“Helicopter money” could have real impact on the economy

The “helicopter money” concept, which could translate into the European Central Bank giving money directly to European citizens, could have a real impact on the economy, according to the latest investors’ barometer published on Tuesday by the ING bank.

In the current economic slowdown, economists are asking themselves which means are still available for re-dynamising the economy where necessary, the ING recalled.

With high public debt limiting budgetary incentives and with European interest rates already bottoming out, “helicopter money” or “the money helicopter” is sometimes touted as an alternative solution. This concept entails the distribution of liquid cash to citizens by central banks to encourage them to consume and thus boost prices and the economy. As ridiculous as the idea may sound, it has already been described as “very interesting” by BCE President Mario Draghi.

If the BCE were to deposit 20,000 euros into the account of each household, investors polled by ING said they would spend between 24% and 31% of it. “Since the consumption of investors is less than that of the average Belgian, that percentage of supplementary spending, taken to the level of the general population, could be a bit higher yet,” ING stresses.

Some 15% of the ING’s respondents said they would save the entire sum of 20,000 euros, while 49% would earmark less than 30% for non-recurring purchases and only 16% would spend more than half. “The unspent helicopter money would be used by the Belgian investor to invest (53% of respondents) or to be placed in a savings account (42%). About 20% would give it to their children or families and 15% would use it to pay back debts,” ING explained.

The monetary policy of the BCE, whose key interest rate has been 0% since 2016, is viewed rather favourably by Belgian investors polled by ING. Some 41% of them feel the policy of low interest rates has benefitted the economy thus far, while 19% consider it economically harmful.

About 33% also feel the rates have been beneficial to the Stock Exchange while 26% have serious doubts in this regard.

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