October 21, 2008

"Trust Me"

Right. The biggest casualty of the current financial crisis is trust.

Wall Street, already viewed askance by Main Street for it’s lavish ways, now conjures images of the Strip in Las Vegas after a losing streak. The self-styled “Masters of the Universe” that Tom Wolfe skewered so justly in Bonfire of the Vanities, have duped us again – and themselves in the bargain. Lehman Bros., a brand that was almost a synonym of trust, has vaporized overnight. Banks are taking money from the Fed for nominal interest and hanging onto it, afraid even to loan it their fellow banks. Credit is “tight” because trust is the scarcest resource. Collateralized Debt Obligations? Talk about putting lipstick on a pig.

We spend most of our lives, and particularly our economic lives, walking on air, supported by the trust we place in the financial institutions we take for granted. We measure our sanity on the shared belief that our world is governed by reliable, predictable rules and behaviors. To question everything that is questionable is annoying and paralyzing, and in its extreme forms, even clinical. We know in our minds that “historic performance is no guarantee of future results,” but in our hearts we believe that if we just walk fast enough and don’t look down, we will stay aloft.

The good thing about falling is that it usually wakes us up, at least for a while, to the reality – or maybe unreality – of the stuff we call money. Money is based on a web of agreements, assumptions and contracts. Money is not, and never was, “your money,” in spite of the slogans of the anti-tax ideologues. As we have seen in dramatic form recently, no government, no money. The dollar may carry the slogan “In God We Trust,” but the real trustee is the U.S. Treasury, which, as of this writing at least, is still solvent. This solvency is based purely on the trust we place in one another as citizens and as taxpayers. The self-indulgent party of the few is now over, and we on Main Street are looking anxiously at one another and the resources we have left, testing the ground before we take the next step. There is something bracing about this alertness, this focus on what is really important and where value really lies. But it is only a matter of time before we tire of our vigilance and drift back into our dream. Trust me.

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