In a previous post I wrote about how inflation was built-in to our banking system. Since inflation is caused by having a string of different players – mostly banks – manage the currency who need to make a profit every stage of the process, we could try a bottom-up instead of the top-down approach we currently have.
Here is how it could look like: Give it to the people directly.
This is similar to what Ben Bernanke’s idea who proposed that he mount in a helicopter to distribute cash to combat deflation. We don’t want to risk a ‘Bernanke down’ before he has doled out all of the cash, so I have a better and more convenient idea.
If people were to be paid directly by the central bank in the form of a secure ‘guaranteed basic income’ that they can count on and that would cover their basic needs. The need to depend on savings, retirement accounts, social security or welfare would be done away with and so would be the costs associated with managing all that.
If I assume that the FED would pay all U.S. citizens of age 18 years and over a lifelong guaranteed ‘basic income’ of some 2800$ without any conditions, then, since there are around 230 million people over the age of 18 according to U.S. Census Bureau that would immediately create a market of some 7.8 $ trillion. This is income people could spend on services and products such as housing, food, clothing, health-care, communication, some leisure.
People without job or no other income could immediately benefit from this and stabilize their lives to be able to train themselves for a new job – as we know, that takes some time.
People without job but other income that is coming from the government, e.g. Medicaid, Medicare, can benefit as well, but will have to phased out of those programs.
People who currently still have a job can benefit as well, since this will give them additional income that they can use to pay down their debt (which will make the banks happy, since this in the end ends up with them).
The basic guaranteed income will come with no strings attached except that once you get it, that’s all you going to get from the government. You must be able to make do with that otherwise, you have to find a job that pays you an additional income.
If anyone thinks he or she needs more because she has special wishes such as holidays in the Maldives, or a really upmarket car, then she can always earn additional income by finding a job.
There is another point: The basic guaranteed income cannot be pledge as a collateral for credit, loans, etc and in cannot be garnished.
There are additional thoughts I have about the pros and cons of such a basic guaranteed income, which I will publish later on. Please note that this is part of an idea for a new economy I posted some time ago.