Helicopter Drop (Helicopter Money)

What if, one day, we were chillin’ in our backyard, minding our own business, and all of a sudden a helicopter flew by and dropped twenty grand into our hands? That would be pretty epic, wouldn’t it? Just think of all the things we could do with an extra $20,000.

We wouldn’t bank on it happening any time soon, but the idea here—that money can be directly distributed to people in unconventional ways—is kind of what we’re talking about when we use the phrases “helicopter drop” or “helicopter money.”

Some experts say that an economy’s ideal inflation rate is somewhere around 2%. During a recession, though, it’s not completely unheard of for that inflation rate to decrease or, if the recession is bad enough, even go into the negative. This is not good, because it means the economy is stagnating; productivity isn’t where it needs to be and jobs aren’t being created. Couple a too-low inflation rate with too-low interest rates, and we’ve got ourselves a problem: an economy that is dead in the water but can’t cut interest rates to stimulate spending and investment.

In these situations, some advocate so-called helicopter drops; if we can’t stimulate spending by cutting interest rates, then maybe banks could shortcut the whole interest rate process by just sending checks to people. Most likely, those people would spend the money (as opposed to stashing it under the mattress), which would kickstart the economy and hopefully (eventually) pull us out of recession.