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Inflation disproportionately affects people who have most of their net worth in cash, aka people living paycheck to paycheck (or UBI payment to UBI payment), no

by Zanfa 5y ago

Inflation disproportionately affects people who have most of their net worth in cash, aka people living paycheck to paycheck (or UBI payment to UBI payment), not the people with the most money. The problem I see is it doesn't make sense to save in cash, because you don't need to, due to UBI payments in perpetuity as well as inflation eating through any cash savings. So your options are either to invest in assets, thus driving up asset prices across the board, which primarily benefits the owners of such assets (aka the rich). Or you could go and spend the grant on accommodation or other expenses, thus driving the demand there and as we've seen this year especially, the supply isn't infinite and will result in higher prices. Now UBI payments must also be indexed to inflation, otherwise it won't be of much use for very long, so you'll create this infinite loop of increasing UBI, resulting in higher asset prices, cost of living and thus inflation, requiring a further increase in UBI, triggering another round of asset prices and inflation and so on. In the end, the rich are as rich as ever and the poor will still be poor.

mlyle 5y ago
> Inflation disproportionately affects people who have most of their net worth in cash The 80th percentile of households by income each have more sitting in banks in cash than the 20th percentile make in a year. A slug of inflation takes away far more resources in absolute terms from the wealthy than the poor. > Now UBI payments must also be indexed to inflation, otherwise it won't be of much use for very long, so you'll create this infinite loop of increasing UBI, resulting in higher asset prices, cost of living and thus inflation, requiring a further increase in UBI, triggering another round of asset prices and inflation and so on. In the end, the rich are as rich as ever and the poor will still be poor. This is a bit of a funny argument. The only way that it could happen is if 100% of money flowing into households via UBI bids up the price of scarce resources with no elasticity, and money flowing out of households that are net contributors to UBI results in no decline in purchase of those resources. While some things may have little (but non-zero) elasticity (housing in urban markets), many other things have elasticity (food, fuel, consumer goods, utilities, housing in other markets). Otherwise, there's an inflationary impact to poor households, but it's less than the amount of the UBI payment, and there's a net redistribution of income to them.

by Zanfa 5y ago

mlyle 5y ago

> Inflation disproportionately affects people who have most of their net worth in cash The 80th percentile of households by income each have more sitting in banks in cash than the 20th percentile make in a year. A slug of inflation takes away far more resources in absolute terms from the wealthy than the poor. > Now UBI payments must also be indexed to inflation, otherwise it won't be of much use for very long, so you'll create this infinite loop of increasing UBI, resulting in higher asset prices, cost of living and thus inflation, requiring a further increase in UBI, triggering another round of asset prices and inflation and so on. In the end, the rich are as rich as ever and the poor will still be poor. This is a bit of a funny argument. The only way that it could happen is if 100% of money flowing into households via UBI bids up the price of scarce resources with no elasticity, and money flowing out of households that are net contributors to UBI results in no decline in purchase of those resources. While some things may have little (but non-zero) elasticity (housing in urban markets), many other things have elasticity (food, fuel, consumer goods, utilities, housing in other markets). Otherwise, there's an inflationary impact to poor households, but it's less than the amount of the UBI payment, and there's a net redistribution of income to them.