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this post was submitted on 10 Oct 2023
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Futurology
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Yes, regardless of if the money gets printed or just ends up in people's bank accounts, as the amount of money in circulation increases, inflation will follow. The only other way to get money in people's accounts is to take it from other accounts, like taxing the crap out of the wealthiest people, purchases over a certain threshold, etc. Then it wouldn't lead to inflation, just redistribution of wealth. I'm not an expert on economies, and I'm sure the semantics of what I'm saying isn't quite right, but I think you know what I mean.
Yeah you have a good grasp of the ideas involved.
If you don't print money to fund a UBI, money in circulation stays the same so there is no inflation.
In fact in the few widescale UBI experiments that have taken place, inflation decreased. Alaska has had a form of a basic income, funded by oil revenues on from state land, since 1982. Ever since, Alaska has had LOWER inflation than the entire U.S. Their term it is the Permanent Fund dividend and it managed by a state owned corporation.
As an aside Economics is a social science, and is imperfect because it cant be replicated. The term for this is Replication crisis. Interesting wikipedia article on that.
I'm not understanding the need for printed money to increase inflation. Wouldn't direct deposit to people's checking accounts have the same effect as printed currency?
No, direct deposit is just the method of moving around currency from the government to people. Inflation is based upon the economic theory of supply and demand. The price of a good is determined by the intersection of supply and demand. If both supply and demand go up equally the price stays the same. If supply goes up without demand changing the price goes down. If demand goes down without supply changing the price goes up.
Supply in this case is how much money is in circulation. When money is moved around from a group of people to another, then the amount of money is still the same. Demand in this case is how much it costs to borrow money. Demand is otherwise known as the interest rate when applied to money.
If both the amount of money in circulation and the interest rate stay steady, than no change will occur in the value of money. This is the case of a UBI funded by cutting spending or increasing taxes.
However if only supply increases and demand stays the same, then the value of money will decrease. Likewise if only demand increases and supply stays the same, then the value of money will decrease.
Inflation is the devaluing of currency caused by either of the above listed changes to the supply-demand equation.
Think about the amount of printed currency like housing supply in LA. The price for housing is ever increasing because the demand for housing is increasing while the supply is barely inching upwards. That is an example of the value of houses in LA inflating. The same concept applies to government backed money. The only difference is the government decides the supply and demand of the currency market.
Thanks. I appreciate the time and effort put into your response.