Declining Trust

There’s an article here by Edward Chancellor that you might find as interesting as I did. It’s about the role of trust in modern societies. What is the clearest emblem of trust, at least in the economic sphere? Fiat money:

Money, writes Hosking, makes trust economically effective. It expands the realm of trust, whilst simultaneously depersonalising it. Money only has value because we trust it, and this trust is backstopped by our trust in the government of issue. Our faith in money represents a belief that society will collectively honour its obligations. When that belief is threatened, money loses its value. Hyperinflation beckons.

Oer the years our trust in various institutions from churches to banks to companies to the government has eroded. Trust in government is at a low ebb.

A lack of trust is one of the reasons for the economy’s present slow growth. It’s like grit in the wheels.

Trust must be earned. Once lost it is very difficult to recover.

4 comments… add one
  • ... Link

    And don’t forget that the more ethnically heterogeneous a society is, the lower the trust, generally. Which makes one question current immigration policies even further.

  • steve Link

    Almost OT, but should we really have less trust in so many of these institutions? Take the Church. On the whole is really less worthy of trust now than it was 100, 200, 500 years ago? I don’t really think so. It is pretty clear that the sex abuse thing has been going on forever, it just finally got brought out in public. Corrupt priests and ministers have always existed. It is not clear to me that it is really worse. What is clear is that the shortcomings are much mor public now.

    Take the banks, please. They have always been a problem. This is not really new. If you let them, they will blow up the economy. It is what they have laws done and what they will always do. This has been known for a long time. It is why I love Lord Acton’s quote.

    The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.

    Lord Acton

    Finally, should we really trust govt less now than in the past? When? Was it really more honest when they openly sold govt jobs? Should we really have been more trusting of govt when it was out secretly overthrowing other govts, leading to what we have now? When govt lied to us about the conduct of our wars and how many people were actually being killed?

    Setting aside little blips up and down, I am not sure that our institutions are, by and large, any less or more worthy of trust than in the past.

    Steve

  • I agree that institutions need to be more worthy of trust and that’s the crux of the matter. However, the reality is that the modern world would be impossible without trust. For our society to continue to function with greatly reduced trust will require changes so depressing I don’t even want to contemplate them.

  • TastyBits Link

    In order for the trust in the dollar to be broken, people would need to realize that the dollar represents currency not money, and that is never going to happen.

    Fiat money is a scheme by investors to increase the capital supply. Without fiat money, investors must use banknotes backed by a bank’s assets, but with fiat money, the Fed (a bank) uses federal dollars backed by the US government.

    The problem with this scheme is that the investors continually draw upon the Fed, and they use each draw as the asset/basis for the next draw. In the 1920’s, the underlying assets were stocks, and in the 2000’s the underlying assets were houses.

    After the banking collapse, Sen. Glass & Rep. Steagall got to the bottom of what occurred. Allowing investors access to the wellspring of government backed trust will lead to the collapse of the financial sector. Hence, G-S was designed to eliminate the problem.

    With G-S, the financial institutions could trust that the fiat money was not being abused, and therefore, they could run wild in their dealings with each other. The public could trust that their savings accounts would not vanish, and they could get reasonable loans.

    Or, it could be George Bush’s fault. I am certain that he gave my dog a skin infection, and he clogged my pipes.

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