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Jan. 1, 2022

IBC And The Fear Of Inflation

IBC And The Fear Of Inflation

One of the biggest talking points in 2021 has been inflation with government reported CPI at numbers not seen since the early 1980's. Will inflation be "transitory" as Fed Chairman Jerome Powell stated or is it here to stay? More importantly for Infinite Banking, does IBC still make sense going into 2022 and beyond if inflation persists?


One of the biggest talking points in 2021 has been inflation with government reported CPI at numbers not seen since the early 1980's. Will inflation be "transitory" as Fed Chairman Jerome Powell stated or is it here to stay? More importantly for Infinite Banking, does IBC still make sense going into 2022 and beyond if inflation persists?

We tackle why IBC still makes sense in a world with rising inflation so you'll want to take a listen to this episode. As we continually remind listeners, you'll never be in a worse position by having access to cash, especially in a world with so much uncertainty!

For more information on getting started with Infinite Banking or if you have specific questions we can help answer in future episode, get in touch with us at www.TheFifthEdition.com.


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Transcript

- In a move against inflation, the president has just refused a collect phone call from Henry Kissinger. Mr. President, why didn't you pay for the call? ♪ Oh, Oz never did give nothing to the Tin Man ♪

- There's the doorbell. Why it's Henry Kissinger. How did you get here so fast? ♪ I straddled that Greyhound and rode into Raleigh ♪ ♪ And on across Caroline. ♪ Mr. Kissinger, what are people in the rest of the world saying about inflation?

- All right, welcome to episode 43, titled "Infinite Banking and the Fear of Inflation". Think we have a fun one. I know this topic definitely gets me fired up. We're going to be talking about how the Infinite Banking system works, even when we are dealing with rising inflation. We have gotten questions as the numbers, the CPI numbers have been creeping along this year, and the questions that we get pertaining to IBC is, does this still work when inflation is 6%, 8%, or whatever the government tends to report CPI at? And with all the printing that's going on and the fiscal deficits that's going on, you know, how does, how does IBC work when the world is seemingly getting more expensive every single month? So we're going to discuss how IBC works in the macro, given the state of things with inflation, and we're also going to talk a little bit about what exactly inflation is, because, let's face it, we don't learn this stuff in schools, you can get a four year degree and you still don't really understand what causes inflation. So we'll talk a little bit about that, and try to keep this reigned in to IBC too. But just to forewarn you, I may go on my little rant because inflation is definitely something that fires me up. And hopefully by the end of this episode, it fires you up too, because if you really understand what's going on, well, like Nelson used to say, you'll know what the solution is. So, John, let's get this started.

- Sounds good. I mean, you know, inflation is a, it's one of those things that I bet a lot of people that listen to this podcast are probably tracking the effects of inflation, but there are so many people out there that really just consider it something that just happens. Like they think it's just a natural phenomenon almost, like why does the, why did the prices of things keep going up? And it was funny. So we had a little recording snafu when we first started this. And so we decided to take a quick break and wait for the disruption to end. And while I was doing that, I was on my Twitter and Thomas Sowell came up on my Twitter feed. If you're, you know, a lot of, again, a lot of people might know who that is, but if you don't look him up. And it was right on the topic that we're discussing today. And he said, you know, one of the biggest taxes is one that's not even called a tax, it's called inflation. When the government spends money that it creates, it's transferring part of the value of your money to themselves. You know, I get into political discussions and things like that, and, you know, I guess social discussions and when, when we start talking about things that aren't working the way we hope they would, it almost always ends up with a discussion of inflation, because it ends up getting, you know, where, if you're talking about disparities in the, in the world of economics, if you start with the very fabric of what our economics society is built on and you start affecting that and making it, making the denominations of that fabric less valuable, well, you can start to trace a lot of, a lot of the effects of what's going on, back to that. But it's such a crazy big discussion that a lot of people just don't even want to get their heads around it. So I think it'll be fun to talk about today, in terms of, you know, how it affects Infinite Banking.

- Yeah, absolutely. I think this is a topic that easily can go in so many different directions and, yeah, the challenges. Well, let's, let's try to reign it in specifically for IBC because that's why everyone is listening to the show. They want to know, well, how does inflation affect our IBC policies? And the biggest argument that I want to lay out for everyone is that look, we're, we're basically living in this fishbowl where everything that we do is denominated in dollars. What's happening, what the Euro, the pound, Canadian dollars. It doesn't matter. If you're in the United States, we're all dealing with dollars and we're in this rat race, we're on this hamster wheel and we're trying to get out of it. And the, the problem with the system is that we're constantly being pushed further and further on the risk spectrum. And for most people out there, and I say most it's like 99.9% of the people, what everybody tends to do, because there is no reward for saving money these days, everything gets skipped right along to, to the investing side of the spectrum. And that's what I mean, you know, people get pushed out further on the risk spectrum, where they're having to take so much risk with their money to just do what, stay ahead of inflation, because we all inherently understand that the value of our dollars is decreasing every single year. Well, Infinite Banking gives us the ability to have a monetary system, a financial system that is completely under our control, and we're not tied into automatically having to go out further and further on that risk spectrum in order to stay ahead of inflation. What I mean by that, those who practice IBC, don't have all their assets in 401ks, or in IRAs, which basically limit you to basically choosing for the most part, what wall street based products, where you're buying security stocks, mutual funds, ETFs, all to do what? Take more risk and try to stay ahead of inflation. With the IBC system, we have a financial system that allows us to accumulate what I call a base layer or a foundation of cash that is growing. Now, it's growing conservatively, we, we all realize that, but it gives us the power to do something that if all you do is a 401k, IRA, or maybe you have a brokerage account where you're, you're investing in securities and mutual funds and things of that sort, you don't have any true liquidity because all your investments are basically tying up what you're putting aside. With Infinite Banking, you have a base layer of money that allows you to choose other investments that can potentially help you outpace inflation. So you're basically taking ownership and control over a pool of money that is growing conservatively each year, but more importantly, you have the ability to take loans, borrow against that cash value, or what we call leveraging in and out of the policies in order to acquire other assets that will help you stay ahead of inflation. Let's take a little bit more into that first point there, because I think it's really important to discuss how IBC really gives you the freedom and control that you otherwise wouldn't have in our battle to stay ahead of inflation.

- Yeah, and you touched on a lot of really important points, and if I could, you know, go back and maybe reiterate a couple things. So when you talk about pushing people out on the risk spectrum, the risk spectrum, we could kind of break it down like this. If you, if you look at people who are saving money, the inflation is a negative to savers because people who are saving their money because we're making more of it and creating more dollars out there, devalues the dollars already in existence. And so what we're taught, and the reason this is important is your dollars are worth less year after year after year. And so we're taught by the financial institutions that in order to counteract that, you know, supposedly just natural phenomenon, they don't, they don't recognize the fact that it's the money printing that actually does that, in order to counteract that we're taught to take risk by putting our money into like the stock market and try to get a high rate of return that outpaces inflation. Just another way of saying what John Montoya already said. And I think the crux of the problem, or the crux of the matter is that, when you do that, you give up control over what's happening in your financial life because the second you put all that money into your 401k or into a brokerage account or whatever it is, you put your money into something where you have no control, you have no collateral, you take all the risk, and you're just kind of hoping that it's all gonna work out. And we're taught that if you just put your money in there, you'll definitely get an 8% rate of return over the long run or 10% or 12%, whatever they're telling you these days. And that's, that's how we're taught to deal with inflation. And so the trade-off is again, giving up control and taking all the risk. So what I think what we're saying with Infinite Banking is that we're now strategically accumulating capital in a way that allows, that gives us options. It gives us control. It gives us guarantees. And then because of the strategies that can fit around that, the Infinite Banking Concept, it gives us some options that we can do other things with our capital rather than give up control and take all the risk, and still outpace inflation.

- Yeah, and that's the reason why we call it the "and" asset or the "more" asset, because we have the ability to do more with our capital. If our capital is tied up in qualified accounts, controlled by the government and our employers, we, we don't have that control. And we can't leverage into other assets that are going to outpace inflation. So some examples of asset classes that have historically stayed ahead of inflation, real estate, gold, Bitcoin, and in the notes, I have Bitcoin, not crypto. And if you don't understand the difference between Bitcoin and crypto, I highly encourage all of you to check out "Bitcoin Audible" by Guy Swann. You can listen to that, probably the same place where you listen to our show. But if you want to learn more about specifically Bitcoin and how it's not crypto, I definitely recommend checking out that podcast. But those are three different asset classes that can help you stay ahead of inflation. And these are all assets that you can acquire using your Infinite Banking system, because the IBC system is an "and" asset. It is a "more" asset. It allows your money to work in multiple places at the same time. And the nature of this game of building wealth, and you kind of have to treat it like a game, is that, you want to give yourself more options. You always want to have more options. The more options you have, the better off you're going to be. When it comes to growing your net worth, there's definitely more options out there than what we get rained on with when it comes to, you know, the, the typical average portfolio, which is again, 401ks, mutual funds, ETFs, everything that wall street wants to sell. And I'm not saying all those things are bad things, they're not, but you have to realize that, you know, the old saying you don't ever want to put all your eggs in one basket. Well take a look at how you're quote unquote, saving money. If you're investing and all your assets are wall street based, you essentially have all your eggs in one basket. And even worse, if all your eggs are in a 401k basket, or an IRA basket, that's a basket that's controlled by Uncle Sam. When we're talking about inflation, well, who creates inflation? The government. Politicians. Why? Because they have the most powerful weapon in existence. It's the power to create and issue money. And it destroys our capital. And that's what really fires me up is, is that we work so hard to earn a living, and we get paid in dollars, and these dollars get devalued every single year. Now, the, the stated inflation goal or mandate is 2% per year. And so it's small enough that we don't really get too fired up about it, but over a generation, two generations, I mean, you're essentially losing half the value of your money. So not only is it harder and harder to earn a living these days, but once you do earn that living, guess what happens to that money that you do save? It starts to erode. Michael Saylor, the CEO of MicroStrategy calls it a melting ice cube when referring to dollars. And if you're not aware of this, I mean, you really should be asking the questions about what is money? how is money created? It's what really got me started with this whole, you know, rabbit hole of, you know, what can I do to somehow address this innately, inherent, just unfair system that we all have to live with and just accept. What can we do to take more control over our dollars, so that we can ensure a solid foundation, but also a solid future for not only ourselves, but for our kids too. And so IBC helps to address that. I'm going to turn it over to you, John, 'cause I don't want to keep going on my, on my rant, but maybe you want to continue on from there before I keep going.

- No, I mean, you're, you're hitting the nail on the head and I mean, inflation, penalizes savers. And if you want to look at discrepancies in the economy, you know, people talk about the 1%, you know, it's like if the Fed's mandate is 2%, why is it 2%? You know, why isn't it, why isn't it more? You know, why isn't it less? And you know, if, if you look at most of the people out there, most of the people are regular people who are working for a living and it'd be great for them to be able to just save money and not take on risk in order to make their wealth grow. But when you have any inflation percentage, like John's saying, it starts melting the ice cube. But what people don't understand is the people that get that 2% first, they are the one or 0.1%. Those are the people who get that inflated currency, that new currency that comes out, they get it first, they get to create more and more wealth with it while the other people, the rest of the, you know, by the time it gets to them, it's already been devalued. And so that's where the that's sort of where that idea of like a hidden tax or the inflation tax comes in, that idea. By the way, I fall victim to the same thing. I want to just, you know, kind of harp on inflation. But I think the, the point of this podcast is to talk about whether or not IBC still works in an inflationary environment. We're seeing some crazy, you know, short-term anyway, inflation right now. We don't know what that, how that's going to pan out in the long-term. But I think just getting back to the strategies to get away from this, you know, like John said, we're all, we're all working in US dollar. So, you know, unless you're going to start getting into, you know, different types of currencies and things like that, we're going to be working in US dollars. That, that's it. So what can we do to combat the effects of inflation? And one of them, as John mentioned, John Montoya mentioned, is we can have money in assets that beat inflation and that's good. And that's sort of like what people try to do in the stock market. And again, we're not bashing stocks and all those things, but it's really do you have something that will allow those to perform in a more guaranteed manner and get more out of them over the long-term, instead of trying to just beat inflation with assets, another way to beat inflation is by buying assets that create an income, because if you can create an income that's coming into you every month, every year, all of a sudden inflation is hitting you less and less, especially when you, if you're working, if you're creating like a quote unquote passive income, there's no such thing as a real, a true passive income. Everything's gonna take a little bit of work, but, you know, people that are going out there and buying, as John mentioned, real estate assets that are creating income for them, that supplemental income is something that will probably do more for anybody in an inflationary environment than trying to actually beat the inflation rate.

- Yeah, one more asset class that helps to maintain against, maintain value against inflation. And this is a really big one and I should have added it to what I had listed; real estate, gold, Bitcoin. It's businesses. Because if you think about it, what is the sole purpose of any business? It's to turn a profit, right? That's capitalism. In order for a business to stay in business, it has to be profitable. And what are we doing with a whole life policy? As Nelson would say, we're starting a business from scratch. And this is a business that is guaranteed to turn a profit. What type of business is it? It's a financial business. It's a money business. You are taking control of the banking function, giving yourself the ability to control your own capital. And what are you going to do with this business, if you have an employer mindset, not an employee mindset where you just let it sit and do nothing. Well, if you're thinking like a business owner, you're going to deploy that capital to acquire assets. So you're going to borrow at 5% simple interest to deploy that capital so you can earn 8, 10, 10 plus percent who knows what. The idea is, you're going to make that capital work for you. And you're going to earn a higher rate than your borrowing rate. When you are able to do that, you have a profitable business and the contract itself is already guaranteed by the insurance companies to be profitable. But now you are multiplying that wealth effect. The question that we're asking here, does IBC work with rising inflation? Yeah, it absolutely does. If you do it the right way. If you have the right mindset where you're deploying that capital to acquire more assets. So think like a business owner. Get out of that mindset where everything that you're doing is market-based with no control, because that's how people typically have their portfolio. It's being managed by someone else. And it's controlled by someone else. If you adopt IBC, and you adopt the right mindset, where you're going to acquire assets with the cash values that you accumulate, you are going to stay ahead of inflation.

- That's a great point, so Infinite Banking allows us to get in allows the regular person, anybody that can get into the business of banking in quotes. But now I've been kind of explaining it to clients like this, you know, Infinite Banking kind of has like two sides of the coin. There's the first side, which is the, you know, we use life insurance to strategically accumulate capital. And then there's the other side, which is the growth side. What do we do with that capital? What kind of assets are we buying? What kind of arbitrage are we finding out there where we can leverage life insurance, cash value to create and build wealth on the other side of it. And that, that same idea, like, I wouldn't say that we would leverage life insurance, cash value to go out and buy stocks, I wouldn't. I also, we might even get in, maybe we'll have an episode where John and I can talk about where we, where we don't agree. I don't, I don't actually, I'm not as huge of a fan of Bitcoin as an asset, just because I still think it's a little untested, John. And I like to argue about this one offline.

- Yeah, we do.

- So we'll make a fun episode about that. So, but my point is I own Bitcoin, by the way, so like, you know, I'm not, I'm not bashing Bitcoin, but what I'm saying is like, I wouldn't recommend going out and taking a loan to buy Bitcoin or to buy stocks. But what it does is if you have it and you have that guaranteed asset available, all of those other things, your stocks, your Bitcoin, all that other stuff, you can get more out of it in the future because you don't have to try to time the market to, you know, whatever other life events are going to be happening in the future. So regardless of what you think about any of those things, having both of them is going to, is going to make everything go that much more efficiently and that much safer.

- Yeah, I agree with everything you said there and, except for the Bitcoin part, which I think it would be fun if we had another episode in the future, specifically talking about how to utilize IBC, to acquire assets. I know we mentioned, or you mentioned possibly doing our next episode about acquiring real estate. And I think that'll be a really good one. Maybe a followup to that would be.

- Yeah, stay tuned for that one.

- Yeah, acquiring Bitcoin through IBC as well. I think that would be pretty powerful, cause I consider Bitcoin to be the anti-fiat, and what are we dealing with? Fiat. You know, that's the whole discussion about inflation. So I think that would be pretty powerful for listeners. But speaking about the power of money and the problems that persist in a world where there's constant inflation, I do want to mention that on the other end of the spectrum is deflation. And now we don't really hear too much about deflation, because for the government, it's the enemy of what they're trying to do, which is constantly grow GDP and grow their tax base, so they have money to fight endless wars and have endless programs to fund either through taxation or the silent taxation as you refer to it, which is inflation, of course, but deflation is also something that should be discussed because, you know, what happens when there is a restriction in the money supply? Well, we get the end of the business cycle, and we get what happens when money is basically taken out of the system. Well, bubbles get popped when that happens. We enter recessions when that happens. And so there, there really isn't any talk about deflation, but there was a book I read in the past month called "The Price of Tomorrow" by Jeff Booth, which I think should be a mandatory reading on your book list, if you're a book reader, or even on audible, listen to it on audible, it really makes a strong case for potentially a huge deflationary pressure that we could be running up against here in the next five to 10 years, because of the power of technology. We all realize that, you know, the price of TVs come down seemingly every single year, especially around this time of year, Thanksgiving and Christmas, but technology in general. I mean, we're, we're able to do so many more things because technology is constantly advancing and the pressure that it puts on prices and the ability to basically get more productivity. Well, it could lead to a lot of deflationary pressure and it's something that we don't even think of kind of like, money. You know, we're just living in a world with US dollars. We're also living in a world where technology advances and, well, what happens when artificial intelligence continues to advance at a fast pace, even an exponential pace? Well, there's going to be deflationary pressure. So there's that concern too.

- And the important thing to remember about deflationary events, when there's blood on the street, cash is really essential. And, when these bubbles burst, the people that are able to prosper, are the people who have access to cash because they can take advantage of buying assets for nickels and dimes, relative to their prior value. So I know inflation is a hot topic, but let's remember too, we live in this world that is artificially constructed to create inflation, but it comes in cycles. And when does a bubble burst? We don't know, but we want to have access to cash, which our IBC policies allow us to do so that we can take advantage of the next cycle. So something to keep in mind.

- I think that's interesting. I, you know, I have not read that book. That could be another good debate for us about deflation. I think it's all super interesting and it just gets back to having control so that you can take advantages, take advantage of changes in the future rather than react to them. And I think most of, most of the people out there are in a position where they're just going to end up with whatever they end up with, and, you know, like by the time they get to retirement or by the time you get to, if you're not planning on retiring, if you just, you know, if you're going to keep working and maybe be, you know, maintain and be an investor, it's like, how do you take advantage of some of the changes that are coming your way, if all you have is things that can go up and down. And it's really a matter of adding to your overall financial picture to give you the ability and the power to have options and control so that you can, you can do what's best for you at the, at the time when you want to do something. And so most people don't have that power. They just, they just have, you know, a brokerage account and maybe some real estate, and, you know, I don't know about you, but I was around in 2008 when all of that stuff got affected, and a lot of people had to sell and a lot of people had to start over. How many more times can, can you do that? You know, I'm in my late forties now, I was around in 2000 and I was around in 2008. How many more times can the market reset before my invest for the longterm strategy stops working for me? And if that, if that's all I'm doing. So I think, you know, just circling back to the control and use, if you have that set up, you can beat inflation by having the ability to take advantage of strategies that you control, and that create income for you, not based on whatever the performance is of, you know, some company that you don't even know who the CEO is, but based on assets that you own and control, and you can grow that and grow that and grow that. And you'll definitely be able to, to beat the inflation side.

- In a nutshell, you'll never be in a worst position by having access to cash. And that's what IBC allows you

- That's it in one sentence. Yeah, you have access to cash completely under your control. You'll never be in a worst position by having access to cash. So, IBC does it fit? Yeah, it absolutely does. I can't think of a case, inflation, deflation, where you aren't in a better position because you have access to capital. If that's the one takeaway that you can leave this episode with, let it be that.

- There you go.

- All right, I think that wraps up this episode. Episode 43 "The Fear of Inflation", if any of this resonated with you, or if you have any questions, feel free to check out our brand new website at thefifthedition.com right there, you can, you can contact us, you can email us, You can book an appointment with us right there on the, on the website. And we have our brand new Soup to Nuts course on whole life insurance. It's an online course. That'll give you everything you need to know about whole life, and you can get a, a 50% discount code right there on the front of the, on the front of our website. Looking forward to talking to y'all guys next time.

- Take care, everyone. Thank you.