Digital Shiny Objects

Assets, Not Currencies
Intermediary Problem
When the Tide Goes Out
Trust Comes Easy
“Dallas, Tulsa, and Family ”

Financial crises are really about trust. They tend to occur when people lose trust in assets, institutions, or people they had thought trustworthy. Whether the lost trust was a consequence of the crisis, or its cause is a different question. But they do seem to go together.

Sometimes trust is misplaced from the beginning. No one should have ever believed that tulips were guaranteed wealth, but plenty of intelligent people did. Other times the trust is initially justified but events negate it—events that may not be obvious until much later.

At some point, the pain from misplaced trust becomes so large that we begin to question our trust in everything around us. Who else could disappoint me? Thankfully, most trust catastrophes are small, contained situations. But they can become systemic, affecting entire systems.

All this came to mind as I read about the collapse of cryptocurrency exchange FTX. Its users—many of whom were hoping to escape a state-controlled financial system—can now only hope a state-controlled bankruptcy system eventually recovers some of their assets (talk about irony). I suspect they will be waiting a long time.