DEFINITION of 'Peace Dividend'

The money that becomes available in a national government's budget when the country is at peace, and can afford to reduce its defense spending. The term "peace dividend" is also used to refer to an increase in investor confidence that sparks an increase in stock prices after a war ends or a major threat to national security is eliminated. The money saved from defense spending is usually used towards housing, education and other projects.

BREAKING DOWN 'Peace Dividend'

During the four decades of the Cold War, U.S. defense spending averaged 40% to 50% of total federal spending. The massive drop in defense spending in the years following the Cold War are commonly called a peace dividend. U.S. defense spending represented about 15-20% of the federal budget in the first decade of the 2000s, with the country fighting wars in Iraq and Afghanistan.

RELATED TERMS
  1. War Babies

    A name given to securities in companies that are defense contractors. ...
  2. Defensive Stock

    A stock that provides a constant dividend and stable earnings ...
  3. War Damage Insurance Corporation

    A government financial protection arm created during World War ...
  4. Budget Deficit

    A status of financial health in which expenditures exceed revenue. ...
  5. War Economy

    The organization of a country's production capacity and distribution ...
  6. Defensive Buy

    Securities or investments that are perceived as being lower risk ...
Related Articles
  1. Personal Finance

    Military Spending: U.S. Versus Everywhere Else

    A look at the figures and patterns of US spending on its military compared to the other countries.
  2. Investing

    Guard Your Portfolio With Defensive Stocks

    Find out how these securities can protect you from a market bust.
  3. Investing

    Economic Conditions That Helped Cause World War II

    Dire economic conditions following the First World War intensified antagonisms between nations that would eventually lead to the outbreak of World War II.
  4. Trading

    Breaking Down The U.S. Budget Deficit

    Find out why this particular piece of national financing gets so much attention from the media and investors.
  5. Investing

    Defense & Aerospace Stocks: Are These 2016's Best?

    These four defense stocks offer potential in 2016, each in different ways.
  6. Investing

    Best Places to Find High-Dividend Yield Stocks

    Learn about the advantages of stocks with good dividend yields, such as income, stocks in defensive sectors and strong-performing companies.
  7. Insights

    Is The U.S. Government Too Big To Fail?

    Some think that the U.S. government is too big to fail, but one must only look at historical examples to know that it's not true.
  8. Insights

    The Top Reasons Behind The U.S. National Debt

    National debt, as with a business, is basically the difference between receipts and expenses--but in the U.S., the latter has far outpaced the former. Why?
  9. Investing

    War's Influence On Wall Street

    Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common.
  10. Retirement

    5 Safest Countries to Retire to in Latin America

    See which countries came out on top in the latest rankings – and which might appeal as a retirement destination.
RELATED FAQS
  1. Why is buying a utility stock known as defensive move?

    Utility stocks are known as defensive stocks for investors due to the fact that consumer demand will remain high even when ... Read Answer >>
  2. What other sectors besides utilities are known as defensive?

    See why certain sectors, other than utilities, are considered defensive and therefore more resistant to the downturns of ... Read Answer >>
  3. How did World War II impact European GDP?

    Understand the effect of World War II on the European gross domestic product and what foreign and domestic factors influenced ... Read Answer >>
  4. What are defensive stocks?

    The term defensive stocks is synonymous to non-cyclical stocks, or companies whose business performance and sales are not ... Read Answer >>
  5. How long has the U.S. run fiscal deficits?

    Read about the history of deficit spending in the United States, dating back to 1789, and learn about then-Treasury of the ... Read Answer >>
  6. What other sectors are most highly correlated with the aerospace sector?

    Learn about the aerospace industry and two closely related industries that share many of the same characteristics. Discover ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center