I’d like to say that all unnearned trust is “fiat trust,” but in fact that’s not true at all. In fact, most of the best trust begins with an act of faith.
“If you don’t go to someone’s funeral, they won’t come to yours”
- Robert Putnam, quoting Yogi Berra
Think of a new relationship where one party has to venture out on a limb and risk rejection in order to deepen the bond. Trust without concrete evidence, aka faith, provides an opportunity for that faith to be rewarded. Trust is built up by… trust.
Of course, the inverse is true.
Money is a societal convention. People accept money today with the expectation that everyone else will accept it tomorrow. At its core, trust in the currency holds the monetary system together. Like the legal system, this trust is a public good. Maintaining it is crucial for the effective functioning of societies.
- Agustín Carstens, Digital currencies and the soul of money
In his impassioned argument for why “central banks have been and continue to be the institutions best placed to provide trust in the digital age,” big ol’ Agustín Carstens accidentaly explains exactly why central banks have lost trust.
If “the soul of money is trust,” as he pleads, then what have central banks done with the trust we have extended them?
Trust requires sound institutions that can stand the test of time. Institutions that ensure the stability of the currency as the economy’s key unit of account, store of value and medium of exchange, and that guarantee the safety and integrity of payments.
Stability? Store of value? Medium of exchange? Safety and integrity of payments? Central banks have openly adulterated all of these aspects of money, via printing, sanctions, cronyism, and obvious self-dealing.
Was the problem “trust,” full stop? Or was our trust merely misplaced in Agustín et al?
And if good trust is possible, can we build it safely?