Only loan money to people that can pay it back

I found this quote in the article, “Worried Banks Sharply Reduce Business Loans,” from the NY Times today:

“Mr. Epstein, forced to limit his production to what he can finance with his existing cash flow supplemented by his own money, has been tightening credit himself: He has been turning down orders from companies with any whiff of financial troubles, lest his company fail to get paid.”

Doesn’t anyone else find it interesting that we’ve gone full circle, from loaning money without trust to loaning money only when we expect to get it back? Of course, this causes contraction in the economy – before we had a bunch of people hawking ideas and getting money to try them out, many (most?) failing. Now, less money circulates, but that money should return what’s expected.


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