IMF Must Get Facebook Books Under Control

The Books Association is falling apart. Visa, Mastercard, PayPal, Stripe, Mercado Pago and EBay have abandoned the Facebook-led corporate alliance for the creation of Libra, the assets-backed cryptoid aimed at revolutionising international money. More corporations will likely follow these as a result of increased pressure from governments that are determined to stop their unattended Libra.

That's a good thing. Mankind would suffer much if Facebook were allowed to privatise the international payment system. But the authorities that are now drowning Liberna must look to the future and do something innovative, valuable and visionary: they must give Libra, or her basic concept, the International Monetary Fund, so that it can be used to reduce trade imbalances and rebalanancing financial flows. Indeed, a literature-like cryptomone could help the IMF meet its original goal.

When Facebook director Mark Zuckerberg announced Liberra with huge fanfare, the idea seemed very interesting and harmless. Anyone with a mobile phone could be able to buy Codes of Books with local currency and use standard methods, such as debit cards or online banking. These codes could then be used for payment to other Libra users, either to buy goods or services or to repay debts.

To ensure full transparency, all transactions would be managed by Blockchain technology. In a strong contrast to Bitcoin, however, the Books would be completely covered with assets of real value.

To anchor Libra with real assets, the association that is supporting it promised to use its revenue generated in addition to the initial capital contributed by member companies (at least $10m each), to buy high- and valuable financial assets (such as US debt titles). Considering Facebook's leading role, it was not difficult to predict a moment when half of the world's major population or 2.4 billion active Facebook users could suddenly have a currency that allows them to conduct transactions with each other by avoiding the rest of the financial system.

The authorities ' initial reaction was embarrassing, negative. Stressing Libra's potential use of criminal activities, they managed to confirm the donor's suspicion that, faced with the threat of losing control of currency, regulators, politicians and central bankers would like to destroy the monetary innovations that bring relief from them at the beginnings. This is unfortunate, because the greatest wrestler of illegal activity is old-style cash, and, most importantly, because books can pose a systemic threat to our political economies even if it was never used for criminal activities or terrorism financing.

To begin with the negative effects of Libra on individuals, we seem to recall the great efforts most countries have made to minimize the rhythm of local currency value in front of foreign coins. As a result of these efforts, a hundred euros or dollars will now buy the same goods as after a month. But the same cannot be said if these 100 euros or dollars were converted into Books.

Depending on the fact that the books will be supported by assets denounced in many coins, the purchasing power of a book code in each country will fluctuate much more than local currency. Books can, in fact, resemble the IMF's accounting unit, known as the Special Law of Attraction, (SDR), which reflects a dishonored average of the world's major currency.

To see what that means, think that in 2015, the exchange rate between the US dollar and the SDR moved 20%. If an American consumer had converted $100 into books at the time, they would have been subjected to the agony of seeing how their codes were worth less or more days each day. And as for residents of developing countries whose coins are prone to devaluation, Libra's swing would speed up the depreciation of these coins, boost local inflation, and facilitate capital evasion.

Since the 2008 financial collapse, authorities have suffered to manage inflation, employment and investments with fiscal and monetary mechanisms that, prior to the crisis, seemed to work well enough. Books will further reduce the capacities of our states to ease business cycles. Fiscal policy efficiency will suffer because the taxation base decreases, while any payments are transferred to the system inside Facebook. An even greater shock is expected to hit monetary policy.

For better or worse, central banks manage the amount and flow of money must be withdrawn or added paper assets to the stock held by private banks. When they want to image economic activity, central banks buy private commercial loans, collateral loans, deposits and other assets from private banks. Banks after that have more money to lend. And vice versa when authorities want to cool off the economy. But the more successful the books become, the more money will be transferred from bank accounts to book accounts, and the less likely the central banks will have to stabilise the economy. In other words, the stronger the transfer to Books, the deeper the fluctuation and crises that affect people and countries.

The only beneficiary of such a scheme will be the Libra Association, which will collect extraordinary income from interests from around the world, which will accumulate through the use of much of the world's savings drawn from its pay platform. Soon, the Society will be lured into lending to individuals and corporations, transforming itself from a payment system into a world bank that no government will ever save from bankruptcy will repair or discipline.

These are all the reasons why the decline of Libra makes it a good thing, along with the collapse of Zuckenberg's dream for a private monopoly of payments on planet Earth. But we shouldn't have to throw a technological baby away at the same time. The trick is to believe in the implementation of this idea of the International Monetary Fund, on behalf of member states, with the idea of re-creating the international monetary system in the way that John Maynard Keynes had imagined in his proposal rejected in 1944 at the Bretton Woods Conference, for an international clergy system.

To create this new Bretton Woods, the IMF has to issue a code supported by technology blockchain similar to books let's call it Cosmos whose exchange rate with local coins stands loose. People will continue to use their local currencies, but all cross-border trade and money transfers will be denounced in Kosmos and will be passed through the accounts of central banks held by the IMF.

Deficit or commercial surplus may be penalised through a tax for disbalancing, while private financial institutions may be charged with a fee in cases of an increase in the flow of emerging capitals. These two penalties will be collected into an account denounced in Kosmos, which operates as a world reserve fund. In such a case, all international transfers are made without obstacles and completely transparency, while small but not insignificant penalities keep in check the dissbalancing in trade and capital flows, serving also as a green investment fund and an investment fund for reshaping wealth from north to south of the planet.

A brilliant idea that in the hands of private pirates could have catastrophic consequences could be put into public service. Thus we can benefit from their genius without suffering the consequences of their negative side. /Project Syndicate/In Albanian by: BIRN/