Friday 27 April 2018

Why we need better credit

"NEITHER a borrower, nor a lender be," said the bard, but the bard didn't live in the 21st Century. The business lobby and John Trethowan's Credit Review Office say there's not enough credit flowing to small and medium-sized companies.

They may well be right, at least for the world we live in.

Credit gets a bad name, but the awkward truth is that the modern economy needs credit, and plenty of it, flowing through the system all of the time. Without a constant flow of loans, preferably cheap, preferably easy to come by, the process of capital accumulation is just too slow and too hard for most modern business plans to sustain.

Too little credit in the economy and investment-starved businesses collapse, consumers can't spend and the economy shrivels.

The answer isn't really about more credit or less credit. It's better credit. Key to that is a competent banking sector, whatever its size. Now wouldn't that be something?

Irish Independent

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