Many people think that the country whose economic condition is very bad, why do not they print many notes and distribute them among the poor?
At this time, due to Coronavirus and lockdown, the economic condition of almost every country in the whole world is continuously deteriorating and people are moving towards poverty.
Even at this time, the question comes to the mind of many people that why the government cannot print a lot of money in this situation and distribute it to the people? But we see that no government does this.
If a country prints a lot of money and distributes it among the people, then it is called Helicopter money. In today’s post, we will talk about Helicopter money in detail.
Let us take an example to understand it properly. Suppose there is a small country where the population is only 100 and the people there have a total of ₹ 50 lakhs.
There are different Shops and Show Rooms in this country like a Two-Wheeler Showroom which has 10 vehicles, Four Wheeler Showroom which has 5 vehicles, One Grocery store, and one Electronics Store where TV, Fridge, Laptop, Fridge etc. are available but all these There is only limited stock of things.
Only a few people of this country are able to afford Two Wheeler Vehicles and even less can afford Four Wheeler Vehicles and similarly, only a few people are able to Afford Consumer Electronics.
Now this country decides that it will print another 50 lakh rupees and distribute it to all the people.
After this, the money will be doubled with the entire population i.e. 50 lakhs to one crore, now after the money comes to the people, they went out to buy different things like Two Wheeler, Four Wheeler, and Electronics Goods.
Due to this money that came to those people for free, the demand for these things started increasing.
Only 10 vehicles come to the Two-Wheeler Showroom here every year because they are able to sell only 10 vehicles every year, but after all the people got the money, they all reached the Two-Wheeler Showroom.
Due to this, the demand of Two Wheeler increased but the supply of Two Wheeler remained the same i.e. supply 10 and 20 or 30 or more people buying and in this situation, due to increase in demand, the price also increases i.e. now out of those 30 people.
Only those who put the highest number of bids will get the remaining vehicles.
The same happened with Four Wheeler and Electronics Goods. Due to the increase in demand, their price also increased and the reason for the increase in the price of all these things, due to more money coming to the people, the demand for these items increases but the supply has to remain the same.
So let’s understand what is the game of Supply and Demand?
At present, lockdown is going on in many countries, due to which the demand for crude oil in these countries has reduced a lot.
The demand for crude oil has reduced by more than 50%, but if we talk about oil producing countries, then they have not reduced the supply of oil production very much, only 10% has been reduced in it.
Due to which the price of crude oil has fallen due to an excessive increase in the supply of crude oil and very low demand.
On the contrary, in the example we gave, the price increased due to an increase in demand and less supply, and due to this inflation came, that is, the value of money started decreasing and inflation started increasing.
Helicopter Money
This means that in the given example, the benefit of distributing money to the people by printing money by that country would have been only when the government there would have doubled the production of these products like a two-wheeler, four-wheeler, and electronic goods so that the supply and demand would be balanced and inflation. Such a situation does not arise.
This means that if a country is producing a lot and providing a lot of services, then only it can print a lot of money because if there is not much production of goods in the country and more commercial services are also provided.
If it is not being done, then printing too much money proves to be a problem for that country.
So there is only one way for any country to move forward that it should produce more and more, provide more and more commercial services and only then that country and its people can become rich.
In the year 2005, African Country Zimbabwe did something similar. Zimbabwe’s production was neither high nor commercial services were better.
Even after this, they printed a lot of money and distributed it among the people. After people got a lot of money, the crowd started increasing in the shops.
People started trying to buy different things, but the buyers increased a lot and the supply remained the same, due to which inflation started increasing and the value of money started falling rapidly.
The inflation of Zimbabwe started increasing by thousands of percent and the condition of the country became such that it had to print even 10 trillion dollar notes.
By printing too much money, people have got a lot of money, but the value of that money is gone, so this is the reason that no country can correct its economic condition by printing more and more money.
There is only one way to come out of poverty and improve your economic condition and that is to improve your GDP i.e. to increase the production of products and commercial services.
Hopefully, now you know that this method of helicopter money is not practical. If you liked this information, then do not forget to share this post, thank you.
