We can definitely have capitalism to decide who gets what many washing machines, or laptops and so on. We do not need capitalism to decide that everyone gets enough food, shelter, healthcare, education etc.
Have socialism for the basics, and have capitalism for affluence. That way you keep efficiency without being inhumane.
Basic income is a zero sum game, it redistributes without creating productivity. Now if you gave everyone that wants to attempt to start a small business 30k to survive the first 3-5 years now your talking about something that could drive GDP.
The people who would benefit from it the most would have the freedom to invest their time and money raising their children, bettering themselves, or taking risks and starting businesses.
Also, money repeatedly changing hands itself generates tax revenue, as well as personal wealth. Again, not zero sum. Giving these people purchasing power can also spur innovation from businesses who would offer them services that otherwise wouldn't be easily monetizeable.
As more jobs get replaced with automation, basic income will become increasingly attractive.
Thinking that properly raising children and investing in bettering oneself doesn't tangibly generate revenue is a bit short sighted.
In 15 years when machines are cheaper and better at driving, manufacturing, and doing most unskilled labor (or even some knowledge worker type jobs). Would it have been a bad economic investment to have all the kids growing up today have parents with the financial freedom to go back to school or focus on giving their kids a proper childhood (so they can grow up and be productive citizens)?
Do you genuinely think that we are better off as a society sticking to "you have to work to live" when the machines are outperforming an entire class of people at their jobs? Not everyone can or wants to be an engineer. At some point our populations will stabilize, and technology will make it so that we have enough food and basic essentials for everyone.
We are all in it together.
We have been printing money for quantitative easing, but it isn't released into circulation. The Fed sets short term interest rates directly, but once those hit zero, the only alternative is QE. QE uses Fed cash (printed if you will) to buy US Treasuries thereby increasing the demand for them and driving down long term interest rates. The goal is to avoid the contraction of credit and the deleveraging of the US economy. If that much cash was just dumped into circulation you would see inflation on a large scale.
As for the rest of it I'm going on opinion which you and I have no chance of agreeing on (which isn't the end of the world, everyone has their own opinion). Yes I think child care and self improvement are great in the long run, but it can be tricky to measure exactly how much they contribute directly to GDP (quantitative measurement). Yes I also think work to live is better for society. I think work helps people stay out of trouble and even when I was making next to nothing it felt good to make my own way.
We are doing these already, and we are spending public money already.
The idea behind basic income is just adjusting where to input public money. Instead of watering the flowers (trickle down economics) you water the roots.
If people have some way to survive then they won't turn to crime and they will be able to buy goods. So this expenditure goes right back into the economy.
There have always been and always will be crap jobs that people would rather not do. If I'm making 18k working a crap job (been there) and I get a 30k basic income, why would I not quit the next day? Now I'm not producing any good or service, but I can demand 12k more in goods or services from the market.
Because if you keep the crap job then you make 48k and if you quit then you only make 30k. You are confusing welfare with basic income.
In any case Basic Income would not be at 30k, much lower. More likely $11k as that is the poverty line. The point is to prevent poverty which results in a much higher end cost to society.
I take it you're in favour of financial market reforms too then?
http://www.economicsinpictures.com/2011/09/size-of-financial...
The image on that page is striking, but this is the key sentence: "Shares and bonds are about the same value of world GDP, but derivatives trading and foreign currency transactions are ten and fifteen times bigger than world gdp.".
Derivatives are a broad field, but can be summarised as bets based on whether the value of something rises or falls (similar statements can be made about foreign currency markets). This money being made on derivative markets only changes the wealth of those making the trades, so unless a productive company is making the trades they are purely unproductive. In effect, it's gambling.
In addition, money only 'performs work' at the point of exchange, which is why it's important to measure transactions rather than available currency. The vast majority of money movement exists outside the productive economy. Even without touching the productive economy directly, these trades can have adverse effects on the productive economy (destabilisation being the most obvious example, e.g. financial crisis of 2007-08).
Any questions at this point?
So financial derivatives? Futures, options, shorting etc? Derivatives can play a very important role in the financial system. They can also be abused.
Futures allow farmers (or airlines, or anyone else dependent on commodity prices) to hedge the chances of a bad harvest (or increased fuel prices) by locking in rates early. It's a form of insurance.
Options, (let's go with calls and puts) were initially seen as purely speculative, but combined with an actual position in the underlying security allow someone to make investments while minimizing their overall risk. Again they act as insurance by people who know how to use them. Morons can make naked calls or puts but the generally lose their shirt.
Shorting stocks plays a very important role in the financial world. Investors that short a company are one of the few entities that have a genuine interest in uncovering the dirt in a company. Regulators, share holders, etc may want to believe that a company like Enron is really doing well, but short sellers have a burning interest in combing through every line of their financial statement.
While CMO's got a bad name in 2008 they are still used today as a relatively high yield alternative to US Treasuries and other fixed income investments since the Fed has decided to keep interest rates near zero for the last 6 years.
CDO's also got a bad rap in 2008, but when used correctly they allow the transfer of risk from one party to another. Kind of like a cosigner on a loan. (gross over simplification, but good enough). If you're AIG and you don't actually have the money to backup all the CDO's your writing, then trouble can ensue.
Interest Rate swaps are probably what jacked up your dollar number in that article. They are the vast majority of derivative investments, but they allow companies with variable rate loans to hedge agains the risk of a rate hike, by swapping with a company that has higher, but fixed rate obligations. Those can be a very big win for both parties.
Financial derivatives get a bad rap because they sound scary and most people don't know what they are. They do however play a massively important role in managing risk.
Sorry if it came across like that, I did wonder if that's how it would be interpreted, but I wanted to make it clear that I was pausing for feedback. Thanks for not holding it against me, let's continue.
> "Financial derivatives get a bad rap because they sound scary and most people don't know what they are. They do however play a massively important role in managing risk."
I understand derivatives in general offer an insurance policy against uncertainty in financial markets (thanks for the explanations of the different types, a couple were new to me).
However, one could argue that insurance isn't a productive use of money, especially if the investment being insured against isn't part of the productive economy. What are your thoughts on this?
Yes I think insurance and other risk management tools are a very productive use of money. The joint stock company allowed the English and Dutch East India companies to take risks that no individual would be able to take alone.
Now if insurance allows someone who decides to build an ocean front home on the Gulf Coast where three other houses have already floated away then its not very productive.
Okay, so it is possible for insurance to be used for non-productive means. Would this extend to anything that wasn't a productive investment? For example, if I buy a house, and I insure that house, is the money I spend on insurance being productive?
Let's also extend this to at another example, the government bond market, which as I'm sure you're aware controls how much new money a government can create. If you take safeguards against hyperinflation, is there any reason you would want to keep the current government bond market (bearing in mind that the bonds come with a debt burden for the government)?
You are absolutely wrong in that it does not create productivity. When the underclass has the ability to take risk, it enables them to take part in all that which makes capitalism great. The loss in innovation at the top is more than made up for an increase in innovation at the bottom.
I don't doubt that some people in the underclass would have an opportunity to take some risks that they wouldn't have otherwise, but many may also drop out of the workforce happy with 30k per year. My opinion is that there would be runaway inflation if you ended up with a situation where people had the option to drop out of the workforce funded by printed paper money.
The fact of the matter is that (1) the inflation fears are far overstated. We are already injecting money into the economy, but we haven't seen inflation. All overt money financing would do is inject money through the people, instead of through banks. (2) A little inflation is good for the economy; that's exactly what we need to ward off a recession (3) The US can export inflation to other countries by virtue of being the reserve currency of the world. | These three points together should address your fear of hyperinflation. I suggest you read Friedman and Keynes, both of whom suggested overt money financing as a mechanism to boost the economy.
Your point about the poor dropping out of the work force is based in class bias. Would you say that quantitative easing with banks blowing up asset bubbles would have the rich people dropping out of the work force? No one says that. The poor are not intrinsically different than the rich; the rich continue working when they have basic necessities met, and so will the poor.
Had QE 1 through 4 been dumped directly into circulation there would have been large scale inflation. I don't know anyone that would dispute that.
A little inflation (about 2%) is good because it means demand is outpacing supply. That means the economy is growing. That is different that inflation caused by the raw printing of money which is destructive. In WW2 Germany had considered the possibility of printing counterfeit British pounds and dropping them on Britain to destroy the currency and economy.
Hyperinflation in Germany was caused by a mix of high economic penalties post WW1 and reckless actions by private banks and investors. It's a common misconception that the hyperinflation was the fault of the government printing too much money, but that doesn't get at the underlying causes.
Would recommend taking a look through this, though you don't need to read to the end, as the article also covers the actions taken after hyperinflation started.
http://www.wintersonnenwende.com/scriptorium/english/archive...
> "My opinion is that there would be runaway inflation if you ended up with a situation where people had the option to drop out of the workforce funded by printed paper money."
You get around this by having debt-free money, which removes one of the key demands on money, the demand that it should be directed towards economic growth.
I agree to some degree. Germany was forced to pay reparations with goods such as coal. However, I've never seen it disputed that money printing causes hyperinflation. Sorry for the Wikipedia quote but I'm doing it...
"Hyperinflations are usually caused by large persistent government deficits financed primarily by money creation (rather than taxation or borrowing)"
In short you can't create value out of thin air. QE is a tool to keep credit flowing, but I guarantee you have never personally touched a dollar printed for the purpose of QE. If you have you were in a bank vault.
It can be caused by that, but you have to question what would cause a government to keep printing money when it became clear that inflation was too high?
With the example of German hyperinflation, printing/creating money wasn't the cause of hyperinflation, it was a symptom that resulted from forces in the German economy, specifically high demands from foreign countries as repayment for WW1 (even though it's debatable whether Germany really caused the war or were pushed into it by Britain, and I say this as someone from Britain) and recklessness on the part of private banks and investors. The German government didn't drive the country into hyperinflation. It's worth noting that even the German central bank was privately owned and run at the time, so all the money printing was happening in the private sector.
I'd be happy to explore an example of when a government created hyperinflation, are there any examples you know of?