Since your analogy was not analogous to my proposal, I could not address it in that context, I did so in the comment that followed.
While taxation is the typical funding scheme for a basic income, it is also the most abhorrent and hated, for obvious reasons, and fails to properly enfranchise all in society and the market.
The most successful example of this impossibility is the post WWI German Mark, that worked out pretty well.
There obviously is such thing as a free lunch for the heirs of those who took possession of the Earth, generally by violence or intimidation.
We live with those risks now, having just lost some $24 bn by threatening to default on our debt.
Two willing parties are required to make a contract, this is the basis of a market system. The flaw in this system is that not all are enfranchised in the market, so not all are equally willing parties. The disenfranchised are at a significant disadvantage at negotiations, I hope this is obvious.
We seem to agree that sufficient wealth exists to provide a basic income, if that can be accomplished by enfranchising each individual, changing the status of the poor from beggar to citizen, that approach should be pursued over one that maintains the status of beggar, because (and I apparently can’t say this enough) personal sovereignty is the key to prosperity and a market system can not function morally or ethically with out it.
It is with some incredulity that I ponder your understanding and acceptance of the Fed financing real estate and buying bonds with imaginary money, but claim that an individual doing the same makes no sense.
A basic income in exchange for what? If income is not exchanged for some good or service, it’s just printing paper.
I THINK what he’s getting at here is the commons, i.e. anything that’s in the public domain and owned by the government or governments of the world. Anything that’s privately owned or owned by a corporation, etc, would remain owned by them, but anything that’s part of the commons (say, the lands controlled by states or the Federal government) would be pooled together and would make up his currency, divided among all citizens (or I guess the world population if you could get it all into some sort of fantasy common pool for everyone), and the value of that currency would depend on the resources of the pool. Or something. I suppose that, once you pooled it all together and then divided it among the people, parts of it could be sold off, or the exploitation of it could be worked out with corporations and the revenue generated would, I guess, go into the fund or whatever that’s paying everyone.
Not when your plan for alleviating poverty involves printing a lot of bank notes. Then, the distinction between wealth and currency is crucial.
[QUOTE=tralfamadoran777]
As accumulated excess is not particularly relevant to a basic standard of living, agreeing on a definition of wealth is obviously needed for meaningful exchange.
If secure capital is not wealth, and bank assets are largely not wealth, then I am at a complete loss.
[/quote]
They only have value because of what they can be exchanged for. The currency itself is worthless, except as paper.
[QUOTE=tralfamadoran777]
My strawman note at the suggestion of just giving large sums is specifically because of the secured nature of the proposed shares. Capital that is secured produces income, while, as you no doubt would observe, distributing arbitrary sums may or may not, and in the case of the poor, likely less astute population, would simply be lost to the wealthy and unscrupulous. (This is the basic income vs basic grant debate, I agree w/ Carol Pateman Redesigning Distribution: Basic Income and Stakeholder Grants as Cornerstones for an Egalitarian Capitalism | Verso Books)
But the creation of fiat capital that can not be squandered produces a flow of income, that produces demand, where previously there was only need or want and losses are restricted to cash on hand. I think a very large number of humans would believe this to be wealth, obviously not great wealth, but what value would be placed on personal sovereignty?
My perception, and every definition I found, seems to be at odds with yours, but I can’t be certain and would be happy to direct a response toward what ever definition you prefer.
[/QUOTE]
A NIT does all that, without hyperinflation or people refusing a new currency.
Monetary and exchange value, as opposed to inherent value. No one can eat, or shelter under, or do anything useful with currency, other than exchange it for things that are useful.
I missed that, and responded to it above. Apologies.
It’s the only funding scheme that would work, however. It allows you to redistribute wealth. You can’t create wealth through government fiat (though you can make wealth easier to produce, though infrastructure, the rule of law, free trade, etc), but you can reallocate it.
Unless your plan is to use hyperinflation as a sort of tax on the wealthy, since it affects those with a lot of cash, or those on a fixed income, worth than those in debt or the cash-poor. That’s inferior to taxation in every way, though.
Why would a negative income tax not enfranchise everyone?
[QUOTE=tralfamadoran777]
The most successful example of this impossibility is the post WWI German Mark, that worked out pretty well.
[/quote]
The cause of the hyperinflation of the mark was printing lots and lots of them to pay off war debt. It had nothing to do with taxation, and indeed is far closer to your scheme than mine.
[QUOTE=tralfamadoran777]
There obviously is such thing as a free lunch for the heirs of those who took possession of the Earth, generally by violence or intimidation.
[/QUOTE]
Nope, hence the need for the violence and intimidation, and then the property taxes and such.
Risk is never zero, but currencies issued by and backed by the full faith and credit of stable governments of wealthy nations is as close to zero risk in currency as there’s ever been.
[QUOTE=tralfamadoran777]
Two willing parties are required to make a contract, this is the basis of a market system. The flaw in this system is that not all are enfranchised in the market, so not all are equally willing parties. The disenfranchised are at a significant disadvantage at negotiations, I hope this is obvious.
[/quote]
Can you define “enfranchised”, as you are using it?
[QUOTE=tralfamadoran777]
We seem to agree that sufficient wealth exists to provide a basic income, if that can be accomplished by enfranchising each individual, changing the status of the poor from beggar to citizen, that approach should be pursued over one that maintains the status of beggar, because (and I apparently can’t say this enough) personal sovereignty is the key to prosperity and a market system can not function morally or ethically with out it.
[/quote]
NIT. Vastly superior to runaway hyperinflation.
[QUOTE=tralfamadoran777]
It is with some incredulity that I ponder your understanding and acceptance of the Fed financing real estate and buying bonds with imaginary money, but claim that an individual doing the same makes no sense.
[/QUOTE]
It makes sense, it’s just foolish to expect anyone to treat the full faith and credit of the United States government and the full faith and credit of Bill down the street equally. The market would price their respective currencies to reflect this.
So I still own it, but the state is borrowing against it. Since everybody else owns it, and is (somehow) deriving income from it, I no longer have to pay taxes, right? Do I have to pay the mortgage? I only own a six billionth of it.
And can you be clear about how exactly it will be monetized? Where does the capital come from? Since everyone owns everything, who do I loan my share to, or borrow a share from, and what benefit do I receive that I would pay money for?
So I have the choice as to whether or not I participate in this? Because above you said the state owns my house because I might default on my taxes, and therefore homes (and businesses and so forth) are all going to be included in the commons. If I opt out, does the state still own my property?
The poor are spending money on their basic needs now.
I am still not clear on how this is supposed to work. How does dividing up the ocean and the air create income for the poor?
Regards,
Shodan
I suggest that in an actual physical social contract, each person would receive a trust fund (to provide the basic income), and the rights enumerated in the Universal Declaration of Human Rights, in exchange for his or her pledge to obey law and the stipulation that the trust must be invested in a highly regulated financial institution to provide capital for secure investment, largely government bonds and real property.
Of course I understand that people are compelled to obey law, but an actual agreement to do so, freely entered into, is of great value and provides a base for personal sovereignty.
A basic income in general is thought of as a social security or welfare program, this is a very good overview: Universal Basic Income
While current activity proposes creating systems isolated within a country, I believe that to properly address poverty, need, and the relationship between the governed and the governments, a global system is required.
Currently in the U.S. the Federal Reserve is buying large amounts of government bonds with money they pull out of thin air, this is the way wealth works now, debt is an asset to be owned, traded, loaned or sold.
The only things that would change in your life: You would be offered a contract (similar to this comment 01-02-2014 10:54 PM) if you choose not to accept, nothing changes, but you would likely experience some prices going up.
If you accept, you will deposit your trust (that comes out of thin air, just like the Fed) in a local financial institution approved to manage it. (this is where the income comes from,) the bank will use that trust to buy bonds, and other secure investments, and you can refinance your house or farm with part of it, and you will receive the dividends.
Otherwise nothing changes.
I haven’t suggested you pay money for anything.
When I said that the government effectively owns your house, I meant now. You own the right to possess your house, but if you don’t pay your taxes the government takes it from you. This will not change and has nothing to do with the proposal.
If that were true, there would be no poverty.
You seem attached to the divvying. Collective ownership does not involve divvying.
When one purchases stock in a company one does not receive the fax machine, resources are pooled to provide capital, stock is the debt one owns.
We claim the planet, but one 6 billionth of the earth is too big to put in your pocket, so we make symbols for that, decide what it is worth and deposit it in the bank. While this may seem crazy, it is far less crazy than what we do now.
The symbols for deposit would be fixed at the number of people times one share, while the Fed has no restriction on how much money it can pull out of the air, the shares of the earth are based on the value of the planet that is the source of being, the Fed’s debt is based on a promise, but if this system were in place they would have to borrow from us.
I never suggested printing anything, and specifically noted that the value of the share would be converted to “coin of the realm” when deposited, just like the imaginary money federal banks issue, so any resulting currency in the system would be indistinguishable.
That is kind of the point, but again, only coin of the realm in circulation.
An NIT is certainly nothing but welfare, and guarantees a minimum income, that is all. It also comes with the welfare trap, in that if Bob is working for minimum wage and taking home $12,000 a year he is poor, will receive nothing from an NIT, and would be better off financially if he stays home and doesn’t burn gas.
Hyperinflation can not be proved, but since the influx of large amounts of capital into the system does not inevitably cause price increases, and law is commonly used to prevent the price gouging that does, I think this concern is overstated.
No international currency in circulation.
Any number of funding schemes could provide a basic income guarantee, though if the judgment of working depends on ending poverty, none will work.
Government fiat is the basis of U.S. and most of the world economy, so that argument lacks sufficient backing.
The inflation one could reasonably expect from the recognition and enfranchisement in the natural wealth of the planet would be from increased labor costs, and increased demand. It is rather disingenuous to suggest that demand could increase from anything other than increased purchasing power, and increased purchasing power is something you state would not occur.
Inflation is the one concern that is valid though, but the same concern would be voiced against a NIT or any other funding scheme, and inflation is something that can be artificially controlled.
The world economy is a market system, a capitalist system, a vote in a capitalist system requires capital. The way people spend their incomes, and choose to conduct their lives is their vote. NIT is not capital, it is a means tested hand-out.
Freedom does not exist without personal sovereignty, capital and the income derived from it provide the freedom to refuse inequitable contracts without the coercion of hunger. NIT has the added expense of individual means testing, the stigma and accompanying loss of self respect of welfare. This is not freedom or inclusion.
NIT is a free lunch, high profits from passive investment in corporations that exploit the natural wealth around the globe is a free lunch protected by the U.S. military, via our taxes.
It is not Bobs ability to repay a debt at issue in this case, though, it is the ability of the investments authorized to be made with Bob’s capital to provide Bob with a dividend.
It appears Human Action is correct - the basic income is funded by printing up banknotes. But then there is no need to do anything at all about the commons - the government can inflate the currency at will. It’s not often a good idea, but it can be done.
Why does anyone need to agree to anything? What does that accomplish?
This whole notion of common ownership and borrowing somehow against the commons doesn’t seem to be necessary at all. The government just creates a bunch of money and hands it out, and we all get rich.
The value to who? I don’t understand what this means.
If everybody already owns everything, how do you redeem your share? Who do you sell it to?
Regards,
Shodan
I suggest learning basic economics.
“Obeying the law” is not “generating wealth”. And how is all this government debt financed and where does this “real property” come from?
There is no difference between the government printing banknotes, and the government issuing direct deposits that are convertible on demand into banknotes.
Having the deposits be in extant currencies is actually worse, because there would no longer be the option to not trade in the new currency.
Which you will be hyperinflating. Bad idea.
Yes, people above the subsidy level don’t get paid the NIT. That’s the point of welfare, it’s for the needy. People below the subsidy level have an incentive to work, because ever dollar of wages only costs them fifty cents of NIT payment.
The Swiss had a proposal they were about to vote on, which paid a basic income to everyone, regardless of income. That’s just wasteful, though, since the well-off people are just going to be taxed to cover the less well-off’s basic income, giving them the basic income and then taking it back through taxes is inefficient.
:dubious: Yes, it can.
You’re not adding capital, though, just currency, a sub-set of capital, which is a fungible commodity. Its value depends on how much of it there is; if you pour in new money, all the money in circulation loses a corresponding amount of value.
Laws against raising prices will simply cause people to stop selling goods, since they’ll be losing money on every transaction. Everywhere will be Zimbabwe.
Just taxation, I’m afraid. Wealth can be redistributed, it can’t be conjured from nothing.
No, the basis of the economy is productivity and trade. Yes, the government can increase the money supply, and as long as they are careful about it (for instance, keeping the inflation rate around the growth rate of the economy), no harm is done.
You’re asking that, instead of being careful with it, they create billions or trillions of new dollars.
So, you aren’t just trying to hammer the rich. That’s something.
Not from your scheme, it wouldn’t. Again, when you add more dollars, each dollar is worth less. You aren’t increasing purchasing power.
Nope. An NIT takes money from one group of people, and gives it to another group. Total money supply is unaffected. Where’s the inflation there?
Only by managing the money supply. How is money being taken out of circulation, to balance all the money pouring in?
Not a helpful definition, at least to Westerns, who are already free of slavery, and endowing with the franchise, and civil privileges.
You just said money was capital, now you’re saying money every month isn’t. Huh?
Making the welfare universal, as stated above, might salve self-esteem (though I doubt it, people are smart enough to know who’s paying in and who’s collecting), but it’s profoundly wasteful, since you’re literally paying people money then taking it back. Or, in your scheme, paying people money which is worthless, and renders all the money they already had worthless.
You don’t seem to understand the term. An NIT isn’t a free lunch, it’s paid for with taxes. Things that are paid for in taxes, like the military, aren’t a free lunch, because they’re paid for with taxes.
Right, the other odd aspect of your scheme. If I understand you, the money isn’t given directly to citizens, it’s conditional on their investing it somewhere, then they collect a dividend, if the investment is profitable?
Of course there is, those bank notes are not cheap to print, and we both know that the amount of currency in circulation is small and fairly stable, so references to it are a distraction.
Perhaps we try an analogy.
Suppose a foreign source of wealth produces $300 tn, offers to invest that in the U.S. and asks for a return of 1.25%?
Do we tell them to go piss up a rope, or accept their offer and let it destroy our economy?
Agreement is the basis of society. Agreement and contract are synonymous. Without contracts there can be no commerce, no trade, no civilization. These things are accomplished only by agreement.
Aside from getting rich not being the point, you have obviously read Human Action’s comments, realize the flaw in that notion, and are simply being argumentative.
I love you anyway, and I like your hair like that.
How valuable is the planet to you?
How would you feel about being evicted?
I maintain that the planet surely must be worth a million dollars to each person, considering the alternative.
Given the choice between paying a million dollars or being thrown off the planet, I would certainly get thrown off the planet, since I don’t have a million dollars.
“Of course I understand that people are compelled to obey law, but an actual agreement to do so, freely entered into, is of great value and provides a base for personal sovereignty.”
You dispute the validity of this statement, so I suggest that you learn basic Psychology. For this discussion, a review of Maslow’s hierarchy of needs should bring you up to speed.
You obviously have gotten through the parts about pissing people off for an argumentative advantage, so I’m sure it won’t take long.
Nice shirt.
Oh, disobeying law destroys wealth, so the absence of that destruction would at least maintain wealth, and with the efforts of destruction moved to the other side of the equation, increased growth is inevitable.
A basic grant has been proposed by a number of respected economists, as an alternative to a basic income. The major flaw in these proposals is that the people most in need of some social security are most likely to lose this grant in fairly short order.
The odd aspect of universal enfranchisement is a mechanism to prevent this from happening, by guaranteeing the security of this capital.
Also pursuant to the security of this capital is the requirement for regulations governing prudent secure investment of the capital.
I understand that hyperinflation has happened, the proof that can not be made is that hyperinflation would inevitably follow from increasing world capital by maybe a factor of two.
Firstly, hyperinflation has only occurred with a particular currency, relative to all others. If this influx of capital is distributed proportionally to all currencies, while none are in the sort of stress of previous examples, how can we reasonably assume that outcome?
Thanks for entertaining the notion, and some sort of fantasy common pool for everyone is exactly what I imagine, very much like a federal reserve bank, except that instead of a pile of gold or something sitting in a big box that you need to guard, the value behind the fantasy pool is the planet we live on, and that we need to guard.
The implementation would be much simpler than you seem to imagine, but obviously would not be simple. The banking infrastructure currently exists, for the most part, and I’m sure would be the fastest to respond to the need. Aside from deciding on specific investment regulations, and I assume a bunch of computer stuff, the only other obstacle I can think of is the unlikely task of convincing the people to demand it.
As others have rightly noted, currency is just a method of keeping score, a number on a balance sheet.
If we stand back and look, the development of the world (so far as human development and accomplishment are concerned) is far from what we could describe as its potential apex.
Can we quantify that, could we say that humans could develop this planet twice as much as it currently is, ten times? We haven’t even got floating gardens around our equator, or stretched a membrane over the deserts to claim them as farmland.
So when I suggest that this physical object in the universe that we rely on completely for the survival of our species, for the survival of all the species, is worth $5.25 quadrillion more than the declared value of things here, and add the new part in equal pieces to lines on ledgers assigned to each of the adult people, I do not believe that the planet will be remotely overvalued.
Thanks again, and I feel deeply in your debt, for listening, Stephen
I hate being so slow, but these also occurred to me, later of course:
"Inflation: Of all of the regularly stated objections, the only one that carries any significant economic weight is the threat of inflation. It should be fairly easy to understand how this might happen.
Take rent for example: If the idle rentier class is aware that their tenants are in receipt of a monthly payment designed to meet their basic human needs, it is clearly in their financial self-interest to then massively increase the rental charge so that it takes the entire amount (and probably a bit more for good measure).
An example of this kind of rent seeking behavior can be seen in the UK childcare sector after the introduction of Child Tax Credits. The childcare providers knew that working families were getting a payment from the government to cover the cost of childcare, so they raised the cost of childcare so much that the UK now has the most expensive childcare in the developed world (33% of family income, as compared to the OECD average of just 13%) meaning that the Child Tax Credit allowance is nowhere near enough to cover the inflated cost of childcare.
If Universal Basic Income is introduced, then it must be done with a package of anti-inflationary measures (such as rent caps) or the value of the payment will soon be eroded away through the rent seeking behavior of the idle rentier class." Thomas G. Clark, AAV
And…
If all currencies are proportionally invested in the same international currency, the quantity of the international currency is fixed (relative to the adult population), and the proportion of investment in the international currency is large, the fixed nature and relative value of the international currency will necessarily stabilize all currencies. (this is why so many countries buy U.S. bonds, that and getting stuck with excess dollars)
So if all currencies are significantly backed by the same thing, what have they to hyper-inflate against?