Trust

Check out my latest at The Partial Observer. Excerpt:

Where the circle of trust is small -- when no one trusts others beyond their family and best friends – it doesn't matter what kind of money circulates in the economy. If one believes others are on the take, it's easy to justify joining them.

But this means people will stop exchanging with each other. People will assume the money that others would give them is counterfeit. A nation could have lots of gold, but still be poor because the people refuse to engage in voluntary exchanges with each other.

Just as gold money won't make a nation rich, so it is true that rich nations don't require gold money. The form of money doesn't matter.

Rich nations get rich on trust.