Hard Money — this term has two definitions:
- In economics, money from a metallic substance (gold, silver). The term “hard” is used to accent the solidity of the material and its authentic value. In contrast, “soft money” (paper currency) was considered a promise to pay. Today the term hard money refers to the monetary instruments that act like monies in their absence. These can be cryptocurrencies or gold bullion.
- In politics, the regulated donation to a certain party or politician.
Nowadays, most countries use soft money, which isn’t backed up by precious metals. But historically, people tended to prefer hard currency because it is less volatile and more stable. Then, the governments stopped using precious metals and a gold standard and completely switched to paper currency to control the economic activity on their territory.
Today the term “hard money” is referred to as the fiat money of stable economics. This money is less volatile, and it is less susceptible to inflation. The most well-known hard currencies of our days are the American dollar, euro, Japanese yen, Great Britain Pound, and Swiss franc.
Hard and soft money
Soft and hard money have both common features and differences. This isn't surprising because, throughout history, the outside appearance of money has been changing permanently. The main common trait of these types of money is their possibility to be applied for a loan. No matter in which currency you will loan, in any case, you will be able to acquire real estate and investment property. They both require a down payment and are reflected in the credit record.
As for the differences, they are much more numerous. Let’s consider them for further details.
Key differences between hard money and soft money:
- The credit in hard money always has a goal and the criteria to pay it back. The credit in soft money doesn’t have a defined purpose.
- The majority of loan providers prefer to provide credit in hard money.
- The closure in hard money is fast and requires less bureaucracy. Closure in soft money may take 30 days.
- The conditions to receive the credit in hard money are quite flexible, while to do the same in soft money you have to follow several requirements.
- Hard money is difficult to receive because it is secured by a property. To get the small money is much easier.
- The usage of hard money is regulated by federal laws. The usage of soft money isn’t regulated.
- Hard money suits long-term investing. Soft money suits short-term investing.
- The funding for hard money is given for pieces of property in bad conditions. Soft money is given for pieces of property in appropriate condition.
Hard Money and politics
The terms hard and soft money refer to American politics. They both mean a contribution donated to a certain party or candidate to help them conduct an electoral race and win the election. As in economics, these terms also have different meanings, when it comes to politics.
The hard many are regulated by federal laws, and it may be received only from a person or a political action committee. The cash receipts in hard money are regulated by the Federal Election Committee (FEC).
Soft money, in contrast, can be provided in any amount. They can be donated by any individual or organization. It can be both direct and indirect contributions. Also, it can be linked to political candidates.