4 ms·

Very interesting comments. I've been thinking a lot about UBI and the one thing I still can't work out is if we are going to just have to print tons of money to

Very interesting comments. I've been thinking a lot about UBI and the one thing I still can't work out is if we are going to just have to print tons of money to be able to make it actually universal (meaning not for people < $50K). Some will still be creating real value for their income so how much is that money devalued by the amount that is given for free via UBI? Will this just cause massive inflation? (I guess I should take some economic theory classes somewhere..)

skywhopper 9y ago
Consider that in many western economies, inflation has been perilously low for a decade or more. Japan, Europe, and the US all have extremely low inflation today. This leads to some problems we don't usually hear economists worry about--namely that debt-financed personal investments like a home mortgage or a student loan become much more onerous to people who have taken on that debt in the last 20 years. Since such debts tend to have fixed payments over fixed periods, a reasonable rate of inflation would ensure that the real cost of paying off those debts goes down over time, and even if everything else gets more expensive, you still end up with more discretionary income over time, even if your real wages never go up compared to inflation. But with 1% or lower inflation, those debts become a decades-long constant drag on an individual's discretionary income, which may never grow. For real assets, such as homes, inflation also ensures that homeowners actually accrue equity over time, in addition to shrinking debt payments. All of that is to say, we could do with a couple of decades of 3-4% inflation. Implementing UBI very likely would trigger some inflation, but if there's one thing central banks know how to do and have the power to do, it's clamping down on inflation. Other economists have proposed less direct methods of giving money, from burying caches of cash (to create employment and stimulate investment), to dropping money from helicopters. Sure, those examples were tongue-in-cheek, but you can kill two birds with one stone by using government money to invest in rebuilding infrastructure, building high speed rail, curing cancer and diabetes, paying for more and better public education from pre-K through college. That money pays off in multiple ways: more people have jobs, you stimulate moderate inflation and wage growth, and in the end you have all new infrastructure, new treatments for disease, and a better educated population. Better still, all that money will get spent by all these people with more money and better jobs on buying better housing, newer cars, better food, more luxuries, and that money can make our corporations more profitable and faster-growing... Yet I fear we are all headed the other direction on these things.
- Dunan 9y ago
  It sounds from your post like you have borrowed money to buy something (a home, perhaps) and are hoping that inflation will make it easier to pay back that debt. Your arguments work exactly in reverse for someone who is saving money for future large purchases and for whom inflation would be a disaster. Without inflation, the working class is able to accumulate savings and better their lives. They don't need to put their money at risk in the markets or negotiate raises at work just to keep from falling behind. Better still, all that money will get spent by all these people with more money and better jobs on buying better housing, newer cars, better food, more luxuries, and that money can make our corporations more profitable and faster-growing... Maybe, maybe not, but all of these things can definitely be had by having a strong, stable currency that does not lose value. The "go into debt and then have inflation devalue your debt" system creates a divide between people who are eligible to go into such debts, and people who are unable to and thus see their savings eroded by inflation. It would be much better to have stable consumer prices and to keep debt manageable by maintaining low interest rates.
  - skywhopper 9y ago
    My argument has nothing to do with my personal financial situation. You say the working class can accumulate savings with low inflation, but savings interest rates are basically zero. And the actual data shows people accumulating more debt, and savings are going down. Too much inflation is bad, but so is too little inflation. We've now had 10 years of far too little inflation.
    - Dunan 9y ago
      ”You say the working class can accumulate savings with low inflation, but savings interest rates are basically zero." Yes; their savings maintains its value even if it does not earn interest. Inflation would destroy the value of what they have saved. Perhaps people are not saving as much as they would like because they know that inflation will ruin them, so they spend their money earlier than would be prudent. We have had significant inflation in the past 10 years; the prices of just about everything at the supermarket have soared upward. That we can buy technology like computers and phones cheaper does not make up for this.
gumby 9y ago
Don't forget that the marginal cost of goods should decline, and even plummet. In the long term with robotic farmers, robotic harvest, robotic transport and robotic production the production cost of a shirt will be pennies and there is no reason why the purchase price should be much above the interest stream on the purchases on the robots. This is a big reason why the productivity numbers aren't as poor as they appear: the number of labor hours required to purchase a shirt or a TV has fallen. You can see that in the massive inflation numbers on labor-intensive industries that haven't been automatable (cf the late Baumol). But when you average them together it looks like productivity hasn't grown as it is denominated in hrs/$

skywhopper 9y ago

Consider that in many western economies, inflation has been perilously low for a decade or more. Japan, Europe, and the US all have extremely low inflation today. This leads to some problems we don't usually hear economists worry about--namely that debt-financed personal investments like a home mortgage or a student loan become much more onerous to people who have taken on that debt in the last 20 years. Since such debts tend to have fixed payments over fixed periods, a reasonable rate of inflation would ensure that the real cost of paying off those debts goes down over time, and even if everything else gets more expensive, you still end up with more discretionary income over time, even if your real wages never go up compared to inflation. But with 1% or lower inflation, those debts become a decades-long constant drag on an individual's discretionary income, which may never grow. For real assets, such as homes, inflation also ensures that homeowners actually accrue equity over time, in addition to shrinking debt payments. All of that is to say, we could do with a couple of decades of 3-4% inflation. Implementing UBI very likely would trigger some inflation, but if there's one thing central banks know how to do and have the power to do, it's clamping down on inflation. Other economists have proposed less direct methods of giving money, from burying caches of cash (to create employment and stimulate investment), to dropping money from helicopters. Sure, those examples were tongue-in-cheek, but you can kill two birds with one stone by using government money to invest in rebuilding infrastructure, building high speed rail, curing cancer and diabetes, paying for more and better public education from pre-K through college. That money pays off in multiple ways: more people have jobs, you stimulate moderate inflation and wage growth, and in the end you have all new infrastructure, new treatments for disease, and a better educated population. Better still, all that money will get spent by all these people with more money and better jobs on buying better housing, newer cars, better food, more luxuries, and that money can make our corporations more profitable and faster-growing... Yet I fear we are all headed the other direction on these things.

Dunan 9y ago
It sounds from your post like you have borrowed money to buy something (a home, perhaps) and are hoping that inflation will make it easier to pay back that debt. Your arguments work exactly in reverse for someone who is saving money for future large purchases and for whom inflation would be a disaster. Without inflation, the working class is able to accumulate savings and better their lives. They don't need to put their money at risk in the markets or negotiate raises at work just to keep from falling behind. Better still, all that money will get spent by all these people with more money and better jobs on buying better housing, newer cars, better food, more luxuries, and that money can make our corporations more profitable and faster-growing... Maybe, maybe not, but all of these things can definitely be had by having a strong, stable currency that does not lose value. The "go into debt and then have inflation devalue your debt" system creates a divide between people who are eligible to go into such debts, and people who are unable to and thus see their savings eroded by inflation. It would be much better to have stable consumer prices and to keep debt manageable by maintaining low interest rates.
- skywhopper 9y ago
  My argument has nothing to do with my personal financial situation. You say the working class can accumulate savings with low inflation, but savings interest rates are basically zero. And the actual data shows people accumulating more debt, and savings are going down. Too much inflation is bad, but so is too little inflation. We've now had 10 years of far too little inflation.
  - Dunan 9y ago
    ”You say the working class can accumulate savings with low inflation, but savings interest rates are basically zero." Yes; their savings maintains its value even if it does not earn interest. Inflation would destroy the value of what they have saved. Perhaps people are not saving as much as they would like because they know that inflation will ruin them, so they spend their money earlier than would be prudent. We have had significant inflation in the past 10 years; the prices of just about everything at the supermarket have soared upward. That we can buy technology like computers and phones cheaper does not make up for this.

gumby 9y ago

Don't forget that the marginal cost of goods should decline, and even plummet. In the long term with robotic farmers, robotic harvest, robotic transport and robotic production the production cost of a shirt will be pennies and there is no reason why the purchase price should be much above the interest stream on the purchases on the robots. This is a big reason why the productivity numbers aren't as poor as they appear: the number of labor hours required to purchase a shirt or a TV has fallen. You can see that in the massive inflation numbers on labor-intensive industries that haven't been automatable (cf the late Baumol). But when you average them together it looks like productivity hasn't grown as it is denominated in hrs/$