People do not seem to appreciate the importance of trust in binding civilization and society. We think that laws, contracts, and religion draw separate individuals together to create the complex network of connections that we refer to as civilization. I contend that without trust, civilization and society would collapse.

It would require a rather lengthy book to deal with all the implications of the subject of trust. In this article, I will introduce a few categories in which trust plays a crucial role.

Traffic

When we travel on highways, sidewalks, or trails, we trust that the vast majority of the people with whom we share those byways will avoid colliding with us. Yes, highways have traffic laws, but those laws provide no protection. Only the fact that we trust most people to abide by those laws provides us with any protection. Sidewalks and trails exhibit an emergent order due to the mutual trust among users.

Promises

Promises represent an excellent example of the power of trust. Why would anyone rely on a promise without trust? I believe the oaths of court witnesses generally include the phrase “do you promise?” Many official offices require an oath with the same phrase, “do you promise?”

Government

The power of every government ultimately relies on the trust of citizens. Whether the government actually earns that trust makes little difference. The most authoritarian government serves because of the trust of citizens.

Laws

Laws have no power without the trust of citizens to follow them. Policy power only has an effect at the margin for the few citizens who break the trust that the majority of citizens give to legal authorities.

Taxation

Taxation works for governments only because citizens trust officials to redistribute citizens’ property according to the citizens’ wishes. If those citizens learned to trust their own judgment, they might vote differently.

Religion

Next to government, religion represents one of the most powerful redirections of trust. Again, people place trust in something outside of themselves. They trust their interpretation of words written in a book hundreds of years ago, or they trust their interpretation of words spoken by someone who quotes words from those books.

Contracts

People generally do not enter into contractual agreements with others they do not trust. A contract only states the promises two parties make with each other. To have an enforceable contract, the signers must trust that the document meets legal requirements.

Ownership

If you think you own something, don’t you trust that you have met specific requirements for ownership? You either created the property with your own efforts or acquired it from someone who had established legal ownership.

Crime

Does crime belong on a list of behaviors that require trust?

I have to acknowledge that some people do not deserve the trust of others, and they never will. Pathological criminals.

Some people engage in crime because they feel that no one trusts them already. For people to learn about trust, someone needs to trust them first. The value of trust in individuals must begin in small groups, first in families.

I do not advocate replacing law enforcement with a social worker. Why have laws if you do not enforce them? But we need to ask how society fosters so much criminal behavior.

Debts

The existence of debt requires a certain level of trust between the borrower and the lender. Contrary to some people’s belief, “risk premiums” (higher interest rates) cannot make up for a lack of trust. Remember the three C’s of credit: 1) character, 2) capacity, and 3) collateral. When lenders overlook the importance of character and capacity and attempt to mitigate risk with collateral, they set themselves up for probable loss. Witness the real estate bubble that popped in 2008. Trusting the false trends in market prices.

Banking

If you ask many people to list the most trustworthy organizations, many might say, after a pause, banks. After all, they let banks keep their “money.” They write checks on their bank accounts, trusting that the bank will see that the “money” gets transferred to the payee’s account. Customers “borrow” dollars from banks, trusting that the bank will not call their “loan” before its due date.

But banks have a dark side on the trust spectrum. When customers transfer dollars to demand deposit liability accounts, they trust having the ability to recall or transfer their claim on those account balances at any time, without notice. That’s why they use their claims as “money.”

Fractional reserve banking has changed all of that. No bank in the country can honor “money” claims at the same time. The banking system has turned demand accounts into widespread fraud.

Don’t run down to your lawyer’s office and ask him to file fraud charges against your bank. The Federal Reserve Act has institutionalized and legalized what, in practical terms, amounts to fraud.

The banking system in its current form will continue to function as long as you and other “depositors” trust that it will.

This leads me to arguably the most important form of trust in our lives: money.

Money

At the most basic level, “money” consists of nothing more than trust. Money does not consist of gold, silver, bank notes, or bank balances; it consists of trust. Whatever physical form of “money” you have, you can only use it as a medium of indirect exchange if you trust that others trust that they can use it for the same purpose: to exchange for other goods and services.

Remember that always and everywhere, only individuals determine the economic value of anything, and that includes “money.” If you offer a good or a claim on a good (or a claim on another claim), it will have more value to the person to whom you offer that a good or a claim on that good if they trust that they can exchange it in turn for other goods.

It would take many pages to develop the philosophical argument that ultimately relies on trust fully, but please consider it.

Now consider what happens when countries around the world stop trusting the US Dollar.

Conclusion

I have mentions a number of activities and structures that function on the basis of trust. Without trust, civilizations and societies would certainly collapse.

By intent, I saved my brief discussion of money, which you might argue consists of nothing but trust, for last. “Money” plays such an important role in your life that you should examine the trust you and others have in what you use as money. You should question whether you trust any “fact” that someone else might state about goods, services, income, wealth, etc., when stated in terms of “money.”