On January 9, 1988, The Economist magazine published a piece entitled ‘Get Ready for a World Currency’. The picture, emblazoned on the front cover, shows a phoenix rising from the flames of a burning pile of cash, with a fictional ‘phoenix’ coin the resulting currency. Some have compared (optimistically, given its scaling issues) that Bitcoin is the global currency The Economist spoke of, but is Facebook’s new Libra coin the true heir to this throne? We look at the case for Libra fulfilling this vision.
What Was Said?
Thirty years from now, Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix.
Given Facebook’s current reach extends to almost a third of the world’s population, the suggestion that a vast number of people will be using the same currency is suddenly not out of this world.
The phoenix will be favoured by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the last twentieth century.
The proliferation of smartphones and internet access worldwide means that it will certainly be more convenient to pay in Libra than to use cash, especially when it comes to exchanging currencies while travelling abroad.
…national economic boundaries are slowly dissolving. As the trend continues, the appeal of a currency union across at least the main industrial countries will seem irresistible to everybody except foreign-exchange traders and governments.
The internet, and applications built on it like cryptocurrencies, is helping to do away with national economic boundaries, and from the response of some governments to Libra, it’s safe to say that they see it as far from irresistible.
The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF.
What The Economist didn’t predict, unsurprisingly, was the emergence of corporations acting as pseudo-governments or central financial institutions – for ‘new central bank’ read ‘Facebook’.
…governments and their creditors would be forced to judge their borrowing and lending plans more carefully than they do today. This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case.
French Finance Minister, Bruno Le Maire: “It is out of the question that Libra replaces sovereign currencies.”
As the next century approaches, the natural forces that are pushing the world towards economic integration will offer governments a broad choice. They can go with the flow, or they can build barricades.
As we have seen with the reaction to Facebook’s plans, and cryptocurrency overall, governments are heavily intent on building barricades to adoption, fearing the negative consequences instead of embracing the positive, mainly out of fear over their loss of control.
The phoenix would probably start as a cocktail of national currencies…In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.
A “cocktail of national currencies”? You mean like how Libra is backed by a basket of automatically balanced fiat currencies? Spooky.
Pencil in the phoenix for around 2018, and welcome it when it comes.
When did rumors first surface of Facebook launching its own cryptocurrency? December 2018.
Libra’s Case is Stronger than Bitcoin’s
The parallels between The Economist’s fictional phoenix coin and the very real Libra coin are even closer than that of Bitcoin, right down to the year of its inception. Interestingly, The Economist released a piece Saturday which asked ‘what could go wrong?’ with Facebook’s vision of a global currency. In the piece they state:
If Facebook’s 2.4bn users adopt Libra to shop and transfer money, it could become one of the world’s biggest financial entities. That would herald a consumer revolution—but could also make the financial system less stable and reduce governments’ economic sovereignty.
Bang on time, it seems like their vision might be about to come true.
