Sunday, October 10, 2010

The Origin of Credit

I'll gladly pay you Tuesday for a hamburger today

I once read that credit was invented long before money. I think that must be true. A minor point from yesterday's post:

If my clan recently graduated from hunter-gatherers to an agricultural society, and I lend a neighbor some wheat, I expect him to pay me back (and then some) after the growing season. That's a credit transaction, even if it takes the whole growing season. Or maybe because it takes the whole season.

It is the delay before completion of a transaction that makes it a credit transaction. That explains the origin of our word "credit" in the ancient Latin word for belief: I must believe you will honor our agreement, because we do not complete the transaction on the spot.

Buy now, pay later.

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