Helicopter money is a theoretical, unconventional monetary policy tool which aims to put money directly into the hands of consumers, when other forms of more conventional monetary policy are failing. The idea of helicopter money was first proposed in 1969 by American economist, Milton Friedman, but has gained attention more recently when referred to in a speech by Ben Bernanke in a speech in 2002 shortly before he became Chairman of the Federal Reserve.
In its purest form, helicopter money does exactly what it says on the tin – money (notes are generally seen as more appropriate than coins) dropped from a helicopter, straight into the hands of the population below, with the intention that they immediately spend it in a nearby shop, thereby providing an immediate and direct boost to the economy. Economists being economists, the term is now used to cover a range of more complicated methods of doing the same thing, delivering money into the hands of consumers.
It is seen as a potential successor to other forms of unconventional monetary policy, such as quantitative easing. These policies are widely seen as having failed in their aim of putting money in the hands of consumers. By channelling money through the financial system, quantitative easing, has boosted the value of financial assets, making the rich richer but it hasn’t trickled down to benefit the vast majority of consumers. Rising inequality is the result. Helicopter money is discussed as an alternative, potentially more effective form of unconventional monetary policy because it can reach a greater proportion of the population.