The global economy is in turmoil and central banks from the breath and width of the globe are struggling to spur economic growth in 2016. They have deployed most the weapons in their arsenal in a desperate attempt to spark economic growth, including negative interest rates and massive stimulus packages but the much need growth remains elusive. Consequently, central banks are looking for new ways to spark economic growth, and the use of unconventional means such as "helicopter money," have become topical issues.
This article seeks to demystify the concept of helicopter money, making it clearer and easier to understand to the ordinary person.
What is Helicopter Money?
Helicopter money is a reference to an idea made popular by the American economist Milton Friedman in 1969 in his paper “The Optimum Quantity of Money.”
The basic principle is that if a central bank wants to raise inflation and output in an economy that is running substantially below potential or targeted levels, one of the most effective tools would be simply to give everyone direct money transfers. In theory, people would see this as a permanent one-off expansion of the amount of money in circulat…