Comment by nerdponx | Hacker News Reader

Comment by nerdponx | Hacker News Reader

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This was my first thought. If you print money on a fixed schedule, the natural market response is to devalue the currency according to the same fixed schedule. Nobody gets any real income; they get a fixed lifetime endowment of buying power, granted in predictable intervals, and the only thing that changes over time is the denomination of the currency. Interesting idea: "universal basic lifetime income", UBLI. But perhaps not what the author was going for.

It's been a while since I've done serious economic analysis. Please correct me if I'm wrong.

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Also, the whole thing is predicated on a web of trust to prevent Sybil attacks. Fine, but PGP has shown pretty conclusively that a web of trust like this is a failed model. A single trust authority makes far more sense for this application.

In the PGP case, casual users like myself don't personally know anybody who uses PGP. I would have to go out of my way to acquire a reasonable degree of trust on my key: I'd basically have to start asking people I hardly know "hey can you sign my key?" which I'd rather not do. That's fine, because PGP is for hacker nerds and not everybody needs or wants to be a hacker nerd.

The problem, however, is that if this is to be truly universal then you need to guarantee universal access. What if I've been in prison for 5 years, I can't get in contact with any of my family, and my old private key is long lost. So I start up a new account and... what? Who trusts me? I basically have to start asking random people to trust me. So people have to trust each other. Then what's stopping a con artist from going from town to town, getting store owners and locals with bleeding hearts to trust each of his multiple duplicate currencies. The Sybil attack can proceed with trivial social engineering.

You're in a Catch-22: either people are skeptical, and the system is decidedly non-inclusive, or people are trusting, and the system is insecure. You need centralized trust: it's the same problem we have today with domain names. You need an authoritative list of valid domains, and a single source of truth for accessing that list.

The nice thing about a trust authority is that it doesn't need to be physically centralized. Just record everyone's citizenship on a blockchain like Ethereum. But at this point I'm just speculating.

My solution to this is to embed key signing in everyday face-to-face activities. If your wallet gets signed every time you buy something, soon it will have useful identity. https://www.wired.com/2014/07/document-coin/

I am not an economist, and am summarizing the received wisdom on stagflation and tentatively applying it to UBI. If I could put my economist hat on, I would think that the real value of UBI allotments would be constant, as you said, in the best case.

The system as described does create real income in those coins - the newly printed money goes to everyone equally, but the inflation affects those who hold existing money. In this manner, it's an ongoing redistribution of the coins (assuming they stay fungible) from those who have them to everyone else.

PGP didn't show that the web of trust is a failed model. PGP sucks from a UI perspective, so it would have failed even if it was centralised. Which it basically is with MIT's keyserver.

The system has more authoritative nodes. Validators require external information like government IDs. You obviously didn't even read it.

I skimmed it. I missed that point. That does address the concern, though. Thank you for pointing it out.

> It's been a while since I've done serious economic analysis. Please correct me if I'm wrong.

=)

> If you print money on a fixed schedule, the natural market response is to devalue the currency according to the same fixed schedule.

This is wrong. Price levels of a currency are determined by the volume of spending relative to the volume of trade. Furthermore, it's not the volume of any trade that matters. It's the volume of trade of goods whose prices you care about.

Money does not spread itself evenly over the course of the economy. To take an extreme example, if we just throw the printed money down a hole, it doesn't affect prices. Or if we spend all that money to buy stocks, it might drive up the price of stocks, but we probably don't care about the price of stocks when calculating the general price level for our currency.

Additionally, people borrow in order to spend. The amount of spending in the economy increases when people borrow more. In this sense, an increase in credit and debt in the economy has a very similar effect to an increase in the amount of money.

As I alluded to previously, there are places in the economy where money flows in faster than it flows out. Money tends to accumulate in these places. The spending that people would have used that money for must be continually replaced or you end up with deflation.

But let's imagine a world in which people are able to buy more of the stuff whose prices we care about. This is the basic income scenario. Assuming that we have the capacity to produce more of that stuff, we will produce more. Note that doubling the number of people who can afford to buy stuff is very different from doubling the amount of money that everyone has. In the former scenario, more people are willing to buy at existing prices. In the latter, people are willing to spend more on the stuff they already buy. The second scenario is always inflationary.

Anyway, I could go on and on about this. And I have. The bottom line is that it's complicated. And you always need monetary policy keeping your currency stable regardless of whether you have a basic income. The effects of a basic income could be either inflationary or deflationary. It probably depends on the amount of the basic income. In either case, monetary policy has got you covered.

I agree with you though that Circles doesn't seem to have any kind of sane monetary policy.

I think we're saying the same thing. Devaluation of the currency and bidding up nominal prices are both synonyms for "inflation" as far as I can tell, and in this case the former happens to be caused by the latter.

The point about deflation is something I hadn't considered. I'm skeptical, and if you have any references on that point I'd be glad to see them.

Not an economist, but wouldn't competition keep prices lower? Also, inflation happens when supply cannot meet demand. More money in circulation does not increase prices until it starts bumping into production capacity limits.

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