4 ms·

I think this is an exceptionally stupid idea and I think part of basic income should be stipulation that it can't be used to get loans ie. make this illegal. B

I think this is an exceptionally stupid idea and I think part of basic income should be stipulation that it can't be used to get loans ie. make this illegal. Because first thing financial industry would use it against the poor, get them lump sum and eliminate benefits of basic income. I am sure this can be made in a way that wouldn't be limiting too much, yet prevent obvious abuses you are bringing.

desireco42 11y ago
To clarify, I am considering this idea not good, not reflective of OP.
drcode 11y ago
The problem of course is that BI's main benefit is to reduce regulatory burden, which is supposed to reduce bureaucratic overhead- now you're suggesting a new regulatory burden of policing issuing of predatory loans against BI holders.
- merpnderp 11y ago
  No regulatory burden necessary. Basic income not subject to credit defaults. Done and done.
Zigurd 11y ago
Protect it from attachments and it can't be used to secure loans.
jjxw 11y ago
In general, I agree, but there is a cost to such regulation in the sense that it would make banks more wary to lend to legitimate borrowers on the promise of future basic income payments. Making it illegal to seize basic income assets in the event of default creates a classic adverse selection problem where bad actors will have incentives to attempt to take a loan. That being said, the point of a basic income in the first place is to introduce financial stability to all households so any costs associated with preventing lending on basic income collateral may be societally optimal.
- icebraining 11y ago
  Adverse selection happens when the borrower knows more than the loaner, no? Why would that happen here? Banks and other credit institutions already force you to prove that you have assets and/or income; here they would do the exact same thing, just disregarding the BI.
  - jjxw 11y ago
    Ah, you are correct. The term I was actually looking for is moral hazard. The reason why banks require evidence of ability to repay the loan is because, without them, there would be a huge incentive for borrowers to take loans without paying them back. This is where the adverse selection comes in - the information asymmetry results from the borrowers knowing what their intent for the loan is and the incentive to mislead the lender. This leads to lenders being more wary (and implementing requirements) when issuing loans.
- desireco42 11y ago
  Maybe you didn't read it completely or I was not clear, I would just make it illegal to lend money expecting it to be paid by basic income. Anyone getting basic income should be completely free to spend it any way they want. That is essential.
  - dawnbreez 11y ago
    >Anyone getting basic income should be completely free to spend it any way they want. Such as to pay off a loan? Therein lies the problem: if you make it illegal to lend money explicitly based on BI, and the debtor pays with BI, who is liable? And if someone is liable, is the debtor truly free to spend BI as they wish? If nobody is liable, then what stops me from claiming that my BI is instead my paycheck, and then taking a loan based on it?
dawnbreez 11y ago
Part of the point of BI is that you can do what you want with it. Yes, the poor would be disadvantaged by this. The solution isn't to take away everyone's ability to take loans on BI; this would leave people unable to take loans on their BI once they've got a stable income. The answer is to educate, to explain that taking that lump sum leaves you unable to use BI later when you need it. At most, pass a regulation stating that loaners are liable if they don't make it clear that the loan is paid off with BI over the course of X years.

desireco42 11y ago

To clarify, I am considering this idea not good, not reflective of OP.

drcode 11y ago

The problem of course is that BI's main benefit is to reduce regulatory burden, which is supposed to reduce bureaucratic overhead- now you're suggesting a new regulatory burden of policing issuing of predatory loans against BI holders.

merpnderp 11y ago
No regulatory burden necessary. Basic income not subject to credit defaults. Done and done.

Zigurd 11y ago

Protect it from attachments and it can't be used to secure loans.

jjxw 11y ago

In general, I agree, but there is a cost to such regulation in the sense that it would make banks more wary to lend to legitimate borrowers on the promise of future basic income payments. Making it illegal to seize basic income assets in the event of default creates a classic adverse selection problem where bad actors will have incentives to attempt to take a loan. That being said, the point of a basic income in the first place is to introduce financial stability to all households so any costs associated with preventing lending on basic income collateral may be societally optimal.

icebraining 11y ago
Adverse selection happens when the borrower knows more than the loaner, no? Why would that happen here? Banks and other credit institutions already force you to prove that you have assets and/or income; here they would do the exact same thing, just disregarding the BI.
- jjxw 11y ago
  Ah, you are correct. The term I was actually looking for is moral hazard. The reason why banks require evidence of ability to repay the loan is because, without them, there would be a huge incentive for borrowers to take loans without paying them back. This is where the adverse selection comes in - the information asymmetry results from the borrowers knowing what their intent for the loan is and the incentive to mislead the lender. This leads to lenders being more wary (and implementing requirements) when issuing loans.
desireco42 11y ago
Maybe you didn't read it completely or I was not clear, I would just make it illegal to lend money expecting it to be paid by basic income. Anyone getting basic income should be completely free to spend it any way they want. That is essential.
- dawnbreez 11y ago
  >Anyone getting basic income should be completely free to spend it any way they want. Such as to pay off a loan? Therein lies the problem: if you make it illegal to lend money explicitly based on BI, and the debtor pays with BI, who is liable? And if someone is liable, is the debtor truly free to spend BI as they wish? If nobody is liable, then what stops me from claiming that my BI is instead my paycheck, and then taking a loan based on it?

dawnbreez 11y ago

Part of the point of BI is that you can do what you want with it. Yes, the poor would be disadvantaged by this. The solution isn't to take away everyone's ability to take loans on BI; this would leave people unable to take loans on their BI once they've got a stable income. The answer is to educate, to explain that taking that lump sum leaves you unable to use BI later when you need it. At most, pass a regulation stating that loaners are liable if they don't make it clear that the loan is paid off with BI over the course of X years.