Economics thread. Have you had enough of wizard of oz monetary scientists?

[chem1st]

I'm not exactly sure what you are saying here. Can you clarify it a bit?

 

Say somebody gets £1 in benefits for being poor.

 

They then go out and earn £1 by working. But lose £1 in benefits.

 

He is effectively earning nothing. Seeing as he would get £1 even if he didn't work.

 

Precisely why I oppose Crayfish's 'voucher' scheme. Housing benefit is like a voucher. You can only claim it to spend on housing. The government effectively controls the local houseprices/pushes money into housing, it might be higher than people would otherwise wish it to be.

 

Giving the poor money to spend as they wish, makes more sense than inflating/controlling the prices of certain goods.

[Longcol]

If I were responsible for welfare reform, I'd certainly aim to ensure that the maximum rate of welfare payments was below the minimum working wage, but I would also design it based around a voucher/card system rather than cash payments.

 

The purpose of this would be to restrict the items that could be bought with welfare handouts to essentials, such as healthy food. Those on welfare would have much less easy access to cigarettes, alcohol, and drugs. Welfare would then become less attractive, and those falling on hard times would not find it as easy to get into a self destructive spiral, increasing their chances of finding work again.

 

Unfortunately, I don't run the country. To offer a competitive tender, I'd be quite happy to do this for £45,000 p.a. and minimal expenses...

 

Dear Crayfish,

 

Your tender has been rejected as you have a very narrow concept of people who claim welfare benefits.

 

Your tender lacks vision, compassion and basic common sense.

 

Yours sincerely

 

Da Gubmint.

[ultimatesens]

If I were responsible for welfare reform, I'd certainly aim to ensure that the maximum rate of welfare payments was below the minimum working wage, but I would also design it based around a voucher/card system rather than cash payments.

 

The purpose of this would be to restrict the items that could be bought with welfare handouts to essentials, such as healthy food. Those on welfare would have much less easy access to cigarettes, alcohol, and drugs. Welfare would then become less attractive, and those falling on hard times would not find it as easy to get into a self destructive spiral, increasing their chances of finding work again.

 

Unfortunately, I don't run the country. To offer a competitive tender, I'd be quite happy to do this for £45,000 p.a. and minimal expenses...

 

In principle I agree but the problem with a voucher system is that you might one day have milk tokens but need bus tickets. Or you might need cash to cover emergencies.

 

We trust that rather than having the extensive and costly bureaucracies that would be required to maintain such a system we can just give people the money and they will make the appropriate choice. Unfortunately as you rightly point out people often make poor choices or develop drug addictions and the like. I don't think a voucher system would even fix this. Someone determined to score a bag of crack would have no problem flogging a food voucher to a drug dealer or buying food with his card and swapping that.

 

Id support a proportion of the money being directly spent on things like rent, electricity, gas and maybe even a phone by the government to the job seeker as these are not really things that can be sold on.

 

Rather than trying to impose a one size fits all approach, convicted drug addicts or people who repeatedly show they are bad at budgeting could receive targeted help in the form of outside financial planning measures.

 

I do not agree with your statement that people on welfare see it as an attractive option. There is never enough money for basics as it is and many people on welfare simply spiral in to debt without needing the added expense of cigarettes and drugs.

 

People who work have the media driven misconception that people on dole are all living the high life. It's actually a soul crushing experience that leads to lack of confidence, lack of financial security, mental health problems (including a defensive mind set that tries to justify being on welfare to themselves and others) and like you rightly said a downward spiral.

 

It is often comes about because of redundancy or bankruptcy, or from a lack of education and insufficient suitable job opportunities. Note here that "job opportunities" is a totally different thing to "work that needs doing" of which there is plenty.

[Longcol]

The great powers came off the gold standard in 1914 so that they could print the money required to fight World War I.

 

As indicated in my previous post, returning to a gold standard without revaluing gold to take account of the intervening money creation caused massive deflation.

 

 

 

 

 

Are you sure about that?

 

World Bank chief calls for new gold standard

 

Return of the Gold Standard as world order unravels [Daily Telegraph, Friday 23 December 2011]

 

Steve Forbes Predicts a Return to the Gold Standard Within Five Years

 

Return to Gold Standard Gaining Traction with Presidential Candidates

 

Stunner: Gold Standard Fully Supported By... Alan Greenspan!?

 

So the USA wants to balance its books by tripling the value of its gold reserves - or Vague Boy has got a bit of gold that he'd like the price to go up overnight.

 

Fail.

[ultimatesens]

Say somebody gets £1 in benefits for being poor.

 

They then go out and earn £1 by working. But lose £1 in benefits.

 

He is effectively earning nothing. Seeing as he would get £1 even if he didn't work.

 

Precisely why I oppose Crayfish's 'voucher' scheme. Housing benefit is like a voucher. You can only claim it to spend on housing. The government effectively controls the local houseprices/pushes money into housing, it might be higher than people would otherwise wish it to be.

 

Giving the poor money to spend as they wish, makes more sense than inflating/controlling the prices of certain goods.

 

Oh I see, so you are saying that many people decide not to look for a job because they are not going to be that much better off financially by working.

 

My family might get £200 a week without anyone having a job and just £210 with one of us working full time and £250 with the other working full time for example, so a combined 80 hours work = £50.

 

I Totally agree that that is a disincentive to work. I think that people should be paid much more by their employers. It's lunacy to suggest this is because benefits are too high.

 

I don't think you can cut welfare because it isn't enough already. So you have to raise the minimum wage. The problem when the minimum wage is it was introduced was so low it wasn't much better than benefits for a working family. Everybody in low paid minimum wage jobs is struggling too.

 

Also working isn't just about the cash. The job people do and their ability to relate to other people matters a lot. Some people get a lot of confidence from working and contributing to society. Other people have difficulty mixing with people and can feel excluded or worthless in the workplace. The nature of the type of work people expect to find influences the decision whether to look for work.

 

Again employers have made little to no effort over the years to make boring work fun (quite the opposite in many cases). They have just expected people to do it because otherwise they will starve.

 

Benefits provide a safeguard against this. By giving a social safety net they force employers to improve working conditions and/or wages. Employers never like doing this so they provide numerous excuses to not do it like, "benefits are too high" and "job-seekers are all picky about jobs"

 

Really benefits should go up as high as is possible and the minimum wage should be well above that. It is also just common sense and human courtesy that employers should try and make work as interesting and fun as possible rather than be all greedy.

 

Don't forget corporate profits are expected to go up every year and are doing so for most of the fortune 500 companies and the 1%. Think how long that has been going on and how high those profits are now. I suggest a large percentage of those profits should be directly added to the wages of all employees and not just given to directors and shareholders.

[ultimatesens]

...and before anyone says that businesses could never afford all that extra spending on wages let me remind you that all the extra cash will be swimming around the economy from all that distributed electricity generation I also proposed.

[chem1st]

Wages, benefits, not the problem.

 

It's the loss of benefits when one works for wages and the resultant income (reward).

 

Single mum might get £266 a week not working. £60 more for work 16 hours.

With working partner & child, might get £366, £20 more if she work 16 hours.

Single man on dole might get £130, £5 more for working 16 hours.

 

But to work, each would have to buy a travel pass costing £25...

 

Just bring in universal credit, and a fair effective tax, say 50%, opposed to potentially 74%, perhaps even have an income disregard for work related expenses (travel in particular).

[chem1st]

...and before anyone says that businesses could never afford all that extra spending on wages let me remind you that all the extra cash will be swimming around the economy from all that distributed electricity generation I also proposed.

 

Arguing with a friend last night.

 

He agreed if we double the supply of money, we double prices.

 

We disagreed that this would then drive production. For some reason, he thought the double money supply = double demand = increased production.

 

He forgot the the double money supply is worth half of the single money supply.

 

Real wealth comes from production, be it growing potato, building house, making leccy, giving foot massage, cleaning up and so on.

 

Not from rent seeking, not from printing more money, not from increasing profit at the expense of everyone else (cutting wages of lowest staff to give bonus to highest staff, whilst keeping the same the price of the finished product for example)

 

We need to encourage production.

 

Man on dole who does work, but gets no reward don't work.

Man on dole who can get reward from work don't stay on dole.

[ultimatesens]

Wages, benefits, not the problem.

 

It's the loss of benefits when one works for wages and the resultant income (reward).

 

Single mum might get £266 a week not working. £60 more for work 16 hours.

With working partner & child, might get £366, £20 more if she work 16 hours.

Single man on dole might get £130, £5 more for working 16 hours.

 

This is only a problem for the first proportion of wages that are equal to or less than benefits. Currently about nearly everything you earn working only 16 hours for min wage. If you work full time you usually see a much higher return because you are getting to take home everything you earn after those first 16 hours.

 

Again I agree part time work should be much better paid too.

 

Just bring in universal credit, and a fair effective tax, say 50%, opposed to potentially 74%, perhaps even have an income disregard for work related expenses (travel in particular).

 

Could you be more specific? Who would be taxed?

 

Arguing with a friend last night.

 

He agreed if we double the supply of money, we double prices.

 

We disagreed that this would then drive production. For some reason, he thought the double money supply = double demand = increased production.

 

He forgot the the double money supply is worth half of the single money supply.

 

This depends what the money supply is. Is it just paper? Is it computer blips. Is is gold or is it electricity?

 

Real wealth comes from production, be it growing potato, building house, making leccy, giving foot massage, cleaning up and so on.

 

Not from rent seeking, not from printing more money, not from increasing profit at the expense of everyone else (cutting wages of lowest staff to give bonus to highest staff, whilst keeping the same the price of the finished product for example)

 

Agreed and paper wealth should be backed by something tangible and valuable. Either because it is scarce like gold or useful like energy.

 

We need to encourage production.

 

Again I agree. Money that can be readily exchanged for something useful and that has an inherent value would prevent reckless money printing. Increasing our energy supply would increase our production capacity and our money supply to go with it.

 

The current system has "wizard of Oz monetary scientists" telling us our money supply doesn't need to be backed by anything and they can just make it up out of thin air and that it all works fine when quite clearly that system doesn't work fine. Interestingly historically it has never worked fine either but we never study the history of money in our schools. Time and again therefore they cause recessions and booms and busts and clean up each time by draining the profit from the system through inflation.

 

Or in other words they print loads of money and get to spend it while its still worth something and before everyone catches on.

[MrSmith]

We need a system where one whom betters himself, betters all.

 

The drive to better yourself is very common.

 

We need a maximum income relative to the minimum income.

 

Once you hit the maximum income, to increase your income further, you must increase the income of the poorest (Or the value of the income relative to the price of goods).

 

So consider you have reached the maximum income, and you wish to have more, so you could have better quality food, you would be encouraged to invest in the production of better food, to drive down the price of good food, and thus allow you to purchase more with your maxed out income.

 

Better food for everyone. And positive incentives.

 

Well done for describing the system we have, as the rich get richer so do the poor, yes the gap gets wider but the poor do become better off.