Egypt, France airdrop aid to Gaza amid growing humanitarian crisis, global criticism of Israel    Supply minister discusses strengthening cooperation with ITFC    Egypt launches initiative with traders, manufacturers to reduce prices of essential goods    SCZONE chief discusses strengthening maritime, logistics cooperation with Panama    Egypt strengthens healthcare partnerships to enhance maternity, multiple sclerosis, and stroke care    Egypt keeps Gaza aid flowing, total tops 533,000 tons: minister    Egypt reviews health insurance funding mechanism to ensure long-term sustainability    Gaza on verge of famine as war escalates, ceasefire talks stall    Gaza crisis, trade on agenda as Trump hosts Starmer in Scotland    Egyptian president follows up on initiatives to counter extremist thought    Indian Embassy to launch cultural festival in Assiut, film fest in Cairo    Egyptian aid convoy heads toward Gaza as humanitarian crisis deepens    Culture minister launches national plan to revive film industry, modernise cinematic assets    Egypt will keep pushing for Gaza peace, aid: PM    I won't trade my identity to please market: Douzi    Sisi calls for boosting oil & gas investment to ease import burden    EGX to close Thursday for July 23 Revolution holiday    Egypt welcomes 25-nation statement urging end to Gaza war    Sisi sends letter to Nigerian president affirming strategic ties    Egypt, Senegal sign pharma MoU to unify regulatory standards    Two militants killed in foiled plot to revive 'Hasm' operations: Interior ministry    Egypt, Somalia discuss closer environmental cooperation    58 days that exposed IMF's contradictions on Egypt    Egypt's EHA, Huawei discuss enhanced digital health    Foreign, housing ministers discuss Egypt's role in African development push    Egypt reveals heritage e-training portal    Three ancient rock-cut tombs discovered in Aswan    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Egypt's Irrigation Minister urges scientific cooperation to tackle water scarcity    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



The death of trust
Published in Daily News Egypt on 03 - 02 - 2009

BANGKOK: A friend recently asked a seemingly naïve question: "What is money? How do I know I can trust that it is worth what it says it is worth? We learn in introductory economics that money is a medium of exchange. But why do we accept that? Banknotes are just pieces of paper with a number attached to them.
We believe in banknotes because we collectively decide to trust the government when it says that 100 is 100, not 10 or 50. Money, therefore, is about trust, without which no society can function.
Just as we obey our leaders' orders to fight and die because we trust their judgment, we entrust our careers and our money to those who run Citigroup and Goldman Sachs and other such banks, because we believe their leaders will be fair to their employees and clients, and honorable in their business practices. We do not grow up wishing to work for crooks and liars.
Once that trust breaks, bad things happen. Money ceases to have credibility. Leaders become figures of contempt or worse.
As I write, inflation in Zimbabwe has reached an unimaginable (if not unpronounceable) level of more than 500 quintillion percent. One quintillion is one million trillion. A year ago, inflation was "only 100,000 percent. This is what happens when trust vanishes.
Fortunately, Zimbabwe is not a country of real consequence for world stability. But the Weimar Republic and China in the 1940s were. One opted for Hitler and the other for Mao Zedong to restore trust. So the risks are clear.
Are we now seeing an erosion of trust in America and in the United Kingdom?
The first warning sign surfaced in 2001, with the bankruptcy of Enron in the United States. Its fraudulent accounts were certified by Arthur Andersen. Now, India's Satyam, audited by PriceWaterhouseCoopers, is found to be missing billions in cash. If we cannot rely on the best auditors, can we continue to trust chartered accountants?
Bond rating agencies have issued misleading ratings on companies in questionable health. Will we ever again be able to trust a triple A rating issued by, say, Moody's?
Banks have been holding our money for safekeeping since the 14th century, when the Florentines invented the practice. The Royal Bank of Scotland, founded in 1727, when laissez-faire philosopher Adam Smith was only four years old, has just become a socialist state-owned-enterprise thanks to the bank's incompetent leaders, who acquired over-priced banks filled with toxic assets.
Citicorp, Bank of America, Goldman Sachs, Merrill Lynch, and other symbols of "excellence all would have collapsed but for public bailouts. And yet for decades we thought that the people who were managing those firms were much smarter than we were.
We grew up admiring leaders such as Robert Rubin, John Thain, and Henry Paulson. Rubin, a former US Treasury Secretary and ex-Chairman of Goldman Sachs, presided over the collapse of Citigroup while taking home $150 million in bonuses. Should he really have been rewarded at all for his "performance ? Just this week, the technically bankrupt Citigroup's senior executives were about to buy a new $50 million luxury French jet for themselves, until the White House stopped it.
Thain, also a former president of Goldman Sachs, helped himself and his Merrill Lynch staff to $4 billion in bonus payments even after he had to sell the firm to Bank of America to save it from bankruptcy. After he was caught spending $1.2 million, even as Merrill Lynch disintegrated, to decorate his new office, Bank of America had to fire him to placate growing revulsion over Wall Street's out-of-control culture of entitlement.
Paulson, the outgoing Treasury Secretary and another Goldman Sachs veteran, left a loophole in his rescue package big enough for a truck to drive through. That loophole allowed his former friends and colleagues on Wall Street to pay themselves billion-dollar bonuses while keeping those firms afloat with taxpayers' money.
The universities these men attended - Harvard and Yale for Rubin; MIT and Harvard for Thain; Dartmouth and Harvard for Paulson - have been magnets for the world's finest young minds. The rest of us thought that these institutions could instill the wisdom, insight, and character of which we all wished we had more.
Perhaps parents all over the world should re-examine their often obsessive craving for these "name-brand universities, pushing their children as if an Ivy League degree was an end in itself. Now we know that Wall Street's titans were never all that smart, and certainly not very ethical, for they failed the only test that counts. All of the firms they led collapsed, and were saved only by money from those who could never get a senior job on Wall Street or a place at Harvard.
These Wall Street princes were smarter in one way, however: they managed to pocket a fortune while the rest of us are stuck with the mess they left behind. Bernard Madoff who hailed from down-market part of New York City and attended a middling university will spend time behind bars, but none of the titans of Wall Street with blue-chip pedigree will ever do so.
History has not been kind to societies that lose trust in the integrity of their leaders and institutions. We need to save our economic system from its abusers, or else.
Sin-ming Shawis a private investor and former visiting scholar at Princeton University. This commentary is published by DAILY NEWS EGYPT in collaboration with Project Syndicate (www.project-syndicate.org).


Clic here to read the story from its source.