4 ms·

> It does not increase the amount of money in circulation. It does, in the sense that money circulates faster. This is known as the velocity of money, and incr

> It does not increase the amount of money in circulation. It does, in the sense that money circulates faster. This is known as the velocity of money, and increasing the velocity of money does cause inflation.

fulafel 8y ago
Well, it's just taking money out of circulation with taxes and paying it out again. It's not inherently speeding anything up - if anything, slowing it down, since it spends some time in the governments pockets. There can be a second order effect of having well off people kick out some money to taxes that would be otherwise going to investments. It might cause a temporary inflation bump in consumer prices and a corresponding deflation in investments/assets. But that's a much smaller effect than what the amount of income transfers is. And causing this kind of increase in rate of economic activity is normally not considered negative, indeed politicians normally try to make them happen. And anyway central banks regulate this with monetary policy. There is no feedback loop of inflation.
- chimeracoder 8y ago
  > Well, it's just taking money out of circulation with taxes and paying it out again. It's not inherently speeding anything up - if anything, slowing it down, since it spends some time in the governments pockets. This is completely wrong. The principle I'm referring to is a standard component of basic macroeconomics and is completely uncontroversial among economists. There's lots of literature about this effect if you'd like to learn more.
  - fulafel 8y ago
    Are you referring to "velocity of money"? Yes, it's a thing and economists agree it's a thing. But it does not follow that UBI causes runaway inflation - as we covered above. And there is certainly no consensus among economists about runaway inflation from UBI. (Unless you care to provide references..? I just did a search and came up emty) Do you think that UBI is qualitatively different from normal tax financed income transfers, from inflation POV, or do you think that just bigger income transfers cause runaway inflation?
    - mercutio2 8y ago
      I’m a proponent of UBI, so I suspect we’re on the same side of this argument. Still, it seems to me you’re arguing a straw man. You claimed, “It does not increase the amount of money in circulation”, and that was all chimeracoder was arguing with. You’re responding as if chimeracoder was arguing increasing the velocity of money will automatically cause runaway price inflation. That’s not what chimeracoder was arguing, though. As it happens, I think you’re both right, the relevant value for economic activity is the money supply times velocity of money, UBI would likely modestly increase velocity of money but not money supply, the increase in their product would likely cause a modest inflationary shock. That shock would probably be somewhat offset by dramatic increases in geographic mobility and changes in the distribution and supply of low wage labor for unpleasant jobs. Sensitivity to housing costs would change in unknown ways, with landlords reaping somewhere between modest and huge windfalls in low housing supply areas, and likely smaller windfalls in areas closer to supply/demand balance, which would tend to make areas with good housing supply more appealing.

fulafel 8y ago

Well, it's just taking money out of circulation with taxes and paying it out again. It's not inherently speeding anything up - if anything, slowing it down, since it spends some time in the governments pockets. There can be a second order effect of having well off people kick out some money to taxes that would be otherwise going to investments. It might cause a temporary inflation bump in consumer prices and a corresponding deflation in investments/assets. But that's a much smaller effect than what the amount of income transfers is. And causing this kind of increase in rate of economic activity is normally not considered negative, indeed politicians normally try to make them happen. And anyway central banks regulate this with monetary policy. There is no feedback loop of inflation.

chimeracoder 8y ago
> Well, it's just taking money out of circulation with taxes and paying it out again. It's not inherently speeding anything up - if anything, slowing it down, since it spends some time in the governments pockets. This is completely wrong. The principle I'm referring to is a standard component of basic macroeconomics and is completely uncontroversial among economists. There's lots of literature about this effect if you'd like to learn more.
- fulafel 8y ago
  Are you referring to "velocity of money"? Yes, it's a thing and economists agree it's a thing. But it does not follow that UBI causes runaway inflation - as we covered above. And there is certainly no consensus among economists about runaway inflation from UBI. (Unless you care to provide references..? I just did a search and came up emty) Do you think that UBI is qualitatively different from normal tax financed income transfers, from inflation POV, or do you think that just bigger income transfers cause runaway inflation?
  - mercutio2 8y ago
    I’m a proponent of UBI, so I suspect we’re on the same side of this argument. Still, it seems to me you’re arguing a straw man. You claimed, “It does not increase the amount of money in circulation”, and that was all chimeracoder was arguing with. You’re responding as if chimeracoder was arguing increasing the velocity of money will automatically cause runaway price inflation. That’s not what chimeracoder was arguing, though. As it happens, I think you’re both right, the relevant value for economic activity is the money supply times velocity of money, UBI would likely modestly increase velocity of money but not money supply, the increase in their product would likely cause a modest inflationary shock. That shock would probably be somewhat offset by dramatic increases in geographic mobility and changes in the distribution and supply of low wage labor for unpleasant jobs. Sensitivity to housing costs would change in unknown ways, with landlords reaping somewhere between modest and huge windfalls in low housing supply areas, and likely smaller windfalls in areas closer to supply/demand balance, which would tend to make areas with good housing supply more appealing.