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The long-term purchasing power of ‘free’, by definition, is zero.

This is what “student loan forgiveness” and “free college” and “UBI” proponents simply do not grasp: the inherent value of anything is equivalent to what must be traded for it in exchange.

CognitiveCarbon

With Democrats and leftists nominally in charge of governments here in the US and elsewhere in the world, the drumbeat of “free stuff” is ever more frequent and loud.

Concepts like “student loan forgiveness”, “free solar”, “4th stimulus check”, “Universal Basic Income” and so on ooze and seep out putrescently from all corners and crevices.

The types of people who champion government-based handouts—more often than not—appear to perceive their own self-worth in relation to how much they can take (via tax, and thus by force) from one group to give to another; they are wired to derive a dopamine hit for feeling that they are “helping someone” using someone else’s wealth without any cognitive awareness of how it harms us all. 

It’s a peculiar fact that some people derive dopamine rewards for the act of giving away other people’s (confiscated) wealth, but react completely differently when it is their own wealth that they have to voluntarily give to others. To see this in action, watch pretty much any Democrat politician in action.

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Bear in mind that “printing money” (which always eventually results in inflation) is exactly and precisely the same as a tax; the only difference is that most people are not able to see it as clearly, because the “theft” happens less visibly when you don’t see the taxes directly withheld on your weekly paycheck. 

Inflation is a hidden tax (although when it is sharply higher, as it has been in 2022, it gets people’s attention.)

There is this idea in academic “economics” that there is some “desirable” level of annual inflation, around 2%. The way I believe you should think about this is as follows: it is not that 2% is a “desirable” level in terms of some magic beneficial effect on the economy, but instead it is simply a level that will escape most people’s attention because its slow and subtle. 

It’s like watching starfish move, instead of watching sharks swim. 

The 2% level is simply the “most they can get away with” and not be noticed. That’s how to frame it.

It seems to me that the “free government money” people don’t understand the root concept of value; don’t understand the meaning of “zero.” 

A symbolic concrete zero.

What is lacking, from the left, is a basic understanding of economics and fundamental monentary principles. 

“Money” (in particular, paper money or digitally-created Fed dollars) is not wealth, but rather a proxy for it; it is simply a symbolic agreement that we have all been trained (or perhaps more appropriately, “programmed”) to use because transferring actual wealth is sometimes too cumbersome. 

Barrels of oil or gasoline, for instance, are valuable in terms of the energy content they contain in the hydrogen bonds of their molecules—there are many useful things you can do with that energy (heat things, move things, manufacture things, etc.) 

But a barrel of oil is heavy and difficult to transport, so instead of trading literal barrels of liquid energy for other goods or services that we need, we substitute paper money (or digital Fed-dollars) instead. 

We use a proxy—money—out of convenience.

The problem, however, is that too many people have now come to mistake a stack of pieces of paper with ‘reserve note’ printed on them for actual wealth.

Here is the problem, for example, with “Universal Basic Income.” The poorly-thought through idea is that (some) people don’t have enough money given the “value” of the work that they do, so the idea is that the government should supplement what they do have with “extra money”—e.g., UBI — so that they can live more comfortably (without expending any more effort.) 

The real problem, of course, isn’t so much that they don’t have enough money to live on—but rather that inflation continually erodes the purchasing power of what they dohave, faster than their wages (and skills) increase to compensate. UBI makes this worse, not better.

If you were to institute a universal basic income program whereby “everyone” is given, say, $10,000 a year “for free” (free means that there is no requirement to trade any labor, intellectual property, creative output, finished goods, raw materials, food etc. in exchange for the new money) then over the long term, the purchasing power—the “value” of the money in relation to what it can “buy”—has to approach and equal the “value” of whatever is given up for it: namely, nothing. 

Zero.

What this means is that if you “add” to someone’s “income” by giving them free money, then those incremental dollars (the dollars over and above what they would otherwise have earned from their own work) will ultimately buy “nothing”, over the long term. The value of what is given in exchange has to (eventually) equal the value of what is received. 

Zero for Zero.

We all recognize this effect via inflation. The money you possess today buys fewer and fewer goods as the years go by, because the “price” in dollar terms of the things you want to purchase inflates. Gas prices go up, food prices go up, etc.

If I give you what amounts to 10% “more money” via handouts, then inflation will necessarily cause the purchasing power of your money to fall by 10% (or more)—eventually. 

No, this effect isn’t instantaneous; the first people who spend their “free dollars” get more “value” than people who spend theirs much later. The “stimmies” given away in 2021 reared their heads as rampant inflation in 2022.

However, once people start to become aware that this is happening—that the longer they hold their “paper money” the less they can buy with it over time (compared to their peers who spent their money sooner) they will change their behavior: they’ll spend it as soon as they get it, so that they get the same “good deal” that the other guy got who acted sooner.

They will spend money not because they necessarily need something (right now) in exchange for it; but because they want to hoard something else besides paper (or digital-Fed) dollars because they know (subconsiously perhaps) that there is “value” in tangible goods that doesn’t erode over time the way the “value” of their money does.

Of course this extra buying pressure just makes prices rise more, worsening the effect of inflation.

The same problematic thinking applies to “student loan forgiveness”. If the “government” wipes away “student loan debt”, then what that necessarily implies is that the value of the “education” obtained in exchange for the “forgiven debt” is diluted. 

A “college degree” (in some useful field, excluding silliness like gender studies) becomes worth less than it used to. Or maybe, to hammer the point home, just take away the space: some college degrees, offset by “loan forgivness” trend toward becoming worthless

If anyone can obtain a degree with little to no intellectual effort and little personal financial risk, and the “cost” to the student of obtaining this piece of paper sharply decreases (because of loan forgiveness, which is “free money”) then the relative value of that “college degree” is necessarily diluted. 

A degree means less than it used to, because the importance of competence and the hard work that used to be needed to obtain it has been obscured. 

College degrees, particularly from certain colleges and universities used to “signal” something important to potential hiring managers; they signalled that the student had to compete, sometimes vigorously, against nearly equally qualified peers, and had to distinguish themselves by studying longer and working harder. 

This wasn’t always a flawless “signal” of future competence in the workplace, but it worked reasonably well. The “signal” vs “noise” is now harder and harder to distinguish, which means that the “value” of the degree is proportionately less.

The increasing prevalence of “free things” adds a spectrum of long-term negative effects on society. It undermines the value of hard work; it masks the signalling value of competence (everyone gets the same outcome regardless of ability.) 

It uses the force of government—taxes are ultimately extracted by the point of a gun, if a citizen refuses to pay them—to take from the competent, and give to the incompetent. 

Why should a plumber—who never went to college but nevertheless built a successful business over decades by hard work and long hours—have to pay, via taxes and inflation, for “students” who spent four years in college learning next to nothing of value and had their loans “forgiven” simply because the government decided this was “fair and equitable”?

There are only two ways we break free from this cycle: one is to remove the ability of “the government” to create the units of currency that society uses (“the money supply.”) This is done through things like non-inflatable cryptocurrency, e.g. Bitcoin.

The other is develop a source of cheap, portable and point-of-use energy, so that the need for “proxies” like money decrease or are eliminated entirely. 

I’ve used this analogy before: If you could trade a brick that you can hold in your hand that is literally a “Gigajoule” of energy for something else that you need, then there is no need for “money”; and if you can use that Gigajoule yourself to grow food, heat or light your home, purify or move water, or power your car or plane—then again, you don’t need “money”. You have energy, which in intrinsically and directly useful. 

In a world that doesn’t depend on “money”, you don’t need “the system”. You break free of the slave system that defines our modern world.

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