The Fall of Confidence

Institutional confidence is akin to gravity. We know it’s there, and we understand a lot

about it - but we haven’t yet been able to explain it adequately enough. At least not

enough to quantify its relationship - or unify gravity with the other physical forces that

we do understand. Of course, we are much further from unification of the interactions

between confidence (behavior), the economy, and finance.

It’s easy to see the effect finance has on the economy. One can even map the ultimate

effect through history, which is riddled with failed currencies. Ultimately, the failure of

an untethered financial system culminates with the collapse of a currency.

Just as gravity is crucial for keeping things from floating away, sound money is the force

that is crucial for controlling the trajectory of modern financial policy.

Somewhere along the line, confidence pushes things over the edge, and the tipping point

comes from a confluence of failures in faith.

This may be where we are now. When you hear people speak of “something afoot,” this

is what they mean.

Of course, financial confidence is an abstract concept formed in the collective view--a

view maintained by truly dangerous falsehoods.

We may not be able to unify confidence with the real economy and a financial system

unhinged, but we can all come to appreciate its gradual thinning.

Note: Some people assume all finance is bad. I don’t. But I believe that a financial system

should be rooted firmly to some physical reality. It should be fixed to a substance that

can be easily valued, measured, and is free floating in the market place. What that

literally looks like and how we could get there from here is another topic for another

day.

Cracks of confidence can appear over broad stretches, in a variety of institutions that one

may find quite surprising when looked at in the overall.

For example, a friend recently sent me a rant about the health care system. It went as

follows:

“The Sick Care fiasco has so many problems that have metastasized over

decades of abuse that I don’t know it can ever be fixed. Between

pharmaceutical corporations, research universities, patent law, doctors,

hospitals, FDA, CDC, and other government bodies, trade associations,

insurance companies, psychiatry, medical coding, no-fault settlements,

Hollywood, Wall Street, and the ignorant ‘just-give-me-a-pill’

consumer/patient - we are stuck in a downward spiral.”

I immediately wrote back with a quasi-MadLib to exhibit how easily the same could be

said for other institutions. My version:

“The {Sick Care | financial system} fiasco has so many problems that have metastasized

over decades of abuse that I don’t know it can ever be fixed. Between {pharmaceutical

corporations | giant multinational banks}, {research universities | economics

departments}, {patent law | zero prosecutions}, {doctors | HFT-dark pool exchanges},

{hospitals | agency revolving door}, {FDA | SEC | CFTC}, {CDC | Federal Reserve |

Treasury | IMF | World Bank}, & other government bodies, trade associations, insurance

companies, {psychiatry | general ignorance | mass propaganda}, {medical coding |

financial reporting | fictional accounting standards GAAP}, {no-fault settlements | two-

tiers of justice}, Hollywood, Wall Street, and the ignorant {‘just-give-me-a-pill’ | ‘just

give me yield’} {consumer/patient | investor/Muppet} - we are stuck in a downward

spiral.

Institutions are strong, cohesive sets of beliefs and expectations held in the collective

mind.

Institutional confidence or “confidence” represents the great unquantifiable component of

modern finance. It simply doesn’t fit into the equations, the risk profiles, the algorithms

or the charts.

There will always be a few, however, who hang on to the conceptual idea, no matter how

poorly the home team performs or how invasive they become.

The problem we face with institutional confidence is that the remaining fans have near

absolute power — they can make things appear to be as they are not for an extended

period of time.

These collective patterns may have made sense or might have worked at some point, but

are now out of date. They are antiquated, afraid, and grasping for more and more power.

Here’s a list of institutions in order of confidence from a Gallup poll taken last year.

The Military

Small Biz

Police

The Church or Organized Religion

The Medical System

US Supreme Court

The Presidency

The Public Schools

Banks

The Criminal Justice System

Newspapers

Organized Labor

Big Business

News on the Internet

Television News

Congress

Military at the top, banking in the middle, and Congress at the bottom.

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outlandish fiat price predictions, check out http://www.silver-coin-investor.com