22 ms·

In the USA, if Basic Income were to be implemented, where would the money come from? Currently the rate of monetary inflation is quite high- we've gone from $1

by MCRed 11y ago

In the USA, if Basic Income were to be implemented, where would the money come from? Currently the rate of monetary inflation is quite high- we've gone from $11T to $18T in the monetary system during the Obama administration. If we were to start printing even more money to pay people a basic income, this monetary inflation would cause prices to rise to wipe out the benefit of the program, most likely. In fact, the reason people are suffering now is the level of monetary inflation (Which has been high going back to the Reagan era, so it's the fault of both parties. This is not a partisan issue- it's an economics one. And the problem is that politicians get elected by promising stuff, but to produce the stuff, they can't raise taxes, so they do the equivalent by printing money.)

AngrySkillzz 11y ago
> the reason people are suffering now is the level of monetary inflation I don't think any respectable economist actually agrees with you on that. The increase in the monetary base during QE was paired with a collapse in the money multiplier. Most of that cash stayed in reserve at banks (see 'Repeat After Me: Banks Cannot And Do Not "Lend Out" Reserves'). Price inflation is nowhere in sight; inflation is below historic levels and even slightly below the Fed's inflation target. As for the original question, the general idea seems to be eliminating most other forms of government welfare programs (TANF, SNAP, social security, etc.) since basic income will replace them, along with redistributive increases in income/capital gains/wealth taxes.
- finance-geek 11y ago
  Depends on which inflation figure you count. When I think of inflation, I think of the largest costs first -- housing, which can easily be 30 to 50% of your earnings for most people. Check out the Housing Price Index -- does that look flat to you? http://us.spindices.com/indices/real-estate/sp-case-shiller-us-national-home-price-index http://us.spindices.com/indices/real-estate/sp-case-shiller-...
  - MarkMc 11y ago
    Well as house prices have shot up, interest rates have come down, so the cost of servicing a typical mortgage might be flat.
- pdonis 11y ago
  > Most of that cash stayed in reserve at banks (see 'Repeat After Me: Banks Cannot And Do Not "Lend Out" Reserves'). This is a very misleading use of terminology. It is true that banks can't lend out "reserves", if by "reserves" you mean the 3% reserve that banks in the "upper reserve tranche" at the Fed (which is basically any bank you've ever heard of) have to keep in their accounts at the Fed and not lend out. But the actual balances of those banks at the Fed are far in excess of that 3% reserve requirement; they are being kept in "reserve" by the banks not because the Fed requires them to but because the banks choose not to lend it out. Why would they do that? They aren't saying, at least not publicly, but the obvious hypothesis is that it's because their expected rate of return from lending it is lower than the rate of interest the Fed pays on their balances. In other words, they are worried about borrowers defaulting and driving the banks into insolvency and then bankruptcy, and the government refusing to bail them out because it wouldn't be politically acceptable this time around. So the reason inflation has been so low is that most of the several trillion dollars the Fed has printed in the last few years has never actually been put into circulation. (The doublespeak about "collapse of the money multiplier" is just a roundabout way of saying the same thing.) Which says nothing at all about what would happen if that amount of money were put into circulation, as it certainly would be if printed money was used to fund a basic income program instead of "quantitative easing".

by MCRed 11y ago

AngrySkillzz 11y ago

> the reason people are suffering now is the level of monetary inflation I don't think any respectable economist actually agrees with you on that. The increase in the monetary base during QE was paired with a collapse in the money multiplier. Most of that cash stayed in reserve at banks (see 'Repeat After Me: Banks Cannot And Do Not "Lend Out" Reserves'). Price inflation is nowhere in sight; inflation is below historic levels and even slightly below the Fed's inflation target. As for the original question, the general idea seems to be eliminating most other forms of government welfare programs (TANF, SNAP, social security, etc.) since basic income will replace them, along with redistributive increases in income/capital gains/wealth taxes.

finance-geek 11y ago
Depends on which inflation figure you count. When I think of inflation, I think of the largest costs first -- housing, which can easily be 30 to 50% of your earnings for most people. Check out the Housing Price Index -- does that look flat to you? http://us.spindices.com/indices/real-estate/sp-case-shiller-us-national-home-price-index http://us.spindices.com/indices/real-estate/sp-case-shiller-...
- MarkMc 11y ago
  Well as house prices have shot up, interest rates have come down, so the cost of servicing a typical mortgage might be flat.
pdonis 11y ago
> Most of that cash stayed in reserve at banks (see 'Repeat After Me: Banks Cannot And Do Not "Lend Out" Reserves'). This is a very misleading use of terminology. It is true that banks can't lend out "reserves", if by "reserves" you mean the 3% reserve that banks in the "upper reserve tranche" at the Fed (which is basically any bank you've ever heard of) have to keep in their accounts at the Fed and not lend out. But the actual balances of those banks at the Fed are far in excess of that 3% reserve requirement; they are being kept in "reserve" by the banks not because the Fed requires them to but because the banks choose not to lend it out. Why would they do that? They aren't saying, at least not publicly, but the obvious hypothesis is that it's because their expected rate of return from lending it is lower than the rate of interest the Fed pays on their balances. In other words, they are worried about borrowers defaulting and driving the banks into insolvency and then bankruptcy, and the government refusing to bail them out because it wouldn't be politically acceptable this time around. So the reason inflation has been so low is that most of the several trillion dollars the Fed has printed in the last few years has never actually been put into circulation. (The doublespeak about "collapse of the money multiplier" is just a roundabout way of saying the same thing.) Which says nothing at all about what would happen if that amount of money were put into circulation, as it certainly would be if printed money was used to fund a basic income program instead of "quantitative easing".