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Ask HN: Would a universal basic income lead to inflation?

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Re: Ask HN: Would a universal basic income lead to inflation?

#51

Post by gruez »

t-3 wrote: post #10

It depends on what you believe about how prices are set. Many opponents of UBI claim that a UBI will cause inflation and reduce the value of money because the supply increased. Proponents reject this, pointing to MMT and the concept of fiat currency. The truth is probably in between - opportunists and highly sought-after items will raise prices to offset UBI gains, while most commodities should be relatively unaffect…

>Many opponents of UBI claim that a UBI will cause inflation and reduce the value of money because the supply increased. Proponents reject this, pointing to MMT and the concept of fiat currency.

To be clear, MMT doesn't say you can print money and hand it out without causing inflation. It only says that if the money printing is offset somehow (eg. taxes), there won't be inflation.

Re: Ask HN: Would a universal basic income lead to inflation?

#52

Post by noworld »

incomingpain wrote: post #43

In Canada during covid we deployed non-universal basic income. It was basic income but not everyone got it. This was not that unlike what the democrats did in the USA. During a pandemic I would hope the government would help people through it. Was it the right call? I have the benefit of hindsight. https://tradingeconomics.com/canada/central-bank-balance-she... We must now deal with the consequences. https://tradinge…

That's called welfare.

Re: Ask HN: Would a universal basic income lead to inflation?

#53

Post by Workaccount2 »

dagss wrote: post #26
globular-toast wrote: post #11

Earlier quoted context omitted.

Essentially if everyone had $1000 extra then everything would cost $1000 extra. So if you went from 0 to $1000, you'd just be left with $1000 and nothing to spend it on. You can't eat money.

There is no argument here -- why would everything cost $1000 extra? You just said "then". Where is the argument? So if I earn $500 now, and buy 500 lollipops at $1 each. If everyone gets $1000 as UBI, then those 500 lollipops will cost ... $1001 each and $501000 in total? Isn't that absurd? That is what the sentence "everything will cost $1000 extra" means, and the only way "raising the value of zero" makes mathemati…

You are conflating "giving everyone $1000 of currency" with "giving everyone $1000 worth of value"

The first one just requires changing some digits in a bank account. The second requires an enormous amount of positive work by the whole of society to generate that much value.

Re: Ask HN: Would a universal basic income lead to inflation?

#54

Post by Workaccount2 »

globular-toast wrote: post #32
chii wrote: post #12

Earlier quoted context omitted.

It's not money creation that causes inflation, it's _excess_ money creation. Banks only loan money to people who have good credit, and can pay it back. Those people with good credit will work to pay it back. This work is often worth more than the loan + interest, and thus, wealth is created by this process. E.g., you borrow money to build a business. And for consumer loans, the consumer would have to work harder to p…

> It's not money creation that causes inflation, it's _excess_ money creation. No, it's just money creation. Money creation and inflation are essentially synonymous. > Banks only loan money to people who have good credit, and can pay it back. Well, that's clearly been far from the truth if we look back at recent events. But apart from that, the majority of bank loans nowadays go into housing and house prices are fore…

If you print $1000 to lend to a startup business, and that business grows to generate more than $1000 of raw value, then that original printed $1000 (that was paid back) is not inflation, its growth.

Imagine you could print corn seeds. You print the seeds and get a whole bunch of (real) corn cobs back.

Re: Ask HN: Would a universal basic income lead to inflation?

#55

Post by willnonya »

It depends on how the UBI is financed. If it is financed through debt or simply printing new money and increasing the amount in circulation then yes, it absolutely will increase inflation. This applies to more than just a UBI though and the reason some point to the stimulus is because it was paid through debt.

If there were no deficit and this UBI is paid through taxes or other direct revenue then there will likely be some inflationary forces but they should stabilize as the markets adjust. What we do instead of letting the markets stabilize is constantly increase the amount of money available so that the stabilization we're chasing is a moving target based on an increasingly more available, and less valuable, dollar.

Re: Ask HN: Would a universal basic income lead to inflation?

#56

Post by trgn »

eqvinox wrote: post #22
forgotmyolduser wrote: post #17

If we print money to fund it, yes. If we fund with taxes without printing money, then no.

Was about to comment exactly this. The question makes no sense, whether or not inflation happens has nothing to do with universal basic income itself, it's a question of where the money comes from.

It might not be that simple. Even if UBI is funded by taxes, UBI would be a wealth redistribution, increasing money on the lower end, generally pushing up demand for goods and services that fulfill basic needs, and lowering the money on the top-end, which is spent differently, like on luxury goods, put on the sideline as savings, or spent chasing assets. This redistribution may cause inflation too, even though the overall money supply is not increased.

Re: Ask HN: Would a universal basic income lead to inflation?

#57

Post by em500 »

PhD in econometrics speaking, here's my handy guide to macro-economics:

- The main variables of interest are (aggregate) real production / income (GDP/GDI), unemployment and inflation (arguably in that order)

- Nobody knows much wrt the causes, effects and future trajectories of any of these. Not professional Ivy League economists who publish in journals like AER, QJE, JPE or Econometrica, nor traders getting paid millions at hedge funds or prop trading desks, nor fringe bloggers, gold/crypto-bugs or neophytes from different fields (traditionally from physics, but probably increasingly from CS/AI/ML). Especially beware when they sound very sure of themselves, often using correct wonky economic jargon or details like the plumbing of money flows. Top academic economist are at least (usually) somewhat honest that they know very very little.

- Even if someone did know anything, 3rd parties like you or I can't distinguish the Real Truth from quackery.

- The root cause of this knowledge deficiency is the inability to run proper controlled experiments. Pretty much no theory about macro-economics is convincingly testable/falsifiable, except banal trivialities like we can't make everybody rich by sending everyone a $10M check. This will not change in our lifetime, if ever.

- All the writing on macro-economics is story-telling and catering to their specific audiences. Academics write foremost for other academics to gain a position at a prestigious faculty (and incidentally to influence politics). Crypto-bugs write to sell you crypto-coins. Fringe bloggers like Shadowstats write to get newsletter signups and ad-dollars. Most of them employ the effective mechanism that the reader is initiated to advanced/semi-hidden knowledge, which makes the reader feel better about themselves.

Given this, the answer to your question is: maybe, maybe not, who knows?

Re: Ask HN: Would a universal basic income lead to inflation?

#58

Post by thesuitonym »

It's possible. Nobody can say with certainty because we don't have data on a large enough scale to say for sure. But consider this: We don't have UBI, and we have historically high inflation anyway. If we're going to have high inflation anyway, maybe we should just help people.

Re: Ask HN: Would a universal basic income lead to inflation?

#59

Post by dagw »

gruez wrote: post #51
t-3 wrote: post #10

It depends on what you believe about how prices are set. Many opponents of UBI claim that a UBI will cause inflation and reduce the value of money because the supply increased. Proponents reject this, pointing to MMT and the concept of fiat currency. The truth is probably in between - opportunists and highly sought-after items will raise prices to offset UBI gains, while most commodities should be relatively unaffect…

>Many opponents of UBI claim that a UBI will cause inflation and reduce the value of money because the supply increased. Proponents reject this, pointing to MMT and the concept of fiat currency. To be clear, MMT doesn't say you can print money and hand it out without causing inflation. It only says that if the money printing is offset somehow (eg. taxes), there won't be inflation.

Most 'serious' UBI implementations I've read about have a mechanism for clawing back some to all of UBI from higher earners via raised income tax on those people. I guess that is what is being hinted at.

Re: Ask HN: Would a universal basic income lead to inflation?

#60

Post by mark_l_watson »

‘Printing’ money leads to inflation. I view the world situation as a control problem: how do political and financial elites control the population and keep most of their privileges.

While I don’t agree with their objectives (usually) I am a digital member of the World Economic Forum because I think that reading their material is a valid signal for what may happen in the future.

I am not sure how it will happen, but I think most common people will be “liberated” from owning property and assets via media enhanced drama like wars, pandemics, dollar crashing, etc. a combination of absolute control of news media and taking advantage of crisis as they occur either naturally or planned will be sufficient for elites to hold on to most of their power while keeping society functioning.

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