Helicopter Money

The term comes from economist Milton Friedman, who in 1969 imagined money being dropped from a helicopter to illustrate the effects of increasing the money supply. It describes putting new money directly into people’s hands, rather than working through banks and interest rates.

It differs from quantitative easing. In quantitative easing, the central bank buys assets, such as bonds, which it can later sell, so the money creation can in principle be reversed. With helicopter money, the money is given away or used to fund government spending permanently.

For example, a central bank could create money to fund a one-off payment to every citizen, aiming to boost consumer spending during a deep recession.

Supporters argue it could be a powerful tool when interest rates are near zero. Critics warn it could undermine central bank independence, blur the line between monetary and fiscal policy and, if overused, cause high inflation. Some pandemic support payments, financed by government borrowing while central banks bought large amounts of bonds, were compared with helicopter money, although they were not formally described as such.