Helicopter money - a short guide

Helicopter money - a short guide
Ashley Seager
The Guardian, Thursday 18 December 2008

The idea of dropping money from a helicopter sounds great, particularly if you are lucky enough to be standing under one. But surely it would only happen in a banana republic or some weird work of fiction? Well, maybe.
The term "helicopter money" is on everyone's lips thanks to Ben Bernanke, the head of the US central bank, the Federal Reserve. Dubbed "Helicopter Ben" by his critics, he has been associated with the idea since he gave a speech in 1992 quoting legendary economist Milton Friedman as proposing it in extremis should deflation - or continually falling prices - ever grip a modern economy.
There are now fears that exactly that might be about to happen. On Tuesday night the Fed slashed interest rates to nearly zero in a bid to breathe some life into the collapsing US economy. The Bank of England looks about to do the same thing here. But both central banks are worried that cutting rates to zero may not on its own stop the rot so they are considering radical next steps to pump money into the economy to get people and businesses spending again.
The plan is known as "quantitative easing" which in layman's language means increasing the quantity of money in the economy rather than lowering its price by cutting interest rates. At first instance this will involve buying up government bonds, known as gilts, from individuals and pension funds, for an attractive price. As bonds are a form of saving, if you swap them for cash people are more likely to spend it.
If that doesn't work the government could simply give cash handouts. Poor pensioners or working people would be the priority, as they can be relied on to spend it. You can even issue time-limited spending vouchers for shops. You don't, in reality, need helicopters to do that, but it's a nice image.

http://www.guardian.co.uk/business/2008/dec/18/useconomy-economics