Currencies are interlinked with trust, and always have been.
Trusted relationships are the most efficient relationships, and provide the best basis for prediction. When we have trust, we have predictability.
Currency really is all about predicting the future. Currencies are fundamentally transferrable credit. That’s how currency starts. Someone accepts an IOU, and that person is able to pass on that IOU to someone else.
In modern times, the currencies have been issued by the government, because the government was viewed (for the most part) as trustworthy. When they are not, the currency becomes worthless.
So, if currency is really just transferable credit, then the typical risk assessments needed for loans is completely applicable for currencies. In other words, will this currency–will this promise of repayment–be worth anything tomorrow?
In our modern worlds, those with the highest credit ratings typically have the greatest efficiencies available to them.
Trying to divorce currencies from trust is like trying to separate weather from the atmosphere. They will always be linked.
Watch all episodes in order at the Conversations with Kip Playlist