Chapter One
PREHISTORIC AND PRIMITIVE CREDIT AND INTEREST
In historical times credit preceded the coining of money by over two thousand years. Coinage is dated from the first millennium B.C., but old Sumerian documents, circa 3000 B.C., reveal a systematic use of credit based on loans of gra...
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Chapter One
PREHISTORIC AND PRIMITIVE CREDIT AND INTEREST
In historical times credit preceded the coining of money by over two thousand years. Coinage is dated from the first millennium B.C., but old Sumerian documents, circa 3000 B.C., reveal a systematic use of credit based on loans of grain by volume and loans of metal by weight. Often these loans carried interest.
In prehistoric times, even before the development of common measures of value or of mediums of exchange, credit probably existed. There are many ethnological instances of credit in kind in communities where no trace of any medium of exchange or even standard of value can be discovered. Credit existed from the very earliest phases of economic activity, even before the evolution of barter proper.
When we consider credit in its broadest meaning we can infer something of its earliest forms. Primitive credit need only have consisted of a loan of seed to a son or brother or neighbor until harvest time or a loan of an animal or of a tool or of food. Such transfers are called gifts if no repayment is expected, loans if repayment is expected, and loans at interest if the repayment of a certain amount more than was loaned is expected. These transactions in kind required no money, no exchange, and no barter.
Today a transfer without immediate quid pro quo is usually classified in one of three ways: a gift, a loan, or a theft.Those of us who remember our dormitory years know that the distinction between gift, loan, and theft is not always clear. The conventional euphemism is "loan," and it is understood that the aggrieved party, whose necktie is missing, may reciprocate at a convenient opportunity by "borrowing" something belonging to his roommate. Thus loans occur even when not formally negotiated; credit can exist without being clearly defined.
This ambiguity is not new. Thefts, of course, were common in primitive times as they are now. However, before the evolution of governments, the logical response to a theft was a countertheft; a cattle raid for a cattle raid. "Gifts" between chieftains were at times the principal form of peaceable international trade; gifts from one chieftain were expected to be met with a return of gifts, preferably of greater value, from the other. If time elapsed, this could be called credit.
Loans without interest undoubtedly were always common as they are today: friendly or charitable or interested help to a relative or neighbor. They may take the form of the loan of a lawn mower or a cup of sugar or a large or small sum of money or the use of an empty residence. We are here concerned with loans at interest and with the amount of interest expected. The earliest historical records show that interest was already a usual and accepted concomitant of credit. What can we say about its origin?
The loan of a tool to a neighbor suggests no payment of interest, even today: merely the return of the tool in equivalent condition, and the implied privilege of borrowing one of his when needed. Nor does the loan of food or shelter to needy friends or relatives suggest repayment with interest. In fact, such loans are customarily gifts with sometimes a vague hint of reciprocity. But other sorts of loans exist and existed at very early times, which do suggest repayment with interest: loans of seeds and of animals. These were loans for productive purposes. The seeds yielded an increase. At harvest time the seeds could conveniently be returned with interest. Some part or all of the animal's progeny could be returned with the animal. We shall never know but we can surmise that the concept of interest in its modern sense arose from just such productive loans.
By earliest historical times productive loans of this sort, repayable in kind with an agreed rate of interest, had become common. Also common was the friendly charitable loan of nonproductive goods without interest.
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