top of page

A Tale of Two Systems

Updated: Apr 26

It was the best of times, it was the worst of times....

OK, I'll stop there quoting A Tale of Two Cities, but isn't that kind of where we find ourselves? We live in a time that has more abundance and availability of goods and services than our forefathers could have ever imagined. We also live in a time where there is much financial uncertainty, both as a nation and as individual households, and the current plan of action seems to be to just kick the can down the road.

We were born into a world monetary system that we did not get to vote for, and in which we really have no say so. It's just the way things are. However, there is an alternative. It's a return to our roots, so to speak, considering the way our grandparents and great-grandparents thought about money and saving. What is this system, you ask? We'll get to that, but let's take a closer look first at the one in which most of us are currently participating.

Everything changed in 1913. This is the year that the income tax was first adopted, and also the year that the Federal Reserve was formed. You might be surprised to learn that the Federal Reserve (or the FED, for short) is about as federal as Federal Express. It is a central banking system owned by the biggest banks in the country, which are in turn owned by about 10 very wealthy families. This is who is calling the shots on our monetary policy, and this is who has supplied our government and banking system with a seemingly free access to the the money printing press. Now you have to ask yourself....who are they in business to benefit?

You might also be surprised to learn that the money you put into the banking system doesn't really belong to you anymore. In essence, you are given an IOU of sorts, that states that you can come back and get money from the bank according to what you have put in. That's all well and good as long as the banking system has plenty of cash on hand. The problem is, or can be, that they don't keep that cash on hand. Banks participate in what's know as "fractional reserve" banking, which basically means that banks are only required to keep a fraction of their balance sheet in reserve. The rest is lent out to other borrowers at a much higher rate than they are paying you.

Let's say that a bank pays you 1% on money that you store there, and they loan it out at 4%. What is their profit margin? If you said 3% you would be mistaken. Let's put it in terms of real dollars on $100 deposit. They pay you $1 in interest to be able to loan that same $100 out to someone else and make $4. They have paid $1 for the opportunity to make $4, for a return of 300%! That's a great business model, and the stockholders of the bank should be very proud. They are providing a service, and again, it's what we're used to. But who are they in business to benefit?

Now let me pose a question. Let's say that you have money on deposit with the bank, and decide that you'd like to start up a new business venture. Where do you go to get the capital that's needed to bring your idea to life? Well, you go to the bank, of course. Who decides whether or not you can obtain that loan? Well, the banker, of course. Who decides how you will repay that loan? Once again--these are not hard questions--the bank does. They are in control of every part of the loan process. Now this is understandable, seeing that they are putting their capital at risk in order to loan you the money, but at the end of the day, they call the shots.

None of this is wrong or evil, but there is another system that you could choose to participate in. Imagine a different type of monetary system, a system in which the purpose of its very existence was to benefit its participants. It is a system in which a group of like-minded individuals got together to pool their resources in order to spread out the risks that are inherent in life. It is a system in which the individual can take control of all banking operations (and the profitability thereof), except for maybe a checking and savings account. In this system, people would save their money and finance the needs and opportunities of life from a reserve that was 100% backed, instead of just a fraction. They would pay interest on loans back into a company in which they were a part owner, and that paid them a dividend each year the company was profitable. They wouldn't need to apply for a loan, they would just request it. They wouldn't have to pay it back on anyone else's schedule, or even prove that they could repay it. After all, the company loaning the money was also the one holding their collateral. Oh, and by the way, that collateral was guaranteed to go up in value each year, even when money was borrowed against it. Can you imagine such a system? Would it not be the epitome of peace of mind and simplicity? In fact this system has been available (and profitable!) for hundreds of years. It is dividend-paying whole life insurance from a mutual company.

Now, if you need to take a minute and pick your jaw back up off the floor, that is allowed. It's not just any kind of whole life insurance, but policies that have been specially designed for high cash value, so that they are optimized for what is known as the Infinite Banking Concept, or IBC for short. This concept was discovered in the 1980's by the late R. Nelson Nash, and made widely available through his book Becoming Your Own Banker. If this type of system sounds appealing to you, there is your step 1. Read that book. Open your mind to the possibilities of a system that not only has multiple benefits for your life, but also has the potential to leave a legacy for the generations that come after you. In summary, I'd ask you to consider the two paths before you, for just having this information does truly place you at a crossroads. To quote another famous literary work, "I took the one less traveled by, and that has made all the difference."

19 views0 comments

Recent Posts

See All


bottom of page