Is The Credibility Bubble Bursting?
In a fiat currency system, perception is, by definition, everything. Paper money has no intrinsic value. So the people saving it and accepting it in exchange aren’t expressing faith in the money itself but in the competence and honesty — and power — of the institutions managing it. Let that faith erode and those slips of colored paper and ephemeral computer bits revert to their intrinsic value.
And on the credibility front, the trends aren’t encouraging. Consider the coverage of this weekend’s Washington DC meetings of the International Monetary Fund and World Bank, two global financial institutions that the US dominates. From the New York Times:
At global economic gathering, concerns that US is ceding its leadership role
This article is available only to subscribers, but a similar one from India’s Business Standard makes many of the same points:
US primacy seen ebbing at global meet
As world leaders converge here for their semiannual trek to the capital of what is still the world’s most powerful economy, concern is rising in many quarters that the United States is retreating from global economic leadership just when it is needed most.
The spring meetings of the International Monetary Fund and World Bank have filled Washington with motorcades and traffic jams and loaded the schedules of President Obama and Treasury Secretary Jacob J Lew. But they have also highlighted what some in Washington and around the world see as a United States government so bitterly divided that it is on the verge of ceding the global economic stage it built at the end of World War II and has largely directed ever since.
…click on the above link to read the rest of the article…
