They exist entirely at the behest of their respective nation states' laws and regulations, and are completely subordinate to all official law enforcement and military forces. It's a flawed analogy. This would be tantamount to a private military company asserting their right to conduct foreign wars in the name of a subset of citizens.
Libra is still a problem. They start with a basket of USD + Yen + EURs to start. This appeases governments, just for the reason you mention "based on their currences".
...but Libra is designs that they can move away from them over time. It can move to revenue generating investments, like corporate bonds (like money markets do).
Libra can then wait until closer to countries defaulting on their national debt. The countries then start money printing at far higher rates. Their currencies drop in value (aka far higher inflation rates). Libra then shifts to corporate bonds and revenue generating assets.
This is good for citizens. It moves Libra from unsound money (USD + Yen + EURs) to sound money (asset backed & revenue generating assets). That makes Libra more powerful than bitcoin.
This becomes a strategic problem because it can cause a RUN on the national fiat currency, as Libra flees it. Libra then is infitely better than national's fiat currency, because Libra is asset backed. The US Dollar has about $0.03 worth of gold backing per $1.00 (after all of the money printing).
Libra is an idea AND a political entity, which feels like some mixture of status quo and new world which makes me uncomfortable.
But it is designed so they can switch those out for Gov bonds, corporate bonds, real estate (REITs), etc.
What are the advantages of libra compared to a normal bank transfer inside the bank union? Almost all positive aspects of libra already exists in the eurozone thanks to SEPA.
From an american perspective libra seems like an improvement, but the US is decades behind compared to the rest of the world when it comes to banking.
https://en.wikipedia.org/wiki/Academi (formerly known as Blackwater)?
So far we have private companies providing security/defensive services, but we have yet to see private companies providing mercenary/offensive services without the explicit involvement of a government.
The British empire was explicitly on board with the East India Company, and passed laws clarifying what they were allowed to do.
France: Wagram Protection, Secopex, and many others.
PMCs are everywhere.
It's true that on the fringes there are private intelligence companies but the way the US has used PMC's, which at some point outnumbered american soldiers in the middle east, is a privatization of war not really thinkable in europe.
The statement you quoted is just typical gov/political PR, common rhetoric.
However, it's everything but a bizzare statement, fundamentally. Ask yourself: how does the USA treat the US Dollar, would they be willing to just let it wane or die, be "invaded" by a foreign and private currency, as if it were not "inherent to its sovereignty"? Would the Fed be OK to just vanish and let the BCE or some private Asian conglomerate run the monetary show from San Francisco to Berlin passing by tokyo in terms of monetary policy? You in fact support the opposite view, inflation has indeed become many a government's tool.
Come on. This comment was either disingenuous or wildly uneducated about macroeconomics and political theory, either way totally fails to account for/relate to the European political/philosophical framework. Your world view is absurdly narrow, hyper-centered on the peculiar American case: few countries have privatized their citizens' State hence sovereignty to such an unfettered extent.
This can only happen one of two ways:
a. US government declares that currency legal tender. They won't do it ever.
b. all of US citizens voluntarily agree to accept this currency instead of dollars, only using dollars when they must (e.g. when paying taxes) but otherwise avoiding it like plague. This has been a common occurrence in places with unstable national currency - e.g. exUSSR countries in 90s-2000s, and many others. At that point, the US dollar would be effectively dead anyway as currency, and the only way to recover it would be stabilize it back and make it preferable means of trade.
The only way for other currency to push out US dollar is for US citizens and the whole world to become convinced this currency is better for them - safer, more stable, more convenient, more trustworthy - than the US dollar. If anybody can ever do that, it's not Facebook. So there's nothing to worry about.
> wildly uneducated about macroeconomics and political theory
What exactly in macroeconomics or political theory suggests that any private coin - of which literally thousands already exist - pose any threat whatsoever to the existence of national currencies?
They, of course, pose tax-avoidance, money-laundering, etc. risk - and if particular state's central bank goes completely bonkers and ruins their own currency with their monetary policies - as it happened in Zimbabwe, Venezuela and many countries before that - then the national currency can vane and die. But that happened many times before Facebook even existed and will undoubtedly happen again. Libra has zero to do with it, and nothing you just described comes even close to explaining bizarre and non-sensical action of European government. It's mostly looking as "this new thing is confusing to me so I ban it just in case". Funny thing it's not even new, it's just pure ignorance.
That‘s a single, mostly dead non-profit project in a tiny area, not accepted by most stores even in that area and 99% of Germans have never heard of it. Hardly comparable to Libra.
The Libra proposal kept its value constant with respect to a basket of currencies.
(This is one of the things that confuses me about Libra's target market; if you believe the cryptocurrency marketing about privacy and permissionlessness and inflation-hedging, then Libra is terrible at those things. If you don't, and you're in Europe, you just use SEPA.)
Not in France or Germany.
Just because US privataises it's military doesn't mean that this is universally accepted as a good idea.
Pardon me for not taking the corporate rebranding shenanigans too seriously.
[1] https://en.wikipedia.org/wiki/Nisour_Square_massacre
[2] https://www.reuters.com/article/us-venezuela-politics-erikpr...
It isn't. Only the Bundesbank / ECB is allowed to provide a currency in for Germany.
https://de.wikipedia.org/wiki/Währungsmonopol
The Chiemgauer is a regional voucher system - more comparable to regional loyalty programs or frequent-flyer programs.
Official stance IIRC is: illegal, but so small and irrelevant by volume that it's best to ignore it and let people have a little fun and community engagement.
not in EU they don't
also firms like Securitas mostly provide security services to enterprises, and gouvernements sites, not to citizens.
bad comparison example
Trust is the central component of the monetary system, you must trust the notes and systems used to exchange money. Creating a framework that brings this trust has been a central component since the invention of money[0], thru issuing that money and having the king or whatever passed as authority sign the coins. This is why issuing forged money has also always been such as an important crime - because that was forging the signature of the king/queen/emperor/minister of treasury.
So it's not that surprising to see that guaranteeing that trust and trying to prevent the issuance of alternative currencies is a role that governments attributed themselves in that framework.
One question is whether it actually is their role to say "you should not trust anyone else's signature" - aka your enemy reference
The more important one to me is, accepting this is now a thing, whether they should instead regulate what issuing organizations need to provide as guarantees under that signature.
I personally think so, because I don't trust FB one bit, and I'd love them to be bound to a set of rules
[0] Sapiens- https://www.goodreads.com/book/show/23692271-sapiens?
> none can afford to hold the more valuable currency due to the damage caused to export business.
So it is said, but there are more effective ways to prop up an export business. Eg, direct subsidies for strategically important sectors. Lowering currency value does help exporters, but it helps them by basically giving free goods and services to foreigners at the expense of someone else. The US lowering their currency doesn't result in a better deal for the US nation. It results in more goods and services leaving the country than is honestly justified for the amount of imports. Resources are misallocated away from US consumers to foreign consumers. Economically speaking, that is an own-goal.
The US debt-to-gdp is on a wartime footing [0]. Devaluing the currency favours debtors. A link between those two facts is more plausible than governments really believe giving goods & services away to foreigners is a path to prosperity. There is a broad economic philosophy that has taken root that debt funded consumption is to be encouraged and monetary policy is a key tool for that viewpoint.
[0] https://tradingeconomics.com/united-states/government-debt-t...
I'm sorry but you are drawing a false equivalence. Security may be inherent to sovereignty, but you would have to argue that a MONOPOLY on security is inherent to sovereignty, in order for your argument to apply to currency.
From a legal perspective, there are three things that create monetary power.
1. The money created by the monetary power can be used to settle tax liabilities. Currently no currency except Federal Reserve Notes can be used to settle U.S tax liabilities.
2. The money created by the monetary power is not subject to capital gains tax when it is transferred. Currently, everything that pretends to be money is actually considered property and thus subject to capital gains tax on every single transaction. The tax is measured in its value in money.
3. The monetary power has the power to destroy money's value. In United States v. Kahre, a guy in Nevada was paying people in gold coins that were issued by the U.S government and circulated in daily commerce in the 1900s as legal tender. He used the face value of the coins stamped on them to report and pay his income taxes. The IRS said to him that those coins aren't money any more, even though they were at some point. A 15 year criminal conviction resulted.
By virtue of the taxing authority of governments, only the government has a right to monetary power. In fact, without tax authorities, the monetary power wouldn't exist.
Also, what the hell is that supposed to mean? If something is inherent to something else, it doesn't mean it's exclusive to it. Maybe something got lost in translation, but if not - they don't even know how to say whatever it is that they want to say.
No, and that's the great point everyone is missing. Paraphrasing their logic: "it is inherent to the sovereignty of nations that no private entity can claim monetary power". In other words, they don't want private entities to control monetary power, but they tolerate this power being in the hands of "public" entities, such as the peer-to-peer/decentralized nature of many cryptocurrencies like Bitcoin.
This we-will-block-Libra attitude combined with we-will-torelate-Bitcoin-and-others is a big sign of approval for these cryptocurrencies.
I doubt the use of the words "private entity" was specifically intended to exclude decentralized currencies. It probably actually means "anyone who is not us."
They are not saying governments should have control of this power. They are just saying no private entities should have control.
From the article:
> In a joint statement, the two governments affirmed that “no private entity can claim monetary power, which is inherent to the sovereignty of nations”
I parse that as: monetary power is inherent to the sovereignty of nations; thus, no private entity can claim it.
It's like saying: "No dog should be allowed to eat chocolate, which is toxic to animals."
It would be helpful to have the actual original statement, but I wasn't able to find it very quickly and gave up.
In everyday English, it would be obvious, but regulators and politicians are not bound by that.
"It's obvious" is rarely a good argument on this particular site. If it were obvious we wouldn't be talking about it.
I don't think it's being used in a legal sense in the statement quotes in this article. If it is, I'm not sure how "private entity" is defined in the EU, France, and Germany.
"Private entity" actually is clear in common English, but my experience is that governments tend to take words from common English and use them differently.
If you have specific legal experience with this term in a particular legal jurisdiction---and you very well might---it would be helpful to say so.
Bitcoin has no Facebook-sized entity the French and German governments can control/admonish.
Neither did any entity related to Bitcoin go out and stake any ground like Facebook did.
That is exactly the point. That would be a threat as they see it (just from reading the statement even). That's why bitcoin which is not a private entity, is not seen as a threat at this time.
Bitcoin is tolerated because it's not centralized, and no one (obvious) entity is controlling it. If the EU governments could, they totally would ban Bitcoin.
Libra, on the other hand, is a power grab by someone they can regulate, so they will.
And again, if they didn't tolerate it, they could ban/outlaw it, just like China did.
The ability to devalue their currency is an essential tool that central banks wield to battle financial crises.
Keynes pointed out that workers don't want to take a pay cut (and employers don't want to offer a pay cut, because they fear causing resentment), so nominal wages are "sticky." When they need to fall to reach price equilibrium, the economy tends to experience mass unemployment instead. It would be very difficult to convince all workers universally to accept a pay cut. The alternative is to devalue the currency so everyone is affected through the currency rather than by trying to propagate policy changes throughout the private sector.
Also, countries can have huge problems when they take on debts in a hard currency which they can't devalue. This is how you get runaway hyperinflation. Their revenues are in the local currency, but their debts are in (usually) USD. If they run low on foreign currency reserves, they can be forced to sell huge amounts of the local currency on the forex market in order to acquire sufficient USD to pay their debts. I can see why France and Germany wouldn't be eager to see yet another USD rise to prominence and leave them disadvantaged in debt financing.
Another talking point which comes up all of the time is the tension introduced when different regions (like Germany and Greece) are forced to use the same currency, even though normally economic forces would cause the weaker region's currency to move against the stronger one's. Devaluation would be fantastic for Greece but it's hobbled by crushingly expensive exports since it's in the Euro monetary union.
Germany is in a unique position of being able to jawbone about devaluation and monetary policy while reaping the rewards of spendthrift member states.
Germany has, and has had, an immense interest in keeping their currency artificially devalued and they have achieved this by entering into a fixed exchange currency union with countries like Italy and Portugal and Spain.
The PIIGS currency is, relatively, overvalued in comparison to the German currency because they have the same value.
So a first glance at German policy which is in place to protect their fragile banking system which is overexposed to PIIGS debtors looks to be currency strengthening - and perhaps it would be if they had their own currency. However the broad impact of German policy (their policy to be in a monetary union with PIIGS) is tremendously weakening of their currency, relative to the other members of the Euro group.
Also these bills literally say on the bill what currency they’re pegged to every time I’ve seen them. There aren’t enough in circulation for basic transactions otherwise.
Security for a nation state is different to a security guard standing in a shop. Also I'm quite sure that nation states reserve the right to claim a monopoly on certain parts of the security industry. The monetary/security power is in being able to claim that monopoly, as your currency example shows, the nation state can allow certain behaviours, that doesn't mean it has to allow everything.
"Inflation, and the ability of the state to force it upon its citizenry by forbidding the use private money - has come to be viewed as inherent to the sovereignty of nations"
So it isn't a bizarre statment then since you're pretty much agreeing with it. Maybe you only think it's bizarre because you don't like that nations accept that they have and want this power?
Inflation right now is very low in all developed economies
This comment, talking about Germany, the one of the country that has had such a fear of inflation for almost a century, is highly ironic.
So yes, 84 years count as «almost a century»
Facebook if it were a country would literally be bigger than China. Their political power is fast approaching that of a nation state, they can already impact elections, have shitloads of money, etc.
When they do anything that smells even remotely like moving towards sovereignty, yeah you bet countries are gonna take notice.
Private security firms are also not ideal.
We've seen plenty of examples where politically controlled security forces have done terrible things to significant portions of the citizenry they are presumably there to "protect & serve."
It has written something like "club internal voucher" on it!
But in Europe, we have more trust in our own governement and less in corporation than in the US, where it seem to be the opposite
Don't be naive.
- In order to make a choice, you need to be properly informed. Now, most people won't have the time or interest to see what Libra is and what the consequences of widespread Libra adoption would be.
- Facebook can force a sector of their paying users (mainly advertisers) to use Libra.
- Facebook also has a lot of influence, most people use at least one of Facebook, Instagram or Whatsapp. Those apps can be used to advertise and push Libra.
- Once Libra adoption reaches a critical point, you'd need to use it because you need to buy things.
- You don't need to use it to suffer negative consequences due to a private foreign for-profit business controlling monetary policy.
And the track record of public, non-profit entities controlling monetary policy is ... great?
Furthermore, Libra would have incentive to move the policy towards further profit for the members, while central banks have incentives to stabilize the economy.
I've seen that said many times in fora (fortunately not so often on HN), but the only people that seem to subscribe to it are the preppers and the gun fanatics, usually using some kind of reference to words that have not been updated in a couple of centuries. It's about as useful as wanting to back to the glory days of England.
Americans trust their government on average just about as much as people of other countries trust theirs, with a notable exception made for the Swiss.
> The distinction is this: No one is forcing anyone to use Libra its your choice. : )
And it is the choice of the democratically chosen governments of France and Germany to decide to so something about it, and I'm fully in agreement with that.
The last we need is for the Zuckerbergs to have the power to start dictating monetary policy, the amount of power he has today is already way more than he should have.
Note that neither Germany nor France has decided to 'block bitcoin', or outlaw it (which they could do, but it remains to be seen how much effect that would have). And we are not forced to use that either.
Maybe, excepted that Facebook is not an individual. Compagnies are not individual.
They are just private entities seeking for their own profit and should be treated as such.
There is no trust to have in Facebook: if they can fuck half of the world to double their benefits, they will do it. That's it.
Trusting such entity to ensure "common good of people" through a currency is simply madness. And Libra is exactly that.
I'm sorry if it shock the American "free" way of thinking, but this is our European way of thinking.
Corporations are exercises or government power, in fact.
I'm aware that I'm very biased here but the tragedy that is Facebook upsets me all the more for what it could've been. Instead of being a boon to society, they've become the worst form of surveillance capitalism.
I wouldn't trust facebook with handling my garden, let alone a monetary system. They have proven time and time again that they are reckless if not outright malicious and outdo even some incumbent bad guys in the sheer underhanded disregard for anything but their own bottom line.
But in that light, what France and Germany are doing makes sense too. At the end of the day, they too have the right to protect their collective interests, correct?
Or would you have them do something that goes against their interests so you would be able to protect your assets?
On the second part of your comment: I suspect some tech companies were given a while lot of leeway in many aspects by society at large, because it was generally believed that they would act in a more responsible way. Now, we come to the realization that maybe some of that leeway was misplaced.
There's another HN article in the frontpage today that basically floats the idea that Big Tech is a menace to Democracy itself. I think that's partly the explanation why people (and nations in general) are so suspicious of Libra.
Try creating a private army and see. The state giveth and the state taketh
Perfectly correct statement.
No, it's not: providing security is a goal, several powers inherent to sovereignty might be applied toward that goal (conscription power, warmaking power, the power to impose punishment, and various other incidents of the monopoly on legitimate violence; even the monetary power is applied to that end), but the goal is distinct from the inherent powers of sovereignty.
What a bizarre statement. Providing for security is also inherent to sovereignty of nations, but private security firms flourish.
It's also odd in the context of Germany in particular where a private currency has been used for many years:
https://en.wikipedia.org/wiki/Chiemgauer
I suspect there's a lot more behind this statement than meets the eye:
Inflation, and the ability of the state to force it upon its citizenry by forbidding the use private money - has come to be viewed as inherent to the sovereignty of nations. The world's governments are now entering a new phase in which none can afford to hold the more valuable currency due to the damage caused to export business. Net importers like the US have been holdouts, but even it too will have to bow to reality.
This conflict means that, no matter how well intentioned, policy makers will be feel compelled to devalue their own currencies. It's a race to the bottom, but without a bottom. Alternatives, especially private alternatives readily available to citizens, will increasingly be viewed as the enemy.