On Helicopter Money

If you're reading a personal finance blog, there's a decent chance you may have heard or read terms like "quantitative easing" or "economic stimulus".

That is an indirect, though you could say effective, way of getting money into the hands of people and getting them to spend. So that the economy (or the flow of money through spending, business, income, and more spending) moves or grows faster.

But that's mostly imperceptible to us common folks.

So it was a little surprising to read about "helicopter money" - or government/central banks thinking about directly handing out money to people, bypassing banks altogether.

I obviously can't analyze how effective it would be, as I'm no economist (someone else can do that). But at first glance I assume it would be more effective, and perceptible, than any economic stimulus they are doing right now. I mean, what would you expect people to do with "bonus" money, right?

But what if I did get some helicopter money?

Well, from past experience with "bonus" money, I'd probably save up to half of what I'd get, and invest and spend the rest. I doubt I'd spend half - let alone most - of what I'd get.

This is where's its pertinent to mention that what's good for the economy in general is not necessarily good for the individual.

I'm no hypocrite. Sure there's a decent chance I splurge or "invest" in cost-saving household items. But I'd probably also invest some in stocks (also a result of the current, indirect economic  stimulus). And I'd definitely put a big chunk in my emergency fund.

So on second glance, it might not be as effective after all.

But then again, it's bonus money. And history has shown that when a lot of people get a lot of bonus money, they spend a lot and business booms even if for a time (hello Christmas and 13th month pay!).

Which isn't necessarily bad.

So here's to hoping they actually decide helicopter money is a good thing, and that they do it over here too!



If you liked this article, please subscribe to my feed, like me on Facebook, circle me on Google+, or follow me Twitter @thePFApprentice. It's free, you won't miss new articles, and you'll also get my free ebook: the Super Savings Guide.

Enter your email address for your free subscription






photo taken from econintersect.com

No comments:

Post a Comment