Definition
Helicopter Money
Helicopter money is a radical stimulus where the central bank directly finances government cash handouts to the public, permanently increasing the money supply.
Coined by Milton Friedman as a thought experiment, helicopter money means showering citizens with newly created cash, via direct transfers funded by the central bank, to jolt spending when conventional tools fail.
Unlike QE (which buys assets and can be reversed), helicopter money is meant to be permanent, raising inflation risk. It was debated globally during the pandemic; India used large direct benefit transfers but funded through borrowing, not outright monetisation.
Related terms
- Fiscal PolicyFiscal policy is the government's use of taxation and spending decisions, set out mainly in the Union Budget, to influence the economy.
- Liquidity TrapA liquidity trap is when interest rates are so low that monetary policy loses traction, as people hoard cash and extra money fails to spur borrowing or spending.
- SeigniorageSeigniorage is the profit a government or central bank earns from creating money — the gap between the face value of currency and what it costs to produce.
- Quantitative Easing / TighteningQuantitative easing is a central bank buying bonds to inject money into the economy; quantitative tightening is the reverse, draining money by reducing those holdings.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.