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0 pointsmindslight7y ago0 comments

Saying that inflation is low is referring to a broken metric. Inflation in housing, healthcare, and education have significantly contributed to the current problem in the US. https://news.ycombinator.com/item?id=19106964

I would say the root problem is all that debt, specifically the ongoing costs of servicing the debt. Staying alive does intrinsically require ongoing expenses for food, energy, shelter upkeep, personal grooming, etc. But the cost of these is dwarfed by the amount spent on rent (aka debt) for the space on which the shelter resides.

Basic income is really just a natural progression of the last several decades's policy of overwhelming monetary inflation. If the BI mostly goes towards just servicing debt then it's only increasing the speed of that debt treadmill and making people's financial position ever-more precarious - they then depend on both continuing to hold down their job, and conforming to whatever conditions will be placed on the BI.

The one sensible thing BI would do is allow people to have income in areas with low economic activity, which is great for those willing to "retire" to such areas. It's just not going to alleviate the pain of the average person having to "make rent" as everyone seemingly envisions.

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AnthonyMouse7y ago· 2 in thread

There is a very specific reason housing, healthcare and education costs are so high -- the government keeps subsidizing them in particular. Mortgage interest tax deduction, exclusion from capital gains tax, employer health insurance deduction, ACA subsidies, federal student loan interest deduction and subsidies, etc.

The problem with all of this is that it doesn't cause general inflation, it only raises the cost of those specific things. Which means in particular that it doesn't raise general wages, so the cost of those things increase relative to wages. On top of that most of those subsidies are to loan interest rather than principal, so the incentive is to take out a huge loan, which multiplies the effect on overall price. They really are very poorly designed policies. Unless you're a bank or an insurance company or an existing landlord.

A UBI is the opposite of that. It doesn't require you to do anything in particular, so it doesn't raise the price of anything in particular relative to everything else.

It also helps you out of the megopolis treadmill. The job in Pittsburgh pays $50,000, but the job in SF pays $150,000, so you take that one. Then you learn it costs $100,000 more to live in SF at the same quality of life, so you're really only just breaking even.

Add $12,000 worth of UBI and it becomes more advantageous to live in the median city than the huge megopolis, because the extra $12,000 goes further there and unlike the salary it's the same amount in both places. So more people do, and prices fall everywhere, because that's also more efficient. You increase economies of scale by increasing population in the smaller cities while reducing resource contention in the huge cities where economies of scale are already maxed out.

And likewise if you replace student loans and healthcare subsidies with the UBI, the cost of education and healthcare comes down, because then people don't lose any part of the subsidy if they choose a less expensive school or a higher deductible insurance policy, they just get to use it for something else. Like for patronizing service workers, which increases their wages relative to housing/healthcare/education.

mindslightOP7y ago

I agree with much of what you said including that costs are high due to government subsidies - I just think that the primary subsidy is keeping general interest rates low. That mortgage interest tax deduction really just further reduces the the effective interest rate for home loans. The primary subsidy isn't even acknowledged as an explicit policy, but obscured by describing it as a mechanical application of a purported economic consensus.

I guess my point of disagreement is that since the low interest subsidy is basically turning any mildly dense area into a rent treadmill, then why isn't the goal to directly address that as the problem? The increasing financialization of most people's lives (pet insurance!!) seems like a much more pressing issue than trying to indirectly prop up rural economy.

AnthonyMouse7y ago

> I guess my point of disagreement is that since the low interest subsidy is basically turning any mildly dense area into a rent treadmill, then why isn't the goal to directly address that as the problem?

Because nobody wants to touch it with a ten foot pole.

There are basically two ways to get interest rates back up. The first is that you just do it, and nothing else. We've discovered that doing this at anything faster than glacially slow when people are as leveraged as they currently are causes the world to burn. If interest rates doubled over a short period of time, the thousands of dollars people are already paying in interest would also double, and eat all of their disposable income and then some, requiring them to borrow even more at the now-higher rates in order to make rent. Bankruptcies would follow. The higher interest rates would make it harder to get a huge mortgage at current housing prices, so housing prices would crash. People have borrowed money to invest in stocks because the return on stocks has been higher than the interest on money, and raising interest rates tends to be deflationary in general, so you raise interest rates fast and the stock market crashes. At the same time as the housing market. Nobody really wants this version. It's terrible.

The alternative is that you raise interest rates against a backdrop of a series of pro-inflationary policies, that allow wages and the price of everything other than housing/healthcare/education to catch up and rebalance. And you need for people to pay down their debts so that interest rates can rise without bankrupting everyone, which means they need money to pay them with. But money comes from two places. One is debt -- banks create money when they make loans. But we can't use this one because the whole point is we need less of that.

The other is the government creates it. They need to create enough money for people to pay off their debts with, which destroys it again. That would be trillions of dollars. And then enough on top of that for wages to catch up to housing prices. (A UBI would actually be a great way to deliver the money to people.)

The banks would hate this with the fire of a thousand suns, because it would mean that the total amount of outstanding loans would fall significantly. In other words, their industry would shrink, by a lot.

So those are your options. Lots and lots of bankruptcies and a huge economic crash, or printing trillions of dollars for people to pay their debts with. Either way the banks are stuffed -- and they're the ones with the largest influence on this kind of policy, so they're firmly in the "kick the can down the road" camp of leaving interest rates low.

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