Economics

“UNIVERSAL BASIC INCOME IS INEVITABLE IN THE NEAR FUTURE, I DON’T THINK WE HAVE A CHOICE” — ELON MUSK

WHY UNIVERSAL BASIC INCOME (UBI) IS NECESSARY?

The overall economy is inflating day by day, it is inevitable and as a repercussion of that, a new method will be used to combat it, which is of UBI (Universal Basic Income). This is done for the fulfillment of the basic needs and requirements of the needy and the poor.

“There would be fewer and fewer jobs that a robot cannot do better in the future.” — Elon Musk

In simple words, it is providing the basic income to everyone regardless of their class and income. It is primarily done to support the poor and the lower middle class.

The actual amount spent on UBI is much less than anticipated because the rich and the middle-class would repay it back in the form of taxes. Hence the actual people who need it the most will be benefited.


WHY WAS IT NOT IMPLEMENTED TILL YET?

In the early days, the inflation rate and the gap between the rich and the poor were not great but in recent times due to the pandemic, everything seems to be going high in value, this is partly due to the fact that “40% all the existed dollar in history were printed during the coronavirus pandemic”. Hence in the early days, UBI was not needed.
But now it is the need of the hour. Many countries are getting serious about it. If the inflation rate continues to grow, UBI will be implemented soon than ever.

Also, it is a major step for any country’s economy because once this gigantic step is taken it can’t be altered or taken back if for some reason the disadvantages outweigh the advantages. The consequences can be unimaginable so as a result it is not implemented yet.


WHICH COUNTRY WOULD BE MORE BENEFICIAL WITH UBI?

Especially those countries whose GDP is on the lower side will be benefited the most. The African nations will make their citizens more viable but history has told us they will be the ones who would do it last. The more developed countries like the USA and UK would be the ones starting with the trend.

Countries like Spain and other few European countries have already started UBI in the trial form, let’s see what’s the result ends up being. Due to its inevitable nature, other countries might have to start giving UBI before it’s too late.

This technique will surely encourage a little bit of inflation as everybody would be having that minimum amount. But inflation is an unavoidable phenomenon that silently steals your money without you even knowing it.


WHAT CAN YOU DO TO BE AHEAD IN THIS REGIME?

1. Don’t save, Invest

Saving your money is like losing your money by 10% every year because inflation is a silent killer, with the passage of time the buying or purchasing power of money decreases because their supply is unlimited, they can be printed that will by your government.
And keeping your money savings account won’t do anything either because the banks will give you 5 to 6% interest on your money annually but you are losing at the rate of 10% because of inflation so you encounter a loss of 4% every year if you compound that loss annually then you end up losing a lot of money in the long run.

Mind you, this is still better than simply saving and keeping it in physical cash. At least you will be getting the interest rate of your bank.
Investing your saved money in the S&P 500 or NASDAQ would give you an annual CAGR return of 15% which will have a net profit of 5% compounded annually. And if you do the maths 5% over a long period of time but surely gives you an upper edge over others.
So use the magic of the eighth wonder of the world, compound interest to your advantage.

2. Have multiple sources of Income

Just having multiple sources of income reduces your problems by quite a lot. In the long run, it serves out to be a huge asset as if one of the sources gets depleted then it is covered by the other ones. But if you only have one source of income then it becomes more of a liability than an asset because when you start getting bored of your job, you cannot leave it because it is your only source of income.

People understand the concept of having multiple sources very late but when they do they belong to different age groups and sometimes avoid certain things which generate secondary passive income.


EFFECTS OF UBI ON SOCIETY (Assumptions)

Positive

  1. Abolishment of Poverty
  2. Abolishment of less or no paying jobs and an increase in the number of business started
  3. Increase in Happiness Index
  4. Abolishment of child labor
  5. Improvement in healthcare

Negative

  1. Inevitable Inflation
  2. Overdependency on UBI, people will not be self-sustained
  3. It Will make people more lazy and miserable
  4. Underdevelopment, the government can cancel some schemes for the fulfillment of UBI

WHAT IF…..

There are some conditions to the concept of UBI,

  1. Only a few people from the lowest income category are selected for UBI.
    Then in this situation nothing much will happen except for the fact that it will go against the basic principle of universal basic income, which was to provide everyone regardless of the class.
  2. Suddenly the UBI stops
    Then in this situation, the financially illiterate people will suffer the most because those who know how the money works will somehow find to do well for themselves with the basic UBI itself. But those people who wait for the weekend to burst it all will suffer the most because they want to leave the rat race virtually in the weekend which is never going to happen and these people are the ones who don’t understand the concept of money.

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