How would you like to see money being thrown out of a helicopter as it hovers over you house?
However unlikely it may seem, we’re edging ever closer to the realisation of Ben Bernanke’s 2003 speech in which he talked about dropping money from a helicopter. Since that day, he has had the dubious honour of being known as ‘helicopter’ Bernanke.
But could this fantasy be played out for real in the UK? Yes. In fact, it has already started to happen.
Ok, there’s little likelihood of your ‘favourite’ bank freely dishing out cash from a large brown bag. It’s even less likely that he’d hire a helicopter from which to dispense the cash. What is more likely is that the the Bank of England committee has already been operating a variation of this idea for quite some time.
Printing money has a similar effect. Instead of simply giving the money away to the people that need it the most, the Bank of England bought gilts from financial institutions. Buying these guilts raised their value (similar to the way a buying frenzy on the stock market causes share prices to rise). In turn, government borrowing became cheaper.
The intended outcome of all this quantitative easing was that the bankers would suddenly realise the world hadn’t ended. They’d realise they did still have customers to service. More importantly, they would start lending to those customers again. Sadly, the banks decided to do their own thing and, in effect, pocketed your money.
Can You See A Helicopter On The Horizon?
Ironically, the excesses of the banks might actually see money being quite literally dropped into customers waiting hands.
Way back before quantitative easing was even a twinkle in Mervin King’s eye, the banks were already treating customers with contempt. Outrageous fees for being overdrawn, mis-sold credit card PPI and the investment mess have made the banks look out of touch.
More recent cases such as the Libor fixing scandal have hurt the banks reputation. I have no doubt that, at some point in the future, the banks will be fined and customers will start to reclaim some compensation for this latest fiasco.
The first helicopter most of us will have seen is the one carrying the compensation from the PPI claims. In most cases, the awards given to customers reached a maximum of about £3,000. Yes, it is your money that was misappropiated and you’re entitled to it. But there’s more to come.
Mortgage PPI is being very closely examined and it seems likely that home owners mis-sold this type of insurance will be eligible to claim. How much is this going to cost the banks? A lot. Stephen Hester, head of RBS, has already said that the £9 billion put aside for compensation may not be enough.
Can you see the helicopter now? It’s the one loaded with cash put aside to cover the mortgage PPI payments and it’s going to land in your waiting hands.
To be fair, we deserve all the money we can get back from the banks. The financial institutions have a done a first class job of taking money from the tax payer to prop themselves up. We all understand that banks need to be protected, to a degree. But, at the rotten heart of it all, we don’t expect our money to fund bankers massive bonuses.
With that last thought in mind, it’s time to set your alarm clock and wait for Mervin King and his helicopter full of cash.