All you cash belong to Zuck

Say what you like about Mark Zuck, but the fellow doesn’t lack ambition. There’s a bit of the Terminator in him, or one of those mediaeval giants that takes quivers full of arrows but keeps on coming.

It not just your innermost secrets, your lives, your loves and of course what consumer goods you buy he wants to know. The Zuck is now coming for your money. Be very afraid. It’s called Libra, it’s blockchain, and Mark is doing it because he wants to make more money and know how you spend yours has a deep compassion for the

1.7bn people around the world without a bank account would be able to use it to make instant and nearly free international money transfers from their mobile phones

Earth calling Zuck. You may have a brain the size of a planet but has it ever occurred to you that a good number of these people don’t have a bank account because they don’t have any money? How do you fix that? Well, paying your taxes rather than spiriting the ill-gotten gains into Moneyland would help this altruistic aim more than facilitating people to spend money they don’t have, all watched over by the benevolent gaze of Facebook’s servers.

the great and the good involved with Libra

There are other companies involved, and of course Libra’s website makes much of its credentials as a not-for-profit independent company, along with all the good is will do for these good folk who are unbanked, possibly ‘cuz they don’t have anything to bank. To wit:

Reinvent money. Transform the global economy. So people everywhere can live better lives.

There’s a Youtube puffery vid for ya

There are some questionable statements delivered in that minute and a half:

Technology has improved the world around us

Not sure what Extinction rebellion would say about that. Not if you’re a London sparrow. Or a cyberbullied teen. But sure, it’s improved many things, lets move on:

So why is it simple to send these [on screen example of low-value consumer goods] anywhere, but not money? What if we made money truly global, stable, and secure

Err, that’s because there’s no United States of Earth to protect us from the goddamned strongmen that we already have and seem to be siphoning off resources into offshore tax havens? Who watches the watchers, and how to we kick the blighters out if we create such an overarching single point of failure? The problems here aren’t technical. They are human. The history of the world shows you shouldn’t put a few people in charge of power. Piss off, Zuck and your ubermensch mates. What part of No do you not understand? As for secure, with Facebook on the board that’s just not happening. I’m not even sure it’s possible at all. Every bugger has their price.

Let’s run Libra through the bullshit translator, shall we. Let’s take a look and what’s wrong with money now. Money is two things. One is a medium of interchange. If you have money, you can get people to do things for you, right now – clean my windows, fix my drains, make me and my SO a nice meal in attractive surroundings, build be a superyacht so I can big up my ego.

It’s also a claim on future human work, which is often called a ‘store of value’. For various technical reasons, ever since 1971 and arguably before then, it’s not particularly good at that. To store value these days you are usually advised to use it as a medium of interchange to buy a diversified array of other things like equities and bonds. Storing value as currency doesn’t work that well in normal times. It can work exceptionally poorly in abnormal items – Venezuela now, Argentina not so long ago, Germany in between the wars. It was pretty iffy in Britain in the 1970s 😉

Improvement is possible. Some people critique the issue of there being no anchor – once upon a time currencies were backed by gold. With crypto you could probably achieve a similar limit in the money supply, well, until quantum computing comes along and people get to forge it. But that’s technical, it’s probably solvable. There was a problem with the gold standard in an expanding postwar economy. If your money is fixed and the amount of valuable stuff in the economy it is chasing rises, you are locked into deflation, and the real value of your mortgages and bank loans goes up with time. Of course, having floating currencies lets politicians promise more than they can deliver and let a slow devaluation in the currency tax people invisibly. But given that we don’t want to pay tax I guess it’s got to come from somewhere…

OK, maybe we have gone ex-growth, environmental degradation may mean contraction and convergence. Maybe a fixed  worldwide amount of money could work. But not if it’s run by Facebook.

Iffen it ain’t broke don’t fix it.

Banks use ancient IT systems, but I can’t recall the last time a load of money just disappeared. Challenger banks are making the user interface better. Western consumers don’t need easier payment systems and micropayments. really they don’t. Consumer debt is already bad enough

UK households already owe £60k on average. They don’t need easier spending

One of the easiest wins you can have with spending is simply to insert a wait loop. want to buy something that’s over £50 and isn’t a matter of health and safety? Stick it on a piece of paper with the date, and wait a week. If you still want it a week later, go buy it. It’s amazing how many want-it-now purchases can be canned.

Paying for something really isn’t that hard these days, assuming you have the money. We don’t need a totally new edifice run by tech giants to fix something that just ain’t broke in that way.

I’m not saying that money can’t be improved. But let’s think long and hard about the requirements capture, the social ramifications and how we kick out abusers of power and grifters before we build a system because money attracts bad sorts like shit attracts flies. Before we have a Global Currency of Earth let’s have a United States of Earth first, eh? Currency unions are historically rife with problems – ask the Greeks how that’s going over a small area with closer economic convergence that Earth.

Libra. Just say no, if only to keep Mark Zuckerberg out of your payment history. He knows far too much about you as it is! One of the most scary bits in the Grauniad article is the kicker at the end.

Facebook claims financial transactions will remain siloed from social media activity and that user ad profiles will not be based on Libra habits

Yeah, right. And I am the King of Spain.

19 thoughts on “All you cash belong to Zuck”

  1. That’s a great coincidence, I’m reading that book right now – borrowed from the library, go me! You still have the best blog, Senor Ermine.

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  2. > Before we have a Global Currency of Earth let’s have a United States of Earth first, eh?

    This is unlikely to ever happen (i.e. the One World Government thing) – IMO it could never be stable. Because of that fact, states will always play by different rules from each other leading to the incentives for competition between jurisdictions (look at Ireland for example – it’s an explicit goal of their economic policy) and currencies. As such, the tax ‘arrangements’ described in Moneyland will never disappear.

    I suspect that a lot of the opinions on this subject are in the category of ‘ought’ rather than ‘is’. The general consensus is that it’s bad that the mega-wealthy don’t pay tax but the incentives that allow this to happen will always be there so it will never stop. Perhaps it’s just a fixed property of a global market economy comprised of human beings. Everybody has a price.

    My guess would be that if governments did tighten up on the Moneyland phenomenon, that would exert market pressure towards the adoption of a genuinely decentralised cryptocurrency.

    I think that Libra itself will turn out to be a dud in terms of adoption anyway. Hopefully they open source any tech advances that are achieved though so that the next (decentralised, open-source) Bitcoin descendant may eventually turn in to a currency which acts as a reasonable medium of exchange and store of value.

    Related: I’ll be interested to see what fiscal and monetary antics will ensue if a certain Labour politician gets elected as PM in this country – perhaps crypto in general will start looking more attractive?

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    1. I wasn’t advocating full-on UNNWO headed up by the Antichrist ;), but I do think currency unions larger than political unions are doomed due to centrifugal forces. Exhibit A being the Euro, though history is not favourable either

      In a theoretical sense one could postulate a global medium of interchange/store of value based on blockchain, or some other as yet to be determined method of controlling the supply so the store of value bit is stable. But that has dangers of its own. At the moment a single currency can go titsup due to political error eg Venezuela, Argentina, perhaps GBP under JC. We will survive. But imagine a worldwide currency where suddenly, say some technical advance or unobserved flaw means the supply suddenly increases by 100. Or decreases, like in the thesis of of the pre-Nixon era movie Goldfinger.

      Diversification is a good thing, IMO. If you want worldwide assets at the moment holding world equities and a mix of world bonds does the store of value sort of thing imperfectly but without a single point of failure. Hedging Jezza might be a mix of physical gold and a mix of BTC and some other cryptocurrencies, if a broker account outside the UK and end-to-end encryption is thought too susceptible to his ministrations.

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      1. Fortunately I’m neither wealthy enough (yet) nor do I have a high enough income (by design) to have a target painted on my back if JC gets in (hopefully). He can’t tax me on my ability to charge a decent day rate – I actually have to earn the money (and I’m pretty good at the frugality thing if all else fails).

        I’m a lot more keen on a competitive marketplace of decentralised cryptos (i.e. no single point of failure/control) than I would be on a single world currency. I suspect you’d still end up with a de facto standard in the end though.

        IMO Bitcoin is an awesome idea that just hasn’t been executed well yet. Imagine if politicians had to actually raise taxes in order to pay for wars that ‘help out’ or friends in third world countries because they couldn’t inflate away debts incurred by overspending. The general thesis of Moneyland is that money and state should be tied together more tightly (to stamp out the corruption) but I believe the opposite. Lots of regulations leave a big ‘attack surface’ for bribery and ‘donations’.

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      2. > competitive marketplace of decentralised cryptos

        Crypto20 is heading that way. Mind you, based in the Cayman Islands. 0.5% p.a. costs (on effectively cash, FFS, this is not a productive asset) and on a blockchain exchange all point in the run away now direction to me. But the idea is out there, at least. A sort of VWRL-like fund of cryptocurrencies rebalanced by nominal capitalisation could be what you want.

        One of the weaknesses of blockchain in practice as opposed to blockchain in theory seems to be that it lacks the anonymity of cash, although we seem to have come to a general societal conclusion that anonymity of currency above a certain amount is A Bad Thing so perhaps that is just the way it goes. The exchanges also seem to be a serious point of weakness regarding anonymity and single points of failure, though I don’t understand enough to say why.

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  3. I did read a while back that phone based micropayments were actually proving very beneficial in various developing countries already, improving security and encouraging trade

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    1. Doesn’t that fall into the iffen it ain’t broke category? Existing system – people need to pay for mobile phone service somehow to have a mobile phone, to keep the network running. So in these markets mobile payments is an addon thing that uses the existing structure, presumably also works with dumb phones as well as yer latest iPhone.

      I could see FB’s case if this were starting up from the get go, but it isn;’t. FB is already sucking the oxygen from the open web, but in the end nobody _needs_ an open web. Be a shame for FB to insert their surveillance tentacle into all our financial transactions under the flag of those fine words IMO.

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      1. Yes, I think it was dumbphone based, unfortunately I don’t have the article reference. For sure, FB would seem to be reinventing wheels in that particular area – and no-one likes FB shaped wheels.

        Another thing I noticed is that homeless people in my hometown all have smartphones (how do they charge them?). I found that initially surprising but then thought the phone has essentially become a human-right/essential item.

        Both these things indicate even if you are properly poor, you can have a phone.

        Liked by 1 person

      2. > indicate even if you are properly poor, you can have a phone.

        Somewhere I read a riposte to a digital detox article that being able to live without a mobile smartphone is in fact, an indication that you are rich.

        It means you’re not working for uber or some other gig economy non-job, you aren’t at your employer’s beck and call 24/7 and you aren’t in the hive mind. Initially I thought WTF, but on reflection they have a good case IMO.

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  4. “Technology has improved the world around us…”

    I tried out a contactless credit card payment, mainly out of curiosity, and was shocked to find out that a 12% ‘service charge’ was automatically added to the bill, presumably by way of a tip. Needless to say, never again.

    A little while ago, I was in my local pub with a few friends, and noticed a group of young people on a night out paying for their drinks by contactless cards. Not only did they have no idea whatsoever how much they were spending (presumably each transaction was below £30.00), but they had no idea that they may have been tipping at 12% every time.

    Improvement? I don’t think so.

    Libra appears to simply be an extension of this way of robbing ignorant people out of even more of their money.

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    1. You were possibly a bit unlucky there. I’m gen-X so no millenial but still think contactless is a boon. I really like it. Don’t really carry cash any more.

      I’ve noticed that businesses run by anyone under say 35 are tending not to accept cash anymore. As it stands, I’m an advocate.

      I still ask for receipts on contactless most of the time, I’ve never had a tip added automatically touchwood!

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      1. @TR

        As a baby boomer, I’ll confess to being somewhat out of touch with many current trends. Nevertheless, I still think that anything that allows you to spend money without being able to account for it cannot be a good thing.

        As a contributor to this site and as I know, Monevator, there is no way that you are financialy ignorant. Even so, you say “I still ask for receipts most of the time”, but not all of the time. My concern is that uninformed people don’t ask for receipts any of the time.

        Uniformed spending = debt.

        Liked by 1 person

      2. @The Borderer
        You were unlucky with that transaction. Couple of years ago I bought a round with a credit card and after observing there was a 50p card charge (displayed on a post-it note stuck to the till) decided not to do that again.

        But it’s certainly not a feature of contactless, it’s more a feature of the pub knowing people want a drink and have run out of cash, so they can get away with it. Round these parts they have a simpler rule, card payments need ot be at least £10.

        @The Rhino
        You don’t even need receipts with Starling contactless – they itemise the spend (and roughly categorise it) within seconds. But you do need a smartphone to see that…. Presumably a card from any challenger bank will do the same.

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  5. Coming from an era where the boss handed you a paycheque and you had to physically deposit it in the bank, this is all too much for my little mind to contemplate.
    I was in the local convenience store to pay for a tank of petrol the other day. I was told “sorry sir, if you intend to pay with cash you’ll need to stand over there in the other queue. I can only do debit or credit cards here.” Oy…

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  6. @Borderer – haha reading great FI blogs is no guarantee of lack of financial ignorance, but I hope I’m not as bad as some, but a little knowledge can be a dangerous thing!

    I’ve been doing monthly accounts for a while, and have noticed through that activity that spending cash is the hardest to account for as there’s no electronic record of the transaction, you have to get involved with paper receipts and thats (more) time consuming. I keep receipts but only refer back to them if things go wrong.

    I think it probably is sensible to get a paper receipt for contactless and eye-ball it just before going into your wallet just to see all is as expected at the moment of transaction, and you can also double back if you see something unexpected later on in your statement at the end of the month.

    I would wager that millenials are able to instantly see all transactions on their phone though, which may somewhat mitigate the requirement for paper receipts. I’ve drawn the (generational?) line there though and have no app based banking. My worry is having my phone nicked. Maybe thats paranoid and I’m missing out on some good stuff? I don’t know..

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    1. I do get the distinct impression its considered to be a hipster social faux-pas though to ask for a receipt for a transaction < £3 in a pop-up cafe or craft-ale house.

      Thankfully my line of work doesn't require a uniform, I'll attribute that to my lack of consumer debt?

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  7. “being able to live without a mobile smartphone is in fact, an indication that you are rich.”

    It’s ages since someone called me rich. In that case it was an irate little chap who took exception to something or other and illustrated his point by gesturing at my fifteen year old Landrover. It’s a funny old world, as our greatest political philosopher remarked.

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