The expression helicopter money is often attributed to the conservative economist Milton Friedman.
Here is a small extract of what he wrote, at a time when he was an unknown and young economist:
Let us suppose now that one day a helicopter flies over a community and drops $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. (…)
We don’t know whether Friedman was seriously considering what came to be known as the helicopter money policy. Many people say that it was just a thought experiment. It’s possible…
Leaving aside Friedman’s helicopter drop speculations, the policy would not be difficult to implement in our days.
Very broadly, it would involve cash or electronic transfers to the bank accounts of selected groups of people, say, unemployed people. In other words: it would involve distributing money to taxpayers, financed by central banks. It could also entail tax rebates, with the goal of promoting consumption or, in some cases, investment; and also monetization of the public debt (definitive purchasing of public debt), in order to allow lower tax rates and broader state intervention.
This policy has some unique features: it doesn’t create public debt and, unlike quantitative easing, isn’t too restricted to the interbank markets; quantitative easing has been mostly used in contexts of financial distress, to save banks in dire situations.
But helicopter money has an obvious catch: inflation; ramping inflation if implemented on a large scale… Central banks can’t put large amounts of money in circulation without inflation.
Or so economists assumed until recently.
The monetary base is in equilibrium with the available amount of goods and services through the system of prices. If we break this balance – by increasing the money supply – inflation will inevitably reappear or even soar.
In other words: we should not minimize the high risks of hyper-inflation that may come with helicopter money.
However, economists like Adair Turner think that money supply is now rather decoupled from inflation, and that being so, we should try helicopter money.
And there are some policymakers ready to try it – or already doing it.
The Financial Times Alphaville suggests that helicopter money policies are here to stay.
The Chinese monetary policies, in the last years, may be regarded as a kind of helicopter money. And more recently, following the coronavirus pandemic, Hong Kong, Macau and Singapore have issued shopping vouchers and cash handouts – a form of helicopter money, in small scale.
On the other hand, in what concerns the best-known monetary western economists – people like Ben Bernanke, Martin Wolf or Laurence Summers –, though they aren’t fully aligned with Adair Turner they aren’t contesting him either.