31
May
2016
How-To Guide for Newcomers to the Infinite Banking Concept (IBC)
In this first of a two-part series on the Lara-Murphy Show, Carlos and I start from scratch and tell newbies what they need to do to prepare for implementing IBC for their households or businesses.
Hey, I like these talks, I’m not trying to criticize here.
I think I’ve pointed out before, that modern banking essentially operates around the concept of instant gratification, not saving your pennies. We can start a discussion on the good and bad side of that, by all means. Just let me start that discussion by mentioning the concept of “consumer sovereignty” where the business tries to serve the consumer in order to get their custom. Clearly people buying actually like their instant gratification loans… the sovereign consumer has made a decision, in favour of the bankers.
Now I agree that your method of savings first and buying later will be a good method to discourage monetary inflation. That’s quite logical. The problem here is that for the individual making a purchase (now) that monetary inflation isn’t really on their radar… why care? It may inflate prices in future, but that just means the price of the house I bought ends up increasing which is itself a good reason to get in and buy early…
Can you see where I’m going with this? Inflation ends up being a collective action problem, requiring some general contractual agreement between individuals that none of them will get tempted by instant gratification, and all will agree to keep the money sound. I just don’t see how a handful of people refraining from participating in modern banking would change things.
It’s kind of like the Amish protesting modern technology… they are no doubt very dedicated people, and may have valid grievances… but the new technology still keeps coming… because people are attracted to it.
“I just don’t see how a handful of people refraining from participating in modern banking would change things.”
As with all things libertarian, it’s only meant to change things for those individuals who refrain.
*That individual* is more protected from misleading price signals.
(Not that I’m pro infinite banking – I haven’t learned much about it.)
“Clearly people buying actually like their instant gratification loans… the sovereign consumer has made a decision, in favour of the bankers.”
Loans are not, themselves, purchases of consumer goods, for what it’s worth; And I’m under the impression that this point would matter for your larger “collective action problem” premise.
If it worked like that, it would make a lot of sense.
Trouble is, one guy is saving up to buy a house… and the other guy goes straight to the bank to borrow fictional reserve money. Well the second guy gets first bid, because saving for what you want requires patience. By the time the second guy gets some savings together prices have gone up… inflation is eating those savings. Both guys face the same inflated market prices. No one gets protection.
Instant gratification is a significant advantage in being able to bid on resources. That’s the point.
Isn’t that part of the modern banking scenario, though?
I was trying to say that sound money would protect those individuals that used it.
(I don’t consider paper or such things as bitcoins to be sound money, btw.)
Yes exactly, it’s also the banking scenario that your government wants you to use (and they can be persuasive).
But only if those individuals can decouple themselves from other people’s capacity to inflate the monetary supply. For example, if they practice IBC where all contracts are denominated in silver, then they have no concern about inflation in USD. Even in that situation, the asset you want to buy (e g. a house) might go up in price faster than silver does (just as an example) but it might not.
Besides, the buyer who chooses instant gratification also gets a place to live instantly, which can be useful at times. Modern banking is very attractive, not because people are stupid, but because it gives you what you want.
“Even in that situation, the asset you want to buy (e g. a house) might go up in price faster than silver does …”
I think what you have in mind is a situation where both houses and silver are being valued in FRNs.
But when I imagine escaping from modern banking, no FRNs are used. So it wouldn’t matter what the FRN prices are.
“Besides, the buyer who chooses instant gratification also gets a place to live instantly, which can be useful at times.”
There are plenty of places to live instantly if people ignore building codes, zoning laws, Minimum Wage laws, and tax laws.
(The more wealth that’s accumulated provides an increasingly greater ability to protect yourself from the health risks of ignoring the otherwise good parts of building codes – which is why, as per Walter Block, the slumlord is a hero of sorts.)
And under modern banking, the instant gratification comes at the expense of later users of FRNs.
It’s also a gamble that, when the economy corrects for the malinvested resources, that you’ll be the one who gets to keep what was bought with FRNs.