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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?

#11

Post by globular-toast »

xnorswap wrote: post #7
arrakis2021 wrote: post #2

One of the arguments I’ve heard is that if you give $1,000 to everyone who has zero dollars, you’ve just raised the value of zero.

That's not an argument. At best it's reductio ad absurdum, but where's the argument? It wouldn't change the value of zero, because even if it devalued the dollar heavily everyone still has something. There's no attempt in that argument to say why it would change the "value of zero".

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.

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

#12

Post by chii »

onion2k wrote: post #5

Whenever someone suggests a central bank creating money will lead to inflation I suggest they read this report - https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... tl;dr Private banks create far more money than central banks. If you're worried about inflation from UBI, stimulus checks, bailouts, etc then your brain will explode when you learn about how much money banks put into the economy in the name of…

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 pay it back in the future, or sacrifice future consumption to pay it back.

Money "printing" by banks are unlikely to cause inflation, unless they lent so much that productivity increases cannot keep up.

Money printing by governments, however, will cause inflation. Venezuela and Zimbabwe both printed to solve their debt problems and spending obligations. But these aren't loans, and spending these money does not increase productivity. Therefore, they cause inflation.

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

#14

Post by etempleton »

onion2k wrote: post #5

Whenever someone suggests a central bank creating money will lead to inflation I suggest they read this report - https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... tl;dr Private banks create far more money than central banks. If you're worried about inflation from UBI, stimulus checks, bailouts, etc then your brain will explode when you learn about how much money banks put into the economy in the name of…

I think the question is what happens when that money goes to the lowest income individuals and not the wealthiest, corporations, and the Military?

If everyone has more money and there is constrained supply of a desired thing the price will go up. Housing prices, for example, would almost certainly rise with a UBI.

Not saying a UBI would be a bad idea, but it would almost certainly cause massive inflation because the lowest income individual of society would have the largest increase in spending power—supply and demand and all that.

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

#15

Post by aceazzameen »

arrakis2021 wrote: post #2

One of the arguments I’ve heard is that if you give $1,000 to everyone who has zero dollars, you’ve just raised the value of zero.

Random thought, what if that $1000 UBI was instead a percentage of something else? I'm not sure what though. The GDP Deflator? Total stock market cap? Something to keep it on a level playing field with everything else.

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

#18

Post by pharke »

onion2k wrote: post #5

Whenever someone suggests a central bank creating money will lead to inflation I suggest they read this report - https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... tl;dr Private banks create far more money than central banks. If you're worried about inflation from UBI, stimulus checks, bailouts, etc then your brain will explode when you learn about how much money banks put into the economy in the name of…

Isn't it more important who gets the money and how the money is spent? Like if you create a trillion dollars but it goes to a single person who is incapable of spending it all so most of it winds up in high priced assets or investments vs. creating a trillion dollars and splitting it evenly among the entire population where it would wind up being spent on a wide variety of goods and services. In my mind, inflation is like bidding at an auction, the more people that participate and the more money they each have, the higher the prices will trend since they will attempt to outbid each other for the limited supply of goods. We saw this effect during the pandemic when spending shifted away from restaurants, entertainment and vacations to home improvements and home gyms for example. The prices at hardware and fitness stores went through the roof because there were suddenly more dollars and a big pool of people buying the same things.

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

#19

Post by EricE »

major505 wrote: post #13

Dependes on how is the plan to achieve it. If enough people keeps on working to produce enough stuff for everyone who want to buy it.

Exactly. With the ongoing disaster of COVID Bucks, I can't believe people aren't embarrassed enough that they still want to bring UBI up.

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

#20

Post by globular-toast »

onion2k wrote: post #5

Whenever someone suggests a central bank creating money will lead to inflation I suggest they read this report - https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... tl;dr Private banks create far more money than central banks. If you're worried about inflation from UBI, stimulus checks, bailouts, etc then your brain will explode when you learn about how much money banks put into the economy in the name of…

This was one of the most mind-blowing things I learnt about money. So many people assume the government prints money, but in fact government printed money is about 2% of the money in the economy. The vast majority of it is created by banks when they make loans, which are predominantly mortgages. Banks have been consistently creating money via mortgages at a higher rate than people are paying them back for decades. This is possible because house prices are constantly rising.
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