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by nicksellen 3690 days ago
You can extend this argument to banking though:

If the U.S. pumps an endless supply of money into Haiti, how could Haitian banks hope to compete with their loan offers?

4 comments

It depends on the size and the stability of the basic income. If a bank knows a customer will get $X/year for the next 5 years, giving an upfront loan to allow that person to create a business becomes a lower risk proposition. A basic income could easily expand the number of low to medium-risk borrowers and expand the amount of savings present to use as a base for lending.
Banks generally do better when people have more money, not less. They'll get more deposits, and hopefully more loans that can actually be paid back.
I'm not an economist so I'm sure there are variables I'm not accounting for, but here's my opinion. I think the difference is that an endless supply of money (we know it's not truly endless, but a large influx of cash) allows commerce to occur and people can buy/sell more than commodities. The mere existence of a bank doesn't improve the lives of citizens if said citizens have no money to purchase food/goods and no assets to offer as collateral to take out a loan in the first place. There needs to be some sort of economy in place before a bank will benefit a population anyway. The bank could also benefit because residents now have assets to leverage when seeking cash above and beyond their basic income since I'm assuming starting a business may cost more than donations or a basic income would provide.

I would love to hear others' opinions on this.

> an endless supply of money (we know it's not truly endless, but a large influx of cash) allows commerce to occur and people can buy/sell more than commodities

I'm not an economist either, but I think the concepts you want to look up are 'money supply' and 'velocity of money'.

I don't think this works. Presumably cash has a lot more utility than rice or shoes, for example. These people can always use more money (i.e. bank loads in your example), but once they have x shoes or y rice, the utility of new shoes or rice is very low.
> Presumably cash has a lot more utility than rice or shoes, for example.

It has a lot more fungibility, which should also mean that the marginal utility of cash drops slower (as a function of total utility from that source) than for rice or shoes.