A collapse of confidence

Jim Sinclair has said that when a currency enters a catastrophic decline (i.e. "hyperinflation"), this is a psychological event. It's a widespread and rather sudden loss of confidence which causes the currency to fail (or be dramatically devalued). The currency held by foreigners comes rushing back into the country, dumped back onto the market as a bad asset. Furthermore, the citizenry becomes desperate to get rid of this rapidly depreciating paper, and commerce temporarily soars as everyone plays "hot potato" with their failing paper, hoping to convert it into anything and everything of real, tangible value. Just as a stock market may crash because of a change in attitudes, so may a currency.

Lately I've been wondering: Does a collapse of confidence in government predict an imminent loss of confidence in the currency?

During the Bush years, many on the left felt that Bush had not won the 2000 election nor the 2004 re-election, but had stolen both. He was an imposter, a usurper. Today, some on the right wing think Obama cannot legally be the President. Set aside, if you would, any thoughts about whether these folks are correct or incorrect. The point is that a goodly part of the population no longer believes our presidents are legally elected (let alone fairly elected, which everyone knows hasn't been the case for decades).

Meanwhile, Congress is approaching record low approval ratings in both parties. A Pew research poll shows that 63% of those polled feel the news media is frequently inaccurate -- up from 53% only 2 years ago. Homeschooling is on the rise as people abandon public schooling, and alternative medicine is also on the rise as people increasingly distrust mainstream medicine. Again-- whatever your personal thoughts about all this, it points to a loss of faith in authorities and institutions. It points to a growth in distrust, suspicion, and cynicism. And I don't say they're wrong, because when you come to the end of an empire, everything pretty much goes to hell in a handbasket, and that's where we are today.

Moreover, I don't think the "incompetence" defense is working anymore. People are more inclined to believe that their representatives are corrupt through and through, that they have never acted in good faith, that they're "in on it," "one of the boys," "taking a cut." They're increasingly willing to believe that a given disaster was "an inside job." And I don't say they're wrong. At the end of an empire, maximal levels of corruption are reached. Power corrupts not only individuals, but societies.

I would assume that this disillusionment spreads from one area of life to another. Americans who feel disillusioned about government, the media, schools, the military, the FDA, and other institutions are Americans who are angry, cynical, and ready to feel they've been cheated. Such Americans will be ready to believe, in the not-too-distant future, that the ultimate swindle is that piece of green cotton in their wallet. That cotton they worked so hard for, but which is now swiftly losing value, robbing them as surely as a thief. They might soon look at their Federal Reserve Notes and recognize that they are worth nothing of real value, that their only real utility is as kindling. They might be quite ready to make the paradigm shift and realize that they are much better off with sacks of sugar and dried beans than with currency. They might realize, in a panic, that they'd better get out all that green cotton from the bank and convert it into canned food and blankets and shovels and seeds.

And I don't say they're wrong.