March•2014 PULSE ON THE MARKET Whoa-oh China Gold Discreet Yellen BUILDING THE 10% Bank of England Shreds Ah, Venice Napolitano Judges Lincoln LMR Page 5 DO LIFE INSURERS KEEP CASH VALUES AFTER DEATH? by Robert P. Murphy Page 8 EXPLODING ENRON AND OTHER ENERGY MYTHS INTERVIEW WITH ROBERT L. BRADLEY, JR. Page 25 THE INFINITE BANKING INSTITUTE: OUR FIRST ANNIVERSARY by L. Carlos Lara Page 17 LARA-MURPHY REPORT 2 LMR MARCH 2014 THIS MONTH’S Features 178 25 DO LIFE INSURERS THE IBI: OUR FIRST EXPLODING ENRON KEEP CASH VALUES ANNIVERSARY AND other AFTER death? BY L. Carlos Lara ENERGY MYTHS BY Robert P. Murphy Lara wishes congrats but the best is Interview yet to come. Murphy tackles the common Robert Bradley is one of the world’s objection that life insurance leading free-market energy economists. companies keep your cash value The future is bright, if government when you die. would get out of the way. IN EVERY ISSUE 4 5 31 Dear Readers Economic Deep End One More Thing LARA-MURPHY Report PULSE ON THE MARKET EVENTS AND Time to mark your calendar for this Whoa-oh China Gold • Discreet ENGAGEMENTS year’s Night of Clarity! Yellen • Bank of England Shreds Learn more in person from Lara, • Ah, Venice • Napolitano Judges Murphy, and other Austrian economists, Lincoln at these upcoming appearances. Overview 3 LMR SEPTEMBER 2010 ABOUT LARA & MURPHY L. CARLOS LARA manages a consulting firm specializing in corporate trust services, business consulting and L. Carlos Lara debtor-creditor relations. The LMREditor in Chief firm’s primary service is working Dr. Robert P. Murphy with companies Executive Editor in financial crisis. Serving business Anne B. Lara Managing Editor clients nationwide over a period of three decades, these engagements have involved companies in Stephanie Long Design Director most major industries including, manufacturing, distribution and retail. Lara incorporated his CUSTOMER SERVICE consulting company in 1976 and is headquartered In order to subscribe to LMR, visit: in Nashville, Tennessee. www.usatrustonline.com/store He married Anne H. Browning in 1970. and click on subscriptions. Together they have three children and five To update your account information please visit the same grandchildren. online store, login and manage your account. For questions or comments concerning LMR, its articles or anything about the publication other than advertising please DR. ROBERT P. “BOB” email: [email protected] MURPHY received his Ph.D. in economics For questions or comments concerning LMR advertising please from New York email: [email protected] University. After READERS STATUS: LMR staff and its contributors warrant and represent that they are not teaching for three “brokers” or to be deemed as “broker-dealers,” as such terms are defined in the years at Hillsdale Securities act of 1933, as amended, or an ”insurance company,” or “bank.” College, Murphy LEGAL, TAX, ACCOUNTING OR INVESTMENT ADVICE: LMR staff and its contributors are not rendering legal, tax, accounting, or investment advice. All exhibits left academia to in this book are solely for illustration purposes, but under no circumstances shall work for Arthur the reader construe these as rendering legal, tax, accounting or investment advice. Laffer’s investment DISCLAIMER & LIMITATION OF LIABILITY: The views expressed in LMR concerning finance, banking, insurance, financial advice and any other area are firm. Murphy that of the editors, writers, interviewee subjects and other associated persons as now runs his own indicated. 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It is illegal to redistribute for sale or for Depression and the New Deal (Regnery, 2009). free electronically or otherwise any of the content without the expressed written consent of the principle parties at United Services & Trust Corporation. The only legal Murphy is Senior Economist at the Institute audience is the subscriber. Printing LMR content for offline reading for personal use for Energy Research, and a Research Fellow with by subscribers to said content is the only permissible printing without express written consent. Photo’s are from various public domain sources unless otherwise noted. the Independent Institute. He lives in Nashville, TN. 4 LMR MARCHMARCH 2014 “Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.” —Ludwig von Mises, Human Action Virtually every social problem today that ostensibly justifies further government intervention into our private affairs, has at its root an economic foundation. Beyond the obvious issues such as the Fed’s “quantitative easing” programs, proposals to raise the minimum wage, and of course ObamaCare, even things like the situation in Ukraine—where cynics suspect energy has more to do with it than political self-determination—require knowledge of economic science. For another example, economists are the ones most qualified to describe why gang violence (think Al Capone) flourished under alcohol Prohibition; this is not something historians can really explain, unless we mean historians who have studied economics. So we see that like it or not, it is vital that the public grasps at least a basic understanding of economic theory, and knows how to apply these concepts to major policy issues of the day. Only an educated public will be able to see through the fog of deceptive promises spun by our political leaders and talking heads in the media. We here at the Lara-Murphy Report have adopted the motto of “Building the 10 Percent.” It is our firm belief that if we can just educate and inspire a small segment of the population, then we can roll back the tide of mushrooming government meddling in our lives and pocketbooks. To this end, we hold an annual event in downtown Nashville entitled The Night of Clarity. The Night of Clarity is the perfect embodiment in conference form of everything we do here at the Lara- Murphy Report. It is held over the course of two days. On the first day (Friday), we have short and riveting talks from the world’s leading scholars and orators in Austrian economics to lay out the problem with our financial system and government. Then on Saturday we have a workshop in which experts lay out the solution as described by Nelson Nash’s Infinite Banking Concept. For a memorial video capturing the highlights from the 2013 Night of Clarity (which featured Ron Paul as the headliner) see: http://tinyurl.com/nyju6dw This year the Night of Clarity will feature former Reagan budget director and author of the NYT bestseller The Great Deformation David Stockman as the headliner. It will be held August 15-16, 2014 so mark your calendars. In upcoming issues of the LMR we will spell out all of the exciting details, so be watching! Yours truly, Carlos and Bob Lara-Murphy Report 5 LMR MARCHMARCH 2014 PULSE ON THE MARKET RECENT DEVELOPMENTS THAT MAY BE OF INTEREST TO READERS OF THE LARA-MURPHY REPORt… Whoa-oh China Gold SPECulatION OF GOLD BACKING FOR CHINESE CURRENCY Freya Beamish recently published a note for clients of Lombard Street Research which speculated that the Chinese authorities may be preparing to back their currency with their growing gold reserves. It might be helpful here to review some history: Starting in 1995, the government of China pegged the yuan to the USD in a pretty tight range (about 8.3 yuan to the dollar), in which it stayed up through May 2005, at which point the authorities began letting the yuan appreciate against the dollar. (Since then, the yuan has strengthened to 6.1 against the dollar, meaning the dollar has lost more than 25% of its value against the Chinese currency in the last nine years.) The entire episode is an alarming microcosm of what seems to be playing out on the world stage more generally: China had originally pegged the yuan to the USD because it was seen as a sign of stability, a solid anchor. But China eventually had to let the yuan float and appreciate against the dollar, lest the Federal Reserve’s inflationary policies during the housing bubble years bring the yuan down with it. If the Chinese authorities take an even bolder step by linking their currency to something much more reliable—such as gold or a broader basket of physical commodities—then it would be “game over” for the USD as the world’s reserve currency. Of the factors delaying such a move, is surely the fact that the Chinese possess (as of January 2014) $1.3 trillion in U.S. government Treasury securities. Any sudden action that crashed the dollar in the foreign exchange markets would also wreck the Chinese bond portfolio, which is why they have to play the long game. Pulse on the Market 6 LMR MMARCHARCH 2014 PULSE ON THE MARKET RECENT DEVELOPMENTS THAT MAY BE OF INTEREST TO READERS OF THE LARA-MURPHY REPORt… Discreet Yellen YELLEN FED SIGNALS POLICY UNCertaINTY The markets eagerly awaited the first announcement from the Federal Reserve after Janet Yellen had assumed the chair.