Helicopter money concept : It is the question of many people that if any country’s economic condition is bad then why the country or government can’t print money and distribute among poor people? Recent we saw that many countries declared lockdown to stop the coronavirus spread.
For this reason businesses of these countries stopped their operations. As a result many people become poor because of the lack of work. Then why government can’t print money in this situation? Many people think also that if any country is poor then why doesn’t the country become rich printing so much money?
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Why Government can’t print money & distribute among poors? Helicopter money concept।
If any country prints money and distributes it among citizens then it is called helicopter money. The article covers the reasons for what government can’t distribute helicopter money to people. Let’s understand with an example. Assume that a country have total 100 people. And there is total 50 lakh rupees among the 100 people.
There is a two-wheeler showroom where have 10 bikes , also a four wheeler showroom where have 5 four-wheeler and a electronic shop where have a,c, refrigerator, laptop and a clothing store. All the shops have limited stocks. Few people have the afford to buy the four-wheeler. Few people have the ability to buy two wheeler and also few people can buy the electronic equipments.
Now government of the country decides that they will print 50 lakh rupees and will distribute it to people. Before the print total 100 people had total 50 lakh rupees. But now after the money print the amount become double. It means 100 people have now total 1 crore rupees.
For the coming of extra rupees everyone start to buy different products. Some people start to buy four wheeler, some people start to buy two wheeler and some other start to buy electronic products such as laptop, a,c etc. So naturally the demand of the limited products are suddenly increasing.
Every year total 10 bikes are come in the showroom because the showroom can sell maximum 10 two-wheeler every year. But now for the coming of helicopter money many people gather in the showroom to buy two-wheeler. There are total 10 bikes in the showroom but 30 people gather there to buy the bikes. For this the demand of the two wheeler rapidly increases but the supply of two-wheeler is still remain same.
So what will happen in this case? So the people who bid the most for vehicles will get the two-wheelers. As a result the price of the products increases because of the incrasing of the demand of the products. And the same thing happens with the four-wheeler showroom and electronic shop and clothing store.
The price of the products increase because there are the limited products but the demand of the products is increasing because of the coming of helicopter money. It means the supply of the products is remain same but the demand increases. Let’s understand quickly the supply and demand. Recently we watched that the price of crude oil decreased recently.
The crude oil’s price decreased because many countries declared lockdown and for this the demand of crude oil decreased. The demand of the crude oil decreased about 50% of its past demand. But the crude oil producing countries didn’t stop its supply instantly. They decreased the supply of crude oil near to 10%. For this the crude oil producing companies had the huge supply. But the demand became less. So its price became less.
And its opposite example is the first example and the answer of the title. It means its opposite things happen with the country. The supply of two-wheeler, four-wheeler, electronic equipments etc is remain same but the demand of these products increases because goverment distribute helicopter money to people. For the coming of goverment printed money supply doesn’t increase but demand increases. For this inflation starts on the country.
It means the value of money decreases. The idea of printing money will work then when the production of two-wheelers, four-wheelers, electronic equipments etc are also increased. Then the supply and demand is remain same. And the situation of inflation never comes. If any country did the production of many products and gives different services then they can print money. If the production of any country doesn’t grow and comercial services aren’t provided then in this case the extra printed money can be burden later.
So the one and only way to grow any country’s economy is that they have to do hard work and produce different things and have to provide commercial services. And thus any country and its citizens can be rich. The same thing was done by an african country in 2005. Neither production nor commercial services increased there. Without doing this they printed huge money and distributed it among the people.
For the coming of huge money huge people gathered in every shops to buy different products. The demand increased heavily but the supply was remain same. For this inflation grew there and the value of money decreased there heavily. Inflation increased there more than 1000%. They faced such type of situation for that central bank of the country was obliged to print 10 trillion dollar notes. The people of the country became billionaire in their currency but there was no value in their currency.
For this reason government can’t solve economic problems or out from poverty printing so much money. To solve the economic problems every country have to grow their gdp. It means they have to increase the production of goods and have to provide commercial services. So you can surely understand that the concept of helicopter money is not practical.
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