Loaning money destroys friendship and family relationships - The Hill

Shakespeare warned, in Hamlet, "neither a borrower nor a lender be ? for loan oft loseth both itself and friend. And borrowing dulls the edge of husbandry." That aphorism conveys primarily a moral, not a financial, message. In our discussions of the modern world, the basic principles are often put off into broad generalities ? whether we want to speak about governments, banks, corporate America, the mortgage industry or consumers. But at the basic level, every one of these abstractions is built upon the activities of individuals. One of the most salient lessons we can learn from the subprime debacle is about individual behavior ? specifically, the way in which individuals should deal with debt.
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A virtuous approach is usually to spend only after one has earned. Being in debt is never an ideal situation for anyone. First, it reduces freedom. Also, friendships suffer when someone holds the reins over another. It causes a reduction in the flow of affection and creates a formality that weakens social bonds between friends, family and colleagues. Refusing to lend money to an irresponsible friend or family member may, in fact, be the best thing a true friend could do.
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More importantly, indebtedness creates a moral hazard. The normal developments that would make people change their behavior ? such as going broke ? no longer operate effectively in a debt-fueled society. No matter how insolvent one becomes, one can always delay the day of reckoning. But the fundamental moral problem is that people don?t respect what they don?t earn. Slick Wall Street brokers who artificially create trades to inflate quarterly earnings ? and thus increase their bonuses ? end up spending them on frivolous pursuits. Easy come, easy go. Extending unemployment benefits during the economic downturn may seem like a benevolent gesture designed to help people who?ve been displaced by the economy. But at the same time it reduces the incentive for people to find work. Bailing out big banks by extending them interest-free loans might delay their collapse. But it does not curb the reckless behavior that got them into the situation in the first place.

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Source: http://thehill.com/blogs/pundits-blog/economy-a-budget/239935-loaning-money-destroys-friendship-and-family-relationships

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