Consumer credit may seem like a fairly new invention – but it’s actually been around for more than 5,000 years!
In fact, many millennia before the credit score became ubiquitous, there is historical evidence that cultures around the world were borrowing for various reasons. From the writings in Hammurabi’s Code to the exchanges documented by the Ancient Romans, we know that credit was used for purposes such as getting enough silver to buy a property or for agricultural loans made to farmers.
Consumer Credit: 3,500 B.C. to Today
In today’s infographic from Equifax, we look at the long history of consumer credit – everything from the earliest writings of antiquity to the modern credit boom that started in the 20th century.
Consumer credit has evolved considerably from the early days.
Over the course of several millennia, there have been credit booms, game-changing innovations, and even periods such as the Dark Ages when the practice of charging interest (also known as “usury”) was considered immoral by some people.
A Timeline of Consumer Credit
Below is a timeline of the significant events that have helped lead to the modern consumer credit boom, in which Americans now have over $12.4 trillion borrowed through mortgages, credit cards, student loans, auto loans, and other types of credit.
The Ancients and Credit
3,500 BC – Sumer
Sumer was the first urban civilization – with about 89% of its population living in cities. It is thought that here consumer loans, used for agricultural purposes, were first used.
1,800 BC – Babylon
The Code of Hammurabi was written, formalizing the first known laws around credit. Hammurabi established the maximum interest rates that could be used legally: 33.3% per year on loans of grain, and 20% per year on loans of silver. To be valid, loans had to be witnessed by a public official and recorded as a contract.
50 BC – The Roman Republic
Around this time, Cicero noted that his neighbor bought 625 acres of land for 11.5 million sesterces.
Did this person literally carry 11.5 tons of coins through the streets of Rome? No, it was done through credit and paper. Cicero writes “nomina facit, negotium conficit” – or, “he uses credit to complete the purchase”.
Moral Concerns About Lending
800 – The Dark Ages in Europe
After the collapse of the Western Roman Empire, economic activity grinded to a halt. The Church even banned usury, the practice of charging interest on loans, for all laymen under Charlemagne’s rule (768-814 AD).
1500 – The Age of Discovery
As European explorers and merchants begin trade missions to faraway lands, the need for capital and credit increases.
1545 – England
After the Reformation, the first country to establish a legal rate of interest was England in 1545 during the reign of Henry VIII. The rate was set at 10%.
1787 – England
Philosopher Jeremy Bentham writes a treatise called “A Defense of Usury”, arguing that restrictions on interest rates harm the ability to raise capital for innovation. If risky, new ventures cannot be funded, then growth becomes limited.
The Birth of Modern Consumer Credit
1803 – England
Credit reporting itself originated in England in the early 19th century. The earliest available account is that of a group of English tailors that came together to swap information on customers who failed to settle their debts.
1826 – England
The Manchester Guardian Society is formed, and later begins issuing a monthly newsletter with information about people who fail to pay their debts.
1841 – New York
The Mercantile Agency is founded, and starts systemizing rumors about the character and assets held by debtors through a network of correspondents. Massive ledgers in New York City are made, though these reports were heavily subjective and biased.
1864 – New York
The Mercantile Agency is renamed the R. G. Dun and Company on the eve of the Civil War, and finalizes an alphanumeric system for tracking creditworthiness of companies that would remain in use until the twentieth century.
1899 – Atlanta
The Retail Credit Company was founded, and begins compiling an extensive list of creditworthy customers. Later on, the company would change its name to Equifax. Today, it is the oldest of the three major credit agencies today in the United States.
The Consumer Credit Boom
1908 – Detroit
Henry Ford’s Model T makes automobiles accessible to the “great multitude” of people, but they were still too expensive to buy with cash for most families.
1919 – Detroit
GM solves this problem by loaning consumers the money they need to buy a new car. General Motors Acceptance Corporation (GMAC) is founded and popularizes the idea of installment plan financing. Consumers can now get a new car with just a 35% downpayment at time of financing.
1930 – United States
By this time, efficient U.S. factories are pumping out cheaper consumer products and appliances. Following the lead of GM, now washing machines, furniture, refrigerators, phonographs, and radios can be bought on installment plans. It’s also worth noting that in this period, 2/3 of all autos are bought on installment plans.
The First in Big Data
1950 – United States
By 1950, typical middle-class Americans already had revolving credit accounts at different merchants. Maintaining several different cards and monthly payments was inconvenient, and created a new opportunity.
At the same time, Diners Club introduces their charge card, which helps open the floodgates for other consumer credit products.
1955 – United States
Early credit reporters use millions of index cards, sorted in a massive filing system, to keep track of consumers around the country. To get the latest information, agencies would scour local newspapers for notices of arrests, promotions, marriages, and deaths, attaching this information to individual credit files.
1958 – United States
BankAmericard (now Visa) is “dropped” in Fresno, California. American Express and Mastercard soon follow, offering Americans general credit for a wide range of purchases.
1960 – United States
At a time when the technology was limited to filing cabinets, the postage meter, and the telephone, American credit bureaus issued 60 million credit reports in a single year.
1964– United States
The Association of Credit Bureaus in the U.S. conducts the first studies into the application of computer technologies to credit reporting. Accuracy of data is also improved around this time by standardizing credit application forms.
1970 – United States
The first Fair Credit Reporting Act is passed in the United States. It establishes a standard legal framework for credit reporting agencies.
1980s – United States
The three biggest credit bureaus attain universal coverage across the country.
1989 – United States
The FICO score is introduced, and quickly becomes a standard system to measure credit scores based on objective factors and data.
2006 – United States
VantageScore is created through a joint-venture between the top three credit scoring agencies. This new consumer credit-scoring model is used by 10% of the market, and 6 of the 10 largest banks use VantageScore.
The Information Age has enabled a new era in consumer credit and assessing risk – and today, credit reports are used to inform decisions about housing, employment, insurance, and the cost of utilities.
Learn more about how data, the internet, and modern computing is changing credit in Part 2 of this series.
Ranked: Big Tech CEO Insider Trading During the First Half of 2021
Big Tech is worth trillions, but what are insiders doing with their stock? We breakdown Big Tech CEO insider trading during the first half of 2021.
Big Tech CEO Insider Trading During The First Half of 2021
When CEOs of major companies are selling their shares, investors can’t help but notice.
After all, these decisions have a direct effect on the personal wealth of these insiders, which can say plenty about their convictions with respect to the future direction of the companies they run.
Considering that Big Tech stocks are some of the most popular holdings in today’s portfolios, and are backed by a collective $5.3 trillion in institutional investment, how do the CEOs of these organizations rank by their insider selling?
|CEO||Stock||Shares Sold H1 2021||Value of Shares ($M)|
|Jeff Bezos||Amazon (AMZN)||2.0 million||$6,600|
|Mark Zuckerberg||Facebook (FB)||7.1 million||$2,200
|Satya Nadella||Microsoft (MSFT)||278,694||$65|
|Sundar Pichai||Google (GOOGL)||27,000||$62|
|Tim Cook||Apple (AAPL)||0||$0|
Breaking Down Insider Trading, by CEO
Let’s dive into the insider trading activity of each Big Tech CEO:
During the first half of 2021, Jeff Bezos sold 2 million shares of Amazon worth $6.6 billion.
This activity was spread across 15 different transactions, representing an average of $440 million per transaction. Altogether, this ranks him first by CEO insider selling, by total dollar proceeds. Bezos’s time as CEO of Amazon came to an end shortly after the half way mark for the year.
In second place is Mark Zuckerberg, who has been significantly busier selling than the rest.
In the first half of 2021, he unloaded 7.1 million shares of Facebook onto the open market, worth $2.2 billion. What makes these transactions interesting is the sheer quantity of them, as he sold on 136 out of 180 days. On average, that’s $12 million worth of stock sold every day.
Zuckerberg’s record year of selling in 2018 resulted in over $5 billion worth of stock sold, but over 90% of his net worth still remains in the company.
Next is Satya Nadella, who sold 278,694 shares of Microsoft, worth $234 million. Despite this, the Microsoft CEO still holds an estimated 1.6 million shares, which is the largest of any insider.
Microsoft’s stock has been on a tear for a number of years now, and belongs to an elite trillion dollar club, which consists of only six public companies.
Fourth on the list is Sundar Pichai who has been at the helm at Google for six years now. Since the start of 2021, he’s sold 27,000 shares through nine separate transactions, worth $62.5 million. However, Pichai still has an estimated 6,407 Class A and 114,861 Class C shares.
Google is closing in on a $2 trillion valuation and is the best performing Big Tech stock, with shares rising 60% year-to-date. Their market share growth from U.S. ad revenues is a large contributing factor.
Last, is Tim Cook, who just surpassed a decade as Apple CEO.
During this time, shares have rallied over 1,000% and annual sales have gone from $100 billion to $347 billion. That said, Cook has sold 0 shares of Apple during the first half of 2021. That doesn’t mean he hasn’t sold shares elsewhere, though. Cook also sits on the board of directors for Nike, and has sold $6.9 million worth of shares this year.
Measuring Insider Selling
All things equal, it’s desirable for management to have skin in the game, and be invested alongside shareholders. It can also be seen as aligning long-term interests.
A good measure of insider selling activity is in relation to the existing stake in the company. For example, selling $6.6 billion worth of shares may sound like a lot, but when there are 51.7 million Amazon shares remaining for Jeff Bezos, it actually represents a small portion and is probably not cause for panic.
If, however, executives are disclosing large transactions relative to their total stakes, it might be worth digging deeper.
This Simple Chart Reveals the Distribution Of Global Wealth
Global wealth at the end of 2020 was about $418 trillion. Here’s a breakdown of the global wealth distribution among the adult population.
The Global Wealth Distribution in One Chart
The pandemic resulted in global wealth taking a significant dip in the first part of 2020. By the end of March, global household wealth had already declined by around 4.4%.
Interestingly, after much monetary and fiscal stimulus from governments around the world, global household wealth was more than able to recover, finishing up the year at $418.3 trillion, a 7.4% gain from the previous year.
Using data from Credit Suisse, this graphic looks at how global wealth is distributed among the adult population.
How is Global Wealth Distributed?
While individuals worth more than $1 million constitute just 1.1% of the world’s population, they hold 45.8% of global wealth.
|Wealth Range||Wealth||Global Share (%)||Adult Population|
|Over $1M||$191.6 trillion||45.8%||Held by 1.1%|
|$100k-$1M||$163.9 trillion||39.1%||Held by 11.1%|
|$10k-$100k||$57.3 trillion||13.7%||Held by 32.8%|
|Less than $10k||$5.5 trillion||1.3%||Held by 55.0%|
|Total||$418.3 trillion||100.0%||Held by 100.0%|
On the other end of the spectrum, 55% of the population owns only 1.3% of global wealth.
And between these two extreme wealth distribution cases, the rest of the world’s population has a combined 52.8% of the wealth.
Global Wealth Distribution by Region
While wealth inequality is especially evident within the wealth ranges mentioned above, these differences can also be seen on a more regional basis between countries.
In 2020, total wealth rose by $12.4 trillion in North America and $9.2 trillion in Europe. These two regions accounted for the bulk of the wealth gains, with China adding another $4.2 trillion and the Asia-Pacific region (excluding China and India) another $4.7 trillion.
Here is a breakdown of global wealth distribution by region:
|Change in Total Wealth |
|Change %||Wealth Per Adult |
India and Latin America both recorded losses in 2020.
Total wealth fell in India by $594 billion, or 4.4%. Meanwhile, Latin America appears to have been the worst-performing region, with total wealth dropping by 11.4% or $1.2 trillion.
Post-COVID Global Outlook 2020-2025
Despite the burden of COVID-19 on the global economy, the world can expect robust GDP growth in the coming years, especially in 2021. The latest estimates by the International Monetary Fund in April 2021 suggest that global GDP in 2021 will total $100.1 trillion in nominal terms, up by 4.1% compared to last year.
The link in normal times between GDP growth and household wealth growth, combined with the expected rapid return of economic activity to its pre-pandemic levels, suggests that global wealth could grow again at a fast pace. According to Credit Suisse estimates, global wealth may rise by 39% over the next five years.
Low and middle-income countries will also play an essential role in the coming year. They are responsible for 42% of the growth, even though they account for just 33% of current wealth.
Green2 weeks ago
The World’s 25 Largest Lakes, Side by Side
Economy1 week ago
The 20 Fastest Growing Jobs in the Next Decade
Science4 weeks ago
Comparing the Size of The World’s Rockets, Past and Present
Misc4 weeks ago
Every Single Cognitive Bias in One Infographic
Misc2 weeks ago
All World Languages in One Visualization
Misc3 weeks ago
Razor Thin: A New Perspective on Earth’s Atmosphere
Misc4 weeks ago
Visualizing the Highest-Paid Athletes in 2021
Markets1 week ago
Mapping The Biggest Companies By Market Cap in 60 Countries