What would happen if everyone got 1000 USD every month?

[DoomDumas]

Why kill anyone ?  Where this come from ?  No need to kill anyone !

Scarcity is the product of the monetary system we all live in.

There is much more ressource than needed to fullfill anyone needs and more !

[Spaceman_Spiff]

https://en.wikipedia.org/wiki/Criticisms_of_socialism#Reduced_incentives

Looks like you didn't read my post. I am not saying everyone basically gets the same, like in socialism. I ask about people receiving an addition to whatever they earn anyways. Things would not change other than that. Please, either learn about what socialism is or read my post.

Looks like you didn't understand my post.  If you do not understand that your proposal is wealth redistribution, and that this could have reduced incentive to work as an effect, well...

Only for a while though, if your 1000$ bonus is fixed and not adjusted for inflation, it would soon be pretty worthless...

By the way, the reduced incentive thingie is still somewhat debatable, whereas claiming this proposal wouldn't result in inflation is downright laughable...

Please, either think some more about what you are proposing or stop giving arrogant answers.

EDIT: Afterwards I realised this wasn't a very mature reply, I know you mean no harm, I was just quite pissed at the time :-)

[anu]

every single person would receive 1000 USD (like direct from the printing press) could improve things.

Governments certainly could spend money into existence like that. Unfortunately they are under the influence of the banking system. As it is, everyone believes that new money must be created as debt and everything else (including Bitcoin) is evil.

That said, creating $1,000 per nose and month would certainly debase the money even faster than the ECB and the FED is doing it now. But a smaller amount, say, $100 per nose of debt free money would IMHO do much more good than those $100 by getting things going again.

[EDIT] I should make it clear that YOU exist for the benefit of the fiscal financial complex, not the other way round. So it should be clear that your idea is completely counter productive as it would set you free from wage slavery. The system wants you to be indebted. Submit to it.

[herzmeister]

"Render therefore unto Caesar the things which are Caesar's" 

[AfricanHunter]

OP it is still socialism and it is still paid for (mostly) by the rich.  
It is a indirect form of wealth confiscation and transfer.  Not materially different in the outcome of using taxes to fund welfare or other programs.
The fact that you make it universal doesn't really change anything other than how it is implemented.

Hypothetical scenario.

Population is 1 million people.
Total GDP: $50 billion.
Most modern economies have a velocity of ~1 so lets assume monetary base (pre "print & give") is ~= GDP = $50 billion
We will call this the "pre print & give economy".

Now lets compare two example persons in this economy:

homeless man
Income of $5,000 annually (odd jobs, panhandling, crime, etc).
The $5K has $5K of purchasing power in the "pre print & give economy"

small business owner
Income of $250,000 annually.*
The $250K has $250K of purchasing power in the "pre print & give economy"
* Technically the the SB owner would pay taxes and thus his post tax income would be lower however it doesn't materially change this comparison so for simplicity it has been left off.

Now lets look at the "post print & give" economy.

Now the govt prints an additional $10K and gives it to every person so that increases the money supply by $10B.
No additional wealth has been created.  Money is merely an accounting system.   You now have more slips of paper (physical or digital) which can be exchanged for the same amount of goods and services.
We would expect to see ($10B + $50B) / ($50B) = 20% price inflation.

So lets go back to our two persons.
The homeless man now has $5K + $10K = $15K in income.  
However prices have increased 20% so his purchasing power (in pre "print & give" dollars) is $15K / 1.2 =  $12.5K annually.  
An increase of 150%.  Remember nominal numbers are irrelivent.  If tomorrow your central bank doubled the effective money supply you would expect prices (including your wages) to double however you wouldn't be any richer
or poorer.  Adjusted for inflation (in real terms) you income and wealth would be exactly the same.


The business owner now has $250K + $10K = $260K in income.  
However prices have increased 20% so his purchasing power (in pre "print & give" dollars) is $260K / 1.2 =  $216K annually.  
An decrease of 13%.

You have taken wealth from one person and given it to another.
Note that for these two people you could acheive the exact same goal (transfer of wealth from rich to poor) via a tax funded welfare program.  
Say instead of operation "print & give" you had instead given $7,500 in welfare to anyone below the poverty line and paid for it with a tax increase of 13% on the income of everyone above it.

Under that scenario:
Homeless man.  $5K in income + $7,500 govt handout = $12,500 in income (money supply not expanded) An increase of 150%.
Business owner.  $250 income - (13% tax = $33K tax) = $216K in income (money supply not expanded) A decrease of 13%.
Exactly the same outcome (in inflation adjusted dollars = purchasing power) as the "print & give".

Money isn't wealth.  Increased money doesn't result in increased wealth.  Money is merely an accounting system.  Increased Productivity results in increased wealth.   You can't produce wealth by merely changing the accounting "rules".  All you are doing is moving wealth from one person to another.  The net effect is zero.

Also to expand your mind a little a similar though process ... a government with control of the printing presses doesn't even need to collect taxes (or borrow).  They govt can simply print enough money to cover operations and thus "tax" people indirectly via inflation.  For example the US govt spends roughly 25% of GDP.  The govt could simply print 25% more money each year and collect no taxes and issue no treasury bonds.   Someone making $100K would simply be "taxed" $20K because the price of all goods and services would rise 25% and thus $100K would only buy what $80K bought the year prior.  Government choose taxation over monetizing operation costs because it allows them to influence (manipulate) via tax policy.  With indirect "taxation" via inflation the effect is universal (i.e. solar panels rise in price as much as crack cocaine does).


The reverse is also true.  In the US there has over the years been a proposal called the "fair tax" it would be a flat sales tax to replace all other forms of taxation in the country.  One criticism of sales taxes is they hurt the work (especially the working poor).  The "fair tax" system would use a prebate.  If the sales tax is 20% and you wanted to in effect make the first $30K in income "tax free" the government would simply (in this case via collected funds not via printing) send $30,000 * 20% = $6,000 to every person.    So a family making $50K  would have $50K + $6K = $56K.  Lets pretend they save nothing and spend it all.  They would pay 20% * $56K = $11K in taxes at the cash register - $6K prebate = ~$5K in taxes for an effective tax rate of 10%.  Someone making $30K would have an effective tax rate of 0%.  Someone making (technically spending) $1,000,000 would have an effective tax rate of 19.4%.  Someone making $200M would have an effective tax rate of 19.997%.

All of this! Op, I think your intentions are basically good but what you have to realize is that inflation is just another tax when the gov prints more money. It also disproportionately affects the rich (just like the current tax code). Printing more money and/or taking more from the rich (job creators) is, IMO, never the correct answer to fixing an economy.

[anu]

Money isn't wealth.  Increased money doesn't result in increased wealth.  Money is merely an accounting system.  Increased Productivity results in increased wealth.   You can't produce wealth by merely changing the accounting "rules".  All you are doing is moving wealth from one person to another.  The net effect is zero.

The type of money matters. Our money is all created from debt, which means there is interest on all money. This is at the heart of the current debt crisis.

The proposal was to spend debt free fiat money into existence. The proposal further was to simply give the newly created money equally to citizen.

If you think this is socialism and paid for by the rich: Did you ever wonder why productivity in many industries increased 1000% and more the last 40 years while wealth declined for 99%? Is it maybe because interest payment of the 95% wage slaves go to the 0.0001%, leaving a mere 5% of free citizen? (Free = not too poor to quit)

[DeathAndTaxes]

Money isn't wealth.  Increased money doesn't result in increased wealth.  Money is merely an accounting system.  Increased Productivity results in increased wealth.   You can't produce wealth by merely changing the accounting "rules".  All you are doing is moving wealth from one person to another.  The net effect is zero.

The type of money matters. Our money is all created from debt, which means there is interest on all money. This is at the heart of the current debt crisis.

The proposal was to spend debt free fiat money into existence. The proposal further was to simply give the newly created money equally to citizen.

If you think this is socialism and paid for by the rich: Did you ever wonder why productivity in many industries increased 1000% and more the last 40 years while wealth declined for 99%? Is it maybe because interest payment of the 95% wage slaves go to the 0.0001%, leaving a mere 5% of free citizen? (Free = not too poor to quit)

If you want to debate come armed with facts (or at least fake stats which could possibly be mistaken for correct).

Hint: interest doesn't make up 95% of anything.
Wealth has increased for the 99% over the last 40 years.

[herzmeister]

http://www.economist.com/blogs/dailychart/2011/10/income-inequality-america

[anu]

http://www.economist.com/blogs/dailychart/2011/10/income-inequality-america

Statistics. Does that include the fact that people have 2 jobs now? Or the whole family 3? While in 1970 it was sufficient to feed a family with one earner?

But the real issue is IMHO OP's proposal that govt issues debt free fiat (as opposed to central bank created debt money). Like the US did in it's early history in periods when central banks have been banned - like under President Jackson. And also Lincoln, I believe.

I never really understood why governments have to issue bonds for debt that always expands when they can also issue notes.

[DeathAndTaxes]

The US government never issued debt free fiat.   The US govt did issue gold back currency but that wouldn't be fiat.  During the period of "free gold" you could bring 1 oz of gold to US Bank and receive 1 oz worth of dollars or bring dollars worth 1oz of gold and receive 1 oz of gold.  The gold would then be shipped to a US repository and formed the "backing" for the notes issued.   Alternatively you could bring 1 oz of gold to the US mint and they would mint it into a new US coin (for a small seignorage fee). In the early history of the US government it didn't have much of a credit rating.  The gold backing was the only reason anyone (foreign govt or individual) would accept the notes. 

Countries which simply print as much money as they need end up in hyperinflation.  

I mean look at the US debt expansion (excess spending is covered by debt financing rather than pure printing).  In 1941 the US national debt was ~$50B.  Really think about that.  The combined surpluses and shortfalls of the US federal government for the first 165 years was $50 billion.  By 2000 that had reached $5,600B.  Still it took six decades.  Another way to look at it is the federal govt was spending beyond its means by "less than" $1,000B per decade.  The federal debt is now $15,500B.  An expansion of almost $10,000B in little over a decade.  The government overspent in the last year 20x as much as it did in the first 165 years COMBINED.    Without the "debt ceiling" the projected budgets (which likely are overly optimistic) through 2016 put the debt expansion to $20T (more than 120% of GDP).  The government is spending over a $1T a year more than it has.  A trillion dollars a year.

You honestly think it would be better if governments simply printed what they wanted when they wanted? A trillion, ten trillion, hundred trillion, a quadrillion dollars?   Even with the token constraint of the need for the government to balance receipts and revenue (and fund the difference with debt) governments (not just the US but all modern governments) have borrowed utterly insane amounts.  

They have shown an utterly reckless inability to "leave within their means" even with the ability to unilaterally confiscate any and all wealth they see fit.  Government aren't responsible.  Given them the ability to print unlimited money and they certainly will try to print an unlimited amount.  

The end result of every government which hasn't balanced receipts with revenue has been Hyperinflation.

[niko]

What would happen if everyone got 1000 USD every month?

You may think this is an ideology-neutral idea, but it is not. It works against capitalism. Worker's insecurity is good for the system, etc. So, what would happen is that this imaginary country would first be politely asked to reverse the decision, then a "pro-democracy" movement would be financed by the capitalists, then an armed rebelion might start with their support, then trade sanctions would be imposed, then there would be attempts to poison the president, then this might be escalated to an aerial bombardment by NATO, and if this doesn't work, ground forces would be sent in to invade and re-educate this country. Speaking of which, it would be much harder to find recruits for your ground forces if you were handing out a thousand bucks to each miserable kid in trailer parks of Alabama and Kentucky.

[anu]

You honestly think it would be better if governments simply printed what they wanted when they wanted?

My opinion?

No, I agree with you that governments have been proven untrustworthy time and again. But unlike you I don't see how a central bank and fractional reserve banking makes things better. On the contrary: The whole fiscal financial complex is a huge machine for redistribution of wealth from the hard working to the ultra rich. The existence of the Reichsbank certainly did nothing to prevent the hyperinflation in 1923. Nor the deflation after 1929 which made many house owners default without even a bubble bursting. Which was of course the intention after the Hauszinssteuer was introduced, so the banks could gobble up all the real estate. So much for the beneficial role of the Reichsbank in particular and central banks in general.

I think everyone, including the government, should be able to create fiat. If they find people to accept them - why not. There should not be legal tender laws to coerce people to accept a particular currency. Of course it will depend on your reputation if people will accept your fiat.

I think it should be illegal to charge interest on money that comes into existence by the act of lending it out. The whole fractional reserve banking is a scam.

The ultimate money is commodity. I think in a system with no legal tender, Gresham's law will sort things out. If there is a role for fiat, it willl play one. If not, then not. I will not be sad.


But this is all my wish thinking for a financial system. From where we are now I think it would indeed be a good idea if govt monetizes the debt necessary to eliminate the central banks. Under such measures, OPs proposal makes sense to me.

[anu]

The US government never issued debt free fiat.   The US govt did issue gold back currency but that wouldn't be fiat.

Then could you please explain me what a greenback is? In my understanding, it was a treasury note which was spent into existence and not created from debt - just what OP proposes.

Which is very much not the same as a Federal Express (ooops, sorry) Reserve Note. Please correct me if I am wrong and the greenback was indeed backed by anything which is not green.

[anu]

What would happen if everyone got 1000 USD every month?

You may think this is an ideology-neutral idea, but it is not. It works against capitalism. Worker's insecurity is good for the system, etc. So, what would happen is that this imaginary country would first be politely asked to reverse the decision, then a "pro-democracy" movement would be financed by the capitalists, then an armed rebelion might start with their support, then trade sanctions would be imposed, then there would be attempts to poison the president, then this might be escalated to an aerial bombardment by NATO, and if this doesn't work, ground forces would be sent in to invade and re-educate this country. Speaking of which, it would be much harder to find recruits for your ground forces if you were handing out a thousand bucks to each miserable kid in trailer parks of Alabama and Kentucky.

Exactly. Just one minor point: It doesn't work against capitalism if you use this as a synonym for "free market system", it works against the fiscal-financial complex, which is about as capitalist as the Soviet Central Planning Comittee.

[DeathAndTaxes]

The United States Note was the last national currency of the US.  I was incorrect in saying it was never unbacked fiat.  Due to the cost of the civil war (and the removal of the Congressional seats of the south where "hard money" was more popular) the US federal government did print without backing of precious metal from 1861-1874.  Part of the reason was that the civil war was very unpopular in the North (depsite the whitewashing attempts over the years).  If the civil war had to be financed by raising taxes it likely would have never been won.  Ironically it was the use of "taxation" via deception through inflation which is what I indicated a "print to spend" system does.  Much harder to explain the loss of purchasing power due to inflation to the masses then a direct tax.  The change was very unpopular and was repealed.

http://en.wikipedia.org/wiki/Resumption_Act


Even with the war time unbacked spending there are two things which separate it from an unbacked fiat currency.  The first is that after 1874 all US notes could still be redeemed for gold or silver even the ones issued between 1861 and 1874.   Due to the law of 1875 the government in the long run didn't issue unbacked currency it instead incurred a debt.  Iit needed to boost its silver/gold reserves of the coming decades so the reserves matched the number of notes minted.  Today US notes are no longer redeemable for gold or silver however they remain a debt of the US government, as the government needs to exchange them for Reserve Notes (which is must issue debt to acquire).  The treasury estimates there are roughly $230 million US notes (and slowly falling due to loss and redemption) in circulation and they contribute to the total indebtedness of the federal government.



If you look close you will notice something interesting about this note.  Today most people would call this a "twenty dollar bill" right?  Well not exactly.  Notice it says "will pay twenty dollars to bearer".  This note wasn't twenty dollars.  This note was an IOU.  A promise to pay the redeemer twenty dollars.  So what was a dollar?  371 grains of silver.  So you could redeem this note (which isn't dollars) for twenty dollars worth of silver.  Notice that dollar was a unit of measure.   Like saying a gallon of water, or an ounce of gold you could say twenty dollars of silver.  

Over time the language changed but a promise of redemption existed up to the very last US note.  After 1900 dollars were no longer redeemable for silver (only gold) so when the treasury would run short of gold and had an excess of silver it would issue silver certs. 

[anu]

Over time the language changed but a promise of redemption existed up to the very last US note.

Thanks for that interesting excursion into US Dollar history. Are you sure they didn't rely on people not to actually redeem the notes? I like the rationale of Mephisto in Goethe's Faust: The gold backed currency of the emperor is actually backed by gold yet to be mined. Still good enough to pay the soldiers. Goethe must have known - he was finance minister in Weimar after he left the secret service.


But Lincoln's bag of tricks should provide guidance for today's fuckup. Lincoln had to finance a war. Many similarities to today. The US has to recover from excessive spending for a number of stupid wars, Europe has to recover from an excessive social security system.

Unless you think Bitcoin is ready for prime time and the banksters will peacefully go home and turn off the lights.

[niko]

What would happen if everyone got 1000 USD every month?

You may think this is an ideology-neutral idea, but it is not. It works against capitalism. Worker's insecurity is good for the system, etc. So, what would happen is that this imaginary country would first be politely asked to reverse the decision, then a "pro-democracy" movement would be financed by the capitalists, then an armed rebelion might start with their support, then trade sanctions would be imposed, then there would be attempts to poison the president, then this might be escalated to an aerial bombardment by NATO, and if this doesn't work, ground forces would be sent in to invade and re-educate this country. Speaking of which, it would be much harder to find recruits for your ground forces if you were handing out a thousand bucks to each miserable kid in trailer parks of Alabama and Kentucky.

Exactly. Just one minor point: It doesn't work against capitalism if you use this as a synonym for "free market system", it works against the fiscal-financial complex, which is about as capitalist as the Soviet Central Planning Comittee.

Point well taken. Thanks.

[johnyj]

Money has to be produced to faciliatate the trade, this is the original reason of money printing

If you give people money, it is better ask people to do something to exchange for it, if they can get if for free, then it will lose credibility

But in a rich society, anyway you will give money to some people for free since they are at too low efficiency thus become pure consumers, this is unavoidable due to all the production have been more or less centralized to a couple of international corporations

I have seen a rich family who owns a big enterprise, their children just take what ever job they like in the company, but they do not really contribute anything, just work for fun and take their salary. This is another kind of pure consumer

[farlack]

Hyperinflation, it would just make everything cost $1000 a month more.