100% of the currency would eventually be spent back into the economy, but American spending and saving habits that are based so much on emotion would create instability in the economy like it always does. ergo, when people think times are bad, everyone hoards their money and times do become bad because of poor currency circulation.
Yes, the tax on the middle class that they are using now is the same idea. And does it work? no.
UBI WILL be used by governments there will not be a free market implementation. It will be paraded as though it is something designed by free and willing people, but governments will coopt it and turn it into a scam just like everything else. I get that in a perfect world it could be feasible, but not in the political system we have today. The gov is power hungry.
On the topic of scarce currency. If you look back in history of why the federal reserve was created along with a fiat air-backed currency, you'll hear people say "a gold back currency is to unstable" but the fact of the matter is that people just have unstable emotions when it comes to their money. Like I stated in the paragraph above, "when people think times are bad, everyone hoards their money and times do become bad because of poor currency circulation." So, the money wasn't unstable, but people were. When you have a scarce currency, you can't pull levers, redistribute, and "control" the economy like they attempt to today. Using a scarce currency with UBI gives the potential for hoarding. Scarce curency incentivizes to save, no cap currency incentivizes to spend. That's why you would have to use 'fiat' and why the money's purchasing power would eventually be destroyed, but much quicker than normal considering people are given the money without producing any value, making it much easier for them to let go of it through spending. Faster circulation = rapid inflation.
I get your theory that a free market COULD (and by the way I would welcome it in a free market) implement a sort of UBI, but do you really think we would be able to move forward with that without a government having control over it?