Notes from the Cutting Edge of Finance

I’ve just returned from the Nelson Nash Institute’s (NNI) annual Think Tank conference for practitioners of the Infinite Banking Concept (IBC) in Birmingham, AL. It seems appropriate to say a few words about the experience.

For context, the IBC is a cash-flow management strategy that allows individuals to opt-out of the federally-enforced cartel that you might know as “the commercial banking system.” Nelson Nash is the creator of the IBC and author of the book Becoming Your Own Banker — the key text wherein Nelson explains the IBC from start to finish. The NNI is the organization that certifies financial professionals who wish to assist individuals in properly implementing the IBC through the unique construction and design of the financial contract necessary to do so.

The conference featured an address from Nelson himself (86 years young!), presentations on best practices from Authorized IBC Practitioners, and a talk on the proper design of IBC-adherent policies.

From my perspective as a trained economist and former employee of a Fortune 100 financial services firm, the annual NNI Think Tank is the preeminent financial conference, period. No, it wasn’t because of any nifty “free crap” giveaways, nor due to any high-dollar celebrity appearances (although NNI co-founder Robert Murphy may qualify as a “celebritarian” or “libertarian celebrity” in some circles, if not a karaoke phenom to boot).

What solidifies the NNI Think Tank’s position as the destination for financial professionals has two elements: the content and the men behind the operation.

Plainly speaking, the IBC is the every-man’s financial strategy.

A man who produces more than he consumes has an opportunity. He can choose to deposit his excess income (or profit, at the business level) with a commercial bank. He who does so faces the inherent risk associated with commercial bank accounts — that of total loss of his money. Because commercial banks engage in what is known as “fractional reserve banking,” or in simple terms: the process of accepting deposits and lending out up to a small fraction of them, all commercial banking institutions are unable to satisfy all customer withdrawal requests in a given time period. Yes, this means that if too many people request to withdraw their money from a bank at one time, the bank may simply reject the request. Not only may the bank reject the request, but they can do so legally, since the federal government implicitly endorses the process of fractional reserve banking by imposing “reserve requirements” of less than 100% (it’s closer to 10%). This means that while customers may think that they have access to their deposited funds, the fact is this may not be true.

Economist Murray Rothbard describes the problem in his typical, brilliant style:

There are two major ways in which [the banker] can become insolvent.
The first and most devastating route, because it could happen at any time, is if the bank’s customers, those who hold the warehouse receipts or receive it in payment, lose confidence in the chances of the bank’s repayment of the receipts and decide, en masse, to cash them in. This loss of confidence, if it spreads from a few to a large number of bank depositors, is devastating because it is always fatal. It is fatal because, by the very nature of fractional-reserve banking, the bank cannot honor all of its contracts. Hence the overwhelming nature of the dread process known as a “bank run,” a process by which a large number of bank customers get the wind up, sniff trouble, and demand their money. The “bank run,” which shivers the timbers of every banker, is essentially a “populist” uprising by which the duped public, the depositors, demand the right to their own money. This process can and will break any bank subject to its power. Thus, suppose that an effective and convincing orator should go on television tomorrow, and urge the American public: “People of America, the banking system of this country is insolvent. ‘Your money’ is not in the bank vaults. They have less than 10 percent of your money on hand. People of America, get your money out of the banks now before it is too late!” If the people should now heed this advice en masse, the American banking system would be destroyed tomorrow. (Bold added)

Nelson hints at the alternative to this risk-riddled banking option in the title of his life-changing book Becoming Your Own Banker. Individuals can become their own “banker,” instead of relying on other bankers, by managing their cash and “banking” activities through a specifically-designed, dividend-paying Whole Life insurance policy.

These policies have special features that allow the owner to “bank” — that is, to conduct the process of borrowing and repaying money — on incomparable terms. In particular, the person who “deposits” money through premium payments to the insurance company builds cash value, which you can think of as equity, or ownership, in the policy — that he controls. He can collateralize the cash value of his policy and borrow money from the insurance company when he demands it and he sets the terms of repayment. Meanwhile, the cash value continues to grow, compounding constantly. Indeed, practicing IBC through a properly-designed, dividend-paying Whole Life policy is the only method of compounding the value of a financial contract on a guaranteed basis. Of course, since we’re talking about a life insurance contract, there’s also a death benefit, which — with appropriate design and use — will increase over time.

Put simply, whereas the typical bank deposit carries a risk of total loss, is the property of another party, lacks a death benefit, cannot be used as collateral on a loan, and hardly grows at all, the cash value of a properly designed and used “banking policy” is guaranteed against loss, is the property of the contract owner, is linked to an increasing death benefit, can be used as collateral on-demand, and grows exponentially.

No other organization is devoted to the promotion of such a concept. This alone puts the NNI and its Think Tank conference directly at the top of any ranking of financial education organizations and events.

The NNI was founded by Nelson Nash, Robert Murphy, Carlos Lara, and David Stearns. A few words apply to them all. These are Christian gentlemen. They’ve each done what the critical, thinking man aims for in this life: to conduct his professional affairs in a manner such that he is able to serve his fellow man in a mutually-beneficial fashion all integrating his own spiritual and philosophical views. A word comes to mind that characterizes each of them: formidable.

Nelson Nash himself deserves special attention. His book is a hint at his intellectual prowess; his presence is a testament to the integrity of his character. Consider: an 86 year-old man stands on stage, speaking before tens of high-producing financial professionals in total command of their attention. He weaves Christian teaching with advanced economic theory, inserting extemporaneous strikes of humor and wit with timing that — like the IBC — is more “caught, rather than taught.” As fellow audience members would attest, you could witness a Nelson Nash presentation 100 times, and every time would feel as though it were the first. That level of rigorous authenticity has an endearing, magnetic pull to it. You’re drawn in whether you want to be or not, and the thought of resisting wouldn’t make sense anyway.

Taken together, the content of and the men behind the annual NNI Think Tank make it “a must.” If you have the opportunity to attend a future NNI Think Tank either as an Authorized IBC Practitioner, or as a guest of one, I unequivocally recommend that you capitalize on it.

Read more of my thoughts on the Infinite Banking Concept: