15
May

Richard Leader, CFA, writing in the Houston Chronicle, had this to say about the trust and the economy:

Central to financial markets around the world is the issue of trust.  Trust enables people to do business with each other.  Lack of trust causes economic stagnation.  Lots of different things have contributed to this mess we find today.  Governments have promised benefits that they can’t deliver.  Corporations flush with cash are offering few new jobs.  Worker compensation is stagnant even as productivity has soared.  Add to this the repercussions of the dot com implosion of 2000, the housing collapse of 2008, and the sub-prime mortgage market treachery and it’s not surprising that people are unusually cynical.

Top economists say that trust is necessary for an economy to grow.  It’s the oil of the engine of capitalism.  Without trust, the engine seizes up.  Distrust is arguably the primary reason this economic crisis won’t go away.  The world economy is stuck in first gear.  While people generally want to be trustful, many institutions have not acted in a trustworthy manner.  Financial institutions, in particular, have done a very poor job of honest dealings with their customers.  The recent housing collapse looks like a replay of the 1930s, a time when Americans completely lost faith in bankers.

We couldn’t agree more with Mr. Leader.  Without greater trust in our institutions, particularly the institutions of business and government. we don’t our economy will grow fast enough to reemploy all those who lost their jobs in the Great Recession, as well improve the financial picture for the vast majority of working Americans.

Aneil

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