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MARC STEINER Welcome to The Real News Network. I'm Marc Steiner. Great to have you all with us. When Facebook announced the launch of a new currency some call it a cryptocurrency, some say it's not, but it's called Libra the reaction was swift and negative from many quarters from left to right, libertarian to socialist, from progressive and conservative experts alike. But many differed on why Libra would be a bad idea. Maybe it's not. A cryptocurrency controlled by Facebook may turn Facebook into an even more state-like institution, some say, with its own internal economy, the ability to impose economic policies on his customers as if they were citizens of a state. Most important for most analysts and people paying attention to any of this is that Libra seems to give Facebook even more power to control our private data with the ability to use the unprecedented alleged currency for a tool for surveillance. Will that happen?
In the white paper written by Facebook about Libra, the following short text was buried, which might shed light on what Libra is really all about and many have used this one piece to talk about it. The quote is, "An additional goal of the association is to develop and promote an open identity standard. We believe that decentralized and portable digital identity is a prerequisite to financial inclusion and competition." Well, to parse through all of this jargon and confusion, we once again turn to Bill Black. Bill Black is of course the author of The Best Way to Rob a Bank is to Own One. He teaches Economics and Law at the University of Missouri-Kansas City, was the Executive Director of the Institute for Fraud Prevention from 2005 to 2007, and a central figure in exposing the congressional corruption during the savings and loan crisis. Bill, good to have you back.
BILL BLACK Thank you.
MARC STEINER So let meWhere do I begin? There's so many places to start this. Let me just start with, can we just take maybe a minute and a half for you once again, for our viewers, to define this notion of cryptocurrency and what Libra has to do with that?
BILL BLACK Okay, but the reason there's what you refer to as confusion is because there's confusion inherent in this design, and here's what I mean by that. Libra can be changed at any time to do virtually anything by a two-thirds vote of an "association." This association is made up of the usual for-profit actors in the world the big credit card companies, etc. And more private for-profit entities can buy-in. So they can make Libra into most anything that is conceivable to make, and any promises that it won't be used in certain ways are completely hollow because Facebook is not going to run Libra like we would trust. If Facebook did run Libra, but [laughs] Even if Facebook gave us promises, which it's done in the past and lied about, and somehow we believed that this would never occur again, and Facebook had turned over a new leafFacebook doesn't control it! A bunch of other really nasty heads of these control it.
MARC STEINER Like who? Like what? What do you mean by that? Like what?
BILL BLACK Like the credit card companies and such own it and whoever wants to. Whoever finds that it would be sensible to take over this organization can take it over, get a two-thirds vote, and then Libra, they can make into almost anything.
MARC STEINER Well, let me just ask a quick question here because there's a lot to parse through in the 10-15 minutes that we have together. So what do youWho are these organizations? What do we mean by that? I mean, Libra was created by Facebook as allegedly some kind of account mechanism. People could buy things online and whatever else that we can do, which we'll talk about, but who is this association? What do they have to do with Libra if it was founded by somebody else?
BILL BLACK Okay, so this is in large part "watch my left hand, watch my left hand." [laughs]
MARC STEINER I never did trust you, Bill. [laughs]
BILL BLACK I can understand, and I think no one trusts Facebook. As you said, this is the universally hated corporation. The right is likeThe libertarians are writing saying, "God, the government has to protect us from these people." [laughs]
MARC STEINER And we all use it.
BILL BLACK That type of thing. And so, is it a cryptocurrency? Well that's in the never, never land of what the hell the definitions are. I would say, no. What it is, is a system that uses blockchain, but anybody can use blockchain. Blockchain is simply a technology that widely distributes information and keeps a registry so that certain information, not nearly most frauds, much less all frauds, are more difficult. All right. Now, it's still vulnerable to all kinds of computer attacks that would create all kinds of spurious information and, you know, bitcoin, for example, would break down instantly if it were subject to an effective attack. That way they created tons and tons by which I mean literally millions of pieces of false information so anything that uses blockchain is subject to that kind of computer harassment.
The currency isn't really a currency, right? It says, what you get is a right to something that is created in a reserve. Who controls this reserve fund? Well, that would be this association of for-profit folks of which all the worst actors in the world [laughs] are going to be members, right? And already are such members. So what can they do? They can buy currency, but if they do thatYou don't pay interest on currency, you may have noted, and these clowns are going to want to make lots of interest. So they're also allowed to do bonds and other such things. And as I noted, with a two-thirds vote, they can invest in anything like toxic mortgages.
MARC STEINER So let me ask my next question here with that, so I was going to wait until later in the conversation to do this but let me do it now. So as a person who was a regulator, should regulators take an interest in this? I mean, when we have a financial crisis, they always seem to start with an unregulated sector somewhere, right? And Libra will in effect, some people have written that Libra in effect will be like a giant shadow bank. And if regulators are concerned about that effect, Libra's effect on anything financial stability you know, they'll have to come up with a solution. So does that mean that Facebook has to become a regulated bank subject to capital liquidity requirements? You know, like what happened to Goldman-Sachs or anybody else? I mean, does that fall into this category? How do youThere are two aspects of what I think we have to talk about in terms of control. Let's start with this one.
BILL BLACK Okay. So it isn't like a shadow bank, it is a shadow bank.