if nobody produces anything (i.e., everyone "living off" UBI), then of course we're getting nowhere--worse, really, we're all impoverished because the relative price of everything goes sky high: lots of consumers, no producers.

The idea with UBI is that it's a more efficient way to distribute social services (bc recipient just gets money, instead of some bureaucratic hoopla, with rules and regulations, and can just spend that into the economy). In theory the proposals "work" when they're set at low enough a level that most people will continue producing.

A UBI generous enough that it cannibalizes production means, like you say, we all become poor; a UBI low enough means most people keep producing but at the margin (and for the poorest) we cut back.

Whether UBI distorts markets I'm not sure of. If anything, it distorts markets less than government-provided replacements I would think