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Comment by twblalock | Hacker News Reader

This should be the nail in the coffin for UBI. The consumer demand created by the last round of stimulus is nothing compared to what UBI would create, and that stimulus is clearly a contributor to the inflation we have been seeing since last year.

Larry Summers was right about the stimulus and the Fed, and quite a lot of the economists who missed this are guilty of wishful thinking. They let their political preferences blind them to the consequences of the stimulus package. Larry Summers is right about UBI too.

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UBI != stimulus. The vast majority of this money went into state and local governments which led to infrastructure projects, expanded social programs, etc. which have large ripple effects in the economy. I'm not really on one side or another regarding UBI, but it's faulty to compare large scale government spending with UBI. The demand is in different places. It's also faulty to lay this strictly at the feet of stimulus when the seismic shift in the global economy and workforce also play a role.

The stimulus was implemented by the same people who will implement the UBI. It is obvious they don't understand the UBI theory, or they'd have implemented the stimulus differently.

They also aren't even admitting that their policies are the cause. In the linked article, the white house has incorrectly identified policy failures as evidence of Putin's influence US economy. Which is kinda off, Russia is a global minnow compared to the inflation that is going on. Doesn't sound like someone learning the theory correctly based on their mistakes.

There is evidence that while what you want != stimulus, what is most likely to get implemented just got nailed in a coffin in the minds of people who like evidence.

The theory that an increase in the dollar supply will drive down the price of a dollar (as denominated in tons of grain) is not hard to understand, and there is no shortage of educated people in Washington. I am afraid to say what we are seeing is a great example of politicians deflecting the blame for a crisis they themselves engineered.

Are you aware of the huge wealth transfer that happened due to the PPP loans that a lot of them have been forgiven?

The best thing is, the database is public. I know so many people who got dozens to hundreds of thousands of dollars and got it forgiven by the govt.

The stimulus is a distraction. We had the largest wealth transfer from the working class to the rich during the pandemic and they've got us squabbling about the small stimulus checks.

Link to the database? Is there an api or documentation?

https://projects.propublica.org/coronavirus/bailouts/

Yeah, I checked on that website and my (somewhat shady) friend somehow got $42k PPP money, his wife got $41k and his mom got $40k.

None of them have businesses or employee paychecks of any kind to protect. I do wonder how common this is and if any of them will actually have to pay this back ever. (I also feel like a little bit of a sucker working for a living...)

Does it show it as loan forgiven? If so nope!

But yeah people blaming the stimulus checks which literally directly went back into the economy are just...unaware of how much money was printed and distributed to large companies and shady people during the pandemic.

> Does it show it as loan forgiven?

Here's what it shows...

Loan Status: Not Disclosed

Date Approved: (ranges from "Jan. 27, 2021" to "May 5, 2021")

Business Type: Sole Proprietorship

Jobs Reported: 1

Business Age: Existing or more than 2 years old

Where applicants said the money will go: Payroll (100%)

Any guesses on how this works out for him?

I'm gonna guess that's gonna be partially forgiven.

I was pre-approved for 50K as well. Fucking lol what a mess.

> This should be the nail in the coffin for UBI. The consumer demand created by the last round of stimulus is nothing compared to what UBI would create

Unlike deficit-funded stimulus, paid-for UBI is redistributive and this has less of an inflationary effect (not none at all, because marginal spending and where it is directed differs across the economic spectrum, and downward redistribution has some stimulative effect.)

> Unlike deficit-funded stimulus, paid-for UBI is redistributive and this has less of an inflationary effect

Unless you manage to replace Congress with people who fully buy in to the vision of pure UBI, that's not going to happen. UBI, if it ever exists, will be implemented by the politicians we have.

This is a gross misrepresentation of UBI.

Amongst other reasons, UBI would only be given to individuals. Unlike the stimulus, most of which went to industry and government.

> Unlike the stimulus, much of which went to businesses and governments.

However, business and governments didn't drive up the price of macaroni. However, the $4500 the government gave my family probably did.

Money circulates.

Yes, but Econ 102 explains the importance of money supply on prices.

This is obviously about money supply. And UBI is not necessarily an increase in money supply (as it’s usually paid for by taxes and reduced welfare programs), whereas a government stimulus during an economic slowdown is, nearly by definition, an increase in money supply via government printing.

(And the relationship between money supply and inflation would be covered in 101, not 102)

Wait so let me read this properly:

People bought food and therefore cost of food went up?

So, following this logic, we have enough people who are regularly not getting enough food that when they can, it kills the economy?

I...honestly if that's the actual reason this is happening then it seems like we should be looking at seeing how do we make it so everyone has food and produce food with that metric. Not with a lower metric and be fine with people hungry.

Fascinating.

No, that is not at all what I said.

Giving everyone more money for the same supply of goods is the very basis of inflation.

In Monopoly, if you give 1 player $500 they get a big advantage. If you give every player $500... nothing happens other than all auctions go up.

> I...honestly if that's the actual reason this is happening then it seems like we should be looking at seeing how do we make it so everyone has food and produce food with that metric. Not with a lower metric and be fine with people hungry.

This is exactly the point. If your goal is 0% inflation, the supply of money needs to be tied to actual economic growth. If the economy makes less stuff (like, during a pandemic) you actually need to find ways of taking money out to keep prices stable.

Maybe not for UBI, but definitely for Modern Monetary Theory.

2 years ago, Stephanie Kelton was doing lectures about how fears of inflation are unfounded. Now she is reduced to sharing every conspiracy theory about price fixing.

Even if you believed that there was some amount of free money the government was able to find before reaping the penalties of inflation a) it ended up being a lot less than they promised and b) high inflation is much more painful and politically toxic than people remember.

> Maybe not for UBI, but definitely for Modern Monetary Theory

MMT: “The only real constraint, and the one from which false fiscal constraints are a distraction, of government net tax and spending policy is monetary impacts like inflation/deflation, so government spending and taxation debate should center monetary conditions and considerations, not fiscal balance“

(For sake of argument leaving off debate over accuracy of this characterization): massive inflation resulting from monetary effects of fiscal stimulus

Commentators: “This is why wer should disregard MMT!”

Wait, what?

Many of the chief proponents of MMT are now spending their time arguing that current inflation is not a result of net tax or spending policy. Kelton has even been advocating for things like price controls and micromanagement of supply chains. My point is that their own model implies that now is the time for a tax-hike or spending controls but none of them want to admit it.

They're right. Current inflation is not a result net tax of spending policy. Current inflation is the result of sabotaging the supply chain (due to Covid, not saying it wasn't justified) + Russia attacking Ukraine ...

That doesn't really change the reaction central banks/MMT/all of finance should have. It doesn't matter what causes inflation to start rising. It only matters that we don't get it feeding back on itself: we must have inflation ... without raises (because demand for goods needs to go down).

You're of course right that it'll be politically toxic in the extreme. So they will try everything in their power to avoid doing that.

> current inflation is the result of sabotaging the supply chain

This is an often repeated misconception (signal boosted by the White House, no less), but a lot of the purported supply chain disruptions are a result of consumers flat out just consuming more stuff:

https://www.businessinsider.com/americans-spending-goods-ver...

A chip shortage can explain the cost of a car going up, and a global war can explain the cost of gas or wheat. But why is the cost of domestic beef going up? Or a cubic yard of soil?

The old Monetarist explanation is clearly the right one - there is too much consumer money in the economy. From both stimulus (much of which was initially good), but clearly interest rates have been too low for too long.

You think this to do with the stimulus check? I haven't heard that.

What about fuel? The billions that have been pumped into the economy by the government as covid measures?

Re UBI, its coming. But not until we have a CDBC. And it will come with conditions - be a good citizen. (Points will be deducted if you scream on your balcony when you're locked in)

> The billions that have been pumped into the economy by the government as covid measures?

That is the stimulus, and a lot of it was given as direct payments to individuals without means testing.

No - I'm talking about money given to vaccine companies, media companies, hospitals, emergency measures, etc, etc. The stimulus was small by comparison.

There are plenty of countries that are seeing inflation and didn't get any stimulus money. The official explanation blaming the war also happens to be the better fit temporally (you'd have to explain a two-year lag) and sectorally (why are energy prices and energy-intensive food prices rising sharply, when income effects would be seen more broadly, or focussed on luxury products (i. e. everything except food, energy, and housing))

> The official explanation blaming the war also happens to be the better fit

Inflation has been high for nearly half a year and the war only started 6 or 7 weeks ago. The timing doesn't line up.

> This should be the nail in the coffin for UBI. The consumer demand created by the last round of stimulus is nothing compared to what UBI would create

UBI or the stimulus checks are nothing compared to interest rates held to record lows for a record amount of time. Basically, what we found out is that welfare for the rich (via low interest rates that the poor can't take advantage of anyways) does not work.

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