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Still don't understand how UBI is not inflationary? No real value is created since its not tied to any productive work. So supply of real good remains static,
by PKop 9y ago
Still don't understand how UBI is not inflationary?
No real value is created since its not tied to any productive work. So supply of real good remains static, and in a local market, won't there be sudden increased demand for housing, for example?
What will happen to apartment prices?
- nothrabannosir 9y agoIt's redistribution of wealth, not quantitative easing.
- toomuchtodo 9y agoThose are the same things, just different methods and targeting different economic cohorts. QE vastly inflated equity and real estate values, benefiting the wealthiest (at least in the US).
- scarmig 9y agoNo. One changes the money supply, one shifts money from one group to another.
- rukittenme 9y agoThey're not. QE devalues all dollars equally. Wealth redistribution targets high income people to the benefit of low or no income people.
- deleted 9y ago[deleted]
- splintercell 9y agoQE devalues all dollars equally, but then who receives that wealth? Do all people receive that wealthy equally? Do poor receive that wealth? Do rich people receive that wealth? Because that money is eventually spent by the govt, whomsoever receives that wealth gets the redistribution of wealth from everyone to them.
- bogomipz 9y agoCan you explain why you believe Quantitative Easing is a redistribution of wealth? QE is the creation of something new i.e money supply. A transfer of wealth is ex post facto(that wealth already exists somewhere.)
- PKop 9y agoIt could be described as a transfer of wealth from creditors to debtors. Or from savers to debtors, no? The wealth existed in the dollars saved, and the loan asset that was devalued and transferred to the debtor Why governments love doing it so much because they are the biggest borrowers, and corporations don't mind inflation because it's a cut to real wages.
- bogomipz 9y agoInteresting, I hadn't thought to view it as such before. I'm glad I asked. This makes sense as the rich hold assets and the poor hold debt. I found this article which is an interesting read on QE as a means of wealth transfer if anyone else is interested: https://dealbook.nytimes.com/2014/10/22/how-quantitative-easing-contributed-to-the-nations-inequality-problem/ https://dealbook.nytimes.com/2014/10/22/how-quantitative-eas...
- PKop 9y agoI'm saying that large businesses, governments, banks etc. are able to borrow in large quantities, at relative lower rates. Governments often borrow in astronomical numbers. Anyone who does this (think of taking on massive debt to finance a real estate business, building apartment complexes for example) has incentives to prefer inflation, QE, devaluing the currency. Over the course of lets say 30 years, they collect rents from tenants. They can increase the rents over time. Their payment on that debt will stay the same. So in "real" terms, the payments decrease over time, while the rent collected at least matches inflation. Do you see now how those with ability to borrow large amounts to finance.. whatever.. have incentives to prefer inflation. Think about the renter. Or the saver. Their dollars are going down in real value. The renter's monthly rent goes up. Wages? They are sticky. They stay flat for long periods, which in real terms implies a wage cut. "Inflation is taxation without legislation" - Milton Friedman “the arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislature. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her saving in a 5 percent passbook account whether she pays 100 percent income tax on her interest income during a period of zero inflation, or pays no income taxes during years of 5 percent inflation. Either way, she is 'taxed' in a manner that leave her no real income whatsoever. Any money she spends comes right out of capital. She would find outrageous a 120 percent income tax, but doesn't seem to notice that 5 percent inflation is the economic equivalent.” ― Warren Buffett
- PKop 9y agoCan you honestly say that, within some defined boundary, whether you think of it as geographic (some predominately low income community) or by product segment (local real estate markets for example), that the money supply hasn't increased after this policy? Are there not now more dollars chasing the same goods?
- maxerickson 9y agoI guess $15,000 at the bottom of the market would not tend to have huge localized effects on housing (I think people would be more inclined to move towards cheaper housing than to compete for scarce housing; the $15,000 eases pressure on moving to better paying jobs). For goods like food, the supply is pretty freaking elastic.
- PKop 9y agoThe bottom of the market is exactly where those depending on basic income reside. A "move towards cheaper housing" by others would be competing against basic income dependents within this market segment. This is what I meant by within some defined boundary. Here, its the lower end housing market.
- maxerickson 9y agoRight, but it wouldn't happen in a geographically constrained area and location is the factor that really drives crazy housing prices.
- ekianjo 9y agoIf everyone gets basic income, you can be sure that the rents will rise accordingly.
- mi100hael 9y agoThose concepts aren't really mutually exclusive in this case. What's it matter if the money is being conjured out of thin air by a central bank or being pulled from a billionaire who would otherwise park it somewhere? Either way it's going to create a whole lot of extra demand and cash being spent on goods & services, which will drive inflation.
- paddy88 9y agoNobody could understand how a PC would get on every desk either. And then it happened. Thanks to a bunch of young people unhampered by that thinking.
- PKop 9y agoWhat does this have to do with the specific criticism of the policy being inflationary? You could have said "Was it over when the Germans bombed Pearl Harbor?" and it would have had as much bearing on the discussion as undervaluing the growth of the PC market. Whether one is hopeful or young, or not... doesn't allow them to escape basic economic forces. Do you have an economic argument to inform the conversation?
- jtsylve 9y agoThe Japanese bombed Pearl Harbor, not the Germans. Am I missing something from your argument or is this just a silly mistake?
- PKop 9y agoIt was an unnecessarily snarky comment (not trying to be mean) just as a way to illustrate that I viewed OP's comment as a non-sequitur. http://bfy.tw/C1Mr http://bfy.tw/C1Mr
- jtsylve 9y agoBelieve it or not, I wasn't trying to be snarky. I honestly didn't know if I misunderstood your argument. It was possible that you were talking about using a flawed premise or something that I wasn't understanding. Sorry to offend.
- notahacker 9y agoYoung people who assumed that potential problems identified with their proposal couldn't possibly be actual problems also created Theranos...
- deleted 9y ago[deleted]
- scarmig 9y agoIt's not generally inflationary. Some goods will go up in prices, some will go down, depending on if they're essentials or luxury goods. Though supply of real goods also wouldn't remain static. To the extent that some people can't afford basic necessities, capital would shift to making those.
- mindslight 9y agoThe largest "basic necessity" is housing. In popular areas, its price is supported not by the cost of construction materials and labor, but by the interest on circular real estate valuations. The counter argument seems to be that people could stop working, move to economically unproductive areas (where rent doesn't rise to consume all surplus income), and effectively retire on UBI. To me, this sounds like the polar opposite of a distributed economy, further cementing the rich-poor divide. But centralizing puppetmasters don't consolidate power by advocating for fiscal responsibility.
- scarmig 9y agoThe dystopia you envision foisted on us by evil centralizing puppetmasters isn't realistic. For the most highly productive places, a UBI isn't going to result in fresh bidding wars that substantially impact prices. For one, it's simply way too small to have anything but a marginal effect. For two, any plausible funding mechanism for a UBI will substantially tax people and investments in those areas. You're more likely to see a drop in prices in SF and Manhattan than an increase. (Yes, that means a decline in the standard of living for most people commenting here.) A UBI would have a centrifugal effect, in that it would encourage many people to leave the most costly areas for cheaper areas. But, there would also be centripetal forces too, because of the microstructure of how labor mobility happens: many people are stuck where they live now in Bumblefuck because they lack any liquid capital and are stuck in an economic and social rut. The places that would see the real influx of people, and substantial inflation in real estate prices, are regions that are not top performers but also still economically productive. That has winners and losers, and it does mean that some of the UBI would be consumed by real estate inflation. But it's implausible that all of it, or even a majority of it, would be.
- clhodapp 9y agoPrices will go up! So you are right! The immediate effect would definitely be inflationary. Underneath that, though, UBI would be a slight equalizing force on actual purchasing power. Therefore, I guess even in that inflated economy, there would be a bit more demand for apartments. Longer-term, this would mean that more would be built, I'd think. I suspect that UBI is a very good idea, but also that its fans tend to ignore the second order effects and its critics tend to ignore its third-order effects, which are where I think the real benefits are.
- nebabyte 9y agoThere'd also be a lot more demand for minimal apartments/housing in which you can live in while you save... which, no joke, is exactly the kind of thing I'm looking for at the moment, without much success. ._.