Why We Don't Have A Financial Crisis

Writing about debtors prisons some 250 years ago, Samuel Johnson observed,

Those who made the laws have apparently
supposed, that every deficiency of payment is the crime of the debtor. But the truth is, that the creditor always shares the act, and often more than shares the guilt, of improper trust. It seldom happens that any man imprisons another but for debts which he suffered to be contracted in hope of advantage to himself, and for bargains in which he proportioned his profit to his own opinion of the hazard ; and there is no reason why one should punish the other for a contract in which both concurred.

* * *

It is vain to continue an institution which experience shows to be ineffectual. We have now imprisoned one generation of debtors after another, but we do not find that their numbers lessen. We have now learned, that rashness and imprudence will not be deterred from taking credit; let us try whether fraud and avarice may be more easily restrained from giving it.

Fortunately, the world heeded Johnson's words and human nature has changed! Now people are unwilling to take on debts they cannot afford, and the abolition of debtor's prisons and advent of modern bankruptcy laws have made lenders cautious about making loans to people who may not be able to repay them.