Sign Up for the Lara-Murphy Report!
Carlos Lara and I are launching an electronic newsletter (scroll to the bottom of this page), with the first issue coming out in September. The “Lara-Murphy Report” will come out monthly. Every issue will feature an interview with a prominent financial or economic figure, an article from Carlos applying insurance and/or trust products to household or corporate needs, and an article by me on a macroeconomic topic. We will also have a “Pulse on the Market” giving a quick rundown of what’s happened in the financial world since the previous issue.
For our inaugural issue in September, we have an interview with Morgan Stanley’s Caitlin Long. (This is the woman who wrote the recent FT piece on Hayek.) Caitlin is an expert on insurance, and she will discuss the connection between investment banks and major insurers. (In our new book, one of our major themes is that individuals should pull their money out of the Wall Street/Fed nexus and put it into whole life insurance policies.)
For example, insurance companies do buy derivatives, but for hedging purposes. They try to match the duration of their assets with their liabilities, and if there’s a mismatch they will use derivatives to plug the holes. For another example, the issue of leverage is very interesting. On the one hand, investment banks clearly have more leverage in the traditional sense, and are more vulnerable to a financial shock. On the other hand, there is a sense in which insurers are extremely leveraged–if every policyholder died of a heart attack tomorrow, they would be up a creek.
In the September issue, Carlos will discuss the way a household can use a trust to shield its assets from creditors and the government. This is one of Carlos’ core businesses; he has been meeting with individual clients and setting up trusts since before I knew the proper pronunciation of Mises. Of particular interest to those who are fans of Nelson Nash’s Infinite Banking Concept, Carlos will show the interrelation of using whole life insurance policies as a major asset embedded in a trust.
Finally, I will be writing up the presentation I gave at our Austrian Workshop in Nashville in July. Specifically, I will show how Austrian economists knew that the housing bubble was going to burst. I will go beyond the mere qualitative statements like, “The Fed distorts interest rates,” and show the specific things that led me to declare (as early as July 2007) that this would be the worst recession in 25 years.
So check out the revamped website and bookstore. Our new book, How Privatized Banking Really Works, is available. (We have switched to a different “shopping cart” software, so the kinks in the shipping charges that some of you experienced two weeks ago should be ironed out now.)
Check out the cover of the Lara-Murphy Report, and hop on board the train. Everyone’s doing it. If we get enough subscribers, it will be possible for me to work on those deep macro questions that many of you constantly email me about. Wouldn’t it be nice if I actually answered you for a change?
Caitlin is an expert on insurance, and she will discuss the connection between investment banks and major insurers. (In our new book, one of our major themes is that individuals should pull their money out of the Wall Street/Fed nexus and put it into whole life insurance policies.)
I guess that’s one thing I still don’t understand: in what sense am I really decoupling myself from Wall Street and the Fed by having a whole life insurance policy? You recommend a mutual one, so that’s covered — it’s owned by the members. But then, when they have all this money, what do they invest it in to get these returns?
I assume they’re the people (suckers) who are saying, “30 year government bonds at 3.5%? Lemme buy!” And then, of course, bonds from extremely blue-chip companies, which are probably the most government-entangled of all. (And it’s not like they need to hedge against inflation.)
Do I hear a topic for a Lara-Murphy report in the near future?!
Quick answer: At the very least, it’s is still helping if you stop taking out loans from commercial banks, and (indirectly) own bonds rather than equity in Wall Street firms. People who held a portfolio of bonds issued by S&P 500 companies did much better in 2008 than people who owned stocks from the same companies, right?
NOTE: I’m not conceding that the above are the only differences, I’m just saying, even if that were it, this would still be significant.
I was never planning to take out a commercial loan (unless credit unions count?), and fixed-income securities aren’t exactly the ideal investment for a high-inflation environment, even if they did do well during a low-inflation flight-to-quality.
It just doesn’t feel like “fighting the power” when I hold the bonds of well-connected large companies and governments.
I may be missing the point but I’m not sure that loans from commercial banks are inherently bad. It seems to me that a long-term fixed rate loan could even be considered an “investment,” provided the interest rate is below the real inflation rate.
Is my logic faulty?
If the commercial bank doesn’t practice 100% reserve banking, then when you take out a loan, you are helping the bank create money out of thin air. Put differently, if nobody took out loans from commercial banks, then they couldn’t expand the money supply.
I just finished the book last night. I think you guys have really hit on something with this. I have read a large amount already on the first two sections in the book, but for people who don’t have a grasp on money and banking this gives them a good primer. The third section really is the difference maker. I think you guys have presented a very good case for whole life insurance as a means to become your own banker. I now want to read Nash’s books on it and really learn how to put the plan into practice.