Loosening Credit Standards Research Paper Example | Topics and Well Written Essays - 1750 words

slackening Credit Standards - Research Paper Exampleods and services that implies some form of consumer credit (meaning the credit lengthy is for eventual consumption) by the borrower and the lender expects to be repaid either in money or in material body later on.Credit had been used since immemorial times ass to Biblical periods or even extending back to antiquity as shown by the Hammurabi Code of ancient Babylon in which there was the provision for punishment for throng who do not pay their debts or try to escape their financial responsibility by absconding or running away. The purpose of credit had ever been the same it is used to facilitate the exchange of goods and services commodious before modern economics came into being as a distinct academic discipline and as a legitimate profession itself.The Hammurabi Code consisted of about 282 laws with approximately half of these laws dealing with commercial contracts in which there is a graded punishment for contract violators . In modern free-market capitalist economies today, the sanctity of contracts is always upheld to help promote trade and commerce by creating conditions of trust in which parties to a transaction argon assured of payment and other stipulations by which to ensure compliance by the other party. The loosening of hard credit standards can lead to serious, unforeseen, and dire consequences for an entire economy because it causes higher credit default rank as borrowers cannot pay.Credit is used in perhaps ninety percent of all commercial proceeding compared to the use of cash. This is because cash can be limited at times which can hinder the limit of any contemplated transaction credit provides the necessary link for the transaction to push through despite the absence seizure or lack of sufficient cash on the part of the buyer. If the seller is willing to be trust or take a risk as to the trustworthiness of a buyer, then credit is extended. hoi polloi trusted other people to honor fin ancial obligations in such ways as a mere handshake to seal a deal.