Growth & Today
The brief account on the previous page describes only three decades of colonial trade, and yet it reveals a pattern that was to be repeated several times.
First, a stimulus to trade: in the 1820′s it was the Industrial Revolution in England and the consequent greatly increased demand for fine wool; in the 1850′s it was the gold rush and the sharp increase in population; in the twentieth century it has been the discovery of minerals and the great technological development.
A period of expansion and optimism follows. There is a sharp increase in economic activity and in living standards. This upward spiral of economic growth is supported and further stimulated by the greater availability of credit and investment capital.
However, in these boom periods, credit is often granted carelessly and for ventures that do not give adequate returns. Optimism gives way to pessimism and recession occurs. While this downturn is often precipitated by other factors such as drought or economic conditions overseas, it is always marked by an abrupt withdrawal of credit and investment funds, and consequently, widespread bankruptcy and business failure.
Such recessions occurred in the 1840′s, the 1890′s, and the late 1920′s.
Australia Today
Today, almost all sales above the retail level in this country are conducted on a credit basis, and the dollar value of such sales is at an all-time high. The contribution of the credit system towards the high living standards we enjoy is significant.
Credit when properly extended provides responsible people with a supplement to their own capital through money, goods and services which they can put to use in creating further wealth.
However, the lessons of history cannot be ignored: if no serious brakes are applied to the extension of credit in boom periods and many unwise loans and credit exposures are made, disastrous results are inevitable.