Facebook’s Libra: A Threat to the System

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Hear that noise? That’s my BS detector going off. Who dare impede upon my equanimity this merry morn?

Step forward Jerome Powell! That’s the Chairman of the Federal Reserve — the US central bank — if you don’t know the name.

The New York Times reports that Señor Powell has raised ‘serious concerns’ about ‘money laundering, consumer protection and financial stability’.[1] 

He is referring to Facebook’s cryptocurrency Libra. This has rattled the cosy cages of bankers the world over.

The article notes that the Chairman’s bureaucratic bleating follows on from other central bankers expressing similar concerns.

What I find so hilarious about these guys is that they act as if the system they oversee has any of these qualities in the first place…

The Fed has been in place since 1913.

The American economy has lurched through boom and bust the entire time regardless. Where was the ‘financial stability’ in 2008?

And the Royal Commission here in Australia just exposed the level of concern the banks have for ‘consumer protection’.

I don’t know about you, but I got the impression they don’t give a rat’s about customers, except to the extent they can be gouged for fees[2] and interest — even if they’re dead.[3]

Blah blah. Money laundering, tax evasion and consumer protection are all smokescreens to obscure the real issue.

Facebook’s Libra’s project is an encroachment into a government-protected industry designed to keep the status quo (read: monopoly profits and control) in place.

You and I, in a free market, are more than capable of exchanging value via whatever medium of exchange we like. If we choose to use Facebook’s Libra, what exactly is the problem?

The history of money shows a diverse range of options humans have used over the centuries: Tobacco, gold coins, tally sticks, paper notes, and now bitcoins and other crypto.

But we can’t have the little people getting out from under the boot of the powers that be, can we?

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They might just catch on to the fact that banks create credit out of nothing (but don’t let Facebook do it!) and, ludicrously and obscenely, do it with taxpayer backing and subsidies in place.

That’s why it’s almost inevitable that governments will move to tax and regulate cryptos, possibly invoking legal tender laws.

Or there’s a second a play on this theme. The central banks will issue national currencies based on blockchain. They’ll declare them legal tender and anything else null and void.

Don’t laugh. The People’s Bank of China (PBoC) is already working on it.[4] 

A deputy director of the PBoC also says Libra isn’t sustainable ‘without the support and supervision of central banks’.

Why?

Don’t be fooled. There is no reason why. Central banks are overrated in their usefulness.

Their main monetary tool, moving interest rates, is practically useless. That’s why Europe is stuck in low growth despite having zero rates for years now.

This ECB (European Central Bank) policy is also killing the German banking system. Look at the decline in German banks’ income in recent years…

Source: Bloomberg

Why do you care? Germany was one of the few countries that did not have a real estate bubble before 2008 (unlike Ireland, Spain, the UK, Portugal and Greece).

That’s because it’s large network of community banks do what banks are supposed to do: Lend money to productive businesses (as opposed to inflating the cost of housing like we do here in Australia).

The European Central Bank is now killing these fruitful relationships. It will bring about the decline of German industrial power if it continues.

It’s also brewing a real estate bubble in Germany (and why Berliners are protesting and calling for rent caps).

The world will shake when the German economy busts out. Watch this space.

Why would the ECB pursue such a policy?

Central bank power grab coming

An academic I follow suggests it’s slowly breaking the private banks to assume further control itself.

Hence another reason why we can expect central banks to issue their own cryptocurrencies.

A central bank digital currency may sound like a reasonable proposition. I don’t think so.

The next step would be to abolish cash, giving the central bank total control and a full record of your financial life. There’s no freedom or privacy in such a system.

China is a perfect example. The government over there is creating a ‘social credit score’ based on behaviour.[5]

If you don’t please the government, you can be denied travel rights or put on a blacklist in your local community.

I do urge you to follow the Facebook Libra story. It’s a perfect example of how government power will manifest to crush it.

Facebook might monetise your data, but it doesn’t have the power to imprison you for tax evasion or for using ‘unlawful’ money.

The government does, and won’t be shy about using it if the threat is big enough.

Facebook’s Libra is big enough.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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