In the 1970’s the sound of army helicopters over Belfast was part of the soundtrack of the troubles. A constant reminder of the tense state of alert across the city. There disappearance a silent herald of peace.

Another helicopter is about to take off and is set to be a much more welcome visitor. The Norther Ireland Executive’s Economy Minister, Elaine Dodds, has announced a £95m High Street Stimulus Scheme, part of a wider £213m Covid-19 support package for the province.

The £95m would be used to provide spending vouchers for the citizens of Northern Ireland to spend in local shops. The aim being to provide a stimulus to the economy at the start of the new year.

Seemingly, there have been previous experiments of this sort in Jersey and Malta and the idea is known as helicopter money. In essence the notion being in order to stimulate demand you simply fly over the country throwing out money which people then collect and spend. A less strenuous version of the suggestion by Keynes that you pay people to bury money and then pay them to dig it up again.

£95m is a lot of money. However, it pales into insignificance when compared to the £895bn spent on quantitative easing. Another version of helicopter money but one which is a) funded differently and b) distributed in a rather more discerning way.

If we first look at how it is funded. The £95m, which, for information is 0.01% of £895bn, is part of a package provided through the government, funded either via taxes or borrowing. The £895bn is funded by the Bank of England who fortunately do not have to borrow as they control the printing presses for pound notes.

In terms of distribution the £95m is set to be distributed in a very egalitarian manner to all citizens . There may be age restrictions but broadly people who live in Northern Ireland will benefit directly with cash in their hands to spend as they wish.

Of the £895bn, £875bn has been used to buy government bonds. In other words the debt of the Government. If the National Debt is £2trn, which is roughly right, then something like 45% of the debt is owed to the Bank of England.

The purpose of buying these bonds is via the demand it puts into the market it increases the value of the bonds and thus reduces the yield, or interest, on those bonds which has the effect of reducing the rate of interest in the economy as a whole. This in turn, according to the theory, increases confidence and promotes investment and thus growth. A good thing.

The remaining £20bn spent went on high grade non-financial, investment grade corporate bonds, e.g. BP debt or similar. Together these purchases of financial assets pumps money into the economy which the previous owners of the bonds use to buy other assets thus pushing up the value of financial assets generally. This makes people feel better off, thus increases confidence making people willing to buy more.Again this stimulates economic activity and growth. Another good thing.

There is one significant difference. The immediate beneficiaries of the cash into people’s pockets version of helicopter money is everyone. The beneficiaries of the quantitative easing version are predominantly the c10% of the population that have significant holdings of financial assets.

What would be really interesting to know is which mechanism generates the most benefit to society. The thing about the people that own significant amounts of financial assets is that they tend to be rich. and are likely therefore to save more than they spend. On the other hand the vast majority of the population are likely to save very little of the wind fall they receive thus pushing it into the economy increasing aggregate demand and thus growth.

Lets hope there are lots of researchers looking into how effective the 0.01% of helicopter money works as compared to the 99.99%!

This is an article I would really welcome feed back on what I have got wrong. It clearly has fascinating implications for the scale of debt the country now owes and to… whom?