5 ms·

Where does your 30k come from? Do we decrease spending from other areas, increase taxes, increase debt, increase GDP, or print money? The answer is usually dec

by lujim 11y ago

Where does your 30k come from? Do we decrease spending from other areas, increase taxes, increase debt, increase GDP, or print money? The answer is usually decrease defense spending, but that's not a free lunch either. You kill a lot of middle class jobs and consumer spending noticeably drops in some regions. The same spending that supports something like 2/3 of the GDP. Basic income is a zero sum game, it redistributes without creating productivity. Now if you gave everyone that wants to attempt to start a small business 30k to survive the first 3-5 years now your talking about something that could drive GDP.

littletimmy 11y ago
Overt money financing, i.e. printing money is a good option. Especially at this point in time, when we are struggling with low aggregate demand and asset bubbles, printing money to give to the poorest makes most sense. It shores up consumer spending without contributing to asset bubbles, unlike pumping money into banks. You are absolutely wrong in that it does not create productivity. When the underclass has the ability to take risk, it enables them to take part in all that which makes capitalism great. The loss in innovation at the top is more than made up for an increase in innovation at the bottom.
- lujim 11y ago
  Printing money and putting in into circulation has historically caused hyperinflation. Money is just a proxy for goods and services and without a gold standard it's nothing more than paper. Germans were burning and wallpapering with Marks in 1922 and 1923 because of the printing of money. I don't doubt that some people in the underclass would have an opportunity to take some risks that they wouldn't have otherwise, but many may also drop out of the workforce happy with 30k per year. My opinion is that there would be runaway inflation if you ended up with a situation where people had the option to drop out of the workforce funded by printed paper money.
  - littletimmy 11y ago
    Monetarists were fanning the fear of inflation at the start of quantitative easing 7 years ago. What inflation has happened since? The fact of the matter is that (1) the inflation fears are far overstated. We are already injecting money into the economy, but we haven't seen inflation. All overt money financing would do is inject money through the people, instead of through banks. (2) A little inflation is good for the economy; that's exactly what we need to ward off a recession (3) The US can export inflation to other countries by virtue of being the reserve currency of the world. | These three points together should address your fear of hyperinflation. I suggest you read Friedman and Keynes, both of whom suggested overt money financing as a mechanism to boost the economy. Your point about the poor dropping out of the work force is based in class bias. Would you say that quantitative easing with banks blowing up asset bubbles would have the rich people dropping out of the work force? No one says that. The poor are not intrinsically different than the rich; the rich continue working when they have basic necessities met, and so will the poor.
    - lujim 11y ago
      There is no inflation because QE money is used to keep up the demand for US Treasuries which keeps long term interest rates low. It jacked up asset prices because baby boomers can't get risk free yield by buying bonds so they are buying stocks. It's non just 1% baby boomers, it's all baby boomers. Had QE 1 through 4 been dumped directly into circulation there would have been large scale inflation. I don't know anyone that would dispute that. A little inflation (about 2%) is good because it means demand is outpacing supply. That means the economy is growing. That is different that inflation caused by the raw printing of money which is destructive. In WW2 Germany had considered the possibility of printing counterfeit British pounds and dropping them on Britain to destroy the currency and economy.
  - ZenoArrow 11y ago
    > "Printing money and putting in into circulation has historically caused hyperinflation. Money is just a proxy for goods and services and without a gold standard it's nothing more than paper. Germans were burning and wallpapering with Marks in 1922 and 1923 because of the printing of money." Hyperinflation in Germany was caused by a mix of high economic penalties post WW1 and reckless actions by private banks and investors. It's a common misconception that the hyperinflation was the fault of the government printing too much money, but that doesn't get at the underlying causes. Would recommend taking a look through this, though you don't need to read to the end, as the article also covers the actions taken after hyperinflation started. http://www.wintersonnenwende.com/scriptorium/english/archives/articles/hyperinflation-e.html http://www.wintersonnenwende.com/scriptorium/english/archive... > "My opinion is that there would be runaway inflation if you ended up with a situation where people had the option to drop out of the workforce funded by printed paper money." You get around this by having debt-free money, which removes one of the key demands on money, the demand that it should be directed towards economic growth.
jaimeyap 11y ago
Basic income is absolutely not zero sum! The people who would benefit from it the most would have the freedom to invest their time and money raising their children, bettering themselves, or taking risks and starting businesses. Also, money repeatedly changing hands itself generates tax revenue, as well as personal wealth. Again, not zero sum. Giving these people purchasing power can also spur innovation from businesses who would offer them services that otherwise wouldn't be easily monetizeable. As more jobs get replaced with automation, basic income will become increasingly attractive.
- lujim 11y ago
  I think raising your children and bettering yourself is a great thing, but it doesn't tangibly generate revenue. Starting a business might if it's successful, but there are small business loans. Money changing hands (money velocity) is one of the ingredients to inflation along with high demand for goods and services. Detaching the expectation of some level of productivity from income is a recipe for big inflation
  - jaimeyap 11y ago
    The inflation argument is a little misleading. We have been printing money to offset historically low and increasingly declining money velocity. The money velocity is declining precisely because wealth is being aggregated in silos and not being spent. Money velocity is essential to a healthy economy. And quite frankly, we could do with a little inflation to encourage spending and not hoarding by the uber wealthy. Thinking that properly raising children and investing in bettering oneself doesn't tangibly generate revenue is a bit short sighted. In 15 years when machines are cheaper and better at driving, manufacturing, and doing most unskilled labor (or even some knowledge worker type jobs). Would it have been a bad economic investment to have all the kids growing up today have parents with the financial freedom to go back to school or focus on giving their kids a proper childhood (so they can grow up and be productive citizens)? Do you genuinely think that we are better off as a society sticking to "you have to work to live" when the machines are outperforming an entire class of people at their jobs? Not everyone can or wants to be an engineer. At some point our populations will stabilize, and technology will make it so that we have enough food and basic essentials for everyone. We are all in it together.
ZenoArrow 11y ago
> "it redistributes without creating productivity" I take it you're in favour of financial market reforms too then?
- lujim 11y ago
  Elaborate por favor.
  - ZenoArrow 11y ago
    Okay, let's set the scene. Let's start here: http://www.economicsinpictures.com/2011/09/size-of-financial-markets.html http://www.economicsinpictures.com/2011/09/size-of-financial... The image on that page is striking, but this is the key sentence: "Shares and bonds are about the same value of world GDP, but derivatives trading and foreign currency transactions are ten and fifteen times bigger than world gdp.". Derivatives are a broad field, but can be summarised as bets based on whether the value of something rises or falls (similar statements can be made about foreign currency markets). This money being made on derivative markets only changes the wealth of those making the trades, so unless a productive company is making the trades they are purely unproductive. In effect, it's gambling. In addition, money only 'performs work' at the point of exchange, which is why it's important to measure transactions rather than available currency. The vast majority of money movement exists outside the productive economy. Even without touching the productive economy directly, these trades can have adverse effects on the productive economy (destabilisation being the most obvious example, e.g. financial crisis of 2007-08). Any questions at this point?
    - lujim 11y ago
      The "any questions at this point" comment seems a bit snippy and unnecessary, I was just trying to figure out what you were talking about... but no biggy here goes. So financial derivatives? Futures, options, shorting etc? Derivatives can play a very important role in the financial system. They can also be abused. Futures allow farmers (or airlines, or anyone else dependent on commodity prices) to hedge the chances of a bad harvest (or increased fuel prices) by locking in rates early. It's a form of insurance. Options, (let's go with calls and puts) were initially seen as purely speculative, but combined with an actual position in the underlying security allow someone to make investments while minimizing their overall risk. Again they act as insurance by people who know how to use them. Morons can make naked calls or puts but the generally lose their shirt. Shorting stocks plays a very important role in the financial world. Investors that short a company are one of the few entities that have a genuine interest in uncovering the dirt in a company. Regulators, share holders, etc may want to believe that a company like Enron is really doing well, but short sellers have a burning interest in combing through every line of their financial statement. While CMO's got a bad name in 2008 they are still used today as a relatively high yield alternative to US Treasuries and other fixed income investments since the Fed has decided to keep interest rates near zero for the last 6 years. CDO's also got a bad rap in 2008, but when used correctly they allow the transfer of risk from one party to another. Kind of like a cosigner on a loan. (gross over simplification, but good enough). If you're AIG and you don't actually have the money to backup all the CDO's your writing, then trouble can ensue. Interest Rate swaps are probably what jacked up your dollar number in that article. They are the vast majority of derivative investments, but they allow companies with variable rate loans to hedge agains the risk of a rate hike, by swapping with a company that has higher, but fixed rate obligations. Those can be a very big win for both parties. Financial derivatives get a bad rap because they sound scary and most people don't know what they are. They do however play a massively important role in managing risk.
crucialfelix 11y ago
> Do we decrease spending from other areas, increase taxes, increase debt, increase GDP, or print money? We are doing these already, and we are spending public money already. The idea behind basic income is just adjusting where to input public money. Instead of watering the flowers (trickle down economics) you water the roots. If people have some way to survive then they won't turn to crime and they will be able to buy goods. So this expenditure goes right back into the economy.
- lujim 11y ago
  I agree with you, demand for goods would skyrocket. So much so that so would prices. All of the sudden that 30k basic income would have the buying power of 20k, then 15k etc. There have always been and always will be crap jobs that people would rather not do. If I'm making 18k working a crap job (been there) and I get a 30k basic income, why would I not quit the next day? Now I'm not producing any good or service, but I can demand 12k more in goods or services from the market.
  - crucialfelix 11y ago
    > If I'm making 18k working a crap job (been there) and I get a 30k basic income, why would I not quit the next day? Because if you keep the crap job then you make 48k and if you quit then you only make 30k. You are confusing welfare with basic income. In any case Basic Income would not be at 30k, much lower. More likely $11k as that is the poverty line. The point is to prevent poverty which results in a much higher end cost to society.
    - lujim 11y ago
      Would I really make 48k? Wouldn't a large part of that be needed to support the basic income system? Doesn't the current welfare system address some of these problems?

by lujim 11y ago

littletimmy 11y ago

Overt money financing, i.e. printing money is a good option. Especially at this point in time, when we are struggling with low aggregate demand and asset bubbles, printing money to give to the poorest makes most sense. It shores up consumer spending without contributing to asset bubbles, unlike pumping money into banks. You are absolutely wrong in that it does not create productivity. When the underclass has the ability to take risk, it enables them to take part in all that which makes capitalism great. The loss in innovation at the top is more than made up for an increase in innovation at the bottom.

lujim 11y ago
Printing money and putting in into circulation has historically caused hyperinflation. Money is just a proxy for goods and services and without a gold standard it's nothing more than paper. Germans were burning and wallpapering with Marks in 1922 and 1923 because of the printing of money. I don't doubt that some people in the underclass would have an opportunity to take some risks that they wouldn't have otherwise, but many may also drop out of the workforce happy with 30k per year. My opinion is that there would be runaway inflation if you ended up with a situation where people had the option to drop out of the workforce funded by printed paper money.
- littletimmy 11y ago
  Monetarists were fanning the fear of inflation at the start of quantitative easing 7 years ago. What inflation has happened since? The fact of the matter is that (1) the inflation fears are far overstated. We are already injecting money into the economy, but we haven't seen inflation. All overt money financing would do is inject money through the people, instead of through banks. (2) A little inflation is good for the economy; that's exactly what we need to ward off a recession (3) The US can export inflation to other countries by virtue of being the reserve currency of the world. | These three points together should address your fear of hyperinflation. I suggest you read Friedman and Keynes, both of whom suggested overt money financing as a mechanism to boost the economy. Your point about the poor dropping out of the work force is based in class bias. Would you say that quantitative easing with banks blowing up asset bubbles would have the rich people dropping out of the work force? No one says that. The poor are not intrinsically different than the rich; the rich continue working when they have basic necessities met, and so will the poor.
  - lujim 11y ago
    There is no inflation because QE money is used to keep up the demand for US Treasuries which keeps long term interest rates low. It jacked up asset prices because baby boomers can't get risk free yield by buying bonds so they are buying stocks. It's non just 1% baby boomers, it's all baby boomers. Had QE 1 through 4 been dumped directly into circulation there would have been large scale inflation. I don't know anyone that would dispute that. A little inflation (about 2%) is good because it means demand is outpacing supply. That means the economy is growing. That is different that inflation caused by the raw printing of money which is destructive. In WW2 Germany had considered the possibility of printing counterfeit British pounds and dropping them on Britain to destroy the currency and economy.
- ZenoArrow 11y ago
  > "Printing money and putting in into circulation has historically caused hyperinflation. Money is just a proxy for goods and services and without a gold standard it's nothing more than paper. Germans were burning and wallpapering with Marks in 1922 and 1923 because of the printing of money." Hyperinflation in Germany was caused by a mix of high economic penalties post WW1 and reckless actions by private banks and investors. It's a common misconception that the hyperinflation was the fault of the government printing too much money, but that doesn't get at the underlying causes. Would recommend taking a look through this, though you don't need to read to the end, as the article also covers the actions taken after hyperinflation started. http://www.wintersonnenwende.com/scriptorium/english/archives/articles/hyperinflation-e.html http://www.wintersonnenwende.com/scriptorium/english/archive... > "My opinion is that there would be runaway inflation if you ended up with a situation where people had the option to drop out of the workforce funded by printed paper money." You get around this by having debt-free money, which removes one of the key demands on money, the demand that it should be directed towards economic growth.

jaimeyap 11y ago

Basic income is absolutely not zero sum! The people who would benefit from it the most would have the freedom to invest their time and money raising their children, bettering themselves, or taking risks and starting businesses. Also, money repeatedly changing hands itself generates tax revenue, as well as personal wealth. Again, not zero sum. Giving these people purchasing power can also spur innovation from businesses who would offer them services that otherwise wouldn't be easily monetizeable. As more jobs get replaced with automation, basic income will become increasingly attractive.

lujim 11y ago
I think raising your children and bettering yourself is a great thing, but it doesn't tangibly generate revenue. Starting a business might if it's successful, but there are small business loans. Money changing hands (money velocity) is one of the ingredients to inflation along with high demand for goods and services. Detaching the expectation of some level of productivity from income is a recipe for big inflation
- jaimeyap 11y ago
  The inflation argument is a little misleading. We have been printing money to offset historically low and increasingly declining money velocity. The money velocity is declining precisely because wealth is being aggregated in silos and not being spent. Money velocity is essential to a healthy economy. And quite frankly, we could do with a little inflation to encourage spending and not hoarding by the uber wealthy. Thinking that properly raising children and investing in bettering oneself doesn't tangibly generate revenue is a bit short sighted. In 15 years when machines are cheaper and better at driving, manufacturing, and doing most unskilled labor (or even some knowledge worker type jobs). Would it have been a bad economic investment to have all the kids growing up today have parents with the financial freedom to go back to school or focus on giving their kids a proper childhood (so they can grow up and be productive citizens)? Do you genuinely think that we are better off as a society sticking to "you have to work to live" when the machines are outperforming an entire class of people at their jobs? Not everyone can or wants to be an engineer. At some point our populations will stabilize, and technology will make it so that we have enough food and basic essentials for everyone. We are all in it together.

ZenoArrow 11y ago

> "it redistributes without creating productivity" I take it you're in favour of financial market reforms too then?

lujim 11y ago
Elaborate por favor.
- ZenoArrow 11y ago
  Okay, let's set the scene. Let's start here: http://www.economicsinpictures.com/2011/09/size-of-financial-markets.html http://www.economicsinpictures.com/2011/09/size-of-financial... The image on that page is striking, but this is the key sentence: "Shares and bonds are about the same value of world GDP, but derivatives trading and foreign currency transactions are ten and fifteen times bigger than world gdp.". Derivatives are a broad field, but can be summarised as bets based on whether the value of something rises or falls (similar statements can be made about foreign currency markets). This money being made on derivative markets only changes the wealth of those making the trades, so unless a productive company is making the trades they are purely unproductive. In effect, it's gambling. In addition, money only 'performs work' at the point of exchange, which is why it's important to measure transactions rather than available currency. The vast majority of money movement exists outside the productive economy. Even without touching the productive economy directly, these trades can have adverse effects on the productive economy (destabilisation being the most obvious example, e.g. financial crisis of 2007-08). Any questions at this point?
  - lujim 11y ago
    The "any questions at this point" comment seems a bit snippy and unnecessary, I was just trying to figure out what you were talking about... but no biggy here goes. So financial derivatives? Futures, options, shorting etc? Derivatives can play a very important role in the financial system. They can also be abused. Futures allow farmers (or airlines, or anyone else dependent on commodity prices) to hedge the chances of a bad harvest (or increased fuel prices) by locking in rates early. It's a form of insurance. Options, (let's go with calls and puts) were initially seen as purely speculative, but combined with an actual position in the underlying security allow someone to make investments while minimizing their overall risk. Again they act as insurance by people who know how to use them. Morons can make naked calls or puts but the generally lose their shirt. Shorting stocks plays a very important role in the financial world. Investors that short a company are one of the few entities that have a genuine interest in uncovering the dirt in a company. Regulators, share holders, etc may want to believe that a company like Enron is really doing well, but short sellers have a burning interest in combing through every line of their financial statement. While CMO's got a bad name in 2008 they are still used today as a relatively high yield alternative to US Treasuries and other fixed income investments since the Fed has decided to keep interest rates near zero for the last 6 years. CDO's also got a bad rap in 2008, but when used correctly they allow the transfer of risk from one party to another. Kind of like a cosigner on a loan. (gross over simplification, but good enough). If you're AIG and you don't actually have the money to backup all the CDO's your writing, then trouble can ensue. Interest Rate swaps are probably what jacked up your dollar number in that article. They are the vast majority of derivative investments, but they allow companies with variable rate loans to hedge agains the risk of a rate hike, by swapping with a company that has higher, but fixed rate obligations. Those can be a very big win for both parties. Financial derivatives get a bad rap because they sound scary and most people don't know what they are. They do however play a massively important role in managing risk.

crucialfelix 11y ago

> Do we decrease spending from other areas, increase taxes, increase debt, increase GDP, or print money? We are doing these already, and we are spending public money already. The idea behind basic income is just adjusting where to input public money. Instead of watering the flowers (trickle down economics) you water the roots. If people have some way to survive then they won't turn to crime and they will be able to buy goods. So this expenditure goes right back into the economy.

lujim 11y ago
I agree with you, demand for goods would skyrocket. So much so that so would prices. All of the sudden that 30k basic income would have the buying power of 20k, then 15k etc. There have always been and always will be crap jobs that people would rather not do. If I'm making 18k working a crap job (been there) and I get a 30k basic income, why would I not quit the next day? Now I'm not producing any good or service, but I can demand 12k more in goods or services from the market.
- crucialfelix 11y ago
  > If I'm making 18k working a crap job (been there) and I get a 30k basic income, why would I not quit the next day? Because if you keep the crap job then you make 48k and if you quit then you only make 30k. You are confusing welfare with basic income. In any case Basic Income would not be at 30k, much lower. More likely $11k as that is the poverty line. The point is to prevent poverty which results in a much higher end cost to society.
  - lujim 11y ago
    Would I really make 48k? Wouldn't a large part of that be needed to support the basic income system? Doesn't the current welfare system address some of these problems?