American Consequences - August 2019

Facebook’s planned cyber currency, libra, is little more than a glorified currency board – the failed arrangement that in 2001 caused the largest sovereign default the world had ever seen. A major risk is devaluation – and the problems don’t stop there. W WILL FACEBOOK'S LIBRA TURN INTO A CANCER? hen it announced its plans to launch a cyber currency, Facebook emphasized that its libra will benefit “people with Consider Argentina, which, in April 1991, adopted a novel monetary arrangement: It would peg the value of the Argentine peso to that of the United States dollar, and it would issue pesos only in exchange for dollars. So the peso would now be fully “backed” by reliable American greenbacks, enabling Argentina to end a century of monetary instability. less money [who] pay more for financial services,” especially in developing countries. But when one compares Facebook’s current blueprint to those same countries’ experiences, libra starts to look like a hazard.

By Andrés Velasco and Roberto Chang

American Consequences


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