A UBI increases inflation – even if it doesn’t inject new money, it increases the Velocity of spending – markets perceive this and will react with higher prices.

Acc 6/14/23 TA]

Higher Prices and Inflation A UBI would essentially transfer wealth away from higher earners toward low earners. This spurs higher consumption because those with lower incomes have a higher propensity to consume. On a macro basis, this may not necessarily create any inflation, as there is no new money entering the economy. However, it will create inflation on a micro basis. Rather than money going toward investment, it is going toward consumer goods. Instead of inflation occurring through a wide variety of areas, it is being concentrated. Importance of Velocity Yang says this is just using the existing money in the economy. In part, he is right. However, he fails to consider the velocity of money. One of the reasons the US did not experience significant inflation after quantitative easing was due to a slowing of consumption growth. If we put $12,000 into everyone's hands, consumer demand will rise, and so, too, will velocity. When velocity increases, the same $1 exchanges hands at a quicker rate. For example, A may buy a television from B for $100. B will then buy a used iPhone from C for $100. C will then buy a used sofa from D for $100. The initial $100 has circulated around the economy at a value of $300. This sends demand signals to the relevant parties, who then respond with higher prices.