UBI – a dangerous trap

Many people look forward to the future of Universal Basic Income, free of worry. Could it be a vicious trap?

The world has reached a historic turning point with the crash of the financial markets in March/ April 2020. After the collapse of the oil price as a result of the incipient recession, the global financial system could only be saved by creating the largest money supply to date and lowering key interest rates to zero or almost zero.

In other words: in the next crash, even larger sums of money would have to be used and interest rates would have to be lowered to the negative range to revive the system. But since we are already dealing with the biggest bubbles ever on the stock, bond and real estate markets, these would certainly burst and cause the system to collapse for good. Interest rate cuts into the minus area, on the other hand, would be the certain end of the banking industry and thus of the traditional core business of banks.

Both possibilities are therefore no longer an option. But that is not yet the whole dilemma that those responsible are currently facing. Added to this are the consequences of the lockdown, i.e. redundancies, company bankruptcies and exponential growth in the already unbearable debt burden, as well as the rapidly advancing digitalization, which is destroying more and more jobs in ever shorter periods of time.

The therefore imminent historic slump in the labor market will lead to an unprecedented slump in demand and force governments to ensure that people who lose their jobs continue to consume anyway. However, because public coffers are empty, this can no longer be done in the traditional way, i.e. by paying unemployment benefits and social welfare from the state budget, but only by the creation of new money by the central banks.

This is precisely where the currently most important project of the financial industry comes in, a project that is being pushed forward at a rapid pace, hardly noticed by the public: The creation of digital central bank money.

The plan is as follows: The classic banking system, which can no longer function under the conditions that are developing, is to be radically restructured. The deposit business and the granting of credit by commercial banks are to be completely abolished; instead of the usual current, capital or savings accounts, each citizen will only receive one account at the central bank.

Wages and salaries will be paid into this account, taxes will be automatically deducted from it, and fines will be withheld in case of violations of the law. Account holders will only be able to make payments through this account. All transactions will thus become transparent and traceable, and this is the most comprehensive state control of citizens by the state ever.

Of course, such an undertaking would meet with considerable resistance from the majority of the population. However, in order to overcome this, politicians have already given the central banks a steep draft: The consequences of the lockdown, as well as all the measures supposedly taken to contain the pandemic, make it possible to declare the avalanche of company collapses and mass layoffs to be a pandemic-related «corona crisis», to which not politics but a disease is to blame.

This opens up the historic opportunity to introduce the digital central bank currency through the back door: Politicians could pretend that they want to alleviate the suffering of the population caused by mass unemployment and impoverishment with the help of the central banks through the UBI in the form of central bank money – and make the account setup look like an act of humanitarian aid.

Whether it will actually happen in this way cannot be said at the moment. What is certain is that the current monetary system is at an end and that there is no realistic possibility of keeping it alive artificially, apart from the digital central bank money.

However, digital central bank money would not be a permanent solution either, because as soon as it arrived in the real economy, it would push prices upwards and lead directly to rapidly rising inflation. It basically serves only to delay the problems further without solving them.

The allegedly universal basic income, even if it is demanded by many well-meaning people, is certainly not a social progress, but basically a dangerous trap from which it will be almost impossible to get out: If the majority falls into it, then after the drastic democratic restrictions of the past months, the most important freedom, namely the personal sovereignty over one’s own finances, will be taken away.

Ernst Wolff