|

Another preposterous free money universal basic income test on the way

Another UBI Test is coming up. This time in Germany.

The UBI Idea

The goal is to provide a "living wage" to everyone as a basic right no matter how productive anyone is. 

Under UBI, governments collect taxes and redistribute the money or alternatively just hand out free money. 

Under some proposals, everyone gets free (or redistributed) money but in other proposals, free money only goes to the needy. 

German Test of UBI Coming Up

Eurointelligence reports Universal Basic Income Now Subject to a Vaccine-Style Test.

A German NGO is funding a unique economic experiment that works like a vaccination test: a group 120 people will be given a universal basic income of €1200 per month for three years. The idea is to study what they will do with the money and how the universal basic income changes their lives.

This reminds us of scientific experiments funded by the pharmaceutical or tobacco industry. If the source of funding has an interest in a particular outcome of a study, chances are that the study will be biased in many subtle and not-so-subtle ways. We would be very surprised if this particular NGO concluded that the universal basic income was a thoroughly bad idea in the unlikely event that the experiment sprang a surprise. Remember: no empirical evidence in economics ever led to the abandonment of an economic theory. They exist in a universe of their own.

Test Cannot Possibly Fail

Even without the built-in bias, the test cannot possibly fail. 

If you give a carefully-selected group of 120 people €1200 free money monthly, it is certain all 120 people will have an improved standard of living. 

Any UBI test has but one mission: Come up with the wrong answer.

Free money, what can go wrong?

The obvious problem, which is why these tests should never happen in the first place, is the tests do not scale. 

It's relatively easy to come up with €1200 * 12 months for 120 people. That's €1,728,000.

UBI annual cost for Germany

Let's do the math for 83 million people in Germany. 

 

UBI for all of Germany would cost about €1.2 trillion annually. 

Where is that money supposed to come from? Unlike the US, Germany does not even have its own printing press. 

And right off the bat Germany would face a huge immigration problem. People from all over the EU would move to Germany.

That would cause an instant housing crisis with soaring rent, mandating a bigger monthly UBI to keep up.

I suppose you could pick winners (no immigrants and no wealthy) instead of handing out free money to everybody. 

But that creates a huge incentive to not work, especially at the margin. 

Previous studies claim that does not happen. But participants know the test will end. 

Higher Taxes? How High?

Tax the wealthy enough to pay for this monstrosity and the wealthy will move. 

More Studies? Why?

The problems are many, obvious, and insolvable. UBI in any non-trivial amount will never scale. 

I show how and why studies are guaranteed less than useless. Unfortunately, ridiculous economic theories never die.

For example, the economic illiterates at YouMatter conclude "more experiments will probably need to be done to assess whether a universal basic income would be a good idea." 

The clamoring and studies will continue until the economic fools eventually get approval somewhere. 

Will California Be First? 

California, like Germany, has no printing press but it is willing to tax anything and everything for the sake of social fairness.

Also note that California's Radical Brainwashing Curriculum Soon To Be Mandatory.

Thus, California may be as good a guess as any. 

Author

Mike “Mish” Shedlock's

Mike “Mish” Shedlock's

Sitka Pacific Capital Management,Llc

Mike “Mish” Shedlock is a registered investment advisor for SitkaPacific Capital Management.

More from Mike “Mish” Shedlock's
Share:

Editor's Picks

AUD/USD pulls back from monthly high but holds above 0.7000

AUD/USD retreats from the monthly high set earlier this Thursday, sliding back to 0.7000 during the Asian session as a further escalation of tensions in the Middle East undermines the risk-sensitive Aussie. However, recent hawkish comments from RBA officials could support the Australian Dollar. Furthermore, the prevailing US Dollar selling bias, despite Fed hike bets and geopolitical uncertainties, could limit losses for the pair.

USD/JPY declines to a one-week low; eyes trading range support near 157.50 on weaker USD

USD/JPY drops to a one-week low during Thursday’s Asian session, with bears now awaiting a break below multi-week range support near mid-157.00s before placing fresh bets amid a broadly weaker US Dollar. Despite bets for a December Fed rate hike and Middle East jitters, the recent decline in US bond yields keeps USD depressed near a three-week low. Moreover, hawkish BoJ expectations and intervention risks underpin the Japanese Yen, further weighing on the currency pair.

Gold remains offered just above $4,000

Gold prices resume their decline on Thursday, easing toward the area of two-month lows around $4,050 per troy ounce. Higher crude oil prices have reignited speculation of further tightening by the Fed, supporting the US Dollar and weighing on the precious metal.

The estimates keep falling: Why Bitcoin's quantum countdown is accelerating

The threat that Artificial Intelligence (AI) and quantum computing pose to Bitcoin (BTC) and cryptocurrencies in general is no longer a matter of if hardware will catch up; it is a matter of when.

The Bank of England just got its clearest reason to hike. Here's what it's really watching

UK inflation as measured by the CPI accelerated to 3.5% YoY in September, up from 3.1% in August, according to the Office for National Statistics. This is the highest level since October 2025, exceeding economists' expectations of 3.4% and pushing inflation further from the BoE's 2% target.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.