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2 - Corporate suspicion in the kingdom of rationality

Published online by Cambridge University Press:  05 June 2012

Jocelyn Pixley
Affiliation:
Macquarie University, Sydney
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Summary

Corporate attempts to conquer uncertainty are behind financial booms, and lead to busts only too quickly. Trust and distrust are primary drivers, we will see. Chapter 1 looked at money's inevitable uncertainties and ‘ideal’ positive outcomes. This chapter shows how money's special emotions in Anglo-Saxon countries are institutionalised. Coping strategies became rules/habits and impersonal suspicion, in a quasi-infrastructure of trust agents meant to stabilise claims/distrust between creditors, debtors and the ‘community’. None can predict. Stability is tentative; default is never unthinkable; past trust can shatter.

Banks create money – extend it for fees – on promises of debtors. Firms, governments, taxpayers and households are borrowers. Lenders are private banks, money funds, central banks and the public if bondholders, depositors or savers. All depend on chains of trust. Money's critical, ideal role in economic activity is its benign social purpose. Private creditors finance national debt for sound government activities, allowing favourably priced credit to foster economic activity which a government taxes. But since the future is unpredictable, ‘ventures may fail, taxes cannot be collected, debts cannot be repaid’ (Ingham 2004: 132–3). Economic decline can set in. All decisions are made under uncertainty; there are only expectations, mirages, about the future. This fragile relation is bonded with trust; bonds are one expression of this trust; interest rates ‘indicate’ this abstract trust or distrust.

Type
Chapter
Information
Emotions in Finance
Booms, Busts and Uncertainty
, pp. 36 - 68
Publisher: Cambridge University Press
Print publication year: 2012

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