Do you wonder why the economy continues to do poorly? Do you wonder why the fiscal crisis continues to drag on and on? You may think it was a result of the internet bubble and cheap money. You may think the economic malaise is a hang-over from the real estate bubble. And you would be right…partially.
Lack of Trust
At the heart of the matter is lack of trust. Can any of you honestly say that you trust the banks after the Libor scandal or the robo document signing fraud? Can you trust the inflated values of real estate after “liar loans” and an appraisal system that was rigged? Can you trust that the stock market doesn’t favor the big Wall Street firms or high frequency traders? Can you trust the government to manage or regulate these massive institutions that all seem to be screwing the little guys?
The bottom line is that every economic transaction is based upon some level of trust. If you buy your produce from a farmer’s market, you trust that it hasn’t been contaminated with animal waste that would make you sick. If you are an employer wanting to hire someone, you trust that their application and resume accurately reflects the knowledge and experience of that potential employee.
You trust that your employees will come into work and do their job to the best of their ability so that you can gain and maintain customers. Employees trust that the company will be run in such a way as to manage the finances and business in order to continue paying them.
Every economic transaction depends upon that type of trust. Unfortunately, that trust has been betrayed by the institutions I have mentioned plus many others. Why should I continue to invest if I feel the system is rigged against me? Why should I trust the banks if they lie about the interest rate known as Libor in order to profit at my expense? Why do I want to buy products that will harm my family such as tainted baby formula from China? Why should I trust that my governmental leaders really know what they are doing when they can’t agree about anything and bicker worse than my kids?
Do you want to know when the economy will get better? When people start to trust again! Until then, everyone will just be hunkering down and trying to survive without getting screwed.