So Dark The Con of Man: The Economy

Is it too simplistic to say that the central element of our economic system is a con game, a “confidence game,” where it only works if people believe in it, and it simply doesn’t work if they don’t. All of banking is about projecting a veneer of solidity, of being established and immobile – think of those heavy columns and marblesque floors, of vaults and 18th century or greek revival architecture. Hell, half of what I learned about banking I learned from Mary Poppins:

A British bank is run with precision
A British home requires nothing less!
Tradition, discipline, and rules must be the tools
Without them - disorder! Chaos!
Moral disintegration!
In short, we have a ghastly mess!

Money by definition is a con – a piece of paper that we all have to simply agree has value. Sure, there was a time when bills were exchangeable for gold. But Nixon nixed that. Now if you’re nervous about this paper’s value, you’re stuck with “In God We Trust.” Bills are made formal and engraved and cool looking to inspire confidence and trust. Americans for years were rather snarky about colorful currency and stamps. If they looked too fun, whimsical, fashionable they’d be disregarded as transient and cheap. It took a unique combination of technology and public outcry, and I believe an act of Congress, to get stamps interesting and get our money just a hair less blah. “Blah,” I’m sure they’d have told me, was the asset.

So if people don’t think the system works, that money has no value, that risks to loan money are too great, and to borrow money enormous, and so on, we (the people) create a massive negative cycle that ends in the dissolution of our economic system. The answer, it would seem, is simply (and simplistically) to believe. Trust that money has value, that things will get better, that investments will grow…and it begins the wheel’s spin in the other direction. When naysayers say the economy is in the toilet, they are not so much predicating it as fomenting it. Similarly, Obama and the administration isn’t being Pollyanna to say that this will end, this will be our best hour, that it’s a simple - but dramatic – readjustment. It too is laying the groundwork for it all to come back online. They’re both right. And the more you believe the negative tales the longer this will go on.

I don’t know what it’s called, but it is some kind of flocking principle that I most often see illustrated when people arrive at a Southwest gate to take a flight. I get to the gate 45 minutes early and no one has started to line up. So I take a seat and look at my magazine. As time creeps by, finally someone stands up and gets in the front of the line. He stands there alone, and the rest of the waiting room eyes him. There’s still 20 minutes, and everyone would rather stay seated comfortably in a chair then start standing in line. Heck, the first 30 people are all going to get good seats in group A. But everyone is watching, ready to move. A few people get fed up with the game and get in line. Now people are getting nervous. Why wait in the chair and NOT be in line, when they can wait in line, 10 feet away, and hold their own spot. Seems a shame to be early for the plane and still end up last in line to get a seat. So a few more stand, and now everyone is edgy, calculating… and something happens. When there are maybe 4 or 8 people in line, the group sort of explodes into action, moving quickly to take their places. In just a minute the line goes from a half dozen to 30. That’s the moment. If no one had gotten up in the first place, they all could have remained comfortably in seats for another half hour. But now they’re standing (or sitting) in line. Trust, justice, panic, effort. Some combination of effects makes this happen.

This is where we are. The slipping trust, the eroding economy is temporary, but no one wants to get in line too quickly. We sit back, watching the markets fall, the prices drop, knowing the longer we sit back the worse things get for everyone, but unwilling to trust again these institutions we had trusted for so long. We trusted banks and Wall Street and mortgages as safe the way we trust elevators in sky rises: initially some people knew how they worked, gears were exposed both to insure trust and to keep costs low… but as time progressed the elevator box made the workings invisible to the user: we didn’t want to see ourselves hanging in a heavy box suspended hundreds of feet in the air by a cable. Very creepy. The mechanics were hidden and we just trusted that it was well made and safe. But I tell you, when those boxes start to drop the public will want to see how they’re made, know who is inspecting them, and maybe have a few friends learn enough about what’s going on to be a trusted voice and these matters.

The system fell apart because our trust was abused. We are a beaten spouse, probably never to trust our partner again, or now always a little on guard, a tiny bit defensive. We’d leave, but there’s no where to go. So we’re still in this damaged relationship, all options seem untenable. What Obama is doing is simple: he’s trying as fast and hard as possible to get the public to trust – him, the administration, the institutions. He’s trying to be transparent. He’s trying to get trustworthy leaders. He’s speaking from his heart and he is a charismatic and passionate individual. I don’t know a lot about politics, but I have a feeling that this is precisely the thing we need.

The con is on. “So dark the con of man”? Naww… it’s the underlying principle of economics.