As if the world’s central banks, especially America’s private central bank the Federal Reserve System, weren’t secretive enough, powerful enough, manipulative enough, and self-serving enough, along comes Facebook, creator of another central bank.
Yep, you heard me.
Facebook is creating a central bank, though I doubt they’ll ever admit it or call it that, to manage Libra.
Be afraid, be very afraid, if Facebook’s Libra cryptocurrency takes hold, because the central bank it’s setting up will be secretive, powerful, and manipulative, just like the Federal Reserve.
Where Facebook Goes Next with Cryptos Nobody Knows
Suppose Libra takes off and billions of people use it. Or, that millions of people use it a lot.
I’m not asking you to suppose how easy it might be to use Libra to make payments for apps you buy through Facebook or elsewhere to use Libra to pay for stuff like your Spotify or Netflix subscription.
I’m asking you to suppose how much money could flow through the entire Libra platform, system, bank.
Because, in the end, and from the beginning, Libra will need a central bank to make it work like a bank.
That’s why Facebook’s already setting up a de-facto central bank, though they’ll never call it like it is.
It works like this…
Suppose one quarter of the world’s 1.7 billion unbanked people use Libra (that would be 425 million people), maybe because they have Facebook.
Perhaps they trust Libra because Facebook’s a giant, hugely profitable American company.
Or maybe, because it will be cheaper to use than any other existing payment system, and just maybe because they don’t trust their own country’s payment systems, banks, or currencies.
Suppose even one quarter of Facebook’s 2.4 billion users, which would be 600 million people, use Libra.
They would all probably at some time or another have a balance on deposit in the Libra system.
That’s where Facebook’s central bank comes in. Keep in mind, it’s already being set up.
The Facebook Central Bank set-up.
Facebook’s gathering 100 “partners” to back Libra. They’re being asked to pony-up $10 million each, which is tip money for all of the would-be investor partners.
That would give Facebook $1 billion, which it would manage as a portfolio by investing it in safe government bonds, maybe with currency hedges, maybe in money market like instruments, we’ll never know, unless they’re regulated. But, then again, none of the world’s other central banks are regulated.
The idea for Facebook and its investor partners is to make money, not just from fees it charges customers to transact or buy anything using Libra, but from the money itself floating in the Libra system.
They’ll start by making money on their initial backing investment, and they’ll grow that exponentially.
How much Facebook and its investor partners make will depend on how many users of Libra there may be and how much real money will flow through Libra.
Take the 1.7 billion unbanked potential users of Libra and suppose one quarter of them, or 425 million people, deposit and leave in on average $10 in Libra. Now suppose one quarter of Facebook users, or 600 million people, deposit or leave in $10 in their Libra accounts.
That’s 1,025,000,000 people times $10. That’s 10.25 billion dollars.
Now suppose Facebook Central Bank earns just 1% on that. That would be $102.5 million dollars a year.
Divide that by the 100 investor partners and they’ll each get $1.025 million, or a 10 plus percent return on their investment, per year, maybe forever.
Not bad, right?
But wait. What if that total amount floating in the Libra system was $50 per person?
That would mean there’s 5 times as much in the system, which means more than $50 billion dollars. So more than $500 million a year is going to the investors, which results in a better than 50% return, per year.
Starting to get it?
That’s at 1%.
As if the Facebook Central Bank won’t reach for more return on its portfolio, like every other bank in the history of banking.
And we all know what risk comes along with big banks’ greedy ways.
But, there’s more.
They have $1 billion in capital, which sounds like a good start. But remember, central banks can print money and so can Facebook.
What if they release more coins than are backed by reserves?
Oh wait, what reserves?
There may be $1 billion in “reserves” to start with, but there’s nothing that FB’s said that won’t let it print more Libra money like every other central bank does, without any additional reserves.
Do you see where this is going?
It’s going where every other central bank in the world has taken economies, markets, and the world, to the brink of disaster, and sometimes beyond.
[CRUCIAL] The end of market chaos
Now you know what Facebook’s really doing with Libra.
So, when you hear about how much they’ll facilitate transactions, lower payment costs, help the unbanked, that social media is a force connecting the world for the better, be sure to remember this article.
And remind yourself, you’ve been warned.
It’s not the first time I’ve warned about major catastrophes…
In 2000, I told everyone who’d listen that tech stocks were about to crash and take the entire economy down with them when they did.
And in 2007, I warned my readers that a handful of subprime mortgage companies were about to fail and bring the economy to its knees and in doing so, crush stocks.
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