I use to think UBI was a good thing, but looking at what's happened in the past year, I was completely and totally wrong. UBI would likely be a complete disaster. It'd be less Star Trek and more The Expanse. This is a horrible idea.
Or are you referring to the $600 that supplemented the unemployment insurance? But those went to people who were just recently working and had their livelihoods wrecked by government action and/or inaction. I'm pretty sure you would agree they deserve that money and it's okay for them to do what they damn please with it. Even if that means them not going back to work for some time because they have the freedom to. Imagine how less fucked we would be if we just paid the majority of non-essential workers to stay the hell home. Less competition for the essential jobs, so people who do really want to work can work and the essential jobs will be filled.
Handing of the money in an emergency situation has also the fundamental difference that it isn't meant to be sustainable: it's one off, and the preparation does not include reworking the financial structure of the state to make it permanent, like all UBI proposals I've seen so far.
That it failed in the current political landscape doesn't mean that it will fail in every case, and you haven't presented any evidence ruling it out. Thus "There is no possibility of making it sustainable in the not-universal form" is an unfounded claim.
One thing for sure, a big change will require a long ramp up, or a big shock.
First, the possibility space of politics/economy is enormous. Presuming European countries are the ones you're talking to which couldn't bear this year's economical help, that's a useful data point, but EU countries share a lot in common: developed, industrialized, capitalist, democratic, old society, efficient etc. That by itself doesn't exhaust all the possible configurations. One could imagine countries that retain the same desirable or unavoidable properties (democracy, old age), but differs significantly in others (simple tax laws?).
Until we determine whether implementing UBI would work from all reasonably reachable configurations, it's still worth evaluating.
There have been semi-successful UBI-like ambitions IMO, when we look at the idea of "bullshit jobs". While they exist in the West, the most interesting example is Soviet countries, where citizens were given the most pointless jobs, which would give them enough money to survive. Perhaps it's not the most successful thing ever, but it's worth noting this didn't cause an immediate collapse of the system.
Treating coronavirus help as a data point is also dangerous. The results are confounded because of how the world economy was affected by the lockdowns.
You were going to have to pay one way or the other. It was just about a matter of when and what form of payment. Most of the world has decided that going into debt was better than paying with the lives of their people. You can renegotiate debt later on. It's just numbers in a excel sheet or some shit. Can't renegotiate the lives of dead people.
If people don't work they lose their productive output irrevocably and can lead to a cycle of poverty. The damage caused by unemployment is far worse than any damage caused by debt because debt can be reversed easily once you have mild inflation around 2-3%. Just the effects of inflation alone will reduce the debt burden, let alone the potential tax increases through higher employment or the economic growth that will happen once the economy is no longer broken.
Modern economic theory proposes that nations, with full control over their currency, have infinite spending power (aka can go into infinite debt) without any issues, as long as full-employment hasn't been reached
This is of course not entirely possible for many EU countries, since being a member of the eurozone means the country does not have full control over its currency - which was a large contributor to, for instance, the Greek financial crisis
If anything, stuff like global currencies ($, €) bail out their respective owners because they're world reserve currencies. Some of the smaller Eurozone countries would have definitely defaulted, had hyperinflation, etc, without the Euro. Now they're in recession instead, which sucks a lot but still less than the alternative.
You don't have to issue more currency/debt once you have reached the target inflation rate because if you manage to hit the right inflation rate every year you have already executed your stimulus properly and are reducing unemployment. Consumer inflation is a proxy for worker income because most of the goods or services that are indexed are the product of labor. If the stimulus arrives in the hands of workers first it will mean that worker salaries will grow ahead of inflation.
>If anything, stuff like global currencies ($, €) bail out their respective owners because they're world reserve currencies. Some of the smaller Eurozone countries would have definitely defaulted, had hyperinflation, etc, without the Euro. Now they're in recession instead, which sucks a lot but still less than the alternative.
They are in recession because of a lack of demand for domestic workers which is basically the problem that moderate inflation would solve.
Just look at these charts:
https://www.statista.com/statistics/225698/monthly-inflation...
Inflation is high in Poland and Hungary. Does this mean they suffer from problems? Actually no it's the opposite.
https://www.statista.com/statistics/268830/unemployment-rate...
Poland has the second lowest unemployment rate and Hungary is still well below the EU average. Please bear in mind that this chart only shows the inflation rate in August. I chose this chart because it is a easy to read bar chart. Some numbers may be outliers but the general trend will be the same no matter what chart you look at.
Just because a government is printing money it doesn't yet mean they practice a sane economic policy, which would be to increase the demand to meet the supply of labor.
Inflation is only an issue if you spend money beyond what is required to achieve full employment in the workforce, since new money in the system is balanced with new wealth being generated through work
Inflation can then be controlled through taxation. Raising taxes pulls money out of circulation, thereby reducing inflation
Private banks already have the ability to create money out of thin air, but for some weird reason, that's apparently not really an issue for most people
I can't think of any small European countries that I can imagine defaulting without the euro. Could you specify which ones you think would have defaulted?
They would have defaulted and the drachma would have probably been at a point where a loaf of bread would cost millions of drachmas.
It also doesn't matter how "many" of a currency is needed for a loaf of bread, as long as the supply is available. The Italian lira was extremely inexpensive, but as long as the government made sure the supply matched the demand there was no issue
Edit: I'd also say that Greece is not really a "smaller European country", being the 14th most populous European country
You're just listing questions without contributing with any alternatives or reflection on what has been said by others
Hyperinflation is an extreme case and others have already posted several answers to this, which you have chosen to ignore
I've chosen to ignore the rest because everyone treats hyperinflation like a rare occurrence, under the circumstances.
I don't see how the number of defaulted countries that experienced hyperinflation is relevant to whether MTT is an accurate model for describing economical systems
I also can't find any responses to your post that states hyperinflation is a rare occurrence. On the contrary, there's answers to most of the questions you've asked me
I'm not interested in convincing you of one thing or another. I want to broaden my horizon through discussion, so if the only thing you bring to the table is questions that could be easily googled, I'm not interested in continuing this conversation
Some debt is a good thing because, like for a business or individual, it is generally a good thing to borrow in order to invest for the future (leveraging effect).
But too much debt is not a good thing. Debt must be serviced and one need to find creditors willing to lend.
Infinite borrowing based on "full control of currency" only means that the value of the currency decreases towards zero and creates hyperinflation: can Zimbabwe support a debt of trillions of Zimbabwean dollars? Sure... But how much is a Zimbabwean dollar worth? Close to nothing and people need a wheelbarrow full of cash to buy a loaf of bread.
Well, if we assume that your country is unable to introduce more money into the economy through no fault of its own (well that's never true) you can still fix the problem by investing into more production capacity and education. The unemployment in Zimbabwe is relatively low at around 5% so any additional money it prints will turn into inflation. If you were to follow MMT you would stop introducing more money because that is the core argument in MMT: print until inflation is back on track. Inflation is already on track in Zimbabwe.
The thing is, once you are in this situation you are almost set up to fall into the pit of success. All you need to do is invest into businesses, expand production capacity through automation and also invest into education. Follow the Chinese model by creating special economic zones where foreign investors can easily do business. Follow the German model of vocational training to solve the education problem. These problems are far less intractable than what first world countries are suffering through.
Avoiding hyperinflation is about "how" you spend the money, not where they come from. In the case of Zimbabwe, the events leading up to their crash was massive destruction of productivity, which meant their wealth generation no longer matched the amount of money in circulation
The trust in their currency took a nosedive, because of the confiscation of assets from wealthy farmers - basically a clear message saying, that the government will not protect assets purchased with their currency, making it risky to own and use
Most western economies are much more stable and have high levels of demand for their currencies, which acts as a counterweight to inflation as well
Sovereign nations do indebt themselves through banks and financial markets in general, most often through the issuance of bonds, which can be defined as highly tradeable loans.
This is why sovereign debt is given a rating by credit agencies and why interest rates on debt freely vary based on the perceived risk by creditors. This also means that it can become difficult for a country to borrow at all (hence organizations like the IMF sometimes stepping in)
There is no magic.
However you spend money, inflation is created by an excess supply, not least when money is printed to cover debts (an effective devaluation). This is actually what happened in Zimbabwe.
A nation doesn't issue bonds to cover the cost of its spending, but to remove money from circulation. It's simply a way of saying "hey, there's too much money around. If you let us remove some of it now, we'll give you back more in the future"
There's literally no situation where a sovereign nation would not be able to pay out the bonds it has issued. It's simply a matter of making the money printer go "brrrrr" and presto - the debt has been resolved
In the most broad terms, the only difference between realising bonds and simply printing the money is the lag time
As you say yourself - there is no magic
In the case of Zimbabwe, and as stated very well by imtringued in the other post to this thread, Zimbabwe could have invested in production, education, and infrastructure to grow the economy, instead of trying to sell bonds, which is essentially saying
"Hey, you know this currency that is rapidly loosing value - we're going to print so much more of it in the future! Doesn't this seem like a great investment?"
Another significant difference: Printing money transfers wealth from the rich to the poor, borrowing transfers wealth from the poor to the rich. So countries which cares for their poor and low corruption among politicians see low government debt rates, while countries like USA where politicians are very close to rich people just continues borrowing forever.
On the other hand if we do the same thing with borrowed money demand for goods for poor people will still increase, prices will still go up, just that now it all has to be paid back in taxes or other transfers in the future. So the main effect is that poor people now pay more for goods they pay for with borrowed money and rich people got both interest from the governments loan and can sell their goods to the poor for more.
Another patently false and strange claim...
I am puzzled by where you might have got all of these "theories" from.
Or you could simply spend some time reading the Wikipedia entry https://en.wikipedia.org/wiki/Modern_Monetary_Theory?wprov=s...
Since you now twice called my statements "patently false", without offering any evidence to your argument or even explaining them, I'd like you to provide some sources to support your claims
H
The sources to support my claims are everywhere. You are claiming that I am not providing sources that water is wet.
Just look up information on your country finances and borrowing, these are usually public information. Look up treasury bond, guilt, etc. These are all extremely basic stuff... Econ 101.
Even the simple existence of bonds and bond auctions demonstrates that foreign nations do use financial markets to borrow and that they do have creditors.
It seems to me that it is used to provide a backing to political agendas by those who have exhausted other, failed, ideas. When the UK government (and most governments at this point) increases borrowing to record level to pay for the Covid crisis this demonstrates that borrowing is used to pay for spending.
If the money borrowed goes into spending it cannot be that it is to remove money from circulation...
What I called out as patently false is indeed patently false.
I'd be also wary of any theory that calls itself "modern". That's a classic rhetorical trick to imply correctness and that those who do not agree are not modern...
Today the overwhelming majority of money is digital and producing more doesn't require the government to have enough metal to mint coins. They simply need to change numbers in a spreadsheet
The "borrowing" you're referring to is not a transfer of physical assets. The money doesn't "go" anywhere, because they only exist as abstract representations in a spreadsheet
The government of the UK has chosen to only spend an amount equal to the one removed from selling bonds, but there's is literally nothing preventing them from doing it without that step
If the government want to spend more money than they get in through bonds and taxes, they can just do it
If they wanted to remove money from circulation they would simply issue bonds and not have an equivalent spending at the same time
It's two independent operations, that seems connected if you have a mental model that a government runs a household budget
That the UK base economic decisions on that assumption does not change the underlying mechanics of the transactions or invalidate MTT as a model for describing economical systems
If you can show definitive proof that there is a limitation on the spending power of a government, that can only be overcome by selling bonds or collecting taxes, I'll happily change my position
I'd like to know what evidence would make you change your position?
So having an UBI is not really that different than change in demand from one set of products to another, which the economy should be able to handle even according to classical theories. But people are still rewarded for useful work even in the system with UBI, as usual. In fact, if many people decide not to work with UBI, and you do a useful job, your salary might go up, since demand from all these people for your work has gone up.
Your post taught me something new, which I probably wouldn't have found out on my own. Thank you :)
Why do you say this as a Scandinavian when all Scandinavian are fiscally responsible and don't take on more debt every year? Taking on debt isn't a good thing, you can have currency without having any debt as a nation, they aren't related at all. People arguing for that are just trying to manipulate you into believing they are on your side.
Are you talking about private debt or governmental debt? They are, as stated in my first post, two entirely different things
https://tradingeconomics.com/sweden/government-debt-to-gdp
For example Sweden where I live has reduced their government debt to GDP ratio pretty consistently the past 25 years, and I haven't noticed any problems with it. People saying that we would have problems if governments balanced their budgets are just big fat liars.
In fact reducing national debt through taxation is an effective way of reducing inflation. Reducing national debt does not mean the economy will fail.
The economy is not a binary system ("success", "fail"), so the more interesting question to me, is whether Sweden's economy would have done better if they had chosen a different economic policy
You essentially block yourself of improving yourself by realising you might be wrong about something
It sounds to me like you think of a national economy as a household budget. Taxes are income and welfare is expenses, you take loans from banks, which have interest and needs to be paid back or you get punished
It's a nice and simple explanation, which also happens to be 100% wrong
Government debt have no interest and there's no creditor who needs to be paid back. Whenever the Swedish government prints 100 crowns, it goes 100 crowns more into debt
Whenever it gets 100 crowns in through taxes it resolves 100 crowns of debt
National debt is not the same as private debt. They're two completely different things, that unfortunately have kind of similar names
National debt is simply the amount of the national currency in circulation. To be "debt free", Sweden would have to remove every single crown from circulation, which obviously is not a good idea for the economy
Additionally - the government does not use taxes to fund spending. Swedish crowns are essentially worthless to the Swedish government, because they own the money printing press and could make infinite money if they wanted to
If parents setup a system for their kids, where they get small paper notes for doing chores, which can be traded in for the daily WiFi password, the notes have no value for the parents and the WiFi would work without the kids paying chore notes, but they're still useful because they facilitate the "doing of chores" and have value to the kids because of the "WiFi tax"
In other words the purpose of taxes is to create demand for the currency to match the supply the government is creating by printing more money. By having a demand for the currency, the government can use it to pay people to do "chores" it wants done by simply turning on the money printer, then collecting taxes at a later date
> Government debt have no interest
No it isn't, this is such a stupid dumb lie, why did you fall for this? The big fat liars really got to you. USA paid 500 billion in interest on their government debt last year, "Interest free" my ass.
https://www.treasurydirect.gov/govt/reports/ir/ir_expense.ht...
And about my harsh language, your side on this is like the "smoking doesn't cause cancer" propaganda funded by tobacco companies. Some must have strong incentives to want to increase government debt, otherwise such crap wouldn't be spread around.
Bonds have an interest rate on them, that essentially equate to the government saying "X amount of years from now, we'll be printing this amount of money". It's a roundabout way of simply printing money directly
If a bond need to be realised the government switch on the money printer and hands it out (though it's not really a printer, since it's all digital). If they hadn't issued the bond they could simply create the exact same amount of money and have the exact same amount of "national debt". Sure it's called interest rates, but from the government's side of the table it makes no difference
The government can print infinite money at any time and there is literally no difference in the taxes needed, the level of national debt, or the government's ability to fund welfare whether they issue bonds or not. Bonds are a plan for how much the government expects to print in the future, not loans that requires taxes to be paid
It's your choice to put me in some box belonging to a "side". I don't see myself that way and you telling me which side I belong to is not really going to change that. It does however make me sad to read your message. I think the world already has too much conflict and the only way I can see out of it is with dialogue, openness, and empathy
Putting people in boxes, on a "side", or assigning them a label prevents all of those and will only create more conflict and more frustration
I'm guessing you're scared of the concepts in MTT, since you're comparing it to the tobacco industry.
My personal experience is that understanding people you disagree with is the best way to move past being scared. I hope you make a choice for yourself to approach disagreement in a more constructive way for your own sake
I'm fine with you having a different worldview than me, but I'm not really interested in hearing what you have to say if it's not done in a respectful dialogue, so I'm not interested in discussing this further with you
Exactly, and bonds are included in government debt. Hence this statement is wrong:
> Government debt have no interest
Also this statement is also wrong, since government bonds aren't money in circulation:
> National debt is simply the amount of the national currency in circulation.
Another proof about this statement being wrong: Sweden has currency worth just 1.26% of GDP in circulation, but about 35% of GDP in debt. If what you said was true that would be an impossibility. You are trying to spread falsehoods and even contradict yourself, that is a fact.
The responses to the covid lockdowns, which are incredibly expensive, were only considered because they were one-offs and time-limited.
If payments are restricted to a minority, the poorest, then it boils down to what already exists in most European countries and the question is then "what's new?"
In general UBI proposals are ideological solutions to ideologically-constructed problems. They are not realistic nor practical and thus thin on practical considerations and hard numbers.
That's not an ideologically-constructed problem.
It's pure logic. What is ideologically-driven, in my opinion, is claiming that "other jobs will be created, so no need to worry". Which implies, on the other hand, that the poor deserve being poor, due to their own negligence, lack of education, or laziness. We don't need to care about them. We provide a capitalist system which rewards the brave and the competent, and it's meritocratic. That is pure ideology, not based on reality.
You do not put forward any argument to my previous comment, and in fact illustrates my point.
At the moment there is an economic crisis due to the covid pandemic. This is a specific, time-limited issue and welfare has stepped up to help people, at an extreme cost. This is not sustainable and only considered because it is an emergency in nature.
If jobs dry up due to automation then there will indeed be scope to discuss UBI based on taxing 'robots' (so a clear and plausible way of financing it) . This is not what UBI as proposed now is about.
No-one has claimed that the poor deserve to be poor and/or do not deserve help. There are plenty of welfare schemes in Europe and quite a few of them result in effective UBI, but only for the poorer who actually need it.
There are smart ways to do it though, such as doing it in a second-tier currency that buys only essentials or directly in terms of food, shelter and education. Just a free STEM/business education will go a long way if we can find some way to keep students engaged and committed to put the effort to actually learn.
Based on the last year, you can conclude nothing because people, countries, and politicians were just panicking and trying to survive on incidental handouts which don't allow for planning a future. That's not basic income.
Universal basic income would be living in the certainty that no matter what you will always have enough to take care of yourself and your family without obligations to do anything that you don't want to do. This is why libertarians like the idea because they don't agree being told how to live their lives by governments.
UBI leads to different life choices; including maybe not spending your career working double jobs cleaning and flipping burgers in double jobs while still not making enough to cover rent, insurance, or the ability to retire. This kind of poverty exists in some places that are filthy rich (i.e. the US).
But it is kind of an anomaly among other similarly wealthy (and even a lot less wealthy) countries. Elsewhere, it's basically what a lot of us already have except it's still surrounded in rules and morals that dictate that you have to live a "productive" life.
IMHO UBI could just be formalizing that status quo. We're basically taken care of anyway and now we simply take care of everyone unconditionally. It's not that massive of a change once you accept that there's a cost per person in each country for sustaining them that these countries are basically already paying for. But just in a really convoluted way. Making that less convoluted would probably result in some savings and allow some of the poorest people in our society to get a grip on their life or make some different choices. Some people would qualify that as fairness.
It could be as simple as if you don't work you receive X; no questions asked. If you do work, you also receive X and you now urn Y-X, where Y is your total income. If you get unemployed, you get X+benefits from your (optional) unemployment insurance. If you get sick, basic health care is part of your basic income but you can insure for benefits (optional). The hard part is establishing a value for X that is high enough that it matters and low enough that we don't destroy our economies.
It would basically mean labor gets a lot cheaper and simpler for companies. Of course UBI has to come from somewhere. Like for example corporate, income taxes and part of what used to be separate insurances for e.g. unemployment, state pensions, etc. We can still have those insurances except that they would now be about insuring the difference to UBI so the cost would be lower. And we can also make those optional since UBI would be enough, thus making everything extra something you'd opt in for.
For, many countries, this is effectively what they have already except that they tend to have these hugely inefficient bureaucracies to try to get you back to work. Which in the case of e.g. Spain with double digit unemployment numbers tends to be a bit futile. Hence, the discussions on UBI are a bit further there.