This latter brings us to the second factor: the existence of some sort of
overarching institutions, larger than states, usually religious in nature, that ensured that credit systems didn’t fly completely out of hand. For much of human history, the great social evil — the thing that everyone feared would lead to the utter breakdown of society — was the debt crisis. The masses of the poor would become indebted to the rich, they would lose their
flocks and fields, begin selling family members into
peonage and slavery, leading either to mass flight, uprisings, or a society so polarized that the majority were effectively (sometimes literally) reduced to slaves. In periods where economic transactions were conducted largely through cash, there are many parts of the world where this actually began happen. Periods dominated by credit money, where everyone recognized that money was just a promise, a social arrangement, almost invariably involve some kind of mechanism to protect debtors.
Mesopotamian kings used to rely on their
cosmic ability to recreate society to declare clean slates, erase all debts, and simply start over. In ancient
Judea this was institutionalized in the seventh-year
Jubilee. In the Middle Ages, Christian and Islamic bans on
usury and debt
peonage, far from being
impediments to trade, were actually what made most trade possible, since they ensured ordinary people were not entirely impoverished, and had the means to purchase the merchants' wares, and because those religious systems became the foundation for networks of honor and trust.