Facebook’s Libra must be stopped | Hacker News Reader

Facebook’s Libra must be stopped

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75 pointshhs28 comments

Be careful: Facebook's best weapon in these situations (as has been done wrt "we don't sell your data") is for people to create arguments in the zeitguest that are easily debunked. They are relying upon off-the-cuff hot takes to emerge which they can shoot down effectively so by the time a real analysis of what they're doing can result in a cogent, irrefutable argument, the skeptics have already been "debunked" and they can move forward.

The absolute worst thing you can do when Facebook announces initiative X is, that afternoon, write a one-sided think piece based upon surface-level understanding and emotional appeal that does not methodically include counter-arguments pre-emptively to their inevitable response. With regards to Libra, this article fails completely to address the governance structure and the other fail safes involved to prevent the outcome the author mentioned. This does not mean that insolvency is not an issue, but it does mean that this kind of analysis will be weaponized by Facebook to deflect from more serious analysis that will be forthcoming after experts digest the whitepaper, plan, etc.

It's already known that people advocating for one position will write poorly-defendable opposition pieces to specifically weaken their opponent's position. Forums for debate usually ban that behavior and encourage notifying moderators when it occurs, but at internet scale, I don't know if there's anything you can do about it.

The whole premise of this article is that Libra will be financially insolvent and will need to be bailed out.

This makes a pretty huge leap from "Facebook = bad" to the Libra foundation not having sufficient controls on their treasury and becoming insolvent because they didn't actually back every Libra coin with real currency.

Say what you will about Facebook, I'm certainly not a big fan of their track record on privacy, but they're doing this right. They're setting up an independent foundation with representation from 100 companies, and every one of them has an equal vote. The Foundation will be regulated by swiss banking law, which is one of the most strict in the world, so I would be highly skeptical of any claims that they will be "insolvent" any time soon.

The definition of cryptocurrency includes the language "operating independently of a central bank". These ~100 stakeholders sound somewhat analogous to federal reserve branches. It's a pseudo central bank. The U.S. should be raising huge red flags about Libra. If financial transactions in US dollars decline, and Libra increases, it reduces the United States' ability to conduct effective monetary policy. But, if Libra can't exist in a stable manner, as all other cryptocurrencies have failed to do, perhaps the problem will resolve itself, and the dominate nature of the U.S. Dollar will continue.

If you live in the United States, you don't want Libra to succeed. You don't want your paycheck in Libra, you don't want mortgage payments in Libra. You want a central bank that has some capacity of providing stability to our economy.

This is doubly true because zuck bucks will undermine the position of the Dollar as the world's reserve currency. Facebook is giving yen, euro, etc. a say in the value of the coin.

Also she mentions as why it should be banned the "debacle with money market funds in September 2008" where lots of people tried to cash out at once and "US Federal Reserve stepped in to offer liquidity support." To which I say big deal - I don't think the FED lost any money - why shouldn't it help out to the benefit of investors. That said I don't think it would bother with the Libra or similar.

> That said I don't think it would bother with the Libra or similar.

I think that's the whole point. The author isn't saying the FED bailout was bad, in fact I understood the opposite: they're saying it was a good thing but that it would be hard to pull off in a Libra-based market.

> A run on Libra would require support on a much larger scale, as well as close coordination among all central banks affected by it.

The author doesn't think that this kind of coordination is realistic/feasible in Libra-land, and therefore no bailout would occur, and therefore Libra holders would be left with nothing.

At least that's what I interpreted.

I have no financial background so forgive me if this is an ignorant question, but is there a way to treat runs that would expose insolvency (despite sufficient and careful financial planning) like DDoS attacks that would expose an exhaustion of resources?

I'm not saying Libra is good or bad. What I am interested in is how the article seems to focus on how a global currency could not stand up to a considerable proportion of users converting their holdings to a standard fiat currency. I just wonder if the technological aspect of the currency could help mitigate this in a similar way to how enterprises try to limit the impact of DDoS attacks on their systems.

Again, I know nothing about finance. There may be a really good reason why this is not a good analogy that I just lack the understanding of. But I am certainly curious to learn if that's the case.

One "solution" we tried here in Argentina in 2001 is the Corralito [koraˈlito] https://en.wikipedia.org/wiki/Corralito : Each day you can only extract a small amount of cash from the bank, but you can still transfer the money to another person/sucker using debit or credit cards or checks. [Note: It didn't end well.]

The equivalent to cryptocurrencies is that you can only convert a small amount per day to hard money. With cryptocurrencies it is more difficult to enforce the restrictions "per person", but we had a few trick IRL here too.

The worst part isn't that the currency has no state backing, it's that the currency incorporates the default risk of such a large basket of sovereign currencies and bonds. Illiquidity in any one component of the basket could endanger the liquidity of the entire basket.[1] Although it's hard to say that's definitely worse than the possibility of braniacs in Washington voting during the next downturn to bail out Mark Zuckerberg.

[1] https://www.investopedia.com/articles/economics/09/money-mar...

But now the cat is out of the bag. What if russia or china launch a similar payments system that bypasses banks? No no, facebook's libra must go through.

Russia did, it's called Mir [0]. Its initially in Russia, but expect it to be rolled out across the one belt, one road system.

We are going to be moving in a bi-polar moment very soon. Where in the west, we'll have VISA, SWIFT, etc. In the east you have Russia/China and OBOR countries all using a different payment systems not owned by the US.

[0]: https://www.reuters.com/article/us-russia-cards/mir-card-pay...

>expect it to be rolled out across the one belt, one road system

That's silly, China has plenty of homegrown payment systems, why would it ever need Mir? Nor does it need Russia for its silk road thing.

I don't have the time nor inclination to do a deep dive. At the D-Day celebrations who were together? Putin and Xi [0].

Even back in 2018 [1], China was worker for closer ties to Russia. I could probably find more videos discussing closer relations, but I'm gonna leave it here.

What you probably don't seem to realise or what to know. Russia and China are becoming ever so intertwined on various issues:

1) All border issues settled.

2) Military cooperation and investment into weapons.

3) Integration Payment systems. When Russians travel they use Mir. When China Travel they use UnionPay.

4) Investment from China into Russia.

5) Sharing of technology from both Russia and China to each other and working on the same projects. This is a HUGE one. Both Russia and China sharing technology to improve their economies and AI is a big one.

6) De-dollarizing from their respective economies and trading in Rubles and Yuan. Meaning that the US/EU cannot sanction them and they can trade with Turkey and Iran.

7) Organising the OBOR initiative to trade with those currencies, again circumventing US sanctions.

8) Russia, China, Turkey, Iran, Germany, OBOR makes for a compelling case where both Russia and China share trade and both sit atop a large chunk of the world. Away from US influence.

[0]: https://youtu.be/gdl1Rp6u09Y?t=151

[1]: https://www.youtube.com/watch?v=5V0_bKa4jng

Libra is the worst of all worlds: all the supposed risks of “fiat” currencies the crypto-libertarians complain about, a cartel of VISA and other payment companies to earn from it, plus an added layer of centralization with the reigns in the hands of Facebook, the world’s least trustworthy company since East India Co.

I have no idea why it should succeed. But it probably will because somehow the US still hasn’t figured out how to easily pay back your friend the $10 they gave you the other day.

> "Facebook, the world’s least trustworthy company since East India Co"

We've got big oil ruining the environment, big pharma extorting folks on prescriptions, big defense's insane government contracts, big telecom working with the NSA, credit reporting agencies vacuuming up our info and getting hacked, wells fargo's account fraud and redlining, and HBO with that game of thrones ending...

With all of that, we're really going with facebook for least trustworthy? :)

If nothing else, I think Amazon or Google is more of a contender for East India Co 2.0, given their diverse product offerings :)

Facebook is not diversified (hence their frantic pivot to "crypto"). Amazon has a wide array of offerings. And Google is often painted as "just an advertising company" but Gsuite and Google Cloud are two independent revenue streams that don't rely on ads.

> US still hasn’t figured out how to easily pay back your friend the $10 they gave you the other day.

Cash worked pretty well for a long time. Checks, too. The problem isn’t how to pay your friend back, it’s how to make it so that you actually do pay them back in a timely manner.

My credit union lets me use a "bill pay" that will send a check drawn on the CU (not my personal account) to any address in the USA. And almost everyone has check scanning apps in their bank apps now.

Alternatively, I favor not getting caught up in reimbursing every dime in a friendship and trying to alternate paying for things if you can't split the bill.

There are products (Venmo, Zelle, Popmoney, Quickpay) that solve problem.

And they are only available to customers that have access to the US banking system.

Cash works for everyone.

Except when you need to buy something online.

Or send remotely.

WhatsApp is the defacto "the phone" in many countries. They will simply add Libra payments into it, copying WeChat but on global scale.

Re: the author of the silly article, on of the reasons of the downfall of the West is that women were given (still fortunately limited) decision power about money.

on (sic) of the reasons of the downfall of the West is that women were given (still fortunately limited) decision power about money.

I missed where the OP discusses the downfall of the West (past tense) and/or the role of women being “given” economic power.

Did the author say this? If not, are you claiming this?

I don’t want to rush to condemnation, please clarify what this statement is doing in your comment.

What could possibly go wrong?

¯\_(ツ)_/¯

Hehe.

Great article. I've added the opinion piece / commentary to the Awesome Libra page / collection [1] to cover both sides (that is, for and against). [1]: https://github.com/openblockchains/awesome-libra#articles

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