So, the Bitcoin and Libra speculation these days has finally eclipsed tulip-mania and proceeded into the weeds from whenst only black swans return. The news is balderdash and so scarce of substance that the context has become the substance. To that end, I think some things need to be stated aloud. Libra can become the world reserve, in a very technical, real, and highly unlikely way. So can Bitcoin. Then, reality.
The financial environment of 2019 has two thousand white papers worth of rationale to skirt saying the unimaginable aloud: the dollar, as a unit of account, is fraudulent. It’s not a unit of measure with a basis in science and is not an independently reference-able and experimentally-duplicable standard. It’s a controlled medium of exchange that is controlled by a small group. That medium, through methods you and I would not employ, has been financially engineered to a net result of a rise in living standards of 7.5B people. The horrors and the successes, like it or not, the dollar was a net positive to the species…
…and it’s time to move on. Any measure of self respect that doesn’t include the willingness to protect your own hard work is not respect of self. You, human, need to understand that the reason America is peaceful is because it’s prosperous. It’s prosperous through stable trade and adjudication. The systems that stability is managed on have been mismanaged. While we can drink and throw pretzels at the politicians when they come on tv, most couldn’t do that job, including the ones doing it. Incompetency yields the same results as fraud without the satisfaction of justice, just the taste of defeat and a mop.
Libra, for good or ill, represents a mechanic that has not really existed before, at least on a scale that’s relevant. When you look down upon the globe, you can see the bailiwicks of currencies. The US dollar is the foundation and it’s being briskly abandoned. While this may not mean a lot to you at the pump, macro-rejection of the dollar eventually comes home. Panic time? I dunno. No one does, unless they are sleeping with someone at the Fed.
Let’s make the relevant distinctions. Three systems and two methods are discusses here. Private, corporate, and government issued money systems have relevant Venn diagrams with the two methods, fiat and open distributed ledger. No need to get into private fiat; let’s live in the now. The open distributed ledger, regardless of who assembles and maintains that system, is superior to fiat in every way. The end. Well, some people will tell you you need a central control point. That’s false and even if one would like to believe that’s an opinion, it’s not their place to mandate it upon me. So, again, the end. Government organizations are now adopting blockchain systems, but altering them to function as fiat. Again, the fraud surfaces they require to survive must be installed by mandate, lest you #walkaway in a manner that makes mass policing impossible.
Private, decentralized currencies are owned by no one. There has been private money issuance in the past. There are instances of good and bad. Andreas is the man on this for crypto. These systems are “governed” by code, not by people. You participate by those rules and everyone has the same rule set.
Government money is a centrally controlled endeavor with control surfaces that can be used for fraud if used properly and can be considered fraud via their use at all. However, there are arguments for financial centralization for efficiency reasons. The germane mechanic here is the understanding that not all parties participate in that system on an equal playing field by design. The real reason the end user wants a private money over a government one is obvious, the objective participation level. Be it by “quantitative easing” or “lender of last resort” or any other asinine mechanic that allows one party to counterfeit your medium of exchange and devalue it, you do not want this in your life, objectively. No one wants this and the private systems, see Web 3.0 as Mike Novagratz describes here, are here to fix this fraud mechanic in the way we all trade.
Corporate money, again, is not new. Historical examples, knock your socks off. However, Libra, Venus, et al, represent an oddity that’s unique to having global commerce at home. Throughout history, exchange rates were what they were, caveat emptor. Then, a global reserve was established before any of us were born. One coin to rule them all, and it has. History is horror and the dollar horrors came with global internet and air conditioning. As you enjoy both, be at least uncomfortable enough to think about how your life is swiped from your pocket, as if by magic, by the Federal Reserve bank printing more money. Well, now corporations have the ability to gut a government by offering a better currency option and depriving any regime sustaining on that fiscal oxygen, including the world reserve.
There are two dynamics I’d like to point out about corporate currencies, one legal and one financial. The legal one is simple; a government is a legal fiction and so is a corporation. Legal rules for non-humans that allow humans to do stuff other humans can’t is dumb. Pretending currency issuance is only the job of one legal fiction and not another is also dumb. Why? It’s no ones “job” to issue a currency. Currency is a service you pay for, like it or not. How that service works matters for you so that you may get your life back out of the currency that you put it into. Well, the corporate money isn’t trying to fiat their blockchain; they are providing legitimate competition even though the legal logic of “Who came first, the corporation or he who defines what a corporation is”?” question may be fed to a human centipede for digestion.
The dynamics of currency are not very difficult but the particulars look like an Easter egg hunt at David Copperfield’s house. If you don’t know how something works, it’s hard to get quality. If you do, it’s hard to get and keep value. It’s not a new problem; it does have new solutions.
The financial mechanic, though, is a real social good to those people not near where you live. If anyone with access to Facebook can toss their money at X conversion into Libra, as a choice or as a temporary way out of fiat, those people will be allowed to avoid a first-hand currency crisis; I don’t care if their government has one. Libra houses fiat. Those currencies can devalue and Libra allows arbitrage opportunities for currency shocks internal to the pool and another currency to remain liquid in if being the dollar, for any reason, is not preferred by metric. This is not gloom-and-doom talk. This is the-world-is-changing talk.
I will also submit that Libra is particularly susceptible to being used as a tool to manipulate perception during a devaluation. If the fiat-pool devalues together, Libra to the pool exchange ratios should remain stable. If you don’t look how the dollar, euro, pound, and Libra are moving in comparison to another measure, you’ll be getting bled again as other things slowly devalue against those large pools of perceptive strength.
Conclusion: Currency talks are exhausting. People don’t take the time because it’s difficult and if they knew how many hours of their life they lose in this way, they’d be happy to take a legal and financial hygiene class and get their lives back.
P.S. : BTC is mostly mined in China. 95% of the coins are in 5% of the wallets. NIRP and ZIRP are not normal; they are signals that fiat is going the way of the dodo. It appears that BTC may be very controlled; Cuban and O’Leary did a 180; Dan Pena had a rant about who was involved. Then, Pat Byrne got on FoxBusiness and named Peter Strozk as the guy who got him involved in espionage. IMHO, BTC price is fore running a crash and the fraudulent markets will begin getting cleaned up as the swamp gets drained. The paving stones of the Trump 2020 campaign are perp walks. Whenever he needs 3 points in the polls, he’ll march out another fraud, rapist, or murderer. That’s going to hit markets. I can’t tell you the last time I had this much optimism.
Donnie Gebert is a former military intelligence analyst who served in the US Army and Navy.