Universal Basic Income, Money, and You
I've been hearing a lot about the Universal Basic Income, and all these reasons why it is a good idea.
I'm here to share my viewpoint, as to why it is NOT a good idea.
At the end of this post I'll share some links from the Mises Institute (Austrian School of Economics vs the Keynesian School of Economics on which most governments of the world have been creating a wealth transfer from the lower and middle classes to the elite class).
The first question I ask is, "what is money?"
Well, money is an idea backed by confidence. Which means it is ANYTHING (including cryptos and fiat) that you and I agree can represent value, and we can use to exchange for goods and services. In other words, is the evolution of the barter system.
Barter meant that I could only trade my programming services with a fisherman who needed a website, perhaps. Money fixed all that.
Now, behind that, what does money stand for? It stands for value. The most basic value is a product. You plant some potatoes, give them manure and water, and later on you have something you can exchange for goods and services. A product.
Without that product, we can print as many units of paper or digital currency and it is meaningless as there is nothing to buy, right?
OK, so you need to have a product or a service that people value, and want to exchange with little bits of paper or digital numbers.
Now, let's suppose that we have 10 people and they all have 5 units of currency (USD, EUR, satoshis, etc.).
And one of those people picked an apple and brought it to market. There are 9 people who may be interested in that apple. How much will that apple be worth? (Fair Market Value)
Like a bidding war, it'll be worth the most that any 1 person is willing to pay for it. Let's say everyone is willing to buy it at 1 unit, but only 3 are willing to spend 2 units, and only 1 is willing to spend 3 units. So, the guy who bids 3 units gets the apple. If "bidding" had stopped lower, the price would be lower... or higher.
The Law of Supply and Demand says that the higher the demand, and the lower the supply, the higher the price will be, and the lower the demand and higher the supply, the lower the price will be.
So, if instead of 1 apple you had 20 apples, the price might drop to 0.5 units and everyone could have an apple. But if that were the only apple, and people really wanted that last apple, then the price would go to 5 units.
What's the problem with a Universal Basic Income, then?
Well, if money represents value, and you just give it to everybody, then suddenly, instead of 5 units, they have say, 20. And what happens to the price? It goes up.
In other words, since there is no more value entering the system, simply more paper notes or digital numbers, you are inflating the money supply and raising inflation (goods get more expensive).
But more important than that, you're saying that money really has no value. If anyone can get it simply for breathing, then the value of the currency drops. Not just because of inflation, but because you don't have to work so hard for it, so it is worth less.
Which do you value most? The things that came to you for free? Or the things you really had to work hard for?
Then, some people say, well, what if the government imposes price controls so the prices remain the same?
Well, many countries have tried that, and you have 2 problems I can see: 1) you end up creating a black market where people sell their goods for higher profit (perhaps to another country), and 2) you limit what any person can earn, like in Europe, which can limit productivity. You are not allowed to reward those who produce more, therefore you lose those people to places who do. Look at what happened with the labor costs in America -- companies found cheaper labor elsewhere, or re-homed in countries with less tax burden.
Universal Basic Income sounds great. Money for nothing. But who wants something for nothing? Isn't that the Criminal Think? Take something without giving anything in return? Don't we all feel better when we are productive and can contribute to each other? To our families?
Where does all the money come from in the end? Governments do not create value or wealth or a product. Governments make money by taxing you directly, or by inflating the currency which taxes you indirectly by raising costs, and then you still have to pay that money back. When the US government "increases" the money supply, they are essentially borrowing money from the Federal Reserve (US Treasury issues Bonds which the Fed buys with money created out of nothing).
You probably heard the saying "There ain't no such thing as a free lunch!" Well, money is not free. Someone had to sweat to create the product that then was bought for fiat or other currency unit.
Someone has got to pay the piper sooner or later.
If that weren't so, then why would anyone, private companies or government ever have to file for bankruptcy?
Then what about if machines create all the value?
Again, that sounds great, and certainly they can and already do create value. Robots make cars, computers, etc. And they do it very well. But even robots require maintenance, and require better and more efficient versions, and a human to monitor progress and make sure things are on track.
And who owns them? Who had to pay currency units for their creation, maintenance, etc.? Does he deserve the same compensation as a guy who produces nothing? Some people will think so. Then, what's the benefit of working hard? Or producing? Or studying mechanics and robotics enough to maintain and create those units? Altruism? Would you do it? Work for nothing?
And still, it doesn't change the fact that you won't really change anyone's standard of living, because by throwing money units into the system, you're going to inflate prices.
Maybe when everyone has a good replicator, and owns their own home, we won't need to worry about exchange. Maybe one day we'll all be spiritually evolved enough to where that might work. But look around you, do you really think that humanity is that evolved that a UBI will turn into anything else than a mess or loafers mooching off the producers? We already have that and there's no basic income.
And just how much is a "fair" basic income? Why not double or triple that? It's free money isn't it? Why be greedy with its dispersal?
Don't fall into that trap. Credit and borrowing has never created wealth... only slaves. And we're already indebted enough as a planet. It's time to produce. Let's do it.
REFERENCES
Here is The Dangers of a "Universal Basic Income".
And here is another article from [LewRockwell.com](Libertarianism and a Universal Basic Income).
And here is a post about the Cato institute's position.
The problem with your simplistic inflation analysis is that it takes no account of the ability for supply to expand to match demand. If supply expands as much as demand does, you have no inflation. And you might be interested to consider that most western countries are struggling now to maintain inflation in the face of technological deflation (basic technologies that we all own are getting cheaper and cheaper each year).
The next problem you have is what are you going to do in the face of increasing technological unemployment? If the consumer class has no money to buy products with, capitalism fails.
Finally, you need to understand where money comes from. The vast majority of it is loaned into existence as debt. That is, most of the money that pays for economic growth, is debt. That is, economic growth requires debt. To be clear, this is a farcical situation, but if you are going to talk about money, you need to know where it comes from.
Yes, yes, I am aware of all those situations. I'm also aware that the populations of most Western countries are in decline. The birth rate isn't keeping pace with the death rate as many people chose not to have children. Which means a decrease in demand. Hence the interest of many countries in having migration.
And that very mechanism of the US Treasury issuing bonds for the Federal Reserve to buy, is what they use to make our money seem legitimate. And the same mechanism will be used to create the "Universal Basic Income." On top of that, you can't forgot that one of the reasons for no inflation in the face of an ever increasing dollar supply, is that most of those dollars are held abroad, or by the Fed. Once countries lose faith in the dollar, and it comes home to roost it'll be a whole different kettle of fish.
Also, I believe we are now in the deflationary phase that precedes a hyperinflation. And some areas, like food, are already inflating. I'm paying a lot more per week than I did last year. And with the recent flooding and storms since the beginning of the year, there have been a lot of crop losses.
But I wasn't trying to get into all that. Just to explain why I believe UBI won't work.
A lot of people will become unemployed, but giving them free money is not going to solve anything. I believe people have a basic need to work. To feel useful. That's what separates us from a criminal who takes without giving. Just look at the gas shortages that happened during the recent storms. There are even studies mentioned by Reason Magazine that show how they fail, and how their results are doctored to seem promising. Production is the basis of morale. Without that, we feel useless, and free money might stave the hunger but it won't change that fact.
The only way is to educate and create new jobs. Automation will come and replace a lot of jobs, especially the ones that you have to pay more than what they're worth (i.e. minimum wage).
People need to take their lives into their hands and get training in areas that will be necessary.
Certainly, food will be a very important area of attention. In the coming Solar Minimum, a lot of crops will be lost. And it'll be necessary to replace the lost food. That and cryptos would be 2 great areas to get involved in.
Ultimately, I agree. It's farcical. But it's intended to create the wealth transfer from the lower classes to the elite class. No president on Earth can change that. Only loss of faith in the system, and the shift toward cryptos can fix that problem. But people need to understand the problem as well, so they don't fall into the same trap. These are critical times we are in. I'm just trying to warn and elucidate as many people as I can.
I wish the best to all of us!
A UBI doesn't necessarily have to be funded by new money creation. Scrapping most of the current welfare system and the bureaucracy associated with its assessment and enforcement will cover a large chunk of it. Shortfalls would have to be made up through either increased taxation on the rich and/or reduced military spending. Of course, both of those things are hard to implement in today's shallow political climate. Something has to be done, though. Capitalism is going to collapse if we continue on this path.
Money is the primary way they enslave us. UBI would only create more indentured slaves. The same people who'd give you UBI are also keeping interest rates at all time lows destroying savings and investments. They're also the ones that force you to use the banking system to raise funds for your new project/idea - and the banks keeps 60% or more of your IPO. How could ANYTHING coming out of the government really be anything but more slavery?
The solution, in my mind, is to use cryptos for peer-to-peer transactions that can't be traced and taxed. Less taxes means more savings and more investment and more wealth. Life is not monopoly, you can't print your way into prosperity UNLESS you are a bank. And that does not create value... only currency.
Basic income is meant only to give people the very basics they need to survive. Food water shelter and maybe some clothes every once in a while.
Survivng is what you give back to society for your "free money". There would be less bums shitting in the street, stealing for food, or squatting in houses. All of which costs money to fix/prevent. We already have programs like this for poor people, but the amount of money that goes into running these seperate programs and checking to see if people fit the criteria is a ridiculus ammount.
There is also the argument used by most followers of basic income that it is specifically meant for when automation has gotten to the point where we really don't need most humans to do work. There is little point in having 8 billion programmers and engineeers. Basic income allows for people to survive in an age where there is more then enough production to go around. This allows them to spend their time doing things that may not make a survivable amount of money, but still holds value to the world. For example, art.
So, why not give them a hundred thousand? Or a million? Why not make everyone millionaires so nobody has to work?
Really excellent post @idealsceneprod. This is definitely a subject that needs more focused attention and I see UBI as a scary piece in the possible dystopian future that we currently face.