Perpetual monetization of deficit spending only works for a country a) whose currency is the global reserve currency; and/or b) is importing goods whose prices are falling; and 3) has structural income inequality so most of the money being created circulates down into the general population at a slower rate than the rate of economic growth. In other words, turning on the money taps has mainly produced asset price inflation, not general inflation because very little of the money thus created has filtered down to the poor and middle class. UBI would change all that and would definitely be inflationary in a world of tariffs, reshoring and mercantilism.
Yeah, the USA with the dollar is definitely in a better position than most countries. But, the basics of MMT is really just a description of how the dynamics of fiat currencies work and explain, for example, why Japan has been able to keep a relatively prosperous society going with very large debts relative to GDP, and they've partly done this by using the muscle of their central bank to keep interest rates low and therefore their debt repayments manageable. USA's biggest problem at the moment is the interest rates on its debt, even more than the total debt size. But, as you say, with the dollar the USA has more options than others.
@Go-Meta Not a Yank, Singaporean suffering from inflationary pressure & proven known foeman of the FRBNY. Until others rebel from their thralldom by refusing to play ball by not paying their tribute to subsidise it. Capiche Yankee Doddle 😊
That’s the way it has worked, but is that the only way it can work? Some things are almost unthinkable in today’s environment, but what would things like price controls, higher progressive tax rates, wealth taxation similar to property taxes, or maybe a system like Georgism being introduced? Basically systems to claw back some of those inflationary pressures, or pulling some of the drivers of inflation out of the market like land, housing, or basic food allowances?
u cannot rid the world of inequality it’s a pipe dream. if i own the machines why would i wanna give up my money i earned money for people who don’t do anything? And if i do have to give up my money for someone else to live i want a say over their life. if they need UBI they obviously don’t work or don’t have a meaningful enough job to be above poverty. UBI will basically lead to techno-feudalism, the rich will then own the means of production aswell as the responsiblity to take care of you….yk like a king would
@@oksaturn122 So who's going to pay for and maintain public services and infrastructure if no-one pays tax? Look at US healthcare, people are getting ripped off left, right and centre by insurance companies who can just deny claims anyway to avoid spending money and put people in serious harm or they end up with bills that financially cripple them for the rest of their lives because they needed life-saving medical care or medicine. If they had universal or affordable healthcare and paid a little more in tax for it, then this wouldn't be an issue, it would literally put money back into people's wallets because they're not paying extortionate amounts of the money THEY WORKED FOR to greedy, profit-driven companies who avoid responsibility because no-one can afford to sue them either.
UBI by definition is fair. Or do you mean in terms of amount? Like a UBI that's pitifully small, and won't end up doing much to help those with no/low income?
@@GreatWhiteElf@GreatWhiteElf I mean government policy involves many levers, UBI is only one among many.... tax, healthcare, social security, education, low wages with high competition for fewer paid jobs home purchase, inflation, interest rates. The whole mix needs to be adjusted and UBI is not a panacea to fix everything
I have this sentiment as well. MMT and this implementation of UBI would require careful and TRUTHFUL analysis of the economy and the monetary situation and I don’t think that’s possible when most of the people in power don’t even believe in objective truth.
Newbie question. There's a way the sandbox metaphor doesn't model reality that I think hides something significant about the current economy. Sand piles have a natural maximum slope, and this limits their height. They can't get taller without getting wider. You wouldn't have tall skinny sand piles one grain of sand in diameter and reaching the sky, comprising the vast majority of the sand in the sandbox. I'm only starting my journey of learning more about economics and willing to learn and be wrong, but something that imposes a maximum slope on a sandpile makes sense to me, where it can't get taller without getting wider. A progressive tax, an income ceiling (as opposed to a UBI), a wealth tax, etc. I'm not sure I understand how MMT addresses wealth inequality. Maybe there are other videos that go into this in more detail, or it will be covered in a future video?
Money is just another word for debt. Money is somebody elses debt. The value origins in the fact, that the debtor must recollect the money and sell something to those, who have the money. How much of this do you see in the sandbox metaphor?
The sand is just a metaphor, mostly tied to the sandbox being the size of the economy. The physics of sand wasn't important to the analogous value outside of filling or overflowing the sandbox. Money is a contrived solution to trade. Fiat currency isn't backed by tangible goods and is instead based on debt. Since it's all contrived anyway and debt must grow for anyone to repay debt, this only works because it should get easier to pay debt over time through the growth of the economy and managed increases (the target 2.5% the Fed tries to hit). The thing is, it's a mass delusion. We all agree it works, so it appears to work. Until someone gets all nervous and tries to call in debts because they're afraid whoever owes it can't repay in the future. This is why the US can keep operating this way with impunity-- it's the world's reserve currency, and Japan can too, because they take their debts in their own currency, so they can obviously repay it, too. But this only all works as long as people believe in the mass delusion. Monetary things have very little to do with real economics of goods, supply, demand and all that. The control of inflation is to feed the mass delusion to give people stable prices so they don't stop playing along. Yeah, it's not a hard science, despite there being a ton of math and logistics. It's a lot of "we make stuff up" and people's feelings and psychology. This is why economics has a ton of 'theory' and 'models' that are highly debated and full of flaws due to idiotic assumptions made to fit some math or a chart of data someone decided should mean something. It's a ton of guesswork, really.
You probably know that 4 out of 5 new businesses fail in a short period of time. This is a reflection of the fact that capitalism is a game that very few people win. Once a capitalist builds a business that is capable of growing, turning a profit, and outcompeting its competitors, than that capitalist is quite wealthy indeed, and they've left a lot of impoverished competitors in their wake. In the end, the only thing that addresses this unavoidable trend toward the wealthy getting wealthier, and the poor getting poorer is taxing the wealthiest people and corporations at a higher rate ... i.e. progressive tax rates. In the MMT model, this taxation makes money dissapear. And the government, as the issuer of fiat currency can make money "appear" by creating it out of thin air. Some people will say that the only way to put more money into the economy is by the government issuing bonds, then paying back the bonds with interest. But the government can skip the issuance of bonds and just create money out of thin air. MMT model or not, progressive taxation and public safety nets are the two main tools to deal with wealth inequality.
@@larrym2434taxing the rich is insufficient. They own everything, everything they own was bought with stolen money or stolen resources. De-privatize, re-publicize.
I would like to see private bank credit money creation added to these discussions. If the aim is to control inflation we should be concerned with all money creation and it’s allocation. Banks have made their money by fuelling the competition for residential property. Owning your own house should be a right (UBH) and the use of new credit money for someone to buy a 2nd or more existing house is allocating money for speculation not investment. Sand piles should be accumulated from productive investment not the speculation common in Neoliberal economies.
Great title! And you've made the best case for UBI that I've yet heard-by analyzing it through the MMT lens. I think you've addressed the risks pretty well, and it remains to be seen if it will come about. Thanks for these stimulating presentations! 👍
I had an idea of UMI, universal monetary income, where the amount of "sand" sprinkled is adjusted based on inflation. So it CAN be zero some months, and only gets big if deflation forces hit. Imho the BASIC in UBI is what kills it.
Can I just suggest that if UBI is not alive in the future then humans are not alive in the future. So whatever you think kills UBI had better be solved really quickly - the robots are coming…
@@daveozip4326 robots will be used to improve humans too. Maybe even upload us eventually. While I like UBI concept, you can always do social transfers instead.
@@lukap3rcic please be very careful how much you buy the hype. I suggest UBI as a safety net for the tsunami of human victims of automation. With no way to earn an income UBI seems to be what is required in the short term to save lives. I would love to be living past the automation transition phase, then what you talk about will be realistic, but that will be a long way off, so meantime we need to protect those who will be impacted (ie. ALL OF US)…
@@daveozip4326 i am not the one buying the hype. People will (probably) always be needed, and the hysteria about everyone losing the jobs always turned out to be just that- a lack of imagination, and maybe worse, an intentional scare tactic of the promoters of the technology/ideology to present it as make or break, which in turn cause people fomo. Not saying it will never happen, I don't know the future, but most likely scenario is "nothing ever happens" - meaning we will slowly adapt and upgrade ourselves and ai will be just another tool.
I have been intrigued with MMT and UBI for awhile. Lacking any backgound in economics, I have just enough understanding of MMT to be excited about it being used show how UBI can be executed without causing inflation but not enough, yet, to explain it to anyone else. This video was very helpful. I especially value the sand metaphor. Good Job. I do think Automation and AI will make UBI not just possible but absolutely necessary unless we all want to live in a dystopian novel.
Yeah, it seems there are lots of people expecting UBI to be inevitable as part of a future with far fewer jobs where it's economically viable to employ humans, but that leaves a huge question: how could our economy work in a way that, as you say, isn't just completely dystopian.
@@Go-Meta(AI x Automation) x Neoliberal Capitalism = Dystopia. (AI x Automation) x some form Democratic Socialism = Sustainable Global Civilization. I am no expert on Marx but my limited investigation left me with the impression he did a pretty good job of diagnosing the problem but I am not sold on his solutions (or any of the tried variations ie Leninism etc)
@@tamowillsat3929 i honestly dont think there has been a true socialist country -they are/have all been run by autocrats, dictators and despots. To me, it looks like workers owning a share of the capital of the business, basically worker co-ops and not the state owning everything, it looks akin to the economy within kim stanley robinson's mars trilogy
This is a great and simple explanation for MMT as well as money movement, love the sand metaphor. The only thing I'd add is a reference on bond issuance because there're a lot of people who understand how the money supply is created but believe that there are equivalent bonds issued and that each dollar is accounted for in that way by being actually paid for with existing money.
Thanks! My video summary of Stephanie Kelton's book covers some aspects of the relationship between the Treasury, central bank and bonds via the open market: ruclips.net/video/kWcvVf7r88s/видео.html But obviously it's always going to be a bit simplified in a ~20min video 😀
A helpful tool would be if you created a sand box that was accurate in scale to the wealth distribution in the US. Imagine a pile of 70% of the sand in a square that was 1/10th of the sand box. Just a little redistribution would make a big difference.
It's because capital acts as a bonding agent and prevents it from naturally falling back down. Worker and Consumer cooperative based economies wouldn't have that issue as they prevent capital accrual/clumping.
We have been defacto practicing MMT for decades with perpetual and expanding deficit spending. Some, like Ruchir Sharma, claim that this has led to asset inflation, for example, stocks, housing, and high-end goods. Also, they claim it leads to income inequality, though I believe that is more a function of technology and policy decisions. However, another real downside is that debt is a powerful accellerent to an economy that is fast devouring the planet. As to UBI, the best I can see is that it would reduce the state welfare bureaucracy, but what scares me is that it could rob people of purpose. To be brief, how about shorter hours, higher pay, and better work conditions. Shorter hours alone could provide universal employment, which I am very much for. People need something to do.
Yeah, I've seen many who have noted that the quantitative easing after then 2008 crash, injected lots of cash into assets from the 'top' of the economy in a way that was unfair and increased inequality. Possibly a UBI would have been a fairer way to inject this cash into the economy (but they were specifically trying to inject liquidity into the govt bond market, so maybe they had to do QE that way). Also, in terms of improving work conditions, the origins of MMT is very much linked to the idea of a job guarantee, which is also hoped to put a pressure on other employers to offer better conditions, so you may well like/prefer this traditional MMT perspective. Personally I'm less convinced by a job guarantee for various reasons, but I agree that we need to develop a society, a culture, that values and encourages people to find a useful, engaging purpose in their lives. I think even with really advanced AI there will still be lots of important things to be done by humans. There's plenty of 'work' to be done, just not all of the work can be funded via traditional market forces.
I'd rather people had the choice, and there were some social pressure to work. Some people legitimately thrive in a state of "unemployment" because they produce things they're interested in or go to school.
Can't we do other things aside of work? I realy Hate to work... I wish I could train boxing all day Go out in dates with girls Go out with my hommies And do wagerer I decide when I decide Why do you want to take people's liberty and time just to make them work?
Have you though that through? I REALLY don't think it would rob people of purpose, any more than our current system does. At least to start, we're not talking about enough money to quit working, rather just enough to pay some bills. People might be able to work a little less with it, but having a little extra time is a good thing for purpose and family. Additionally, many studies on UBI equivalent aid, found that it enabled a higher rate of people to 'find purpose'. Money is the necessary enabler for a lot of things. I can tell you, if I was given a UBI, that'd be enough for me to turn my hobbies into a source of income. I'd spend my time running my own business, instead of struggling for part time jobs.
@NikoKun I've been self-employed nearly my whole life, doing work I want to do. I've been in the vanguard of the 30 hour week since day one. Less is more. I do support scholarships, grants, and community service, but I don't think UBI is a politically viable position. How about starting with something achievable, like mandatory two week vacations and a shorter work week.
things like disability benefits and state pension are essentially UBI IMO I would fear UBI = bare minimal survival as such benefits currently do, esp during high inflation cycles when those of us on long-term benefits/limited income and incapable of working suffer the most. I can also see an evolving 2-tier system, where only those of the highest IQ and wanted skills can acquire financial independence from the state. It also doesnt protect the population from a democracy that has turned into a fascist autocracy. I would LOVE for UBI and MMT to work, but i am sceptical, perhaps my MECFS brain just cannot understand well enough
Brilliant video. I am a new convert from a more libertarian view and I am embracing MMT and have ordered many of the books reviewed. Love the sandpit analogy.
In the end there's really no "converting" to MMT. It's just literally how things actually work for any currency sovereign entity with a fiat currency. It definitely will cause you to think differently about politics and policy. It really helps emphasize that political will rather than a perception that money is scarce should drive all policy discussions. There will still be plenty of disagreement but at least we won't be getting stuck on nonsense arguments like "where will the money come from."
@@pocklecod And don't I know it. Having been a gold standard advocate for 15 years, I felt there was something wrong with the idea, but wasn't sure what. So I began a journey of study and had to keep a very open mind. I have had many heated debates over the last couple of months with gold stackers (I wasn't that far personally). They think I am a moron, idiot, fool, the names go on and on. They give me all the examples like John Law, the Weimar Republic etc etc and how printing money to oblivion has never worked. I do get sick of the pointless arguments after a while.
@danthorley6592 Yeah for sure. And to be clear you could still make a coherent argument for the gold standard while acknowledging MMT. Basically you'd be claiming that fiat currency is a bad idea and nations should be stripped of the option to increase currency supply at will. So far empirical evidence seems to indicate that well managed fiat currencies do work well, and the ability to control currency supply is a good thing if properly managed, but the fiat system certainly has potential risks if badly managed. It's really not even GS people who you just have to roll your eyes at, it's people who think taxes create money for sovereign nations. Which unfortunately is most people...
Another analogy that we could use is water in extreme low temperature, if the rain fell in Antarctica, it would create ice spike towers, rather than an icy lake. The heavier the rain, the more lake-like it becomes, scooping ice spike allows more area to pile up spikes on top of bigger spike and stabilizes the structure. You also need to "melt" the assets ice to create "liquidity" before giving back to economy, so the ice disappeared, to be used as a shower. Now, if you add constant rain to icy lake in mid winter, the ice floor will melt and those melted slower can rise up as a tower, this is analogous to adding constant money in one area. I've never seen anyone tried adding mist onto icy lake which is analogous to spaying money everywhere to create UBI, I can't predict that. But, my guess is we could see it in evening of earlier winter, or end of the fall, if it's not snowy. Evening mist will thicken icy floor, and create snow film on the surface. This snow film is fragile, it melts when it touches water, and blew away easily by wind. Come to think of it, maybe a better analogy is winter snow on icy lake. Showering heavily on icy lake makes holes on it, but slowly pouring water steadily on one spot makes an ice spike. Spraying mist of water makes small ice shards that doesn't bind with the surface. I find it more related to real world cases this way.
Great show! Thanks for taking on the issue of MMT-based UBI. I hope it helps spur discussion much more broadly and deeply moving forward. I do find the sandbox metaphor useful. Hopefully, it catches on to facilitate more productive conversations about societal resource management. I still believe that the upcoming era of superabundance brought on by cheap renewable energy, AI & automation may be the best antidote to the inflationary pressures of UBI. In fact, UBI may be necessary to prevent deflation! We’ll see. Cheers!
There is something weird with the current state of democracy, where ‘taking things out of political control’ e.g making them the responsibility of the central bank is seen as universally safer and better. Surely we need to work out how we can change the incentives of actors within our political systems so they aren’t seemingly guaranteed to make the wrong decisions, such that we want to reduce the scope of their decision making powers as much as possible.
I know what you are getting at, but I think there are many functions in society where you actually want experts within the given field to make the day to day decisions based on data, but within bounds set by our politicians who should continue to oversee what the experts are doing. So, the politicians are still and always ultimately in charge and responsible for setting the parameters of what is being done by the experts.
@ I agree, but I think there is a fundamental issue with democracy in the age of distrust, conspiracy and misinformation. With the populace as it is, competence is seen as the enemy. I don’t think we know how to fix this.
Sand is only slightly better. Money is not conserved. It is created by government borrowing and destroyed by taxation. Wealth is not in money but in assets. Assets are produced by work, but also destroyed over time with depreciation. Money can be exchanged for both assets and work, but the exchange rate is highly volatile. (Currently work is very cheap, even in the west.)
Indeed! "Wealth is not in money but in assets." this is a point that I don't think enough people fully realise, especially when they are talking about inflation.
The "asset", money is all about, is debt. When somebody owes to you something, it is an asset. Money is the bookkeeping system about who in the society owes and to whom they owe.
I know that the "money = debt" view is very popular, but I think it only covers a part of the story and is indeed a bit confused / confusing 🙂 In a modern economy, a lot of money is created through private banks issuing loans, but there is an asymmetry between debt and money. Debt does follow specific people around. Money does not. And, when debt is written off in certain situations (e.g. debts owed to a company that goes completely bankrupt and is closed down), then the money invisibly 'linked' to that debt is no long even linked to an active debt. And in this context, the person holding the dollar 'notes' is the debtor and the bank that 'created' the money is the creditor. So, the person holding the note owes something back to the bank. But, in the olden days "debt = money" scenario, the person holding the note was holding the IOU (as in the bank owes you gold!). So, in this scenario the person holding the dollar 'note' is the creditor and it is the bank that owes the gold back to the dollar holder. So, personally I think it's more confusing than useful to seem to imply an identity between money and debt. I totally agree that modern money is a creature of double entry book keeping that tracks the movement of money and who owes what to whom. But sometimes an entry denoting an asset is just an asset that is owned outright. Indeed we can imagine a person who choose to never take on any debt. So, if through working and/or gifts, they end up with, say, $100,000 of money, it is not clear how useful it is to keep thinking about this money in relation to the debt that it was originally created 'from' (assuming lets say that all of it was indeed traceable back to a loan or whatever). The person with the $100,000 doesn't owe anyone anything.
Good breakdown but I didn't see a key inflation-management point that would have to be addressed. How on earth do you stop wealthy property owners welcoming UBI as just another way of transferring centrally supplied money into their accounts by jacking up rents? Clearly there'd be more money around competing for the same number of limited resources/properties. Wouldn't this quickly shake down to a zero sum gain but with amplified wealth inequality?
Yup, good question(s). I think there are two points you're raising: 1) rental price rises and 2) wealthy people using UBI to increase their savings / wealth. For 1) I'd say the way to solve excessive rents is to build more affordable houses. This is essentially a supply and demand problem and I think governments should have a, say, 20 year commitment to bring down price/wage and rent/wage ratios to much lower levels. But, this goal and policy is independent of a UBI. If there are lots of rental properties on the markets, rents will go down even if there is a UBI (and maybe the government should fund non-profit NGOs to own and run lots of affordable housing at decently low rents to help prevent profiteering - so not rent controls, but just making cheaper rents available in the market) For 2) Rather than means test the UBI, the simplest solution is to also have progressive taxation that just means that wealthy people will be making a net contribution to the government. But also, as I say in the video, lots of people seem to think that UBI is 'inevitable' so we need to find all of these kinds of possible problems and then find solutions to how we can avoid them if/when we introduce a UBI.
@@Go-Meta With digital, liquid or sand analogues for money I should think it possible to apply computer modelling to entire state economies (esp. nowadays with the scale of computer-power available) taking several if not all monetary theories and possible inflation scenarios into account. Is anybody doing this? It would surely require far less compute-power than, say, a global climate model. Okay, humans can be unpredictable and irrational with spending habits but I bet the patterns would quickly average out in useful ways (for modelling purposes at least). And basic, major transactions in life - the essentials - are relatively few in number.
Thank you, this helped remove the “we can’t afford UBI” block in my brain, and thus the biggest anti-AGI argument I had..not that there aren’t others. I don’t know enough about MMT to understand pitfalls..but are you sayin if the inflation problem is kept in check, we could grow labour productivity indefinitely, free people from mundane jobs and still have room for the most innovative to build their sand pile Bigger than the average joe? Thats optimistic!
Think of all the deflationary technologies that could have free up people from BS jobs. The problem is that the gains went to billionaires, that's why billionaires exist. We could have easily gone the other direction, outlaw billionaires and shrink the work week. We could of had something like a 20 hour work week.
@ and I’m very afraid that the gains of AI advances WILL accrue to billionaires without pause, oversight or measure. But if MMT holds, couldn’t the taps be turned on enough to let billionaire play with their sandcastles while still raising standard for everyone?
@@theshi3152 the video is nonsense regarding the sandbox analogy. Money is a bookkeeping system of debt. Banks go bust when many of their debtors go bust, since money is not sand. It is an IOU. The banks go bust, because they become the net debtors behind the IOUs, they have created. But it is not their business to produce and sell for the money. This is the business of their debtors. The job of the banks is the bookkeeping of debt. How does this relate to sand? Not at all.
@@ThomasVWorm Because this is an archaic thought process to describe a bank. they literally.. create money due to how the Overnight Lending system and Central bank agreements work. Banks dont work because they have capital from Investors and Debtors. Banks dont really go bust anymore either, Central banks tend to bail them out. The recent situation with Silicon Valley is different.
@@theshi3152 you miss the point completely. Money is created, when you sign a credit contract. You create an IOU (the credit contract) and the bank creates an IOU (the money in its ledger) and you exchange both with each other. This creates no debt, since both sides owe each other the same. Debt is created when the debtor spends the money. The debtor now owes to the seller to take the money back and sell for it too. The bank sits between those two as an intermediate: the seller has an IOU of the bank and the bank an IOU of the debtor. When the debtor fails to sell to get the money back, the bank stops being an intermediate and becomes a net debtor. But it can make other debtors become the net debtors via interest. But this has limits, since the bank cannot raise interest rates, as it wants. Otherwise the people borrow from other banks. When too many debtors go bust, the bank becomes unable to service its debt. Then the bank goes bust too. So, the sandbox metaphor is far from being realistic. For a UBI you need debtors - those who produce and sell for the money. The state creates them by demanding taxes first (collecting taxes is at the end and debt repayment). But, when each and everybody gets a UBI, no one is left, who can be taxed. The money is worthless, since nobody needs to sell for it. And money loses it purpose as a mean of control since a UBI is about giving up control.
MMT just says that actual economics is the raw material, energy, infrastructure and labor added together and managed. You do not afford anything with money, you either can utilize those resources effectively or you cannot. If for example you want to do an EV transition, the question is not how much money you have but whether you have sufficient material and labor to mine the raw material and build them and the related infrastructure. If you don't, then no amount of money being thrown at it will do anything but create a bubble. If you do, then directing money towards it will not cause inflation if markets are sufficiently open to new entry or if nationalized efforts are taken. Another example, we currently throw away more than enough food to feed everyone, offering food vouchers for that food would not cause price increases as the goods already existed and were simply poorly allocated. So the real question is what do we have and what can we do with it as money is just a measurement of what is being done and a vehicle for facilitating those exchanges. One doesn't "practice MMT" but rather MMT is a description of all economies at all times, the modern part is that we are describing complex systems by their components and interactions as observed as opposed to what used to largely be philosophy. MMT isn't there to tell you what you should or shouldn't do but rather the consequences of whatever actions you do take. MMT can be used to describe a feudal economy just as well as a communist one or a capitalist one because they all ultimately rely upon the same core inputs which no matter the economic system have the same properties. Iron ore under feudalism is not distinct from iron ore under communism.
MMT is more a description how fiat currencies work. With bound currencies like crypto or gold bound there is an artificial maximum limit of the money supply which can cause trouble in the economy.
@@uweengelmann3 MMT also can be used to describe those things. Crypto especially as it is an ecosystem which is not bound and is likewise not the functional money of any economy currently. Gold, it describes why economies struggled with metals based economies, MMT is an understanding of the fundamentals of economic activity in the same way you might explain the workings of an ant colony. It is simply a more rigorous approach to economic analysis than curves draw on napkins, math for math's sake and philosophical musings. It's approaching the realm of actual science.
I much prefer a Mutualist Worker and Consumer Cooperative based economy. We bake into the system mechanisms that prevent sand clumping like capital accrual that generates massive heaps.
Not an expert, but I really like the sand analogy! I had some vague notions of the economy as a household as well as how fiat currencies differ from non-fiat currencies, but this video helped to develop upon those notions. I also think proposing UBI such that it is similar to other levers already used by independent financial institutions can be really helpful in appealing to conservatives (small c, but also maybe big C?). Thanks for the video!
If dollars were grains of table salt, then avg. lifetime earnings in the US (~$2 mil) will fill a coffee mug. A billion fills a bathtub. A trillion fills a semi.
@adamchristensen2648 my comment is a mnemonic for tracking the scale of large numbers, and making them more understandable. When you hear "million" on the news you can think "that is half of the life time value of an avg. American." When you hear "billion" you can think "an avg. person earns a 'coffee mug' gradually over their whole life... and a billion is a 'bathtub full' all at once." ... That's the life time earnings of 500 people... much different from numbers measured in mere millions. When you hear "trillion" you can think "life time earnings for normal folks is a coffee mug, billionares have a bathtub, but a trillion is a semi full." Measured in life times a trillion is 500,000 life times. Think like a vampire if it helps. An avg. person is $2 million (coffee mug). A billion dollars is 500 people (bathtub). A trillion dollars is half a million people (semi).
Corporations can issue new shares of stock too, but new issuances dilute the value of existing shares. New 'sand' dilutes the value of the hills of sand currently controlled by some. The growing economy can't be uniform. Some sectors will see more money (sand) to static supply. Prices will rise, somewhere.
Yeah, but I'm starting to realise that "prices will rise somewhere" is always true for various reasons. Prices will fall in other places. So, the real trick is to try to keep the experienced purchasing power of a currency as stable as possible so that prices today can be usefully compared to prices tomorrow and in a week's time. But the economy is a sea of price changes, even relative to gold or Bitcoin. So perfectly "zero inflation" is a both an unreachable mirage and will only every be true for a certain subset of goods or services.
One potential method of reducing inflation in an economy with UBI would be to reduce government expenses in other areas. For example, if UBI starts at a nominal $100/month we could cut all government welfare payments by the same $100/month. This would be acceptable because the welfare recipients will be no worse off. Edit: Something else to keep in mind is that AI controlled robots will drastically cut the cost of production of many products, leading to strong deflationary pressures.
I'm not totally convinced AI robots will make things cheaper. TVs and head phones are cheaper but housing, food, vehicle's are all more expensive. We've had robots for along time but I don't see things becoming really cheap.
@@behonestwithyourself3718 It depends on how much human labor adds to the cost of production for that specific product. If something is very labor intensive, such as clothing manufacture, you can expect the cost to drop a lot when robots replace human labor. If something is not very labor intensive, such as mechanized agriculture, then the savings will be minimal. By far the biggest savings will be in professional services, such as accounting/tax, education, medicine, law, etc. Expect the cost of these services to drop dramatically.
@@marcusmoonstein242 I hope your right. I think the sectors you listed should come down in price with AI too. I just feel like the massive corporations will always bleed as much as they can out of the working classes. I'm all for businesses for making a decent profit. It just seems like alot of the wealth is being transferred to the asset class and the purchasing power of a paycheck is getting lower.
How would AI reduce prices of items? Rather, why would companies not be inclined to pocket the savings generated by not paying workers for labor? A company's only responsibility is to their shareholders.
A question I'd like to ask. Assume everyone gets UBI. How do we stop landlords from just jacking up the rent by that exact amount? Or even "sudden inflation" from groceries "mysteriously" getting more expensive?
These are good questions, and inflation is certainly the key risk to manage. My first thought on this issue is to introduce the UBI slowly, say over 5 or 10 years. Introducing UBI should be about planning for and moving slowly towards a future economy where fewer people can get waged work, not a panicked step change. This should make it harder to justify prices rises on the back of UBI being introduced. But secondly, and more importantly, we need to make sure that market competition both in groceries and in property rental prices (for the cases you mention), puts a downward pressure on prices to keep them the same while the UBI slowly increases. In the case of rental properties in particular, I personally think that governments should be doing more to ensure that there are plenty of affordable, good rental properties on the market (e.g. by funding housing associations to build and run more rental properties). In other words, we increase supply of these goods so that competition keeps prices lower.
Keep in mind that UBI is typically proposed as an alternative to existing welfare programs, not to further supplement them. We should consider things in this relative context. Consider food stamps, for example. Food stamps tend to create a growing demand towards groceries, which comes bundled with price-raising incentives (if not due to corruption, then simply due to greater shortages). Since food stamps can only legally be used for food and have a monthly expiration date, families receiving food stamps are often incentivized to overconsume on food. They can end up hoarding more food than required, such as stocking up on food with a long shelf life. There's no incentives to only buy the food they require, since there is no compensation whatsoever for unused benefits. Instead there are incentives to use every last penny of the food stamps on food. Consider the alternative of providing that needy family money rather than food stamps. They now have incentives to no longer spend the entirety of that sum on food. The result should produce fewer perverse incentives for grocery prices to rise, not less.
@@Go-Meta Please correct me if I'm wrong as I'm no economist (software engineer) and only have my basic high school and uni education, but downward market pressures on prices doesn't just require suppliers to compete for demand on the supply side to my understanding, but for consumers to be incentivized to shop around for the best deals on the demand side. At least that makes sense to me on the pure behavioral side of things. An appeal I see to UBI (or NIT as an alternative) is that, combined with price transparency, it does seem to better incentivize shopping around for deals on the consumer side over alternatives like housing assistance, food stamps, subsidized healthcare, and subsidized education. I do see some unique perverse incentives compared to the existing welfare alternatives (ex: someone spending their UBI compensation on gambling and booze), but compared to the existing welfare programs, UBI actually seems to reduce inflationary pressures to me (possibly even too much toward deflation if many recipients end up saving their compensation). At least it doesn't produce higher demand towards a very specific type of supply.
Say it with me now! This is what Rent price restrictions are for kids! But seriously though. That's the solution here. Realistically the rest of the economy is the issue here.
What stops them from doing it now? In a properly functioning economy, if some entities jack up their prices when they don't need to, consumers will just switch to their competitors who didn't. Obviously if there isn't enough competition then monopolies can ask for whatever they want regardless of how people get their incomes. UBI doesn't change anything here. Efforts need to be put in place to ensure markets remain competitive (for example by blocking mergers and/or monopolies are regulated to avoid excessive price increases.
13:00 there is nothing wrong with low wages going up on the cost of others, since better wages need a different distribution of production. And there are jobs, which cannot be automated, like care work. They need wage increases when the overall productivity increases in order to participate from the grown productivity. Without we run out of nurses. This would be ok, if we think, nurses are of no importance at all. The other way to let them participate is to use productivity gains to lower prices. But the main reason for investing into machines is to produce and sell more with the same cost for production and by this, to make more profit. Nobody invests to sell for a lower price and the same profit. So some inflation is needed.
The analogy is a good one. I am against that type of UBI because it won't work. Essentially what it means is people will be rich when the economy goes well and grows, but what actually makes that growth happen? if it's only or mainly UBI and deficit spending, it will stop growing at some point and then what? you will get into a spiral where there is a recession, which means less UBI and even less growth. I think a UBI program has to be independent, but not part of the monetary system, it has to be part of the capitalist system, then you won't have to deal with that inflationary pressure. Basically you replace a Warren Buffet by citizens. Make everybody an investor. People highly subsidize capitalism anyway, which is why inequality grows so much. If a corporation goes well, all the profits go to private investors. If it goes bad everybody pays to keep it up from bankruptcy. So it makes sense to make the overall population partners since they already are. Then the profits would go up and down naturally, without needing bureaucrats or politicians deciding what is the right level of inflation or whatever. If capitalization was made roughly of 30% for the public and 70% private, every time the private wants to cash in, everybody would at the same time through their non voting shares. You could imagine it being stable even if there is no growth or even if there is a recession. Mining rights is also usually a good place to get some money for those type of programs.
>> Make everybody an investor. How would your system decide where to invest our collective money? Using the film industry for example, how would you determine that investing our tax dollars for Christopher Nolan to produce what would become a box office hit like The Dark Knight is likely a great investment with a high probability of a great ROI, but not a horrible box-office flop like Madame Web where we end up losing money? Would you invest my tax dollars into Android or iPhone to force me to own shares? Both? I'm an Android fan. I hate iPhones and thoroughly disagree with their EULA (monopolistic and only allows us to download/buy software through the Apple store). I actually consider it unethical to support Apple.
>> If a corporation goes well, all the profits go to private investors. If it goes bad everybody pays to keep it up from bankruptcy On this point though, I don't pay anything if my company goes under. Investors are the only ones who actually lose any money, having paid in advance without getting compensated. I'm a software engineer working in R&D and a lot of our explorations of cutting-edge innovations carries high risk of failure. The types of people who invest in us tend to be high-rolling gamblers who don't mind a very high chance of failure in exchange for an extremely rewarding success (lottery mindset, because 99% of the time the attempt to invent something brand new fails miserably). For example, one time I worked in a team where we spent three years trying to develop a new software only for it to fail miserably. I actually thought it would fail just based on the design thinking it wouldn't be so popular among customers, but I was just one programmer in a team of a dozen programmers. Still I did what I was paid to do and implemented the designs as specified. As I predicted, the software failed to attract much demand. The reason I never bought shares of that stock (I do have shares in other stocks) is because I didn't believe our product had the highest probability of success. On the contrary, I thought it was weighted towards failure. When our product failed, we did end up losing our jobs but I was able to find a new one. I didn't lose any money for the product's failure: instead over the three years, I was paid over $300,000 without losing any of it.
Great video... our current system of using interest rates to control inflation and government bonds to manage debt is like using bloodletting as a way to treat disease and the sooner we change our thinking the better.
Good video - nice job of making this accessible. The rise of crypto currencies could be a threat to monetary policy and government control over the economy. Libertarians see this as a feature and not a bug.
The problem with MMT + UBI is that there are some businesses that by their nature are non "ever expanding". Small businesses what comes to mind. But UBI with its prepensety to push inflation just slightly higher, would force such businesses either to close or adopt stupid policies forcing them to expand beyond actual business need.
The issue I have with MMT is it seems to ignore the incompatibility of continual economic growth (consumption) with the amount of physical resources that are available in a finite world.
UBI has already existed for many decades in the form of Welfare. Also, given that _only humans_ want to be paid money, this means that the main effect of increasing automation (where an increasing % of production will be done by robots who don't demand "living wages") will be the reduction in the cost of living per capita, as opposed to an increasing number of unemployed humans, each demanding the same level of income. This means that the main premise of this video ("how can we dramatically increase the money supply to pay UBI without increasing inflation too much?") is a bit misguided. The more serious issue under UBI is very likely to be the fact that the ever-shrinking % of population, who are still willing to work, will naturally need to be compensated better than the majority, who want to have a lifestyle without positively contributing to others, which means that this economically-inactive majority will be complaining about the abovementioned minority earning higher incomes (which will give rise to the complaint of "inequality", "unfairness" and "not paying their fair share" - just like we have now).
I'm not going to pretend I understood every part of this. But the bits I did understand seemed very interesting and seemed to fit into what I see in the world around me. Probably the big thing I see UBI doing is improving capitalism because I think having a safety net would free people up to try new things and hopefully create some more competition in markets. That would of course be affected by other polices, but I think it would be important to help keep driving economy.
The real question: is the powerful forced to change their system to make UBI an option or will they use UBI to artificially increase their profits in the current system?
part of the issue is paying individuals, but the broader issue is maintaining productivity. With so many people out of jobs how are they going to spend their days?
Borrowing (money creation) comes before taxes. Loans (money creation) create deposits. The closed Fluid Mechanics or plumbing system analogy is wrong because the “fluid” has to be created and removed. The key phrase is “Money is created and destroyed.” Although because of interest more has to be created as debt than is destroyed by “repayment.”
5:20 you can only detach money from physical resource use through efficiency gains, and there is a limit to those given the level of technology and physical limitations.
Great work, I hope more people get to see this. You gave me much to think about. There's a french economist who specializes in this topic : Bernard Friot. Perhaps if he has publications in english, you could help us understand his contribution/version of UBI ?
I feel like taxation should be the most important funded of a UBI scheme. With wealth generating assets concentrated in only a few, then all UBI payments will be funneled up through them (and inflate asset prices that keep others out of it). Without clawing them back from those generating the wealth through these assets, UBI will just essentially be a 2nd hand socialized scheme of funding wealthy
What's the difference between MMT and Keynesianism then? Doesn't Keynes also say that spending creates growth, and that reducing spending reduces the economy?
So if you take as a supposition that automation and by extension AI (we are not close to AGI regardless of what you hear) will replace so many jobs that you require UBI, one needs to understand why that is. It will not be needed because no one has a job. It will be needed because money itself has lost its meaning and value, including real money like gold. The reason goes back to the core meaning of all money, which is the translation of the real or perceived work of human beings, which began about 10k years ago. If a loaf of bread or a candlestick suddenly appear in front of you as if by magic, the value of those things is effectively zero, especially if at the moment you don't need to use either one. This will translate down to the deepest levels of markets, meaning no money of any kind has value. The only way that UBI could help this scenario would be as an interim state between what we are doing now and what we do next. That will not and cannot last long. There is no economic reason to do it because there will immediately be no economy. It would be purely for emotional reasons.
Your previous Video also made a big error with Bank Balance sheets. A new borrower from a bank is not both an asset and a liability. The matching liability is one of a) Interbank Loan b) bonds issued c) borrowing from central bank or equity from issued stock. It’s not simply created out of nothing. You have a fundamentally wrong conception of how bank balance sheets work. Many MMT proponents also fail to grasp the nature of banking systems because they are economists.
I'm not sure what you are getting at here. If a bank lends $1000 to Jane, then, the instant that loan is approved, Jane's bank account at the bank will be increased by $1000. This increases the banks liability *to Jane* by $1000. But at the same time they now have record of Jane's new debt to the bank for $1000 principal plus the interest. This new debt is a new asset owned by the bank that they could in theory sell on to another bank. Or, for example, if Jane stopped paying back the debt, the bank could sell that debt on to a debt collector (albeit for much less than the $1000 original debt value). So, this is why the debt is an asset to the bank. That is what I was saying in the other video, and I cannot see how this (initial) part of the story relates to interbank loans or bonds or the central bank. Sure, later, further transactions may become more complex, but initially it is really quite simple.
@ no that’s wrong when a bank lends to Jane the bank has to have the cash to immediately transfer the cash to tge account of the bank of the acccount of the buyer. When you use your credit card to buy something no cash goes to instead the bank transfers money to the account held by a bank of the store. When a business buys an big asset no cash actually goes to the account of the borrower and the fact they can’t put their hands on the cash is typically explicit in the loan agreement
@@Go-Meta sorry I meant debit card. Credit cards have Visa etc as an intermediary and they may be the lender but their balance sheet is run like a banks.
@@Go-Meta every bank has a Treasuer (titles vary). The Treasurer’s department monitors 24hrs the balance of bank cash balance. Money in from deposits and loan repayments etc and money out from withdrawals and lending. They must maintain the balance so at daily book closing it is netted out. If they have extra cash they lend it to other banks in the interbank market or buy short duration treasuries. If they have a cash shortfall they borrow in the interbank market or if the market is thin they go to the US treasury “window”. Why would there even be a “window” if banks didn’t have to daily match their cash positions.
@peterschief9778 I wasn't talking about either debit or credit cards, which are indeed more complex transactions with more parties involved. I was simply talking about someone getting a loan from their own bank. No other banks or other people or purchases involved. Just a simple loan.
@yohami I totally agree that this is a key question. We need a political economy that keeps incentives and rewards for those who work hard. But I don't think the fear of abject poverty needs to be a part of those incentives, especially if we move towards a world where there are fewer paying jobs, especially for less skilled people. You want incentives to be related to actions that you can actually do something about. For the moment it could be argued that there are plenty of jobs for less skilled people. But with AI improvements that could change in a very short space of time. We need to have a plan for how to react if that does happen. UBI is just one option we should consider.
You say that MMT tells us that the government can grow deficits until inflation becomes a problem. This sounds reasonable until you realize that the money printing induced inflation for assets has been high for a long time. Asset prices correlate with deficit spending. In other words, MMT has been redistributing the wealth to the rich for decades now in the form of asset price inflation from all the money printing. The wealthy make insane amounts of money in capital gains. You might say, "Don't worry, we can fix this. MMT tells us that we can just tax it all back." How are you going to tax unrealized capital gains? And even if you found the political will to do it, it would still crash the market and create chaos. I think it's funny that MMT proponents say that we can print even more money without consequence, not realizing we've passed the limit a long time ago. UBI can only be funded by high taxes. But good luck taxing all those unrealized capital gains. Look up the "buy, borrow, die" strategy. You will cry when you realize how bad the problem is.
"MMT" does *not* redistribute wealth to the rich - bad "trickle-down" economic policy redistributes wealth to the rich. It is *not* any kind of MMT policy. It's an extreme simplifiction of the MMT analysis to say that taxes are the only check on inflation; taxes are indeed always the _first_ check on inflation, but that only addresses demand, while MMT economists also address resource supply chains and pricing power abuses. Using interest rates to control inflation doesn't work (except at extreme levels that wreck the economy-a big 'price' to pay). No MMT economist says "we can print even more money without consequence"-where did you hear that? You clearly haven't read any MMT literature! Or you wouldn't be making such claims.
@@randyallred2382 The MMT system requires constant inflation to function. Let me summarize MMT. Governments grant banks the ability to create debt money. Debt money is unstable. When debt reaches a certain level, a deflation death spiral starts. Then government must increase the money supply with non debt money (deficit spending) to inflate away the debt. If this is not done, than the deflationary spiral will keep deleting money until all the debt money is gone and the economy declines into poverty. This means governments must always deficit spend, resulting in constant inflation. This creates a never ending bubble that subsidizes asset holders with unearned wealth. Notice that inflation is compounding interest for asset holders. This is wealth redistribution from the workers to the owners. And it's a side effect of how the MMT system is structured. Policy cannot fix this, because that would undermine the system. That was my point about taxing unrealized capital gains. If you do, then the market bubble that MMT is founded on gets popped. If MMT proponents want price controls to fight inflation, then that's a big fail. Price controls have never worked. But I'm going to give MMT the benefit of the doubt and assume price controls are just the ignorance of some MMT proponents and not another problem with MMT itself. Also, I didn't say that interest rates are a good way to fight inflation. I'm saying that inflation is baked into MMT itself. Interest rates will not stop this. Price controls will not stop this. My solution to this problem is to stop banks from being able to create money based on debt in the first place. Because that's the root of the problem. As you know, "money is debt" is a foundational premise of MMT. This false premise forces you to accept their solution of chronic inflation. But it doesn't have to be this way. Of course, replacing the MMT system will cause short term pain, because the asset bubble will pop and create chaos. But if we do not do this, we will continue to go down the road of absurd wealth inequality. The few will have immense unearned wealth. The many will have immense unearned poverty.
@@logical-machine - What "MMT system" are you talking about? MMT describes the existing money system. Federal deficit spending is the primary source of household savings and business profits. Eliminating govt deficits is a recipe for permanent recession. *If you actually read any MMT literature, you'd know that most MMT economists say the govt should just stop selling long-term bonds*-it's an unnecessary operation that contributes to wealth inequality. So, govt selling bonds is not an "MMT system," it's the system that currently exists (and that MMT did not create). You are correct, the financial industry is inherently unstable-something that all MMT economists recognize (see Minsky). The government is the only stabilizing backstop to finance sector instability. "Price controls have never worked" is just a facile statement with no historical or economic justification. The US Constitution mandates the govt to regulate the value of its money-and the value of money manifests in prices. The government is _obligated_ to regulate money's value. Regulating pricing power abuses is critical, not just in fairness to consumers, but to avert imbalances across different sectors of the economy. Federal Reserve rate changes are a form of (attempted) price control-it's the primary mode of price control under the prevailing "trickle-down" economic theories. The MMT analysis, and history, shows that using rate hikes to control inflation doesn't work. Plus, it's all at the cost of working people, when the Fed tries to cut employment & lower wages. The dollar is an accounting tool. When an issuer (govt & banks) issues dollars, it's necessarily entered as a debit on the balance sheet-a liability-i.e., "debt." To the payee, it's an asset. Because federal deficit spending is technically recorded as "debt" doesn't mean anyone has to repay it. Talking about "replacing the MMT system" doesn't make sense. And MMT exponents do not advocate for the system that increases wealth inequality-they have proposed any number of steps to reduce it.
@@randyallred2382 >Talking about "replacing the MMT system" doesn't make sense. And MMT exponents do not advocate for the system that increases wealth inequality-they have proposed any number of steps to reduce it. And all their plans to fix wealth inequality will fail because MMT is founded upon wealth redistribution. I explained all of this in the comment you're responding to, but you are not engaging with what I said. I'm not here to talk about price controls, interest rates, or bonds. These are all tangents. I am charging MMT with fundamentally being trickle down economics because it's based on money being debt. If you disagree with my logic, then engage with it. It seems like you just skimmed my comment and wrote generic talking points. If I write too much stuff, youtube hides my comment. I originally responded to all your points, but I had to cut out the tangents to get this comment past youtube censorship.
@@logical-machine - Look, with all respect, you clearly haven't read any MMT literature, so you don't know what you're talking about when it comes to MMT. A pillar of the MMT analysis is the very instability of the finance sector that you mention (this comes mainly from Minsky's instability hypothesis). MMT didn't create that system, nor do MMT economists endorse it; they _describe_ it. Further, they recommend policy changes to curtail the finance sector's opportunities for risky behavior that creates imbalances in the economy (e.g. the 2008 GFC, which MMT economists predicted). You confuse the MMT descriptive analysis with policy-as if the existing system was "MMT's" idea or something that MMT advocates. You couldn't be more wrong. Money has always been issued as a liability-a debt-of the issuer. That's not the problem; the problem is that banks-extenders of credit-are allowed to undertake highly risky behaviors for short-term gains. If you're addressing wealth inequality, you must address the current system of bond sales and the interest paid to bondholders. The Fed's misguided rate hikes cause the Treasury to pay out enormous sums of interest to rich bondholders. Your original question was about the sustainability of issuing Treasury bonds when federal deficit spending occurs. I answered that, but now you're focusing on bank credit. etc. Where did you learn what you're saying? Would you like some reading receommendations?
Recommend you redo this great presentation. It is very good but could be significantly improved by just focusing on the sandbox analogy after transitioning from the water and not trying to justify it further. Additionally, perhaps the height of the sandbox rim can represent inflation tolerance of the economy. The sandbox analogy has much potential. For instance, people or groups perhaps be represented as points in the sandbox over drains or holes representing taxation and conduits between them representing payment flows. One aspect of UBI that isn't addressed is that it is implemented by imperfect humans subject to temptation. Additionally, wealth is not only the ability to buy luxuries but also the ability to buy power that is then often used to buy wealth insurance and wealthleverage 😉
This is fairly within the scope of supply and demand (i assume ur referencing that of money) and for the "price" of money to remain the same, he argues that increasing productivity can cover continuous defecits, and taxation is a secondary tool, nothing radical
No matter which economic theory you use, the government needs a balanced budget. Also, incomes of people that do not add value via a service and/or production( stock market speculators etc. ) would have to end and income caps would have to be implemented. Plus, a fair and flat tax would be needed. And that just starts the list of things needed before we could even think of UBI.
When private budgets are unbalanced - hoarding money is the consequence of an unbalanced budget - the government budget must be unbalanced too in the opposite direction. Otherwise the whole economy will crumble because of the imbalance of the private budgets. And this will hurt the most those, who do balance their budgets, those, who do spend all their budget. And a flat tax is not fair at all.
Politicians will never ever reduce ubi. Not under our current political framework. We cannot count on that happening. They will only increase it, what leads to inflation and to the whole system come crashing down. That’s something I’m completely sure about
Why UBI? Not sure how it really improves things. It seems like the link between universal free income and inflation is a pretty direct one. The Job Guarantee mitigates this problem and more.
Those unwanted jobs... those can be tied directly to citizenship pathways. Food and housing vouchers can be given in the immediate term so that monetary income can be used to purchase necessities. A time frame is given, and citizenship is earned. Some derivative based on the number of people coming in and how long it takes to replace all workers across the program... A conservation corps style program, where any place that has municipal needs or companies that have commercial needs, can register.
Reagan's 'trickle down' theory is absolute bunk, but from where I sit it does /seem/ that trickle up theory holds some water, so to speak. If we imagine a hypothetical government that sits at one point of an economic recycling triangle whereby money from the largest sand piles flows to the government then to the smallest sand piles, my question becomes is MMT developed enough to prove or disprove this idea.
Yeah, trickle down doesn't seem to have worked as advertised at all !! But I'm not sure that it is possible to conclusively *prove* that a UBI would definitely work as intended because human societies are so dynamic and unpredictable. But I would hope that it's possible to at least get to the point where it is possible to show that UBI *could* work and be financially sustainable, but then some countries are going to have to just try it, where I think the real trick will be to introduce it in the most sensible, slow way. Unfortunately it'll then take quite a long time to be able to really judge whether or not it has been a success or not.
The trouble with MMT, UBI and the “big picture” view of the economy is that it ignores what money fundamentally is. To say that money is just digital records of account is true, but records of account of what? Well, money represents risk and effort expended. If I work for Joe’s Widgets then Joe pays me money, which represents the value of the work I did for Joe in making Widgets. Sally’s Bakery will accept the money-tokens because Sally recognizes (at some level) that they have worth, and she can save them to buy a Widget herself one day. If the government hands this stuff out as UBI (digitally or otherwise) it does not represent anything except government largesse: It has no worth and that will be recognized. The government will then have to force you use their tokens by taxation, requiring payment of taxes in government fiat currency, even though under MMT taxes are rendered unnecessary. The government use taxes to coerce the use of fiat money, using violence if necessary. Talk about tyrannical!
*The notion that "under MMT taxes are rendered unnecessary" is completely false.* Not a single MMT economists ever said that! Where did you hear that?? Taxes are the flip side of money creation (that's why Ben Franklin said taxes and death are the only certainties). You're not accounting for the existence of money. Where Joe and Sally's money originate? You are saying that work creates money, but that's backwards; money is the tool that produces work-through measuring, organizing and mobilizing real resources. This is true whether the money comes from bank lending or from government. A UBI (which I oppose in preference to job guarantee) provides consumer demand that feeds markets. Taxation has always been used to give value to (i.e. create a demand for) state moneys, since the first coins were issued by a Lydian king 2400 years ago. Yes it's coercive, but- like any *law* - it's a socially agreed-upon coercion. Money is a creature of law, and laws are coercive. Again, taxation (or loan repayment) is the flip side of money issuance.
At its heart paying people for the products and services they work to provide with “ counterfeit” is theft. When the state decrees it to be money , its ok But when a counterfeiter dose the same think he is robbed the popular of buying power and thus the value of their work. Devaluing people’s work thru any means other than competitive innovations is a tort against them.
So what is the real resource limit? Gee it would have been nice to have a constant number of tokens to represent resources with so that we could see what percentage of resources were deployed.
That's the problem. When having a UBI, the resources become completely unpredictable. The resource, money is about, is labour. The state accesses and reserves this resource by demanding a tax. Demanding a tax creates debtors. Debtors must supply their labour and sell it for money. This is how they get the money to pay their debt/tax. But you cannot tax UBI receivers. You give them money without demanding anything from them. Taxing them results into making them giving back the UBI, which makes the UBI pointless. Since you give the UBI to everybody, there is nobody left, who can be taxed. What you can tax is, when somebody freely offers his labour or just works. But in contrast to now, you cannot force people to work by taxation. So you will never know, how much resources are available for the UBI. But you know how much UBI you will pay. And the less people offer labour, the more you must tax them to cover the UBI. But this makes offering labour a poor idea. So your economy becomes completely unpredictable and uncontrollable. The idea of money is to achieve the opposite. A UBI contradicts completely the functionality of money.
Because Kuwait, Saudi Arabia and the gulf states need the west to do the labour. The west are energy addicts. For energy they do everything. And what the west is giving for energy can be distributed to the population of those countries. When the west wants to do the same, it must find first someone, who does for the west what the west does for those oil states.
If UBI. Is put in action than inflation will always be in double digits and GDP formula will completely change and some major parts like food fuel will be replaced and cost of shelter will also be changed vastly in formula and in theory but not in practicality.
the government didn't produce anything. The first ones getting that money get the most value out of it, and later the inflation catches up. Think in terms of energy and resources, not dollars.
17:20 when we do have AGI and production is completely done by machines, a UBI won't fix any problems resulting from it. When no more labour is involved, the prices of products are practically zero - no one is left, who needs to be paid. Or what is the wage you pay to your washing mashine for washing your clothes? And what does the AGI need money for? Does it go to a human hairdresser, so that the money circulates back to humans? No. An AGI industry is like a black hole for money, when it puts a price tag on its products. And how do we determine prices? What do we bargain about on a market, when one side has nothing to sell to the other side and where the otherside provides almost everything what the one side needs? Money is somebody elses debt. It becomes pointless, when one side is a permanent lender and the other side must permanently borrow without ever being able to repay the debt. With an AGI industry, we need a total different type of an economy.
Even with full blown AGI, we will still have many resources that are limited and that we need to find ways to share out in a reasonably fair and efficient way and that reflects the different preferences of everyone. If everyone was given the same number of "purchasing tokens" at the start of each month, then some people would choose to use their fair share of purchasing power in one big clump for an "expensive" item and others would choose differently. This natural price discovery within a market is one of the best features of market economies. It not only finds the "right" price given people's different preferences, but it also sends a "signal" to those producing to know which things are in higher demand than others. Of course, in the real world this resource allocation function of markets is a long way from ideal, most especially because people do not enter this market with the same level of purchasing power in the first place - the preferences of rich people are prioritised over those less well off. Plus lots of other problems. But, in theory a monthly UBI would be one of the fairest ways to distribute such purchasing tokens (AKA money) so that people can freely purchase things in the market. So, yes, we are going to need a new type of economy, but actually I think the biggest change will be away from the idea that most people can only get their "fair" share of money (purchasing power) through waged working.
@Go-Meta money is debt, which means, you have to give as much as you have given. This is why inflation is so disappointing: it devalues what you have given, which means, you will get less than you have given. This creates the reference for finding prices: what you have given. With a UBI this reference erodes. Nobody has to give anything, which results into those numbers on the coins becoming meaningless. Then, how much shall an AGI ask as a price, when it is basically meaningless to an AGI. It does not need money at all. You can put a price tag on natural resources. But then the price of a product is nothing but the sum of the prices of the resources being used, which means the price is the cost. So for "finding" prices you do not need a market but only a calculator. To limit resource access, you just have to limit the UBI. So a government would regulate the total resource access by putting a price tag on resources and by setting the sum, which is distributed as a UBI. The only thing, which will be decided by the market, is what the AGI will produce. And this decision will come at 100% from the demand side. The AGI will only process the orders and deliver. But this is not a market economy anymore. It works more like a restaurants, where the customers gets a menu and the AGI is the cook, who cooks and brings, what will be ordered. Prices on the menu are set by a regulator.
@Jesus-o7v9x not necessarily. It doesn't have to be loaned into existence. States, for instance, have the power to issue currency and then immediately spend it into the economy, interest free. Other forms of organizations could also potentially do that.
@@NelsonGuedes All money has to have a recourse mechanism. If by states you mean nations, then yes they can issue money interest free. The nation state has a recourse known as taxation. Anybody can issue money, the problem is getting it accepted as payment. The money used by a nation is accepted for payment because it's a tax credit. Taxes drive currency. There's a lot businesses that issue coupons, which are a form of money. Their is a hierarchy to money.
@@NelsonGuedes Also, when work you create wealth. So why do we need money at all. We don't. No one needs money, they need goods and services. That's what people don't seem to understand. The rich do, that's why they focus on assets and not money.
UBI makes no sense to me as it will simply trigger inflation, and if it’s tagged to inflation then you’ll get acceleration of inflation! If I have $10bucks and you have $100 you are richer. If we all start at the same amount above $0 then the base is lifted to the new level; almost like hitting the 0.00 button after you stand in the scale! Things adjust to the new normal of UBI soon after time passes.
@@Go-Meta you have a weird sort of monotone that is all soft and safe which I associate with people pushing nonsense, and you seem to support all kinds of things that I am biased against, perhaps unreasonably, like hyperinflating our way out of debt with Stefanie so yeah like this guy I just assume you're going to sell me crap I think is worthless. So yeah I don't blame him for making that assumption. Most of us aren't academics we actually work low class jobs and do things in the world. So these theoretical everythings fine even though there fires burning outside stuff isn't really a huge win. Perhapse you could begin your videos by presenting a thesis statement to preclude such assumptions?
In light of the earlier comment, I have actually changed the title of the video to note that MMT actually centres inflation risk. But even though Stephanie Kelton says this many, many times, people still seem to think that MMT supporters want to create high inflation. I certainly have lots to learn about how to communicate ideas in a way that breaks through people's default assumptions, but it's not trivial 😀
@@Go-Meta Sorry commented first before watching! Sorry. I compeletly agree with you. Actually, I just found your channel today and sub'ed right away. I'm making the same type of content from different perspective! Cheers and Great work!
UBI is not a realistic option. It would require a very large increase in government spending. So tax revenues would need to be dramatically increased, to avoid inflation. But those subject to the taxation can always shift their wealth, their income, and/or themselves to jurisdictions with lower taxation -- individuals or corporations. All nations are in competition to offer low taxes, and cannot increase taxes without causing flight of wealth and income to other countries. This is why deficits and debt are now ubiquitous around the world. No nation is free to increase spending by UBI (except places like Saudi Arabia).
The financing is not a problem at all - it is already financed today. It is only a change in how it is financed. The issue is more: this is not what money is all about, how it works and how the state uses it to organize us.
Can you please talk about Jacques Fresco's resource based economy ideas - RBE/The Venus Project and if those ideas have gained any more traction in the last 15-16 years since the release of the Zeitgeist movies. Fresco has been talking about these things since at least the 1970s but I think a lot of us learned about it from Zeitgeist: Addendum.
MMT is often misinterpreted and also proponents of MMT are often quite idealistic and too non-chalant about increasing the monetary supply, I also think it fails to accout for behavioural conditioning in the market as even if MMT is true and optimal but people with the money don't think so then it will inevitably create unsought and extensive negative externalities. That's why most economists aren't self idenitified MMT'ers do however indirectly follow and validate MMT It's just how far you take it. Do you think that central banks should be able to directly control inflation by controlling demand via direct personal stimulus and contraction? (I.e. money is given and taken from your bank account automatically) Do you think that congress or another body should be able to rapidly pass bills to increase/decrease taxataion? Do you want a job guarantee?
WRT "Job Guarntees" - I'm afraid it might end up looking a lot like the movie "Brazil" - where nearly everyone works for the government, monitoring that everyone else follows all the rules.
No. The purpose of the Job guarantee is to distinguish those who cannot work from those who do not want to work. The government only needs a few jobs so that it can offer them, which makes the test. Therefore you are only offered a minimum wage, since when you have to work anyway, you would find yourself a better paid work in the economy. And it will be not that difficult, since with an understanding of how money works, the government can target full employment in the economy.
@@ThomasVWorm Unless Agi has replaced nearly all jobs OTHER than those the government creates by fiat to keep everyone employed, as is the video's premise.
@@tomcraver9659 when AGI has replaced nearly all jobs, you do not need money nor jobs and the AGI controls everything. You will then have robocops. You should be more worried about the AGI seeing us as a competition for resources. An AGI will be practically a new, superiour species.
Can you do a video on why exactly we always need inflation? Why is my labor now worth less than 20 years from now if I just save in fiat. Your forced to invest in the stock market or something or else your money will automatically be worth half by the time you retire. Its frustrating and stressful.
Yeah, I do plan to do a video about inflation sometime - probably early next year given other commitments, but the 'short' answer is that prices are all in flux all the time for various different reasons and inflation is just a measure of the average change of a basket of goods. So, you can try to keep this basket of goods at a fixed price (zero inflation), but you don't really want to have an economy with widespread deflation either because this will disincentivise people to spend today if they know that they'll get a better deal tomorrow. So with deflation economic activity slows down, companies sell less and they lower their prices further to try to sell stock and get it moving - which causes more deflation. So, from what I've understood, there is a general preference for a small amount of inflation (2%) to be the best compromise target to aim for to make sure you neither get deflation, nor high inflation (which is also bad in the short term - as we've just seen!!). And, hyperinflation is just a disaster for an economy. So, 2% is seen as the "goldilocks" level of inflation. The good thing with 2% is that day to day prices and even year to year prices are very comparable and the changes in those prices are dominated by other factors (like changes in material costs or just dynamics of the market). So even at 2% inflation the dollar, for example, remains a good day to day unit of measure of the monetary value of different things. But, yes, that does mean that over long periods of time people holding cash in low interest accounts will lose money on those savings. However, a shockingly large % of households/people do not have any significant savings at all. So this doesn't impact them. And anyone with a large amount of savings, should really be looking after it sensibly and at least putting a large % of it into high interest rate bonds (if they do not have the stomach for more risky choices like stock and shares) or indeed invest into owning their own home or whatever (not financial advice!! :-) ) Anyone with very serious wealth will already have most of that in assets that are likely to be inflation proof anyway. So, there's actually only a very particular subset of the population who are actually likely to be impacted because they are keeping large amounts of cash in a very basic bank account. And, yes, sadly, that is just bad financial planning on their behalf given that 2% inflation (or up to 3%) is likely to be the norm for decades to come. Banks should be encouraged to nudge these people to look after their money in more sensible ways.
@Go-Meta thanks for the response! I recently saw your channel and I really like your content. I'm not totally convinced that shorter periods of low deflation wouldn't be a bad thing. I feel like people would still buy things over a 2-5% deflation period. I don't think people would wait a year to save 2% on most items. I'm thinking more as a hedge to combat these massive bubbles that inflate the cost of living dramatically. The last thing to go up in inflationary times is peoples wages. Big corporations just send me emails announcing price increases. The small guy doesn't have that kind of leverage. I'm doing ok but the younger guys that work for me struggle on what 5-7 years ago would be a very good wage. I'm not an economist I'm a home builder but it's very hard to build affordable housing where I live. Wages can't go down. It's a tough time. The cost of building has doubled in the last 6 years.
Physics. You need inflation because we can move in time only from now to tomorrow. Businesses do buy first and then sell later. They cannot stand buying at a high price and selling at a low price. When they do, they go bankrupt. So they prefere stable prices and can life with selling for a higher price. With inflation you can have an economy running at its maximum, which means, that though your money loses value, you reach the maximum level of living standard possible. The idea, that when your money would have been stable in value, you could have bought more, then is nothing but fiction. Saving money is not saving at all. It requires somebody else to consume instead of you. Otherwise you have a surplus production, which is not bought. This is a loss. But nobody owes to you forever. Money origins in credit. Credit has a term. So money also has a term. So your ability to save is limited by the credit contracts. Your saving plans must be in parallel with the debt plans of the debtors. Your money is their debt. When they go bust because you save too long, your money loses its value. And forget the word "fiat". It was created by people, who never understood money. Money is a bookkeeping system of debt.
@@ThomasVWorm Thanks for insights. Its just hard for people these days how much things inflated and how the money has less purchasing power. Especially where I live housing doubled in the last 5 years. 1700sgft small lot house is 1 mil now. Wages haven't doubled that's for sure. Interest rates were too low for too long and people were out bidding each other like crazy. I saw this happening. I'm a homebuilder not an economist. I'm lucky because I have a house. The guys that work for me are screwed. The younger generation are out of the market. Happened so fast.
@@behonestwithyourself3718 be careful with the word "inflation". Inflation is measured by observing prices. But when prices go up, it is not always inflation. On a market prices change with supply and demand. This normal change of prices is not inflation. Markets are never static. The economic system we have is capitalism. Capital are the means of production, which are mainly machines. Machines are used everywhere and they need energy. So when only a single price change, it can affect all other prices. And this is the price for energy. When the price of energy drives all other prices, this is not what is meant by inflation. Inflation is a rising of prices, which cannot be easily explained by things happening on the market like coffee becomes scarce because of a bad harvest etc. A reason may be businesses are doing very well and they can imagine doing even better and they borrow more money than they can spend. In such a situation the central bank would raise interest rates to stop the borrowing. But it also means: we live in good times. Then companies are trying to make profits by selling more at the same price by increasing productivity. In order to participate from the increasing productivity, workers raise there wages even in businesses, where there are no productivity was not increased. This causes inflation, which is needed to distribute the increase of total wealth. Otherwise nurses would still have the same living standard as 200 years ago. So inflation means: all live richer. But you can also have bad inflation. But then to know the cause is important, to stop it.
Would it not make more sense to have a quest worker program for those difficult low playing jobs? In other words, it seems we need to get smart about the role that immigrant - both legal and illegal - have been playing and could continue to play in our economy.
It would be interesting to see this experiment run in competing economies - one MMT/UBI and the other laissez-faire/free-market. I suspect the 'free' economy will expand quicker with widespread capital accumulation so that as super-abundance draws closer the free citizens will be deciding whether it is wise to send their returns on capital to help their less well-off neighbours in the centrally managed state who will still be arguing about the 'right' level of UBI to catch up. We have run a century long experiment growing the state and there seems to be little self-awareness in progressive circles about our position - the answer is always more of the same.
So, one of my goals on this channel is to try to gently nudge the conversation beyond the central planning vs market economy kind of dichotomy that defined the left/right politics of the 20th century. Personally I think the jury of history is pretty clear on the basics of this: we need a market economy for many sectors, but we also need a liberal democratic state to perform certain functions. We need both. The fundamental challenge to a hard-core laissez-faire, or anarcho-capitalist economy is what to do if AI really does render a larger and larger % of the population economically unemployable. If society unceremoniously dumps this growing set of people to fend for themselves on the scrap heap, not only would that be shameful behaviour for any decent society, but it would also potentially lead to dangerous levels of unrest (to put it mildly). The great thing with UBI is that, although yes the state administers it, the state otherwise lets its citizens crack on with living their lives how they see fit. For many people they'd use this minimal economic freedom to do useful, purposeful work of some kind in their community - work that wouldn't be naturally funded through the market. But also note, that I was being very clear in the video that I also think it's important to have an aspirational economy where many people decide to work hard for a wage or setup a company in order to earn a lot more than just the bare minimum. So, yes, it would be interesting to see which society would turn out best. One that puts a floor on how low you can fall, or one that doesn't.
Great comment. @Go-Meta I believe a society that puts a floor on how low you can fall already exists in Germany for instance. Would the last 20 years of German well fair system provide enough data for analysis?
@@Go-Meta - If the state has re-directed vast community resources into UBI how would anybody crack on living their lives ? - it would be a fantasy. The state would be telling us how marvellous everything was working out - even if we were going downhill, just as they do now - they would do the catastrophising about how anything else would be worse or the terrible disaster they helped avert - as you have in your comment. Democratic freedom is not anarchy it allows setting the rules collectively - not being ruled by another gang of neo-aristocrats... I could drone on - thanks for your comment/interesting vid.
Whenever little people get surplus income, inflation will increase to take care of it. Increasing rates will push wealth towards where it belongs, to the wealthy.
the question is whether sand is better than water as used to describe our uses of money in our political-economy; and whether sand is better than water when we discuss concerns such as inflation and economic/social disparities. a priori, what's got me wondering, is why you use "sandpit" as opposed to "sandbox," Oli? I ask because a sandbox has walls or a "frame"; whereas a sandpit is a quarried hole of irregular shape. This notion of defined walls is a significant element of our current political- economy discourse, especially in the USA but also many European states where we see a 'shift right' in political vote counting; we are having a heated "domestic" debate in the USA as to how impermeable our borders ought to be: with neighboring terrestrial nations of Mexico and Canada; also, with water-accessible neighbor such as Cuba and the BVI, et al. So, walls may be a missing component of your sand frame (sorry, bad pun). Setting aside the USA, can it be said that any nation that provides UBI to its residents is likely to attract immigration? Can the sand analogy estimate the magnitude and strength of the signal that attracts new residents, who are "illegals?" This would seem a necessary ingredient for modelling how UBI might work. so, please consider the significance of 'border walls." e.g., are truly impermeable border walls a precondition for UBI to work for the Citizens of a nation? also, setting aside "walls", the use of granules of sand does seem better than droplets of water, because of the wealth divide; the current wealth divide means that we are seeing "Gilded Age" wealth concentrations; some individuals today have "sand castles" that are HUGE; while, the vast majority of the populace of the USA have few granules. also consider the idea of "topographic" mapping; a netlike grid that is lain over the sandbox that cab measure wealth inequality -- charting the orders-of-magnitude of the mass of sand that forms each sand castles. it might be fun to think less of sand castles, and instead think of Pyramids, as erected in Giza. instead of sand, consider Legos. thanks again. appreciated.
I used 'sandpit' because here in the UK that's what we call them 😀 (and apparently across most of the Commonwealth countries too), but I learned while making the video that in the USA the same thing is called a 'sandbox'. Never knew that before. But, yes, your link with walls is an interesting one and I do indeed agree that any country introducing a UBI will have to think very carefully about the implications for immigration. These are not trivial issues to solve well, but if this is a likely future for our societies, then we need to discuss now how we can make it work well. And I also like the way you've described how the sand analogy makes it easier to compare scales of wealth compared to the water analogy. A few grains compared to a sand castle. 👍
Are you referring to the Venus Project / Zeitgeist Movement ? What little I know of these ideas is that they're imagining a world without money, which always sounds romantic, but I actually think that money and markets genuinely solve a type of co-ordination problem that will be extremely hard to solve as well in any other way. There are, of course, real problems with market economies, but (in my humble opinion) these problems are not in the core ideas of money and prices and markets to allow consumers to freely express their preferences to producers. The problems are in the unequal distribution of money and other details going on around and within the markets. For *some sectors* the core idea of allowing people to freely self-organise through a market mechanism is a good one. But, I have to admit I haven't read much about the Venus Project / Zeitgeist Movement, so maybe I'm misunderstanding their ideas.
A government SHOULD tax the money that it spends. If it just prints the money that it spends like UBI (or the covid stimulus checks) without any production to go along with it you just get inflation spikes like the 9% inflation the US faced a couple years ago
Yes. But money is always created first, then spent, and then recollected. So it is always "printed" first. But this is no problem at all, since money stands for debt. People owe the money before it is printed and spent, so they must offer and sell something for it, to return it to the issuer of the money (bank/goverment). Those debtors are created by demanding taxes (or when people borrow from a bank). But sometimes inflation is better than another problem. In a crisis you do not want businesses to vanish, when you know, they are needed after the crisis. Their presence is strongly related to the value of money anyway and even more to the wealth of your nation. Inflation then is a much smaller problem. But a UBI is not a mean to deal with a crisis. A UBI is a crisis.
@@ThomasVWorm I think it's more apt to say money stands as a place-holder for value. Value derived from a good or a service, transferable for another good or service later. You having ten dollars doesn't mean you're indebted ten dollars, it means you (ostensibly) provided 10 dollars worth of service or goods to another and can then exchange that for 10 dollars worth of goods or service from another at a different point in time. The government printing money doesn't create the debt, you don't "owe" the government for printing money and giving it to you. And we typically value our money in relation to the productivity of our nation. That's why we compare national debt to Gross Domestic Product and NOT total tax revenues. Because the number doesn't matter, it's the relationship it has to the actual goods and services happening. Inflation is a smaller problem then complete economic collapse, up until the point where inflation causes that collapse (hyperinflation). But what level of inflation is acceptable and what level of risk to business is acceptable is difficult to pinpoint. We know when we've gone too far, for sure, but by then it's too late.
Does 100% of everything require money? There are essential things in life that humans need to stay alive, like food and water. Other things make our lives better and help perpetuate our well-being, such as medical care, communication, information or data, and housing. These five categories could be considered resources within a resource-based economy. That leaves everything else as desirable, not needed for human existence but preferable for a higher standard of living. What if we economically separate these two categories and create two different economic systems that work differently to battle inflation? Do we really need one system that covers everything? What if there were two different types of economies or uses of money instead of one that captures everything? What if the five essential things were covered by UBI and given to everyone equally, and the desirable things were left to another type of accounting system and its market forces? An argument could be made that the costs (manufacturing and distribution) of creating all essential stuff should also be added to the UBI distribution pile since the cost of creation and consumption are intimately tied together by their joint inflation rates (supply and demand).
Perpetual monetization of deficit spending only works for a country a) whose currency is the global reserve currency; and/or b) is importing goods whose prices are falling; and 3) has structural income inequality so most of the money being created circulates down into the general population at a slower rate than the rate of economic growth. In other words, turning on the money taps has mainly produced asset price inflation, not general inflation because very little of the money thus created has filtered down to the poor and middle class. UBI would change all that and would definitely be inflationary in a world of tariffs, reshoring and mercantilism.
@MurrayLake Yes, my gut would say just pull the ‘sand’ from the giant reserves already issued through redistributive policies and taxation.
Yeah, the USA with the dollar is definitely in a better position than most countries. But, the basics of MMT is really just a description of how the dynamics of fiat currencies work and explain, for example, why Japan has been able to keep a relatively prosperous society going with very large debts relative to GDP, and they've partly done this by using the muscle of their central bank to keep interest rates low and therefore their debt repayments manageable. USA's biggest problem at the moment is the interest rates on its debt, even more than the total debt size. But, as you say, with the dollar the USA has more options than others.
Nailed it. 💯
@Go-Meta Not a Yank, Singaporean suffering from inflationary pressure & proven known foeman of the FRBNY. Until others rebel from their thralldom by refusing to play ball by not paying their tribute to subsidise it. Capiche Yankee Doddle 😊
That’s the way it has worked, but is that the only way it can work?
Some things are almost unthinkable in today’s environment, but what would things like price controls, higher progressive tax rates, wealth taxation similar to property taxes, or maybe a system like Georgism being introduced? Basically systems to claw back some of those inflationary pressures, or pulling some of the drivers of inflation out of the market like land, housing, or basic food allowances?
Our civilization's gravestone will have the epitaph: "But I'm rich and I don't wanna pay taxes!"
u cannot rid the world of inequality it’s a pipe dream. if i own the machines why would i wanna give up my money i earned money for people who don’t do anything? And if i do have to give up my money for someone else to live i want a say over their life. if they need UBI they obviously don’t work or don’t have a meaningful enough job to be above poverty. UBI will basically lead to techno-feudalism, the rich will then own the means of production aswell as the responsiblity to take care of you….yk like a king would
i shouldn’t have to ever pay income taxes, nobody should poor or rich. u worked for ur money u deserve all of it
@oksaturn122 then build all the roads you drive on
@@oksaturn122 haha.....fool
@@oksaturn122 So who's going to pay for and maintain public services and infrastructure if no-one pays tax? Look at US healthcare, people are getting ripped off left, right and centre by insurance companies who can just deny claims anyway to avoid spending money and put people in serious harm or they end up with bills that financially cripple them for the rest of their lives because they needed life-saving medical care or medicine. If they had universal or affordable healthcare and paid a little more in tax for it, then this wouldn't be an issue, it would literally put money back into people's wallets because they're not paying extortionate amounts of the money THEY WORKED FOR to greedy, profit-driven companies who avoid responsibility because no-one can afford to sue them either.
Cant say i trust today's oligarchical government to implement a fair UBI
What it did with PP loans during Covid was worse than UBI. 90% went to large businesses.
UBI by definition is fair. Or do you mean in terms of amount? Like a UBI that's pitifully small, and won't end up doing much to help those with no/low income?
@@GreatWhiteElf@GreatWhiteElf I mean government policy involves many levers, UBI is only one among many.... tax, healthcare, social security, education, low wages with high competition for fewer paid jobs home purchase, inflation, interest rates. The whole mix needs to be adjusted and UBI is not a panacea to fix everything
I have this sentiment as well. MMT and this implementation of UBI would require careful and TRUTHFUL analysis of the economy and the monetary situation and I don’t think that’s possible when most of the people in power don’t even believe in objective truth.
How do you think we should ensure the implementation of a fair UBI? Pretend we don't have to worry about any current government.
Newbie question. There's a way the sandbox metaphor doesn't model reality that I think hides something significant about the current economy. Sand piles have a natural maximum slope, and this limits their height. They can't get taller without getting wider. You wouldn't have tall skinny sand piles one grain of sand in diameter and reaching the sky, comprising the vast majority of the sand in the sandbox. I'm only starting my journey of learning more about economics and willing to learn and be wrong, but something that imposes a maximum slope on a sandpile makes sense to me, where it can't get taller without getting wider. A progressive tax, an income ceiling (as opposed to a UBI), a wealth tax, etc. I'm not sure I understand how MMT addresses wealth inequality. Maybe there are other videos that go into this in more detail, or it will be covered in a future video?
Money is just another word for debt. Money is somebody elses debt. The value origins in the fact, that the debtor must recollect the money and sell something to those, who have the money.
How much of this do you see in the sandbox metaphor?
The sand is just a metaphor, mostly tied to the sandbox being the size of the economy. The physics of sand wasn't important to the analogous value outside of filling or overflowing the sandbox.
Money is a contrived solution to trade. Fiat currency isn't backed by tangible goods and is instead based on debt. Since it's all contrived anyway and debt must grow for anyone to repay debt, this only works because it should get easier to pay debt over time through the growth of the economy and managed increases (the target 2.5% the Fed tries to hit).
The thing is, it's a mass delusion. We all agree it works, so it appears to work. Until someone gets all nervous and tries to call in debts because they're afraid whoever owes it can't repay in the future. This is why the US can keep operating this way with impunity-- it's the world's reserve currency, and Japan can too, because they take their debts in their own currency, so they can obviously repay it, too.
But this only all works as long as people believe in the mass delusion. Monetary things have very little to do with real economics of goods, supply, demand and all that. The control of inflation is to feed the mass delusion to give people stable prices so they don't stop playing along.
Yeah, it's not a hard science, despite there being a ton of math and logistics. It's a lot of "we make stuff up" and people's feelings and psychology. This is why economics has a ton of 'theory' and 'models' that are highly debated and full of flaws due to idiotic assumptions made to fit some math or a chart of data someone decided should mean something. It's a ton of guesswork, really.
MMT doesn't address wealth inequality. MMT is only a desciption how our money system works.
You probably know that 4 out of 5 new businesses fail in a short period of time. This is a reflection of the fact that capitalism is a game that very few people win. Once a capitalist builds a business that is capable of growing, turning a profit, and outcompeting its competitors, than that capitalist is quite wealthy indeed, and they've left a lot of impoverished competitors in their wake.
In the end, the only thing that addresses this unavoidable trend toward the wealthy getting wealthier, and the poor getting poorer is taxing the wealthiest people and corporations at a higher rate ... i.e. progressive tax rates. In the MMT model, this taxation makes money dissapear. And the government, as the issuer of fiat currency can make money "appear" by creating it out of thin air. Some people will say that the only way to put more money into the economy is by the government issuing bonds, then paying back the bonds with interest. But the government can skip the issuance of bonds and just create money out of thin air.
MMT model or not, progressive taxation and public safety nets are the two main tools to deal with wealth inequality.
@@larrym2434taxing the rich is insufficient. They own everything, everything they own was bought with stolen money or stolen resources.
De-privatize, re-publicize.
I would like to see private bank credit money creation added to these discussions. If the aim is to control inflation we should be concerned with all money creation and it’s allocation. Banks have made their money by fuelling the competition for residential property. Owning your own house should be a right (UBH) and the use of new credit money for someone to buy a 2nd or more existing house is allocating money for speculation not investment. Sand piles should be accumulated from productive investment not the speculation common in Neoliberal economies.
I have been watching your videos a lot this week. Thank you for making them.
Great title! And you've made the best case for UBI that I've yet heard-by analyzing it through the MMT lens. I think you've addressed the risks pretty well, and it remains to be seen if it will come about. Thanks for these stimulating presentations! 👍
Thank you! 🙏 ... as you say, remains to be seen if UBI will ever actually happen 🙂
I had an idea of UMI, universal monetary income, where the amount of "sand" sprinkled is adjusted based on inflation. So it CAN be zero some months, and only gets big if deflation forces hit. Imho the BASIC in UBI is what kills it.
You suggested the same in the video (independent institution managing it to curb inflation). So... should we make a crypto based on this 😏
Can I just suggest that if UBI is not alive in the future then humans are not alive in the future. So whatever you think kills UBI had better be solved really quickly - the robots are coming…
@@daveozip4326 robots will be used to improve humans too. Maybe even upload us eventually. While I like UBI concept, you can always do social transfers instead.
@@lukap3rcic please be very careful how much you buy the hype. I suggest UBI as a safety net for the tsunami of human victims of automation. With no way to earn an income UBI seems to be what is required in the short term to save lives.
I would love to be living past the automation transition phase, then what you talk about will be realistic, but that will be a long way off, so meantime we need to protect those who will be impacted (ie. ALL OF US)…
@@daveozip4326 i am not the one buying the hype. People will (probably) always be needed, and the hysteria about everyone losing the jobs always turned out to be just that- a lack of imagination, and maybe worse, an intentional scare tactic of the promoters of the technology/ideology to present it as make or break, which in turn cause people fomo. Not saying it will never happen, I don't know the future, but most likely scenario is "nothing ever happens" - meaning we will slowly adapt and upgrade ourselves and ai will be just another tool.
Thank you. Of all the reading I have done on the subject, this is by far the most elegant exposition of MMT and UBI.
Thank you! 🙏 It's never easy to know how well an analogy will convey an idea, so I'm glad to hear that the sandpit analogy seems to be working 😊👍
The sand metaphor is complete nonsense. This is not how money works.
I have been intrigued with MMT and UBI for awhile. Lacking any backgound in economics, I have just enough understanding of MMT to be excited about it being used show how UBI can be executed without causing inflation but not enough, yet, to explain it to anyone else. This video was very helpful. I especially value the sand metaphor. Good Job. I do think Automation and AI will make UBI not just possible but absolutely necessary unless we all want to live in a dystopian novel.
Yeah, it seems there are lots of people expecting UBI to be inevitable as part of a future with far fewer jobs where it's economically viable to employ humans, but that leaves a huge question: how could our economy work in a way that, as you say, isn't just completely dystopian.
@@Go-Meta(AI x Automation) x Neoliberal Capitalism = Dystopia. (AI x Automation) x some form Democratic Socialism = Sustainable Global Civilization. I am no expert on Marx but my limited investigation left me with the impression he did a pretty good job of diagnosing the problem but I am not sold on his solutions (or any of the tried variations ie Leninism etc)
@@tamowillsat3929 i honestly dont think there has been a true socialist country -they are/have all been run by autocrats, dictators and despots.
To me, it looks like workers owning a share of the capital of the business, basically worker co-ops and not the state owning everything, it looks akin to the economy within kim stanley robinson's mars trilogy
Great work. I think helping people understand MMT is very important work at this point in time.
Yeah, there seem to be a lot of people who quickly dismiss MMT because they think it advocates for unlimited spending with no care for inflation.
Lots of misinformation about money out there.
This is a great and simple explanation for MMT as well as money movement, love the sand metaphor. The only thing I'd add is a reference on bond issuance because there're a lot of people who understand how the money supply is created but believe that there are equivalent bonds issued and that each dollar is accounted for in that way by being actually paid for with existing money.
Thanks!
My video summary of Stephanie Kelton's book covers some aspects of the relationship between the Treasury, central bank and bonds via the open market: ruclips.net/video/kWcvVf7r88s/видео.html
But obviously it's always going to be a bit simplified in a ~20min video 😀
A helpful tool would be if you created a sand box that was accurate in scale to the wealth distribution in the US. Imagine a pile of 70% of the sand in a square that was 1/10th of the sand box. Just a little redistribution would make a big difference.
Yeah, that would be a visually stunning infographic!
Maybe one day I'll try to do that, thanks for the idea👍
It's because capital acts as a bonding agent and prevents it from naturally falling back down. Worker and Consumer cooperative based economies wouldn't have that issue as they prevent capital accrual/clumping.
We have been defacto practicing MMT for decades with perpetual and expanding deficit spending. Some, like Ruchir Sharma, claim that this has led to asset inflation, for example, stocks, housing, and high-end goods. Also, they claim it leads to income inequality, though I believe that is more a function of technology and policy decisions. However, another real downside is that debt is a powerful accellerent to an economy that is fast devouring the planet.
As to UBI, the best I can see is that it would reduce the state welfare bureaucracy, but what scares me is that it could rob people of purpose. To be brief, how about shorter hours, higher pay, and better work conditions. Shorter hours alone could provide universal employment, which I am very much for. People need something to do.
Yeah, I've seen many who have noted that the quantitative easing after then 2008 crash, injected lots of cash into assets from the 'top' of the economy in a way that was unfair and increased inequality. Possibly a UBI would have been a fairer way to inject this cash into the economy (but they were specifically trying to inject liquidity into the govt bond market, so maybe they had to do QE that way).
Also, in terms of improving work conditions, the origins of MMT is very much linked to the idea of a job guarantee, which is also hoped to put a pressure on other employers to offer better conditions, so you may well like/prefer this traditional MMT perspective. Personally I'm less convinced by a job guarantee for various reasons, but I agree that we need to develop a society, a culture, that values and encourages people to find a useful, engaging purpose in their lives. I think even with really advanced AI there will still be lots of important things to be done by humans. There's plenty of 'work' to be done, just not all of the work can be funded via traditional market forces.
I'd rather people had the choice, and there were some social pressure to work. Some people legitimately thrive in a state of "unemployment" because they produce things they're interested in or go to school.
Can't we do other things aside of work?
I realy Hate to work... I wish I could train boxing all day
Go out in dates with girls
Go out with my hommies
And do wagerer I decide when I decide
Why do you want to take people's liberty and time just to make them work?
Have you though that through? I REALLY don't think it would rob people of purpose, any more than our current system does. At least to start, we're not talking about enough money to quit working, rather just enough to pay some bills. People might be able to work a little less with it, but having a little extra time is a good thing for purpose and family.
Additionally, many studies on UBI equivalent aid, found that it enabled a higher rate of people to 'find purpose'. Money is the necessary enabler for a lot of things. I can tell you, if I was given a UBI, that'd be enough for me to turn my hobbies into a source of income. I'd spend my time running my own business, instead of struggling for part time jobs.
@NikoKun I've been self-employed nearly my whole life, doing work I want to do. I've been in the vanguard of the 30 hour week since day one. Less is more. I do support scholarships, grants, and community service, but I don't think UBI is a politically viable position. How about starting with something achievable, like mandatory two week vacations and a shorter work week.
things like disability benefits and state pension are essentially UBI IMO
I would fear UBI = bare minimal survival as such benefits currently do, esp during high inflation cycles when those of us on long-term benefits/limited income and incapable of working suffer the most.
I can also see an evolving 2-tier system, where only those of the highest IQ and wanted skills can acquire financial independence from the state. It also doesnt protect the population from a democracy that has turned into a fascist autocracy.
I would LOVE for UBI and MMT to work, but i am sceptical, perhaps my MECFS brain just cannot understand well enough
That dnb interlude after the intro slaps, i was not prepared 0:50
Brilliant video. I am a new convert from a more libertarian view and I am embracing MMT and have ordered many of the books reviewed. Love the sandpit analogy.
Thank you! 🙏 Enjoy the books 👍
In the end there's really no "converting" to MMT. It's just literally how things actually work for any currency sovereign entity with a fiat currency. It definitely will cause you to think differently about politics and policy. It really helps emphasize that political will rather than a perception that money is scarce should drive all policy discussions. There will still be plenty of disagreement but at least we won't be getting stuck on nonsense arguments like "where will the money come from."
@@pocklecod And don't I know it. Having been a gold standard advocate for 15 years, I felt there was something wrong with the idea, but wasn't sure what. So I began a journey of study and had to keep a very open mind. I have had many heated debates over the last couple of months with gold stackers (I wasn't that far personally). They think I am a moron, idiot, fool, the names go on and on. They give me all the examples like John Law, the Weimar Republic etc etc and how printing money to oblivion has never worked. I do get sick of the pointless arguments after a while.
@danthorley6592 Yeah for sure. And to be clear you could still make a coherent argument for the gold standard while acknowledging MMT. Basically you'd be claiming that fiat currency is a bad idea and nations should be stripped of the option to increase currency supply at will. So far empirical evidence seems to indicate that well managed fiat currencies do work well, and the ability to control currency supply is a good thing if properly managed, but the fiat system certainly has potential risks if badly managed. It's really not even GS people who you just have to roll your eyes at, it's people who think taxes create money for sovereign nations. Which unfortunately is most people...
@@pocklecod Many MP's believe that too, you just have to listen to their interviews on TV.
This complexity comes about due to society making the flow money its central focus rather than the wellbeing of its people.
Another analogy that we could use is water in extreme low temperature, if the rain fell in Antarctica, it would create ice spike towers, rather than an icy lake. The heavier the rain, the more lake-like it becomes, scooping ice spike allows more area to pile up spikes on top of bigger spike and stabilizes the structure. You also need to "melt" the assets ice to create "liquidity" before giving back to economy, so the ice disappeared, to be used as a shower.
Now, if you add constant rain to icy lake in mid winter, the ice floor will melt and those melted slower can rise up as a tower, this is analogous to adding constant money in one area. I've never seen anyone tried adding mist onto icy lake which is analogous to spaying money everywhere to create UBI, I can't predict that. But, my guess is we could see it in evening of earlier winter, or end of the fall, if it's not snowy. Evening mist will thicken icy floor, and create snow film on the surface. This snow film is fragile, it melts when it touches water, and blew away easily by wind.
Come to think of it, maybe a better analogy is winter snow on icy lake. Showering heavily on icy lake makes holes on it, but slowly pouring water steadily on one spot makes an ice spike. Spraying mist of water makes small ice shards that doesn't bind with the surface. I find it more related to real world cases this way.
Great show! Thanks for taking on the issue of MMT-based UBI. I hope it helps spur discussion much more broadly and deeply moving forward. I do find the sandbox metaphor useful. Hopefully, it catches on to facilitate more productive conversations about societal resource management. I still believe that the upcoming era of superabundance brought on by cheap renewable energy, AI & automation may be the best antidote to the inflationary pressures of UBI. In fact, UBI may be necessary to prevent deflation! We’ll see. Cheers!
There is something weird with the current state of democracy, where ‘taking things out of political control’ e.g making them the responsibility of the central bank is seen as universally safer and better. Surely we need to work out how we can change the incentives of actors within our political systems so they aren’t seemingly guaranteed to make the wrong decisions, such that we want to reduce the scope of their decision making powers as much as possible.
I know what you are getting at, but I think there are many functions in society where you actually want experts within the given field to make the day to day decisions based on data, but within bounds set by our politicians who should continue to oversee what the experts are doing. So, the politicians are still and always ultimately in charge and responsible for setting the parameters of what is being done by the experts.
@ I agree, but I think there is a fundamental issue with democracy in the age of distrust, conspiracy and misinformation. With the populace as it is, competence is seen as the enemy. I don’t think we know how to fix this.
Sand is only slightly better. Money is not conserved. It is created by government borrowing and destroyed by taxation. Wealth is not in money but in assets. Assets are produced by work, but also destroyed over time with depreciation. Money can be exchanged for both assets and work, but the exchange rate is highly volatile. (Currently work is very cheap, even in the west.)
Indeed! "Wealth is not in money but in assets." this is a point that I don't think enough people fully realise, especially when they are talking about inflation.
The "asset", money is all about, is debt. When somebody owes to you something, it is an asset.
Money is the bookkeeping system about who in the society owes and to whom they owe.
I know that the "money = debt" view is very popular, but I think it only covers a part of the story and is indeed a bit confused / confusing 🙂
In a modern economy, a lot of money is created through private banks issuing loans, but there is an asymmetry between debt and money. Debt does follow specific people around. Money does not. And, when debt is written off in certain situations (e.g. debts owed to a company that goes completely bankrupt and is closed down), then the money invisibly 'linked' to that debt is no long even linked to an active debt.
And in this context, the person holding the dollar 'notes' is the debtor and the bank that 'created' the money is the creditor. So, the person holding the note owes something back to the bank.
But, in the olden days "debt = money" scenario, the person holding the note was holding the IOU (as in the bank owes you gold!). So, in this scenario the person holding the dollar 'note' is the creditor and it is the bank that owes the gold back to the dollar holder.
So, personally I think it's more confusing than useful to seem to imply an identity between money and debt. I totally agree that modern money is a creature of double entry book keeping that tracks the movement of money and who owes what to whom. But sometimes an entry denoting an asset is just an asset that is owned outright.
Indeed we can imagine a person who choose to never take on any debt. So, if through working and/or gifts, they end up with, say, $100,000 of money, it is not clear how useful it is to keep thinking about this money in relation to the debt that it was originally created 'from' (assuming lets say that all of it was indeed traceable back to a loan or whatever). The person with the $100,000 doesn't owe anyone anything.
Good breakdown but I didn't see a key inflation-management point that would have to be addressed. How on earth do you stop wealthy property owners welcoming UBI as just another way of transferring centrally supplied money into their accounts by jacking up rents? Clearly there'd be more money around competing for the same number of limited resources/properties. Wouldn't this quickly shake down to a zero sum gain but with amplified wealth inequality?
Yup, good question(s). I think there are two points you're raising: 1) rental price rises and 2) wealthy people using UBI to increase their savings / wealth.
For 1) I'd say the way to solve excessive rents is to build more affordable houses. This is essentially a supply and demand problem and I think governments should have a, say, 20 year commitment to bring down price/wage and rent/wage ratios to much lower levels. But, this goal and policy is independent of a UBI. If there are lots of rental properties on the markets, rents will go down even if there is a UBI (and maybe the government should fund non-profit NGOs to own and run lots of affordable housing at decently low rents to help prevent profiteering - so not rent controls, but just making cheaper rents available in the market)
For 2) Rather than means test the UBI, the simplest solution is to also have progressive taxation that just means that wealthy people will be making a net contribution to the government.
But also, as I say in the video, lots of people seem to think that UBI is 'inevitable' so we need to find all of these kinds of possible problems and then find solutions to how we can avoid them if/when we introduce a UBI.
@@Go-Meta With digital, liquid or sand analogues for money I should think it possible to apply computer modelling to entire state economies (esp. nowadays with the scale of computer-power available) taking several if not all monetary theories and possible inflation scenarios into account. Is anybody doing this? It would surely require far less compute-power than, say, a global climate model. Okay, humans can be unpredictable and irrational with spending habits but I bet the patterns would quickly average out in useful ways (for modelling purposes at least). And basic, major transactions in life - the essentials - are relatively few in number.
@@cyberistait has a Wikipedia page, computational economics. Modelling is part of it.
Thank you, this helped remove the “we can’t afford UBI” block in my brain, and thus the biggest anti-AGI argument I had..not that there aren’t others. I don’t know enough about MMT to understand pitfalls..but are you sayin if the inflation problem is kept in check, we could grow labour productivity indefinitely, free people from mundane jobs and still have room for the most innovative to build their sand pile
Bigger than the average joe? Thats optimistic!
Think of all the deflationary technologies that could have free up people from BS jobs. The problem is that the gains went to billionaires, that's why billionaires exist. We could have easily gone the other direction, outlaw billionaires and shrink the work week. We could of had something like a 20 hour work week.
@ and I’m very afraid that the gains of AI advances WILL accrue to billionaires without pause, oversight or measure. But if MMT holds, couldn’t the taps be turned on enough to let billionaire play with their sandcastles while still raising standard for everyone?
A UBI can be afforded.
The problem is: it does not work. Money exists because of the opposite, what you want to achieve with a UBI.
The Sandbox is an amazing analogy for MMT. This is the first of your videos i've seen, im looking forward to more.
Is it? Then MMT is blunt nonsense.
@@ThomasVWorm Or you just dont understand what your Video is getting at. good retort..🤦
@@theshi3152 the video is nonsense regarding the sandbox analogy.
Money is a bookkeeping system of debt. Banks go bust when many of their debtors go bust, since money is not sand. It is an IOU. The banks go bust, because they become the net debtors behind the IOUs, they have created. But it is not their business to produce and sell for the money. This is the business of their debtors. The job of the banks is the bookkeeping of debt.
How does this relate to sand? Not at all.
@@ThomasVWorm Because this is an archaic thought process to describe a bank. they literally.. create money due to how the Overnight Lending system and Central bank agreements work. Banks dont work because they have capital from Investors and Debtors.
Banks dont really go bust anymore either, Central banks tend to bail them out. The recent situation with Silicon Valley is different.
@@theshi3152 you miss the point completely.
Money is created, when you sign a credit contract. You create an IOU (the credit contract) and the bank creates an IOU (the money in its ledger) and you exchange both with each other.
This creates no debt, since both sides owe each other the same.
Debt is created when the debtor spends the money. The debtor now owes to the seller to take the money back and sell for it too. The bank sits between those two as an intermediate: the seller has an IOU of the bank and the bank an IOU of the debtor.
When the debtor fails to sell to get the money back, the bank stops being an intermediate and becomes a net debtor. But it can make other debtors become the net debtors via interest. But this has limits, since the bank cannot raise interest rates, as it wants. Otherwise the people borrow from other banks.
When too many debtors go bust, the bank becomes unable to service its debt. Then the bank goes bust too.
So, the sandbox metaphor is far from being realistic.
For a UBI you need debtors - those who produce and sell for the money. The state creates them by demanding taxes first (collecting taxes is at the end and debt repayment).
But, when each and everybody gets a UBI, no one is left, who can be taxed. The money is worthless, since nobody needs to sell for it. And money loses it purpose as a mean of control since a UBI is about giving up control.
MMT just says that actual economics is the raw material, energy, infrastructure and labor added together and managed. You do not afford anything with money, you either can utilize those resources effectively or you cannot. If for example you want to do an EV transition, the question is not how much money you have but whether you have sufficient material and labor to mine the raw material and build them and the related infrastructure. If you don't, then no amount of money being thrown at it will do anything but create a bubble. If you do, then directing money towards it will not cause inflation if markets are sufficiently open to new entry or if nationalized efforts are taken. Another example, we currently throw away more than enough food to feed everyone, offering food vouchers for that food would not cause price increases as the goods already existed and were simply poorly allocated. So the real question is what do we have and what can we do with it as money is just a measurement of what is being done and a vehicle for facilitating those exchanges. One doesn't "practice MMT" but rather MMT is a description of all economies at all times, the modern part is that we are describing complex systems by their components and interactions as observed as opposed to what used to largely be philosophy. MMT isn't there to tell you what you should or shouldn't do but rather the consequences of whatever actions you do take. MMT can be used to describe a feudal economy just as well as a communist one or a capitalist one because they all ultimately rely upon the same core inputs which no matter the economic system have the same properties. Iron ore under feudalism is not distinct from iron ore under communism.
Great explanation! 👍
MMT is more a description how fiat currencies work. With bound currencies like crypto or gold bound there is an artificial maximum limit of the money supply which can cause trouble in the economy.
@@uweengelmann3 MMT also can be used to describe those things. Crypto especially as it is an ecosystem which is not bound and is likewise not the functional money of any economy currently. Gold, it describes why economies struggled with metals based economies, MMT is an understanding of the fundamentals of economic activity in the same way you might explain the workings of an ant colony. It is simply a more rigorous approach to economic analysis than curves draw on napkins, math for math's sake and philosophical musings. It's approaching the realm of actual science.
I much prefer a Mutualist Worker and Consumer Cooperative based economy. We bake into the system mechanisms that prevent sand clumping like capital accrual that generates massive heaps.
Not an expert, but I really like the sand analogy! I had some vague notions of the economy as a household as well as how fiat currencies differ from non-fiat currencies, but this video helped to develop upon those notions. I also think proposing UBI such that it is similar to other levers already used by independent financial institutions can be really helpful in appealing to conservatives (small c, but also maybe big C?). Thanks for the video!
If dollars were grains of table salt, then avg. lifetime earnings in the US (~$2 mil) will fill a coffee mug. A billion fills a bathtub. A trillion fills a semi.
I don't understand enough math, but does that mean we can find UBI with essentially the same amount as we spend on the military?
@adamchristensen2648 my comment is a mnemonic for tracking the scale of large numbers, and making them more understandable.
When you hear "million" on the news you can think "that is half of the life time value of an avg. American."
When you hear "billion" you can think "an avg. person earns a 'coffee mug' gradually over their whole life... and a billion is a 'bathtub full' all at once." ... That's the life time earnings of 500 people... much different from numbers measured in mere millions.
When you hear "trillion" you can think "life time earnings for normal folks is a coffee mug, billionares have a bathtub, but a trillion is a semi full." Measured in life times a trillion is 500,000 life times.
Think like a vampire if it helps. An avg. person is $2 million (coffee mug). A billion dollars is 500 people (bathtub). A trillion dollars is half a million people (semi).
Corporations can issue new shares of stock too, but new issuances dilute the value of existing shares. New 'sand' dilutes the value of the hills of sand currently controlled by some. The growing economy can't be uniform. Some sectors will see more money (sand) to static supply. Prices will rise, somewhere.
Yeah, but I'm starting to realise that "prices will rise somewhere" is always true for various reasons. Prices will fall in other places. So, the real trick is to try to keep the experienced purchasing power of a currency as stable as possible so that prices today can be usefully compared to prices tomorrow and in a week's time. But the economy is a sea of price changes, even relative to gold or Bitcoin. So perfectly "zero inflation" is a both an unreachable mirage and will only every be true for a certain subset of goods or services.
One potential method of reducing inflation in an economy with UBI would be to reduce government expenses in other areas. For example, if UBI starts at a nominal $100/month we could cut all government welfare payments by the same $100/month. This would be acceptable because the welfare recipients will be no worse off.
Edit: Something else to keep in mind is that AI controlled robots will drastically cut the cost of production of many products, leading to strong deflationary pressures.
Yup, totally agree 👍
I'm not totally convinced AI robots will make things cheaper. TVs and head phones are cheaper but housing, food, vehicle's are all more expensive. We've had robots for along time but I don't see things becoming really cheap.
@@behonestwithyourself3718 It depends on how much human labor adds to the cost of production for that specific product.
If something is very labor intensive, such as clothing manufacture, you can expect the cost to drop a lot when robots replace human labor. If something is not very labor intensive, such as mechanized agriculture, then the savings will be minimal.
By far the biggest savings will be in professional services, such as accounting/tax, education, medicine, law, etc. Expect the cost of these services to drop dramatically.
@@marcusmoonstein242 I hope your right. I think the sectors you listed should come down in price with AI too. I just feel like the massive corporations will always bleed as much as they can out of the working classes. I'm all for businesses for making a decent profit. It just seems like alot of the wealth is being transferred to the asset class and the purchasing power of a paycheck is getting lower.
How would AI reduce prices of items? Rather, why would companies not be inclined to pocket the savings generated by not paying workers for labor? A company's only responsibility is to their shareholders.
A question I'd like to ask. Assume everyone gets UBI. How do we stop landlords from just jacking up the rent by that exact amount? Or even "sudden inflation" from groceries "mysteriously" getting more expensive?
These are good questions, and inflation is certainly the key risk to manage.
My first thought on this issue is to introduce the UBI slowly, say over 5 or 10 years. Introducing UBI should be about planning for and moving slowly towards a future economy where fewer people can get waged work, not a panicked step change. This should make it harder to justify prices rises on the back of UBI being introduced.
But secondly, and more importantly, we need to make sure that market competition both in groceries and in property rental prices (for the cases you mention), puts a downward pressure on prices to keep them the same while the UBI slowly increases. In the case of rental properties in particular, I personally think that governments should be doing more to ensure that there are plenty of affordable, good rental properties on the market (e.g. by funding housing associations to build and run more rental properties).
In other words, we increase supply of these goods so that competition keeps prices lower.
Keep in mind that UBI is typically proposed as an alternative to existing welfare programs, not to further supplement them. We should consider things in this relative context.
Consider food stamps, for example. Food stamps tend to create a growing demand towards groceries, which comes bundled with price-raising incentives (if not due to corruption, then simply due to greater shortages).
Since food stamps can only legally be used for food and have a monthly expiration date, families receiving food stamps are often incentivized to overconsume on food. They can end up hoarding more food than required, such as stocking up on food with a long shelf life. There's no incentives to only buy the food they require, since there is no compensation whatsoever for unused benefits. Instead there are incentives to use every last penny of the food stamps on food.
Consider the alternative of providing that needy family money rather than food stamps. They now have incentives to no longer spend the entirety of that sum on food. The result should produce fewer perverse incentives for grocery prices to rise, not less.
@@Go-Meta Please correct me if I'm wrong as I'm no economist (software engineer) and only have my basic high school and uni education, but downward market pressures on prices doesn't just require suppliers to compete for demand on the supply side to my understanding, but for consumers to be incentivized to shop around for the best deals on the demand side. At least that makes sense to me on the pure behavioral side of things.
An appeal I see to UBI (or NIT as an alternative) is that, combined with price transparency, it does seem to better incentivize shopping around for deals on the consumer side over alternatives like housing assistance, food stamps, subsidized healthcare, and subsidized education.
I do see some unique perverse incentives compared to the existing welfare alternatives (ex: someone spending their UBI compensation on gambling and booze), but compared to the existing welfare programs, UBI actually seems to reduce inflationary pressures to me (possibly even too much toward deflation if many recipients end up saving their compensation). At least it doesn't produce higher demand towards a very specific type of supply.
Say it with me now! This is what Rent price restrictions are for kids!
But seriously though. That's the solution here. Realistically the rest of the economy is the issue here.
What stops them from doing it now? In a properly functioning economy, if some entities jack up their prices when they don't need to, consumers will just switch to their competitors who didn't. Obviously if there isn't enough competition then monopolies can ask for whatever they want regardless of how people get their incomes. UBI doesn't change anything here. Efforts need to be put in place to ensure markets remain competitive (for example by blocking mergers and/or monopolies are regulated to avoid excessive price increases.
13:00 there is nothing wrong with low wages going up on the cost of others, since better wages need a different distribution of production.
And there are jobs, which cannot be automated, like care work. They need wage increases when the overall productivity increases in order to participate from the grown productivity. Without we run out of nurses. This would be ok, if we think, nurses are of no importance at all.
The other way to let them participate is to use productivity gains to lower prices. But the main reason for investing into machines is to produce and sell more with the same cost for production and by this, to make more profit. Nobody invests to sell for a lower price and the same profit.
So some inflation is needed.
This is an awesome insight -- thank you!
Glad you enjoyed it! 🙏
The analogy is a good one.
I am against that type of UBI because it won't work. Essentially what it means is people will be rich when the economy goes well and grows, but what actually makes that growth happen? if it's only or mainly UBI and deficit spending, it will stop growing at some point and then what? you will get into a spiral where there is a recession, which means less UBI and even less growth.
I think a UBI program has to be independent, but not part of the monetary system, it has to be part of the capitalist system, then you won't have to deal with that inflationary pressure. Basically you replace a Warren Buffet by citizens. Make everybody an investor. People highly subsidize capitalism anyway, which is why inequality grows so much. If a corporation goes well, all the profits go to private investors. If it goes bad everybody pays to keep it up from bankruptcy. So it makes sense to make the overall population partners since they already are. Then the profits would go up and down naturally, without needing bureaucrats or politicians deciding what is the right level of inflation or whatever. If capitalization was made roughly of 30% for the public and 70% private, every time the private wants to cash in, everybody would at the same time through their non voting shares. You could imagine it being stable even if there is no growth or even if there is a recession. Mining rights is also usually a good place to get some money for those type of programs.
>> Make everybody an investor.
How would your system decide where to invest our collective money? Using the film industry for example, how would you determine that investing our tax dollars for Christopher Nolan to produce what would become a box office hit like The Dark Knight is likely a great investment with a high probability of a great ROI, but not a horrible box-office flop like Madame Web where we end up losing money?
Would you invest my tax dollars into Android or iPhone to force me to own shares? Both? I'm an Android fan. I hate iPhones and thoroughly disagree with their EULA (monopolistic and only allows us to download/buy software through the Apple store). I actually consider it unethical to support Apple.
>> If a corporation goes well, all the profits go to private investors. If it goes bad everybody pays to keep it up from bankruptcy
On this point though, I don't pay anything if my company goes under. Investors are the only ones who actually lose any money, having paid in advance without getting compensated. I'm a software engineer working in R&D and a lot of our explorations of cutting-edge innovations carries high risk of failure. The types of people who invest in us tend to be high-rolling gamblers who don't mind a very high chance of failure in exchange for an extremely rewarding success (lottery mindset, because 99% of the time the attempt to invent something brand new fails miserably).
For example, one time I worked in a team where we spent three years trying to develop a new software only for it to fail miserably. I actually thought it would fail just based on the design thinking it wouldn't be so popular among customers, but I was just one programmer in a team of a dozen programmers. Still I did what I was paid to do and implemented the designs as specified. As I predicted, the software failed to attract much demand.
The reason I never bought shares of that stock (I do have shares in other stocks) is because I didn't believe our product had the highest probability of success. On the contrary, I thought it was weighted towards failure. When our product failed, we did end up losing our jobs but I was able to find a new one. I didn't lose any money for the product's failure: instead over the three years, I was paid over $300,000 without losing any of it.
Great video... our current system of using interest rates to control inflation and government bonds to manage debt is like using bloodletting as a way to treat disease and the sooner we change our thinking the better.
Good video - nice job of making this accessible.
The rise of crypto currencies could be a threat to monetary policy and government control over the economy. Libertarians see this as a feature and not a bug.
The problem with MMT + UBI is that there are some businesses that by their nature are non "ever expanding". Small businesses what comes to mind. But UBI with its prepensety to push inflation just slightly higher, would force such businesses either to close or adopt stupid policies forcing them to expand beyond actual business need.
The issue I have with MMT is it seems to ignore the incompatibility of continual economic growth (consumption) with the amount of physical resources that are available in a finite world.
UBI has already existed for many decades in the form of Welfare.
Also, given that _only humans_ want to be paid money, this means that the main effect of increasing automation (where an increasing % of production will be done by robots who don't demand "living wages") will be the reduction in the cost of living per capita, as opposed to an increasing number of unemployed humans, each demanding the same level of income.
This means that the main premise of this video ("how can we dramatically increase the money supply to pay UBI without increasing inflation too much?") is a bit misguided.
The more serious issue under UBI is very likely to be the fact that the ever-shrinking % of population, who are still willing to work, will naturally need to be compensated better than the majority, who want to have a lifestyle without positively contributing to others, which means that this economically-inactive majority will be complaining about the abovementioned minority earning higher incomes (which will give rise to the complaint of "inequality", "unfairness" and "not paying their fair share" - just like we have now).
brilliant explainer. thank you
I'm not going to pretend I understood every part of this. But the bits I did understand seemed very interesting and seemed to fit into what I see in the world around me. Probably the big thing I see UBI doing is improving capitalism because I think having a safety net would free people up to try new things and hopefully create some more competition in markets. That would of course be affected by other polices, but I think it would be important to help keep driving economy.
A UBI does not create a safety net. A UBI destroys the foundations of a safety net or what a safety net can be.
The real question: is the powerful forced to change their system to make UBI an option or will they use UBI to artificially increase their profits in the current system?
part of the issue is paying individuals, but the broader issue is maintaining productivity. With so many people out of jobs how are they going to spend their days?
Borrowing (money creation) comes before taxes.
Loans (money creation) create deposits.
The closed Fluid Mechanics or plumbing system analogy is wrong because the “fluid” has to be created and removed.
The key phrase is “Money is created and destroyed.”
Although because of interest more has to be created as debt than is destroyed by “repayment.”
Governments have been pruning money since 2008 and inequality has greatly worsened.
The origin of MMT was the study of history.
5:20 you can only detach money from physical resource use through efficiency gains, and there is a limit to those given the level of technology and physical limitations.
Great work, I hope more people get to see this. You gave me much to think about. There's a french economist who specializes in this topic : Bernard Friot. Perhaps if he has publications in english, you could help us understand his contribution/version of UBI ?
Thanks for the suggestion, I've noted down his name and I'll see if I come across something.
Good video, interesting
I feel like taxation should be the most important funded of a UBI scheme. With wealth generating assets concentrated in only a few, then all UBI payments will be funneled up through them (and inflate asset prices that keep others out of it). Without clawing them back from those generating the wealth through these assets, UBI will just essentially be a 2nd hand socialized scheme of funding wealthy
Since we won't have UBI ever, and will probably will lose Social Security as well, is there a point to discussing this?
What's the difference between MMT and Keynesianism then? Doesn't Keynes also say that spending creates growth, and that reducing spending reduces the economy?
So if you take as a supposition that automation and by extension AI (we are not close to AGI regardless of what you hear) will replace so many jobs that you require UBI, one needs to understand why that is. It will not be needed because no one has a job. It will be needed because money itself has lost its meaning and value, including real money like gold. The reason goes back to the core meaning of all money, which is the translation of the real or perceived work of human beings, which began about 10k years ago. If a loaf of bread or a candlestick suddenly appear in front of you as if by magic, the value of those things is effectively zero, especially if at the moment you don't need to use either one. This will translate down to the deepest levels of markets, meaning no money of any kind has value. The only way that UBI could help this scenario would be as an interim state between what we are doing now and what we do next. That will not and cannot last long. There is no economic reason to do it because there will immediately be no economy. It would be purely for emotional reasons.
Still a skeptic but excellent! What Universal Basic Services would or could be cut/replaced by UBI?
The first one that comes to mind is education. Give everyone enough UBI to send their kids to private schools and close government schools completely.
Your previous Video also made a big error with Bank Balance sheets. A new borrower from a bank is not both an asset and a liability. The matching liability is one of a) Interbank Loan b) bonds issued c) borrowing from central bank or equity from issued stock. It’s not simply created out of nothing. You have a fundamentally wrong conception of how bank balance sheets work. Many MMT proponents also fail to grasp the nature of banking systems because they are economists.
I'm not sure what you are getting at here.
If a bank lends $1000 to Jane, then, the instant that loan is approved, Jane's bank account at the bank will be increased by $1000. This increases the banks liability *to Jane* by $1000. But at the same time they now have record of Jane's new debt to the bank for $1000 principal plus the interest. This new debt is a new asset owned by the bank that they could in theory sell on to another bank. Or, for example, if Jane stopped paying back the debt, the bank could sell that debt on to a debt collector (albeit for much less than the $1000 original debt value). So, this is why the debt is an asset to the bank.
That is what I was saying in the other video, and I cannot see how this (initial) part of the story relates to interbank loans or bonds or the central bank. Sure, later, further transactions may become more complex, but initially it is really quite simple.
@ no that’s wrong when a bank lends to Jane the bank has to have the cash to immediately transfer the cash to tge account of the bank of the acccount of the buyer. When you use your credit card to buy something no cash goes to instead the bank transfers money to the account held by a bank of the store. When a business buys an big asset no cash actually goes to the account of the borrower and the fact they can’t put their hands on the cash is typically explicit in the loan agreement
@@Go-Meta sorry I meant debit card. Credit cards have Visa etc as an intermediary and they may be the lender but their balance sheet is run like a banks.
@@Go-Meta every bank has a Treasuer (titles vary). The Treasurer’s department monitors 24hrs the balance of bank cash balance. Money in from deposits and loan repayments etc and money out from withdrawals and lending. They must maintain the balance so at daily book closing it is netted out. If they have extra cash they lend it to other banks in the interbank market or buy short duration treasuries. If they have a cash shortfall they borrow in the interbank market or if the market is thin they go to the US treasury “window”. Why would there even be a “window” if banks didn’t have to daily match their cash positions.
@peterschief9778 I wasn't talking about either debit or credit cards, which are indeed more complex transactions with more parties involved.
I was simply talking about someone getting a loan from their own bank. No other banks or other people or purchases involved. Just a simple loan.
The question is about human nature and incentives
@yohami I totally agree that this is a key question. We need a political economy that keeps incentives and rewards for those who work hard. But I don't think the fear of abject poverty needs to be a part of those incentives, especially if we move towards a world where there are fewer paying jobs, especially for less skilled people. You want incentives to be related to actions that you can actually do something about.
For the moment it could be argued that there are plenty of jobs for less skilled people. But with AI improvements that could change in a very short space of time. We need to have a plan for how to react if that does happen. UBI is just one option we should consider.
You say that MMT tells us that the government can grow deficits until inflation becomes a problem. This sounds reasonable until you realize that the money printing induced inflation for assets has been high for a long time. Asset prices correlate with deficit spending. In other words, MMT has been redistributing the wealth to the rich for decades now in the form of asset price inflation from all the money printing. The wealthy make insane amounts of money in capital gains.
You might say, "Don't worry, we can fix this. MMT tells us that we can just tax it all back." How are you going to tax unrealized capital gains? And even if you found the political will to do it, it would still crash the market and create chaos.
I think it's funny that MMT proponents say that we can print even more money without consequence, not realizing we've passed the limit a long time ago. UBI can only be funded by high taxes. But good luck taxing all those unrealized capital gains. Look up the "buy, borrow, die" strategy. You will cry when you realize how bad the problem is.
"MMT" does *not* redistribute wealth to the rich - bad "trickle-down" economic policy redistributes wealth to the rich. It is *not* any kind of MMT policy.
It's an extreme simplifiction of the MMT analysis to say that taxes are the only check on inflation; taxes are indeed always the _first_ check on inflation, but that only addresses demand, while MMT economists also address resource supply chains and pricing power abuses. Using interest rates to control inflation doesn't work (except at extreme levels that wreck the economy-a big 'price' to pay).
No MMT economist says "we can print even more money without consequence"-where did you hear that? You clearly haven't read any MMT literature! Or you wouldn't be making such claims.
@@randyallred2382 The MMT system requires constant inflation to function. Let me summarize MMT. Governments grant banks the ability to create debt money. Debt money is unstable. When debt reaches a certain level, a deflation death spiral starts. Then government must increase the money supply with non debt money (deficit spending) to inflate away the debt. If this is not done, than the deflationary spiral will keep deleting money until all the debt money is gone and the economy declines into poverty. This means governments must always deficit spend, resulting in constant inflation. This creates a never ending bubble that subsidizes asset holders with unearned wealth. Notice that inflation is compounding interest for asset holders. This is wealth redistribution from the workers to the owners. And it's a side effect of how the MMT system is structured. Policy cannot fix this, because that would undermine the system. That was my point about taxing unrealized capital gains. If you do, then the market bubble that MMT is founded on gets popped.
If MMT proponents want price controls to fight inflation, then that's a big fail. Price controls have never worked. But I'm going to give MMT the benefit of the doubt and assume price controls are just the ignorance of some MMT proponents and not another problem with MMT itself. Also, I didn't say that interest rates are a good way to fight inflation. I'm saying that inflation is baked into MMT itself. Interest rates will not stop this. Price controls will not stop this.
My solution to this problem is to stop banks from being able to create money based on debt in the first place. Because that's the root of the problem. As you know, "money is debt" is a foundational premise of MMT. This false premise forces you to accept their solution of chronic inflation. But it doesn't have to be this way. Of course, replacing the MMT system will cause short term pain, because the asset bubble will pop and create chaos. But if we do not do this, we will continue to go down the road of absurd wealth inequality. The few will have immense unearned wealth. The many will have immense unearned poverty.
@@logical-machine - What "MMT system" are you talking about? MMT describes the existing money system.
Federal deficit spending is the primary source of household savings and business profits. Eliminating govt deficits is a recipe for permanent recession.
*If you actually read any MMT literature, you'd know that most MMT economists say the govt should just stop selling long-term bonds*-it's an unnecessary operation that contributes to wealth inequality.
So, govt selling bonds is not an "MMT system," it's the system that currently exists (and that MMT did not create).
You are correct, the financial industry is inherently unstable-something that all MMT economists recognize (see Minsky). The government is the only stabilizing backstop to finance sector instability.
"Price controls have never worked" is just a facile statement with no historical or economic justification. The US Constitution mandates the govt to regulate the value of its money-and the value of money manifests in prices. The government is _obligated_ to regulate money's value.
Regulating pricing power abuses is critical, not just in fairness to consumers, but to avert imbalances across different sectors of the economy.
Federal Reserve rate changes are a form of (attempted) price control-it's the primary mode of price control under the prevailing "trickle-down" economic theories. The MMT analysis, and history, shows that using rate hikes to control inflation doesn't work. Plus, it's all at the cost of working people, when the Fed tries to cut employment & lower wages.
The dollar is an accounting tool. When an issuer (govt & banks) issues dollars, it's necessarily entered as a debit on the balance sheet-a liability-i.e., "debt." To the payee, it's an asset. Because federal deficit spending is technically recorded as "debt" doesn't mean anyone has to repay it.
Talking about "replacing the MMT system" doesn't make sense. And MMT exponents do not advocate for the system that increases wealth inequality-they have proposed any number of steps to reduce it.
@@randyallred2382
>Talking about "replacing the MMT system" doesn't make sense. And MMT exponents do not advocate for the system that increases wealth inequality-they have proposed any number of steps to reduce it.
And all their plans to fix wealth inequality will fail because MMT is founded upon wealth redistribution. I explained all of this in the comment you're responding to, but you are not engaging with what I said. I'm not here to talk about price controls, interest rates, or bonds. These are all tangents. I am charging MMT with fundamentally being trickle down economics because it's based on money being debt. If you disagree with my logic, then engage with it. It seems like you just skimmed my comment and wrote generic talking points. If I write too much stuff, youtube hides my comment. I originally responded to all your points, but I had to cut out the tangents to get this comment past youtube censorship.
@@logical-machine - Look, with all respect, you clearly haven't read any MMT literature, so you don't know what you're talking about when it comes to MMT.
A pillar of the MMT analysis is the very instability of the finance sector that you mention (this comes mainly from Minsky's instability hypothesis).
MMT didn't create that system, nor do MMT economists endorse it; they _describe_ it. Further, they recommend policy changes to curtail the finance sector's opportunities for risky behavior that creates imbalances in the economy (e.g. the 2008 GFC, which MMT economists predicted).
You confuse the MMT descriptive analysis with policy-as if the existing system was "MMT's" idea or something that MMT advocates. You couldn't be more wrong.
Money has always been issued as a liability-a debt-of the issuer. That's not the problem; the problem is that banks-extenders of credit-are allowed to undertake highly risky behaviors for short-term gains.
If you're addressing wealth inequality, you must address the current system of bond sales and the interest paid to bondholders. The Fed's misguided rate hikes cause the Treasury to pay out enormous sums of interest to rich bondholders.
Your original question was about the sustainability of issuing Treasury bonds when federal deficit spending occurs. I answered that, but now you're focusing on bank credit. etc.
Where did you learn what you're saying? Would you like some reading receommendations?
Recommend you redo this great presentation. It is very good but could be significantly improved by just focusing on the sandbox analogy after transitioning from the water and not trying to justify it further. Additionally, perhaps the height of the sandbox rim can represent inflation tolerance of the economy.
The sandbox analogy has much potential. For instance, people or groups perhaps be represented as points in the sandbox over drains or holes representing taxation and conduits between them representing payment flows.
One aspect of UBI that isn't addressed is that it is implemented by imperfect humans subject to temptation. Additionally, wealth is not only the ability to buy luxuries but also the ability to buy power that is then often used to buy wealth insurance and wealthleverage 😉
"magic money" theory, I mean, just ignore Aggregate demand and aggregate supply in mainstream macro economics
This is fairly within the scope of supply and demand (i assume ur referencing that of money) and for the "price" of money to remain the same, he argues that increasing productivity can cover continuous defecits, and taxation is a secondary tool, nothing radical
Fractional banking is pretty magical
You mean the very incorrect and broken mainstream macroeconomics?
No matter which economic theory you use, the government needs a balanced budget. Also, incomes of people that do not add value via a service and/or production( stock market speculators etc. ) would have to end and income caps would have to be implemented. Plus, a fair and flat tax would be needed. And that just starts the list of things needed before we could even think of UBI.
When private budgets are unbalanced - hoarding money is the consequence of an unbalanced budget - the government budget must be unbalanced too in the opposite direction. Otherwise the whole economy will crumble because of the imbalance of the private budgets.
And this will hurt the most those, who do balance their budgets, those, who do spend all their budget.
And a flat tax is not fair at all.
Politicians will never ever reduce ubi. Not under our current political framework.
We cannot count on that happening. They will only increase it, what leads to inflation and to the whole system come crashing down. That’s something I’m completely sure about
The real problem is a lack of rational reasoning and sense of fairness in our community
Why UBI? Not sure how it really improves things. It seems like the link between universal free income and inflation is a pretty direct one.
The Job Guarantee mitigates this problem and more.
House hold economy works. If you think of it as you keep moving to bigger houses and your income increase
Those unwanted jobs... those can be tied directly to citizenship pathways.
Food and housing vouchers can be given in the immediate term so that monetary income can be used to purchase necessities. A time frame is given, and citizenship is earned. Some derivative based on the number of people coming in and how long it takes to replace all workers across the program...
A conservation corps style program, where any place that has municipal needs or companies that have commercial needs, can register.
Reagan's 'trickle down' theory is absolute bunk, but from where I sit it does /seem/ that trickle up theory holds some water, so to speak. If we imagine a hypothetical government that sits at one point of an economic recycling triangle whereby money from the largest sand piles flows to the government then to the smallest sand piles, my question becomes is MMT developed enough to prove or disprove this idea.
Yeah, trickle down doesn't seem to have worked as advertised at all !! But I'm not sure that it is possible to conclusively *prove* that a UBI would definitely work as intended because human societies are so dynamic and unpredictable. But I would hope that it's possible to at least get to the point where it is possible to show that UBI *could* work and be financially sustainable, but then some countries are going to have to just try it, where I think the real trick will be to introduce it in the most sensible, slow way. Unfortunately it'll then take quite a long time to be able to really judge whether or not it has been a success or not.
The trouble with MMT, UBI and the “big picture” view of the economy is that it ignores what money fundamentally is. To say that money is just digital records of account is true, but records of account of what? Well, money represents risk and effort expended. If I work for Joe’s Widgets then Joe pays me money, which represents the value of the work I did for Joe in making Widgets. Sally’s Bakery will accept the money-tokens because Sally recognizes (at some level) that they have worth, and she can save them to buy a Widget herself one day. If the government hands this stuff out as UBI (digitally or otherwise) it does not represent anything except government largesse: It has no worth and that will be recognized. The government will then have to force you use their tokens by taxation, requiring payment of taxes in government fiat currency, even though under MMT taxes are rendered unnecessary. The government use taxes to coerce the use of fiat money, using violence if necessary. Talk about tyrannical!
*The notion that "under MMT taxes are rendered unnecessary" is completely false.* Not a single MMT economists ever said that! Where did you hear that?? Taxes are the flip side of money creation (that's why Ben Franklin said taxes and death are the only certainties).
You're not accounting for the existence of money. Where Joe and Sally's money originate? You are saying that work creates money, but that's backwards; money is the tool that produces work-through measuring, organizing and mobilizing real resources. This is true whether the money comes from bank lending or from government. A UBI (which I oppose in preference to job guarantee) provides consumer demand that feeds markets.
Taxation has always been used to give value to (i.e. create a demand for) state moneys, since the first coins were issued by a Lydian king 2400 years ago. Yes it's coercive, but- like any *law* - it's a socially agreed-upon coercion. Money is a creature of law, and laws are coercive. Again, taxation (or loan repayment) is the flip side of money issuance.
Money represents debt. Joe owes something to you for your labour.
At its heart paying people for the products and services they work to provide with “ counterfeit” is theft.
When the state decrees it to be money , its ok
But when a counterfeiter dose the same think he is robbed the popular of buying power and thus the value of their work.
Devaluing people’s work thru any means other than competitive innovations is a tort against them.
So what is the real resource limit? Gee it would have been nice to have a constant number of tokens to represent resources with so that we could see what percentage of resources were deployed.
That's the problem. When having a UBI, the resources become completely unpredictable. The resource, money is about, is labour.
The state accesses and reserves this resource by demanding a tax. Demanding a tax creates debtors. Debtors must supply their labour and sell it for money. This is how they get the money to pay their debt/tax.
But you cannot tax UBI receivers. You give them money without demanding anything from them. Taxing them results into making them giving back the UBI, which makes the UBI pointless.
Since you give the UBI to everybody, there is nobody left, who can be taxed.
What you can tax is, when somebody freely offers his labour or just works. But in contrast to now, you cannot force people to work by taxation.
So you will never know, how much resources are available for the UBI. But you know how much UBI you will pay. And the less people offer labour, the more you must tax them to cover the UBI. But this makes offering labour a poor idea.
So your economy becomes completely unpredictable and uncontrollable. The idea of money is to achieve the opposite.
A UBI contradicts completely the functionality of money.
KUWAIT Saudia Arabia and most of the gulf states are already doing this..why can't it be done in the west
And many of the native Arabs don't work, they import workers instead.
Because Kuwait, Saudi Arabia and the gulf states need the west to do the labour.
The west are energy addicts. For energy they do everything. And what the west is giving for energy can be distributed to the population of those countries.
When the west wants to do the same, it must find first someone, who does for the west what the west does for those oil states.
If UBI. Is put in action than inflation will always be in double digits and GDP formula will completely change and some major parts like food fuel will be replaced and cost of shelter will also be changed vastly in formula and in theory but not in practicality.
If the government can afford to throw trillions of dollars to contractors and companies , they can afford an universal revenue for people .
the government didn't produce anything. The first ones getting that money get the most value out of it, and later the inflation catches up.
Think in terms of energy and resources, not dollars.
17:20 when we do have AGI and production is completely done by machines, a UBI won't fix any problems resulting from it.
When no more labour is involved, the prices of products are practically zero - no one is left, who needs to be paid. Or what is the wage you pay to your washing mashine for washing your clothes?
And what does the AGI need money for? Does it go to a human hairdresser, so that the money circulates back to humans? No. An AGI industry is like a black hole for money, when it puts a price tag on its products.
And how do we determine prices? What do we bargain about on a market, when one side has nothing to sell to the other side and where the otherside provides almost everything what the one side needs?
Money is somebody elses debt. It becomes pointless, when one side is a permanent lender and the other side must permanently borrow without ever being able to repay the debt.
With an AGI industry, we need a total different type of an economy.
Even with full blown AGI, we will still have many resources that are limited and that we need to find ways to share out in a reasonably fair and efficient way and that reflects the different preferences of everyone.
If everyone was given the same number of "purchasing tokens" at the start of each month, then some people would choose to use their fair share of purchasing power in one big clump for an "expensive" item and others would choose differently. This natural price discovery within a market is one of the best features of market economies. It not only finds the "right" price given people's different preferences, but it also sends a "signal" to those producing to know which things are in higher demand than others.
Of course, in the real world this resource allocation function of markets is a long way from ideal, most especially because people do not enter this market with the same level of purchasing power in the first place - the preferences of rich people are prioritised over those less well off. Plus lots of other problems.
But, in theory a monthly UBI would be one of the fairest ways to distribute such purchasing tokens (AKA money) so that people can freely purchase things in the market.
So, yes, we are going to need a new type of economy, but actually I think the biggest change will be away from the idea that most people can only get their "fair" share of money (purchasing power) through waged working.
@Go-Meta money is debt, which means, you have to give as much as you have given. This is why inflation is so disappointing: it devalues what you have given, which means, you will get less than you have given.
This creates the reference for finding prices: what you have given.
With a UBI this reference erodes. Nobody has to give anything, which results into those numbers on the coins becoming meaningless.
Then, how much shall an AGI ask as a price, when it is basically meaningless to an AGI. It does not need money at all. You can put a price tag on natural resources. But then the price of a product is nothing but the sum of the prices of the resources being used, which means the price is the cost. So for "finding" prices you do not need a market but only a calculator.
To limit resource access, you just have to limit the UBI. So a government would regulate the total resource access by putting a price tag on resources and by setting the sum, which is distributed as a UBI. The only thing, which will be decided by the market, is what the AGI will produce. And this decision will come at 100% from the demand side. The AGI will only process the orders and deliver.
But this is not a market economy anymore. It works more like a restaurants, where the customers gets a menu and the AGI is the cook, who cooks and brings, what will be ordered. Prices on the menu are set by a regulator.
We’re going to get to UBI then wonder why it wasn’t done long ago.
I think this is absolutely right. When we finally get there it'll be a revelation.
@@Go-Meta it's been tried through marxist revolution. Communism doesnt work because people aren't robots.
The other issue is money being created as debt. We don't need to have a debt based currency, and we don't need to charge interest.
All money is debt. Whether stamped on a coin, printed on paper, typed by keyboard.
@Jesus-o7v9x not necessarily. It doesn't have to be loaned into existence. States, for instance, have the power to issue currency and then immediately spend it into the economy, interest free. Other forms of organizations could also potentially do that.
Also, when we work we create wealth. So why can't we issue currency?
@@NelsonGuedes All money has to have a recourse mechanism. If by states you mean nations, then yes they can issue money interest free. The nation state has a recourse known as taxation. Anybody can issue money, the problem is getting it accepted as payment. The money used by a nation is accepted for payment because it's a tax credit. Taxes drive currency. There's a lot businesses that issue coupons, which are a form of money. Their is a hierarchy to money.
@@NelsonGuedes Also, when work you create wealth. So why do we need money at all. We don't. No one needs money, they need goods and services. That's what people don't seem to understand. The rich do, that's why they focus on assets and not money.
Should a UBI be based on the economy gross profit like we all have an investment in the economy
UBI makes no sense to me as it will simply trigger inflation, and if it’s tagged to inflation then you’ll get acceleration of inflation! If I have $10bucks and you have $100 you are richer. If we all start at the same amount above $0 then the base is lifted to the new level; almost like hitting the 0.00 button after you stand in the scale! Things adjust to the new normal of UBI soon after time passes.
Did you watch the video? It's all about the inflation risks of UBI.
@@Go-Meta you have a weird sort of monotone that is all soft and safe which I associate with people pushing nonsense, and you seem to support all kinds of things that I am biased against, perhaps unreasonably, like hyperinflating our way out of debt with Stefanie so yeah like this guy I just assume you're going to sell me crap I think is worthless. So yeah I don't blame him for making that assumption. Most of us aren't academics we actually work low class jobs and do things in the world. So these theoretical everythings fine even though there fires burning outside stuff isn't really a huge win. Perhapse you could begin your videos by presenting a thesis statement to preclude such assumptions?
In light of the earlier comment, I have actually changed the title of the video to note that MMT actually centres inflation risk. But even though Stephanie Kelton says this many, many times, people still seem to think that MMT supporters want to create high inflation. I certainly have lots to learn about how to communicate ideas in a way that breaks through people's default assumptions, but it's not trivial 😀
@@Go-Meta Sorry commented first before watching! Sorry. I compeletly agree with you. Actually, I just found your channel today and sub'ed right away. I'm making the same type of content from different perspective! Cheers and Great work!
@RadicalModeration No problem, and thanks! I've just subscribed to your channel too, looks interesting 👍
UBI is not a realistic option. It would require a very large increase in government spending. So tax revenues would need to be dramatically increased, to avoid inflation. But those subject to the taxation can always shift their wealth, their income, and/or themselves to jurisdictions with lower taxation -- individuals or corporations.
All nations are in competition to offer low taxes, and cannot increase taxes without causing flight of wealth and income to other countries. This is why deficits and debt are now ubiquitous around the world. No nation is free to increase spending by UBI (except places like Saudi Arabia).
The financing is not a problem at all - it is already financed today. It is only a change in how it is financed.
The issue is more: this is not what money is all about, how it works and how the state uses it to organize us.
Can you please talk about Jacques Fresco's resource based economy ideas - RBE/The Venus Project and if those ideas have gained any more traction in the last 15-16 years since the release of the Zeitgeist movies. Fresco has been talking about these things since at least the 1970s but I think a lot of us learned about it from Zeitgeist: Addendum.
MMT is often misinterpreted and also proponents of MMT are often quite idealistic and too non-chalant about increasing the monetary supply, I also think it fails to accout for behavioural conditioning in the market as even if MMT is true and optimal but people with the money don't think so then it will inevitably create unsought and extensive negative externalities. That's why most economists aren't self idenitified MMT'ers do however indirectly follow and validate MMT
It's just how far you take it. Do you think that central banks should be able to directly control inflation by controlling demand via direct personal stimulus and contraction? (I.e. money is given and taken from your bank account automatically) Do you think that congress or another body should be able to rapidly pass bills to increase/decrease taxataion? Do you want a job guarantee?
It would be fun if you were to review "why nations fail" by the recent nobel prize laureates.
That's a good idea, thanks for the suggestion. I've put it on my list.
WRT "Job Guarntees" - I'm afraid it might end up looking a lot like the movie "Brazil" - where nearly everyone works for the government, monitoring that everyone else follows all the rules.
No. The purpose of the Job guarantee is to distinguish those who cannot work from those who do not want to work.
The government only needs a few jobs so that it can offer them, which makes the test.
Therefore you are only offered a minimum wage, since when you have to work anyway, you would find yourself a better paid work in the economy. And it will be not that difficult, since with an understanding of how money works, the government can target full employment in the economy.
@@ThomasVWorm Unless Agi has replaced nearly all jobs OTHER than those the government creates by fiat to keep everyone employed, as is the video's premise.
@@tomcraver9659 when AGI has replaced nearly all jobs, you do not need money nor jobs and the AGI controls everything. You will then have robocops. You should be more worried about the AGI seeing us as a competition for resources.
An AGI will be practically a new, superiour species.
A form of UBI was done during COVID, its also still happening through Crypto drop downs like WorldCoin. I think its awesome
Can you do a video on why exactly we always need inflation? Why is my labor now worth less than 20 years from now if I just save in fiat. Your forced to invest in the stock market or something or else your money will automatically be worth half by the time you retire. Its frustrating and stressful.
Yeah, I do plan to do a video about inflation sometime - probably early next year given other commitments, but the 'short' answer is that prices are all in flux all the time for various different reasons and inflation is just a measure of the average change of a basket of goods. So, you can try to keep this basket of goods at a fixed price (zero inflation), but you don't really want to have an economy with widespread deflation either because this will disincentivise people to spend today if they know that they'll get a better deal tomorrow. So with deflation economic activity slows down, companies sell less and they lower their prices further to try to sell stock and get it moving - which causes more deflation.
So, from what I've understood, there is a general preference for a small amount of inflation (2%) to be the best compromise target to aim for to make sure you neither get deflation, nor high inflation (which is also bad in the short term - as we've just seen!!). And, hyperinflation is just a disaster for an economy.
So, 2% is seen as the "goldilocks" level of inflation. The good thing with 2% is that day to day prices and even year to year prices are very comparable and the changes in those prices are dominated by other factors (like changes in material costs or just dynamics of the market). So even at 2% inflation the dollar, for example, remains a good day to day unit of measure of the monetary value of different things.
But, yes, that does mean that over long periods of time people holding cash in low interest accounts will lose money on those savings.
However, a shockingly large % of households/people do not have any significant savings at all. So this doesn't impact them. And anyone with a large amount of savings, should really be looking after it sensibly and at least putting a large % of it into high interest rate bonds (if they do not have the stomach for more risky choices like stock and shares) or indeed invest into owning their own home or whatever (not financial advice!! :-) )
Anyone with very serious wealth will already have most of that in assets that are likely to be inflation proof anyway.
So, there's actually only a very particular subset of the population who are actually likely to be impacted because they are keeping large amounts of cash in a very basic bank account. And, yes, sadly, that is just bad financial planning on their behalf given that 2% inflation (or up to 3%) is likely to be the norm for decades to come. Banks should be encouraged to nudge these people to look after their money in more sensible ways.
@Go-Meta thanks for the response! I recently saw your channel and I really like your content. I'm not totally convinced that shorter periods of low deflation wouldn't be a bad thing. I feel like people would still buy things over a 2-5% deflation period. I don't think people would wait a year to save 2% on most items. I'm thinking more as a hedge to combat these massive bubbles that inflate the cost of living dramatically. The last thing to go up in inflationary times is peoples wages. Big corporations just send me emails announcing price increases. The small guy doesn't have that kind of leverage. I'm doing ok but the younger guys that work for me struggle on what 5-7 years ago would be a very good wage. I'm not an economist I'm a home builder but it's very hard to build affordable housing where I live. Wages can't go down. It's a tough time. The cost of building has doubled in the last 6 years.
Physics. You need inflation because we can move in time only from now to tomorrow.
Businesses do buy first and then sell later. They cannot stand buying at a high price and selling at a low price. When they do, they go bankrupt.
So they prefere stable prices and can life with selling for a higher price.
With inflation you can have an economy running at its maximum, which means, that though your money loses value, you reach the maximum level of living standard possible. The idea, that when your money would have been stable in value, you could have bought more, then is nothing but fiction.
Saving money is not saving at all. It requires somebody else to consume instead of you. Otherwise you have a surplus production, which is not bought. This is a loss.
But nobody owes to you forever. Money origins in credit. Credit has a term. So money also has a term. So your ability to save is limited by the credit contracts. Your saving plans must be in parallel with the debt plans of the debtors. Your money is their debt. When they go bust because you save too long, your money loses its value.
And forget the word "fiat". It was created by people, who never understood money. Money is a bookkeeping system of debt.
@@ThomasVWorm Thanks for insights. Its just hard for people these days how much things inflated and how the money has less purchasing power. Especially where I live housing doubled in the last 5 years. 1700sgft small lot house is 1 mil now. Wages haven't doubled that's for sure. Interest rates were too low for too long and people were out bidding each other like crazy. I saw this happening. I'm a homebuilder not an economist. I'm lucky because I have a house. The guys that work for me are screwed. The younger generation are out of the market. Happened so fast.
@@behonestwithyourself3718 be careful with the word "inflation". Inflation is measured by observing prices. But when prices go up, it is not always inflation. On a market prices change with supply and demand. This normal change of prices is not inflation. Markets are never static.
The economic system we have is capitalism. Capital are the means of production, which are mainly machines. Machines are used everywhere and they need energy. So when only a single price change, it can affect all other prices. And this is the price for energy. When the price of energy drives all other prices, this is not what is meant by inflation.
Inflation is a rising of prices, which cannot be easily explained by things happening on the market like coffee becomes scarce because of a bad harvest etc.
A reason may be businesses are doing very well and they can imagine doing even better and they borrow more money than they can spend. In such a situation the central bank would raise interest rates to stop the borrowing. But it also means: we live in good times.
Then companies are trying to make profits by selling more at the same price by increasing productivity. In order to participate from the increasing productivity, workers raise there wages even in businesses, where there are no productivity was not increased. This causes inflation, which is needed to distribute the increase of total wealth. Otherwise nurses would still have the same living standard as 200 years ago. So inflation means: all live richer.
But you can also have bad inflation. But then to know the cause is important, to stop it.
It can be done by sharing stock through baby bonds and a public holding of stocks
Brother… housing and groceries costing more than anyone is willing to pay me is destroying the aspirational portion of the economy
We won't need a central bank to manage UBI, just a specialized AI. Economists will be out of work too.
Compare MMT with Adam Smith’s “There is a lot of ruin in a nation”.
More spending and more taxation? More of the same. Why expect a different result?
Interesting alternative metaphor.
Would it not make more sense to have a quest worker program for those difficult low playing jobs? In other words, it seems we need to get smart about the role that immigrant - both legal and illegal - have been playing and could continue to play in our economy.
A job guarantee and UBI aren't mutually exclusive.
Indeed 👍
It would be interesting to see this experiment run in competing economies - one MMT/UBI and the other laissez-faire/free-market. I suspect the 'free' economy will expand quicker with widespread capital accumulation so that as super-abundance draws closer the free citizens will be deciding whether it is wise to send their returns on capital to help their less well-off neighbours in the centrally managed state who will still be arguing about the 'right' level of UBI to catch up. We have run a century long experiment growing the state and there seems to be little self-awareness in progressive circles about our position - the answer is always more of the same.
So, one of my goals on this channel is to try to gently nudge the conversation beyond the central planning vs market economy kind of dichotomy that defined the left/right politics of the 20th century. Personally I think the jury of history is pretty clear on the basics of this: we need a market economy for many sectors, but we also need a liberal democratic state to perform certain functions. We need both.
The fundamental challenge to a hard-core laissez-faire, or anarcho-capitalist economy is what to do if AI really does render a larger and larger % of the population economically unemployable. If society unceremoniously dumps this growing set of people to fend for themselves on the scrap heap, not only would that be shameful behaviour for any decent society, but it would also potentially lead to dangerous levels of unrest (to put it mildly).
The great thing with UBI is that, although yes the state administers it, the state otherwise lets its citizens crack on with living their lives how they see fit. For many people they'd use this minimal economic freedom to do useful, purposeful work of some kind in their community - work that wouldn't be naturally funded through the market.
But also note, that I was being very clear in the video that I also think it's important to have an aspirational economy where many people decide to work hard for a wage or setup a company in order to earn a lot more than just the bare minimum.
So, yes, it would be interesting to see which society would turn out best. One that puts a floor on how low you can fall, or one that doesn't.
Great comment
You’ve simply described central planning.
Great comment. @Go-Meta I believe a society that puts a floor on how low you can fall already exists in Germany for instance. Would the last 20 years of German well fair system provide enough data for analysis?
@@Go-Meta - If the state has re-directed vast community resources into UBI how would anybody crack on living their lives ? - it would be a fantasy. The state would be telling us how marvellous everything was working out - even if we were going downhill, just as they do now - they would do the catastrophising about how anything else would be worse or the terrible disaster they helped avert - as you have in your comment. Democratic freedom is not anarchy it allows setting the rules collectively - not being ruled by another gang of neo-aristocrats... I could drone on - thanks for your comment/interesting vid.
Whenever little people get surplus income, inflation will increase to take care of it. Increasing rates will push wealth towards where it belongs, to the wealthy.
the question is whether sand is better than water as used to describe our uses of money in our political-economy; and whether sand is better than water when we discuss concerns such as inflation and economic/social disparities. a priori, what's got me wondering, is why you use "sandpit" as opposed to "sandbox," Oli? I ask because a sandbox has walls or a "frame"; whereas a sandpit is a quarried hole of irregular shape. This notion of defined walls is a significant element of our current political- economy discourse, especially in the USA but also many European states where we see a 'shift right' in political vote counting; we are having a heated "domestic" debate in the USA as to how impermeable our borders ought to be: with neighboring terrestrial nations of Mexico and Canada; also, with water-accessible neighbor such as Cuba and the BVI, et al. So, walls may be a missing component of your sand frame (sorry, bad pun). Setting aside the USA, can it be said that any nation that provides UBI to its residents is likely to attract immigration? Can the sand analogy estimate the magnitude and strength of the signal that attracts new residents, who are "illegals?" This would seem a necessary ingredient for modelling how UBI might work. so, please consider the significance of 'border walls." e.g., are truly impermeable border walls a precondition for UBI to work for the Citizens of a nation? also, setting aside "walls", the use of granules of sand does seem better than droplets of water, because of the wealth divide; the current wealth divide means that we are seeing "Gilded Age" wealth concentrations; some individuals today have "sand castles" that are HUGE; while, the vast majority of the populace of the USA have few granules. also consider the idea of "topographic" mapping; a netlike grid that is lain over the sandbox that cab measure wealth inequality -- charting the orders-of-magnitude of the mass of sand that forms each sand castles. it might be fun to think less of sand castles, and instead think of Pyramids, as erected in Giza. instead of sand, consider Legos. thanks again. appreciated.
I used 'sandpit' because here in the UK that's what we call them 😀 (and apparently across most of the Commonwealth countries too), but I learned while making the video that in the USA the same thing is called a 'sandbox'. Never knew that before.
But, yes, your link with walls is an interesting one and I do indeed agree that any country introducing a UBI will have to think very carefully about the implications for immigration. These are not trivial issues to solve well, but if this is a likely future for our societies, then we need to discuss now how we can make it work well.
And I also like the way you've described how the sand analogy makes it easier to compare scales of wealth compared to the water analogy. A few grains compared to a sand castle. 👍
RBE (Resource Based Economy) would be the best solution for our problems.
Are you referring to the Venus Project / Zeitgeist Movement ?
What little I know of these ideas is that they're imagining a world without money, which always sounds romantic, but I actually think that money and markets genuinely solve a type of co-ordination problem that will be extremely hard to solve as well in any other way. There are, of course, real problems with market economies, but (in my humble opinion) these problems are not in the core ideas of money and prices and markets to allow consumers to freely express their preferences to producers. The problems are in the unequal distribution of money and other details going on around and within the markets. For *some sectors* the core idea of allowing people to freely self-organise through a market mechanism is a good one.
But, I have to admit I haven't read much about the Venus Project / Zeitgeist Movement, so maybe I'm misunderstanding their ideas.
What do you think MMT creates? Isn't inflation the limit? goods and services available to buy in the economy.
A government SHOULD tax the money that it spends. If it just prints the money that it spends like UBI (or the covid stimulus checks) without any production to go along with it you just get inflation spikes like the 9% inflation the US faced a couple years ago
Yes.
But money is always created first, then spent, and then recollected. So it is always "printed" first.
But this is no problem at all, since money stands for debt. People owe the money before it is printed and spent, so they must offer and sell something for it, to return it to the issuer of the money (bank/goverment). Those debtors are created by demanding taxes (or when people borrow from a bank).
But sometimes inflation is better than another problem. In a crisis you do not want businesses to vanish, when you know, they are needed after the crisis. Their presence is strongly related to the value of money anyway and even more to the wealth of your nation. Inflation then is a much smaller problem.
But a UBI is not a mean to deal with a crisis. A UBI is a crisis.
@@ThomasVWorm I think it's more apt to say money stands as a place-holder for value. Value derived from a good or a service, transferable for another good or service later. You having ten dollars doesn't mean you're indebted ten dollars, it means you (ostensibly) provided 10 dollars worth of service or goods to another and can then exchange that for 10 dollars worth of goods or service from another at a different point in time. The government printing money doesn't create the debt, you don't "owe" the government for printing money and giving it to you.
And we typically value our money in relation to the productivity of our nation. That's why we compare national debt to Gross Domestic Product and NOT total tax revenues. Because the number doesn't matter, it's the relationship it has to the actual goods and services happening. Inflation is a smaller problem then complete economic collapse, up until the point where inflation causes that collapse (hyperinflation). But what level of inflation is acceptable and what level of risk to business is acceptable is difficult to pinpoint. We know when we've gone too far, for sure, but by then it's too late.
Does 100% of everything require money? There are essential things in life that humans need to stay alive, like food and water. Other things make our lives better and help perpetuate our well-being, such as medical care, communication, information or data, and housing. These five categories could be considered resources within a resource-based economy. That leaves everything else as desirable, not needed for human existence but preferable for a higher standard of living. What if we economically separate these two categories and create two different economic systems that work differently to battle inflation? Do we really need one system that covers everything?
What if there were two different types of economies or uses of money instead of one that captures everything? What if the five essential things were covered by UBI and given to everyone equally, and the desirable things were left to another type of accounting system and its market forces? An argument could be made that the costs (manufacturing and distribution) of creating all essential stuff should also be added to the UBI distribution pile since the cost of creation and consumption are intimately tied together by their joint inflation rates (supply and demand).
Any form of UBI will turn people lazy. You get a guaranteed income, you slow down.