Fractional Reserve Banking Creates Inflation: Infinite Banking is the Solution

Inflation causes everything to feel more expensive, so what do you do to protect your money from inflation? Today, we’ll explore the link between inflation and fractional reserve banking, and how Infinite Banking is the sound money solution.

A thought-provoking journey through inflation, fractional reserve banking, and the revolutionary concept of infinite banking. This episode promises to demystify how the traditional banking system and increased currency supply fuel inflation, challenging widespread misconceptions. You’ll gain a deeper understanding of inflation’s root causes by contrasting liberal views with Austrian economic theories, and learn how your everyday choices can influence market prices.

Next, we shift gears to tackle the often-overlooked topic of healthcare pricing elasticity. Hear real-life stories about how informed consumer decisions can lead to significant savings on prescriptions and medical procedures. Discover practical strategies for price negotiation without confrontation, and understand the ripple effects of increased money circulation on the economy. We’ll also discuss the impact of government policies like minimum wage hikes on business expenses and overall market pricing.

Finally, explore a smarter financial strategy that sidesteps the pitfalls of fractional reserve banking. By leveraging whole life insurance policies, you can protect your assets from inflation and achieve greater financial security. Rachel and Bruce explain the benefits of mutual insurance companies, which maintain robust reserves, and how these practices can create a more stable personal economy. This episode is packed with insights and actionable advice to help you take control of your financial destiny and build a prosperous future.

So, if you want to learn how to ensure more economic stability and prosperity, tune in today!

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What is Inflation?

We all feel the effects of inflation, but what is it really? Inflation is when a dollar becomes less and less valuable. Inflation is why bread used to cost a couple of nickels and now costs more than a couple of dollars. And one of the major reasons for inflation is that our banks continue to pump more dollars into the banking system, decreasing the overall value of a single dollar. 

Fractional reserve banking—our current banking system—allows banks to keep only a fraction of their customer’s money in reserves. This means that banks can do more business than what they actually have available. While this can stimulate the economy on some level, this also means that money is being created out of thin air. And when this happens en masse, it can create major instability. After all, the more money in circulation, the more prices begin to creep up to match.

The Nature of Banking

Let’s look more closely at how banking, as most people know it, works. If you deposit $1,000 in the bank, your institution is not required to have that exact amount in a vault somewhere just for you. In fact, they’re not even required to have that $1,000 at all. They’re only required to have a fraction of that on hand, right now it’s somewhere in the ballpark of a 1 to 10 ratio. So of the $1,000 you’ve deposited, the banks only have to keep $100 on hand. 

When you take a loan from the bank, they’re “creating” that loan out of dollars that do not exist in their reserves. And then you’re paying it back with dollars that do exist. Just the actions of taking loans with our banking institutions are inflating the money supply. Then what happens if you want to liquidate your account, if the banks only have 10% on hand at a given time? 

These are all things that can make banking tenuous. And yet, by taking control of the banking function with whole life insurance, you can mitigate a lot of this harm. When you take policy loans, for example, you’re borrowing money that does exist (because life insurance companies have to keep full reserves), and backing it with your cash value as collateral.

And what if you could make private loans to friends and businesses in need of capital? Wouldn’t that prevent an inflationary event, because you’re loaning them money that’s real and backed by collateral? While this isn’t going to reverse inflation, it can significantly help, while also making sure that you’re not at the mercy banks to get money.

[39:32] “The reason why Infinite Banking is different is because 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 moral basis, on a personal basis, you are saying, ‘I am not choosing to create this inflationary environment or the rest of the economy.’”

Resources:

• Khan Academy
  • (More specifically, here’s the Inflation unit)

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