tight money

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Related to tightening: Monetary Tightening

Tight money

When a restricted money supply makes credit difficult to secure. The antithesis of tight money is easy money.

Tight Money

A situation in which it is difficult to receive credit because of the monetary policy of the central bank. Tight money occurs when the central bank has enacted relatively high target interest rates. While this usually happens when the central bank is seeking to control or is concerned about inflation, tight money can negatively impact security prices and make it hard to receive a loan for a house or business.

tight money

A condition of the money supply in which credit is restricted and interest rates, consequently, are relatively high. Tight money generally has a negative effect on security prices, at least in the short run. Compare easy money.

tight money

or

dear money

a government policy whereby the CENTRAL BANK is authorized to sell government BONDS on the open market to facilitate a decrease in t he MONEY SUPPLY (see MONETARY POLICY).

The decrease in money supply serves to increase INTEREST RATES, which discourages INVESTMENT because previously profitable investments become unprofitable owing to the increased cost of borrowing (see MARGINAL EFFICIENCY OF CAPITAL

INVESTMENT).

Tight money policy, through MONEY SUPPLY/SPENDING LINKAGES, reduces AGGREGATE DEMAND. Contrast CHEAP MONEY.

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For the same reason you use a star pattern when tightening the lug nuts on your car wheel.
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In contrast, a large share of foreign banks reported tightening standards on such loans.
For household purchases and consumer credit, the data showed a net tightening of 14 percent and 13 percent respectively, down from 22 and 21 percent in the previous survey, the ECB said.
The net percentage of banks reporting a tightening of credit standards for loans to households for house purchase and for consumer credit also decreased further to 22 per cent (from 28 per cent) and to 21 per cent (from 26 per cent), respectively, in the second quarter of 2009, down from their historical peaks in the fourth quarter of 2008.
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Recent statements by Government officials hint at more tightening to come.
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This most recent tightening occurred in late November, and was the eighth time this year that the bank tightened rates.