It only triggers inflation if the money supply goes up. If you pay for UBI with taxes, it has no effect on inflation.
In theory.
The problem is that this amounts to taxing the super-rich to a much greater extent than we do now. The super-rich tend to hoard their money (that's part of the problem!) so even if you manage to do that successfully, you do end probably end up increasing the effective money supply. But not to the extent that the income becomes worthless.
How about just creating money and giving the same amount to everyone?
It would have the effect that the value of each individual dollar would go down to a small extent, but everyone would have say 10,000 dollars extra. The effect would be negative for the rich, but positive for the poor.
Quantitative easing seemed similar, but the money was given to the banks who just kept asset prices high - not great for the poor but good for the rich.
Anyone want to "explain it like I am 5" to to why thats such a bad idea?
During QE they didn't just give the money to the banks, they bought stuff from the banks. This introduced new money into the system without being unduly unfair (although by the nature of buying a lot of things at once the price was lower than it would otherwise have been).
This means that when the BoE wants to contract the money suply (as it's doing now) it has assets to sell off.
If it printed money and then gave it away then it would be in a sticky situation if it wanted to shrink the money supply again.
Also producing that much extra cash every year would produce a high rate of inflation. This would have very weird effects and would probably be highly unpleasant for everyone.
I don't really see it as especially fair. I had done my calculations and worked out that a house price correction was well overdue. Instead my taxpayer money was used to keep the prices artificially high, while the bankers kept their huge bonuses and I got next to no interest on the money II had saved for a deposit. How exactly was that fair?
I agree that it would probably cause innflation, but why not just repeat every ten years? As I say it would devalue money for everyone. It would also give a lump some to everyone. That is going to be positive for the people who need it the most and worst for the people that need it the least.
You don’t need to tax the rich more. The US could pay for UBI by raising taxes to the level of Germany. It could do that by simply adopting German tax rates, which don’t really tax the rich more but tax the middle class a lot more.
It's an illogical argument though - the concept of true UBI, not the thing cited in the article, is that everyone receives the living wage and can afford basics like food and housing. If everyone being able to afford food and housing changes the rate of inflation, then that's an acceptable side-effect of ending poverty, it's certainly not something to be feared or cited as an argument against UBI :)
There's a special case on housing expenses. There aren't enough housing units in many areas for everybody who wants to live in those areas. So, the price goes up, and this acts a as a crude filter for how bad you want to live in an area. There is no rate of UBI that will cover housing expenses in such an area -- the rent will always be what everybody can afford + n, where n is large enough that only enough people who can fit can afford it. This dynamic is basically inflation. Increasing supply or redirecting demand is the only way to lower n. n can also manifest itself as a waiting list.
(This is not, by the way, a normative statement, it's merely descriptive)
This inflationary pressure probably won't apply to food, because the supply of food is a lot more elastic than the supply of housing. That more people can afford better probably means that more good food gets sold, and perhaps some scarcer foods might come under pressure, but the supply, and thus price, of things like rice and carrots is unlikely to go up.
>There's a special case on housing expenses. There aren't enough housing units in many areas for everybody who wants to live in those areas. So, the price goes up, and this acts a as a crude filter for how bad you want to live in an area. There is no rate of UBI that will cover housing expenses in such an area
No, but UBI would enable people to move out of that area to areas with cheaper housing and fewer jobs.
I can imagine quite a number of economic migrants from the North of England who currently live in London would decide to return home and live closer to family in cheaper locales if their overall economic situation was a bit more secure.
That would, in turn, put relieve pressure on the housing market in London and provide some economic stimulus for more deprived areas.
>This inflationary pressure probably won't apply to food, because the supply of food is a lot more elastic than the supply of housing. That more people can afford better probably means that more good food gets sold, and perhaps some scarcer foods might come under pressure, but the supply, and thus price, of things like rice and carrots is unlikely to go up.
I think the price of organic carrots and rice would probably go up a lot. Their supply isn't particularly elastic (and is constrained by access to cheap labor... whose price would go up under UBI). If you give poor people more money one of the first things they will do is try and buy better quality food.
McDonalds would probably take a hit and would likely have to shake their image up to attract clientele in much the same way they did in Australia (where, thanks to a high minimum wage, people at the lower end of the economic spectrum have a higher disposable income): https://www.businessinsider.com.au/mcdonalds-in-australia-vs...
The argument (which I don’t necessarily subscribe to, but I too, am no economist) would be that the inflation leapt by such bounds that it directly cancelled out the entire UBI grant.
I think describing what happens to inflation is very, very difficult, because it's difficult to predict what happens to wages.
At a guess, low/medium skilled labour becomes more expensive, because it's no longer required for subsistence, so the labour becomes more about luxury goods, than basic living costs
In theory.
The problem is that this amounts to taxing the super-rich to a much greater extent than we do now. The super-rich tend to hoard their money (that's part of the problem!) so even if you manage to do that successfully, you do end probably end up increasing the effective money supply. But not to the extent that the income becomes worthless.