Tuesday, February 17, 2009

Monetary systems and trust

According to Simmel, the presence of a strong, government-backed monetary system increases overall trust. This is due to both the fact that it inspires trust in a nebulous entity, and the fact that individuals with money receive the benefit of the trust that money inspires.

The recent collapse of the financial system in the United States has caused people to lose faith in those institutions, though trust in the almighty dollar still remains. However, many countries have monetary systems that do not inspire trust, as a result of enormous amounts of inflation, disinflation, deflation, or outright defaults on debt. This lack of trust in money results in less trust in business, which then serves to greatly hinder the economic development of that country.

Is it possible for a country or an economic system to develop a high level of trust, without a trustworthy monetary system?

1 comment:

  1. I think that society has evolved into people thinking that money is security. For example, you see it throughout this country especially in the presence of 401k plans, and life "insurance" plans. People save money, because they want to be secure, and people budget money becuase they want to feel secure and avoid collapse. With that said, i believe that the more money there is in the governement or financial institution, the more comfortable we are going to feel thus the more trust. I find it hard to find trust in something that doesent have a trustworthy monetary system becuase money/profit is what most people live for in the first place.