We Need To Talk About Universal Basic Income
Chris Leeson
8519

Consider that the money has to be coming from somewhere and that brings with it an opportunity cost. Of course, the redistribution must be coming from the coffers of the wealthy.

This is where I lost interest, although I kept reading. Your claim to be “passionate” about economics led me to believe you might have a better grasp on the reality of our modern monetary systems currently in use in both examples you cited. As soon as you ask the question “How do we pay for it?” in the context of needing to find currency to fund spending you disconnect from any mathematical path forward to achieve your goal. You just can’t get there from here, and that is just the math not including the massive resistance you would encounter from the wealthy that spend a considerable amount of their wealth on politicians to safeguard the rest if you insist on applying assumptions to the process that are no longer valid.

Both the US and Australia have sovereign fiat currencies and their debt is denominated in the same currencies. This means they can never run out of money or fail to meet any obligation that is also denominated in those currencies. Holding a dollar of either country gives you no right to demand anything in exchange for it than a dollar exactly like it.

While it’s easy to assign less than benevolent motivations to those who have wealth to safeguard it is understandable when one realizes the “fact” that taxation doesn’t fund spending in either of those countries. Taxation, beyond providing a demand for the currencies, was never intended to be a source of revenue for spending, but rather, a way of balancing the currency supply to a gold reserve to stabilize the currencies against inflation. Spending creates currency into the private sector and taxation “cancels” currency. End of story.

One can not both cancel and redistribute the currency. When the gold reserves were removed from the equations there was no function that allowed tax collections to reduce the amount of currency created to fund appropriations, nor was one ever needed. The issuer of the currency doesn’t need your currency to spend currency. Excepting for rules imposed by lawmakers, there is also no requirement to “borrow” currency into existence. The debt obligation instruments involved are only a form of welfare for those with enough wealth to afford to park it for the term of the bonds and to give some control over interest rates. Debt instruments serve to remove currency from the private sector, not create it, as they must be purchased with existing currency. In the case of trade deficits, this removal is permanent and reduces currency available to the economy if not balanced by spending in equal amounts.

Neither country currently considers government’s deficit spending as the income source of the private sector that it is, regarding it as an “overhead” that drains currency from the private sector as taxes are collected or debt is accumulated to account for it. In reality, that spending is the “only” source of currency in those countries and has no direct relationship to taxation. Without a gold reserve to be defended the currency also doesn’t automatically devalue upon creation of additional currency. In fact, monetary inflation is actually rather difficult to induce in sovereign currency economies. Japan and the US have been trying to devalue their dollars with little success. Japan’s debt is now in excess of 200% of its GDP and no inflation is yet in sight. The “debt”, when viewed in the proper context of such currencies represents the total sum of currency that has been created that has not yet been canceled by taxation.

We don’t “owe” anyone $$ Trillions, as those dollars are paid for. We “OWN” $$ Trillions of accumulated wealth, albeit poorly distributed. Paying the debt, as lunkhead and corrupt politicians agree is necessary, means removing all currency from the economies and defaulting on all private debt. Ya, give us some of that. We have, in the US, only a history of six depressions and the great recession (only kept from being a depression via massive deficit spending) in the only seven times we achieved that goal or got within shouting distance of achieving it. I’m sure that’s just coincidence though, so carry on.

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