Trust is fundamental to the way human persons relate. We need to be able to trust in the sincerity of those who share community with us, those we trade and exchange with, and those who seek to represent us. The absence of trust undermines our ability to meet basic human need, to feel supported, to share resources and to effectively divide responsibilities. Mistrust imposes its own ‘price’ on every ‘transaction’, every engagement with others becomes more costly as we need to account for the perceived insincerity and unreliability of others.
In his 2007 memoir, The Age of Turbulence, Alan Greenspan explained the retention of historically low U.S. interest rates for years after the dot.com dip as reasonable given the health of global supply chains.
The former Governor of the Reserved Bank of the United States argued that raising rates in the mi-2000s would have done little to change long term inflation given that prices would be kept low, not so much by monetary policy but by the increasing efficiency of systems that facilitated the exchange of goods and services. Those low interest rates helped facilitate the ongoing housing boom brought on by cheap credit and meant that there was nowhere meaningful for interest rates to drop when the subprime mortgage mirage was finally found out.
The circumstances are different today but as Australia’s central bank moves to increase interest rates to ward off inflation many of the same dynamics are in play. Indeed, Greenspan’s fundamental insight that global supply chains have much more to do with the cost of goods and services than interest rates set by central bank in prescient. While goods and people can move freely across the globe, prices are likely to be lowered by the timely movement of resources to the places they can be utilised with economic efficiency. All things being equal, of course.
Though all things are almost never equal, still the effect of open lines of supply on prices, and relatedly but more fundamentally the capacity of people to get basics such as food, can be seen now in the negative. We are seeing an increase in prices, and the attenuating failure to get some goods to those in desperate need, because there is a break down in the infrastructure that moves resources around the world.
'Dwindling trust means an unwillingness to invest in long term solutions to global problems. It means an added cost to every transaction