Helicopter Money
A policy in which a central bank creates money and distributes it directly to the public to stimulate spending.
What is Helicopter Money?
Helicopter money is an unconventional economic policy tool—named for Milton Friedman's 1969 thought experiment about dropping money from a helicopter—in which a central bank creates new money and distributes it directly to households, bypassing the banking system's traditional transmission mechanism. Unlike quantitative easing (which creates bank reserves that may not reach consumers), helicopter money guarantees that new money enters the real economy immediately as consumer spending. It blurs the boundary between monetary and fiscal policy, resembling a government transfer payment financed by permanent money creation rather than debt issuance. Helicopter money is considered a policy of last resort in severe deflation or liquidity trap scenarios where conventional rate cuts and quantitative easing have failed to stimulate demand.
Example
During the COVID-19 pandemic, the US government distributed three rounds of Economic Impact Payments to most American adults: $1,200 in April 2020, $600 in December 2020, and $1,400 in March 2021. While funded formally through deficit spending backed by Treasury borrowing rather than direct central bank money creation, the Federal Reserve's simultaneous purchase of over $4 trillion in Treasury securities effectively monetized much of this spending—creating economic conditions that approximated helicopter money in their broad stimulus impact.