Should we fire up the helicopters?

“Helicopter money” was once regarded as an elegant, if highfalutin, thought experiment. Is there any merit to it, asks David C Stevenson.

"Helicopter money" was once regarded as an elegant, if highfalutin, thought experiment. The idea was devised by economist Milton Friedman in 1969 in a paper called "The optimum quantity of money", in which he imagined that "one day a helicopterdrops an additional $1,000 in bills from the sky". As is the way with economists, a rather more dry, respectable-sounding term has now been coined to describe it a "money-financed fiscal programme" (MFFP), as former US Federal Reserve chairman Ben Bernanke wrote in a blog last year.

In simple terms, an MFFP is a permanent increase in the stock of money, with the central bank turning into an agent of government spending. This means the government does not have to raise taxes or issue debt to fund state spending. Hence the money that is given should be perceived by the recipient as a gift.

An MFFP combines monetary and fiscal policy in a last desperate throw of the dice. A standard fiscal stimulus, such as infrastructure spending, sounds great on paper, but is a very blunt and time ineffective instrument it takes time to work through. Huge tax cuts, especially for wealthier investors, rely on trickle-down effects that are hotly contested and probably unlikely to be effective in the medium term.

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MFFP allows a targeted drop of money to those most in need, bypassing traditional policies such as bond-buying programmes, which largely seem to benefit traders and investment banks. Political economist Robert Skidelsky has described a scenario where the central bank issues each citizen with smart cards worth $1,000 each for them to spend as they wish. The Swiss economist Silvio Gesell, who proposed a similar scheme of "stamped money" at the start of the last century, added a stipulation that balances unspent after a month should be taxed, to discourage hoarding.

At this point, the reader may wonder, if it's such a good idea, why has no one tried it before? Or alternatively, this is lunacy get me out of here! Critics point to places such as Venezuela where the problems with reckless money printing are obvious: there's been 3,000% growth in the money supply since 2009 (66% per year), according to an analysis by asset manager Robeco, leading to consumer price inflation of 480% in 2016 based on IMF estimates.

This may be an unfair argument.Most intelligent economists partial to this thought experiment reckon it should only be used sparingly and in extreme circumstances. Hence "the probability of so-called helicopter money being used in the United States in the foreseeable future seems extremely low", says Bernanke. Other economists reckon it should be a clearly signalled one-off policy involving coordination not only at the national level between central bank and government, but also at the international level.

Skidelsky suggests that "success also hinges on the simultaneous pursuit of fiscal expansion worldwide, with each country's efforts calibrated according to its fiscal space and current-account position". Fair enough maybe but are the chances of it being implemented really as low as Bernanke suggests? I'm not convinced.

Properly managed this policy should be much more effective than our current approach of quantitative easing and doesn't directly benefit the Wall Street and City set. As Bernanke says, "it's precisely in the most difficult or extreme circumstances, in which other monetary and fiscal tools might be unavailable or ineffective under certain extreme circumstances such programmes may be the best available alternative".

I'm willing to bet that with spiralling levels of global debt and a broken international capital system, we could end up with the extreme circumstances Bernanke frets about. Other policies won't work and this will for a while at least.So at that point, I'd fill up on equities and sell every available bond. I'd also safely assume that whoever experiments with this first at a national level (my money is on the UK) will in effect debase its currency. This could lead to international tensions, but in the most hopeful scenario might lead to a coordinated international money drop.

David C. Stevenson

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit as well as in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.