The Other US Deficit: Trust, The Universal Underlying Economic Growth Factor

Wednesday, January 30, 2013 07:17
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The Other US Deficit: Trust, The Universal Underlying Economic Growth Factor

Tags: banks | deficit | economy

Trust is not only the most vital factor in the financial advisory business; it’s the backbone of the economy. And it's the other US deficit.

 
Trust is the single common ingredient in financial transactions, employment, policy making, and consumer activity. It's breach has become a common denominator in American society and institutions.

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Lance Armstrong’s confession that his seven Tour de France titles were won by cheating; scandal after scandal on Wall Street; banks who manipulated interest rates to their favor—the list is ongoing.
 
The growing distrust of government over time may have hampered more aggressive stimulus efforts to keep the economy going.
 
The distrust between government and business results in increased regulation. Increased regulation can hold back economic growth.
 
Even the food industry is being more tightly regulated as a result of e-coli and salmonella outbreaks. The facilities at food sources can no longer be counted on to be clean.
 
Investors’ reluctance to invest is also based on distrust, either of sovereign fiscal policies, uncertainty about the quality or motives of asset managers, or lawmaker disagreements that result in gridlock.
 
There is a glimmer that trust in America’s institutions is beginning to stabilize. The securitization markets, which creates pools of securities out of car loans, business loans, credit card debt, or mortgages, is experiencing new issuance.
 
Bank mortgage portfolio values have begun to inch up, decreasing the losses from mortgages gone bad.
 
Trust takes time to rebuild and a recent survey of 1000 people taken in November just after the election by a public relations firm showed that trust in government, media, and business had risen from one year ago.
 
Another survey taken in January after the fiscal cliff deal showed all measures of trust had dropped once again.
 
What, in your opinion, will it take to heal the so-called trust deficit in America’s institutions and markets?
 

 

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