Money and Institutional Hierarchies: On Maintaining Trust Relationships in the Complex Monetary Systems

Abstract

This paper offers an institutional theory of emergence and continuation of trust in monetary relationships. It suggests that individuals involved into monetary exchanges rely on orderly hierarchies of attendant institutions that shore up their trust in money. These hierarchical structures, however, fail to perform their supposed function of protecting trust in money, since their functioning is confronted with the inherent problems of infinite regress, lack of the guarantor of last resort and uncontrollability of complex monetary systems. The paper argues that the breakdown of institutional insurances and guarantees prompts economic agents to accept a weak form of trust in money, not being rationalized or substantiated by the power of auxiliary institutions, but merely combining blind faith with inductive inferences about the conditions of future circulation of monetary forms and instruments.