Helicopter money

{{Short description|Policy proposal; central banks making direct money transfers to the public}}

Helicopter money is a proposed unconventional monetary policy, sometimes suggested as an alternative to quantitative easing (QE) when the economy is in a liquidity trap (when interest rates near zero and the economy remains in recession). Although the original idea of helicopter money describes central banks making payments directly to individuals, economists have used the term "helicopter money" to refer to a wide range of different policy ideas, including the "permanent" monetization of budget deficits{{snd}} with the additional element of attempting to shock beliefs about future inflation or nominal GDP growth, in order to change expectations.{{cite web |last=Rowe |first=Nick |date=3 April 2016 |title=Helicopter Money is Permanent |url=http://worthwhile.typepad.com/worthwhile_canadian_initi/2016/04/helicopter-money-is-permanent.html |website=Worthwhile Canadian Initiative |access-date=5 May 2016}} A second set of policies, closer to the original description of helicopter money, and more innovative in the context of monetary history, involves the central bank making direct transfers to the private sector financed with base money, without the direct involvement of fiscal authorities.{{cite news|url=https://www.theguardian.com/business/economics-blog/2015/may/21/now-the-bank-of-england-needs-to-deliver-qe-for-the-people |title=Now the Bank of England needs to deliver QE for the people|first1=Mark|last1=Blyth |first2=Eric|last2=Lonergan |first3=Simon|last3=Wren-Lewis |date=21 May 2015 |newspaper=The Guardian}}{{cite news|url=https://www.vox.com/2014/9/9/6122517/helicopter-drop-money-print-fed-blyth-lonergan |title=To fix the economy, let's print money and mail it to everyone|author=Dylan Matthews|date=15 May 2015|work=Vox News|access-date=5 May 2016}} This has also been called a citizens' dividend or a distribution of future seigniorage.{{r|ecb la repub}}

The name "helicopter money" was first coined by Milton Friedman in 1969, when he wrote a parable about dropping money from a helicopter to illustrate the effects of monetary expansion. The concept was revived by economists as a monetary policy proposal in the early 2000s following Japan's Lost Decade. In November 2002, Ben Bernanke, then Federal Reserve Board governor, and later chairman suggested that helicopter money could always be used to prevent deflation.

A monetary policy that involves helicopter money requires that central banks operate with negative equity. This touches on an old question in economics on whether money should always be fully backed by segregated assets (gold, loans) or whether lower levels of asset backing are warranted to counter deflationary pressures. This question is again relevant due to the negative side effects of low interest rate policies as well as the development of central bank digital currency.

Origins

Although very similar concepts have been previously defended by various people including Major Douglas and the Social Credit Movement, Nobel winning economist Milton Friedman is known to be the one who coined the term 'helicopter money' in the now famous paper "[https://books.google.com/books?id=FwA7DwAAQBAJ&pg=PT14 The Optimum Quantity of Money]" (1969), where he included the following parable:

Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.

Originally used by Friedman to illustrate the effects of monetary policy on inflation and the costs of holding money, rather than an actual policy proposal, the concept has since then been increasingly discussed by economists as a serious alternative to monetary policy instruments such as quantitative easing. According to its proponents, helicopter money would be a more efficient way to increase aggregate demand, especially in a situation of liquidity trap, when central banks have reached the so-called "zero lower bound".

Friedman himself refers to financing transfer payments with base money as evidence that monetary policy still has power when conventional policies have failed, in his discussion of the Pigou effect, in his 1968 AER Presidential address.{{cite journal |url=https://assets.aeaweb.org/assets/production/journals/aer/top20/58.1.1-17.pdf |title=The Role of Monetary Policy |journal=American Economic Review |author=Milton Friedman |author-link=Milton Friedman |volume=58 |issue=1 |date=March 1968 |pages=1–17 |archive-url=https://web.archive.org/web/20160605050134/https://assets.aeaweb.org/assets/production/journals/aer/top20/58.1.1-17.pdf |archive-date=2016-06-05}} Specifically, Friedman argues that "[the] revival of belief in the potency of monetary policy ... was strongly fostered among economists by the theoretical developments initiated by Haberler but named for Pigou that pointed out a channel{{snd}} namely changes in wealth{{snd}} whereby changes in the real quantity of money can affect aggregate demand even if they do not alter interest rates". Friedman is clear that money must be produced "in other ways" than open-market operations, which{{snd}} like QE{{snd}} involve "simply substituting money for other assets without changing total wealth". Friedman references a paper by Gottfried Haberler written in 1952, where Haberler says: "Suppose the quantity of money is increased by tax reductions or government transfer payments, and the resulting deficit is financed by borrowing from the central bank or simply printing money."{{Cite journal |last=Haberler |first=Gottfried |date=1952-01-01 |title=The Pigou Effect Once More |jstor=1826454 |journal=Journal of Political Economy |volume=60 |issue=3 |pages=240–246 |doi=10.1086/257211 |s2cid=154309155 }}

It is noteworthy in light of more recent debates over the separation between monetary and fiscal policy, that Friedman viewed these policies as evidence of the potency of monetary policy. In the same AER address, he is highly critical of the timeliness and efficacy of fiscal measures to stabilize demand.{{Citation needed|date=July 2024}}

= Revival in the 2000s =

The idea of helicopter drops was revived as a serious policy proposal in the early 2000s by economists considering the lessons from Japan. Ben Bernanke famously delivered a speech on preventing deflation in November 2002 as a Federal Reserve Board governor, where he said that Keynes "once semi-seriously proposed, as an anti-deflationary measure, that the government fill bottles with currency and bury them in mine shafts to be dug up by the public". In that speech, Bernanke himself says: "a money-financed tax cut is essentially equivalent to Milton Friedman's famous 'helicopter drop' of money".{{citation |mode=cs1| first=Ben S. |last=Bernanke|url=https://www.federalreserve.gov/boarddocs/Speeches/2002/20021121/default.htm |title=Deflation: Making Sure 'It' Doesn't Happen Here |id=Remarks by Governor Ben S. Bernanke Before the National Economists Club in Washington, D.C. |date= November 21, 2002 |access-date=5 February 2025 |via=The Federal Reserve Board}} In a footnote to that speech, Bernanke also references an important paper by Gauti Eggertson which emphasizes the importance of a commitment from the central bank to keep the money supply at a higher level in the future.{{cite web|url=https://www.imf.org/external/pubs/ft/wp/2003/wp0364.pdf |title=How to Fight Deflation in a Liquidity Trap: Committing to Being Irresponsible|work=IMF|type=Working Paper|author=Gauti B. Eggertsson|date=1 March 2003}}

The Irish economist, Eric Lonergan, also argued in 2002 in the Financial Times, that central banks consider cash transfers to households as an alternative to further reductions in interest rates, also on the grounds of financial stability."Beyond interest rates", Financial Times, 9 September 2002. In 2003, Willem Buiter, then chief economist at the European Bank for Reconstruction and Development, revived the concept of helicopter money in a theoretical paper, arguing that base money is not a liability, which provides a more rigorous case for Friedman and Haberler's Pigouvian intuitions.{{cite web | url=https://www.willembuiter.com/helinber.pdf | title=Helicopter Money Irredeemable fiat money and the liquidity trap Or: is money net wealth after all? | date=2003-11-06 | author=Willem H. Buiter}}

= After the global financial crisis of 2008 =

In December 2008, Eric Lonergan and Martin Wolf suggested in the Financial Times that central banks make cash transfers directly to households, financed with base money, to combat the threat of global deflation.{{cite news |quote=Central banks may soon resort to their most powerful weapons against deflation: the printing press and the 'helicopter drop' of money. |title=Helicopter Ben confronts the challenge of a lifetime |newspaper=Financial Times |date=16 December 2008 |url=http://www.ft.com/cms/s/0/d049482c-cb8f-11dd-ba02-000077b07658.html#axzz45kZzwC6m |last1=Wolf |first1=Martin}}{{cite news |last=Lonergan |first=Eric|url=https://www.ft.com/content/c9b60ecf-2b41-329d-8aad-a94daf7af45f |title=Central Banks Need a Helicopter|work=Financial Times|date=4 December 2008|quote=We need a legal and administrative framework to allow central banks print money and transfer it to households. This would be efficient, effective and would eliminate the deflation risk for good.}} From around 2012 onwards, some other economists began advocating variants of helicopter drops, including "QE for the people" and a "debt jubilee" financed with the monetary base.{{r|reuters QE 4 ppl|vox combat}} These proposals reflected a sense that conventional policies, including QE, were failing or having many adverse effects{{snd}} on either financial stability or the distribution of wealth and income.

In 2013, the chairman of the UK's Financial Services Authority (FSA), Adair Turner, who had been considered a serious candidate to succeed Mervyn King as Governor of the Bank of England, argued that deficit monetization is the fastest way to recover from the financial crisis in a speech.{{cite web |url=http://www.fca.org.uk/news/speeches/debt-money-and-mephistopheles-speech |author=Adair Turner |title=Debt, Money, and Mephistopheles: How do we get out of this mess? |date=6 Feb 2013 |website=FCA |access-date=5 May 2016}}

Implementation

Although the original definition of helicopter money describes a situation where central banks distribute cash directly to individuals, more modern use of the term refers to other possibilities, such as granting a universal tax rebate to all households, financed by the central bank. This is, for example, what the United States did with the Economic Stimulus Act of 2008. The use of tax rebates explains why some consider helicopter money as a fiscal stimulus as opposed to a monetary policy tool. Helicopter money, however, is not meant to be permanent, and is therefore a different policy option than universal basic income.{{Cite news|url=http://basicincome.org/news/2017/03/helicopter-money-basic-income-friends-or-foes/ |title=Helicopter money and basic income: friends or foes?|date=2017-03-25|work=Basic Income News|access-date=2017-04-10|language=en-US}}

Under a strict definition, where helicopter drops are simply transfers from the central bank to the private sector financed with base money a number of economists have argued that they are already occurring.{{cite news|author=Mehreen Khan |date=19 March 2016 |url=https://www.telegraph.co.uk/business/2016/03/17/central-banks-are-already-doing-the-unthinkable---you-just-dont/ |title=Central banks are already doing the unthinkable – you just don't know it |work=The Telegraph|access-date=5 May 2016}} In 2016, the European Central Bank (ECB) launched a programme of targeted longer-term refinancing operations (TLTROs), lending money to banks at negative interest rates, which amounts to a transfer to banks.{{Citation |mode= cs1 |first1=Emilie |last1=Da Silva |first2=Vincent |last2=Grossmann-Wirth |first3=Benoit |last3=Nguyen |first4=Miklos |last4=Vari |date=2021-11-19 |title=Paying Banks to Lend? Evidence from the Eurosystem's TLTRO and the Euro Area Credit Registry |url=https://publications.banque-france.fr/en/paying-banks-lend-evidence-eurosystems-tltro-and-euro-area-credit-registry |access-date=5 February 2025 |publisher=Banque de France|work=BdF Working Paper Series |number=848 |language=en-GB}}{{cite news |title=Paying Banks to Lend? Evidence from the Eurosystem's TLTRO and the Euro Area Credit Registry |url=https://publications.banque-france.fr/en/paying-banks-lend-evidence-eurosystems-tltro-and-euro-area-credit-registry |work=Banque de France |date=19 November 2021}} Also, the use of differential interest rates on tiered reserves to support commercial banks' profitability in the face of negative interest rates, opens up another source of helicopter drop – albeit intermediated by banks.{{cite news|quote=Central banks have ways to drop money into ailing economies. |title=Free lunch: Helicopter engineering |newspaper=Financial Times|date=29 February 2016|url=http://www.ft.com/cms/s/3/914fae3e-dec6-11e5-b072-006d8d362ba3.html#axzz45kZzwC6m |last1=Sandbu|first1=Martin}}{{Cite news|date=2021-01-14|title=The ECB Is No Longer a Reliable Cash Machine for Governments|language=en|work=Bloomberg.com|url=https://www.bloomberg.com/news/articles/2021-01-14/the-ecb-is-no-longer-a-reliable-cash-machine-for-governments|access-date=2021-03-29}}

In the case of the Eurozone, the use of TLTROs{{cite web |title=T-LTRO: variation on a (ECB's) theme |url=https://www.bruegel.org/blog-post/t-ltro-variation-ecbs-theme |website=Bruegel – The Brussels-based economic think tank |language=en |date=4 September 2024}} is believed by some economists to provide a legal and administratively tractable means of introducing transfers to households.{{cite web|url=http://bruegel.org/2016/03/helicopter-drops-reloaded/ |title=Helicopter drops reloaded|publisher=breugel.org|author1=Hüttl, Pia |author2=Alvaro Leandro |date=14 March 2016|access-date=5 May 2016}} The economist, Eric Lonergan, argued in 2016 that legal helicopter drops in the Eurozone could be structured via zero coupon, perpetual loans, which all European adult citizens would be eligible to receive. The loans could be administered by eligible commercial banks, and under certain conditions the loans would be net interest income positive to the central bank.{{cite web|title=Legal helicopter drops in the Eurozone|date=24 February 2016 |website=Philosophy of Money |url=https://www.philosophyofmoney.net/legal-helicopter-drops-in-the-eurozone/ |last=Lonergan |first=Eric }} Other advocates such as think tank Positive Money or BlackRock's Stanley Fischer and Philipp Hildebrand propose to introduce helicopter money through soft forms of cooperation with fiscal authorities.{{r|positive 2020 COVID|BR next}}

= Differences from quantitative easing =

Like all expansionary monetary policies in general, quantitative easing (QE) and helicopter money involves money creation by central banks to expand the money supply. However, the effect on the central bank's balance sheet of helicopter money is different than with QE. Under QE, central banks create reserves by purchasing bonds or other financial assets, conducting an "asset swap".{{cite web|last1=Grenville|first1=Stephen|date=24 February 2013|title=Helicopter money|url=https://voxeu.org/article/helicopter-money|url-status=live|archive-url=https://web.archive.org/web/20190920074154/https://voxeu.org/article/helicopter-money|archive-date=20 September 2019|website=Vox EU|publisher=Centre for Economic Policy Research|quote=Central banks have no mandate to give money away (they can only exchange one asset for another, as they do in quantitative easing)}} The swap is reversible. By contrast, with helicopter money, central banks give away the money created, without increasing assets on their balance sheet.

Economists argue that the effect on expectations is different because helicopter money created would be perceived as "permanent"{{snd}} that is, more irreversible than QE.

Supporters

Former chairman of the Federal Reserve Ben Bernanke is known to be one of the proponents of helicopter money when he gave a speech in November 2002 arguing, in the case of Japan, that "a money-financed tax cut is essentially equivalent to Milton Friedman's famous 'helicopter drop' of money".{{r|Bernanke speech}} In April 2016, Ben Bernanke wrote a blog post arguing that "such programs may be the best available alternative. It would be premature to rule them out".{{cite web|url=http://www.brookings.edu/blogs/ben-bernanke/posts/2016/04/11-helicopter-money |title=What tools does the Fed have left? Part 3: Helicopter money|author=Ben S. Bernanke|date=11 April 2016|work=The Brookings Institution|access-date=5 May 2016}} Fed chairwoman Janet Yellen also admitted that helicopter money could be an option in "extreme situations".{{Cite news|url=https://money.cnn.com/2016/06/16/news/economy/federal-reserve-janet-yellen-helicopter-money/index.html |title=Janet Yellen: Helicopter money is an option in extreme situations|last=Gillespie|first=Patrick |work=CNNMoney|access-date=2017-11-17}}

Citigroup Chief Economist Willem Buiter is also known to be a prominent advocate of the concept.{{cite news |last1=Seith |first1=Anne |title=Economists Say Handing Out Cash Could Help Euro Zone Economy |url=https://www.spiegel.de/international/business/economists-say-handing-out-cash-could-help-euro-zone-economy-a-1011352.html |work=Der Spiegel |date=6 January 2015 |language=en}} Other proponents include Financial Times' Chief Commentator Martin Wolf,{{cite news|url=http://www.ft.com/cms/s/0/9bcf0eea-6f98-11e2-b906-00144feab49a.html#axzz2vaE3myVK |title=The case for helicopter money|work=Financial Times|date=12 February 2013|access-date=5 May 2016|last1=Wolf|first1=Martin}} Oxford economists John Muellbauer,{{r|vox combat}} and Simon Wren-Lewis, Economist Steve Keen, the political economist Mark Blyth of Brown University, Berkeley economics professor and former Treasury advisor, Brad DeLong,{{cite web|url=https://www.project-syndicate.org/commentary/helicopter-money-fiscal-stimulus-by-j--bradford-delong-2016-04 |title=Rescue Helicopters for Stranded Economies|author=J. Bradford DeLong|work=Project Syndicate|date=29 April 2016|access-date=5 May 2016}}{{Cite web|url=http://www.milkenreview.org/articles/helicopter-money-when-zero-just-isnt-low-enough |title=Helicopter Money: When Zero Just Isn't Low Enough|website=Milken Institute Review|language=en-US|access-date=2017-02-11}} UCLA economics professor, Roger Farmer, American macro hedge fund manager Ray Dalio, Irish economist and Fund manager Eric Lonergan,{{cite AV media|url=https://www.youtube.com/watch?v=5EA2nKqcjtg |archive-url=https://ghostarchive.org/varchive/youtube/20211221/5EA2nKqcjtg |archive-date=2021-12-21 |url-status=live|title=Why the ECB should give money directly to People |id=(Video of Eric Lonergan presentation; uploaded by Positive Money, 8 April 2016)|date=17 February 2016 |access-date=5 May 2016|via=YouTube}}{{cbignore}} Presentation at QE for People Conference, European Parliament. Anatole Kaletsky,{{cite web|url=https://www.project-syndicate.org/onpoint/central-bankings-final-frontier-by-anatole-kaletsky-2016-05 |title=Central Banking's Final Frontier? by Anatole Kaletsky - Project Syndicate|first=Anatole|last=Kaletsky |date=6 May 2016}} Romain Baeriswyl,{{Cite book|title=Monetary Policy, Financial Crises, and the Macroeconomy |last=Baeriswyl|first=Romain |date=2017|publisher=Springer |location=Cham, Switzerland|isbn=9783319562605 |pages=105–121 |language=en |doi=10.1007/978-3-319-56261-2_6 |chapter = The Case for the Separation of Money and Credit}} Martin Sandbu,{{Cite news|url=https://www.ft.com/content/1dc5b4a8-57da-11e6-9f70-badea1b336d4 |title=Helicopter money: if not now, then when?|last=Sandbu|first=Martin |date=2016|work=Financial Times}} and Jean Pisani-Ferry.{{Cite web|url=https://www.project-syndicate.org/commentary/europe-next-recession-alternative-policies-by-jean-pisani-ferry-2019-09 |title=How to Ward Off the Next Recession |last=Pisani-Ferry|first=Jean |date=2019-09-30|website=Project Syndicate|language=en|access-date=2019-10-12}}

The idea also finds support among central bankers. For example, former governor of the Irish central bank Patrick Honohan said he believes the policy would work while the ECB's chief economist Peter Praet once said: "All central banks can do it." The Vice-Governor of the Czech Central Bank Mojmír Hampl published a paper in which he writes that "the idea offers many virtues and advantages compared to other forms of unconventional monetary policy, especially obliterating the need to rely on a complicated transmission mechanism, allowing much easier communication to the public, and boosting consumer confidence when most needed".{{citation|mode=cs1 |last1=Hampl |first1=Mojmir |last2=Havranek |first2=Tomas |title=Central Bank Capital as an Instrument of Monetary Policy |date=2018 |url=https://www.econstor.eu/handle/10419/176828|id=(Discussion paper) |publisher=ZBW – Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft|location= Kiel und Hamburg|language=en}}

Bill Gross, Portfolio Manager of the Janus Global Unconstrained Bond Fund also argues for the implementation of a basic income, funded by helicopter drops.{{cite web|url=https://www.janus.com/bill-gross-investment-outlook |title=Bill Gross Investment Outlook May 2016|access-date=5 May 2016}}{{cite news|url=https://www.wsj.com/articles/BL-MBB-49269 |title=Bill Gross: What to Do After the Robots Take Our Jobs|author=Paul Vigna|work=Wall Street Journal |department=(Moneybeat Blog)|date=4 May 2016|access-date=5 February 2025}}

=In the Eurozone=

File:QE_for_People_European_parliament.jpg (17 February 2016)]]

On 10 March 2016, the idea became increasingly popular in Europe after Mario Draghi the President of the European Central Bank, said in a press conference that he found the concept "very interesting".{{cite AV media|url=https://www.youtube.com/watch?v=Zbb--KxTjWc |archive-url=https://ghostarchive.org/varchive/youtube/20211221/Zbb--KxTjWc |archive-date=2021-12-21 |url-status=live|title=Mario Draghi: 'Helicopter money is a very interesting concept'|date=10 March 2016|access-date=5 May 2016|via=YouTube}}{{cbignore}} This statement was followed by another statement from the ECB's Peter Praet who declared:{{r|ecb la repub}}

{{bq|Yes, all central banks can do it. You can issue currency and you distribute it to people. That’s helicopter money. Helicopter money is giving to the people part of the net present value of your future seigniorage, the profit you make on the future banknotes. The question is, if and when is it opportune to make recourse to that sort of instrument which is really an extreme sort of instrument.}}

In 2015, a European campaign called "Quantitative Easing for People" was launched{{cite web|title=Cookiewall - Het Financieele Dagblad|url=http://fd.nl/economie-politiek/1129670/handtekeningenactie-voor-helikoptergeld|website=fd.nl}} and is effectively promoting the concept of Helicopter Money, along with other proposals for "Green QE" and "Strategic QE", which are other types of monetary financing operations by central banks involving public investment programmes. The campaign was supported by 20 organisations across Europe and more than 116 economists.{{cite web|title=QE for People. A Rescue Plan for the Eurozone|url=http://www.qe4people.eu|url-status=dead|archive-url=https://web.archive.org/web/20180411122417/http://www.qe4people.eu/|archive-date=11 April 2018|work=Quantitative Easing for People|access-date=5 May 2016}}

On 17 June 2016, 18 Members of the European Parliament (including Philippe Lamberts, Paul Tang and Fabio De Masi) signed an open letter{{cite web|title=MEPs want the ECB to look at helicopter money|url=http://www.qe4people.eu/open_letter_to_the_ecb}} calling on the ECB to "provide evidence-based analysis of the potential effects of the alternative proposals mentioned above, and to clarify under which conditions their implementation would be legal". If it doesn't consider alternatives to QE, MEPs fear the ECB would leave itself "unprepared for a deterioration in economic conditions".{{cite news |title=ECB urged to lavish 'helicopter money' on consumers |url=http://www.ft.com/cms/s/0/c5d08c5c-339c-11e6-bda0-04585c31b153.html |work=Financial Times |date=16 June 2016 |last1=Brunsden |first1=Jim}}

In October 2016, a survey showed that 54% Europeans think helicopter money would be a good idea, with only 14% against.{{Cite web|title=54% of Europeans are in favour of 'helicopter money'|url=https://positivemoney.org/archive/poll-helicopter-money/|access-date=5 February 2025|website=Positive Money|date=14 October 2016}}

In 2020, politicians, civil society organisations and economists debated issuing helicopter money as a response to the coronavirus pandemic in Europe.{{r|covid heli|positive 2020 COVID}} While the ECB president Christine Lagarde insisted the ECB had not considered helicopter money, a group of 8 MEPs from different groups (including Guy Verhofstadt) said in a letter to the ECB President that it was "rather surprising to read your emphatic response"{{citation|url=https://www.europarl.europa.eu/doceo/document/ECON-QZ-660068_EN.pdf |title=Direct monetary transfers to eurozone households |id=Question for written answer Z-059/2020 |type=Question from MEPs to the European Central Bank president, Christine Lagarde under Rule 140 |publisher=European Parliament |mode=cs1}}{{Cite news |last=Zydra|first=Markus|title=Geld vom Himmel – Helikoptergeld: Die Europäische Zentralbank ignoriert das Thema |trans-title= Money from the sky – Helicopter money: The European Central Bank ignores the issue |url=https://www.sueddeutsche.de/wirtschaft/helikoptergeld-ezb-1.5117199|access-date=2020-11-25|work=Süddeutsche Zeitung |date=16 November 2020 |language=de}} and asked the ECB to provide further analysis on this notion.

In 2021, the French Conseil d'Analyse Économique (economic advisory council), an advisory body attached to the Prime minister's office, recommended the inclusion of helicopter money in the ECB's toolbox.{{Cite news |date=2021-06-16 |title=French central bank rebuffs 'helicopter money' suggestion |language=en |work=Reuters |access-date=2021-06-20 |url=https://www.reuters.com/article/us-ecb-policy-villeroy-idUSKCN2DS1G2}}{{cite magazine |last1=Martin |first1=Philippe|last2= Ragot |first2=Xavier |last3= Monnet |first3=Eric |title=What Else Can the European Central Bank Do? |url=https://www.cae-eco.fr/staticfiles/pdf/cae-note065-en.pdf |magazine=Les notes du conseil d'analyse économique |number=65 |publisher=Conseil d'Analyse Économique|date=June 2021 |language=en}}

=In the US=

In 2020, the United States Congress debated issuing two times a $1,000 check to each eligible adult citizen, described by media as "helicopter money", as a response to the US coronavirus pandemic.{{cite web|title=The global markets barely budge as helicopter-money measures achieve lift-off|url=https://fortune.com/2020/03/19/global-markets-calm-helicopter-money/|website=Fortune|language=en}}{{cite web|date=17 March 2020|title=Trump seeks stimulus package potentially worth more than $1 trillion, including direct payments to Americans|url=https://www.cnbc.com/2020/03/17/mnuchin-says-trump-administration-is-looking-to-get-cash-to-americans-immediately.html|website=CNBC|language=en}}

=In Japan=

In a meeting with Japanese Prime Minister Shinzo Abe and Bank of Japan's Haruhiko Kuroda in July 2016 it was widely reported{{cite news |last1=Mirhaydari |first1=Anthony |title=Can 'Helicopter Ben Bernanke' Save Japan? |access-date=28 July 2016 |url=https://www.thefiscaltimes.com/Columns/2016/07/12/Can-Helicopter-Ben-Bernanke-Save-Japan |work=The Fiscal Times |date=12 July 2016 |language=en}} that former Federal Reserve chairman Ben Bernanke advised the policy of monetizing more government debt created to fund infrastructure projects,{{cite news|author1=Enda Curran |author2=Toru Fujioka|date=27 July 2016|title=Abe's Unusual Stimulus Unveiling May Be Directed at the BOJ |access-date=28 July 2016|work=Bloomberg News |url=https://www.bloomberg.com/news/articles/2016-07-27/abe-s-unusual-stimulus-announcement-may-be-directed-at-the-boj}} ostensibly as a way to drop "helicopter money" on Japan to stimulate the economy and halt deflation in Japan. Financial markets began to front-run this stimulus effort days before it was announced when accounts of Bernanke's visit to Japan were first reported.{{Citation needed|date=July 2016}} Japan had already before given consumption vouchers in 1999 to citizens.{{Cite news |title=Helicopter money is here |url=https://www.ft.com/content/eeeb0ab2-3155-4a07-82e4-fedefc438ce8 |access-date=2023-12-28 |newspaper=Financial Times|date=26 February 2020 |last1=Jones |first1=Claire }}

Later in the month the Bank of Japan in an ongoing review of its monetary stimulus program was reported to be considering policies somewhat similar to "helicopter money", such as selling 50-year or perpetual bonds.{{cite news|author=Stanley White|date=31 July 2016|title='Helicopter money' talk takes flight as Bank of Japan runs out of runway|newspaper=The Japan Times|agency=Reuters|url=http://www.japantimes.co.jp/news/2016/07/31/business/economy-business/helicopter-money-talk-takes-flight-bank-japan-runs-runway/#.V55ptaIbiUk|access-date=1 August 2016}} However, even if the central bank commits to hold these 50-year government bonds for a very long time, that is not helicopter money as long as this money, financed by the state (debt) and not by central bank money printing per se, is not distributed to households directly.{{Citation needed|date=July 2024}}

= Switzerland =

In October 2020, a Swiss popular initiative was started in an attempt to trigger a national referendum obliging the Swiss National Bank to distribute a 7500 CHF dividend to all Swiss citizens.{{Cite web|title=Swiss May Get to Vote on a $55 Billion Helicopter Money Idea|url=https://www.swissinfo.ch/eng/swiss-may-get-to-vote-on-a--55-billion-helicopter-money-idea/46111048|access-date=2020-10-24|website=SWI swissinfo.ch|language=en|archive-date=24 October 2020|archive-url=https://web.archive.org/web/20201024022412/https://www.swissinfo.ch/eng/swiss-may-get-to-vote-on-a--55-billion-helicopter-money-idea/46111048|url-status=dead}} Citizens have until April 2022 to collect the 100,000 required signatures.{{Citation needed|date=July 2024}}

=Popular culture=

Comedy heavy metal band Nanowar of Steel cited the helicopter drop monetary policy in their financial-epic-metal song "Tooth Fairy".{{YouTube|CzvQxQYKO88|Nanowar of Steel: Tooth Fairy}}: {{cite AV media|author=Nanowar of Steel |title=Tooth Fairy|others=[feat. Mario Draghi]; Video by Christian Ice; from album produced with Alessandro Delvecchio|id=(Lyrics video)|date=December 2018}}

Criticism

= Substitution to fiscal policy =

Many economists would argue that helicopter money, in the form of cash transfers to households, should not be seen as a substitute for fiscal policy. Given the government's borrowing costs are extremely low at close to zero interest rates, conventional fiscal stimulus through tax cuts and infrastructure spending should work. From this perspective, helicopter money is really an insurance policy against the failure of fiscal policy for political, legal or institutional reasons.{{cite web |author-link=Simon Wren-Lewis |first=Simon |last=Wren-Lewis|date=1 March 2016|title=Two related confusions about helicopter money |website=Mainly Macro|url=https://mainlymacro.blogspot.com/2016/03/two-related-confusions-about-helicopter.html|access-date=5 May 2016}}

Helicopter money advocates argue that having the central bank supervise directly the transfers is likely to work better in certain circumstances. For example, economists Xavier Jaravel and Johannes Boehm argue that "monetary policymakers can act faster and are less likely to overshoot, given their inflation mandate. Politicians, on the other hand, may be tempted to launch aggressive stimulus policies that could prove difficult to reverse."{{Cite web|first1=Johannes |last1= Boehm |last2=Jaravel |first2= Xavier |date=2024-12-16 |title=The Missing Monetary-Policy Tool |url=https://www.project-syndicate.org/commentary/central-banks-must-make-stimulus-payments-when-conventional-policy-fails-by-johannes-boehm-1-and-xavier-jaravel-2024-12 |access-date=2025-01-07 |website=Project Syndicate |language=en}}

=Inflationary effect=

In the past the idea had been dismissed because it was thought that it would inevitably lead to hyperinflation.{{citation needed|date=May 2016}}

Consequently, a range of concerns include the fact that helicopter money would undermine trust in the currency (which ultimately would lead to hyperinflation). This concern was particularly voiced by German Economist (and former Chief Economist at the ECB) Otmar Issing in a paper written in 2014.{{cite news |newspaper=Börsen-Zeitung |language=de | url=http://safe-frankfurt.de/fileadmin/user_upload/editor_common/Policy_Center/Issing_Helicopter-Money.pdf | title=Die letzte Waffe – Helicopter Money? | via=SAFE: Sustainable Architecture for Finance in Europe. (Reprint) | date=7 February 2015 | first=Otmar |last=Issing |trans-title=The last weapon – Helicopter Money?}} Later in 2016, he declared in an interview: "I think the whole idea of the helicopter money is downright devastating. For this is nothing more than a declaration of bankruptcy of the monetary policy"{{cite news |language=de |url=https://www.faz.net/aktuell/wirtschaft/ex-ezb-chefvolkswirt-otmar-issing-warnt-vor-helikoptergeld-14141309.html#GEPC;s3 |title=Ex-EZB-Chefvolkswirt Otmar Issing warnt vor 'Helikoptergeld'|date=23 March 2016|work= FAZ – Frankfurter Allgemeine Zeitung |access-date=5 May 2016}} Richard Koo makes a similar argument{{cite web | url=https://ftalphaville.ft.com/2016/07/27/2170980/koo-on-why-helicopter-money-just-wont-work/ | title=Koo on why helicopter money just won't work | work=FT Alphaville | date=27 July 2016 | author=Izabella Kaminska}} when saying "if such envelopes arrived day after day, the entire country would quickly fall into a panic as people lose all sense of what their currency is worth".

This clashes with the argument that people would not spend much of the money they receive (and therefore helicopter money cannot be inflationary).

A study published by the French Economic Advisory Council estimates that 1% of GDP equivalent of helicopter money transfers in the Eurozone would generate around 0.5% of inflation over one year.{{cite magazine |last1= Renault |first1=Thomas|last2= Savatier |first2=Baptiste |title=What Impact Does Helicopter Money Have on Inflation? |url=https://www.cae-eco.fr/staticfiles/pdf/cae-focus63-en.pdf |magazine=Les notes du conseil d'analyse économique |issue=63 bis |publisher=Conseil d'Analyse Economique |date=June 2021 |department=Focus}}

=Would helicopter money be spent?=

Several prominent economists such as central banker Raghuram Rajan are against helicopter money on the grounds that helicopter money would be ineffective because people would not spend the money.{{cite magazine|url= https://www.newyorker.com/news/john-cassidy/raghuram-rajan-and-the-dangers-of-helicopter-money |title=Raghuram Rajan and the Dangers of Helicopter Money|first=John|last=Cassidy |magazine=The New Yorker |date=13 May 2016}} In response, Lord Adair Turner argues: "Money-financed deficits will always stimulate nominal demand. By comparison debt finance deficits might do so, but might not."{{cite web|url= https://www.ineteconomics.org/ideas-papers/research-papers/why-a-future-tax-on-bank-credit-intermediation-does-not-offset-the-stimulative-effect-of-money-finance-deficits |title=Why a future tax on bank credit intermediation does not offset the stimulative effect of money finance deficits|website=Institute for New Economic Thinking}}

Contradicting this argument, several surveys conducted in the Eurozone concluded however that between 30 and 55% of the distributed money would be spent by households, in effect resulting in a boost of around 2% of GDP.[https://web.archive.org/web/20161019000329/http://www.astelloncapital.com/documents/FG/astellon/news/519100_Astellon_Notes_-_Helicopter_Money.pdf "Helicopter Money – Let It Rain?"], Astellon Capital, June 2016.{{Cite web|url=https://www.ezonomics.com/ing_international_surveys/helicopter-money-2016/|title=International Survey: Helicopter Money 2016 |website=eZonomics|publisher= ING|language=en|access-date=2017-02-11|archive-date=12 February 2017|archive-url=https://web.archive.org/web/20170212090910/https://www.ezonomics.com/ing_international_surveys/helicopter-money-2016/|url-status=dead}}{{Cite conference|last1=Djuric|first1=Uros |last2=Neugart|first2=Michael| date=2016-12-17 |conference= Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen |id=Session: Monetary Policy and Consumption |title=Helicopter Money: Survey Evidence on Expectation Formation and Consumption Behavior |publisher=German Economic Association|url= https://www.econstor.eu/handle/10419/168062 |ssrn=2893008|location=German National Library of Economics, Leibniz Information Centre for Economics, Kiel, Hamburg}} [https://www.econstor.eu/bitstream/10419/168062/1/VfS-2017-pid-1842.pdf PDF file]{{Cite web|url=https://www.dnb.nl/en/news/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2016/dnb350283.jsp|title=Will helicopter money be spent? New evidence|author1=Maarten van Rooij|author2=Jakob de Haan |date=2017|website= De Nederlandsche Bank|language=en|access-date=2017-04-10|archive-date=17 February 2020|archive-url=https://web.archive.org/web/20200217130321/https://www.dnb.nl/en/news/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2016/dnb350283.jsp|url-status=dead}} The most recent research on this topic was carried out by the Austrian central bank, and concludes that in the Eurozone the average marginal propensity to consume is around 50%, which is higher than previous research found.{{Cite journal|date=2020-10-01|title=Helicopter money in Europe: New evidence on the marginal propensity to consume across European households|url= |journal=Economics Letters|language=en|volume=195|pages=109416|doi=10.1016/j.econlet.2020.109416|issn=0165-1765|pmc=7382353|last1=Drescher|first1=Katharina|last2=Fessler|first2=Pirmin|last3=Lindner|first3=Peter|pmid=32834238}}

="No free lunch"=

Another range of critics involve the idea that there cannot be such thing as "free money" or as economists say "there is no such thing as a free lunch". This criticism was notably expressed by Bank for International Settlements researchers Claudio Borio, Piti Disyatat and Anna Zabai, who claimed that helicopter drops to citizens would necessarily entail payment by the central bank of interest on the extra reserves being supplied.{{cite web|url=http://voxeu.org/article/helicopter-money-illusion-free-lunch |title=Helicopter money: The illusion of a free lunch|first1=Claudio|last1=Borio |first2=Piti|last2=Disyatat |first3=Anna|last3=Zabai |date=24 May 2016|website=Vox EU|publisher=Centre for Economic Policy Research}}

In a response, the former IMF economist Biagio Bossone challenges the later assumption and argues that "helicopter money is a 'free lunch' in the simple sense that, if it works and succeeds in closing the output gap, people won’t have to repay it through higher taxes or undesired (above optimal) inflation".{{cite web |url=http://archive.economonitor.com/blog/2016/06/why-helicopter-money-is-a-free-lunch/ |title=Why Helicopter Money is a 'Free Lunch' |last=Bossone |first=Biagio |website=EconoMonitor |date=6 June 2016 |archive-url=https://web.archive.org/web/20171211105545/http://archive.economonitor.com/blog/2016/06/why-helicopter-money-is-a-free-lunch/ |archive-date=11 December 2017}}

=Legality=

Other critics claim helicopter money would be outside of the mandate of central banks, because it would "blur the lines between fiscal policy and monetary policy"{{Cite web |url=https://www.ecb.europa.eu/press/inter/date/2016/html/sp160926_3.en.html |title=Interview with Süddeutsche Zeitung |author=European Central Bank |website=European Central Bank |date=26 September 2016 |language=en |access-date=2017-02-11}} mainly because helicopter money would involve "fiscal effects", which is traditionally the role of governments to decide on. However advocates of helicopter money such as Eric Lonergan and Simon Wren-Lewis invalidate this argument by observing that standard monetary policy tools also have fiscal effects.{{Cite web |last= Wren-Lewis |first=Simon|url=https://mainlymacro.blogspot.be/2016/05/helicopter-money-and-fiscal-policy.html |title=Helicopter money and fiscal policy |website=Mainly Macro |date=20 May 2016 |access-date=2017-02-11}}{{Cite web |last=Lonergan |first=Eric |url=http://www.philosophyofmoney.net/the-distinction-between-monetary-and-fiscal-policy/ |title=The distinction between monetary and fiscal policy |date=2016-04-03 |website=Philosophy of Money |access-date=2017-02-11 |language=en-GB}}

=Accounting and implications for central bank balance sheets=

One of the main concerns with transfers from the central bank directly to the private sector is that in contrast to conventional open-market operations the central bank does not have an asset corresponding to the base money created. This has implications for the measured equity of the central bank because base money is typically treated as a liability, but it could also constrain the central bank's ability to set interest rates in the future.

For this reason, Bundesbank president Jens Weidmann also voiced opposition against helicopter money, arguing it would "tear gaping holes in central bank balance sheets. Ultimately, it would be down to the euro-area countries, and thus the taxpayer, to shoulder the costs because central banks would be unprofitable for quite some time."{{cite web |website= Deutsche Bundesbank |department=Interviews |title=Helicopter money would tear gaping holes in central bank balance sheets |date=21 March 2016 |url=http://www.bundesbank.de/Redaktion/EN/Interviews/2016_01_29_weidmann_funke_mediengruppe.html |url-status=dead |archive-date=18 May 2016 |access-date=5 May 2016 |archive-url= https://web.archive.org/web/20160518205952/http://www.bundesbank.de/Redaktion/EN/Interviews/2016_01_29_weidmann_funke_mediengruppe.html}} The National Bank of Belgium also released a paper making a similar argument.{{cite journal |last1=Kasongo Kashama |first1=M. |title=Helicopter money and debt-financed fiscal stimulus: one and the same thing? |url=https://www.nbb.be/en/articles/helicopter-money-and-debt-financed-fiscal-stimulus-one-and-same-thing |journal=NBB Economic Review |publisher=National Bank of Belgium |date=December 2016 |issn=1780-664X |language=en-BE}}

However, more conventional instruments, like TLTROs and quantitative easing can also result in important losses on central banks' balance sheets. During the period 2022-204, Eurozone central banks made losses to the tune of 160 billion euros as a consequence of the ECB's rates hikes.{{cite news |department=Special Report |title=Eurozone Central Banks Face Further Losses |date=9 September 2024|url=https://www.fitchratings.com/research/sovereigns/eurozone-central-banks-face-further-losses-09-09-2024 |work= Fitch Ratings |url-access=subscription }}{{Cite news |date=2023-02-23 |title=Central bank losses risk opening old Eurozone faultlines |url=https://www.politico.eu/article/central-bank-losses-risk-opening-old-eurozone-faultlines/ |access-date=2024-09-14 |work=POLITICO |language=en-GB}}{{Cite journal |last=Belhocine |first=Nazim |date=July 2023 |title=Raising Rates with a Large Balance Sheet: The Eurosystem's Net Income and its Fiscal Implications |url=https://elibrary.imf.org/openurl?genre=journal&issn=1018-5941&volume=2023&issue=145 |journal=IMF Working Papers |language=en |volume=2023 |issue=145 |page=1 |doi=10.5089/9798400244643.001 |doi-broken-date=22 February 2025 |issn=1018-5941}}

The accounting treatment of central banks' balance sheets is controversial.{{cite news|title=Governments can borrow without increasing their debt|url=http://blogs.ft.com/economistsforum/2012/06/governments-can-borrow-without-increasing-their-debt/|access-date=5 May 2016|work=Financial Times}} Most economists now recognize that the 'capital' of the central bank is not really important.{{cite journal|author=Ulrich Bindseil|author2=Andres Manzanares|author3=Benedict Weller |issn=1725-2806 |publisher=European Central Bank |date=September 2004 |title=The Role of Central Bank Capital Revisited |journal=ECB Working Paper Series |url=https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp392.pdf?e7bba27cdd7b653529fc35400ff0a3c0}} What matters is whether expansion of base money can be reversed in the future, or there are other means to raise interest rates. Various options have been proposed. Oxford professor, Simon Wren-Lewis has suggested that the government pre-commit to providing the Bank of England with bonds if needed.

The European Central Bank can, in fact, mandate an increase in its capital, and the introduction of tiered reserves and interest on reserves gives central banks an array of tools to protect their own net income and the demand for reserves.{{cite web|first=Eric |last=Lonergan|date=25 May 2015|title=Does the central bank's balance sheet matter?|access-date=5 February 2025 |url=http://www.philosophyofmoney.net/does-the-central-banks-balance-sheet-matter/|work=Philosophy of Money}}Buetzer, Sascha (6 May 2022). [https://www.imf.org/en/Publications/WP/Issues/2022/05/06/Advancing-the-Monetary-Policy-Toolkit-through-Outright-Transfers-517641 "Advancing the Monetary Policy Toolkit through Outright Transfers"] IMF Working Papers. 2022/87, International Monetary Fund.

= Threat to central bank independence =

Endra Curren and Ben Holland of Bloomberg stated "That type of stimulus [helicopter money] used to be taboo, in part because it risks eroding the independence from politics that monetary policy makers prize [...] History is littered with cautionary tales in which blurring the lines between central bank and Treasury coffers led to runaway inflation."{{Cite news|url=https://www.bloomberg.com/news/articles/2019-09-22/a-long-despised-and-risky-economic-doctrine-is-now-a-hot-idea |title=A Long-Despised and Risky Economic Doctrine Is Now a Hot Idea|date=2019-09-22 |work=Bloomberg.com|access-date=2020-03-16|language=en}}{{cite news |last1=Reichlin |first1=Lucrezia |last2=Turner |first2=Adair |last3=Woodford |first3=Michael |title=Helicopter money as a policy option |url=https://voxeu.org/article/helicopter-money-policy-option |work=Vox EU |publisher=Centre for Economic Policy Research |archive-url= https://web.archive.org/web/20191224180125/https://voxeu.org/article/helicopter-money-policy-option |archive-date=24 December 2019 |date=23 September 2019 |url-status=live |quote=Helicopter money is a form of fiscal policy. The question arises of whether it is the central bank, the Treasury or both in coordination that should implement it. This has the potential to threaten the principle of central bank independence or at least it may force us to reconsider the rules that govern the relation between Treasury and central banks today}}

References

{{Reflist|refs=

{{Cite report|url=https://www.blackrock.com/us/individual/literature/whitepaper/bii-macro-perspectives-august-2019.pdf |title=Dealing with the next downturn: From unconventional monetary policy to unprecedented policy coordination|first1=Elga |last1=Bartsch|first2=Jean |last2=Boivin|first3=Stanley |last3=Fischer|first4=Philipp |last4= Hildebrand |others=Contributions by Simon Wan|date=August 2019|series=Macro and Market Perspectives|publisher=BlackRock Investment Institute}}

Sources:

{{cite web|last1=Galí|first1=Jordi|date=17 March 2020|title=Helicopter money: The time is now|url=https://voxeu.org/article/helicopter-money-time-now|url-status=live|archive-url=https://web.archive.org/web/20200323175324/https://voxeu.org/article/helicopter-money-time-now|archive-date=23 March 2020|website=Vox EU|publisher=Centre for Economic Policy Research|ref=none}}
{{cite news|last1=Stevis-Gridneff|first1=Matina|last2=Ewing|first2=Jack|date=20 March 2020 |title=Will 'Helicopter Money' and the 'Big Bazooka' Help Rescue Europe?|url=https://www.nytimes.com/2020/03/20/business/EU-European-Central-Bank-economy-covid.html|newspaper =The New York Times|ref=none}}
{{Cite news|title=Maßnahmen gegen die Krise: Bargeld für die Bürger: Ökonomen loben das Helikoptergeld |trans-title=Measures against the crisis: Cash for citizens: Economists praise helicopter money|url= https://www.handelsblatt.com/finanzen/geldpolitik/massnahmen-gegen-die-krise-bargeld-fuer-die-buerger-oekonomen-loben-das-helikoptergeld/25723120.html|access-date=2025-02-05|work=Handelsblatt|language=de}}

{{cite news |title=Peter Praet, capo economista all'Eurotower: 'La Bce potrà abbassare ancora i tassi' |first1=Ferdinando |last1=Giugliano |first2= Tonia |last2=Mastrobuoni |language=it |url= https://www.repubblica.it/economia/2016/03/18/news/l_intervista_peter_praet_capo_economista_all_eurotower_grazie_alle_nostre_misure_l_inflazione_tornera_vicino_al_2_ne-135736125/ |work=La Repubblica |date=18 March 2016}}

ECB republished the interview {{in lang|en}}, as: {{cite web|title=Interview with La Repubblica |website=European Central Bank |date=18 March 2016 |quote=Helicopter money is giving to the people part of the net present value of your future seigniorage, the profit you make on the future banknotes.|id=Interview with Peter Praet, Member of the Executive Board of the ECB, conducted on 15 March 2016 and published on 18 March 2016 |url-status=live |access-date=5 February 2025 |url= https://www.ecb.europa.eu/press/inter/date/2016/html/sp160318.en.html |archive-date=16 February 2020 |archive-url= https://web.archive.org/web/20200216181909/https://www.ecb.europa.eu/press/inter/date/2016/html/sp160318.en.html |ref=none }}

{{cite book |last=Jourdan|first=Stanislas |title= Helicopter money as a response to the COVID-19 crisis |date=March 2020 |url=https://positivemoney.org/archive/helicopter-money-covid19-report/|archive-date=5 February 2025 |archive-url=https://web.archive.org/web/20250205012100/https://www.datocms-assets.com/132494/1718631171-helicopter_money_covid.pdf|publisher=Positive Money|language=en-GB}}

{{cite news|date=August 2012|title=How about quantitative easing for the people?|url=http://blogs.reuters.com/anatole-kaletsky/2012/08/01/how-about-quantitative-easing-for-the-people/|archive-url=https://web.archive.org/web/20120803020125/http://blogs.reuters.com/anatole-kaletsky/2012/08/01/how-about-quantitative-easing-for-the-people/|url-status=dead|archive-date=2012-08-03|access-date=5 May 2016|work=Reuters}}

{{cite news|date=2014-12-23|title=Combatting Eurozone deflation: QE for the people|work=Vox EU |url=http://www.voxeu.org/article/combatting-eurozone-deflation-qe-people|access-date=5 May 2016|publisher=Centre for Economic Policy Research}}}}