Easy Money

AAA

DEFINITION of 'Easy Money'

In the most literal sense, money that is easily acquired. Academically speaking, the term specifically denotes a condition in the money supply. Easy money occurs when the Federal Reserve allows cash flow to build up within the banking system. This lowers interest rates and makes it easier for banks and lenders to loan money. Money is therefore easily acquired by borrowers.

INVESTOPEDIA EXPLAINS 'Easy Money'

The value of securities often initially rises during periods of easy money, when money is cheap. But if this trend continues long enough, it can eventually reverse due to fear of inflation. Easy money is also known as cheap money.

RELATED TERMS
  1. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  2. Policy Mix

    A government's combined use of fiscal policy and monetary policy ...
  3. Currency

    A generally accepted form of money, including coins and paper ...
  4. Money

    An officially-issued legal tender generally consisting of currency ...
  5. Bank

    A financial institution licensed as a receiver of deposits. There ...
  6. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
RELATED FAQS
  1. How have low interest rates affected lease rates in the automotive sector?

    Low interest rates have contributed substantially to increased lease rates in the automotive sector. In recent years, the ... Read Full Answer >>
  2. How are asset management firms regulated?

    In principle, the asset management industry is largely governed by two bodies: the Securities and Exchange Commission (SEC) ... Read Full Answer >>
  3. How is the interest rate on a treasury bond determined?

    The yield of U.S. Treasury securities, including Treasury bonds (T-bonds), depends on three factors: the face value of the ... Read Full Answer >>
  4. How much of the United States' money supply is M1?

    As of February 2015, the M1 money supply in the United States was $2,988.20 billion. This is based on figures reported by ... Read Full Answer >>
  5. When the Federal Reserve Bank engaged in Quantitative Easing, did it add to M1?

    When quantitative easing takes place, the money supply is increased, but quantitative easing does not directly boost the ... Read Full Answer >>
  6. Why is purchasing stocks on margin considered more risky than traditional investing?

    Buying on margin involves borrowing money from a broker to purchase stock. A margin account increases your purchasing power ... Read Full Answer >>
Related Articles
  1. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  2. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  3. Professionals

    Wanna Be A Bigwig? Try Investment Banking

    A career in this high-stress field can be very rewarding for the right person. Find out if you have what it takes.
  4. Options & Futures

    The Kingpin Of Wall Street: J.P. Morgan

    From robber baron to the hero of the Panic of 1907, this man helped shape Wall Street as we know it.
  5. Budgeting

    When Good People Write Bad Checks

    Overdraft protection can help when you overestimate your balance, but it will cost you.
  6. Investing

    Pockets Of Value In The Stock Market

    U.S. stocks benefited from signs the Fed’s path toward higher interest rates, as well as from continued merger-and-acquisition activity on of low rates.
  7. Economics

    Why Is The Federal Reserve Independent?

    An overview of the independent status of the Federal Reserve and arguments for and against it.
  8. Investing

    The Implications Of Negative Interest Rates

    If financial theory is grounded in one principal, it would be the that individuals prefer consumption today over consumption in the more uncertain future.
  9. Economics

    The Fed's Impact On Emerging Markets

    Higher US interest rates could make it more expensive for emerging market borrowers to service their debt commitments.
  10. Investing

    Welcome Back, Volatility

    Volatility is likely to resurface as the Federal Reserve gets closer to adjusting its monetary policy stance, even if that adjustment is a measured affair.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center