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Confidence, either in the banking system or the markets, is really about trust. Metrics like consumer confidence answer nothing more than the question, “How much do we trust the people running our institutions to create conditions for future growth?”
That being the case, you would think our leaders in government and industry might do a better job of maintaining our trust.
Trust is important. Our monetary system runs on trust, as does our representative form of government. Banks work because we trust them to not lose our money. The only way credit cards work is because the issuers trust us to eventually pay them back. A credit rating denotes how trustworthy you are deemed to be.
Money itself has value only if we are confident that it will maintain its value.
Given the centrality of trust in enabling the economy to grow faster, it must be cultivated. But, even though we need trust now more than just about anything else, instead of building it, we are destroying it as fast as we can.
Let me give you two obvious examples.
Look at the news from a certain angle, and you will see that at least 80% of it is an assault on our sense of trust. It focuses on the worst thing that could possibly happen. We trust Mother Nature to operate between certain norms of temperature and wind speed, but when she goes wild and destroys an entire town, it assaults our sense of trust – and garners all the emphasis on the news. And while we have thousands of dedicated civil servants and elected officials doing yeoman’s work each day keeping the garbage collected and the streets cleaned, when one loose cannon blows a million dollars of taxpayer money on a wild party in Vegas, he becomes the focus of our news attention.
