During his recent interview with Business Today, Aswath Damodaran explains why we have a ‘trust deficit’ that began in 2008. Here’s an excerpt from the interview:
Damodaran: They can do that with the single institution, they can’t do it with institutions collectively.
The reality is the regulators put together do not have the resources to stop a complete bank-run. And that’s what I meant about this being unpredictable. If in fact the regulators were in control of the process you could rest easier, but they’re not .
They’re only partial control. They can do what they can to try to change the game, but the game here is to bring trust back and that’s no amount of money brings that back instantaneously.
And unfortunately I think we have a trust deficit. We’ve had a trust deficit for a decade or more, and I traced it back to 2008.
I mean I described 2008 as a year we lost trust… we lost trust in governments, we lost trust in regulators, we lost trust in Banks, and that trust has never quite come back.
So I think we’re starting with the trust deficit to begin with and with social media playing out the way it is, it becomes a lot more difficult to stop rumors from spreading, and trust to come back.
You can watch the entire conversation here:
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