Friday, 6 March 2009

The helicopter drop

Reading the financial papers these days is likely to confuse anyone. The latest cut in interests rates appears to have got us as close to zero as we can go. After all if no-one is receiving interest on savings then you may as well draw your money out and keep it in cash under the bed. At least in that way if the bank does go bust you already have your money out! Anyway there are some weird and wonderful rescue strategies being proposed. One of these is "The helicopter drop" first suggested by Milton Friedman.

How does this work, simple, print loads of money, pile it into a helicopter, fly over the UK and drop it out. Everyone gets richer as the money falls from the sky and of course they then go out and spend it in the high street. Unfortunately it does rather lead to inflation and could send sterling plunging.

It has never been properly tried, but in desperation it would pump up a deflated economy.

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