Money supply as mechanism for UBI

Reply Wed 28 Dec, 2016 11:55 am
I am not an economist, so some of my knowledge is very incomplete.

Do you think that the money supply would be an effective mechanism for UBI? I am in Canada and it looks like we increased our money supply by about $10b from August to September of 2016. If that money supply was added directly to the bank accounts of our bottom third, that would be $900/month. That is pretty close to sustenance level. And the best thing is that it involves NO tax dollars.

Ok so what is wrong with this naive idea?
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Reply Wed 28 Dec, 2016 01:53 pm
For those non-Canadians like myself, UBI = Universal Basic Income.

Your idea, at first glance, has some advantages in that by giving it to poor people, the money gets into circulation very fast to boost the economy. One disadvantage, I suppose, is that the money supply is not increased every month, so it's a on-off thing. The poor who have become used to getting a little extra for a few months might suddenly feel the rug pulled out from underneath them when the extra money stops.

Another disadvantage, sure to become political, is that those poor who work to get themselves out of the bottom third might well resent having to do all that work to get themselves ahead, only to have money given from the government to the poor who didn't do anything to deserve extra. Presumably the government already has programs in place that meet the minimum needs of the poor, (whether they actually do is another issue), so those just above that level will resent it.
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Reply Wed 28 Dec, 2016 06:43 pm
If I were you, I would tag this thread as Politics, and also tag it Economics, and give it a third tag like Canada. There are plenty of Canadians on the site who I think would comment if they saw your thread.
cicerone imposter
Reply Wed 28 Dec, 2016 10:29 pm
Economics is not science, so it's difficult to guage how helpful a one time increase in the money supply will be without the matching increase in productivity within the economy.

We know that during the Christmas holidays, retail business does 25% of their annual sales during that period. Knowing this, they add sales clerks to make sure they accommodate their shoppers.

For the bottom third who receives $900/month, most probably have loans to pay off and/or they'll splurge on a big screen tv.

Many economists try to predict what the annual holiday season sales volume will be, and it's been improving the past several years along with an increase in wages.

I think it looks pretty good for this year. Cyber sales will hit a new time high.

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Reply Thu 29 Dec, 2016 12:33 am
I will try to see how to tag a post after writing it. It is not immediately apparent.

UBI is being piloted in a few places in Europe I think and also two places in Canada. But it is not a Canadian thing. I believe that there are lots of people considering it as a possible solution for a potential jobless future.

There are economic and political issues to consider.

One of the political issues is that people have this issue about "their money" being given to other people. So I started thinking about paying for it out of increases to the money supply rather then through tax revenue. I am not sure if that makes sense or not, which is why I am here.

Please correct me when I am wrong. Currently one of the ways that the Fed increases the money supply is to lend money to the government. They simply invent the money and then lend it to the government, the money didn't "come" from anywhere. (the economy grew so they increase the money supply to match). The government spends the money and it enters into the economy.

So what if instead of lending it to the Government, it just went into bank accounts?

Month to month monetary expansion would be impossible to track but over longer periods we could make a pretty good guess.
Edit [Moderator]: Link removed

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Reply Thu 29 Dec, 2016 09:44 am
Oh it looks like its already being considered:
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Reply Mon 30 Oct, 2017 02:46 pm
"If that [$10bn] money supply was added directly to the bank accounts of our bottom third, that would be $900/month...Ok so what is wrong with this naive idea?"

There is a bug in the construction of the idea; it's quite common, and even gets exploited. This post is to present clarity on that point of confusion.

There are tiers to measurement. The first is a count of something, such as 10bn dollars. The second is a rate of something, such as $900/month. (The third would be an acceleration of something but that doesn't come up in this problem)

It's not a little oops, I didn't mean to do that when the toll booth on the road keeps taking money to pay for the road long after the cost has been recouped. So clarity is a good idea. Here's some examples across differing fields so that the specifics can be seen:

Level-1: I drove 25 miles. I used one gallon of gas.
Level-2: I used gas at a rate of 25 miles/gallon

Level-1: I made a bajillion dollars. It took a year.
Level-2: I made money at a rate of a bajillion/12 dollars/month.

Level-1: I wrote ten essays. It took all week.
Level-2: I wrote essays at a rate of 10/7 essays/day.

And so back around to the original problem, with a fictional fill-in
Level-1: They got 10billion. ***missing part*** It was distributed over five years.
Level-2: They received money at a rate of 10bn/(5*12) dollars/month over the five-year period.

Don't feel stupid; I suspect this conceptual hiccup is a product of the combination of homo sapiens brains and the way things are most often taught.
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cicerone imposter
Reply Mon 30 Oct, 2017 03:18 pm
I agree with the article that claims that the people who have investments will enjoy a good holiday season, because of the investment returns enjoyed this past year. I concur with that claim, because my investments increased by 18.75%. My wife's investments didn't increase as much, because her investments are more conservative. That means more money in our son's pocket when he returns home for his annual visit next month.
As I've said before, economics is an art, and not science. There is no way to measure how any economy will perform. Even past performance is often revised.
cicerone imposter
Reply Mon 30 Oct, 2017 03:44 pm
@cicerone imposter,
Sorry. My investments increased by 18.75% for the day. My YTD increase is around 15%.
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cicerone imposter
Reply Mon 30 Oct, 2017 08:29 pm
I don't think so, and I'll try to explain why. Here's a fact sheet on the cost of social security in the United States. https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
I've seen reports that social security funds will survive until after 2030. The government still has time to revise not only the age at which people begin to receive social security, but to change the payroll deduction amounts to a higher level.
Another irony that I just learned. If we Asians move to Connecticut, we can have a life expectancy of 89.1 years vs California of 86.3 years; almost 3 years more! Mr. Green
I remember reading about social security and Blacks many decades ago. Many paid into the system, but the majority of Blacks never collected social security. That trend is now been reversed dramatically, and more Blacks are living much longer to receive social security. They're not suffering from cancer as much as they were in the past. I think a lot has to do with nutrition and health care (ACA).
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