{"id":136499,"date":"2019-07-01T12:02:33","date_gmt":"2019-07-01T11:02:33","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=136499"},"modified":"2019-07-08T12:03:01","modified_gmt":"2019-07-08T11:03:01","slug":"libra-facebooks-audacious-bid-for-global-monetary-control","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2019\/07\/libra-facebooks-audacious-bid-for-global-monetary-control\/","title":{"rendered":"Libra: Facebook\u2019s Audacious Bid for Global Monetary Control"},"content":{"rendered":"

27 Jun 2019 – <\/em>Payments can happen cheaply and easily without banks or credit card companies. This has now been demonstrated \u2013 not in the United States but in China. Unlike in the US, where numerous firms feast on fees from handling and processing payments, in China most money flows through mobile phones nearly for free. In 2018 these cashless payments totaled<\/a> a whopping $41.5 trillion; and 90% were through Alipay and WeChat Pay, a pair of digital ecosystems that blend social media, commerce and banking. According to a May 2018 article in Bloomberg<\/em> titled \u201cWhy China\u2019s Payment Apps Give U.S. Bankers Nightmares<\/a>\u201d:<\/p>\n

The nightmare for the U.S. financial industry is that a technology company\u2014whether from China or a homegrown juggernaut such as Amazon.com Inc. or Facebook Inc.\u2014replicates the success of Alipay and WeChat in America. The stakes are enormous, potentially carving away billions of dollars in annual revenue from major banks and other firms. <\/em><\/p><\/blockquote>\n

That threat may now be materializing. On June 18, Facebook unveiled a white paper<\/a> outlining ambitious plans to create a new global cryptocurrency called Libra, to be launched in 2020. The New York Times says<\/a> Facebook has high hopes that Libra will become the foundation for a new financial system free of control by Wall Street power brokers and central banks.<\/p>\n

But apparently Libra will not be competing with Visa or Mastercard. In fact the Libra Association lists<\/a> those two giants among its 28 soon-to-be founding members. Others include Paypal, Stripe, Uber, Lyft and eBay. Facebook has reportedly courted dozens of financial institutions<\/a> and other tech companies to join the Libra Association, an independent foundation that will contribute capital and help govern the digital currency. Entry barriers are high, with each founding member paying a minimum of $10 million to join. This gives them one vote \u200a(or 1% of the total vote, whichever is larger) \u200ain the Libra Association council. Members are also entitled to a share proportionate to their investment of the dividends earned from\u00a0 interest on the Libra reserve \u2013 the money that users will pay to acquire the Libra currency.<\/p>\n

All of which has raised some eyebrows, both among financial analysts and crypto activists. A Zero Hedge commentator calls Libra \u201cFacebook\u2019s Crypto Trojan Rabbit<\/a>.\u201d An article in FT\u2019s Alphaville<\/em> calls it \u201cBlockchain, but Without the Blocks or Chain<\/a>.\u201d Economist Noriel Roubini concurs, tweeting<\/a>:<\/p>\n

It will start as a private, permissioned, not-trustless, centralized oligopolistic members-only club. So much for calling it \u201cblockchain\u201d. \u2026 [I]t is blockchain in name only and a monopoly to extract massive seignorage from billions of users. A monopoly scam. <\/em><\/p><\/blockquote>\n

Another Zero Hedge writer calls Libra \u201cThe Dollar\u2019s Killer App<\/a>,\u201d which threatens \u201cnot only the power of central banks but also the government\u2019s money monopoly itself.\u201d<\/p>\n

From Frying Pan to Fire?<\/strong><\/p>\n

To the crypto-anarchist community, usurping the power of central banks and governments may sound like a good thing. But handing global power to the corporate-controlled Libra Association could be a greater nightmare. So argues Facebook co-founder Chris Hughes, who writes<\/a> in The Financial Times<\/em>:<\/p>\n

This currency would insert a powerful new corporate layer of monetary control between central banks and individuals. Inevitably, these companies will put their private interests \u2014 profits and influence \u2014 ahead of public ones. . . . <\/em><\/p>\n

The Libra Association\u2019s\u00a0goals<\/a>\u00a0specifically say that [they] will encourage \u201cdecentralised forms of governance\u201d. In other words, Libra will disrupt and weaken nation states by enabling people to move out of unstable local currencies and into a currency denominated in dollars and euros and managed by corporations. . . .<\/em><\/p>\n

What Libra backers are calling \u201cdecentralisation\u201d is in truth a shift of power from developing world central banks toward multinational corporations and the US Federal Reserve and the European Central Bank.<\/em><\/p><\/blockquote>\n

Power will shift to the Fed and ECB because the dollar and the euro will squeeze out weaker currencies in developing countries. As seen recently in Greece, the result will be to cause their governments to lose control of their currencies and their economies.<\/p>\n

Pros and Cons<\/strong><\/p>\n

In a June 9 review<\/a> in Forbes,<\/em> Caitlin Long, co-founder of the Wyoming Blockchain Coalition, agreed that Libra was a Trojan horse but predicted that it would have some beneficial effects. For one, she thought it would impose discipline on the US banking system by leading to populist calls to repeal their corporate subsidies. The Fed is now paying its member banks 2.35% in risk-free interest on their excess reserves, which this year is projected to total $36 billion of corporate welfare to US banks \u2013 about half the sum spent on the US food stamp program. If Facebook parks its entire US dollar balance at the Federal Reserve through one of its bank partners, it could earn the same rate. But Long predicted that Facebook would have to pay interest to Libra users to avoid a chorus of critics, who would loudly publicize how much money Facebook and its partners were pocketing from the interest on the money users traded for their Libra currency.<\/p>\n

But that was before the Libra white paper came out. It reveals that the profits will indeed be divvied among Facebook\u2019s Libra partners<\/a> rather than shared with users. At one time, we earned interest on our deposits in government-insured banks. With Libra, we will get no interest on our money, which will be entrusted to uninsured crypto exchanges, which are coming under increasing regulatory pressure due to lack of transparency and operational irregularities.<\/p>\n

UK economics professor Alistair Milne points<\/a> to another problem with the Libra cryptocurrency: unlike Bitcoin, it will be a \u201cstablecoin,\u201d whose value will be tied to a basket of fiat currencies and short-term government securities. That means it will need the backing of real money to maintain its fixed price. If reserves do not cover withdrawals, who will be responsible for compensating Libra holders? Ideally, Milne writes, reserves would be held with the central bank; but central banks will be reluctant to support a private currency.<\/p>\n

Caitlin Long also predicts that Facebook\u2019s cryptocurrency will be a huge honeypot of data for government officials, since every transaction will be traceable. But other reviewers see this as Libra\u2019s most fatal flaw. Facebook has been called Big Brother, the ultimate government surveillance tool<\/a>. Conspiracy theorists link<\/a> it to the CIA and the US Department of Defense. Facebook has already demonstrated that it is an untrustworthy manager of personal data. How then can we trust it with our money?<\/p>\n

Why Use a Cryptocurrency at All?<\/strong><\/p>\n

A June 20th<\/sup> CoinDesk article<\/a> asks why Facebook has chosen to use a cryptocurrency rather than following WeChat and AliPay in doing a global payments network in the traditional way. The article quotes Yan Meng, vice president of the Chinese Software Developer Network, who says Facebook\u2019s fragmented user base across the world leaves it with no better choice than to\u00a0borrow<\/a>\u00a0ideas from blockchain and cryptocurrency.<\/p>\n

\u201cFacebook just can\u2019t do a global payments network via traditional methods, which require applying for a license and preparing foreign exchange reserves with local banking, one market after another,\u201d said Meng. \u201cThe advantage of WeChat and AliPay is they have already gained a significant number of users from just one giant economy that accounts for 20 percent of the world\u2019s population.\u201d They have no need to establish their own digital currencies, which they still regard as too risky.<\/p>\n

Meng suspects that Facebook\u2019s long-term ambition is to become a stateless central bank that uses Libra as a base currency. He wrote<\/a>\u00a0in a June 16 article, \u201cWith sufficient incentives, nodes of Facebook\u2019s Libra network would represent Facebook to push for utility in various countries for its 2.7 billion users in business, investment, trade and financial services,\u201d which \u201cwould help complete a full digital economy empire.\u201d<\/p>\n

The question is whether regulators will allow that sort of competition with the central banking system. Immediately after Facebook released its Libra cryptocurrency plan, financial regulators in Europe voiced<\/a>\u00a0concerns over the potential danger of Facebook running a \u201cshadow bank.\u201d Maxine Waters, who heads the Financial Services Committee for the US House of Representatives, asked<\/a>\u00a0Facebook to halt its development of Libra until hearings could be held. She said:<\/p>\n

This is like starting a bank without having to go through any steps to do it. . . . We can\u2019t allow Facebook to go to Switzerland and begin to compete with the dollar without having any regulatory regime that\u2019s dealing with them.<\/em><\/p><\/blockquote>\n

A Stateless Private Central Bank or a Publicly Accountable One?<\/strong><\/p>\n

Facebook may be competing with more than the dollar. Jennifer Grygiel, Assistant Professor of Communications at Syracuse University, writes<\/a>:<\/p>\n

. . . [It] seems that the company is not seeking to compete with\u00a0Bitcoin<\/a>\u00a0or other\u00a0cryptocurrencies<\/a>. Rather, Facebook is looking to replace the existing\u00a0<\/em>global financial system<\/a><\/em>\u00a0with an all-new setup, with Libra at its center.<\/em><\/p>\n

At least at the moment, the Libra is being designed as a form of\u00a0<\/em>electronic money<\/a><\/em>\u00a0<\/em>linked to many national currencies<\/a><\/em>.\u00a0<\/strong>That has\u00a0<\/em>raised fears<\/a><\/em>\u00a0that Libra might someday be recognized as a sovereign currency, with Facebook acting as a \u201c<\/em>shadow bank<\/a><\/em>\u201d that could compete with the central banks of countries around the world. <\/em>\u00a0<\/em><\/p><\/blockquote>\n

Caitlin Long thinks Bitcoin rather than Libra will come out the winner in all this; but Bitcoin\u2019s blockchain model is too slow, expensive and energy intensive to replace fiat currency as a medium of exchange on a national scale. As Josh Constine writes<\/a> on Techcrunch.com<\/em>:<\/p>\n

[E]xisting cryptocurrencies like Bitcoin and Ethereum weren\u2019t properly engineered to scale to be a medium of exchange. Their unanchored price was susceptible to huge and unpredictable swings, making it tough for merchants to accept as payment. And cryptocurrencies miss out on much of their potential beyond speculation unless there are enough places that will take them instead of dollars . . . . But with Facebook\u2019s relationship with 7 million advertisers and 90 million small businesses plus its user experience prowess, it was well-poised to tackle this juggernaut of a problem.<\/em><\/p><\/blockquote>\n

For Libra to scale as a national medium of exchange, its governance had to be centralized rather than \u201cdistributed.\u201d But Libra\u2019s governing body is not the sort of global controller we want. Jennifer Grygiel writes:<\/p>\n

Facebook CEO Mark Zuckerberg . . . is declaring that he wants Facebook to become a virtual nation, populated by users, powered by a self-contained economy, and headed by a CEO \u2013 Zuckerberg himself \u2013 who is\u00a0<\/em>not even accountable to his shareholders<\/a>. . . . <\/em><\/p>\n

In many ways the company that Mark Zuckerberg is building is beginning to look more like a Roman Empire, now with its own central bank and currency, than a corporation. The only problem is that this new nation-like platform is a controlled company and is run more like a\u00a0<\/em>dictatorship<\/a>\u00a0than a sovereign country with democratically elected leaders.\u00a0<\/em><\/p><\/blockquote>\n

A currency intended for trade on a national—let alone international—scale needs to be not only centralized but democratized, responding to the will of the people and their elected leaders. Rather than bypassing the existing central banking structure as Facebook plans to do, several groups of economists are proposing a more egalitarian solution: nationalizing and democratizing the central bank by opening its deposit window to everyone. As explored in my latest book, \u201cBanking on the People: Democratizing Money in the Digital Age<\/a>,\u201d these proposals could allow us all to get 2.35% on our deposits, while eliminating bank runs and banking crises, since the central bank cannot run out of funds. Profits from the public medium of exchange need to return to the public, rather than enriching an unaccountable, corporate-controlled Facebook Trojan horse.<\/p>\n

________________________________________<\/em><\/p>\n

\"\"<\/a><\/em><\/p>\n

Ellen Brown <\/em>is a member of the TRANSCEND Network for Peace Development Environment<\/a>,<\/em> an attorney, founder\/chairperson of the\u00a0<\/em>Public Banking Institute<\/a>, and author of twelve books including <\/em>Web of Debt<\/a> and\u00a0<\/em>The Public Bank Solution<\/a>, which explores successful public banking models historically and globally. Her 300+ blog articles are at\u00a0EllenBrown.com<\/a>.<\/em><\/p>\n

 <\/p>\n

Go to Original \u2013 ellenbrown.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

On June 18, Facebook unveiled a white paper outlining ambitious plans to create a new global cryptocurrency called Libra, to be launched in 2020. It has high hopes that Libra will become the foundation for a new financial system free of control by Wall Street and central banks. But it will not be competing with Visa or Mastercard, which are among its 28 soon-to-be co-founding members, including Paypal, Stripe, Uber, Lyft and eBay.<\/p>\n","protected":false},"author":4,"featured_media":104717,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[40,55,62,146,49],"tags":[910,1009,232,120,354,1007,487,651,1226,234,1221,109,287,1220,985,1006,1109,911,172],"class_list":["post-136499","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-transcend-members","category-capitalism","category-media","category-economics","category-current-affairs","tag-big-brother","tag-big-tech","tag-capitalism","tag-conflict","tag-economics","tag-facebook","tag-human-rights","tag-justice","tag-libra","tag-media","tag-monopoly","tag-politics","tag-power","tag-privacy","tag-social-justice","tag-social-media","tag-spying","tag-surveillance","tag-west"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/136499","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=136499"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/136499\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media\/104717"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=136499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=136499"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=136499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}