A case for minimum guaranteed income, with responsibility on people

by Jun 26, 2020Thinking outside the bottle0 comments

universal basic incomeuniversal basic income

Paulo Pinto

Alti Wine Exchange founding member

Greetings, dear reader,

If you have been reading my latest posts on issues that range from global markets and trends in economy and finances to fine wine investment, you know I have been suggesting the need for a new type of Central Bank: one that has the people at the core. I call it the Central Bank of Social Security.

Well, I am back again, and this time with some debate on a recurring theme in my recent articles on the issue: the debate on minimum guaranteed income.

One of the comments we have received from my recent text on Central Banks of Social Security was: “This is just a way of keeping people poor and dependent on the government”. Another comment we received was: “This is a sure way for governments to go broke.”

Let’s start with the second comment.

The reason to create a Central Bank of Social Security is exactly for the government not to go broke. What happens now in countries with their own Central Bank is: governments make promises, then they have to borrow money, then their debt increases, then the Central Bank prints money.

What happens after as a result is, that local currency devalues, people start to blame the rich, then more money flows out of the country and then Central Bank needs to print more money. This sequence, when out of control, results in situations like Argentina, or Venezuela or Zimbabwe.

* * *

As debt increases it restrict economic growth, it is also the catalyst for more taxes, because a fiscally challenged government never makes itself smaller, increasing taxation instead.

At this point, savers are under attack and the purchasing power of the currency is diminishing, with public faith in it eroding – driving people to park money in a different currency or gold for safety and fear of more currency depreciation.

dollar+mount+central+bankdollar+mount+central+bank

With a Central Bank of Social Security, this dogma changes and we need to accept a new one:

All individuals over 18 will receive minimum guaranteed income tax free, and this will replace all other subsidies in existence.

Minimum guaranteed income is cumulative with salaries, and it’s up to people to save it or to spend it.

This is not a system to make us all equal, because we are not. There is only one Messi, one CR7, one Michael Jordan, and many other different players with different skills and different levels of professionalism.

What this Central Bank of Social Security will allow is for people to have a minimum level of dignity and a tool to shine in life with their own skills, and be happy with themselves or not.

This will allow to put back the responsibility on people and out of the government. If people decide to live on the minimum guaranteed income it’s their choice, but they cannot have claims on failed promises from government.

Life is made of individual choices, and a Central Bank of Social Security will reinforce those choices.

‘Paying to generate unemployment?’

I can hear you already saying, “Pay people not to work… and you’ll get people not working”.

This, of course, it’s one way of seeing it and there are probably people willing to do just that, but the goal is providing them the tools with dignity to do whatever they want – to bring added value to society, or to be part of the ‘’useless class’’.

If they want to study to improve further skills, they can – and, like that, guarantee later jobs that pay more. In no circumstances they have to feel unemployed or out of the market. If they want to work and put the money of the minimum guaranteed income into an investment account, they can: it’s only their choice.

This will answer the first question. It will be people individually deciding if they want to be poor or rich if they want to be consumers or producers. It’s a system that will allow anyone to be really good at what they want – or spend a lifetime trying.


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The other comment is much easier to address.

This minimum guaranteed income will not be a cost to the government, so it can’t go broke because of it. Obviously, there is no bad situation that governments cannot make worst. But they will need to do it managing government – not people, as they do now.

What does it mean? It means governments will have no incentive to redistribute wealth because a minimum income is guaranteed, but it is not their responsibility.

It means governments will need only to allocate money raised in taxes in a way that will help the country be competitive. Taxes will pay for the services the government provides, and it is in their interest to free the economy.

Having said that, I believe taxes have a moral role. There should be a maximum of income allowed to anyone, to prevent money to gain power.

Money should be a tool accessible to those able to create wealth, and – as we know – not many people are able to create wealth.

* * *

That is all for today. I hope to have eased such concerns raised by some of our readers.

Any feedbacks and other comments you would like to have from us? Just let me know and I will be happy to address it soon.

Until next time.

Paulo


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