Privatized Banking


Privatized banking in the broad sense means a return of banking back to the private sector. Just as the U.S. government could “privatize the Post Office” by removing its special legal privileges to turn it into a standard business, so too could the government remove all of the special legal privileges given to the Federal Reserve and the banks under its purview.

Members of the Austrian School of economics tend to endorse privatized banking (in this broad sense), because they believe that government intervention in the field of banking has only harmed the public by fostering a “cartel” system and—paradoxically—making the economy more vulnerable to inflation and the boom-bust cycle. In other words, government intervention in banking has produced the very evils that it was supposed to reduce.

To achieve this broad type of privatized banking would require a significant shift in government policy. This means, in practice, convincing a large number of our fellow Americans of the desirability of returning banking to the private sector, where it can be “regulated” by the discipline of competition, rather than trusting officials in D.C. Although we (Lara and Murphy) believe that open-minded people will see the compelling logic in such a case, this process of education will nonetheless take time. Many fans of the Austrian approach despair that the task is hopeless.

However, in our book, How Privatized Banking Really Works, we introduce a special meaning for the term privatized banking. We show that Nelson Nash’s Infinite Banking Concept—which allows individuals to “become their own bankers” through the use of properly designed whole life insurance policies—sidesteps the political process entirely. Just as individuals can use FedEx or UPS in order to get around the bureaucratic Post Office, so too can they implement Nash’s strategy in order to (largely) remove their household or business from reliance on the investment and commercial banking sectors.

In this respect, Nash’s Infinite Banking Concept allows individuals to achieve privatized “banking” in their own realm immediately. Furthermore, the individual results speak for themselves, making it easier to convince others to follow suit.

Rather than asking others to help spread the knowledge of abstract banking operations, we can explain this new type of privatized banking that showers direct benefits to everyone who adopts it. This is our strategy for “building the 10%,” the necessary core of public opinion that—if achieved—will tip the scales in favor of more sensible government policies.