Nobel Prize winner Stiglitz: The fool will believe in Facebook's Libra

Facebook's Libra project has sparked a wave of discussion around the world, with a voice that affirms its technological innovation and concerns about its impact on the global financial system. However, Nobel laureate Stiglitz has claimed that only fools will believe in Facebook's cryptocurrency, because Libra has a dilemma in regulation and privacy. He denounced Facebook: "When Facebook's leadership faced a choice between money and commitment, they chose money over and over again. And creating a new currency is to help them put more money into themselves. Belt."

Stiglitz's reprimand provides us with another perspective on judging the Facebook encryption project. If you have any thoughts on this article, please leave a message.

About the author: Joseph E. Stiglitz is a Nobel laureate in economics, a professor at Columbia University and a chief economist at the Roosevelt Institute. In 2001, he won the Nobel Prize in Economics for his outstanding contribution to economics. He is the author of "People, Power, and Profit: Progressive Capitalism in Dissatisfaction with the Times."


Facebook and its business partners have a whimsy that the world needs more than one cryptocurrency. In order to achieve this goal, Facebook decided to use its rich resources to develop a new cryptocurrency.

The bold idea of ​​Facebook actually reveals the problems of American capitalism in the 21st century.

In a sense, there is indeed some doubt about issuing a brand new currency at this time. In the past, the main problem with traditional currencies was their instability, and unpredictable, rapid inflation led to a lower storage value of traditional currencies. But now, the dollar index provided by Wall Street, the euro against the dollar index, the dollar against the yen index, the dollar against the yuan index are still relatively stable. From this point of view, most of the traditional currencies in the world are relatively stable, people no longer worry about inflation, but are more worried about deflation.

In just a few years, Facebook’s credibility has been declining, and its severity is much worse than the decline in the credibility of the banking industry during special periods.

At the global level, the financial system has become more transparent, and it is simply more difficult to use the loopholes in the banking system to launder money or carry out other illegal activities. In addition, the development of technology allows us to complete transactions within a few nanoseconds, and the security performance is guaranteed. What we don't need most now is an incubator of illegal activities. If Facebook's cryptocurrency is put into use, it is likely to become an incubator of fear.

01 Uncompetitive payment channels

The problem with our existing monetary and financial systems is the lack of competition and regulation between companies that control transactions. The consequence is that consumers (especially consumers in the United States) need to pay more fees, and billions of extra income each year enters large companies (such as Visa, Mastercard and American Express) and bank pockets.

From the "Debin Amendment" to the 2010 Dodd Frank Financial Reform Act, these regulations have only a small limiting effect on the bank's practice of charging high fees to debit card users. And, this raises a bigger problem – banks charge more for credit card transactions.

Other countries, such as Australia, are doing much better than us in this regard. Australian law explicitly prohibits credit card companies from restricting competition through contracts, creating a situation similar to a monopoly, which will help them raise fees. However, the Supreme Court of the United States seems to be blind to such incidents and has not made a clear statement.

But even if the United States decides to have a non-competitive second-rate financial system, Europe and the world will not agree: as Trump recently said, "supporting healthy competition does not mean anti-American."

Some people may be curious: What is Facebook's operating system like? Why are so many people interested in this latest cryptocurrency project? Probably because they also want to have the "big cake" of the profit of this trading platform. They believe that more competition does not reduce profits to zero. This shows that these companies have enough confidence in their market influence – and they also have strong political backings that the government will not oppose them. This extra income.

The idea that the US Supreme Court wants to weaken the degree of democracy in the United States is just around the corner, and Facebook believes it has little impact on itself. However, regulators not only have the responsibility to maintain economic stability, but also the responsibility to promote healthy competition in the market. They are the time to stand up.

In one corner of the world, there may be a place that is not interested in the technological fortune and anti-competitive behavior of the United States.

02 Facebook arbitrage profit

Assume that the new Libra currency can have a relatively fixed value – tied to other government currencies in the world. As a result, Facebook is likely to have a more profitable way: Facebook can achieve arbitrage by not paying interest on “deposits” (traditional currency exchange for Libra) but charging interest on “deposits”.

When companies can invest their assets in safer US Treasury bonds, how can companies still be willing to put assets at zero interest rates on Facebook? (Recording the profit and loss of each transaction is converted into traditional currency, and the existing tax system is also a hindrance to Libra cryptocurrency trading. Unless Facebook believes that it can override the tax system, as it despises privacy and The same as competition.)

There are two obvious answers to the question of the Facebook operating system. One of the answers is that those who engage in illegal transactions (and possibly the current US president) are very willing to pay high fees to hide their illegal activities (such as corruption, tax evasion, drug trafficking, terrorist attacks).

We have been walking hard on this road to prevent people from committing crimes through the financial system. Why, no one, let alone government or economic regulators, will allow criminal tools like Libra. Is it just because Facebook has labeled Libra with "tech products"? If Libra's operating system is indeed as Facebook said, then the government should immediately order him to terminate the project. At least, Libra should have the same transparency as other currencies in the financial industry. However, he may not be a cryptocurrency.

03 Destruction of security and privacy

From another perspective, the information of users participating in the Libra transaction is easily stolen by Facebook, just as he has stolen user information through other means. This information can enhance Facebook's market power and ensure that he has a substantial income, but at the cost of infringing on user privacy. Facebook (or Libra) may promise you that you will never repeat the same mistakes, but who would believe it?

Then the question about reputation comes. Every currency in the world is built on a reputation system. Depositors believe that their hard-earned money is deposited in the bank and can be taken out when they request it. Private banks have proved in this respect how untrustworthy they are, so laws and regulations are so necessary.

But in a few short years, Facebook's approach made him more untrustworthy than these private banks.

When Facebook's leadership faced a choice between money and commitment, they chose money over and over again. And to create a new currency, is to help them put more money into their belts.

Only one fool will entrust his money to Facebook. However, Facebook holds the information of 2.4 billion active users per month, and he clearly knows how many fools are willing to support him.

Translator: Wang Linshan