The world’s per capita GDP (PPP) is about $12k. That’s just above the poverty line in the U.S. for a single person. Going forward, wealth will increase and populations will stabilize and possibly decline, so things should get a teensy bit better? Maybe some trickle down.
The cost of printing has nothing to do with it. You are proposing massively increasing the amount of currency in circulation.
When you say they “produce” $300 trillion, do you mean they print out that many banknotes, or they actually have that much wealth to invest?
You’re guaranteeing low returns then, and you can’t eliminate the risk of loss of principal.
You aren’t increasing world capital, you’re increasing currency. If you can’t distinguish between the two, then you’ll never understand the objections to your plan.
Second, a factor of two? You propose that each person’s basic income come from the dividends on a low-risk investment. Say that return averages 2%. To get $20,000 a year to live on, the principal needs to be $1,000,000. Per person. That adds up quickly.
[QUOTE=tralfamadoran777]
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?
[/QUOTE]
By considering what inflation is and what causes it. If you double the amount of currency, you halve its value. Your scheme would help debtors and people with very little money, it’d devastate lenders and anyone with any money, or anyone who depends on a fixed income (like an annuity), and wreck commerce.
So, is the currency redeemable for a square yard of ocean? In what sense is it backed by the planet?
If you dilute the currency, then forbid merchants from raising prices, then you’re preventing anyone from making money by renting property, selling food, or anything else, because the dollars they are taking in are now worth less than they were pre-dilution. For instance, if a landlord was charging $500/month, then the amount of currency in circulation doubled, he’s now receiving $250/month value. People won’t operate at a loss, you’ll have a black market that reflects market prices, or merchants won’t operate at all, since their choice is between operating at a loss or going to prison.
Again, TANSTAAFL: you can’t pass a law against supply and demand.
[QUOTE=tralfamadoran777]
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?
[/QUOTE]
Setting aside the extreme difficulty of getting 190+ nations to go along with this…
Itself. Anyone who already had currency will see it lose value. Since most people have at least some money, the only winners in your scheme are, again, people with a lot of debt (since they can pay back the expensive dollars they borrowed with cheap, diluted dollars), and people who are flat broke (since having cheap, diluted dollars is better than having none at all). And they aren’t winners in the macro sense, as the economy they live and work it will be trashed.
I must not have made myself clear. AFAICT, if I agree to a contract, the government creates some unspecified amount of money and gives it to me, I invest it, and live off the returns. Is that close?
What I am asking is, what does the government gain by having me agree to the contract? I then have to obey the law? I have to do that anyway.
I don’t know what you mean by “personal sovereignty”, and I also don’t see what Maslow’s needs hierarchy has to do with people agreeing to do something they have to do anyway.
Yes, I have read Human Action’s comments, I see no flaw in my arguments, and I don’t see what my hair has to do with anything.
Either the government simply creates the money by fiat, which is inflationary, or it gets it from somewhere. I thought the idea was to borrow from shares of the planet, or the commons, or something. If the government is going to simply create the money by fiat, then you need to address Human Action’s point about inflation and the difference between capital and currency. If the government gets the money by selling shares in the commons, then please explain how that works. Who do they sell to, and where do the buyers get the money? Especially since you claim that this wouldn’t affect ownership at all.
I don’t know what this means. Who is going to evict me from the planet if I decide the planet is worth more money than I have?
Or suppose I decide my share of the planet is worth ten cents. Who do I give the dime to, and how do we know that is enough?
Regards,
Shodan
Just to follow up, I found Thomas G. Clark’s blog that the above is from, and he’s clearly proposing that basic income be funded through taxation, and not hyperinflation:
I object to some of his reasoning in that article, (though, as noted, I support basic income in the form of a NIT), but he at least got that right.
Absolutely, in this case it would still be the same constant stream of all wealth upward, but this is the trickle down, that has been missing from the system.
What do you think of the hypothetical: What if an alien investor offered to invest $300 tn in the U.S. asking for a return of 1.25%, do we accept the offer or not?
[quote=“Shodan, post:244, topic:676127”]
I must not have made myself clear. AFAICT, if I agree to a contract, the government creates some unspecified amount of money and gives it to me, I invest it, and live off the returns. Is that close?
That is close, except that the government recognizes a specific sum, and living off the dividends is not the intent unless that is needed. Most would simply use it to pay part of their taxes.
The government gains citizens with freedom and a significantly greater likelihood of achieving self actualization.
Sovereignty says, “You can’t tell me what to do,” kings do this, and governments, personal sovereignty is when Margaret can say that.
Agreement is to freedom what coercion is to tyranny. This level of freedom is necessary to fulfill higher needs.
You made an argument? My observation was that the notion of printing large amounts of money to make people rich was a flawed concept, as explained by a comment you had already read.
The idea is to provide an accounting of ownership of the planet, that all may be enfranchised.
I have not denied the likelihood of some inflation, and have noted that. I have addressed the assertion that hyperinflation would occur, and my logic has not been accepted.
This response was an allusion to the experience of the native Americans, and all disenfranchised persons throughout history, and to illustrate the value of the planet, which to each of us is equal at least to the value of our lives.
Value acceptable as equivalent.
Guaranteeing low and secure returns is essential. I find some consensus that greater than 2% growth rate is unsustainable, so suggest a system that would work within that restriction.
Well, you could enlighten, but I disagree with your assessment.
The added “what ever” would be specifically allocated to investments, and not to be spent at the grocery, this is the nature of capital. If a person has a bunch of currency, and buys bonds with it to finance their whatever, it is capital, unless it is the proposed currency?
$5.25 Quadrillion give or take, (I was shooting for 1.25%.)
Indeed, specifically what conditions, and would the proposed actually create them?
Double the currency, halve the value; Even if, is a one time 50% reduction in value hyperinflation? If this halving is universal, where is the motivation, the need or inevitable force to cause everyone to go out and double their prices, or to pay artificially inflated prices.
$5.25 Quadrillion would gobble up pretty much all secure investments, especially at 1.25%, so capital currently invested in that way will be eager to compete with businesses inclined to raise prices. Neither of us can say with absolute certainty.
By the full faith and credit of society. And in the highly unlikely event of this happening, the further agreement to freeze prices for a time is a not unreasonable to expect.
I’m unclear what you mean.
I already have: a negative income tax.
Here’s a start:
Money is a medium of exchange, and nothing more.
Financial capital exists, but your plan isn’t adding financial capital, it’s diluting what exists to the point of worthlessness.
Keep that figure in mind.
One definition is when inflation exceeds 50 percent in a single month.
Would the proposed conditions qualify? Absolutely. In 2008, total currency in circulation was estimated at $4 trillion. To this, you propose adding $5 quadrillion. Are you beginning to see the problem?
Yes (see above definition), but you aren’t proposing doubling circulating currency, but rather increasing it by a factor of 1312. Really putting the “hyper” in “hyperinflation” there.
Ask yourself: why do people accept currency in exchange for goods and services? You can’t eat money. You can’t plant it, you can’t make anything (other than paper mache, perhaps) with it. So why is it in use? Because it’s a medium of exchange. The only value it has it what another person will give you for it. Money is not productive, it’s traded for the fruits of things that are productive: farms, factories, human labor, and so on. This is the concept of purchasing power: what one unit of currency will get you, in goods and services.
If the circulating money supply suddenly doubles, there are twice as many dollars chasing the same supply of goods and services. People still want things, the same amount of things for sale exist, so how do they get the things they want? Offering more money. Except, everyone else can do that too. The result is a rise in prices.
That is another problem with your scheme, the notion that there are enough viable investments out there to absorb $5.25 quadrillion, but it’s entirely secondary to the larger issue of destroying the world economy with hyperinflation and price controls.
Considering that the causes and effects of hyperinflation are well-established, the burden is on you to show that this plan would somehow defy economic history.
In that case, it’s not backed by the planet, it’s backed by the faith and credit of a world government.
Price freezes aren’t the cure-all you seem to think they are. People raise prices in the face of inflation for a reason: because otherwise they operate at a loss and go out of business.
Then in most cases this is simply a tax cut.
And again, where does the government come up with the money? Do they simply create it by fiat? If so, we will get the inflation that Human Action has mentioned.
Can you explain how specifically this is the case? AFAICT, the idea is that the government says to me, “agree to obey the law and you get X amount of money, whereas if you don’t agree, you don’t get the money and you have to obey the law”. How am I freer or more self-actualized? I am not choosing in either case, since I have to obey the law both ways.
Margaret can’t say that.
OK, then where does the money come from?
When you are asked a question about the specifics of your plan, you have an annoying habit of simply responding with nice-sounding but meaningless rhetoric.
How does the government raise the money?
If by that you mean that anyone who has a passing acquaintance with basic economics recognizes that your theory will probably do more harm than good, then I agree.
What the dickens are you saying, specifically?
Let’s assume that the value of the planet is equal to the value of my life. So what? Why does that mean the government should give me money, and where does the money come from?
Regards,
Shodan
What ever you would accept as equivalent, there is little point in me making unacceptable suggestions.
My intent: “Guaranteeing low and secure returns is essential. I find some consensus that greater than 2% growth rate is unsustainable, so (I) suggest a system that would work within that restriction.” Meaning that I was aware of that and it was intentional.
From your quoted article: “In addition, those economists seeing the central bank’s control over the money supply as feeble say that there are two weak links between the growth of the money supply and the inflation rate. First, in the aftermath of a recession, when many resources are underutilized, an increase in the money supply can cause a sustained increase in real production instead of inflation. Second, if the velocity of money, i.e., the ratio between nominal GDP and money supply changes, an increase in the money supply could have either no effect, an exaggerated effect, or an unpredictable effect on the growth of nominal GDP.” Thanks for this though, I was going to look for it, and there it was.
Of course I will still maintain that currency held in trust for working capital is capital, regardless what that currency is, and in this case the currency would be that which is locally acceptable.
Keep that figure in mind. OK
I have no illusion that this could be implemented over any particular night, or year.
As I previously noted, the currency in circulation is that pocket money required to conduct day to day business and this amount would not be significantly effected by funding a bunch of trusts by putting numbers in ledgers.
I am somewhat surprised to have you suggest that there is only $4 trillion in the world when this country alone has a $17 trillion dollar debt.
I appreciate criticism, and highly value the exchange, but could you please avoid being condescending? It does not improve the quality of your argument.
We have established the likelihood of inflation to the degree that people who could not previously purchase things would then increase demand for basic needs, allowing the market to restructure to provide for the increased need.
The magnitude of this increased demand would be limited to the dividends put in circulation, which is not insignificant, but is a tiny fraction of the trust amount, which would be competing for labor, durable goods and services, which will have less likelihood of rising since labor will be getting a $1,000 dollar a month raise.
The people could borrow 1/4 of the fund for the refinance or purchase of homes, farms, or secure interests in their workplaces at twice the 1.25% they receive, provide half the required cash flow, and still have half of their dividend left.
That makes the rest seem a little less impossible.
As nothing similar has ever occurred, defying history is a given.
Considering the unlikelihood of implementation, it is similarly likely that the system could be manifest by some Anonymous group or human actions independent of governments altogether. I don’t suppose I would object to either, but I would prefer it to be open sourced.
The invocation of a world government is really scary though.
Price freezes do prevent the inflation of costs, so folks do not have increased costs to pass on.
Depending on the logistics of implementation, they may not be needed anyway.
Ok, taking the scenario at its most literal, no, $300 tn of foreign investment would not help the U.S.
[QUOTE=tralfamadoran777]
My intent: “Guaranteeing low and secure returns is essential. I find some consensus that greater than 2% growth rate is unsustainable, so (I) suggest a system that would work within that restriction.” Meaning that I was aware of that and it was intentional.
[/quote]
An NIT is funded by taxes. The U.S. GDP, aside from a couple bad years in a recent past, typically grows at more than 2% per year. Thus, an NIT funded by income taxes could, in effect, supply a low, secure return to recipients, just via a different mechanism.
[QUOTE=tralfamadoran777]
From your quoted article: "In addition, those economists seeing the central bank’s control over the money supply as feeble say that there are two weak links between the growth of the money supply and the inflation rate. First, in the aftermath of a recession, when many resources are underutilized, an increase in the money supply can cause a sustained increase in real production instead of inflation.
[/quote]
We’re trying that right now, actually, though not to anything like the extreme degree of your proposal. It’s an unconventional approach to a very narrow set of circumstances.
[QUOTE=tralfamadoran777]
Second, if the velocity of money, i.e., the ratio between nominal GDP and money supply changes, an increase in the money supply could have either no effect, an exaggerated effect, or an unpredictable effect on the growth of nominal GDP."
[/quote]
More money in the hands of the less-well-off will always increase the velocity of money, because they spend more as a percentage of income than the rich do.
[QUOTE=tralfamadoran777]
Thanks for this though, I was going to look for it, and there it was.
[/quote]
You’re welcome.
[QUOTE=tralfamadoran777]
Of course I will still maintain that currency held in trust for working capital is capital, regardless what that currency is, and in this case the currency would be that which is locally acceptable.
[/quote]
You’re not increasing the value of this capital, though. I urge you to think in terms of value, not dollar figures.
[QUOTE=tralfamadoran777]
I have no illusion that this could be implemented over any particular night, or year.
[/quote]
The only way you’re going to avoid severe inflation is by keeping the pace of the expansion of the money supply close to the growth rate of the economy…which is what we do already.
Conversely, a NIT can be implemented overnight without any system shocks.
[QUOTE=tralfamadoran777]
As I previously noted, the currency in circulation is that pocket money required to conduct day to day business and this amount would not be significantly effected by funding a bunch of trusts by putting numbers in ledgers.
[/quote]
But you plan to have this money be invested, so that the returns can provide a basic income. By definition, this means the money must be spent: loaned out, used to buy materials, used to buy land, used to buy stocks, used to build factories, used to pay workers. If it’s just a figure in a ledger, or sitting in a vault, it’d keep inflation down, but how would it produce any sort of return?
[QUOTE=tralfamadoran777]
I am somewhat surprised to have you suggest that there is only $4 trillion in the world when this country alone has a $17 trillion dollar debt.
[/quote]
Whis isn’t in the form of currency, but rather bonds. If you wish to count them, that’s fine, either way adding $5 quadrillion is a massive, massive expansion of the money supply, which is what causes hyperinflation.
[QUOTE=tralfamadoran777]
I appreciate criticism, and highly value the exchange, but could you please avoid being condescending? It does not improve the quality of your argument.
[/quote]
It wasn’t intentional, and I apologize if it came off that way. I was trying to show that your estimate of a mere doubling of the money supply was way off, given the figures you’d arrived at.
[QUOTE=tralfamadoran777]
We have established the likelihood of inflation to the degree that people who could not previously purchase things would then increase demand for basic needs, allowing the market to restructure to provide for the increased need.
[/quote]
That’s the sort of minor inflation that comes from an increase in the velocity of money. The inflation that comes from an increase in the money supply is a different animal. The formula is:
p = v + m – y
p is the rate of inflation, v is the growth rate of velocity, m is the growth rate of money stock, and y is the growth rate of output.
With a massive increase in the money supply, and more money in the hands of poorer folks, v and m skyrocket. y is largely unchanged. Thus, p, the price level, increases. This is how you get hyperinflation.
[QUOTE=tralfamadoran777]
The magnitude of this increased demand would be limited to the dividends put in circulation, which is not insignificant, but is a tiny fraction of the trust amount, which would be competing for labor, durable goods and services, which will have less likelihood of rising since labor will be getting a $1,000 dollar a month raise.
[/quote]
You seem to be forgetting that, in order to get returns, the trust amounts have be invested, and thus circulating.
Further, output isn’t rising significantly here. Factories aren’t more efficient, workers aren’t more productive. The only changes are to velocity, and money supply. Thus, people aren’t actually better off, even though there are more zeroes on their bank statements.
[QUOTE=tralfamadoran777]
The people could borrow 1/4 of the fund for the refinance or purchase of homes, farms, or secure interests in their workplaces at twice the 1.25% they receive, provide half the required cash flow, and still have half of their dividend left.
That makes the rest seem a little less impossible.
[/quote]
Since this problem is, again, a mere trifle compared the basic fact of hyperinflation, and the issue of what wealth is, I’ll leave this be.
[QUOTE=tralfamadoran777]
As nothing similar has ever occurred, defying history is a given.
[/quote]
It sounds remarkably similar to what happened in Zimbabwe recently, though. All the same factors are in place: a massive increase in the money supply and velocity, no increase in output, a surge in the price level, price controls to fight the rise in price level…it’s all in that DallasFED article I linked to.
[QUOTE=tralfamadoran777]
Considering the unlikelihood of implementation, it is similarly likely that the system could be manifest by some Anonymous group or human actions independent of governments altogether. I don’t suppose I would object to either, but I would prefer it to be open sourced.
The invocation of a world government is really scary though.
[/quote]
That’s fine, but such a group is even less able to credibly claim their currency is backed by the planet, are they not? A world government might be able to plausibly implement such a concept.
[QUOTE=tralfamadoran777]
Price freezes do prevent the inflation of costs, so folks do not have increased costs to pass on.
[/quote]
That’s simply not true. The increase in prices comes from the increase in money supply. Again, the value of money comes from its scarcity, and only its scarcity. When you introduce a lot of new money, all current money is worth less.
[QUOTE=tralfamadoran777]
Depending on the logistics of implementation, they may not be needed anyway.
[/QUOTE]
They don’t work, anyway.
Taking the money from one for another to spend doesn’t increase wealth, many argue that the opposite is true, I think it is probably neutral superficially, but perpetuates the current relationship between government and the governed. The importance of the psychological engagement with society should not be dismissed, because it effects every decision a person makes.
It isn’t anything like a return, or secure, as it is a handout that can be taken away with a change in administration.
While that will increase the velocity, increased velocity increases tax revenue, and the money will find it’s way to a rich person’s savings just as quickly as money spent by the poor now, so without quantification, I can’t see the problem.
The value of this capital is not intended to increase, appreciably anyway, Cosmic Commodities: How much is a new planet worth? - Boing Boing, Value of Earth - Wikipedia,
The History Channel aired a documentary making an accounting, and came up with this:
“Precious Metals: $14,766,306,552,234
Timber: $269,766,006,335,474
Rock: $93,045,168,000,000
Edibles: $2,495,823,720,622
Base Metals: $135,475,825,000,000
Diamonds: $529,886,250,000
Rare Earth Elements: $23,831,500,000,000
Water: $5,618,100,089,501,550
Humans: $0 “They mentioned human imagination at the end and said it was important and incalculable.”” (from a Ron Paul forum)
I’m having a hard time rationalizing the cost of actually watching it myself though.
The increase in value can only be determined by the manner in which the flow of money is directed/spent.
What we’re doing now is pouring $85 bn/mo into bonds without a hint of inflation.
The people paying the taxes would be shocked, that is assured. Implementation of a limited welfare system would certainly be easier.
Yes, but spending money is sort of the point. Spending money is what increases potential output and supports “full employment.” A money supply insufficient to create a flow capable of providing a basic income needs expansion.
Theoretical estimates of the planet notwithstanding, the immediate investment of $5 quadrillion is certainly, as you observe, unworkable, but the world bond market is around $100 trillion and if the international currency replaced that, sovereign debt would enjoy a rate reduction to less than 2%, and everyone would earn about twenty dollars a month. So if the entire value of the planet was available as a line of credit to governments on a per capita basis, as the governments acquire more debt, the dividends increase.
With the tremendous number of seemingly idle people and the even larger number of things to do that would facilitate a more productive environment and more cooperative society, there is at least some capacity for expansion. I believe the establishment of a relationship of inalienable individual investment in society must have a positive effect, the value of which may even be calculable, but not by me.
All these examples demonstrate activity within one currency system that is not in a vacuum. The growing currency loses value relative to other currencies.
As for price level rising to match money supply, the notion that the spending of borrowed new capital or dividends arising from that would not increase production and production capacity makes little sense, since that is always what happens, just as inflation will arise from greater demand, so will the market respond to that demand by increasing production or innovating new solutions.
To suggest that the increased demand would not occur, but the inflation would, does not reasonably follow. And bear in mind that money supply refers to cash on hand, and bank deposits. There is no reason to expect the poor to retain significantly more money in this form, per capita, than they do now, but history does indicate that whatever the poor have to spend will be absorbed by the market.
And just as you suggest that the U.S. would not benefit from $300 tn of foreign investment, bloated corporations unable to suck up any more will leave some on the table for new competitive entities and entrepreneurs.
I agree, but would not argue against either.
While that is a well established principle, and expected be valid to some degree in the suggested institution, consideration of the functionality and value of the thing requires the assumption that an agreement has been reached, the logistics of implementation have been worked out, and equilibrium has been reached.
If part of the agreement is that we recognize and accept the loss of value of everything, and continue paying $2 for that $2 loaf of bread that now is only worth $1, for the sake of a “better world,” then the argument becomes moot.
Diluting the currency doesn’t increase wealth either. It actually destroys wealth, by definition. Redistributing wealth works, which is why it’s practiced almost everywhere, just to different degrees.
The only thing that increases wealth is productivity and efficiency. No basic income scheme creates wealth; people working and innovating creates wealth. The idea of basic income is to give everyone a minimum slice of that wealth, not to somehow act as an engine for the creation of wealth.
I propose that the current relationship between government and governed is just fine. I fail to see any problems that taking an oath to obey the law, without which one still has to be obey the law, would solve.
[QUOTE=tralfamadoran777]
It isn’t anything like a return, or secure, as it is a handout that can be taken away with a change in administration.
[/quote]
It is a return, on the innovation and wealth of a stable, prosperous society. It’s no more or less secure than any other thing the government does, including currency, property rights, capital gains, and the other underpinnings of your plan. Government can always change anything.
[QUOTE=tralfamadoran777]
While that will increase the velocity, increased velocity increases tax revenue, and the money will find it’s way to a rich person’s savings just as quickly as money spent by the poor now, so without quantification, I can’t see the problem.
[/quote]
The problem was inflation.
[QUOTE=tralfamadoran777]
The value of this capital is not intended to increase, appreciably anyway, Cosmic Commodities: How much is a new planet worth? - Boing Boing, Value of Earth - Wikipedia,
The History Channel aired a documentary making an accounting, and came up with this:
“Precious Metals: $14,766,306,552,234
Timber: $269,766,006,335,474
Rock: $93,045,168,000,000
Edibles: $2,495,823,720,622
Base Metals: $135,475,825,000,000
Diamonds: $529,886,250,000
Rare Earth Elements: $23,831,500,000,000
Water: $5,618,100,089,501,550
Humans: $0 “They mentioned human imagination at the end and said it was important and incalculable.”” (from a Ron Paul forum)
I’m having a hard time rationalizing the cost of actually watching it myself though.
The increase in value can only be determined by the manner in which the flow of money is directed/spent.
[/quote]
All that stuff already exists, has value, and is traded, irrespective of whether $5 quadrillion in currency is added to circulation. There’s no actual link between the value of the planet, and direct deposits of $5 quadrilllion to investment accounts.
[QUOTE=tralfamadoran777]
What we’re doing now is pouring $85 bn/mo into bonds without a hint of inflation.
[/quote]
1.3%, not zero. The Fed QE policy hasn’t produced the inflation that was feared, but given the nature of the economy (recovering from recession), and who the money went to (banks, that aren’t lending much of it out), that’s to be expected. Pouring far more money, to far more people, worldwide, isn’t remotely comparable.
Again, to actually get a return on investment, the money must be spent.
[QUOTE=tralfamadoran777]
The people paying the taxes would be shocked, that is assured. Implementation of a limited welfare system would certainly be easier.
[/quote]
You’re assuming tax rates would have to rise. Not necessarily, it depends on the NIT rate, the savings offered from eliminating redundant welfare programs, and other spending cuts, such as the military or SSI. If it taxes do rise, I guarantee every rich taxpayer on the planet would rather pay a higher rate of income tax than have all his savings and investments wiped out by hyperinflation.
[QUOTE=tralfamadoran777]
Yes, but spending money is sort of the point. Spending money is what increases potential output and supports “full employment.” A money supply insufficient to create a flow capable of providing a basic income needs expansion.
[/quote]
The money supply is sufficient, it’s the distribution that’s lacking, not the amount of wealth. Even if that were the problem, adding more currency doesn’t create wealth, it dilutes what exists, and is just a really inefficient and really destructive form of redistribution anyway. If you gave every American $1 billion tomorrow, you’d have achieved near income equality, and effectively redistributed wealth…but the consequences would be disastrous.
[QUOTE=tralfamadoran777]
Theoretical estimates of the planet notwithstanding, the immediate investment of $5 quadrillion is certainly, as you observe, unworkable, but the world bond market is around $100 trillion and if the international currency replaced that, sovereign debt would enjoy a rate reduction to less than 2%, and everyone would earn about twenty dollars a month. So if the entire value of the planet was available as a line of credit to governments on a per capita basis, as the governments acquire more debt, the dividends increase.
With the tremendous number of seemingly idle people and the even larger number of things to do that would facilitate a more productive environment and more cooperative society, there is at least some capacity for expansion. I believe the establishment of a relationship of inalienable individual investment in society must have a positive effect, the value of which may even be calculable, but not by me.
[/quote]
Basic income financed by borrowing is also inferior to basic income financed by taxation: you must endure the cost of borrowing, and if you borrow faster than tax revenue increases, you create an unsustainable, growing debt burden for future generations to shoulder. And since the interest is paid through taxes, the only thing you’re gaining is deferring payment into the future. And, unlike a war or a depression, a basic income isn’t a short-term crisis where borrowing to deal with it makes sense. It’s a long-term social program with no end date.
Taxation is the only practical way. TANSTAAFL.
[QUOTE=tralfamadoran777]
All these examples demonstrate activity within one currency system that is not in a vacuum. The growing currency loses value relative to other currencies.
[/quote]
That’s a side effect of the currency losing value in general. Did you see the sidebar in the Zimbabwe article about three eggs selling for $100,000,000,000 Zimbabwe dollars? Eggs aren’t a currency, of course. But they have value: you can eat them. Foreign currency has value: it’s a stable medium of exchange. Currency can inflate against anything of value, anything people try to buy.
[QUOTE=tralfamadoran777]
As for price level rising to match money supply, the notion that the spending of borrowed new capital or dividends arising from that would not increase production and production capacity makes little sense, since that is always what happens, just as inflation will arise from greater demand, so will the market respond to that demand by increasing production or innovating new solutions.
[/quote]
To prevent inflation, it must increase to the same level as the increase in the growth rate of the money supply, and the velocity of money. So, you need real GDP growth of over 1000% to keep pace. Ain’t happening.
[QUOTE=tralfamadoran777]
To suggest that the increased demand would not occur, but the inflation would, does not reasonably follow. And bear in mind that money supply refers to cash on hand, and bank deposits. There is no reason to expect the poor to retain significantly more money in this form, per capita, than they do now, but history does indicate that whatever the poor have to spend will be absorbed by the market.
[/quote]
Joe Citizen is only getting his 1.5% or whatever as a dividend. The principle is in the hands of someone making productive use of it, or there won’t be a dividend.
[QUOTE=tralfamadoran777]
And just as you suggest that the U.S. would not benefit from $300 tn of foreign investment, bloated corporations unable to suck up any more will leave some on the table for new competitive entities and entrepreneurs.
[/quote]
And they can all, or enough of them can, produce a positive return? Remember, these are the marginal players, who weren’t attractive to investors before. Further, since the value of financial capital is unchanged, it’s just been diluted, the most appealing investments probably could suck up a lot of money. When a shovel now costs $20,000, it’s going to take a big investment to get a new building completed.
[QUOTE=tralfamadoran777]
While that is a well established principle, and expected be valid to some degree in the suggested institution, consideration of the functionality and value of the thing requires the assumption that an agreement has been reached, the logistics of implementation have been worked out, and equilibrium has been reached.
[/quote]
Isn’t that what we’re discussing now, the implementation? You can’t just assume all these problems will be sorted out as part of your pitch for the idea, that’s begging the question.
[QUOTE=tralfamadoran777]
If part of the agreement is that we recognize and accept the loss of value of everything, and continue paying $2 for that $2 loaf of bread that now is only worth $1, for the sake of a “better world,” then the argument becomes moot.
[/QUOTE]
This would require the abolition of the free market. People aren’t going to operate their bakeries at a loss for the sake of an ideal. Setting prices like this would require central planning.
If currency is not wealth, how can anything done to it effect wealth? Prices of things are constantly negotiable, constantly changing, but the orchard still produces the same fruit, with the proper attention.
The proposal is for a redistribution settlement, from those who have inherited or taken control of this planet, to those who have no enfranchisement, no secure wealth, and a system of commerce and governments that impede the acquisition of wealth.
Handouts are provided to establish the dominance and self affirmed beneficence of the state.
This assumes that humans without wage earning jobs are unproductive. History of humans prior to a hundred years or so does not support this notion. A basic income would provide sufficient income to sustain a family farm through poor harvests. A basic income would allow people to fail repeatedly at small scale endeavors until one is successful.
Why should enfranchisement in the capitalist economic system not be expected to act as an engine for the creation of wealth? The trust funds of wealthy children have been creating wealth for ages. This does not seek an equal standing with those inflated by birth, just, as you say, a slice.
One does not have to obey the law. One may choose to obey the law, for a number of reasons. Human nature it seems, tends to follow commonly held moral principals, except when stressed. A basic income would relieve a lot of stress, and aside from those we will always need to be wary of, a persons’ word has some value. Our word, our promise is the basis of civilization. The notion that this is untrue, or that the poor are somehow more deficient in moral principals is the basis for the selective morality practiced by many who would keep the poor as low as possible, so their own height might not be diminished.
It is perhaps to you a technical point with no significance, but to many, likely more than you imagine, an agreement to cooperate in exchange for security, is significantly different than submitting to arbitrary rule for nothing. A basic income removes the despair excuse for being uncooperative.
I’m going to have to say that a welfare program is far more likely to be cut than any of those other things.
Exactly, not hyperbole inflation. Though, I remain unconvinced that any resultant inflation would be unmanageable.
Neither is it comparable to rely on disputed economic theory that was developed to predict monetary activity in one of many pre-fiat currency systems to predict results of changes applied proportionally to all currency systems.
Inflation was below target. I suspect all the cash piling up in banks.
The reference was a convenient example that economic activity is heavily affected by the human mind, and is therefore often unpredictable, particularly in scale and scope.
So, are you saying that money poured into investments does not significantly produce inflation?
While the money supply may be sufficient in this country, it is not in others. If an end to poverty is to be manifest the solution must be global or the end is not met.
No system is more efficient than distributing the same thing to everyone, and any mistakes are pretty obvious.
$1000 per month for 250 million people is $3 trillion per year.
If the U.S. increased its national debt to $250 trillion and paid the $3 trillion in interest from taxes you could call it a NIT, and this level of debt would only increase with the population.
That is a lot of taxes to collect, but taking the $12,000 back from those who don’t need it wouldn’t be any more trouble, because they do their taxes anyway.
As previously suggested, secure loans to citizens against their share could easily absorb a quarter or so of that total debt, or more, while providing nearly half of the $3 trillion.
States and municipalities currently have $3.7 trillion debt outstanding, but at 1.25% they may be willing to invest more aggressively in infrastructure, particularly if everyone is spending their dividends and not collecting welfare.
While this may still be a little too expensive, the numbers are within a feasible range, are expected to be adjusted, and while the displaced investment wealth would need to find less secure resting places, risk is reasonably expected from investment, TANSTAAFL. I do not see the disastrous consequences.
We can see the mechanism of inflation in these cases. The price of all imported goods increases reacting to the dilution of currency (cash on hand) and these cost increases cascade throughout the domestic economy.
If the dilution is universal, no currency is changed relative to any other, so no such real pressure to abandon inertia exists. While in your mind somehow everything has a lower value, this is psychological, merely a belief not supported by observation. Those things with real value are still the same, the orchard still bears fruit.
This is an extreme exaggeration of the money supply increase, since productive use of capital does not involve resting it in bank deposits, and Joe is only getting his dividend, which will be spent with typical velocity and returned to capital in the same way.
Yes, they can, or enough of them can produce a positive return. Bear in mind that the bar is set pretty low at 1.25%, and the volume of the flow of money will be increased correspondingly. I would look at home scale power production and water purification systems as an example. While the convenience of connecting to the utility grids and initial cost has prevented these from development, people who live in places where grids are not so functional or available would be able to finance them and the production and competition would decrease cost and increase demand.
Assuming hyperbolic inflation without describing the mechanism is begging the question.
Assuming the value of financial capital would be unchanged and only diluted is begging a question you already answered to the contrary. “The principle is in the hands of someone making productive use of it, or there won’t be a dividend.” “Again, to actually get a return on investment, the money must be spent.”
“All these problems,” consists of an overstatement of the likely inflationary response and the logistics of a roll out that minimizes that inevitability.
While you are only addressing the implementation, my suggestion to consider the effect of the system in operation is intended to reveal the value added to society and the economic system as a whole, to offset or allay the psychological concern of an imagined loss of wealth or value. The stipulations suggested simply recognize those things acknowledged as a requirement for the creation of the thing, not an assertion.
Price gouging laws have not caused the abolition of the “free” market.
You have not described a mechanism for this assumed loss, it is a belief.
Central planning is not required for price gouging laws.
By interfering with the production, distribution, and consumption of goods and services.
[QUOTE=tralfamadoran777]
Prices of things are constantly negotiable, constantly changing, but the orchard still produces the same fruit, with the proper attention.
[/quote]
Exactly, and that’s the problem: more money chasing the same pool of goods and services.
[QUOTE=tralfamadoran777]
The proposal is for a redistribution settlement, from those who have inherited or taken control of this planet, to those who have no enfranchisement, no secure wealth, and a system of commerce and governments that impede the acquisition of wealth.
Handouts are provided to establish the dominance and self affirmed beneficence of the state.
[/quote]
Direct depositing funds into an investment account is no less a handout than a NIT payment.
There’s nothing wrong with handouts. We’ve had government-run welfare in the West since at least 1597.
[QUOTE=tralfamadoran777]
This assumes that humans without wage earning jobs are unproductive. History of humans prior to a hundred years or so does not support this notion.
[/quote]
I didn’t mention wages, I said “people working and innovating creates wealth.” This was true long before wages, and is true today.
[QUOTE=tralfamadoran777]
A basic income would provide sufficient income to sustain a family farm through poor harvests. A basic income would allow people to fail repeatedly at small scale endeavors until one is successful.
[/quote]
I support basic income, I just want one that will work. Yours won’t.
[QUOTE=tralfamadoran777]
Why should enfranchisement in the capitalist economic system not be expected to act as an engine for the creation of wealth? The trust funds of wealthy children have been creating wealth for ages. This does not seek an equal standing with those inflated by birth, just, as you say, a slice.
[/quote]
As I’ve explained at great length, adding money to the money supply doesn’t create wealth, or at least not nearly the extent required to avoid hyperinflation. I even gave you to formula that governs this relationship between prices, output, the money supply, and the velocity of money. I’m giving you facts, you’re not returning the favor.
[QUOTE=tralfamadoran777]
One does not have to obey the law. One may choose to obey the law, for a number of reasons. Human nature it seems, tends to follow commonly held moral principals, except when stressed. A basic income would relieve a lot of stress, and aside from those we will always need to be wary of, a persons’ word has some value. Our word, our promise is the basis of civilization. The notion that this is untrue, or that the poor are somehow more deficient in moral principals is the basis for the selective morality practiced by many who would keep the poor as low as possible, so their own height might not be diminished.
It is perhaps to you a technical point with no significance, but to many, likely more than you imagine, an agreement to cooperate in exchange for security, is significantly different than submitting to arbitrary rule for nothing. A basic income removes the despair excuse for being uncooperative.
[/quote]
This is not nearly the most pressing problem with your prosposal, so I’ll leave this one alone.
[QUOTE=tralfamadoran777]
I’m going to have to say that a welfare program is far more likely to be cut than any of those other things.
[/quote]
Capital gains taxes change all the time, proptery rights have been abrogated in many nations around the world. Currency has been diluted before, it’s an old trick for regimes with debts to pay.
If the appeal of your program is that hyperinflation is hard to undo, well, I’ll take my chances with a program that works and take the risk that it’ll be repealed.
[QUOTE=tralfamadoran777]
Exactly, not hyperbole inflation. Though, I remain unconvinced that any resultant inflation would be unmanageable.
[/quote]
Why not hyperinflation? You are talking about adding $5 quadrillion, remember?
[QUOTE=tralfamadoran777]
Neither is it comparable to rely on disputed economic theory that was developed to predict monetary activity in one of many pre-fiat currency systems to predict results of changes applied proportionally to all currency systems.
Inflation was below target. I suspect all the cash piling up in banks.
The reference was a convenient example that economic activity is heavily affected by the human mind, and is therefore often unpredictable, particularly in scale and scope.
So, are you saying that money poured into investments does not significantly produce inflation?
[/quote]
No, new money poured into investments does produce inflation. That money, by definition, isn’t piling up in banks. If you want a return on investment, the money has to either be lent out, or used to buy an ownership stake in an enterprise, with the money used to buy materials, pay wages, and so forth. Money sitting in a vault or on a spreadsheet doesn’t produce a return.
[QUOTE=tralfamadoran777]
While the money supply may be sufficient in this country, it is not in others. If an end to poverty is to be manifest the solution must be global or the end is not met.
No system is more efficient than distributing the same thing to everyone, and any mistakes are pretty obvious.
[/quote]
Sorry, but I’m not going to support hyperinflation on the grounds that to the poorest of the poor in the Third World, having worthless diluted currency is better than none at all. There are vastly superior ways to help them.
[QUOTE=tralfamadoran777]
$1000 per month for 250 million people is $3 trillion per year.
If the U.S. increased its national debt to $250 trillion and paid the $3 trillion in interest from taxes you could call it a NIT, and this level of debt would only increase with the population.
That is a lot of taxes to collect, but taking the $12,000 back from those who don’t need it wouldn’t be any more trouble, because they do their taxes anyway.
As previously suggested, secure loans to citizens against their share could easily absorb a quarter or so of that total debt, or more, while providing nearly half of the $3 trillion.
States and municipalities currently have $3.7 trillion debt outstanding, but at 1.25% they may be willing to invest more aggressively in infrastructure, particularly if everyone is spending their dividends and not collecting welfare.
While this may still be a little too expensive, the numbers are within a feasible range, are expected to be adjusted, and while the displaced investment wealth would need to find less secure resting places, risk is reasonably expected from investment, TANSTAAFL. I do not see the disastrous consequences.
[/quote]
That’s saner than your original proposal, at least.
[QUOTE=tralfamadoran777]
We can see the mechanism of inflation in these cases. The price of all imported goods increases reacting to the dilution of currency (cash on hand) and these cost increases cascade throughout the domestic economy.
If the dilution is universal, no currency is changed relative to any other, so no such real pressure to abandon inertia exists. While in your mind somehow everything has a lower value, this is psychological, merely a belief not supported by observation. Those things with real value are still the same, the orchard still bears fruit.
[/quote]
You’re still not getting it…the mechanism of inflation is the there is more money, so each individual dollar is worth less in relation to every other dollar, and that’s the only thing that gives money value, unlike food or tools. The orchard still bears fruit, but now the price of each apple has skyrocketed. This is supply and demand, very basic economics. The money really is worth less, it’s not a trick of the mind.
[QUOTE=tralfamadoran777]
This is an extreme exaggeration of the money supply increase, since productive use of capital does not involve resting it in bank deposits, and Joe is only getting his dividend, which will be spent with typical velocity and returned to capital in the same way.
[/quote]
You’re agreeing that the money would have to be in circulation to fund productive activitiy that would produce a return, but say an increase in the money supply is exaggerated? That’s like cognitive dissonance.
[QUOTE=tralfamadoran777]
Yes, they can, or enough of them can produce a positive return. Bear in mind that the bar is set pretty low at 1.25%, and the volume of the flow of money will be increased correspondingly. I would look at home scale power production and water purification systems as an example. While the convenience of connecting to the utility grids and initial cost has prevented these from development, people who live in places where grids are not so functional or available would be able to finance them and the production and competition would decrease cost and increase demand.
[/quote]
Again, this is like problem #5 with your idea, so I’ll let it alone.
[QUOTE=tralfamadoran777]
Assuming hyperbolic inflation without describing the mechanism is begging the question.
[/quote]
:smack: I described the mechanism in detail: an increase in the money supply without a corresponding increase in output. I linked you to a paper from the Dallas Fed about hyperinflation in Zimbabwe, which discussed the causes and the mechanism of inflation. Did you even read it?
[QUOTE=tralfamadoran777]
Assuming the value of financial capital would be unchanged and only diluted is begging a question you already answered to the contrary. “The principle is in the hands of someone making productive use of it, or there won’t be a dividend.” “Again, to actually get a return on investment, the money must be spent.”
[/quote]
You’re not understanding me, then. Money gets into the hands of people that make productive use of it now. We have a massive investment industry, everything from venture capital to mutual bunds to bonds to banks. People that can produce a positive return, and can demonstrate this possibility, get funded. The most productive investments get the most money. By massively increasing the amount of funds seeking investment opportunities, you’re mandating that lower-quality investments be made, because investments don’t scale infinitely. Apple can’t start making ten times as many Ipads and earn ten times the revenue. Exxon can’t start pumping ten times as much oil and earn ten times the revenue.
[QUOTE=tralfamadoran777]
“All these problems,” consists of an overstatement of the likely inflationary response and the logistics of a roll out that minimizes that inevitability.
[/quote]
Overstatement, eh? Since, against my citations of both the theoretical underpinnings of hyperinflation and real-world cases where it’s happened due to the government doing exactly what you advocated, you’re provided nothing but handwaves and ignorance, I remain unconvinced.
How about this: can you name a mainsteam, published economist who advocates your proposal?
[QUOTE=tralfamadoran777]
While you are only addressing the implementation, my suggestion to consider the effect of the system in operation is intended to reveal the value added to society and the economic system as a whole, to offset or allay the psychological concern of an imagined loss of wealth or value. The stipulations suggested simply recognize those things acknowledged as a requirement for the creation of the thing, not an assertion.
[/quote]
It isn’t imagined, though, it is very real.
All the benefits of your proposal can be had, without the crushing aftereffects, via a basic income system funded by taxes. Problem solves.
[QUOTE=tralfamadoran777]
Price gouging laws have not caused the abolition of the “free” market.
[/quote]
Such laws that exist generally apply during declared emergencies and the like, not at all times. Even then, they cause shortages.
[QUOTE=tralfamadoran777]
You have not described a mechanism for this assumed loss, it is a belief.
[/quote]
Really, I didn’t explain how the price level increases when there’s more money but not more output? Funny, I sure remember typing it.
[QUOTE=tralfamadoran777]
Central planning is not required for price gouging laws.
[/QUOTE]
It is if you’re not willing to tolerate business either shutting down, or going to a black-market model.
One more question: What do you think causes hyperinflation?
You have fixated on this hyperinflation notion, and logic it seems can not demonstrate the lack of same in your assertion.
The notion that $5 quadrillion would be instantaneously handed out in bills or coin, placed in checking accounts, and carried in pockets is a stipulation that you have created. I have noted that the full realization of the target activity would take some time, specifically to avoid major perturbations.
Again, your facts consist of a monetary theory, disputed as much as accepted, that was created from the observation that adding more gold and silver coins to circulation simply increased the prices of everything, so the gold and silver should just sit here in my vault. I’m sure it was much more accurate then, but the assumption that no new products and services would become available to provide for the increased demand is why that word starts with ass. This is hand waves and willful ignorance.
I did read the linked story and several other articles, and they all reference very specific events in (as I have previously noted) economic systems dependent on foreign trade. It is the foreign interest, or lack there of, in the subject currency that drives hyperinflation, which is typically very short lived, and again, proportional increases in all currencies removes that foreign influence.
There are no real world cases of what I advocate, so claim to the contrary is false.
Contrary to your apparent belief, an analogy is a literary device intended to clarify a concept, so when you present an analogy that misrepresents my position, you create a straw man with which to argue, because the argument is not applicable to the current conversation.
And then there is this…
How do you rationalize calling me ignorant, while you completely dismiss the psychological aspects of economic activity? Have you in your accumulation of knowledge ever heard the terms; consumer confidence, investor confidence, uncertainty, animal spirits?
You must be coming around then, because this is exactly my original proposal.
I’m saying that you highly exaggerate the likely expansion of the money supply. As you no doubt know, depending on which M’s you want to count, the money supply is accounts that can easily be turned into cash. People only need so much of this, and when they have that much, the money flows out of circulation and into investment. So if the money entering the system is metered to match the money moving out, the expansion of investment capital can be brought up to target level without the dire consequences you predict.
People who can produce a positive return, and can demonstrate this ability, get funded, but only to the extent that funding is available.
Massively increasing the amount of funds available for investment provides opportunity for lower performing, but stable investments to be made.
No one need mandate this.
If sufficient investment capital was available to exploit current opportunities and needs we would not have the current worldwide demand for employment opportunities or an intractable poverty problem.
Those people seeking only the highest return will no doubt continue to do so, with more competition.
Characterizing investments expected to produce less than 20% ROI as lower “quality” is your perspective. A business that pays its employees well and enjoys a regular demand can operate with a very small profit, add to production and still be a secure investment.
Since you bring up Apple, the next major, and minor, economic engines would be facilitated by providing people the opportunity to hang out in garages with their friends.
Quoting a calculation that does not apply to the situation does not explain how my dollar, which is worth a dollar, says a dollar on it and can be exchanged freely for four quarters, can be worth anything but a dollar. While it is common for my dollar to be worth more or less Euros or Pounds or RMB, if the same change is made to all these currencies, where is the motivation to abandon any off them?
How does a NIT provide for natural disasters, refugees, access to established human rights?
Again, dismissal of the psychological aspects of economic activity, and of the improvement in productivity, innovation and loss control to be expected from a general improvement in outlook and mental health seems either a refusal to address a major strength of this proposal, or a true lack of understanding.
Hyperinflation is the most serious problem with your proposal, so that is what I’ve focused on. If you suggested curing poverty through giving every poor person mercury to drink, I’d focus on the toxicity of mercury, moreso than the distribution costs and other factors. I’m working big-to-small.
Further, you haven’t used logic to demonstrate anything, you’ve used special pleading (that maybe, somehow, this time creating a lot of new money won’t cause hyperinflation).
[QUOTE=tralfamadoran777]
The notion that $5 quadrillion would be instantaneously handed out in bills or coin, placed in checking accounts, and carried in pockets is a stipulation that you have created. I have noted that the full realization of the target activity would take some time, specifically to avoid major perturbations.
[/quote]
Been over this already: if you want the money to generate a return, it has to be in circulation. The only way to avoid perturbations is to keep the rate of growth of the money supply under 2% or so…which is what we do already. It’ll take a looooooooong time to add $5 quadrillion that way.
[QUOTE=tralfamadoran777]
Again, your facts consist of a monetary theory, disputed as much as accepted, that was created from the observation that adding more gold and silver coins to circulation simply increased the prices of everything, so the gold and silver should just sit here in my vault. I’m sure it was much more accurate then, but the assumption that no new products and services would become available to provide for the increased demand is why that word starts with ass. This is hand waves and willful ignorance.
[/quote]
Are you reading any of what I write? I’ve been over this too: it’s not sufficient that output increase at all, it must increase in proportion to the increase of the money supply and the velocity of money to avoid an increase in the prive level.
[QUOTE=tralfamadoran777]
I did read the linked story and several other articles, and they all reference very specific events in (as I have previously noted) economic systems dependent on foreign trade. It is the foreign interest, or lack there of, in the subject currency that drives hyperinflation, which is typically very short lived, and again, proportional increases in all currencies removes that foreign influence.
There are no real world cases of what I advocate, so claim to the contrary is false.
Contrary to your apparent belief, an analogy is a literary device intended to clarify a concept, so when you present an analogy that misrepresents my position, you create a straw man with which to argue, because the argument is not applicable to the current conversation.
And then there is this…
[/quote]
If monetarism is "disputed as much as [its] accepted], please provide published works in economics that agree with your position that “It is the foreign interest, or lack there of, in the subject currency that drives hyperinflation, which is typically very short lived, and again, proportional increases in all currencies removes that foreign influence.”
[QUOTE=tralfamadoran777]
How do you rationalize calling me ignorant, while you completely dismiss the psychological aspects of economic activity? Have you in your accumulation of knowledge ever heard the terms; consumer confidence, investor confidence, uncertainty, animal spirits?
[/quote]
Again, I’m working big-to-small here. Yes, because economics is a human activity, it is subject to human psychological factors. That doesn’t mean you can wish or legislate away hyperinflation, it’s been tried before.
[QUOTE=tralfamadoran777]
You must be coming around then, because this is exactly my original proposal.
[/quote]
No, it’s not. Your original proposal was the deposit of $5 quadrillion in a world currency into accounts for each person; the principle would have to be invested in approved ways, or borrowed against for certain approved expenses.
This second proposal is U.S.-only, and financed through borrowing and taxation instead of printing money.
[QUOTE=tralfamadoran777]
I’m saying that you highly exaggerate the likely expansion of the money supply. As you no doubt know, depending on which M’s you want to count, the money supply is accounts that can easily be turned into cash. People only need so much of this, and when they have that much, the money flows out of circulation and into investment. So if the money entering the system is metered to match the money moving out, the expansion of investment capital can be brought up to target level without the dire consequences you predict.
[/quote]
Can you explain to me how investment creates a return? I’m not at all sure you understand how.
[QUOTE=tralfamadoran777]
People who can produce a positive return, and can demonstrate this ability, get funded, but only to the extent that funding is available.
Massively increasing the amount of funds available for investment provides opportunity for lower performing, but stable investments to be made.
No one need mandate this.
If sufficient investment capital was available to exploit current opportunities and needs we would not have the current worldwide demand for employment opportunities or an intractable poverty problem.
Those people seeking only the highest return will no doubt continue to do so, with more competition.
[/quote]
Do you have any evidence that investment opportunities exist, but aren’t being pursued for lack of funds? If anything, right now we have the opposite problem: plenty of funds, not enough opportunities.
[QUOTE=tralfamadoran777]
Characterizing investments expected to produce less than 20% ROI as lower “quality” is your perspective. A business that pays its employees well and enjoys a regular demand can operate with a very small profit, add to production and still be a secure investment.
[/quote]
For an invester, ROI is their perspective.
[QUOTE=tralfamadoran777]
Since you bring up Apple, the next major, and minor, economic engines would be facilitated by providing people the opportunity to hang out in garages with their friends.
[/quote]
Maybe so. A basic income certainly achieves that. You could fund it with taxes, and tie it to income, such that people below a certain threshold got a subsidy, and people above it didn’t.
[QUOTE=tralfamadoran777]
Quoting a calculation that does not apply to the situation does not explain how my dollar, which is worth a dollar, says a dollar on it and can be exchanged freely for four quarters, can be worth anything but a dollar. While it is common for my dollar to be worth more or less Euros or Pounds or RMB, if the same change is made to all these currencies, where is the motivation to abandon any off them?
[/quote]
It does apply to the situation. How does it not?
The dollar is worth a dollar. How much is a dollar worth? What will someone give you for a dollar? This is called purchasing power, and it’s something you seem to be totally unaware of when you make statements like the above. If all currencies inflate at once, your motivation to get off them is to try and keep some of your wealth. You could try to buy land, food, a commodity, anything that can’t be debased by the printing press. Don’t take my word for it, again, this is what people living during hyperinflation actually do.
[QUOTE=tralfamadoran777]
How does a NIT provide for natural disasters, refugees, access to established human rights?
[/quote]
No differently than any other basic income proposal. The NIT just doesn’t pay out to people above the subsidy line, unlike, say, the Swiss universal proposal. That lowers the tax burden, and is, in theory, more efficient, since you don’t have to bother with raising taxes on a person, just to cut them a basic-income check right back. It may turn out that cutting everyone the same subsidy check is actually more efficient, if so, then I’d endorse the Swiss proposal, wasteful as it seems to me.
[QUOTE=tralfamadoran777]
Again, dismissal of the psychological aspects of economic activity, and of the improvement in productivity, innovation and loss control to be expected from a general improvement in outlook and mental health seems either a refusal to address a major strength of this proposal, or a true lack of understanding.
[/QUOTE]
You idea has the same strengths as other basic-income proposals, but with the crushing weakness that it depends on hyperinflation to work (or rather, not work). Other proposals, be it Friedman’s NIT or the Swiss universal income, are simply better at acheiving the same goal.
If you want to prove me wrong, then provide a published economist who endorses hyperinflation as a policy, or who believes that increasing the money supply by $5 quadrillion wouldn’t cause hyperinflation.
“Thus while Marx, Keynes, and Friedman all accepted the Quantity Theory, they each placed different emphasis as to which variable was the driver in changing prices. Marx emphasized production, Keynes income and demand, and Friedman the quantity of money.” Quantity theory of money - Wikipedia
While there is near universal acceptance that, in the long term, prices will rise to match money supply, there is significant doubt that prices can be radically affected in the short term simply from the increase in money supply, so a short term increase in money supply can serve to increase production and convert to capital before having any effect on prices.
The outline of how the implementation could manifest specific to the U.S. is partially funded through taxes, only because that is how sovereign debt is repaid. The requirement for shares to be invested securely expects much of that to be sovereign debt.
From Hyperinflation - Wikipedia
“Models:
Since hyperinflation is visible as a monetary effect, models of hyperinflation center on the demand for money. Economists see both a rapid increase in the money supply and an increase in the velocity of money if the (monetary) inflating is not stopped. Either one, or both of these together are the root causes of inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the “crisis of confidence” model of hyperinflation, where the risk premium that sellers demand for the paper currency over the nominal value grows rapidly.” (This is foreign interest, or lack there of, in the subject currency.)
“The second theory is that there is first a radical increase in the amount of circulating medium, which can be called the “monetary model” of hyperinflation. In either model, the second effect then follows from the first — either too little confidence forcing an increase in the money supply, or too much money, destroying confidence.
In the confidence model, some event, or series of events, such as defeats in battle, or a run on stocks of the specie which back a currency, removes the belief that the authority issuing the money will remain solvent — whether a bank or a government.”
(So this would require a loss in confidence in all currencies)
“Because people do not want to hold notes which may become valueless, they want to spend them. Sellers, realizing that there is a higher risk for the currency, demand a greater and greater premium over the original value. Under this model, the method of ending hyperinflation is to change the backing of the currency, often by issuing a completely new one.” (like maybe an international currency of a specific quantity, stable relative to population, that is only used to underwrite sovereign debt)
“In the monetary model, hyperinflation is a positive feedback cycle of rapid monetary expansion. It has the same cause as all other inflation: money-issuing bodies, central or otherwise, produce currency to pay spiraling costs, often from lax fiscal policy, or the mounting costs of warfare. When business people perceive that the issuer is committed to a policy of rapid currency expansion, they mark up prices to cover the expected decay in the currency’s value. The issuer must then accelerate its expansion to cover these prices, which pushes the currency value down even faster than before. According to this model the issuer cannot “win” and the only solution is to abruptly stop expanding the currency. Unfortunately, the end of expansion can cause a severe financial shock to those using the currency as expectations are suddenly adjusted. This policy, combined with reductions of pensions, wages, and government outlays, formed part of the Washington consensus of the 1990’s.”
(In the proposed case, the new capital would be input through investments that would be transformed to things of value, not held as cash. Business people (foreign influence) would not perceive a policy of rapid expansion, as one would not exist. The implementation would need to be agreed on, so planning could be made with certain expectations.)
“Inflation becomes hyperinflation when the increase in money supply turns specific areas of pricing power into a general frenzy of spending quickly before money becomes worthless.” (With actions being deliberated well in advance, no worthlessness is reasonably expected.)
“Because rapidly rising prices undermine the role of money as a store of value, people try to spend it on real goods or services as quickly as possible. Thus, the monetary model predicts that the velocity of money will increase as a result of an excessive increase in the money supply.” (So money can be spent on real goods and services. Again, the excessive rate is a characteristic of your assertion, not a rational implementation of the utility)
"During a period of hyperinflation, bank runs, loans for 24-hour periods, switching to alternate currencies, the return to use of gold or silver or even barter become common. Many of the people who hoard gold today expect hyperinflation, and are hedging against it by holding specie. There may also be extensive capital flight or flight to a “hard” currency such as the US dollar. This is sometimes met with capital controls, an idea which has swung from standard, to anathema, and back into semi-respectability. All of this constitutes an economy which is operating in an “abnormal” way, which may lead to decreases in real production. If so, that intensifies the hyperinflation, since it means that the amount of goods in “too much money chasing too few goods” formulation is also reduced. This is also part of the vicious circle of hyperinflation. (Flight to what? This is why I say that proportional increases in all currencies limit this activity.)
"Although wage and price controls are sometimes used to control or prevent inflation, no episode of hyperinflation has been ended by the use of price controls alone, because price controls that force merchants to sell at prices far below their restocking costs result in shortages that cause prices to rise still further.
Nobel prize winner Milton Friedman said “We economists don’t know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can’t sell tomatoes for more than two cents per pound. Instantly you’ll have a tomato shortage. It’s the same with oil or gas.” "
(So, don’t set prices too low, if that even is deemed appropriate.)
Another obvious mechanism to limit inflation is in place, in that increased velocity adds sales tax revenue by multiples. This excess tax revenue, and any taxation deemed appropriate, can be held out of circulation. Currency boards, like the Bulgarian that halted their hyperinflation in the month, are based on holding a stable foreign currency.
The 2% limitation on injecting new capital is not with standing as expansions far in excess of that have been sustainable for long periods of time. In China they’re whining about not maintaining 8%. The time required to reach target level would be whatever planning and confidence can arrange, if that is long, it will be worth it.
It should not be difficult for you to believe that I am not a mathematician or economist, along with the vast majority of humans. But I do understand a good deal more than most about calculations.
A bumble bee defies physics by flying, because it doesn’t know physics, or because the calculations are somehow lacking? A dome requires massive support to resist being ripped apart at the base, until the spherical form is greater than half and the forces resolve, (like the ones on minarets.)
With current technology and the array of tools to control hyperinflation, it can not be a given.
Hayek favored a basic income, social security system, but he also spoke often of coercion as a major impediment to the healthy function of the market, and of society.
As long as a human needs to be approved of, or judged by another, to receive “some minimum of food, shelter and clothing, sufficient to preserve health,” there is a potential coercion, and a government can not be expected to leave a power unused.
A self image is established or reinforced by the relationship of dependence and subjugation. While that has little effect on those better adapted to succeed in our modern society, it is hardly reasonable or humane to single out and treat those in need as though they have less right to the sustenance and natural wealth of the planet than any others.
Happy people are more productive, pursuit of happiness is a right.
Positive reinforcement is far more effective than negative reinforcement. Choices between positive and negative reinforcement during treatment for escape-maintained behavior. - PMC
Since we have the tools and resources to provide each person with a meager but sovereign share of the earth, the half measure of handouts to those who can prove a need and fill out all the forms and don’t use any prohibited plant substances one country at a time would be sad.