Economics

The phrase, neither a borrower or a lender be, in William Shakespeares Hamlet implies that the practice of lending money or borrowing money is a not a good venture. In Shakespeares Hamlet, Polonius gives counsel to his son that borrowing is both dangerous to the lender and the borrower. This observation is supported by the fact that mixing debts onto personal relationships can lead to resentment and in the case where the debtor fails to repay the debt the lender may end up losing both the money and his friend. It is crystal clear that borrowing invites more domestic dangers it replaces private prudence (Bloomerg.com). Lending and borrowing has been a common trend in the contemporary society, from an individual to another individual basis, to a nation from another nation. The main idea underlying the practice is the trust of good relationship existing between the lender and the borrower.

In a free enterprise market economy, individuals and businesses have the maximum freedom to operate and compete among themselves. There is hardly any government interference or control. In such a type of market economy, individuals have the capacity to transform, create, produce, develop and compete in the market place. By producing goods and services that the society values most highly, a free enterprise system results in the greatest efficiency of any economic system (Washingtonpost.com). The main objective of individuals and businesses in a free enterprise economy is to produce goods and services for profit, offer their labor for wages and own necessary resources needed to produce and sell goods and services.

The quote of neither a borrower nor a lender be, practically is a good advice for individuals and businesses in a free enterprise economy.  It is evident that most free enterprise economies consist of households, businesses, markets and governments. And between them all there exists good interpersonal relationships that promote perfect competition among themselves. If the practice is adopted, and there is frequent lending and borrowing from one household to another, from one business to another, and from one market to another, then with no doubts the good interpersonal relationships are bound to break apart and it will eventually lead to imperfect competition (Bloomerg.com). This will come up in the event where one party fails to pay another partys debt and what follows is that the lender will lose the money and this will further create hostility between the two involved parties.

Another reason why the act of lending and borrowing may be discouraged in a free enterprise economy is the fact that it is all about the ability to start a business without permission from the government, as long as they do so without practicing actual violence or fraudulent deception. There exists no rule of the law that enforces contracts, which is a legitimate and necessary role of the government. With borrowing and lending in such an environment, lenders stand high chances to be loosing their money since they have no support of the law, they lack the security, and the witness, to make the contract legal.  However, in many other countries an individual cannot start a new business without permission from the government. And such lending and borrowing activities are only enabled through a legal procedure (Hetzel, 203)

The quote is also relevant in the worlds economic recession. The financial crisis has been linked to reckless and unsustainable lending practices compounded by government intervention and the growing trend of securitization of real estate mortgages for instance in the united states. The main idea underlying the economic recession of 2008-2009, is the practice of immense borrowing and lending between different states that further showed a failure to repay the borrowed money. The emergence of supreme loan losses in 2007 began the recession crisis, and exposed other risky loans and over-inflated asset prices. With loan losses mounting, a major panic broke out on the inter-bank loan market. The incapacity of various borrowers to return the money they had been lent by the banks led to losses to the lenders, who later stopped the lending function after the world economic crisis (Hetzel, 204).

Further still, lending and borrowing as said in Shakespeares quote is relevant to the recent recession in America. Most banks that had lent out money to investors, some of whom were trusted but they did not get the money back. This is because such investors failed to pay back and most of them declared bankrupt and all their debts were written off. The result of all this was a break down of most banks in the U.S, and to those that survived, have henceforth stopped the lending activity. Although President Obamas policy of economic recovery is expected to replenish the economy, critics say that the economic recovery package may actually make it worse (Washingtontimes.com).

Generally, Shakespeares quote, that neither a lender nor a lender be, is necessary in the contemporary society, as we see most individuals and businesses are still keeping up the trend without minding the possible risks in the lending function. The market incentives have been blamed for the biased assessment and the clients acted as security issuers who were able to choose the rating agency to use-the one with best rating (Guryan, 7).

The truth is, all over the world, every individual, state of business firms, are undergoing a most severe global financial crisis and it is affecting all the major players of the world economy. The advantage is, the governments and major policy makers of the world economy have taken notice of the urgency of the situation and at least tried to put up measures that try to regulate the rate at which the loans are borrowed from one party to another.