Cooking the Books I: Monopoly money
In June Mark Zuckerberg announced that in 2020 Facebook would launch its own ‘digital currency’. Since Facebook is the F in the GAFA group of US technology corporations that are widely criticised for harvesting private information for profit and/or not paying enough tax (the others are Google, Apple and Amazon), suspicions, not to say conspiracy theories, immediately arose that there must be some ulterior motive, one beyond making more money that is. Even Ed Conway, Sky News Economics Editor, had an article in the Times (21 June) headlined ‘Facebook currency will help it rule the world. Mark Zuckerberg’s new move is designed to make his company more powerful than any country’.
Is there anything in this? Or is it just sensationalism or the usual left-wing practice of selecting particular capitalist corporations or groups of capitalists to blame for things rather than the capitalist system as such or even the far-right delusion that the Jews are out to rule the world?
What is being proposed is an international payments system based on blockchain technology. This is a technology that allows any transaction to be both uniquely digitalised and unable to be tampered with. It was the basis of the Bitcoin scheme devised by the so-called crypto-anarchists. But the Libra, as the Facebook money is to be called (the same as the l in the old l.s.d.), will be different from Bitcoin in several key respects.
First, it will not be that decentralised but run by a central board on which other corporations, such as Paypal, Visa and Mastercard, participating in it will be represented alongside Facebook.
Second, it will be linked to a bundle of state currencies (dollar, euro, yen, sterling, etc) so that, unlike Bitcoin, its value can be stabilised so it can be used as a means of payment.
Third, it won’t be secret. Secrecy is not built-in to blockchain technology but was something added by the crypto-anarchists for Bitcoin to avoid states knowing who the payers and payees were.
Fourth, it will be profit-making. The corporations participating in it are aiming to make a profit out of the fees charged to users.
Those using the service – in theory all of the 2.3 billion Facebook users – will be able to open an account in Libra by converting their state currency into it and using this to pay for goods and services in any part of the world (except China where Facebook is banned). It is rather surprising that the banks themselves have not come forward with such a system. They may well be forced to now. Even the state central banks might have to,
That this is a bid by Zuckerberg to become the ruler of the world is complete nonsense of course. For that, he would have to control armed force, which he doesn’t. And his scheme will be subject to the control of states. They are bound to introduce regulations to stop Facebook money being used for currency speculation, money laundering and other dodgy dealings, just as they have done with Paypal and the others and would love to do with Bitcoin.
Ellen Brown, the US anti-banker theorist, has suggested (‘Facebook May Pose A Greater Danger Than Wall Street,’ Truthdig, 25 June) that what should happen is that the international payments system be run as a public service by ‘democratised’ central banks. That’s to miss the problem. It, too, would be a colossal waste of information technology that could be more usefully employed, in a needs-oriented world, in organising the logistics of ensuring that everyone on Earth had access to what they needed when they needed it – without payment.