because too much
of that money was out, so they said
how can we inc people
to bring more money to the bank?
Well, the way they can inc them is
to pay them to access the gap little.
So they said announce instead of paying us,
we actually going to give you
an interest rate just to bring your money
to bank.
And when they... Did that then, now they
would have
more money to lend out our but really,
they can never lend out more money than
they had in the bank.
So
that was kind of a 1 on 1.
Now they had to be pretty smart about
it. They they didn't wanna go 2 2
and too far into the reserves. Because what
if a lot of people actually thing for
the money. That's called a run on the
bank.
And
still
then what was
replaced,
I would say,
somewhat
responsibly
although, I don't... I don't didn't necessarily agree
with it, but somewhat responsibly is, the Federal
reserve system said, you... We could actually...
We can... You could actually lend to banks
overnight lending and keep the reserves of a
certain amount, and you have to pay us
to actually give you those those reserves.
Well, that just meant they had more money.
And so if they had more money, now
they don't have to worry about as many
people coming back
and the Federal Reserve set that at somewhere
at 10 percent because they would cover it.
People
Now and actually the at at at times
of the great
recession, I believe they actually took off some
of those reserve requirements. It was even worse.
Now, so if you understand that where they
say you only really have to have 10
percent and I actually experience. I talked this
about this on a podcast before.
I went to my bank 1 Thursday.
It might have been a Tuesday. Yeah. Was
a tuesday,
and I said, I'd like to get 5000
dollars of cash because I was gonna go
buy some silver.
And and
they wouldn't give it to me because they
said they didn't have it at the bank,
they would fall below their reserves.
And they said you we're gonna to be
clear. You weren't asking for a loan. You
are asking for your money. I much for
my money account. Yes. Yes. Yes. And I
had a lot more than 5000 dollars in
that account.
And they said you have to come back
on Thursday because gonna have to order it
well where do they get it? They get
it from their Federal reserve. So I went...
I came back on Thursday.
So if you think all your money is
in the bank, we're you're you're badly mistaken.
So what that happens then is that means
that if they only have to have a
reserve requirement of 10 percent,
it's actually even worse than we've already started
because now
I lend it to a construction company.
A construction company actually purchases equipment and supplies.
They also pay their workers.
The workers and those supplied companies now take
that money, and they put it in their
bank.
So it builds up
the
fractional reserve in their in that particular bank.
That bank now,
is now allowed to lend it to
their people that they have relationships with, and
it just keeps getting repeated,
repeat it, repeat it.
And the federal reserve then will actually
change
change how fast it flows in and out
on a very. This is a very rudimentary
way of of thinking about it. But by
lowering and
or she be lower and and raising interest
rates because it'll will slow
how much people will people will take it
out. And the other thing they will do
And this also causes
some inflationary processes
is
they will actually...
Not even approved loans.
It's happening right now. They're nervous about the
economy so that they have tightened
the loan that they will give to certain
people. Mh. It's not only in the interest
rates, but they will tighten the loans that
they will give. For people to buy homes
because they're worried about the housing mark market
crash. So they will... Their collateral will go
down. Well, that means you have
more people
that cannot get loans,
and so you have a situation where housing
prices now,
because the builders can't build more
and because
the because the interest rates would do I
and the people that are sitting in homes
that would like to either downsize or go
up in a home, they have interest rates
that are very, very low
from the last 10:12 years, and they're like,
well, if I move now, I'm gonna get
a higher interest rate, so I'm not gonna
move. So the inventory is way down
for this. So supply and demand now does...
So pay there's not very many homes.
So
there's more dollars that from the baby boomer
generation that don't need loans. To actually chase
this
these fewer homes, and that causes prices to
go up. That's been going on for about
2 years. I just saw
where it's actually flattened out last month for
the first time. Be... And that's and that's
part of what we wanna communicate in this
particular podcast is, yes, you're gonna see these
wild swings.
But if eventually the equilibrium is going to
happen,
The right amount of dollars are gonna be
chasing the right amount of goods,
and you're gonna have not a flat line,
but you're gonna you're gonna smooth out these
prices going up and down.
That's the way the austrians would like it.
Quit
manipulating
to try to get what you want and
just let the free market decide.
What the prices are.
What's really interesting about all of this as
well is that you have the loan...
System,
within the banking function is that if you
have say you've deposited your thousand dollar check.
That now becomes
if you're they're in a 1 to 10
ratio of their reserve
requirement,
that thousand dollars
becomes the reserve,
for which they can then loan out an
additional 9000 dollars.
Bruce correctly me, if I'm wrong on the
math there, but you put in a thousand
dollars that becomes a reserve They can loan
out 9000 additional dollars. So you've... You're creating
Yeah dollars
by your deposit and what happens is that
that is an inflationary act. Even just having
dollars on deposit with a bank and then
participating in the loan system as well. And
so when you look at a macro level
when you have everyone using that
fractional reserve banking system as a deposit mechanism
and then relying on loans to be able
to finance their purchases
all of that is
inflationary.
Yeah.
It, yes. It is. And...
You know, we we have some great dialogue
going on.
I think this shows just how
frustrated people are on both sides of the
issue.
And
I wanna get back
a little bit.
Once again, I must not be
communicating
really well. So, like Mali says,
a
negotiation...
She
She she doesn't agree with me. That you're
negotiating in all prices because she says try
to do that at costco
or pane narrow bread.
Well,
I would agree that you you yourself
cannot go into Costco or Pane
and say to Pane,
I'm not gonna pay you 3 dollars for
the cup of coffee.
I'm only gonna pay you 02:50 will you
take it?
But if you choose not to shop there
because you shop somewhere else. And if enough
people do that, I mean, that is negotiating
interest. Exactly right. That is negotiating prices. And
that's the point I'm making the same with
Costco.
If you go into Costco and you say,
oh, this roti chicken, you have said at
7 dollars,
But at the end of the day, they
still have 2 dozen roti chicken sitting there
because people
people did not buy them and they left.
Without buying them, the next day, if they
have any sense, maybe not exactly the next.
Day they may... They might try it for
a week or so They're gonna say, oh,
we're not selling this a 7,
so we're gonna lower on the sixth. So
you're not negotiating
individually with your voice.
But you're negotiating with
what you're buying, you and all the other
citizens that are going into those. Thanks. Well,
because really, every single... Purchasing
decision you're making
is
ascertain
your value. I mean, it is stating with
your actions, what your value is and what
you're willing to pay. I mean, if somebody
was going to... You're gonna hire a landscape
for your lawn, and they're gonna tell you
it's gonna cost you 14000 dollars to mow
your grass each week. I mean, depending on
the size of your lawn and the beauty
of of your mowing job, I mean, most
people probably aren't gonna pay 14000 dollars to
have their their lawn manic per week. And
so if you... If they set a price
too high, no one's going to be able
to make that purchase or no one's gonna
choose to make that purchase. If the price
is
extremely low then the demand will be such
that they won't be able to have enough
supply to meet that. And so that's what
you're talking about with the free market
fluctuating or changing their prices based on the
vote of the consumers as a as a
macro as a whole.
Mh.
Yeah. And thanks for everybody that participant and
I... We see our regular listener Fritz,
actually,
chi in. Thanks for fritz. This was actually,
this episode was inspired by Fritz
comment last week,
And so now we'd like to finish up
by actually talking about how, if you believe
that
fractional reserve banking. I'm and I'm not saying
you have to believe this.
Because there's a lot of people that obviously
don't believe it. But if you believe that
fractional reserve banking is actually hurting
society,
then you can actually succeed from the from
the system
and the same thing
should happen
because if you say to yourself, I wanna
actually just save
before I purchase.
If you say before you purchase, you're not
using a banking
institution,
that will actually have your dollars to inflate.
Because then they can't
actually
do fractional reserve and as Rebecca Wi Pointed
out, and I and I did too,
the reserve requirement
temporarily is actually sometimes 0.
And so if you want succeed from that
because you think morally
And you also think it's better a system
for
the economy that you're living in,
you could say instead of putting my money
in a bank
you could actually put it it with an
insurance company
because an insurance company will let you borrow
against your money
but they will not let you borrow
any more than the money you have in
the bank,
and they won't let anybody else
borrow against your money.
So it's a 1 to 1
lateral
that is actually happening. So there's no fractional
reserve going on there.
Which means if you have a hundred thousand
dollars of cash value, and Bruce we talked
about this right before the show. But if
you have a hundred thousand dollars of cash
value inside of your
specially design whole life insurance policy designed for
infinite banking.
You can borrow against that hundred thousand, but
they don't have the ability to go turn
that hundred thousand
into a million dollars through fractional reserve banking.
They can't just lend out
a a million dollars on your hundred thousand
dollars, in cash value, which is like a
deposit with them.
So
you also
said, and we've said before on the show
multiple times that they have even more than
just dollar for dollar reserves. Can you speak
to that for a minute?
Yeah. So the top the top
10 mutual companies?
On average actually have 7 dollars more
than a,
100 percent reserve. So they have a hundred
and 7 dollars
for every 100 dollars that they have cash
value promise. Now, where do they get that
extra money? Well, they got it from their
investments
that they actually made on the premium dollars.
They then take those that,
we talked about this last week. They take
those premium dollars. They put them to work.
They have expenses.
They make money,
then they have a profit and because it's
mutual, they share
the profit with
the policy holders because you're part owner of
the company in the form of a dividend,
but they do not...
They actually put it some of that profit
in a 2 additional reserve requirements
So that's where they build up that reserve
reserve requirements from
the
profits that the mutual company has made.
So the reason why
using a whole life insurance policy is different
than using this standard banking systems, specifically with
the federal reserve and the
deposit mechanism of putting dollars into a bank
and having the bank then loan out capital
and having that fractional reserve banking. The reason
why infinite banking is different is because you're
not in in in you're not creating an
inflationary event by creating additional dollars
when you are using your life insurance policy.
And the value of that is that on
a, Bruce you mentioned moral... On a moral
basis, on a personal basis, you are saying
I'm not choosing to
create this inflationary
environment
atmosphere for the rest of the economy. Now
if enough people did that, and enough people
said I'm going to take control of my
own financial
landscape in my own personal economy, and I
am going to save before I spend. I'm
going to build up capital, and I'm going
to borrow against my capital, and I'm going
to be in a position where my dollars
are,
Not inflationary dollars. That doesn't mean you're gonna
prevent all inflation from happening, but it does
mean if there's enough people doing that that
you're in a position where you're taking control
and rather than just being in a position
where you're
storing capital at the banks, and then you're
borrowing
their money, you're in a position where you
are able to borrow against your own capital,
which frees you then from
creating inflation and you're in a position where
your decisions that you're making are creating a
sound money personal economy for yourself.
And Yeah. And then,
you there's so many comments today that I...
We're not gonna get to all of them,
But I would like to get to 1
more, and and I... And I'm not a
linguist, so... Not sure how you pronounce your
first name,
e El or Molina.
He... He or she doesn't agree with me
that
the car is not negotiated because there is
a blue book
that sets the price,
you should be paying.
I think you should research that because all
the blue book value is
is a comp...
Culmination
of how all those
models and years of the car
have been selling.
So they're just taking all of the prices
that those cars have been selling
across the nation
and then getting an average
and telling you this is what
the average person has been has been
paying for this car.
So it is
a
negotiation price
average.
Blue book is in the company that just
says,
oh, I think and it should be this.
Blue book is just comp
all the records
of how these cars and trucks have been
selling. And if you don't lay me just
research on that. It's like the number that's
the aggregate data
of Correct. Purchasers
and sellers.
And their mutual decisions over time. I mean,
would that be accurate way of saying that?
Yeah. That's exactly what it is. This exactly
what it did. They... Also
Get the price from the Dmv... They get
the prices from the Dmv. They know exactly
what the... Those cars are so far. And
then did just aggregate an average. They don't
set that price in the blue book.
Okay? And if once again, if you don't
believe we just go do a little research
on this.
They are just
aggregating the prices that have already been negotiated
out there in the free market.
It's also possible that you could sell your
car for less or more than the Blue
book price.
So... Is exactly correct? If you are willing
to sell your... Your car that Blue book
says is worth 10000 dollars. If you're willing
to sell it for 2000, I'm sure there's
somebody willing to purchase it for that. And
if you're willing to sell your 10000 dollar
blue book value car for 14000
because
I don't know. Whatever reason you made it
a convenient purchase someone else that didn't have
to drive across the country to purchase the
vehicle or something and you added your own,
price to it and somebody was willing to
pay that, you can absolutely sell your car
for more than that. So there's no for
rules. It's the agreement of the buyer the
seller. Right? Yeah. You you suggest the price,
the person that buys it sets the price.
That they were willing to to to buy
for. So... Yeah.
So this has been a great discussion today.
Obviously, I think it's a it's an important
to... Discussion or there wouldn't be so much
engagement today. But I do,
I I would challenge people
to listen to both sides of the aisle
and
listen with the intent to understand not listen
to the intent to respond. Because I think
this is what happens all the time. I
do know that there are times
when people feel like
we cannot
negotiate this price. When I say, we, I
mean, the American citizens are the global citizens
for that much cannot do this. Well, yes,
you cannot do it on your own. When
and it may take a long time to
move the price because of government intervention,
but eventually it will. And I think that's
the frustration with people that are like, I
can't do anything about this because the prices
just stay high, and I can't buy it.
Well, I understand why you think then there's
some... Extraordinary circumstances working against you, some kind
of conspiracy theory,
but eventually those prices
that manufacturer will not be able to continue
to keep those prices high. It's... It makes
no economic sense for them to do that.
And that's what the.
So Bruce, I can link to Khan academy.
I don't know specifically which article you were
talking about there is 1 that's a
financial institutions
class
within the world history course. So I I
was able to find that, But, I'm just
gonna link to Khan academy through the notes
here, and you are welcome to go
do some research and, also, Bruce, if you
have a specific link
for the course you were mentioning. I would
love to So easy. I just I just
plug get in.
You know?
That's. On academy bank discussion,
and it comes up. It's not that difficult.
Awesome. I will link to that afterwards then.
So if you are interested in really pursuing
this idea of how to have your own
stable reserves that you are storing. And keeping
so that you can access capital in any
circumstance.
You don't have to go to the bank
to qualify for a loan. You don't have
to worry about what interest rates are at
the bank or whether they're gonna be too
high that's gonna lock you out of a
purchase.
If you are interested in
being fiscal responsible and being in a position
where you are storing capital, being able to
borrow against that, we would love to be
able to talk with you and help you
do that better through infinite banking and find
out how you can apply these principles in
your own financial life. You can do that
by booking a call at v money advantage
dot com to really just talk through what
circumstances look like for you. So in closing,
thank you for being with us today. Thank
you for the discussion.
Please continue asking your questions, all of that
becomes fodder and
just the fuel for further conversations to be
able to help you make decisions. That puts
you in the most financial control. So with
that, please remember success leaves clues, so model
the successful few, not the crowd and build
a life in business you love. We'll see
you next time.
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