The History of Infinite Banking

(Privatized Banking)

The History of Infinite Banking, or the concept of Infinite Banking gained prominence through Nelson Nash, who introduced it in his publication titled “Becoming Your Own Banker.” Nelson Nash, a veteran Life Insurance Agent with decades of experience, authored and published the book. The ideas and methodologies outlined in the book had been integral to Nash and his family’s financial approach since the early 1980s.

Presently, individuals who discuss the idea and practice of employing high cash-value life insurance as a personal financial resource (referred to as Infinite Banking or Privatized Banking) generally employ the terminology originally introduced by Nash in his initial edition.

Becoming Your Own Banker was published in 2000, and since then Nash has updated the book four times. The 5th Edition of the book is currently available on Amazon. Since then a few other people have followed suit and written their own version of the concept.

One of the more popular books Bank on Yourself by Pamela Yellen, was published in 2009, and shares much of the same information presented in Nash’s book. The book also happens to be one long sales pitch for contacting her organization and working with one of her partners.

The books on Infinite Banking will provide the reader with the basic concepts, the typical vehicle for banking (permanent life insurance), and various comparisons with other forms of financing or banking. But the reasoning behind this concept is much older than Nash or even his parents. The foundation of Infinite Banking is a school of economics called The Austrian School.

Austrian Economics

Austrian Economics is a school of economic theory that was founded by the Austrian Carl Menger. The school of thought was “founded” when Menger published his first book Principles of Economics in 1871, effectively criticizing the classical theory of economics that was commonly held at the time.

Menger proposed the “Subjective Theory of Value,” which stated that the price of a given service or good was NOT the cost to produce it (as proposed by classical economists), but the subjective price that someone was willing to pay. Many famous economists have followed and promoted his school of thought, such as: Ludwig Von MisesMurray Rothbard, and Friedrich Hayek.

The Austrian school is foundational to Infinite Banking in that it views the Boom and Bust cycle (that most Americans have come to accept as inevitable), as nothing more than the unwanted result of excess bank credit in the economy.

Infinite Banking practitioners revel in the fact that they bank with insurance companies that are privately held and have a 100% reserve requirement on the money they loan. This is in sharp contrast to the fractional reserve banking system that is pervasive in the world and typically has a 10% reserve requirement, and therefore creates excess credit and consequently the boom and bust cycles.

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