IBC A Safe, Liquid Retirement Solution With Robert P. Murphy, Austrian Economics Canada

You are listening to the wealth without Bay Street Podcast, a Canadian guide to building dependable wealth. Join your host, Richard Canfield and Jason Lowe as they unlock the secrets to creating financial peace of mind in an uncertain world. Discover the strategies and mindsets to a financial future that you can bank on.

All right, welcome to another episode of wealth without Phase street. And I'm your host, Jason Lowe.

And we've got Richard Canfield here. And joining us today on the Zoom, our friend, the amazing, one of the smartest guys I know, Bob Murphy. Bob is the host of numerous podcasts. He has, of course, the Bob Murphy Podcast, a phenomenal show I would encourage everyone to check out. He is also co hosting with Carlos Lara on the Lara Murphy show, which is laram murphy.com you can access everything there. Bob is the author of and co author of numerous works, including the case for ibc, how privatized banking really works. And Bob is the co director of the Nelson Nash Institute. And we are so stoked and excited to have you with us today, Bob.

Glad to be here.

Well, where should we begin? I think one of the things that we wanted to invite Bob to share was the book the case for ibc. So we would, we would recommend to all of our listeners this is a book that you should absolutely add to your library. It's a terrific read. And we wanted to know, Bob, if you could share with us the inspiration in co authoring the book with Carlos Lara and with the late R. Nelson Nash. And so maybe share with listeners what was the inspiration for writing the case for ibc.

Sure thing. So as you guys certainly know, and presumably your listeners as well, Nelson wrote becoming your own banker, which, you know, introduced the world to the concept of ibc, the Internet banking concept. And Carlos Lara was the person who had introduced me to Nelson's ideas. And it took me a bit, but I finally realized, oh yeah, this makes sense. I was a professional economist. And so it took me a bit to sort of translate what Nelson was saying into my framework. But once I did, I realized, yeah, this just checks out to me. And I, you know, became an IBC person myself. And then Carlos had shown me that what Nelson's ideas implied and what I was doing with the so called Austrian school economist because we were going around the country giving talks about the Federal Reserve at the time, you know, QE and all that stuff. And we were very concerned about the future. And Carlos showed me that look at everybody who implements IBC is helping contain this problem that you Austrians are talking about. And so that's what made Carlos and me decide to write our own book, How Privatized Banking really Works. And then we started going around with Nelson and doing a seminar for the general public on ibc, sort of like a crash course. If you have no prior knowledge, come on to this seminar that we're doing at the local hotel or whatever. And it was like it varied. It evolved over time. It ended up being about four hours long with a lunch break. And so we would just give a crash course. I would give an outline of the economy and what the Fed was doing, how to read life insurance illustrations. Nelson, of course, would explain what does it mean to become your own banker? How did he discover ibc? Carlos would give his input in terms of business owner managing cash flows and so forth, and various legislative milestones involved in, you know, the financial sector and what happened with the tax treatment of whole life policies, all things like that. And at one point I realized probably like a year and a half after we had been taking this show on the road and going around, I was like, guys, you know, there's a lot that we present in the seminar for the public that's not in any of our writings. You know, it's stuff that we kind of developed and refined over time based on, you know, reactions from crowds and things like realizing, like, what some of the misconceptions were, things like that. And in particular, like, I had a whole series of objections to ibc, you know, this is too good to be true. And then I went through a bullet point and, you know, had five or six objections that I dealt with. A lot of people were saying, oh, wow, until you put it that way, Bob, you know, I knew what Nelson's point was, but, you know, my buddy in the water cooler was telling me these objections. And then when you just said that, duh, it finally hit me, right? So that's what the case for IBC was. It was basically codifying the presentation, the live presentation we had been giving to the public for, I think like a year and a half, two years or so at that point. Because I realized we're saying a lot of stuff in these seminars that isn't written down anywhere. So why don't we go ahead and put this in book form?

It's such a great read. We can't recommend the book enough. And I mean, I appreciate that.

But I should also stress too that it's. It's not intended to replace becoming your own banker.

Oh, yeah, of course, yeah.

Hand in hand and in tandem, though, it's a. It's like the, it's like the, as Jason Rink said on one of our pockets, it's the one, two punch for your education process on ibc.

Yeah, completely. And what I guess are some of the key messages that you want readers to take away from the book, Bob.

Okay, sure. So like I said, since it's not intended as a replacement for Nelson's book, I'll mention things that, you know, we, I made sure ended up in the case for IBC that would supplement things that might not have, you know, been spelled out as precisely in Nelson's book or that some readers were confused after still having read Nelson. So one thing is we were like, we have a whole series of objections. You know, hey, I thought you're supposed to buy term and invest the difference. Isn't that the standard? So I went through and you know, because I handled that part and just explain so real briefly for your audience, you know that those there's glib. Let me back up a second. It's not the case that I'm saying no one should ever buy a term policy. There's plenty of cases. I mean, I have term insurance from when I was younger and you know, it still makes sense to keep that thing enforced while that particular policy is still going. But the people who are trying to convince their listeners that getting a permanent life insurance policy, which would include the kind that Nelson recommends for ibc, that that's just the no brain, like that's so stupid who would possibly do that. And they had these quick glib demonstrations showing that, oh yeah, the money you would save if you instead get a term policy of the same death benefit, just put that in a mutual fund or something and then over time that's going to grow more than the internal rate of return on your whole life policies cash value. So the investment vehicle is better and if you happen to die, well then, you know, you get the death benefit. So your death coverage is the same. So in their mind they're thinking they've covered both bases and you know, only shyster could possibly want you to do this again. They weren't just narrowly focusing on ibc, but just in general people pushing life insurance, you know, that had accumulated cash value component to it. So what I did is just go through and show all the different ways that those comparisons that seem to be head to head are actually not head to head at all. They're apples to oranges. And so that doesn't prove that it's a good idea to buy a whole life policy, but it does show you really shouldn't be taking advice on this issue for people who don't know what they're talking about. So just real quickly, some of the differences. The standard demonstrations when they show the same death benefit coverage, it's for a term policy that eventually expires, whether it's a 20 year or a 30 year term policy. Whereas as the name suggests, a whole life policy is in force for your whole life. So obviously one huge difference between person A who takes the one bit of advice and person B who takes the other, is that once the term policy expires, the person who was investing the difference in the mutual fund. Yeah, now they have a nice little mutual fund with a decent balance sitting there, but they have no life insurance because now they could have developed a condition in the interim and literally are uninsurable or just because they're 30 years older. Now the term policy rates are much higher even if they're in perfect health. And maybe at some point they might say, you know, this is kind of crazy, I'm just gonna let that lapse.

Right.

And so, or not lapse, but you know, not, not roll it over for a new policy. So that right there shows these are not the same thing. And so yeah, if you die during the term of that term policy and get the death benefit, then okay, you could plausibly argue it's the same thing. But clearly once that expires, no, it's totally different. Animals. Another huge difference is when they're trying to show that, oh yeah, just put your money in a mutual fund and look at the historical returns that's going to kill what you're going to earn in your cash value of your permit. Well, they're typically looking at the mutual fund that is heavily exposed to equity markets.

Right.

And so, I mean, what that reduces, the saying is if you put your money in the stock market, the mean rate of return over a 20 year period is probably higher than what you're going to earn in fixed income. And yeah, that's a true statement, but that doesn't mean you're stupid if you buy bonds. And you know, only like obviously because there's a difference in risk of volatility that of course the rate of return on, you know, fixed income is much more dependable. And of course in a whole life policy, the cash value, you know, once it goes up, it doesn't go down. Your 401k or I know you guys don't have 401ks, but your retirement vehicle that's invested in the stock market or you know, heavily Exposed to it, it can go up and down. I mean, as this last week just demonstrates, as we're recording here, we had the worst week, at least in the United states markets since 2008. So, again, so that doesn't prove that the one is better than the other. But these glib comparisons to say, oh, you make more money this way and you got the same death benefit, those are clearly just false statements. And it's alarming that people with such reputations are able to apparently make these demonstrations get away with it.

The one thing that Nelson added to what you were describing here, Bob, in his book becoming your own banker, is he really helped us to understand that this is a process, it's not a product. And the process of becoming your own banker is not about addressing the yield of an investment or a function of rates. It's all about how you finance the things that you need throughout your lifetime, which can certainly include investments. But I see the comparison, and you do too, Bob, and Richard as well. So often in discussion, when someone is first exposed to the process, with the abundance of information that's out there on YouTube, on Facebook, Instagram, on social media in general, the conversation so quickly leans into product because we believe that that is the conversation that's going on in the prospect's mind, that somehow they're so focused on the product and comparing it to every other product that's out there. And it just doesn't matter if you don't understand that you have a problem, which is that you're not in control of the banking function as it relates to your needs. And when, when you look out there, Bob, at the information that's being communicated to people about this concept of becoming your own banker, the infinite banking concept, what are some things that you're seeing out there that are just incorrect? Aside from the comparisons of, well, you should buy term and invest the difference, or you should have a whole life policy, no conversation whatsoever about the process of becoming your own banker.

It's all about product comparison or the control of liquidity and capital accessibility. It doesn't end to the conversation either.

Yeah.

Because we're seeing some things that are really frustrating from the vantage point of wanting to make sure that this message is being communicated properly to the general public. And that gave rise to the Nelson Nash Institute, which we're going to have Bob, expand on. But before we do that, Bob, like what are some things that you're seeing, the information out there that's just incorrect?

I do want to come back to that, Jason. It's a Great question. Let me just connect with what you're saying with the process versus the product. Another example of that and something that we cover in the case for IBC is I'll have a lot of people who, because of my warnings about what the Federal Reserve has been doing and so on, they'll say, okay, yeah, you've convinced me, Murphy, and your other stuff, presentations or writings that asset prices are way overvalued and blah, blah, blah, maybe the dollar long term is in trouble. So why would I want to be in a dollar denominated asset? Why wouldn't I just go buy gold or Bitcoin if they're more savvy in terms of computer stuff? So they're getting that. I think you're right, Jason. The mistake they're making is there's. They take me to be saying, oh, Nelson Nash says of all the different assets out there, you should invest more in whole life insurance as an asset class rather than real estate or stocks or bonds. And no, that's not what he's saying.

Right?

Not saying invest in life insurance. He's saying, you know, have this be the headquarters, like your money flows through this vehicle, if you will, so that then you're in a much better position to make whatever investment decisions you want to make. So, for example, if you are worried about the, you know, I'm speaking to a US audience primarily, so I say to them, if you're worried about the US dollar crashing sometime in the near future and you want to have a bunch of gold, well, if you've been practicing ibc, your hands aren't tied. No, you have a nice big cash value that you can take a policy loan against and go buy some gold coins. Whereas if you'd been putting your Money in your 401k like the Gurus say, you wouldn't be able to do that except with a penalty.

Right.

It's not that, you know, IBC is closing doors and preventing you from getting into gold. If you think that, you know, gold and price inflation is going to blow up. No, you'd be glad you had been doing ibc. That'll put you in the position to do it. So. So yeah, there is that disconnect where people I think sometimes believe we're just saying you ought to invest more in life insurance. Give this thing a shot. Incidentally, the more you learn, or the more I learn about whole life insurance as a product, the more like, yo, this thing is a pretty robust little vehicle, even if you didn't know about ibc. So you know, it's not that we're saying it's a bad thing, but it's just that you're really, Nelson's saying so much more. It's just taking control of the banking function is what he's talking about. And it just so happens that this dividend paying whole life policy is, or a system of such policies is a really great way or a platform to implement that on. But it's really, it's not about life insurance, it's about taking control of the banking function. Okay, so then back to you had asked, you know, there ways that sometimes people are trying to market or get across the virtues of IBC to the public. So part of the problem is, and I, you know, I recognize this why this happens, that there's lots of different organizations with different names and they have to, you know, because you're trying to sell something, you know, you gotta stand out from the crowd. And so I understand it. But then it puts someone like me, I'm sure you guys get these questions too where someone will say, oh, I see, you're talking about this, you know, I read this thing, this book from this person over here. Is that the same thing? You know, typically it's like in the same ballpark, but it's, you know, so there's this problem of, you know, am I gonna be now endorsing everyone who writes on this stuff? Well, I can't because I don't know what, you know, I'm not gonna be responsible. So the function of what we were doing with the Nelson Nash Institute is to try to provide a standard and just to say, look, we're not saying other people who do this are wrong, but we're just saying, you know, this is the kind of thing we're controlling our message and trying to give good information to the public about how this works. So for example, I mean this is pretty basic stuff, but since you asked in some expositions people will describe this as like, oh, you're setting up your bank and then you're going to make a deposit this year and then you're taking this and then you're going to borrow money out of your bank and go buy a car and then you're going to repay yourself. And so that language, I think the people aren't trying to deliberately mislead, I think, but in some cases the novice person from the public hearing that kind of talk might not realize that wait a minute, I'm buying a life insurance policy. So clearly you got to be sure they get that you're buying a Life insurance. But we use banking in the generic sense of managing cash flows. It's not literally or legally a depository institution. Obviously, when you're borrowing money, typically what that means is you're taking out a policy loan with your cash surrender value is the collateral. You're not taking anything out of the policy. I think it's more useful to think of it as your policy's over here chugging along like it always was. And then next to it, the insurance company is giving you a loan side by side, you know, that has a lien now on that policy that's still chugging along.

Right.

That's a much safer way. Just like if you took out a home equity loan on your house. It's not that all of us, you know, you didn't knock out the dining room in your home. Your house is still. Right. It still makes sense to say, what's the market price of my house? You know, the value of the real estate market's going up. Your house keeps going up in value.

But did you guys feel the breeze coming through the dining room? Yeah. Wow.

But the mortgage you have at the bank against it is a lien against that.

Right.

But it's not that in any way. You literally took something out of your house. Even though people might metaphorically or loosely say, oh, yeah, we, you know, to refinance these debts over here, you know, we took out some of the. Some of the equity in our home and did that. You know what the person means by that. But strictly speaking, the house is still sitting there. It's worth whatever it is if you sold it. The fact there's a bank that has a lien against it doesn't affect the market price of your house. It just means how much you have net if you decided to sell it. So that's really a better way to think about what's going on with, you know, borrowing against your policy. The last thing I'll mention then, you know, if you guys want to probably we can go further into some of this stuff or different ones. But it's. I've been concerned. Sometimes the way it's presented to the public is they'll say, you know, there's different ways of buying, you know, a car or something. And depending on the presentation or the, you know, the way to try to get the person's interest, it might come off. Like the person saying, you've got your money working in the life insurance policy, and then you can take it and go buy a car with it too. And it's doing two things at once. And it might look like they get free money when. Well no, if you borrow against the life insurance policy, there is an interest rate the life insurance company charges you. So that's still a good thing to do. And that's the whole essence of IBC, is you're buying stuff with your own money in a sense rather than going to a total third party outsider and borrowing from there. But again, some of the expositions I think might lead people, the public to misunderstand and then if someone who is a critic showed them, well no, but you know, keep them, you know, keep account of the fact that you got this loan now that's rolling over with interest. You know, I'm concerned some people might have thought that that or not realize that was the deal. Yeah, yeah, I guess one, one last thing too is there is a confusion the public sometimes has about like looking at, reading illustrations. And I think some people believe if you were to die, you get the death benefit and the cash value. Right. Because of that misunderstanding, some critics then say, oh no, no, the life insurance company keeps your cash value. Haha, you know, and so you understand what the cash value is. That's a complete, you know, non sequoia. That's that last analogy here. Just going back to the house. House thing is, you know, that would be like saying if some, if you were paying off your 30 year mortgage and then finally made the last payment and you said okay, and let's say your house is worth 300,000. And so then the bank teller says, okay, your mortgage is totally paid off, the house is yours, free and clear. Here's the deed and you're like great, and where's my check for 300,000? What are you talking about? Yeah, my CPA just told me, I checked this morning and said Now I have 300,000 in equity in my house. And so yeah, here's the deed, okay, because I paid the loan off, you know, the mortgage off, but I want you to give me my equity too. I mean the person was like, no, no, when the accountant said you were building equity in your house, they meant the market value and then the lien against it was shrinking. So the equity. So that's kind of what the ca. I mean again, it's not a perfect analogy, but that's your growing cash value is reflecting the fact that in a sense it's like the lien against your policy shrinking. So you're getting more of that, you know, it's anticipating that future death benefit. All right, so a lot of complications in there, but I'm saying that the idea someone saying the life insurance company keeps your cash value and only gives you the death benefit when you die, that would be as goofy as saying the bank keeps your equity. It only gives you the deed to your house when you pay the mortgage off. But yet, because people don't really get what's going on with cash value, that's a more abstract thing than how much do you owe the bank on your house. That's why that fallacy sometimes can survive.

I think that this is a testament to why the Nelson Nash Institute, the authorized Infinite Banking Practitioner program, the importance of the general public. People who are listening to this podcast to make sure that if you're exploring this process that you get in touch with an experienced authorized Infinite Banking practitioner with the Nelson Nash Institute. Because if that practitioner is staying in tune with everything that's being communicated forward from professionals like Bob, from, from Carlos Lara, from a number of experienced practitioners who know how to deliver this message properly to the general public, then you're in a much better position to implement it properly because there are ways to do this improperly and far too many to discuss in one episode of a podcast. But, Bob, would you be kind enough just to share what gave rise to the Nelson Ash Institute and maybe share with our listeners, you know, the importance of working with a good practitioner?

And also just to tie into that, you know, Nelson was a passionate Austrian, studied Austrian economics for over 50, was almost, almost 60 years by the time that he passed here. And so it was critically integral to him that someone like yourself, who was an Austrian economist that had a really strong ties to that Austrian community and were actively promoting the mindsets around personal financial accountability through the Austrian mechanics, was involved in this, this methodology and able to kind of take that out to a wider marketplace. So maybe also tie in just, you know, Nelson's thoughts on the Austrian school and why that was so integral to him.

Sure, before I forget on that. Yeah. Nelson used to say that, you know, we'd be presenting to at conferences and whatnot or, you know, events. And he would say something along the lines of an I've been studying Austrian economics for 57 years longer than Bob Murphy has been alive. And then I would get and say, not only have you has Nelson known Austrian economics longer than I've been alive, my dad didn't even like girls by the time, you know, when Nelson was. So it's really back. So let me also mention too, before I forget the train of thought that just to emphasize, reiterate what you guys And I know you guys, especially in your operations, are really good about, you know, working with clients and educating them and just, you know, making sure, hey, we're not even going to go down this path until we know you've read the material. Because I'm still amazed I'll get emails from people saying, hey, yeah, Bob, can you explain? Like, I have some. From the other day, some guy emailed me and was, you know, saying, yeah, I have two IBC policies. And I'm wondering, I see someone else over here who was not part of our organization, has a thing online about you can augment these things, like with a term rider and a pua. It was pretty basic. And I was like, well, gee, you got to go read our book, the Case for ibc. Yeah, we spell it out there he goes, yeah, yeah, I have the book. It was stuff like that where, you know, I hadn't been directly working with the guy. And I don't know, you know, I think he probably got some other life insurance person who wasn't out of our program maybe to set those initial policies up because obviously our people would have know talked about those different features. But my point just being that, you know, just because, like, I've had people who listen to the podcast and then ask me the really basic questions. So it's just showing repetition. You know, this, this stuff is difficult. It took me a while for to absorb it. I'm always still learning. You know, as you guys, I'm sure would attest, every time we get together with other people affiliated with the institute, everybody learns from each other. So this is clearly, you know, stuff that's constantly evolving. And so, yeah, sometimes I forget that people out there in the general public, if they're not even constantly immersed in this, they might miss something. And so it's good to be. To have repetition as far as how the institute gets formed. So real quickly, the backstory was, I went down to Birmingham eventually when Carlos introduced me to the book. And then David Stearns, who was running the IBC think tank, had me come down as a guest speaker just in my capacity as an Austrian economist, you know, give an update on the economy or something. And that's where I saw for the first time, I saw a portion of Nelson's seminar for the public. And then I saw the, you know, the IBC think tank. And then I, as I mentioned, Carlson and I wrote a book called How Privatized Banking really Works, which tried to sort of unite the Austrian school, its views on money and banking the business cycle with Nelson's views on using life insurance policies to become your own banker and just show the affinity between those two things. And so Carlos and I then were going around getting invited by financial professionals to give talks to local groups. They would assemble of either their clients or prospects. And so we'd be up there saying what I still think very correct things. But then we'd go get on a plane and go back home and we'd realize, presumably the reason this person hired us to come out here, that's gonna make the people he's talking to and who, some of whom he got to show up at this event, they're probably more willing now to go ahead and pull the trigger on whatever they've been discussing. And so since we didn't, you know, in the beginning, we knew everybody personally and we could rely on Nelson and David to just, you know, they say, oh yeah, I know that guy, he's a good guy. But we realize at some point, you know, this is, we're gonna have people we don't know asking us how do we do deal with that. And so eventually the solution we came up with was the Nelson Nash Institute and the authorized IBC practitioner training program. So that when people go through, they watch the videos, they read the manual, they take a test, and then only so when we're pointing the public to people, it's the graduates of our program. So we can say we know these people have passed the test in terms of just quizzing them on how would Nelson Nash say you should design policies. And they also signed an agreement with us that anybody from the public that we're funneling to them through our channels, they say, we want a Nelson Nash or an IBC policy. It's gotta be a dividend paying whole life policy. Because I do know, because you asked me before, Jason, I know there are some people out there who are trying to do IBC with different types of insurance policies. And that was something that Nelson was really against that, I think with good reason. And then, Richard, so you asked about the Austrian connection. So, yeah, Nelson had always been a big fan of the Austrian school of economics. Nelson was very passionate about his belief in the free market economy and was very skeptical of government intervention. And so that dovetailed nicely with the IBC view of sort of seceding from this existing system and just taking care of your own finances yourself. So there is that great symmetry there that as the Federal Reserve and the banking Wall street or your Bay street nexus is continuing to inflate and do all sorts of damage, that here's this conservative independent vehicle that you can use to sort of free yourself from the tentacles of this system that kind of ensnares people. So that all fits together. And like I say, the thing that really crystallized it was when Carlos was the one to point out that it's not just that Nelson likes the Austrians and IBC is great, but that literally each household or business owner that implements IBC is one fewer person now contributing to the problem. Because in the Austrian story of what caused the business cycle, it's the banking system inflates the money supply and that pushes down interest rates artificially low. And that's what sets off the unsustainable boom. So the fewer people that are participating in getting loan from commercial banks, that minimizes the problem.

And that's why it's so integral and important that the institutions that we're working with to set up these policies through their participating accounts are a non inflationary oriented system versus in the commercial banking sector, deposit taking commercial banks where they have the fractional reserve capacity. Is that correct?

Yeah, exactly. So what you said is perfectly fine. Let me just paraphrase. So it's commercial banks right now in the us, Canada, Europe, major industrialized economies, the way they work, they engage in what's called fractional reserve banking. And so as I'm sure your viewers all know, if you go and you have $100 in currency, pieces of paper and you deposit it into your commercial bank checking account, your ATM balance, your electronic balance, if you check it on the ATM or on your computer or something goes up by a hundred dollars. So you think, I have $100 more in my account now. But the bank doesn't keep that all physically in the vault. They of course can lend a bunch of that out. And so the person that let's say they lend 90 of it out, so if they lend 90 out to somebody else, well, that person now thinks he's got 90 extra dollars than he had before he took out the loan.

Right.

He can look at it. I got it right here in my hand.

Yeah.

So because of that, there's a genuine sense in which the bank through that transaction or that behavior just increased the amount of dollars in Canada by 90. And so the point is, a life insurance company, if Instead you put $100 into your life insurance policies, then someone else wants to borrow it. It's not nearly, it's not the same process. The life insurance company needs to have the money to be able to give it to someone else. And in the community at large, people don't accept claims on the life insurance company the way they accept claims on banks. And that's really the central thing, is that the reason banks, commercial banks, can get away with this is, and it's so distortionary, is because claims on banks are treated by the community as largely being equivalent to actual money. So if you go into the grocery store and the bill at the register is $50, you can pay with actual currency, or you can take your card and swipe it. And what that is is saying, you know, my bank owes me $300 because I have 300 in my checking account, and now it's only gonna owe me 250 and it'll owe you 50 of it instead. That's really what's happening when you swipe the thing. It's who the bank owes that money to. Now, some of it gets diverted to the grocery store. But that's literally not the same thing as them having a $50 bill. Right? It's just they have a claim technically on that bank, but they're willing to accept that at par because they view the bank as being good for it. So that's really the issue. And that's why if the banks expand loans, in a sense, the community has more money now, and that can push up prices. Whereas life insurance companies. It's not that you can just go into the grocery store and say, okay, well, right now the life insurance company says, I have $100,000 in my cash value, but let me just swipe this card. And Now I'll have 99,950, and you can have 50. Like, they'll say, what are you talking about? No, that's not, you know, that's not a valid form of payment. Here is what they would say. Wouldn't even know what you were talking about. So because of that, that's why life insurance policy loans are not the same thing as money. And why when you take out a loan to buy a new car, you take out a policy loan, that's not inflating the number of dollars in Canada in the same way that a commercial bank, if it grants you a loan to go buy a car, is inflating the number of dollars in Canada.

That was such a great example to walk through.

Cool analogy. Yeah.

Really, really good.

You got to do that think tank next year. That's really cool.

You know, Bob, one of the things that we get asked, especially with people who connect with us by listening to your podcast that you and Carlos do, one of the things that people want to know occasionally is so what is your view on the economy presently? We just of course are experiencing a lot of upheaval in the markets because of the coronavirus. And these are things that are not exposing policy owners to danger. But what are you seeing in the banking sector that's transpired since the last financial crisis? What are the dangers there that people need to be aware of?

Well, sure. So that's a broad question. Let me just give some answers and we can take this whatever direction you guys want. So as you know, I've been warning that I think asset prices, so I have a US focus because that's where I live and I have more, the data is at my fingertips more. But I think a lot of what I would say qualitatively would apply to Canada and many European countries as well. That since the financial crisis of 2008, the US Federal Reserve and other major central banks, their response was just to pump in more money. And not just generically, but they are also even buying assets, so called toxic mortgage or toxic assets, the mortgage backed securities and so on. So that really distorted markets that firms that had made really bad decisions during the housing bubble years should have been allowed to fail. And that would have been their punishment. And it's not just because like we're school moms and we want to punish the naughty children, but because that's how a market economy is supposed to work that you leave it open. So speculative entrepreneurs, if they see the potential for a big gain, they can take a risk. But if it blows up in their face, they need to suffer the consequences. Otherwise that's going to encourage irresponsible risk taking. That's the way you balance risk, reward and risk. Okay, so that was a problem. And that I think set the world economy, the major economies up for another crash. And so I've been. And especially with the yield curve inversion that happened last August, that's a standard signal, that's not just an Austrian thing. Like many commentators agree that since World War II, every time the yield curve has inverted the way it did, a recession has followed within 18 months, let's say. But based on that, I had thought, I gave that presentation, you guys saw the think thing saying I thought a recession was going to start this summer. And then, you know, that typically means stock prices start falling beforehand as investors see that coming. So the fact that we're having this big drop. So as we're recording this, we just had in the US market the worst week since 2008. I don't remember the exact number. I think it's down like 13% in a week. And so, you know, that's. I was expecting things like that anyway. So I think part of it is the coronavirus sort of gave traders an excuse to sell. In other words, I think that this, a lot of people are saying, geez, this seems like a really big sell off just because of the virus and the impact it might have on production and supply chains. And I would agree with that. But I think what happens when you're in a bubble, the higher it gets, more and more people start saying, okay, this is unsustainable, but it's the kind of thing like, well, yeah, but you don't want to miss the gains if it keeps going up. Right? So the definition of a bubble or when does the bubble end? It ends. What it ends, you know, once it starts falling, then everyone's gonna say, yeah, what were we thinking? And that's totally what happened with the housing market. I don't know how bad it was in Canada, but in the United States certainly, like people on financial shows like CNBC and whatever, somebody would mention that, hey, the market, housing market seems overvalued. I think it's gonna be a sharp correction. And they would literally be laughed at. They were just saying, no, no, we think you're right. They would laugh at the guy. And what he was saying ended up being totally correct. So I think that's the situation with equity price. Also with Treasuries, the yields being so low, even though under the Obama administration and Trump administration, they're just piling on the debt in a level that the US hasn't seen since World War II. And the fact is happening in peacetime and now with a decent economy is just mind boggling. So I think there's a lot of fundamentals showing why US markets in particular, but also the Canadian market, I think by extension was very fragile and vulnerable to a big drop. And like you said, Jason, this is all the more reason for people who are considering IBC to accelerate their consideration. So to be clear, IBC makes sense. Whether the future looks great or horrifying, you should always become your own banker. That's never a bad idea. But if the future is bleak, and especially if you're somebody who's right now plowing everything into conventional equity markets because you've been told, oh yeah, the gurus just say buy and hold, don't time the market. You can't know when something's coming. Well, there's a growing number of people that are saying that this market is really fundamentally overvalued. And maybe they're wrong, but I think their arguments make a lot of sense. And so in that environment in particular, it would definitely make sense, I think, to really begin IBC aggressively if you're considering it.

So while this massive drop just happened that you identified, and again, you know, there's, there's correlation to what's going on with the coronavirus here presently at the time of this recording. And it's, it is having that huge impact on the markets. There's other things impacting it as you identified, you know, what's, you know, from an economist perspective with someone who is say, practicing and implementing the IBC concept, utilizing the vehicle as you identified, using dividend paying, whole life. Talk a little bit about the insulation that they have in relationship to those markets and why they're receiving some of those, that insulated risk component relative to those huge market drops and that volatility that we're seeing in the typical marketplace.

Okay, sure, yeah. And that's one of the things, I think, Jason, you had asked me originally, what kind of stuff's in the case for ibc. So, yeah, that's one of the things we covered in there that Nelson didn't explicitly address in his book was just to say, you know, well, how safe are these life insurance companies? You know, you're, you're in all other ways, you're worried about how the economy is going to crash. Okay, so if I get a bunch of my wealth and cash value life insurance and then all the life insurance companies go bust. Right. So obviously, you know, if the earth opens up and buildings are falling in and whatever the meteor strike, I can't rule out extreme scenarios, but in terms of just pretty bad financial crashes, the life insurance sector is remarkably robust. The famous historical analogies or illustrations of that, that in the 30s, again, I'm speaking for the US experience, the Canadian system, by the way, you guys didn't have systematic commercial bank failures, among other reasons. And what people like Milton Friedman would say is because your government allowed for what's called branch banking, excuse me, a lot of syllables there. Whereas in the US they had a lot of prohibitions on that. So it was like the local banks servicing farmers in one area, they couldn't be linked in terms of bank branches that were seven states away. And so that's why if there was a bad harvest, all the banks that had mortgages based on those farms and that region might go down. And so that was part of the reason that during the 1930s in the US you had thousands of banks fail but you know, because our system was more vulnerable because of silly government regulations on what the commercial banks could do. But in any event, you saw, like I say, thousands of commercial banks went down in the early 30s and people turned to their life insurance policies and, you know, they, they were made whole there. So that's just an example showing in the real world when there's a massive catastrophe financially, the life insurance companies were more resilient. Not, not just compared to like Wall street stocks, but even compared to the banking system beyond that, I mean, in the case for ibc, we just show the asset distribution. So what ends up happening is when you send your premium payments into the life insurance company, of course they don't just put it in the vault as currency, they go and buy assets with it. And they'll grow over time. And that's how they match their liabilities to their assets to make sure when people die, they can make the death benefit claims. And that growing portfolio of assets is also the means with which they can afford to then have growing cash surrender values to all the policyholders who have those types of policies in force. So the question then is, okay, in a bad economy, what kind of assets the life insurance companies have? And they typically have pretty safe stuff. And we have the specifics at least as of the latest numbers when we publish the book in the case for ibc. But it's a lot of fixed income things, you know, fairly conservative bond or even some other assets that are still fairly conservative. So it's again, a matter of degree, but certainly it depends what you're comparing it to. But the life insurance sector is pretty robust and the people making those investments are fairly conservative. I mean, the fundamental thing is life insurance companies, they want to be boring, right? You're not. That's the virtue. You're not investing in life insurance to get that great quarterly return. The prospect, you know, I'm saying that that's, that's what you invest in a hedge fund for life insurance is supposed to be boring. The whole point is they're saying, you know, that their business model is to say you give us premium payments and you can just relax and know that if you happen to die next week, you know, your estate or your widow or whatever is getting this big check. You don't have to worry about, oh gee, did we invest in the right thing? So that's the idea. So by design, they're very conservative because again, they're not trying to impress investors with a high rate of return in terms of their asset portfolio.

I would Also I would add to that and say that our belief is that life insurance companies, in particular mutual life carriers, are some of the most financially solvent institutions on the globe. Nelson would share that your money must reside somewhere. And when someone is looking at investing money in stocks and Nelson would share that the stock broker or the analyst would have an opinion on whether you should buy, hold, sell. And the actuary is referencing data based on millions of pre screened insured lives. And he would ask a question to help you rethink your thinking. He would ask, who do you think has the better data? And so when you can store capital inside of a life insurance company and you have a unilateral binding contract and 100% of the risk is shifted to the insurance company away from the policy holder and the insurance company can't encroach on the value of that contract because they don't own it, they're only administering it. And you're shielding capital from tax risk and investment risk and market risk and liquidity risk and the list goes on and on. How much capital do you want residing there? You know, as much as possible, I.

Would argue because when, when markets change and shift and they do, they always do, right? Doesn't matter if it's what, what the market is, it's the bond markets, the real estate markets, the stock market, it's the, it's the precious metals marketplace, any of those, it doesn't make a difference. Opportunities are going to present themselves and opportunities look different. As our friend Ryan Greg says to those who are under capitalized, don't have access to liquidity and control over a large pool of financial value and capital.

Right.

Those that are over capitalized, they have access to a large pile of financial value and capital.

Well, and you assess opportunity differently when you have ready access capital, but opportunity will most certainly track you down. Bob, was there anything else that you wanted to add to. And again, we're emphasizing the case for ibc, but the book titled How Privatized Banking really Works is also available from, from our bookstore. These reading materials, they will provide you with an abundance of clarity on this process. And it goes without saying to have Nelson Nash's book Becoming youg Own Banker is really the, the foundation, I guess, if you will, you know, on this process as he developed it and founded it and he would always ask us a question. How long do you think a skyscraper would stand on a weak foundation? So I think what we really, really want to express to our listeners is that we're going to include in our show Notes A variety of different methods that you can tune into and read and listen to some of the material that Bob and Carlos Lara put out there for the general public. And all of it is valuable.

It's incredible. There's some unbelievable content there. I reference it frequently. I tune into Bob's podcast. I love them. I think they're fantastic. Not only is he a ridiculously smart individual, he's also quite entertaining. And if you ever have the chance to watch Bob perform in karaoke, you have, you have an incredible opportunity there.

Wondering why we didn't do that this past think tank.

You know, now I think it's because I'm too old.

But, yeah, I was in bed by like nine o' clock on one of the nights.

So with that in mind to close out our show, you know, I think, Jim, Jason, I'd like to maybe have you walk Bob through our final question and we'll capture his interesting take on that.

Yeah. Thank you, Richard and Bob, it was such a pleasure to have you on the show. We'd love to have you back. And we just know that our listeners are going to love it. Please rate review this episode and share it with others who you think would benefit from the gift of the knowledge that's been communicated here today. And we always end our podcast with a specific question, but we preface it with that, you know, not all heroes wear capes. And so you might not think of yourself as a hero per se, Bob, but every time you create value for other people, you're benefiting them and making life easier or better for them in some way. And so our question to you is, who do you want to be a hero to?

Well, that's a great question and I appreciate all the kind things you guys said said there. What I try to do, you know, I was looking because I do a lot of different things and I was trying to go through, like, what is the common element in it? What I really try to do is explain things to people so that they can really understand it. So it's not even that I'm trying to get them to agree with whatever my take on it is. But I know there's a lot of complicated things. You know, certainly my background's in economics and, you know, the financial sector, life insurance and so on. So that stuff that might have taken me a while to learn and finally, like, oh, and it clicks. And then I realize that, okay, now I see it really clearly. And then I try to figure out how can I save other people time? Like, how can I get them to this clarity that it took me two years to get to. Is there a way I can come up with an easier way to explain it so that they don't have to go through and read all the stuff I just did? Like, can I get them, you know, to that understanding more quickly? So that that's what I try to do for people, just to give them clarity and to save them time. Because I know not everybody has the time to devote to reading Federal Reserve minutes and so forth.

Well, on that note, Bob, thank you again so much. We're very grateful to you and thank you for committing some of your time from your busy schedule to join us today. And we do look forward to having you back again real soon.

Thanks for having me, guys. It was a pleasure. Thanks for all you do.

Thanks for listening to the Wealth Without Bay Street Podcast where your wealth, wealth matters. Be sure to check out our social media channels for more great content. Hit subscribe on your favorite podcast player and be sure to rate the show. We definitely appreciate it. And don't forget to share this episode with someone you care about. Join us on the next episode where we continue to uncover the financial tools, strategies and the mindsets that maximize your wealth.