Facebook's Libra cryptocurrency 'could take down the entire global economy' - KatharinaPistor
NEW YORK — Facebook has just unveiled its latest bid for world domination: Libra, a cryptocurrency designed to function as private money anywhere on the planet.
Unlike states, private parties must operate within their means, and cannot unilaterally impose financial obligations on others as needed. That means they cannot rescue themselves; they must be bailed out by states, or be permitted to fail. It is easy to imagine a scenario in which rescuing Libra could require more liquidity than any one state could provide. Recall Ireland after the 2008 financial crisis. When the government announced that it would assume the private banking sector’s liabilities, the country plunged into a sovereign debt crisis.Facebook is barreling ahead as if Libra were just another private enterprise.
But when Lehman Brothers collapsed, MMF investors all tried to cash out at the same time, whereupon it became clear that many funds could not deliver. To forestall a widespread run on all MMFs and the banks that backed them, the Federal Reserve stepped in to offer liquidity support. Would governments be able to seize control of the system if it proves incapable of sustaining itself?
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