WHY AI FORCES A RETHINKING OF MONEY ITSELF — PART 1
A Universal Basic Income (UBI) has long been proposed as a way to cushion the blow of jobs lost
to automation. Under that model, everyone receives a modest monthly payment – enough to
cover basic needs and prevent extreme poverty.
But Elon Musk has gone further. On April 16, he posted on X:
Universal HIGH INCOME via checks issued by the Federal government is the best way to
deal with unemployment caused by AI.
AI/robotics will produce goods & services far in excess of the increase in the money
supply, so there will not be inflation.
Rather than a subsistence stipend, Universal High Income (UHI) would be a level of income
allowing ordinary people to live well in a world where machines do most of the work. Musk has
also said that AI and robotics are the only things that can solve the massive U.S. debt crisis.
That sounds promising, but where will the government get the money to pay the UHI? Critics
say any government that tried it would go bankrupt. There are also other concerns, which will
be addressed in Part 2 of this article. Here we will look at the financial underpinnings: why UHI
is even thinkable, why AI forces a reexamination of how money enters the economy, why the
current system cannot scale to meet what is coming, and the implicit transition needed to meet
that challenge.
Why the Current Money System Cannot Scale
The national debt of the U.S. government just topped $39 trillion. China’s is $18.7 trillion.
Japan’s is $8.6 trillion. Those of the UK, France, Germany, Italy and Spain are each in the multi-
trillion-dollar range. Collective global debt now stands at $353 trillion, 305% of the world’s
annual economic output. So even if, hypothetically, everything produced in the world in a year
were applied toward liquidating the debt, it still would not be enough to pay it all off.
In fact the debt can never be repaid, because of the way money currently enters the system.
Nearly all of the money supply today is created by banks when they make loans. Banks do not
lend their existing capital. The loan itself creates the money. The bank adds the loan amount to
the asset side of its balance sheet and balances that sum with the same amount on the liability
side. When the borrower withdraws or transfers the funds, either the bank takes them from its
reserves in “vault cash” or the Federal Reserve debits the bank’s digital reserve account at the
central bank. But the lending bank typically has funds coming into its reserve account at about
the same rate as they are going out, so its reserves are continually replenished. Thus a very
small reserve account can support a much larger money creation engine. For decades before
the Fed discontinued the reserve requirement in 2020, it hovered at around 10%.
The chief problem with this debt-based system is the interest, which the bank does not create
in its original loan. For a typical long-term loan, interest can double the total tab or more.
Where is the money to come from to pay this added liability? Across the system as a whole, it
must either come from more borrowing or from existing funds. In the case of governments,
that means issuing interest-bearing bonds or tapping taxes and other revenues. The interest on
the debt compounds, meaning the government is paying interest on interest. This makes the
debt increase exponentially, until it is mathematically unsustainable. Then bankruptcies occur,
of banks or even whole governments. Booms turn into busts, and the cycle begins again.
Today, interest on the federal debt is the second largest budget line item after Social Security,
exceeding $1 trillion. Meanwhile, workers are losing jobs to AI/robotics, shrinking the income
tax base. The system is clearly unsustainable.
How to Raise Demand to Scale to the Upcoming Supply
A Universal High Income would replenish the shrinking tax base by replacing the lost wages of
unemployed workers. But where will the money come from to pay the UHI? The only
sustainable solution is for the government to issue it interest-free. That does not mean through
the Federal Reserve, which creates money in the same way banks do: it buys federal interest-
bearing securities with accounting entries. The Fed collects the interest, which it is supposed to
return to the Treasury after deducting its costs. But since 2008, its costs include paying interest
on the reserves of its participating banks, which consumes its profits.
The only interest-free, debt-free solution that will actually increase the money supply
sufficiently to match the projected productivity of AI/robotics is for the money to be issued
directly by the Treasury.
This is not a radical new idea. It is authorized in the U.S. Constitution, which provides in Article
1, Sec. 8, that “The Congress shall have Power To … coin Money [and] regulate the Value
thereof .…” Abraham Lincoln used government-issued “Greenbacks” to avoid a crippling debt to
British-backed bankers. Debt-free government-issued money was also the funding mechanism
by which the American colonists succeeded in creating a thriving economy and liberating
themselves from the oppressive yoke of the British Empire.
In his 1729 pamphlet “A Modest Enquiry into the Nature and Necessity of a Paper-Currency,”
Benjamin Franklin argued that a lack of currency was a tax on industrious farmers and
producers, and that a reliable, locally issued paper currency was the “oil” for the gears of trade.
The “Nature and Necessity” of this currency was to facilitate the movement of goods between
neighbors. Franklin observed that the British strategy of keeping the colonies short of cash was
a method of economic suppression. By forcing the colonies to use gold and silver, which were
constantly drained back to London to pay for imports, the Crown kept the colonies in a state of
permanent debt and low productivity. When the money supply matched the productive
capacity of the people, universal prosperity resulted without inflation.
This logic evolved into the “American System of Political Economy” championed by Henry
Carey, economic advisor to Abraham Lincoln. He wrote:
Two systems are before the world… One looks to pauperism, ignorance, depopulation,
and barbarism; the other in increasing wealth, comfort, intelligence, combination of
action, and civilization. … One is the English system; the other we may be proud to call
the American system, for it is the only one ever devised the tendency of which was that
of elevating while equalizing the condition of man throughout the world.
In the context of the 21st century, the “oil” that best lowers the friction of trade is debt-free
government-issued money similar to Lincoln’s Greenbacks and colonial scrip. Rather than
implementing a radical financial innovation, we would be returning to our roots.
Inflation or Deflation?
The chief objection to the colonies’ paper “scrip” was that they tended to over-print, so that
“demand” (money) outstripped supply. Too much money chasing too few goods produced price
inflation. But in the 21 st century, we will soon have the opposite problem: too little money
chasing too many goods. Machines don’t need food, clothing, shelter, transportation, medical
treatment or other services. So who will buy those goods and services?
Money needs to be issued to human consumers, and not just to a few wealthy human
consumers serving as debt brokers thriving on interest. To create sufficient demand for the
voluminous output of AI/robotics, it needs to go to the whole national population, evenly
distributed. Not only can UHI work in that sort of abundant supply without producing price
inflation; it is actually essential to prevent deflation.
In a conversation on X, Musk wrote:
In a normal economy, issuing more money simply increases the dollar price of the
existing output of goods & services, meaning people do NOT get more stuff. If
AI/robotics massively increase goods & services output, then you actually MUST issue
dollars to people or there will be massive disinflation.
As paraphrased on Yahoo Finance (reposted from Benzinga), Musk wrote that handing out
more dollars becomes a problem only when the economy’s supply of goods and services fails to
surge alongside the money supply. His claim is that AI and robotics could lift production so
sharply that the bigger risk would be falling prices, not rising ones.
But aren’t falling prices a good thing? In this case, no. Prices would be falling due to a lack of
demand, meaning producers can’t find customers for their products. They wind up laying off
workers and eventually going bankrupt. When spread across the whole economy, the result is a
deflationary spiral: prices fall, businesses lose revenue, and the economy contracts, not
because production is inadequate but because purchasing power is insufficient. The result is
recession or depression. In the Great Depression of the 1930s, food was rotting in the fields
while people were starving, because they were out of work and had no money to spend.
Job cuts from AI are already happening. According to the same Benzinga article:
Evidence of near-term strain is showing up in corporate announcements: employers disclosed
more than 27,000 job cuts linked to AI in the first quarter of 2026, according to Challenger,
Gray & Christmas. The outplacement firm said that figure was up 40% from the same period a
year earlier.
Robert Reich reports that wages are around two-thirds of the typical corporation’s total cost,
and that in the first four months of 2026, big U.S. corporations cut over 128,000 jobs.
How Soon Will All This Happen?
Another Benzinga article, reposted on Yahoo Finance on March 16, detailed Musk’s projected
time frame:
Speaking remotely to the Abundance Summit last week, Musk told XPRIZE founder Peter
Diamandis that the global economy is on the verge of an explosion so massive it defies
historical precedent.
“I’d say the economy is 10 times its current size in 10 years,” Musk said, before quickly
clarifying that the growth could be even more explosive. “Greater than,” he added,
framing the projected shift in economic output as a “fairly comfortable prediction.” …
“Obviously if there’s like World War III or something, that could put a kink in those plans
or those expectations,” Musk warned. “But in the absence of World War III, if current
trends continue, I would say the economy 10xes in 10 years.” …
The catalyst for this vertical climb isn’t traditional manufacturing or trade, but the “hard
takeoff” of artificial intelligence. Musk explained that civilization is currently moving
through a period of recursive self-improvement, where AI models are increasingly being
used to design and build their successors.
Ray Kurzweil, author of The Singularity Is Near, sees AI reaching Artificial General Intelligence
(human-level intelligence across virtually all domains) by 2029, and full transformative
abundance by 2045.
Other experts question these time projections, but a radical transformation of traditional
manufacturing and trade is likely to happen sometime in the reasonably near future. The
question is, will the money system transition soon enough to rescue all the laid-off workers
from homelessness and famine?
The Sovereign Wealth Fund Alternative
There is another model for distributing the gains of automation, one that can be phased in
gradually as the AI workforce expands. It comes from Sam Altman, CEO of OpenAI. In an ironic
twist, Altman and Musk, who jointly founded OpenAI in 2015, are now locked in a high-profile
legal battle over whether Altman diverted Musk’s $44 million investment to transform what
was conceived as a nonprofit “for the benefit of humanity” into a highly lucrative for-profit
enterprise.
That dispute aside, Altman’s alternative model for sharing AI-generated wealth is a national
sovereign wealth fund seeded by the profits of AI and robotics. His proposed American Equity
Fund would take public stakes in the companies and technologies driving automation, capture a
portion of the resulting productivity gains, and distribute them as universal dividends. The Fund
would not replace a Universal High Income but would complement it.
This approach has several advantages. It ties payments directly to real output, scales
automatically with productivity, and can be introduced gradually, avoiding the shock of issuing
large payments before the supply side has fully expanded. It would resemble the Alaska
Permanent Fund, which distributes oil revenues to residents, except that here the resource
would be the most powerful general-purpose technology since electricity.
Conclusion: A New Monetary Logic for a New Productive Era
For centuries, money has been issued as a claim against the future productivity of human labor,
repaid from the income that labor generates. The logic of this debt-based system collapses
when machines become the primary producers of goods and services. Then the limiting factor
becomes purchasing power — the ability of human beings to access the abundance their own
technologies create. That requires a monetary architecture that expands with output rather than debt, and distributes income not through wages alone but through mechanisms tied to the
productive capacity of the whole system.
Universal High Income and a sovereign wealth fund are two ways of doing that. One ensures a
stable floor of demand; the other ensures that the public shares in the gains of automation.
Both would be grounded in real production. But for the public to have access to those gains, the
money supply needs to expand in proportion to the expanding pool of goods and services. This
can be done by restoring the innovation our forefathers baked into the Constitution: debt-free
money issued by the government itself.
How to fund a UHI without triggering inflation or driving the government into bankruptcy is the
first objection critics raise, but there are others. They argue that people would stop working or
stop learning, that society would collapse into idleness or chaos, that life would lose meaning
without jobs, that the government would have the power to control how people spend their
money. Will a UHI ring in the promised utopia or lock us into a state-controlled digital prison?
Part 2 of this article will address those concerns.
This article was first posted as an original to ScheerPost.com. Ellen Brown is an attorney,
founder of the Public Banking Institute, and author of thirteen books including Web of Debt, The
Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. Her
400+ blog articles are posted at EllenBrown.com.