credit

LORD POLONIUS
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
– from “Hamlet,” William Shakespeare, 1599/1601

Few of us have been following Lord Polonius’ advice. Credit is the lubricant of the modern economy. In the throes of a major financial collapse triggered by excessive credit formation we are being urged to spend and assume yet more debt to stimulate economic activity and job creation. If it is impossible to operate on a strict pay-as-you-go basis, the next best thing is to make sure you borrow from people or organizations you know and trust.

The relationship between borrower and lender has become so attenuated that even legal authorities have a hard time determining the identity of the lender. A lender of record on a mortgage may not be the property owner since the mortgage might have been bundled together with other such loans to form an asset base for a mortgage backed security that was sold to investors. “We don’t own the property,” [said] a spokesman [for a bank]. “We’re the owner of record, but the investors who bought the mortgage-backed securities own it” (NYT, March 8, 2009).

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