“It seems that if there was any truth to our language, ‘trust’ would be a four-letter word.”
Joel – “Risky Business”
Trust is the most important aspect of human endeavor. Without trust there can be no interaction. No communication.
No friendship. No love.
The key to understanding economics is understanding people. The basis for all human interaction is the basic trust that a trade once completed will be honored.
The global economy runs solely on trust. Without the trust that contracts signed today can be fulfilled tomorrow and disputes settled with a reasonable degree of amity, there can be no iPhones.
When politics become toxic, when the sides refuse to cooperate on the very basic functions of government, uncertainty reigns. And uncertainty filters down to the people getting up everyday, going to work and providing a home for themselves and their families.
It’s like that great scene in the classic movie “Trading Places” where Eddie Murphy talks about the guy who’s worried he won’t be able to buy his kid that “G.I. Joe with the Kung Fu Grip” for Christmas.
That guy was the barometer for the market. That guy knew something about trust.
I had one of those G.I. Joe’s as a kid. My dad rarely let me down in supplying the most important things on my Christmas list.
It’s part of the reason why I loved him and trusted him completely. He was very human, but he kept his promises and I always knew where the boundaries were.
He and mom did what they could without making promises they couldn’t keep.
That example, despite the heartbreaks and the setbacks, shaped my approach to being a husband and a father. I don’t make promises to my daughter or my wife I can’t keep.
The global economy works on the same basic principles as the trust between you and anyone close to you. Trust takes a lifetime to build and a minute to lose.
This is why I watch in horror as company after company betray the basic trust between them and their consumers. From Facebook to Google, Twitter to Mastercard they all now believe it is in their best interest to dictate terms to their customers.
They’ve moved from offering their services to people to judging them as worthy of using their product. They’ve broken the basic trust providing a place to communicate or do business free from bias that was sold to us when they needed us.
Now our opinions are inconvenient to their political and social goals.
But we know it doesn’t come solely from them. We know this pressure comes from powerful political forces intent on holding onto stolen power gained through years of inflation, legislation and media manipulation.
And they will, in the end, empower the competition that will destroy them. Because once you lose someone’s trust. No amount of convenience or enticements will bring them back.
The same holds true, if not more so, for political institutions. Brexit is proving that Britons who wanted out of the European Union were right that the political classes and monied oligarchy I like to call The Davos Crowd view the people as inconveniences to their consolidating power for their own betterment.
Brexit has destroyed the careers of two British Prime Ministers and will likely destroy both the Conservatives (Tories) and Labour before it’s finally done.
Theresa May’s resignation was met with cheers by the working class in the U.K. like England had just won the World Cup.
The media punditry, namely Ryan Heath of Politico, in love with the EU are already writing eulogies for it in anticipation of poor turnout giving voice to Euroskeptics who don’t represent the ideals of a united Europe.
Among Heath’s 12 people who have ruined the EU elections are Helmut Kohl, Angela Merkel and Mark Zuckerberg the very people who weaponized the Deutschemark (euro), immigration and censorship respectively.
Trust in the money, your community and your ability to express yourself are all under basic attack.
Donald Trump is single-handedly attacking the foundations of a global economy at a time when it is in no position to handle the shock of his bipolar personality disorders.
I wrote earlier in the week tariffs won’t fix what ails the U.S. because:
“We have diverted so much money and capital to education that we have cheapened its value in the labor market while encouraging two generations of kids to go heavily into debt to chase some dream of fame or fortune that had an ever-shrinking probability of ever coming true.
$100,000 for a Women’s Studies degree will not train you to run a production line. It won’t get your air-conditioner fixed. And it won’t prepare you to take responsibility for your wasted time and energy.
But what this will do is further destroy trust in our leadership as the premier place to do business in the world.
The gap between the U.S.’s legal infrastructure and the rest of the world’s is shrinking. Trust is breaking down. Countries like Russia are rising in trust while the U.S. falters.
In 2012 the U.S. ranked 4th in the World Bank’s Ease of Doing Business. We’ve since fallen to 8th. In 2012 Russia ranked #111 while today they rank 31st, which is better than that of China at #46.
And that rank rose sharply in 2018 along with India, who still has a long way to go.
Commerce seeds ideas and humans are very good at figuring out what is worth copying and what isn’t. The difference between a Frontier/Emerging Market and a Developed one is trust. Putting money into them is easy. Getting that money back out is the barrier to commerce and growth.
Every day Donald Trump wakes up and sanctions another company. Another CEO. And every day the world looks on in horror as the rules of trade change.
Every day is another day where trust frays a little more.
When it’s lost chaos follows. That is what we’re witnessing today and what will shape our investment decisions tomorrow.
What Price Chaos?
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