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UBI means giving money to people, which means that money has velocity because it would be promptly spent. We did this during Covid as furlough payments, and th

by hn_throw2025 1y ago

UBI means giving money to people, which means that money has velocity because it would be promptly spent. We did this during Covid as furlough payments, and the result was high inflation. Wages didn’t significantly increase to match, so in my country anyway people feel that the cost if living is significantly worse post-Covid. Anywhere that implemented UBI would also have to implement rent controls, otherwise Landlords would just see it as money on the table. But you couldn’t have controls for all prices, so inflation would still result.

geoffmunn 1y ago
This is what most people miss when they criticise UBI - for most people, it will be immediately spent, taxed, and put back into the economy. As long as the velocity is there, it's not an entirely bad idea as long as inflation can be kept under control.
- eru 1y ago
  If you have an inflation targeting central bank, velocity of money doesn't really matter. If velocity speeds up and inflation goes up, the central bank will remove money from circulation to hit their target. If velocity goes down, the central bank will inject money into circulation. The fiscal multiplier is zero. (Or rather, any deviation of the fiscal multiplier from zero is evidence of an incompetent central bank.)
- hn_throw2025 1y ago
  > as long as inflation can be kept under control. Nice trick if you can pull it off. So for the 1GBP you print, you recoup up to 20p in VAT, or less for foodstuffs. And more money chasing the same goods and services means…?
  - eru 1y ago
    Are you suggesting that UBI should be paid out of freshly printed money? I don't think that's how people commonly understand how UBI should be financed.
    - hn_throw2025 1y ago
      I can only speak for the UK. But given the fiscal headroom for the foreseeable, I don’t see where else it would come from? If they don’t have it, they either borrow or print it? For any meaningful scheme, you would be talking about hundreds of billions.
      - surgical_fire 1y ago
        That's were things such as wealth tax kicks in. The money that just sits untaxed on the vaults of the extremely wealthy should be taxed to finance this. This is trickle down economics done right. Remove money from the wealthy and redistribute it to benefit society.
        hn_throw2025 1y ago
        I would imagine the extremely wealthy have passports, global homes, and the vaults you mention might well be in Switzerland. The extremely wealthy will also have an army of lawyers and accountants to mitigate against this, not to mention trusts and holding companies. It’s a nice idea, but the implementation is tricky. I’m not arguing for them, just being realistic.
        surgical_fire 1y ago
        What they actually have is an inordinate power to lobby governments. No army of lawyers would save them from actually effective regulation.
        eru 1y ago
        Voting with your feet will save you from that. Of course, if you want to do business in country X, you are subject to the laws of that country X. But otherwise, you can leave that country and settle down elsewhere and do your business there. No matter how 'actually effective' that regulation is. (Unless you do an 'East Germany' and don't allow people to leave.)
eru 1y ago
> We did this during Covid as furlough payments, and the result was high inflation. No. The high inflation was a result of Fed policy, not fiscal tricks like furlough payments. > Anywhere that implemented UBI would also have to implement rent controls, otherwise Landlords would just see it as money on the table. But you couldn’t have controls for all prices, so inflation would still result. You are right that UBI can lead to higher relative prices for rent. And that's why you would want to pair UBI with land value taxes, not rent control. (UBI would not lead to inflation, and would not necessarily lead to higher absolute rents. The overall level of inflation is something an inflation targeting central bank, like the Fed or ECB, controls.)
- hn_throw2025 1y ago
  > And that's why you would want to pair UBI with land value taxes, not rent control. In the last place I rented (London), the private landlords were unlikely to own the land. Fixed term leasehold was overwhelming common, not freehold.
  - eru 1y ago
    That doesn't make a difference to how land value tax works. If a landlord doesn't own the land, he leases it from someone who does. But to make LVT simpler to understand (and economically equivalent): you can imagine the government owns all the land, and rents out plots for eg 20 years at a time to the highest bidder. To help people plan better, the auctions can be done 5 years ahead of time. So leases for 2036 - 2056 will be auctioned off in 2031. You can stagger the auctions, so a few leases get auctioned off every week.
    - hn_throw2025 1y ago
      If we step away from the realms of imagination, then in the UK typical leaseholds are legally valid for about 100 years, with some going up to 999 years. Of course, many leaseholders - the rent seeking Landlords - may come and go within those lease cycles. Or are you proposing State confiscation and management of the land? I can’t quite tell from your post.
samiv 1y ago
Thats because the state basically printed money and handed it out. Ask yourself when you have a normal working class person who roughly breaks even on their income vs. their spending where does all that money go? They pay rent. And then what? They pay mortgage, they car insurance, they utilities. One way or another the money ends up to the top of the pyramid, i.e. the wealthy individuals who own capital assets, properties, businesses etc. You had high inflation because the government essentially printed money. But what if instead of printing that 1 trillion dollars (or however much it was), the state had actually taxed the that money off of the rich individuals and corporations and then handed that out. The same money would again flow through the system back to the same rich people where it could be taxed again and handed out and put back into the circulation. This would not cause inflation by itself since the monetary value of the money would not be devalued. It would require a government that actually gave a damn about its citizens and had balls to tax people and corporations and when the said corporations and individuals run the government its of course not going to happen.

geoffmunn 1y ago

This is what most people miss when they criticise UBI - for most people, it will be immediately spent, taxed, and put back into the economy. As long as the velocity is there, it's not an entirely bad idea as long as inflation can be kept under control.

eru 1y ago
If you have an inflation targeting central bank, velocity of money doesn't really matter. If velocity speeds up and inflation goes up, the central bank will remove money from circulation to hit their target. If velocity goes down, the central bank will inject money into circulation. The fiscal multiplier is zero. (Or rather, any deviation of the fiscal multiplier from zero is evidence of an incompetent central bank.)
hn_throw2025 1y ago
> as long as inflation can be kept under control. Nice trick if you can pull it off. So for the 1GBP you print, you recoup up to 20p in VAT, or less for foodstuffs. And more money chasing the same goods and services means…?
- eru 1y ago
  Are you suggesting that UBI should be paid out of freshly printed money? I don't think that's how people commonly understand how UBI should be financed.
  - hn_throw2025 1y ago
    I can only speak for the UK. But given the fiscal headroom for the foreseeable, I don’t see where else it would come from? If they don’t have it, they either borrow or print it? For any meaningful scheme, you would be talking about hundreds of billions.
    - surgical_fire 1y ago
      That's were things such as wealth tax kicks in. The money that just sits untaxed on the vaults of the extremely wealthy should be taxed to finance this. This is trickle down economics done right. Remove money from the wealthy and redistribute it to benefit society.
      - hn_throw2025 1y ago
        I would imagine the extremely wealthy have passports, global homes, and the vaults you mention might well be in Switzerland. The extremely wealthy will also have an army of lawyers and accountants to mitigate against this, not to mention trusts and holding companies. It’s a nice idea, but the implementation is tricky. I’m not arguing for them, just being realistic.
        surgical_fire 1y ago
        What they actually have is an inordinate power to lobby governments. No army of lawyers would save them from actually effective regulation.
        eru 1y ago
        Voting with your feet will save you from that. Of course, if you want to do business in country X, you are subject to the laws of that country X. But otherwise, you can leave that country and settle down elsewhere and do your business there. No matter how 'actually effective' that regulation is. (Unless you do an 'East Germany' and don't allow people to leave.)

eru 1y ago

> We did this during Covid as furlough payments, and the result was high inflation. No. The high inflation was a result of Fed policy, not fiscal tricks like furlough payments. > Anywhere that implemented UBI would also have to implement rent controls, otherwise Landlords would just see it as money on the table. But you couldn’t have controls for all prices, so inflation would still result. You are right that UBI can lead to higher relative prices for rent. And that's why you would want to pair UBI with land value taxes, not rent control. (UBI would not lead to inflation, and would not necessarily lead to higher absolute rents. The overall level of inflation is something an inflation targeting central bank, like the Fed or ECB, controls.)

hn_throw2025 1y ago
> And that's why you would want to pair UBI with land value taxes, not rent control. In the last place I rented (London), the private landlords were unlikely to own the land. Fixed term leasehold was overwhelming common, not freehold.
- eru 1y ago
  That doesn't make a difference to how land value tax works. If a landlord doesn't own the land, he leases it from someone who does. But to make LVT simpler to understand (and economically equivalent): you can imagine the government owns all the land, and rents out plots for eg 20 years at a time to the highest bidder. To help people plan better, the auctions can be done 5 years ahead of time. So leases for 2036 - 2056 will be auctioned off in 2031. You can stagger the auctions, so a few leases get auctioned off every week.
  - hn_throw2025 1y ago
    If we step away from the realms of imagination, then in the UK typical leaseholds are legally valid for about 100 years, with some going up to 999 years. Of course, many leaseholders - the rent seeking Landlords - may come and go within those lease cycles. Or are you proposing State confiscation and management of the land? I can’t quite tell from your post.

samiv 1y ago

Thats because the state basically printed money and handed it out. Ask yourself when you have a normal working class person who roughly breaks even on their income vs. their spending where does all that money go? They pay rent. And then what? They pay mortgage, they car insurance, they utilities. One way or another the money ends up to the top of the pyramid, i.e. the wealthy individuals who own capital assets, properties, businesses etc. You had high inflation because the government essentially printed money. But what if instead of printing that 1 trillion dollars (or however much it was), the state had actually taxed the that money off of the rich individuals and corporations and then handed that out. The same money would again flow through the system back to the same rich people where it could be taxed again and handed out and put back into the circulation. This would not cause inflation by itself since the monetary value of the money would not be devalued. It would require a government that actually gave a damn about its citizens and had balls to tax people and corporations and when the said corporations and individuals run the government its of course not going to happen.