Really? The "Dismal Science" and the increasingly irrelevant discipline of theology?

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“In God We Trust”

I tend to take my ideas for posts primarily from my favorite blogs and podcasts that help people like me digest the current topics in economics. One of my favorites, that I will continue to recommend is Planet Money recently did a podcast on what would happen in the event of a default of Greek banks, brought about by a vote against raising the amount of money disposable to the EU to support compromised countries and banking systems. For 20 minutes they discuss the domino effects of what seems increasingly inevitable in that area of probably the largest economic system in the world. What struck me the most about the story, and about the discussion of marketplace and the economy at large, is the issue of trust.
The argument essentially goes that the other European countries don’t trust that Greece or other countries like it (see: Portugal, Spain, Ireland, possibly Italy), can repay them if they lend them money to bail out the governments that have spent way more than they have. (The debt to GDP ratio of Greece is around 150% last I heard). So the Greek banks have lent money to the Greek government that can’t pay them back. The everyday depositors wonder if the Greek banks can then pay them back because they have poured all your money into the black hole that is the Greek government. Do you trust your bank? Other Europeans here about this going on in Greece, say in Portugal or Spain, and they start pulling their money out of their banks. They don’t trust their banks. And, on and on it goes. But at the root of it all is trust.
This is probably not a revelation to many readers. But, it is curious to me. My dad tends to be an optimistic guy, but most of the time that I talk to him about recessions, the mortgage crisis and things of that sort, he always tends to talk about it in a way that says everything will be ok. Now why is that? Is he just an optimist? (Sure partly, that’s why I always talk to him when things are going wrong. He can see a way out). But, whenever journalists or the media tells the story, they seem to be more negative. Maybe they just like to sell disaster scenarios. Planet Money journalists are pretty up front about their negativity. My dad also has an another motive. As a bank employee, he needs to be positive because people have to trust him with their money. I am not saying my dad is a liar or swindler, because he is most certainly the most honest and trustworthy man I know. That is why he is a great banker. What is evidenced is the degree to which our economy lives and dies by this idea of trust.
Our currency itself displays this, “in God we trust.” However, that’s not quite right is it. We trust the money itself that it is worth what it says it is. We trust the government who backs it. We trust the banks that will keep it for us to protect it. We trust the the buyers and sellers in the exchange of goods when we use the dollar as the basis for the trade. The government has built in extra layers of trust like the FDIC and various other government agencies that seek to protect that very trust but at the end of the day its still just trust. You could look at the rising costs of commodities like gold and silver as a kind of index of trust that exists in the US. It is at historic levels. It continues to rise daily. We don’t trust the Fed knows what it is doing. We don’t trust banks to invest our money there. What we trust is gold.
I think one of the most interesting explanations to the reason for the recession that began as a result of the mortgage crisis in 2008 was that our financial institutions became to intertwined and convoluted that they could not be understood. If nobody can understand what Citi Bank or AIG was doing with all their financial instruments, they pulled their money. The trust was gone. They just billowed out of control with their mortgages bundles, credit default swaps and the like. No one knew what exactly was going on and the trust eroded. With the trust eroding, the paper market ground to a halt. There was no money being lent. Companies and entrepreneurs need credit to grow and there was no trust. I am not saying I understand totally what occurred in this absurdly confusing quagmire, but it everything seems to revolve around trust.
I am not sure where to turn with all of this analysis or conjecture, but at the very least, it seems to me that it is disingenuous to fault believers of whatever their respective faiths for their trust in the divine. At bottom, any person who engages in the economy at large places large amounts of faith and trust in institutions that they have to believe have their best interest at heart. Or, if not their best interest, at least they most believe that they will not totally wipe out their life savings. We are a massively trusting people.
One considerable difference in the divine is that we are placing our trust in a being of some sort that we have of course never seen, or that nobody has ever seen. The quote from Hebrews 11:28 comes to mind, “faith is being sure of what you hope for and certain of what you do not see.” However, I am not sure that it only applies to the divine. The same might also be said for money, the government or the banks that we put our trust in. Or, the very notion, which cannot be seen, that our money is worth something. As with all esoteric notions, we only see the effects or evidences of their existence without seeing the thing itself. Why are we more likely to trust the banker or Ben Bernanke than we are a God, the creator and sustainer of the universe? It is at least no more foolish than the wager that we engage in daily by placing our savings and banks and relying on them to give us that money back in 10, 20 years when we need. Or the wager place that the labor we engage in on a daily basis will result in a currency that is trustworthy to be traded for the food and shelter we need in order to preserve our lives. We are tremendously trusting, and faithful people. Do not be fooled. Some of just place more faith in our manmade institutions than the divine.