Economic Futurosophy

[Tahuti]

Okay, well I don't really have an opinion on the idea, but I really would love to start a discussion and thought experiment about it: Imagine a world with an economic system that has:
1) A basic income sufficient to live on, that is provided unconditionally to every person
2) The basic income will be financed by seignorage (aka printing money)
3) Fractional reserve banking will be abolished
4) Any costs stemming from the likely decrease in the availability of labor can and will be offset by automation
5) The basic income will replace unemployment and old-age benefits and welfare
6) It'll be market capitalist system like the one we have today, except it has the things noted above

Will it be more sustainable than the current system? More fun to live in? Less prone to economic crisis? More efficient?

 

[Cutlass]

My basic response to that is

 

[Masada]

Cutlass is on the printing press

 

[Ayatollah So]

I've seen something like this before, only without points 2 and 3, and (your) number 4 was at the top of their list. Assuming sufficiently futuristic tech, it just might make sense. Hell, if the "basic income" was small enough, it would probably work fine right now - without points 2 and 3.

 

[Terxpahseyton]

Why 3)?
Other than that, sounds interesting! I think someone should try it. If this basic income is low enough to still encourage people to seek work, it could indeed work already. Work nobody wants to do would have to be compensated accordingly rather than to be a collecting tank for those who relatively lost.

 

[amadeus]

2) The basic income will be financed by seignorage (aka printing money)
3) Fractional reserve banking will be abolished

ಠ_ಠ

I mean...
...what would be the point?

 

[Tahuti]

Why 3)?

To offset inflation due to the seignorage of the basic income. And because an economy with a more democratic character is part of the thought experiment; Without fractional reserve banking, all loans will directly or indirectly come from basic income money.

 

[SS-18 ICBM]

Does the current fractional reserve banking system increase the money supply by as much as all payrolls for every income period?

 

[Tahuti]

Does the current fractional reserve banking system increase the money supply by as much as all payrolls for every income period?

No it doesn't, but remember that in such an economy, monetary velocity will be much slower (partially because of the absense of easy credit) and businesses can produce goods much cheaper due to automation.

 

[SS-18 ICBM]

monetary velocity will be much slower (partially because of the absense of easy credit)

Please elaborate, as I don't see any incentives to save money when a basic income is guaranteed all the time all the way to old age. Seems like the thing to do is spend your money on stuff you like.

 

[amadeus]

He'd have to use legal tender laws so as to prevent people from using noninflationary money.

 

[Cutlass]

Does the current fractional reserve banking system increase the money supply by as much as all payrolls for every income period?

FRB increases the effective money supply as a one shot deal for every increase in the monetary base.

 

[amadeus]

I wonder where the capital would come from in order to pay for all of the automation, a long-term investment, when saving rates would be low and interest rates would be sky-high because of inflation.

 

[Cutlass]

I wonder where the capital would come from in order to pay for all of the automation, a long-term investment, when saving rates would be low and interest rates would be sky-high because of inflation.

So now you admit that Ron Paul's plan is a disaster.

 

[amadeus]

So now you admit that Ron Paul's plan is a disaster.

How would full-reserve banking and a gold standard cause inflation?

 

[Tahuti]

Please elaborate, as I don't see any incentives to save money when a basic income is guaranteed all the time all the way to old age. Seems like the thing to do is spend your money on stuff you like.

Without fractional reserve banking, there will be an increased demand for money, so investing saved money elsewhere will be highly lucrative.

How would full-reserve banking and a gold standard cause inflation?

They don't. But they do lead to high interest rates, which was Cutlass' point.

 

[Cutlass]

How would full-reserve banking and a gold standard cause inflation?

There is no such thing as "full reserve banking" There is FRB, and there is the complete absence of a banking sector in the economy. Seriously, we've been over that a dozen times at least. As for the gold, only some people seem to think Paul means gold. Gold means periods of inflation mixed with periods of depression and deflation. But some people keep saying that Paul means "market money", whatever the hell they mean by that. And the only thing certain about that is that the printing presses will be running overtime.

 

[Tahuti]

But some people keep saying that Paul means "market money", whatever the hell they mean by that.

Market money means that government is completely absent from the financial system and every major bank would issue its own currency, which is currently forbidden because of legal tender laws. Amadeus may correct me if I'm wrong, but that's the gist I'm getting from the term.

 

[amadeus]

Gold means periods of inflation mixed with periods of depression and deflation.

So now it causes inflation and deflation.

 

[Cutlass]

Market money means that government is completely absent from the financial system and every major bank would issue its own currency, which is currently forbidden because of legal tender laws. Amadeus may correct me if I'm wrong, but that's the gist I'm getting from the term.

Well, first, there won't be banks without FRB. Not a one of them. So it will be someone else with the printing presses. And whoever prints the most the soonest wins.