The Facebook Libra Global Currency – A Corporate Dream Or A Nightmare?

Gerry Brady July 12, 2019 184 No Comments

Facebook released a White Paper last week called the Official Libra White Paper. It stated — the “mission is to enable a simple global currency and financial infrastructure that empowers billions of people.” Simple?

Of course, Facebook defined itself as a White Knight with a noble quest, coming to the aid of 1.7 Billion people on the planet who have no bank account.

They can see clearly what is wrong with current offerings — “Mass-market usage of existing blockchains and cryptocurrencies has been hindered by their volatility and lack of scalability, which have, so far, made them poor stores of value and mediums of exchange.”

They are promising “a giant leap forward toward a lower-cost, more accessible, more connected global financial system”. But I note that no comment or analysis is made as whether or not this is desirable for the people on the globe.

They go on to say — “The world truly needs a reliable digital currency and infrastructure that together can deliver on the promise of “the internet of money.” Why?

This could be interpreted as a direct threat from a group of corporate entities to the US Dollar Empire which is already a digital currency (as are all national currencies). It could also be interpreted as a direct threat to all national currencies.

They then outline key elements of the project as — “It is built on a secure, scalable, and reliable blockchain; It is backed by a reserve of assets designed to give it intrinsic value; It is governed by the independent Libra Association tasked with evolving the ecosystem.”

In other words, they are going to use a new Blockchain called the Libra Blockchain which will presumably promise to be a better data base management system than the Bitcoin Blockchain, the Ethereum Blockchain and others currently in use.

They are proposing a global “currency” called a Libra and they are promising stability in its price. Each Libra will be backed by a basket of bank deposits and short-term government securities. In other words, the “Libra” will be a Stablecoin backed by the value of the basket of cash and cash-like securities denominated in a range of currencies from “stable and reputable” central banks. This sounds very much like the SDR — Special Drawing Rights basket of currencies used by the IMF as an accounting device.

They acknowledge that the Libra will have to be accepted for use by many people before it can really be called a currency. That is important as general acceptance and use is the hallmark of what defines a currency. A currency cannot be imposed on a society (except by force). It must erupt from the need to solve a social problem and move towards general acceptance.

Facebook says that the Governance of the Libra will be the task of the Libra Association registered in Geneva, an independent, not for profit organization. Founding members of that Association are predominantly corporations — 6 payments industry companies (including Mastercard and VISA), 7 technology companies (including Facebook), 2 telecommunications companies, 4 Blockchain companies, 5 venture capital companies and 4 non-profit organizations. The great majority are US based. They hope to expand this number to 100 members by 2020.

Facebook has created a subsidiary company called Calibra to “separate” data and “operate services” on top of the Libra network. Not much is mentioned about Calibra in the White Paper which begs the question — is Libra a Trojan Horse and Calibra the invading army? The Libra blockchain will begin as a private blockchain but will (somehow) transition to a public blockchain within 5 years.

Again somehow, the Libra is supposed to have “low inflation” as a feature. This implies a volume control mechanism. A notable feature is that the Libra Association (the governance body based in Geneva) will have the sole power to create Libra and to destroy it. New Libra can only be created with direct backing from an established fiat currency and can only be destroyed when the securities representing the fiat currencies are sold. This means that Libra cannot be created over and above the money supply of accepted fiat currencies, thus it could be interpreted as “non inflationary”. There is no mention of the possibility of credit being created in loans denominated in Libra. Either they have not thought of this… or perhaps they have.

Since “authorized resellers” will always be able to sell Libra coins to the reserve at a price equal to the value of the basket, the Libra Reserve acts as a “buyer of last resort.” This means that the Libra Association effectively has some features of a private, global central bank owned by a group of corporations.

“The association will work to establish a geographically distributed and regulated group of global institutional custodians for the reserve.” Who?
“The association will establish policies and procedures that establish how the association can change the composition of the reserve basket.” How? And When?

You can read the whole Facebook White Paper here: https://libra.org/en-US/white-paper/

The word Trust does not appear in it.

I am not a fan of any “global currency” project and that includes Bitcoin and all the other “Alt coins”. I am a fan of many new local, regional currencies circulating inside nations in cooperation with the generally accepted national fiat currencies circulating outside nations. I am also not a fan of single, supra-national currencies that seek to bind a group of nations, such as the EURO.

Please don’t forget that Fees will be extracted from the Libra system — presumably by Calibra, a subsidiary of Facebook — thus making it a giant global taxation system, run by Facebook…. forever. Facebook Forever — a Corporate Dream.

Then there is the problem of inadequate asset backing for a corporate “global currency” to run $ 80 Trillion of GDP transactions globally. I suggest that Facebook return this project to the drawing board where it should remain. It appears clear to me that Libra can never be a global currency because its design is faulty. This is the exact same reason why Bitcoin and other so-called “crypto-currencies” and “alt coins” can never be global currencies either. They cannot and should not be imposed upon the people without representation.

We already have a global currency in slow decline called the US Dollar and it is the root cause of much global tension.

Some History

The Father of modern Fascism, the Italian dictator Benito Mussolini ruled Italy with an iron fist from 1925 – 1945 and joined Adolf Hitler as an ally in World War Two. He described fascism as “…Corporatism because it is a merger of state and corporate power”.

The ultimate corporate dream would be for a group of self appointed, technocratic corporations to govern unanswerable to the people and issue a supra-national, private global currency while collecting taxes and as much personal data from users as possible.

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