UBI doesn't add money to the economy. The government doesn't create it in order to make the payments. It comes from the government's revenues (i.e. taxes).
And those taxes themselves come from money moving in the economy (i.e. sales tax, income tax, etc), and active money in the economy ultimately comes from debt under most current fiat money systems (follow any chain of money back and at some point it'll be a loan from an entity such as a bank).
UBI is a wealth redistribution scheme.
Technically true, but in what way it redistributes wealth is obfuscated by too many layers in a system whereby the UBI is paid as a specific number of units (e.g. dollars) but the real value of those units is changing through a process of money creation that isn't spread evenly throughout society. The only way it can be a fair wealth redistribution (side note: I'm far more liberal than libertarian despite agreeing with aspects of both philosophies; and I absolutely do believe that taxes and UBI are good things when implemented correctly) is if the wealth that's being redistributed is a clear representation of a percentage of the total economic activity.
Let's do it as a simplified thought experiment:
- - For a start, say we have a civilisation of one million people. They live in Happyland.
- - The population grows at a rate of around 5% per year due to there being more fun sexytimes in Happyland than deaths.
- - They're a productive bunch and increase their total economic value by around 10% every year (more than population growth because of technology advances and other economic improvements without direct human growth).
- - They have a total monetary supply of a trillion happybucks (symbol: ). It all moves around in active use (like I said, we're keeping it simplified).
- - The government of Happyland takes 10% of all economic activity as taxes.
- - The government of Happyland uses 1% of that (0.1% of all economic activity) as UBI for all citizens.
- - From this, we can see that in Happyland, in the first year, the government collects a hundred billion as taxes. They pay out a total UBI amount to their million citizens of one billion , which is a thousand per person.
In the second year, there are 1050000 people in Happyland. The monetary supply hasn't changed, but happybucks have become 10% more valuable due to the increase in the total economy (this is called deflation, and most economists will tell you it's a bad thing; they're wrong - I'll explain that soon). The government still collects a hundred billion happybucks as taxes and still pay out a billion in UBI. That billion is now only 952.38 per person due to the increase in population, but is actually worth the equivalent of 1047.62 of last years money because of the appreciation in the currency's value.
One day, a man named Keynes comes along and tells everyone that it's bad to be getting less happybucks each year and that they'd stimulate their economy more if people were encouraged to spend their happybucks on stuff they don't really want or need instead of saving them. He explains the best way to do this is through printing more money. Being the overly trusting types that they are (probably because of all the fun sexytimes), the Happylandians agree to let him set up the Federal Reserve Bank of Happyland (not actually a federal institution at all, just a completely private entity that has control over the printing of happybucks).
The "fed" (as it comes to be known) is tasked with printing new happybucks to stay in line with the economic growth and just a "little bit more" to stimulate more economic growth by making people not want to save money anymore and instead spend it on useless crap. Keynes does his job well and prints enough happybucks to have a 2% inflation rate.
The following year, there are 1102500 people living in Happyland. The monetary supply has been increased to 1.071 trillion according to the rules that Keynes defined. The government takes in 107.1 billion in taxes. The UBI pays out 971.43 per person. Due to the 2% inflation that Keynes introduced though, this is now only worth the same as last year's 952.38. The numbers have increased, but the value has stayed the same despite economic growth still outstripping population growth.
Some Happylandians also notice that the cost of goods and services is increasing more than than the 2% inflation set by the fed despite their UBI only paying then 2% more happybucks. What they quickly realise (since they're a clever bunch, despite being overly trusting) is that the money isn't added to the entire economy at once, but instead directly at the fed and filtered out through loans via the local banks. This results in some people having access to new money before others, making the richer - generally those who run production within the economy - feel the inflation before everyone else. The result of this is that goods (especially those with a high cost of production) are hit by inflation before everyone else and the cost of those goods increases disproportionately to the increase in their incomes.
What's worse is that under the old system before the fed came along, a decrease in population or economic output would self-balance. The fixed monetary supply makes tough times a bit more of a struggle since there's no way to ease it through money creation allowing for loans that can be paid back in better times, but since those loans can actually never be paid back in a system where all new money is created as debt, the new system the Happylandians find themselves under actually only makes each successive economic crisis more drastic than the last.
This would have been a sad end for Happylandia, doomed to enter a death spiral of hyperinflation like so many other countries before it, were it not for an anonymous Happylandian going only by the moniker Satoshi, who was able to introduce a digital currency called Joycoin with a fixed supply that couldn't be artificially inflated due to being backed by the provable use of energy instead of trust in a central institution. Joycoin was adopted more and more as Happybucks spiraled in to hyperinflation and became worthless. Those who switched to Joycoin in its early years became extremely wealthy compared to those who came later, but this inequality was nothing compared to the catastrophic destruction of the economy that would have occurred without it. Furthermore, it was also only temporary, as being back on a fixed supply, those who actively contribute to the economy were again able to take a known and true fraction of the total economy for their labour (or as UBI) and those who did not contribute gradually spread their wealth out amongst the population of those who do.
