All credit is based on trust essential in all financial dealings

Most of us view trust a valuable and desirable feeling, something that improves the quality of our personal lives. We seldom take the next step and view it as indispensable, a vital ingredient in the society and in the economy. All credit is based on trust, and the fundamental problem in a credit crisis is not just the lack of "liquidity" but also the absence of trust, the trust that is essential to all financial transactions. British Historian Geoffrey Hosking noted recently: "A liberal, free market society needs trust in the trustworthy as the core of its values, not just as a exotic moral extra. Operating somewhere between hope and certainty, trust is the belief that the other person means what he says. That is, he could be wrong but he is not trying to deceive. He is reliable in the same way we feel ourselves to be reliable. In times way past, a handshake was often considered sufficient to seal a deal, however such a handshake had to be "trustworthy," offered by someone who knew himself, knew his resources, and was aware, as well, of the dangers in making a promise he couldn't deliver. See tort law in the United States, chapter based entirely on word of mouth and handshake contracts. Hosking points out: "The 2000s were bad years for social trust, at least in the UK and USA. They were the culmination of several decades during which generalized social trust had been declining. Surveys in the UK suggest that, when asked in 1959 Would you say that most people can be trusted?' 56 per cent replied Yes'; in 1998 the equivalent figure was 30 per cent. In the USA, when asked the same question in 1964, 55 per cent answered Yes', but in 1995 only 35 per cent." And than, the recent crisis came And then came the credit crisis, along with the collapse of investment values as we knew them. The exposure of the greed, carelessness and fraud that permeated the financial industry leading up to that crisis eroded even further the public's trust. The extraordinary salaries and bonuses subsequently shelled out to those responsible for that failure, actions that finished the job, namely, loss of trust.

I agree one hundred percent with Hosking who pointed out that more than financial inefficiency and distress is at stake and with distrust pervading the population, all the social services that the governments traditionally provided became more difficult to administer and, more expensive: "As a result, there are today, more overworked teachers and demoralized social workers, there is more litigation, greater reluctance to help the police, greater recourse to private health care and the like." The most important point is not that people need to be encouraged to trust, since most of us want to trust and have the basic inner calling to trust. At this crossroad, we need institutions that are trustworthy. Every investor knows about Greece, and has views about its debts and potentiality to derail the Euro project. A good number have stood in awe before its classical glories or lain in idleness on its equally glorious beaches. And many have views about the inhabitants of the country of Homer's wine dark sea. To put it mildly and stereotypically (but erroneously) all those towns and islands are populated by lazy lotus eaters who pay no taxes and have their fingers in the communal honey pot. Elsewhere in the Euro-Zone (sources : international press) Reuters Breaking views discussed recently a real problem : "France is in a very precarious situation - if they delay any kind of reform, or question any commitment to reform and it will make the markets very nervous. The incoming president will then have even less room for maneuvers. France needs to control its budget deficit, stimulate growth and restore competitiveness. If (the rival politicians) can agree on that basic idea, they can then have a debate. If they disagree on the basic scenario, there could be problems." Reuters adds that the French election could actually help propel reform to the extent that it forces politicians to focus on generating growth in the economy. The Policymic blog says that: "Americans should still be concerned about who occupies the Elyse Palace at this crucial point in time, for France, together with Germany, is the very fulcrum of the EU, holding the euro zone together." The Guardian election blog agrees that the stakes are high. It suggests that hopes are still high that the Euro-zone crisis can be resolved without a disorderly default by Greece or another indebted state. However, it suggests, the French election could upset such calculations. Liberal expat on the Guardian site believes that the French are more pragmatic than they may initially appear: "French voters tend to vote with their hearts - and go for a protest vote (Le Pen/Bayrou) - in the first round, with their wallets in the second." The real worry is that the bond markets do not trust them to make the right choice and send their cost of debt spiraling. This could prompt another phase of crisis for the Euro-zone.

Looking forward , beyond the summits and hot air political statements The Merkel and Sarkozy plan, but mainly Merkel have one sole objective in mind, and that is to have a single currency across Europe. Almost all of the rest of Europe cannot find a way to support the value of that euro. This is because, as I said, the economies of countries across Europe are based on widely different criteria. It has been stated that the objective of all the members of the European Union have to be to pursue the objective of stable growth, employment and cohesion. There is one major problem with this objective. It is called the Merkel / Sarkozy plan and this plan will allow countries to borrow more via the ECB loan scheme, and it wants to impose high taxes, austerity measures, and cutbacks in spending, along with fines and penalties on those countries that do not meet the EU (read the German) targets, plus for countries who fail to meet these targets have their government submit their budgets to the EU (read Bundestag) for approval and/or change, before putting it to their voters. Where is democracy in this?
Date: January 30.2012

Mircea Halaciuga, Esq. 0040724581078 Finance and Law