Barry Ritholtz observes that one way to look at the current economics crisis is as a five-year hiccup in our approach to lending.
Over the entire history of human finance, the underlying premise of all credit transactions — loans, mortgages, and all debt instrument — has been the borrower’s ability to repay.
This goes as far back as when Og lent the guy in the next cave a few dozen clamshells in order to go and purchase that newfangled wheel. If Og didn’t think his neighbor would be able to repay him those clamshells, he never would’ve entered into what we can describe as the first commercial loan.
From 1 million B.C. up until the present, repayment ability was the dominant factor.
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