ABSTRACT
It is easy to imagine that credit is a modern invention, like the DVD player or the mobile phone. The reality is that DVD and the mobile phone are little more than the development of previous methods of display and communication, in the same manner that the motorcar is an advancement on the horse and cart. Credit has been a part of human existence for a very long time – the levels of sophistication and progress in utilising and controlling credit continue to improve. Who would argue that today’s family hatchback is not a much more versatile and reliable form of transport than the 1920s ‘any colour you want so long as it is black’? From the earliest times, three principal factors became apparent as humans began to populate the planet and form themselves into groups or communities. From the beginning, some people, for whatever reason, would have more than others – today we recognise the word ‘surplus’ – and others would want some of it, but not have the means to pay. No change there then! If we add to that the seasonal agricultural factor, the roots of today’s credit cycle are even more obvious. Plant the seed, grow the crop, sell the crop, plant the seed can be illustrated by a twenty-first century flow chart, but remains as ancient a credit problem as ever – income is derived from selling the crop, but what pays for the seed in the first place? The buyer would want to see the product before paying for it, and if the source of supply was a long way from the source of demand, a period of time elapsed before payment would be made.
