Debt has been around for hundreds of years, probably as long
as there has been money. Debt has been a burden to many since
then. In early Greece debt was physically tied to bondage, for
if one was unable to repay their debts they simply became
property of the lender. In his wisdom Solomon, the great
lawgiver, passed a law in 594 B.C. that outlawed debt
bondage and canceled all outstanding debts. That was of
course good news for those who owed money but not so for
those who had lent it.
It was in the Italian banking system in the 1300's that
modern lending got its start. Using a bill of exchange
a bank could lend money, designate from among dozens of
currencies and transport it safely over poorly guarded
highways. Even if it was stolen it could not be cashed by the robber.
Thus 100 gold coins in a bank in Venice could be used in Florence.
The bill of exchange was then able to be used as currency among
merchants and lenders, further increasing the value of the initial
gold coins. This type of lending was only available to the merchants
and the nobles, so ordinary workers were kept from the benefits and
burdens of debt.
Debt in America - The Twentieth Century
Lending continued to be reserved for the upper class until fairly
recently. Most middle-class and working-class people had no debt
because the banks refused to lend them money. Most rented their
homes and even if they did own a home it was paid for as it was
being built. A middle class person in need of a loan only had
the options of a pawn shop or a loan shark. The New York State
Attorney General, in an attempt to curb loan sharking, put great
pressure upon banks to make consumer loans available.
In 1928 the National City Bank of New York offered loans with an
interest rate of 12 percent to its working class customers.
On the first day the bank received five hundred applications.
Because of the interest rate and a low rate of default, the loans
became a source of great profits for the bank.
This should give you an idea of how it all started and maybe some
idea of how it might end.
The Bible says, "Neither Lender Nor Borrower Be"
We got ourselves into this mess and maybe we need to acknowledge that
and get ourselves out of it.
Your comments are welcome but kill the Messenger!
