4 ms·

Even if I like the idea of UBI idealistically, I am worried about potential inflation. Once there is more money in the system (that before the UBI just wasnt t

by stiray 6y ago

Even if I like the idea of UBI idealistically, I am worried about potential inflation. Once there is more money in the system (that before the UBI just wasnt there) the prices of basic things might rise and at the end the money you get from UBI will be a "new zero". I am not saying that this will happen but I think this is serious concern.

nicoburns 6y ago
UBI doesn't actually create money. It redistributes it. I would expect the effect you describe in the short-term, but in the longer term supply of basic goods should increase to match increased demand.
- stiray 6y ago
  > in the longer term supply of basic goods should increase to match increased demand Why? What would be the reasoning?
phantom0308 6y ago
The entire world is stuck in a liquidity trap and we have negative real interest rates. No advanced economy has had north of the 2% target for a meaningful amount of time prior to the pandemic. Inflation is something to watch out for. IMO, deflation is the bigger concern. Source: former deficit hawk convinced hyper-inflation was just around the corner for half a decade.
- imtringued 6y ago
  I'm the opposite. I've thought about deflation for half a decade. Interestingly the conclusion is always the same but with a different coat of paint. The central bank stimulus doesn't reach the real economy and by "real economy" I mean the parts of the economy that are being used to measure inflation. Inflation happens when lots of money chases too few goods or workers. We see it in housing, stocks, perhaps also education and healthcare. The money does go somewhere but not to where it is most effective. Why is there no inflation in salaries? Because of underemployment. Companies can always fill their open positions and pick among the cheapest applicants. Why is there no inflation in other consumer goods? Production is happening primarily in developing countries with an even larger surplus of labor. The answer is probably a little boring and obvious. Give money to people that will spend it immediately, rather than to people who will try to convert it into inflation proof assets. The coronavirus related economic stimulus packages are pretty much the only policies that even attempt to do this. If they overdo it can easily result in hyperinflation but I think inflation is overdue.

by stiray 6y ago

nicoburns 6y ago

UBI doesn't actually create money. It redistributes it. I would expect the effect you describe in the short-term, but in the longer term supply of basic goods should increase to match increased demand.

stiray 6y ago
> in the longer term supply of basic goods should increase to match increased demand Why? What would be the reasoning?

phantom0308 6y ago

The entire world is stuck in a liquidity trap and we have negative real interest rates. No advanced economy has had north of the 2% target for a meaningful amount of time prior to the pandemic. Inflation is something to watch out for. IMO, deflation is the bigger concern. Source: former deficit hawk convinced hyper-inflation was just around the corner for half a decade.

imtringued 6y ago
I'm the opposite. I've thought about deflation for half a decade. Interestingly the conclusion is always the same but with a different coat of paint. The central bank stimulus doesn't reach the real economy and by "real economy" I mean the parts of the economy that are being used to measure inflation. Inflation happens when lots of money chases too few goods or workers. We see it in housing, stocks, perhaps also education and healthcare. The money does go somewhere but not to where it is most effective. Why is there no inflation in salaries? Because of underemployment. Companies can always fill their open positions and pick among the cheapest applicants. Why is there no inflation in other consumer goods? Production is happening primarily in developing countries with an even larger surplus of labor. The answer is probably a little boring and obvious. Give money to people that will spend it immediately, rather than to people who will try to convert it into inflation proof assets. The coronavirus related economic stimulus packages are pretty much the only policies that even attempt to do this. If they overdo it can easily result in hyperinflation but I think inflation is overdue.