Hello Switzerland, the New Greece.

The headline: Swiss to vote on 2,500 franc basic income for every adult.

The link: http://www.reuters.com/article/2013/10/04/us-swiss-pay-idUSBRE9930O620131004.

Someone at redditt asked if this won’t lead to inflation, and someone else replied that of course not, that is such linear thinking.

Obviously, we need a little Smiling Dave to shed light on the situation.

Depends how they fund this.

If it’s done by printing new digital money, of course there will be price inflation, even though it won’t be “linear”. Think of it as Santa Claus stuffing his bag with more and more toys. You don’t know where the bumps will show up in his bag, and they won’t be evenly distributed, but you do know two things. First, that the bag will not get any less inflated, ever. Second, that there will be bumps, and huge ones. And the more toys stuffed in there, the higher the bumps. That’s the situation, except with new digital Swiss francs instead of toys, and higher prices instead of bumps.

If it’s done by taxing away money from people of higher income, then some prices will go up and some will go down. But this won’t happen, I think, because I doubt there is enough income generated by the Swiss workforce to give everyone $33,000 a year. That is a huge amount. I mean, we aren’t talking Saudi Arabia here.

Now they might borrow the money for a while, until the international community realizes that Switzerland is the new Greece, unable to repay its debts except in almost worthless money constantly devaluated, and will raise interest rates to impossible levels. So they’ll gain a few years delay, but it will be a short reprieve.

As for people preferring to work, how laughable. All the teenagers and college grads, unused to being underlings to a boss and to the depressing role of serving tables, will just sit home and wait for the check to come in, just like every other welfare recipient in the history of the world. Same for all the single moms, and in fact for everyone. And don’t make the mistake of thinking people will prefer the dignity of a few more Swiss francs and the self respect of actually earning a living. That’s all nice in dreamland, but when you have to get up like a dog at 6 AM while your neighbor is snoring after a night of partying, suddenly staying home for $33,000 a year will look mighty tempting.

The real beauty of this scheme is that it is doomed to fail very early, will bring Switzerland to its knees, but will be impossible to repeal. Nobody is going to vote to give up on $33,000 a year. Just the opposite. Expect constant referendums from now on, upping the ante. I mean, why not?

Bye bye Switzerland. You used to be a prosperous country. Your money used to be actually worth something. Forget all that.

Devil’s Advocate: How do you know all this, Dave? Are you psychic now?

SD: No Devil, I know it because in disguised form, and on a much more modest level, this experiment has been tried many times. Why do you think Greece and all the other PIIGS countries plus France, and even the United States, [and certainly California and other bankrupt cities and states] are in such big trouble? Because they did exactly what Switzerland plans to do, give people free money for not working.

Now in these other countries, it was disguised. You had to show up in some office and do nothing, instead of doing nothing at home. Or maybe you really had to actually do some productive work, but you got way way overpaid. Not to mention your fat pension in your retirement years, in which you do no work.

DA: But Switzerland is planning to give everyone a retirement pension even before they work at all. They can retire from day one. Surely that means the economy will blossom. All that increased spending. Keynes would be proud.

SD: Bye bye Switzerland.