I imagine you've already thought about this, but won't increasing inflation (because we're not increasing production) eat all the gains?
I come from Venezuela, so I know first hand how government handouts to alleviate poverty work great in the short run, and reek havoc in the long run.... How do we keep global inflation from gobbling up the 60$?
For all that economists (and non-economists) have written and talked about inflation over the decades, it is still a poorly understood phenomenon. We don't really understand what causes it beyond a few ironclad basics. For example, we can say with confidence that printing large amounts of money and injecting it into the economy can have inflationary effects (this doesn't happen when vast sums are printed but not injected into the economy directly i.e. industry/corporate bailouts, subsidies, etc.). We know that supply and demand, interest rates, and supply chains play a role, but at the end of the day, there are so many moving parts (especially given that the economy is global), that inflation cannot be confidently predicted from basic income. In fact, everywhere that basic income has ever been trialed or implemented, the inflationary effects have either been minimal or virtually nonexistent. I am no expert on Venezuelan economic history, but in Western countries, government programs of all sorts that effectively redistribute wealth have been in place for many decades without causing much inflation. As long as we avoid funding a basic income by printing money we'll be alright.
The other aspects to note are that more public purchasing power ultimately does lead to more production, though the process may take a couple years to fully ramp up. The market adjusts. Additionally, some amount of inflation is good. Obviously hyper-inflation is very bad. Obviously the amount of inflation we have seen over the past two years is bad. But for the 40 years prior, we have had extraordinarily low inflation, too low, in fact, according to economists to keep pace with growth. Covid and all of the downstream effects are playing a role in this inflation we now see, but another element may be a market correction. These things have a way of balancing themselves out, sometimes later rather than sooner.
Getting money to Americans who mostly have bank accounts and fixed addresses can be done using processes developed in the early 20th century (mailing checks, which can then be deposited into bank accounts).
The same is not true in most developing countries.
Only 57% of Romanians have a bank account and Romania is one of the more wealthy poor countries—poor to European standards, but not to world standards. Only 55% of Kenyans have bank accounts, the the number goes down from there all the way to Chad, where fewer than 9% of people have bank accounts.
This is one reason why Honduras—where only 43% of people have banking access—adopted Bitcoin as a currency. Cryptocurrency wallets function essentially the same as a bank account, where you can deposit and withdraw money stored away digitally. Now of course, the value of the money is highly volatile.
In most developing countries, however, the only way to get $61 to them is in cash. Most of the poorest people don't even have street addresses.
Hello,
I imagine you've already thought about this, but won't increasing inflation (because we're not increasing production) eat all the gains?
I come from Venezuela, so I know first hand how government handouts to alleviate poverty work great in the short run, and reek havoc in the long run.... How do we keep global inflation from gobbling up the 60$?
Cheers and thanks!
For all that economists (and non-economists) have written and talked about inflation over the decades, it is still a poorly understood phenomenon. We don't really understand what causes it beyond a few ironclad basics. For example, we can say with confidence that printing large amounts of money and injecting it into the economy can have inflationary effects (this doesn't happen when vast sums are printed but not injected into the economy directly i.e. industry/corporate bailouts, subsidies, etc.). We know that supply and demand, interest rates, and supply chains play a role, but at the end of the day, there are so many moving parts (especially given that the economy is global), that inflation cannot be confidently predicted from basic income. In fact, everywhere that basic income has ever been trialed or implemented, the inflationary effects have either been minimal or virtually nonexistent. I am no expert on Venezuelan economic history, but in Western countries, government programs of all sorts that effectively redistribute wealth have been in place for many decades without causing much inflation. As long as we avoid funding a basic income by printing money we'll be alright.
The other aspects to note are that more public purchasing power ultimately does lead to more production, though the process may take a couple years to fully ramp up. The market adjusts. Additionally, some amount of inflation is good. Obviously hyper-inflation is very bad. Obviously the amount of inflation we have seen over the past two years is bad. But for the 40 years prior, we have had extraordinarily low inflation, too low, in fact, according to economists to keep pace with growth. Covid and all of the downstream effects are playing a role in this inflation we now see, but another element may be a market correction. These things have a way of balancing themselves out, sometimes later rather than sooner.
There's more problems than just cooperation.
Getting money to Americans who mostly have bank accounts and fixed addresses can be done using processes developed in the early 20th century (mailing checks, which can then be deposited into bank accounts).
The same is not true in most developing countries.
https://www.theglobaleconomy.com/rankings/percent_people_bank_accounts/
Only 57% of Romanians have a bank account and Romania is one of the more wealthy poor countries—poor to European standards, but not to world standards. Only 55% of Kenyans have bank accounts, the the number goes down from there all the way to Chad, where fewer than 9% of people have bank accounts.
This is one reason why Honduras—where only 43% of people have banking access—adopted Bitcoin as a currency. Cryptocurrency wallets function essentially the same as a bank account, where you can deposit and withdraw money stored away digitally. Now of course, the value of the money is highly volatile.
In most developing countries, however, the only way to get $61 to them is in cash. Most of the poorest people don't even have street addresses.