Severe financial crises trigger a loss of trust in markets

Evidence

In 2009, economist Tyler Cowen predicted that the Great Recession might teach young people financial humility and prudence: “Today’s teenagers stand less chance of making foolish decisions in the stock market down the road. They are likely to forgo some good business opportunities, but also to make fewer mistakes.” Instead, the collapse of trust in the global financial system drove an entire generation of young people into speculative fervor. Crypto became more than a financial vehicle—it became a lifestyle. Born from techno-anarchist dreams of overthrowing the global financial order, cryptocurrency eventually merged with other twenty-first-century macro-trends: the entrepreneurial hustle of Jay-Z, the scarcity of streetwear, and the magical thinking of woo-woo. — W. David Marx, Blank Space, 735 (#exemplifies, via linked claim)

Of course, when a manufacturer or dealer faces bankruptcy, its usual reputational and legally induced incentives to be trustworthy can deteriorate badly. When future expectations collapse for any such reason—the previously trusted party suffers from radically changed circumstances—there is less reason to expect trustworthiness. Similarly, governments may often be quite trustworthy in carrying out the laws, even though a particular government might be very untrustworthy in designing the laws to be carried out. In both these cases, institutional control devices are often powerful and well directed. — Russell Hardin, Trust and Trustworthiness, 257 (#expands, via linked claim)

Categorization

• XREF: connects to: Markets gained legitimacy as experts lost it after 2008 — Aris Komporozos-Athanasiou, Speculative Communities: Living with…, 113; Collapsed trust turned commerce into mutual deception and crippled lending; Bankruptcy and collapsed future expectations erode even established trustworthiness — Russell Hardin, Trust and Trustworthiness, 257 (+9 more)

Related

• Financial crisis collapse of trust pushed young people into crypto speculation (similarity 0.85)
• Bankruptcy and collapsed future expectations erode even established trustworthiness (similarity 0.81)

Broader Connections

• Collapsed trust turned commerce into mutual deception and crippled lending #expands (0.88)
• Bankruptcy and collapsed future expectations erode even established trustworthiness #expands (0.85) — Russell Hardin, Trust and Trustworthiness, 257
• Financial crisis collapse of trust pushed young people into crypto speculation #exemplifies (0.85) — W. David Marx, Blank Space, 735
• Banks are protection firms because trust collapse dooms them #expands (0.80) — Diego Gambetta, The Sicilian Mafia The Business of…, 113
• Trust survives widespread fraud in advanced economies #qualifies (0.80)
• Financial bubbles burst when future-productivity claims lose credibility #corroborates (0.78) — Max Haiven, Cultures of Financialization, 497