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.
Quote
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".
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:
Quote
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.
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.
Quote
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%.
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%.
