Years ago (before 2017), were you one of those idiots that totally missed out on buying Facebook or Bitcoin? If so, join the club—so was I!
One lesson I learned from these ‘disrupters’ is that I will never underestimate anything in the mobile-service or crypto-commodity space again—and especially if something some day combining both comes along.
Remember that guy testifying in front of Congress in February 2019 dismissing the ‘ideas’ of MMT? Here’s what he recently said about Facebook’s Libra: “Libra is a new thing. We’re looking at it very carefully. The authority for overseeing it is going to be in a number of places. Given the possible scale of it, I think that our expectations from a consumer-protection standpoint and from a regulatory standpoint, are going to be very, VERY high.”—Fed Chair Powell, at the Council on Foreign Relations in NY, 06/25/2019
In other words, the central banker of the largest economy on earth isn’t taking political ‘prescription’ MMT (aka #FakeMMT) seriously; but he is taking people combining mobile-service & crypto-commodities seriously.
My understanding so far, Libra is a work in progress. Rather than detail any specific technical design, its whitepaper describes ‘aspirations’ that will be ‘modified’ along the way ‘to satisfy regulators, resolve conflicts, attract users, please investors and deal with anticipated users’. Meaning that all of the following is subject to change:
For now, for those that like their digital assets being ‘sound money’, Libra will be a ‘stablecoin’, which means it will have a 100% ‘reserve requirement’ (it will be 100% pegged, however not pegged 1:1 to the US dollar but fully-backed by the value of a basket of worldwide currencies in cash +/or invested in worldwide gov’t bonds).
For now, for those that like their digital assets being ‘decentralized’, Libra, unlike credit cards that are partnered with banks that are heavily regulated by gov’t, will not be partnered with banks (because Libra will live on smartphones in securely stored in digital wallets—and only ‘linked’ to bank accounts).
For now, for those that like their digital assets being ‘monetized’, Libra will be an open ecosystem, meaning it will be open to any financial service (not just for making payments but also including financial institutions offering credit or loans denominated in Libra).
“Facebook is building a digital wallet called Calibra for Apple and Android-powered smartphones that will integrate with Facebook’s Messenger and WhatsApp mobile services which are now used by over a BILLION people. Over time, as the system grows and it is built into more products and services, there will be more things you can do with Libra,” Calibra VP Kevin Weil says.
Perhaps MMT academics and the rest of the MMT community are barking up the wrong tree?
The political ‘prescription’ MMT mentality today is not much different than any other garden-variety charity (with the only exception being that MMTers aren’t talking about giving THEIR money away of course).
My guess, once Libra becomes firmly established, it’s not a matter of if, but a matter of when, Libra gets cut loose from that ‘peg’. Then who knows, as a marketing promotion, Libra could announce that they will create an additional issuance for the sole purpose of, let’s say, to be spent on free college scholarships around the globe. If the ‘value’ of Libra were to continue to remain steady (meaning the ‘users’ continued to approve), then just like any ‘unlimited’ fiat, the sky’s the limit for what other progressive initiatives that crypto-commodities could fund.
So, in the not-too-distant future, if MMTers had the ears of the ‘issuers’ of a nonconvertible free-floating Libra, these MMTers could become influential ‘policymakers’ that sway decisions on how to spend Libra for the public purpose and the general welfare. Which may appeal to both worldwide Libra users, along with the Libra issuers at Facebook—who are politically-aligned to MMTers.
Very similar to fiscal policy-making in the public sector, positioning yourself as an organization in the private sector that directs where charitable dollars go, that’s where the action is too. For example, the folks at Real Progressives—who see the writing on the 2020 election result wall—have already started the process of forming a tax-exempt nonprofit organization.
Maybe a ‘Mosler Institute for Functional Finance’ (that reinvents itself as an MMT-savvy force to reckon with on Boards of Directors instead of in Halls of Congress) would be taken seriously enough to reach critical mass?
Besides, that’s where the (newly-printed) money is.
Thanks for reading,
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