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Monthly Newsletter - February 2016

Banknotes

2957 Old Rocky Ridge Road Birmingham, Alabama 35243

BankNotes archives:

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Nelson Nash, Founder nelson31@charter.net

David Stearns, Editor david@infinitebanking.org

Why the NNI?CarlosLaraandRobertP.Murphy

At theFebruary2013 IBCThinkTank, the InfiniteBankingInstitutewas launched. Itwasnotabrandnewentity,butinsteaditmarkedamoreformalizedstructure through which Nelson Nash’s InfiniteBanking Concept (IBC) could be communicatedto the general public and the financial servicesindustry. David Stearns marked the transformationwith a revamped website at www.InfiniteBanking.org.UndertheumbrellaofthenewlycreatedInfiniteBankingInstitute,theIBCPractitionerProgramwasalso launched in February 2013. Two years later,at theFebruary2015ThinkTank, the institutewasformallyrenamedtheNelsonNashInstitute,orNNI.

In thisshortarticle,wewillexplain themotivationfor these decisions, as we were actively involvedinregulardiscussionswithNelsonNashandDavidStearns when they made them. It is important forthe general public and financial professionals tounderstandwhy theNNI exists, and to understandthe relationshipof theNNI to the IBCPractitionerProgram.

A Beacon of Clarity for the Public

The primary purpose of the Nelson Nash InstituteistoprovideasourceofinformationontheInfiniteBankingConcept,asNelsonNashhimselfconceivedanddevelopedtheapproach.

As with any revolutionary idea, Nash encounteredresistance and confusion when he first tried toexplain IBC to others in a 10-hour seminar (splitovertwodays).Thiswastobeexpected.Afterall,hewas turningeverything theyhadbeen taught aboutbankingandfinanceupsidedown!Nasheventually

wrote Becoming Your Own Banker to codify hisperspectiveinaslimvolumeintendedforthegeneralpublic.

As with any new paradigm, there were “earlyadopters” who recognized Nash’s genius andwantedtodotheirparttohelpspreadthemessage.Sometimestheywouldtweaktheterminologyand/orinventdifferentrhetoricaltechniquestogetpeopletoputtheirbusylifetothesideandlisten.

We understand why this happened. You’ve gotsoccer moms driving kids to practice and officeworkerswho’vebeentaughtsincechildhoodthattheresponsiblewayto“saveforretirement”istoputasmuchintoa401(k)asthepoliticianswillgraciouslyallow. In this environment, working against theseheadwinds, it’s understandable that some financialprofessionals resorted to provocative thoughtexperimentsandmarketingtechniquesinordertobeheardoverthedinofourbusyworld.

Without criticizing anyone’s intentions, we mustremark that this situation eventuallymade it quitedifficult to communicate the original essence ofNash’svision.Withvarious imitators running theirownoperations—someofwhomwerequitefaithfultoNash’sownviews,butotherswhoonlypaid lipservice—theaveragepersoncouldnolongereasilyfind out what “IBC” was all about. There wereall sorts of books and videos, and heaven forbidsomeonetriedtodoanInternetsearch—itwaslikeplayingRussianroulette.

In this context, what was originally called theInfiniteBankingInstitute(IBI)wasformed,formallylaunchedat theIBCThinkTank inFebruary2013.ItspurposewastoprovideanauthoritativesourceofeducationonwhatIBCreallywas,inthevisionofits

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creator.NeitherNashnor thoseofus involvedwiththisdecisioneverwantedto“putafence”aroundIBC,ortotellotherstheywerebarredfromadaptingitfortheirownapplicationsandclientele.Tothecontrary,whatwesetouttodowasreaffirmIBC’scredibilityinordertopromoteitsgrowth.

However,wedidwanttoensurethatthepublichadatrustworthysourceofsolideducationthatwasfaithfulto Nash’s original conception. The public was freeto peruse other sources of information—the morethemerrier.Butwewanted topitch inandcreateawebsite,aYouTubechannel,andaWorkshopforthepublic that provided a consistent message that wecouldvetforaccuracyandfidelitytoNash’svision.Theseweretobetrustedoutgrowthsoftheoriginal,and revolutionary, message contained in BecomingYourOwnBanker.

Asmentioned above, two years after the launch oftheInfiniteBankingInstitute,wedecidedthatitwaswisetorechristenittheNelsonNashInstitute(NNI).(We appreciate the suggestionsmade by some IBCPractitioners that encouraged us to take this route.)Thisname-changedidnotindicateachangeofmissionorcontent,butinsteadwasintendedtosolidifyNash’slegacy.Because therewere somanyvariantsof theIBCterm,wethoughtitwouldresonatemorewiththepublictonametheInstituteinhonorofthepatriarch.We (Carlos and Bob) want to stress that the namechangehasnothingtodowithpersonalvanity;Nelsonreallydoeswantwhateverismostlikelytohelpfuturegenerations discover the virtues of IBC. Indeed theoriginal name of the institute was a reflection ofNelson’s modesty and desire to point the spotlightonanidearatherthanaman,butinretrospectweallagreethattheNelsonNashInstituteistherightlabel.

The IBC Practitioner Program

Finally, we come to the IBC Practitioner Program.Thisisastand-aloneentitycreatedundertheumbrellaof the Nelson Nash Institute. The NNI seeks toeducate thepublic,yes,but it also seeks toeducatefinancial professionals. After all, IBC involves theuseofdividend-payingwholelifeinsurancepolicies.Therefore, in order to correctly apply IBC to their

owncircumstances,membersofthepublicwillneedtoconsultwithqualifiedfinancialprofessionalswhoreallyunderstandhowIBCworks.

Toputitsuccinctly,afinancialprofessionalwhowantsto incorporate IBC into his or her practice cannotsimply read BecomingYour Own Banker, or evenattend Nash’s seminar, and consider that adequatetraining. Nash’s books and seminar are designedfor thegeneralpublic.Therearemanynuances thatafinancialprofessionalmustknow, inorder tohelpa client tailor a particular policy to achieve desiredobjectives.

Nelson Nash, David Stearns, and we (Lara andMurphy) worked together to create the IBCPractitioner Program. It involved intense study ofinsurance textbooks and visits to home offices, aswellasconsultationswithactuariesandotherexperts.The IBC Practitioner Program includes an initialinterviewbeforeacceptanceintotheprogram,anin-depthtrainingcurriculuminvolvingwrittenandvideoinstruction,aproctoredexam,and(forthosewhoarenewtotheindustry)amentorshipperiod.Afterthesehurdles have been passed, the candidate graduatesfrom the Program and is now an authorized IBCPractitioner.Thepubliccanlocatetheseprofessionalson the Practitioner Finder at:www.InfiniteBanking.org/Finder.

Conclusion

Tobesure,thereismuchmorewecouldsayaboutthecircumstancesleadinguptotheformationoftheNNIandtheIBCPractitionerProgram,andthedecisionswehave allmade along theway.Butweknow thereader’s timeisvaluable,soweshallstophere.Forthosenew to IBC,weencourageyou tovisitwww.InfiniteBanking.org to sample someof thematerial,or the YouTube channel for those who prefer thatmedium.

It’salwaysagoodtimetotakecontrolofthebankingfunction inyour life,but there isparticularurgencyin our current environment. The Federal Reservehas begun raising interest rates, and we fear thatmanypeoplewhotrusted“theexperts”aregoingtoexperience significant financial pain in the coming

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BankNotes -NelsonNash’sMonthlyNewsletter-February2016years.We can’t prevent such fallout, but individualhouseholds and business owners can take stops tominimize the damage in their own lives. We urgeyoutoinvestigatetherevolutionaryInfiniteBankingConceptthatNelsonNashhaspresentedtotheworld.

Why Capitalists Are Repeatedly "Fooled" By Business CyclesDECEMBER21,2015—FrankShostak

According to the Austrian business cycle theory(ABCT) the artificial lowering of interest rates bythecentralbankleadstoamisallocationofresourcesbecausebusinessesundertakevariouscapitalprojectsthat — prior to the lowering of interest rates —weren’t considered as viable. Thismisallocation ofresources is commonly described as an economicboom.

As a rule, businessmen discover their error oncethe central bank— which was instrumental in theartificial lowering of interest rates — reverses itsstance,whichinturnbringstoahaltcapitalexpansionandanensuingeconomicbust.

From the ABCT one can infer that the artificialloweringofinterestratessetsatrapforbusinessmenbyluringthemintounsustainablebusinessactivitiesthatareonlyexposedoncethecentralbanktightensitsinterestratestance.

CriticsoftheABCTmaintainthatthereisnoreasonwhybusinessmenshouldfallpreyagainandagaintoanartificialloweringofinterestrates.

Businessmenarelikelytolearnfromexperience,thecriticsargue,andnotfallintothetrapproducedbyanartificialloweringofinterestrates.

Correctexpectationswillundoorneutralizethewholeprocessoftheboom-bustcyclethatissetinmotionbytheartificialloweringofinterestrates.

Hence,itisheld,theABCTisnotaseriouscontenderintheexplanationofmodernbusinesscyclephenomena.AccordingtoaprominentcriticoftheABCT,GordonTullock,

One would think that business people might be

misled in thefirst coupleof runsof theRothbardcycle and not anticipate that the low interest ratewilllaterberaised.Thattheywouldcontinuetobeunabletofigurethisout,however,seemsunlikely.Normally,RothbardandotherAustriansarguethatentrepreneursarewell informedandmakecorrectjudgments.At the very least, one would assumethat a well-informed businessperson interestedin importantmatters concernedwith the businesswould read Mises and Rothbard and, hence,anticipatethegovernmentaction.

EvenMiseshimselfhadconcededthatit ispossiblethat some time in the future businessmen willstop responding to loose monetary policy therebypreventing the setting in motion of the boom-bustcycle.InhisreplytoLachmann(Economica,August1943)Miseswrote,

Itmaybethatbusinessmenwillinthefuturereacttocreditexpansioninanothermannerthantheydidinthepast.Itmaybethattheywillavoidusingforan expansion of their operations the easy moneyavailable, because they will keep in mind theinevitable endof the boom.Some signs forebodesuchachange.Butitistooearlytomakeapositivestatement.

Do Expectations Matter?

Accordingtothecriticsthen,ifbusinessmenweretoanticipatethattheartificialloweringofinterestratesis likelytobefollowedsometimeinthefuturebyatighterinterestratestance,theirconductinresponseto thisanticipationwillneutralize theoccurrenceoftheboom-bustcyclephenomenon.Butisittruethatbusinessmenarelikelytoactoncorrectexpectationsascriticsaresuggesting?

Furthermore, the key to business cycles is not justbusinessmen’s conduct but also the conduct ofconsumers in response to the artificial lowering ofinterest rates— after all, businessmen adjust theiractivities in accordance with expected consumerdemand. So on this ground one could generalizeand suggest that correct expectations by people inan economy should prevent the boom-bust cyclephenomenon.Butwouldit?

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In a Post-Boom World, Auto Prices Will FallJANUARY19,2016—PatrickBarron

Itseemsthateachnewbubblebringsforthclaimsthat,although thebubblemaybe the resultofartificiallycreated demand, prices of this or that product willnot fall andmay even continue to rise. Howmanyso-calledrealestateandfinancialplanning“experts”claimedthatthesurestpathtofinancialsecuritywasin buying the largest house possible with the leastamountofone’sownmoney?

The Boom: McMansions and Luxury Cars

Since homeprices never go down—wewere told—thegainfromusingOPM(otherpeople’smoney)resulted in huge multiples of gain for the littleinvestedofone’sownmoney.Thus,inthefirstdecadeofthenewcentury,Americanswerebuyingso-calledMcMansions: huge homes with every imaginablefeature.When the bubble burst, the leverage effectworked in reverse.Mortgage balances far exceededthe lower market price, creating the so-called

For instance, if an individual John, as a result of aloosecentralbankstance,couldlowerhisinterestratepaymentonhismortgagewhywouldherefusetodothatevenifheknowsthatalowerinterestrateleadstoboom-bustcycles?

AsanindividualtheonlyconcernJohnhasishisownwellbeing.BypayinglessinterestonhisexistentdebtJohn’smeanshavenowexpanded.Hecannowaffordvariousendsthatpreviouslyhecouldn’tundertake.

As a result of the central bank’s easy stance thedemand for John’s goods and services and othermortgageholdershasrisen.(Againitmustberealizedthat all this couldn’t have taken place without thesupportfromthecentralbank,whichaccommodatesthelowerinterestratestance.)

Now,thejobofabusinessmanistocatertoconsumers’future requirements. So whenever he observes alowering in interest rates he knows that this mostlikelywillprovideaboosttothedemandforvariousgoodsandservicesinthemonthsahead.

Henceifhewantstomakeaprofithewouldhavetomakethenecessaryarrangementstomeetthefuturedemand.

Forinstance,ifabuilderrefusestoactonthelikelyincreaseinthedemandforhousesbecausehebelievesthatthisisonaccountoftheloosemonetarypolicyofthe central bank and cannot be sustainable, then hewillbeoutofbusinessveryquickly.

To be in the building businessmeans that hemustbe in tune with the demand for housing. Likewiseanyotherbusinessman inagivenfieldwillhave torespondtothelikelychangesindemandintheareaofhisinvolvementifhewantstostayinbusiness.

Abusinessmanhasonlytwooptions—eithertobeinaparticularbusinessornottobethereatall.Oncehehasdecidedtobeinagivenbusinessthismeansthatthebusinessmanislikelytocaterforchangesinthedemandforgoodsandservicesinthisparticularbusinessirrespectiveoftheunderlyingcausesbehindchangesindemand.

Failing to do so will put him out of business veryquickly. Now, regardless of expectations once the

centralbanktightensitsstancemostbusinessmenwill“getcaught.”Atighterstancewillunderminedemandforgoodsandservicesandthiswillputpressureonvarious business activities that sprang upwhile theinterest rate stance was loose. An economic bustemerges.

We can conclude that correct expectations cannotpreventboom-bustcyclesonce thecentralbankhaseaseditsinterestratestance.Theonlywaytostopthemenaceofboom-bustcyclesisforthecentralbanktostopthetamperingwithfinancialmarkets.Asarulehowever,centralbanksrespondtothebustbyagainloosening their stance and thereby starting the newboom-bustcyclephase.

Comment by R. Nelson Nash – This article demonstrates the need for individuals to secede from the system by learning to become their own banker as taught by the NELSON NASH INSTITUTE. T h e r e are thousands who have done so and they could care less what the interest rate manipulations by the FED is doing.

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BankNotes -NelsonNash’sMonthlyNewsletter-February2016“underwatermortgage.”Lowerpriceshadwipedoutnotonlythelittleequitycontributedbythebuyer,butcreatedanegativeequitybalance.Buyersabandonedtheir heavy mortgages and sought smaller, lowerpricedhomes.Itturnedoutthathomepricesdidnotgrowtothesky,asthepunditshadpredicted.

Thesameistrueofautomobiles,andespeciallythoseboughtwith auto loans.Easy credit has enticed carbuyers into evermore luxurious and amenity-ladenvehicles.Itisimpossibletodaytobuyanewcarthatisnot loadedwith luxuryentertainment,navigation,and safety features that were unknown only a fewyearsago.

Manyofthesefeatureswouldneverhavebeensoldinsuchquantitieswithoutthebenefitofeasycredit.Asa frequentcar rentalcustomer, Ihavebeenexposedtothesefeaturesandhavefoundthemdifficulttouseat best and completely unnecessary and distractingat the worst. On a recent business trip my modestsized four door Buick sedan’s speedometer wasprojectedontothewindscreenandthelaneproximitywarningsbeepedatmeconstantly.Ineverdidfigureout how to turn off these annoying devices,which,I admit,maybe desired by amarginal fewdrivers.ButweAustrians know that all economic choice isbasedonahierarchyofpreferences.Thecostofeachpreferenceismeasuredinthealternativepreferencesone sacrifices.Make some preferences cheaper andthey move up our personal scale. Easy auto creditmeant thatbuyersdidnothave tosacrificeasmanyalternativeusesfortheirmoney.

Lastweek,TommyBehnkeinMises Dailypredictedthatautopriceswillfallasthebubbleburstsfromtheartificiallycreateddemandgeneratedfromexcessivecreditcreation.Behnkepointedoutthatcarproductionhasincreasedawhopping100percentsince2009,butthat apologists for government’smonetary stimulusprogramsseethisfactasproofofthesuccessoftheirKeynesian,aggregatedemandhypothesis.

Behnke, on the other hand, took the Austrianperspective that the government has simplysubstituted a bubble in subprime auto loans for thebubbleinsubprimehomeloans.Asdefaultsriseand

automobile loan credit tightens, the result will bethe same.Namely, afloodof used cars, and fallingprices.Thesamehappenedwithhomesfollowingtheburstofthelastbubble:afloodof“used”houses,andfallingprices.

Surprisingly,thearticleattractedanumberofreadercommentspredicting thatusedcarpriceswouldnotfall,allegedlyduetoincreasesincomplexityofcarsorincreasesinthedifficultyofrepairingthem.Anothersuggestionwas that large dealerswill dominate theusedcarmarketandsimplyraisepricesatwill.

Whileit’scertainlytruethatgovernmentinterference—suchasCashforClunkers—canraisethepricesof cars, it is not true that private dealers (or anyotherprivateparty)cansimplyraisetheprice.Morecomplexanddifficult-to-fixcarswillnotkeeppricesfromfallinginanenvironmentinwhichtheinventoryofusedcarsisincreasing.

Used Car Dealer or Used Car Collector?

There is one thing that we can know a priori: thatanincreaseinthesupplyofsomegoodoradropinitsdemandwillcauseitspricetobelowerthanthatwhichitotherwisewouldbe.Thereisnootherwaytoclearthemarket.

Misesexplained that,eventually,evenamonopolistwouldprefer anyprice tozeroprice.Maintainingapriceabovethemarketclearingpriceproduceszerorevenue. In a flooded used-car market, car dealersmustreducetheirpricesinordertoavoidbankruptcy.Otherwise, theusedcardealerceases tobeadealerand becomes a collector. The laws of supply anddemand have not been rescinded, even in a worldwith very expensive-to-build and complex cars.As the automobile bubble bursts, quality used cars will flood the market, creating a buying opportunity for those with cash.(bolditalicsbyRNN).

Aswithhouses,itdoesn’tmatterhowbigorluxuriousor complex you make new cars. When the creditbubblebursts,autopriceswillnot“alwaysgoup.”

Comment by R. Nelson Nash – People that have learned to become their own banker are going to find some good deals in the near future!

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ASSUMEByR.NelsonNash

I’mintheprocessofwritinganewbookentitled—It’s All About How You Think —I probably shouldinclude a subtitle –And Sometimes How You Don’t Think!Itisjustpartofourhumannatureanditcanproduceresultsthatarebothhumorousandothersthataretragic.

InmostcasesitseemstomethatthisfailuretothinkprobablyinvolvesthewordASSUME.Somepeoplehavemadethisobservation:“WhenyoudissecttheworditcanrevealthatassumingsomethingsinlifewillmakeanASS--U---ME!”

Understanding this would probably include thingslike interpersonal relationships which can result inembarrassmenttoseveralparties.Forinstance--likethemanwhotoldtheladyherstockingswerewrinkled–and she wasn’t wearing stockings!Hisassumptionwas wrong and it produced some very interestingresults,I’mcertain.Ifyouhaven’tmadeafaux pas ofsomekindlikethisthenyouhaveaccomplishedamiracle–oryoujusthaven’tlivedlongenough.

Ontheotherendofthespectrumofassumingcertainthingscaneasilyproducetragediessuchasimmediatedeath.Asanexample,thisgivesmetheopportunityto tell you more about my experience as anArmyAviatorwiththeAlabamaNationalGuard.

Inthebirthmonth,amilitarypilotmustgetanannualphysical examination, pass a proficiency check ridein the aircraft inwhich he is rated and is currentlyflying,andpassaninstrumentflightexamination(ifhe is instrument rated). These last twocheck ridesareconductedbyqualifiedandcertifiedcheckpilots.

Typically,aNationalGuardpilotattendstwoweeksofactivedutyeachyearatsomemilitaryfacility.Healsoattendsa“weekenddrill”everymonth.ForthisSaturdayandSundayheiscreditedwithfourdaysofactivedutypay.Additionallyheisallowedtomake24FlightTrainingPeriods(FTPs)peryearathisownschedule–orwhenheiscalledtoperformamissionthathascomeupinhisorganization. Forthisheis

credited with one day’s active duty pay. The FTPrequired6hoursdurationtoqualifyassuch.

Allofthisexplanationistosetthestageformystory.Withtheforegoingunderstandingyoumaynoticethatapilot cancheck into theflight facility at4:00PMonaFridayafternoonforaFTPwhichendsat10:00PM.IftheregulardrillweekendbeginsthenextdayandcontinuesonSundaythenthisresultsinfivedaysofpay.Thisisgoodtimemanagement.(Ifthisisnotclearlyunderstood, thengobackandreadtheselastthreeparagraphs).

Now,forthestory:Itoccurredover30yearsagoinMarch,my birthmonth. ANG drill weekendwascomingdue.IhadarrangedforanInstrumentCheckPilot–whowasamemberofourunit--tocometoBirmingham NG facility on Friday to conduct myInstrumentCheckRideduringaFTPforthebothofus.

This man worked at Ft. Rucker, AL and was anInstrument Flight Instructor there. Hehadfinishedafulldayofwork.ItisathreehourdrivefromFt.RuckertoBirmingham.OurFTPstartsat4:00PM.ThismeansthatFrank(hisrealname–bytheway,heandIsharethesamebirthdayexceptthatheisseveralyears younger than I) has beenup andworking forelevenhoursbythistime.

Wemetandmadeourflightplansforthecheckride.Paperwork!Thistookatleast45minutestoanhourbefore we even got in the airplane -- a BeechcraftBaron. Themilitarydesignation is aT-42. It is afour-placetwinenginewith230hpeach.Itisarealjoytofly!DuringthemakingoftheflightplanFrankaskedme,“HowlonghasitbeensinceyouhavemadeaVOR approach?” (VOR stands forVisual OmniRange.This approach is a non-precision approach – one in which you descend no lower than 700 feet above the surface of the airport. By theway, theairport elevation at Decatur is 592 feet above sealevel.Ifyouhaven’tbrokenoutofthecloudsbythattimethenyouwillhavetogotoyouralternateairportthathasahighercloudceiling.Rememberthisfact.Itwillbenecessaryforyoutounderstandtherestofmystory.)

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BankNotes -NelsonNash’sMonthlyNewsletter-February2016Ireplied,“Ithasbeenanumberofyears.”Franksaid,“Let’sflytoDecatur,AL--- doaVORapproach–thengoover toHuntsville anddo an ILSapproachthereandcomeonbacktoBirmingham.(AnILSisaPrecisionApproachthatallowsyoutodescendaslowas200feetaboveground.Ifyouhavenotbrokenoutof thecloudsat that level thenyoumustgotoyouralternatedestination).Sothatwasourplan.

During a check ride the Check Pilot also has toperformthefunctionofCo-pilot.Hehastoperformall the other pilot functions that I direct him to do.I have towear a hood that limitsmy vision to theinstrumentpanel(unlessItiltmyheadbackward.AtthatpointIcanlookforwardthroughthewindscreen).ThismeansthathewillbereadingallthedirectionsontheApproachPlatefortheairportatwhichwewillmakeattheparticularairport.(TheApproachPlateisadiagramandcontainsallthepertinentdirectionstoconducttheapproach).

At least twohourshadpassedby the timewewereunderwayintheflightanddarknessisapproaching.WearetravellingNorthtoDecatur,yettheApproachPlateprocedurerequiresthatwedosoheadedSouth.It was dark when we arrived at the Decatur VORstationwhich is located on the airport. We had toreversecoursetomaketheVORApproach.Actingastheco-pilot,FrankwasresponsibleforreadingalltheApproachPlateinformationtometoaccomplishthismaneuver.IannouncedtoFrank,“Wehavearrivedat the VOR. Give me our outbound heading andaltitudelimitationsforthe‘procedureturn’toreversecourseforthe‘finalapproachleg.’whichwewillbeinterceptingat a45degreeangle.” Frankcomplieswithmyrequest.

I said toFrank, “Wehave completed theprocedureturn and are now on our final approach leg. Givemetheminimumdescentaltitudeforthisapproach.”Frankresponds,“700 feet.”Ihavecompletedthepre-landingcheckandwearedescendingtotheairportatanairspeedof100milesperhour.

Whenwegotto700feetabovesealevel–andwithmyhandonboththrottlesIsaid,“Weareat700feetandIamstartingthego-aroundprocedure.”Frankyelled,

“PULLUP!!TREES!!!!”ImmediatelyIshovedthethrottlestomaximumpowerandyankedbackonthecontrolcolumn. I raisedmyheadat thesame timesothatIcouldseeovertheinstrumentboard.Isawnothingbutdarkness.AsplitsecondlaterIsawtherunwaylightsoftheairport.Whatthatmeansisthatwe were below the level of the trees – and probably less than 50 feet above the ground!!

Weclimbedtocruisingaltitudeandflewforatleasttenminuteswithouteitherofussayinganything–justrealizingthatwecamewithintwoorthreesecondsofcertaindeath!Iwonderwhatabloodpressurecheckoneitherofuswouldhavelookedlikeiftakenatthattime!!Finally,Frankkeyedthemicrophoneandsaid,“I’ve just been thinking about how this would bereportedinanaccidentinvestigationifwehadcrashedtwoorthreesecondsbeforethatabruptpull-up?Two old, high flight time pilots just flew a perfectly good airplane into the ground?Pleaseunderstand–atthattimeIhadover5,000hoursflyingtimeandover1,000ofthemwereininstrumentflightconditions.Frankhadmorethanthreetimesthatnumberofhours–and was an instrument flight instructor at Ft. Rucker.

So, how does one explain this near-catastrophe?Ibelieve it tobe simple. Both of us were guilty of ASSUMING. Although I had beenflying formanyyears in North Alabama and knew that the fieldelevation of theDecatur airportwas 592 feet and IknewthattheVORapproachisanon-precisionone(withaminimumdescentaltitudeof700feetabovetheairportsurface–thenFrankshouldhavegivenmeaminimumdescentaltitudeof1,300feet.Hesimplygaveme thewrong number listed on theApproachPlate.But, inmymind, I’massuming “Frank is aninstrumentflightinstructor,sojustdowhathetellyoutodo.”

RememberthatFrankhaddoneafullday’swork,andthen driven three hours to Birmingham before ourFTPperiodstarted. So,fatigueisprobablyafactorinthiseventalso.Ihadputinafullday’swork,too.But,he was assuming “this is an older pilot with lots of experience so I can just relax and enjoy the flight on a beautiful night.”

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VISION byLeonardE.Read

Note - Frequent readers of BANKNOTES are aware of my relationship with Leonard E. Read and my admiration for his works during his lifetime. In the following issues I will be sharing his book, VISION, one chapter per month. It was written in 1978. What a privilege it was for me to know this great man! -- R. Nelson Nash

Chapter8

WHYFREEDOMWORKSITSWONDERS

Youreadofbutonewiseman,andallthatheknewwas–thatheknewnothing.

---WilliamCongreve

Hereismyexplanationofwhymen,whenfreetotryandtoactcreativelyastheyplease,producemiraclesby themillions. Ismine the rightandfinalanswer?Nosuchclaimiswarrantedbymeonthissubjectorbyanyoneonanysubject.Nevertheless,Iamboundtoseekforandtosharewithothersthatwhichseemstoberight.

Thewiseman referred to by theEnglish dramatist,Congreve(1670–1729)wasSocrates.Itwasn’tthatthisgreatGreekknewnothing.Everyoneabovethemoronic level knows a wee bit of something. ThewisdomofSocratesmightbethusparaphrased:

ThemoreIknowthemoreIknowthereistoknow.ThemoreIseethemoreIknowthereistobeseen.

Notmanyofusseeourselvesinthislight.Onlyrarelydoweencounteranyonewhoiskeenlyawarethatthemoreheknows,themoreheknowshedoesn’tknow.

AsIcitedbackinthefirstparagraphofthisarticle–assumingcertain thingscanproducebothgoodandbad results. Most of them would fall in the goodcategory.Lifewouldbemiserableifwehadtothink abouteverylittlethingwedoinlife.Butremember,just one bad assumption can cancel out a hundredgoodones!

There are lots of good lessons that can be learnedfromthisstory.

Yet,isthisSocraticwisdomliestheexplanationastowhyfreedomworksitswonders.

Interestingly, freedom serves us well despite ourunawareness.Why,then,dwellonthematter?Thedangeristhatthosewhohaven’ttheslightestideaofhowlittletheyknowwillbecomeourmasters.Indeed,wehave,forsometime,beenonthatdeplorableroad.The know-it-alls have been gaining and exercisingpolitical power. So, it’s high time that power bewithdrawn.How?Socraticwisdomisthekey.

HowexplainthatthemoreIknowthemoreIknowthereistoknoworthemoreIseethemorethereistobeseen?TheanswerrelatestothedistinctionbetweenInfiniteConsciousness–thelimitlessunknown–andfiniteconsciousness–ourinfinitesimalbitsofknow-how.

Toassistinmakingthepointhereaissue,visualizeablackboardhavingnoboundaries–nonewhatsoever–theunknown.Next,withwhitechalkdrawacirclethesizeofasilverdollartosymbolizeconsciousnessachieved,say,tenyearsago.Now,drawacirclefivefeet indiameter tosymbolize today’sconsciousness– an admirable growth. But take note of this fact;the circumference, the exposure to darkness – theunknown–isnearly100timesthatofadecadeago.The more a growth in consciousness is experienced, the nearer one comes to a realization that he knows nothing. Socrates was wise, indeed!

Unfortunately, those who experience no growthin awareness, perception, consciousness won’tunderstandmyillustrationeither.Unlessoneisdailybecoming more and more aware of how little heknowsorsees,heisnotgrowing!Rather,heisdyingonthevine,asthesayinggoes–stalemated!Thankheaventhereareindividualswhoexperiencegrowthandwhocanseewhyfreedomworks itswonders–admittedly,andelusivetruth.

Weneedonlykeepthesepointsinmind:

1. Arealizationthateveryindividual,regardlessofpompous claims to the contrary, knows next tonothing.

2. Among themore than 200million personswho

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BankNotes -NelsonNash’sMonthlyNewsletter-February2016inhabit the U.S.A., no two are remotely alike.Each possesses , at best, awee bit of expertiseunlikethatofanyotherindividual.

3. Theonlywisdomthatgracesuswithanabundanceof goods and services stems exclusively fromthesemillionsofinfinitesimalknow-howsfreelyflowing and configurating. Every one of theseblessingsisanaggregationoftinythink-of-that’s–noexceptions!

To me, it is self-evident that we should leave allcreative activities – education ofwhatever – to thefree and unfettered market where the wisdom is.Whatcanbemoreabsurdthanleavingourwelfaretothosewhohavenoawarenessthattheyknownot,thatis,tosuchlow-gradeignorance.

Nooneknowshowtomakesuchasimplethingasanordinarywoodenleadpencil.So,whataboutcomplexthings as a 747 jet airplane? That transportationmarvelhasabout4,500,000parts,andnotamanonearth knows how to make any one of these parts.WhenaloftIoneofthemiraclesofthemarket,Ioftenreflectonaremarkableblessing;theSocraticwisdom.

As I have written before, “What gives socialismappearanceofworkingisthefreedomsocialismhasnotyetdestroyed.”Orphraseitthisway:Whatgivesthosewhoareunawareoftheirknow-nothingnesstheappearanceofbeingresponsibleforourprosperityisthewisdomofthemarkettheyhavenotyeteliminated.

Appearances!Howfalseandmisleadingmostofthemare,particularlyinthepolitico-economicrealm.HereareseveralthoughtsonappearancesbyafewgracedwithSocraticwisdom,includingSocrateshimself:

Judgenotaccordingtotheappearance.–John 7:24

Alwaysscornappearance,andyoualwaysmay.–Emerson

Weshouldlooktothemind,andnottotheoutwardappearance.–Aesop

Wearedeceivedbytheappearanceofright.–Horace

Thereisnotrustinginappearance.–Sheridan

Don’trelytoomuchonlabelsforoftentheyare

fables.– Spurgeon

Youlookwise.Praycorrectthaterror.–Lamb

Thefinalgoodandthesupremedutyofthewisemanistoresistappearance.–Cicero

Beware,solongasyoulive,ofjudgingmenbytheiroutwardappearance.–La Fontaine

Theshortestandsurestwaytolivewithhonorintheworld,istobeinrealitywhatwewouldappeartobe.–Socrates

As to howwe should proceed not only to preservebuttoincreasethewonderswroughtbyfreedom,theanswerisaseasytostateasitisdifficulttoaccomplish.

Paynoheed to appearances! Look clearly throughthepoliticalfog.

In appraising a person, whether he be in or out ofoffice, examine his avowed principles. Should theindividual claim a devotion, then determine if hispractices are consistent therewith – no “buts,” no“leaks”! If his practices belie his preaching, placenofaithinhim.Butifheconsistentlypracticesthefreedom he espouses, he will be a worthy partnerin explaining where the wisdom is and why itsmiraculousaccomplishments.

For encouragement, reflect on the growing numberwhoarecomingtolightaspartnersinthisintellectualenterprise. We discover more and more of themfromthenearandancientpast.AndIampersonallyacquaintedwithseveralthousandwhohaveachievedthisgoalinrecentyears.Butevenmoreencouragingarethecountlessthousandsseekinganddiscoveringthistruth,notafractionofonepercentofwhomeverheardofyouormeorweofthem.Thepointisthatanyfriendoffreedomisafriendofyoursandmine.Noneofusstandsalone.

Toclaimthat thewisdomin thefreeandunfetteredmarketisatrilliontimesgreaterthanpossessedbyanysinglepersonwouldbegrossunderstatement.Ofonepointwecanbecertain;thereareenoughindividualssufficientlywise to see throughall the shamand tocaptureandexemplifythistruth.

THETRUTHSHALLMAKEYOUFREE!

10www.infinitebanking.org david@infinitebanking.org

BankNotes -NelsonNash’sMonthlyNewsletter-February2016Is the Auto Loan Bubble Ready to Pop?JANUARY11,2016—TommyBehnke

On Tuesday, it was announced that over seventeenmillionnewvehiclesweresold in2015, thehighestit’severbeeninUnitedStateshistory.

While the media claims that this record has beenreachedbecauseofdrastic improvements to theUSeconomy, theyareonceagain failing toaccount forthecentralfactor:creditexpansion.

Wheninterestratesarekeptartificiallylow,individualsaremisled into spendingmore than they otherwisewould.Inhindsight,theydiscoverthattheirjudgmenterrorswreakedhavocontheirfinancialwell-being.

ThisisalessonthatthecountryshouldhavelearnedfromtheSubprimeCrisisof2008.Excessivecreditcreation led too many individuals to buy homes,buildhomes,andinvestinthehousingindustry.Thissurgeinartificialdemandtemporarilyspikedprices,resultinginoverfourmillionforeclosedhomesandthekillingofoverninemillionUSjobs.

Insteadoflearningfromthemistakesthatsentshockwaves throughout most of the planet, the FederalReservehascontinuedwithitsexpansionistpolicies.Since2009,themoneysupplyhasincreasedbyfourtrillion, while the federal funds rate has remainedatornear zeropercent.Consequently, thehousingbubblehasbeenreplacedwithseveralotherbubbles,includingoneintheautomotiveindustry.

Automotivecompanieshave takenadvantageof thecheapborrowingcosts,increasingvehicleproductionbyover100percentsince2009:

Source:OICA

In order to generate more vehicle purchases, thesecompanies have incentivized consumers with hot,hard-to-resist offers, similar to the infamous “liarloans” and “no-money down” loans of the 2008recession. Dealerships have increased spending onsales incentivesby14percentsince lastyearalone,andthebannersintheirshopsnowproudlyproclaimtheir acceptance of any and all loan applications— “NoCredit.BadCredit.AllCredit. 100PercentApproval.”Asaresult,autoloanshaveincreasedbynearly $80billion since 2009,manyofwhich havebeengiventoindividualswithfar-from-stellarcreditscores.Today,almost20percentofallautoloansaregiventoindividualswithcreditscoresbelow620:

Source:NewYorkFed

Not only aremore auto loans being originated, buttheyarealsoincreasinginduration.Theaverageloanterm is now sixty-sevenmonths (that’s 5.58 years)

for new cars and sixty-two (that’s 5.16 years)months for used cars.Botharerecordnumbers.

Average transactionprices for new and usedcars are also at theirrecord highs. Used car

prices have increased by nearly 25 percent since

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BankNotes -NelsonNash’sMonthlyNewsletter-February2016andmoreeconomicheadachesintheyearstocome.

Comment by R. Nelson Nash – The very thought of the FED “stopping their misleading individuals into making irrational investments” is totally irrational. The unspoken mission of the FED is to control your life! Hence, the need to secede from their system.

2009,while new car prices have increased by over15percent.Partofthishastodowiththeincreasingdemand for cars generated by the upsurge in autoloans.Themainreason,however,isthatconsumers—takingadvantageoftheaccessibilityofcheapcredit—arepurchasingmoreexpensivebodystyles.Thisfollows thehousingbubble trend,when themediansizeofanewlybuiltsingle-familyhomeroseto2,272squarefeetatthestartof2007.

We all know the end result of theGreat Recession—pricessoared,millionsofhouseswereforeclosed,andunemploymentsurged.Demandforhomes thenplummeted, andhomepricesultimatelydroppedby20percenteachmonth.

The auto bubble has yet to burst, but its negativeeffects are already starting to gradually appear. Forone, delinquencies on car loans have increased bynearly120percent,fromjustover1percentin2010to2.62percentin2014.Sincecarsrapidlydepreciatein value, this number is projected to spike. By thetimethesesix,seven,andeightyearno-moneydownloansareduetobepaidinfull,manyofthesevehicleswon’tbeworthpayingoffanymore—maintenanceand loan costswill start exceeding the value of thecars.

According to the Center for Responsible Lending,oneineverysixtitle-loanborrowersisalreadyfacingrepossessionfees.Ifdefaultssharplyincreaseinthecoming years as projected, themarketwill becomefloodedwithusedcars,andtheirpriceswill,withnearcertainty,falltoasignificantdegree.

Atatimewhenlaborforceparticipationisatitslowestlevel since 1977— at a timewhen realwages arerisinglessthantheyhavesinceatleastthe1980s—itisimperativethattheFederalReservestopmisleadingindividuals into making irrational investments. Theeconomy is simply too frail to continueweatheringtheseendlessbusinesscycles.Economists,politicians,andthegeneralpopulaceneedtostartlearningfromtheireconomichistorysotheycanbeginrecognizingthat favoring debt over thrift isn’t beneficial to thecountry’sfinancialwell-being.Failure todo sowillsimply lead tomorebubbles,moremal-investment,

BankNotes -NelsonNash’sMonthlyNewsletter-February2016

12www.infinitebanking.org david@infinitebanking.org

Nelson’s Newly Added Book Recommendations

https://infinitebanking.org/books/

Anatomy of the State byMurrayRothbard

Wealth, Poverty and Politics byThomasSowell

Man’s Search for Meaning byVictorFrankl

Nelson’s Favorite Quotes

The four most expensive words in the English Language are, “This time it’s different.”–SirJohnTempleton.

“Nowadayspeopleknowthepriceofeverythingandthevalueofnothing.”―OscarWilde

Welcome the newest IBC Practitionershttps://www.infinitebanking.org/finder/

ThefollowingproducersjoinedorrenewedtheirmembershiptoourAuthorized Infinite Banking Concepts Practitioners teamthismonth:• StuartGaines-Birmingham,AL• JonVavra-Fong-CastleRock,CO• SteveMinnich-Newport,WA• DaleMoffitt-Calgary,AB,Canada• StephenDevlin-Vancouver,BC,Canada• FranzGriswold-Dansville,NY• HowardSilvermintz-Atlanta,GA• JustinBauer-CannonFalls,MN• MichaelSparks-Clarksville,TN• EricO’Connor-Beaver,PA• LindaBlue-SunstHills,MO• TerryHellenbrand-Waunakee,WI• BradZabadal-Bartlett,IL

You can view the entire practitioner listing on our website using the Practitioner Finder.IBC Practitioner’shavecompletedtheIBC Practitioner’s Program and have passed the program exam to ensurethat they possess a solid foundation in the theory andimplementation of IBC, as well as an understandingofAustrian economics and its unique insights into ourmonetaryandbanking institutions.The IBC Practitionerhasabroadbaseofknowledgetoensureaminimallevelofcompetencyinalloftheareasafinancialprofessionalneeds,inordertoadequatelydiscussIBCwithhisorherclients.

13www.infinitebanking.org david@infinitebanking.org

BankNotes -NelsonNash’sMonthlyNewsletter-February2016

The IBC Work Shop is our premier Live Event for the public. It is a rare opportunity to listen to R. Nelson Nash, the creator of the Infinite Banking Concept, and best-selling author of the classic Becoming Your Own Banker live! Nelson will be joined on stage by Robert P. Murphy, Ph.D economist, and L. Carlos Lara.

The IBC Work Shop Birmingham Jefferson Convention Complex (BJCC)

2100 Richard Arrington Jr. Blvd. NorthEast Meeting Rooms "A-C"

Birmingham, AL 35203$50 per person, guests only $10 more with registered attendee.

Starts at 9:30 am on Saturday, February 13th and ends at 2:30 pm.

click here to Register NowR. Nelson Nash is the discoverer and developer of The Infinite Banking Concept. Nash has spent over 58 years in the study of Economics (The Austrian School). He established a 35 year career as an Advisor-Agent with The Equitable Life Assurance Society and with The Guardian. Recognized for his high achievements, Nash was inducted as a Hall of Fame Member by The Equitable. He is a Chartered Life Underwriter, and Life Member of the Million Dollar Round Table. Author of the best-seller Becoming Your Own Banker, and Building Your Warehouse of Wealth

Robert P. Murphy is Research Assistant Professor with the Free Market Institute at Texas Tech. He has a PhD in economics from

New York University. Murphy is the author of hundreds of articles and several books, including The Politically Incorrect Guide to Capitalism, the Study Guide to Ludwig von Mises' Human Action, and (with co-author Carlos Lara) How Privatized Banking Really Works. He is a co-creator of the Infinite Banking Concept (IBC) Practitioner's Program, an online training course for financial professionals.

Carlos Lara is CEO of United Services and Trust Corporation, a consulting firm specializing in business advisory services. Lara's experience at raising capital for privately held corporations and business rehabilitation background makes him a regular speaker at credit management conferences.He is a passionate advocate of the Austrian School of Economics. In 2010 he co-authored How Privatized Banking Really Works - Integrating Austrian Economics with the Infinite Banking Concept with economist Robert P. Murphy. He is a co-creator of the Authorized IBC Practitioner's Program for financial professionals and publishes the Lara-Murphy Report (LMR), a special on-line economic research and reporting newsletter.

Contact David Stearns at 205.276.2977 or david@infinitebanking.org