Dear Money Definition
The term "dear money" refers to funds that are expensive to borrow.
Reason for Dear Money
Money becomes "dear" primarily when the cost of obtaining it is high. This cost is directly represented by the rate of interest charged on loans.
- High Rate of Interest: When interest rates are high, borrowing money requires paying a larger amount in interest charges over time, making the money less accessible and more costly, hence "dear".
- Low Rate of Interest: Conversely, low interest rates make borrowing cheaper, leading to "cheap money".
- Inflation: While inflation erodes purchasing power, it doesn't directly define the cost of borrowing itself as "dear".
- Depression: Economic depression is typically associated with low interest rates aimed at encouraging borrowing and spending.
Therefore, a high rate of interest is the direct cause of money being considered "dear".
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