Battling Megaliths: Facebook and the American Government Battle Over Digital Currency and the Future of Money
In 2019, Facebook attempted to create an international digital medium-of-exchange by bundling multiple currencies under the banner of one digital currency: Libra. David Gerard has written a short, very good book in Libra Shrugged (LS) that provides pertinent details relevant to Facebook’s ill-conceived endeavor to bring Libra into being. Gerard’s tale pits Facebook executives Mark Zuckerberg and David Marcus against the U.S., French, and German governments. These are some of the most powerful parties and interests, among many other weaker and less sophisticated parties, engaged in a struggle to ensure that Libra met basic financial regulatory standards. Zuckerberg and Marcus, congressional committees, and regulators serve as the anchors around which this struggle to control an emerging digital currency unfolds.
Gerard lets readers know, Facebook’s plunge into the financial transactions world didn’t emerge ex nihilo in 2019. Back from 2010 to 2013 or so, Facebook played around in the technology-finance-law nexus with Facebook Credits, a dollar-based credit system used for in-game purchases. By 2014, Facebook had turned its eye of innovation towards monopolization in its purchase of, and merger with, popular social media websites Instagram (IG) and WhatsApp, a couple of the biggest mergers among many other smaller acquisitions over the last decade. Many of these mergers were facilitated by the Obama Administration, with much cheerleading and fanfare ringing out from Wall Street investors, a run of monopolist consoldation that emboldened the company’s decision-makers to consolidate as much power as possible in the years leading up to Libra in 2019.
In chapter three Gerard explains, “By February 2019, Facebook was talking to cryptocurrency exchanges about selling their new crypto-coin — which would not float in value like Bitcoin, but would instead be a “stablecoin,” its value pegged to a basket of conventional currencies.” Bitcoin “could go up or down 10% in a day,” making it a volatile digital asset class wishfully posing as a currency. Bitcoin’s volatility is the primary reason why Facebook chose to go with a stablecoin. “In cryptocurrency trading, a stablecoin is a crypto that is kept at a more-or-less steady value — and won’t go up and down like Bitcoin.”
Gerard is able to pierce through Facebook’s consumer-friendly, and often lofty, Libra rhetoric by telling readers, “Libra isn’t really for consumers — Libra is Facebook’s call to arms against the very notion of regulation. Facebook wants to be too big to regulate, and lead the way for its Silicon Valley fellows to be too big to regulate.” He historically situates this series of Facebook’s immediate power-driven activities, to take over the money, within a much larger financial history of power relations.
This financial history includes mentions of the U.S.’s adoption of the Gold Standard in the 1790s, to the decoupling of the US Dollar from the Gold Standard in the1970s, on through to the Asian Crises of the late 1990s, and all the way up to Bitcoin and other digital currencies of today. What we are left with is a short, powerful book that depicts a modern-day power struggle as a colossus, cephalopodic-like technology corporation (Facebook) attempts to permeate every system in the modern world by expanding its dominion over multiple currencies via Libra. Facebook’s actions in bringing Libra about were contrary to those Leviathans’s (U.S., Germany, France, et al.) interests that have political influence, legal jurisdiction, and control over the currencies of their respective country’s. Facebook believes its insidious tentacles should be able to reach and expand into every facet of modern society.
Facebook’s power move to bring Libra into creation is impossible to overstate, it’s very consequential. In fact, it might be one of the most aggressive power moves made by any mega-multinational corporation in recent history (or ever), a direct assault against the powers of the State. The former Chairman of the Bank of England is quoted in the book as having said in 2019, “The US accounts for 10% of global trade and 15% of global GDP — but half of trade invoices and two-thirds of global securities are priced in dollars.” Similarly, “The Bank of International Settlements (BIS) — the central bank for central banks” — was even more direct than the UK central banker, warning in a 2019 report, “a big tech [company like Facebook, with its 2 billion users] could be small in financial services and yet rapidly establish a dominant position by leveraging its vast network of users.”
It is remarkable, and not in a good way, that a corporation chartered in Delaware in 2004 was attempting to take on the most sophisticated States on the planet in an attempt to take over the money just fifteen years later in 2019? Only in a legal system totally devoid of reason and balance could this massive concentration of power take place in such a short span of time. These underlying power dynamics justified central bankers’s skepticism towards Facebook’s attempt to take over the money.
Facebook’s lurch towards Libra was driven to increase the monopolist’s access to financial data of its users and to extend its dominion into the realm of international currency. Those are troubling drivers considering that Facebook had a track record of ruthlessness and deceit going into the 2019 Financial Services Committee on Libra. For instance, Facebook executives repeatedly made clear that Facebook’s collision with multiple states in the name of Libra was driven by the altruistic motive of “banking the unbanked.” Anyone with a pulse who believes this “banking the unbanked” altruistic rationale should seriously question their ability to discern our modern monopolist reality as it exists. Facebook has two primary drivers: Money and Power. That’s it.
Facebook’s inherent drive towards monopoly is its built-in stumbling block. See, as Gerards notes, “Crypto dreams are tolerated when they’re put forward by weird small-time nutters — but not when they’re coming from a huge company with a continent-sized user base.” Facebook is simply too big. And when a giant squid-like Facebook is simultaneously challenging multiple whale-like States, implicit in the battle is the question: When a Giant Squid and a Whale clash, who wins? The Whale, of course. Now, what if you perceive the cephalopod not as a Squid, but as something bigger, something less understood than your traditional cephalopodic foe? Maybe an island-like Kraken? Well, the outcome is then much less easily determined, when you are dealing with the ill-defined and unknown.
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Gerard’s book weaves a multilayered historical garment. It situates Facebook’s effort to take over the money in 2019 within a much larger financial and economic history unfolding over the course of centuries. Prior to Facebook throwing itself into the realm of international currency markets, there was an ever-unwinding drama around currency creation, management, and destruction unfolding across time, space, and political orders. Being prepared to win this instance of the ever-present currency wars was never Facebook’s intent, as the author makes clear. This was the Kamikaze effort during a more significant period of social tumult to map out future attempts at which time they will aim to be successful in establishing their monopolistic dominion over multiple international currencies.
Facebook executive and cryptocurrency enthusiast, David Marcus, is a lead performer in the monopoly’s pursuit of its global currency regime. In mid-July, Marcus testified before the Senate and Congress. At 10 AM On October 23rd, 2019, The Chairwoman of the House Committee, Maxine Waters (D, CA-43), seated opposite Mark Zuckerberg, opened a hearing into the behemoth corporation entitled “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors.” The hearing’s primary subject was Libra.
During her opening remarks of the Financial Services Committee hearing, Chairwoman Waters offered a not-so-subtle rebuke of Facebook’s attempt to take over the money. She said in her remarks, “I’ve come to the conclusion that it would be beneficial for all if Facebook concentrates on addressing its many existing deficiencies and failures before proceeding any further on the Libra project.” Waters also brought up trust and antitrust issues, both relevant to Facebook. If there isn’t a well-known and paradoxical double entendre around antitrust law, there should be, because: you can never trust the (monopolist) trust. It’s a silly play on words the world would be wise to internalize eternally.
For example, in 2016, Facebook was accused of violating a Federal Trade Commission (FTC) settlement established in 2011 when, among other things, it allowed Cambridge Analytica “access to user data contrary to the users’ privacy settings.” Gerard explains, “The FTC eventually fined Facebook $5 billion over Cambridge Analytica in 2019 — just before [Facebook executive] David Marcus appeared before the House and Senate in July.” Facebook continued to show its lack of trustworthiness all the way up to the their attempted take over of the money and beyond.
In early 2021, Facebook prevented its users from publishing or sharing national or international news in response to a proposed law by the Australian Government that, according to CNN, “would allow certain media outlets to bargain either individually or collectively with Facebook and Google so they could be paid for the news distributed on those websites.” Somewhere between Cambridge Analytica and Australia 2021, Facebook thought it would be a good idea to start its own private currency. The author shows in great detail why Libra was simply one more blunder in a long line of Facebook blunders.
The interstitial space between what Facebook executives say and what executives do and the deceptions they use to obfuscate that gap is where a lot of power exists today. There is a modern moral in this tale of Power between States and Corporations. Libra Shrugged lucidly situates Facebook, a bemouth-tentacled-technology cephalopod, within an era of monopolization and financialization, via a semi-coherent set of narrative stories that demonstrate the economic power (systemic threat to the financial system) and political power of both governments and monopolist corporations.
The high-intensity clash between Facebook and regulators from U.S., French, and German central governments is one that fits well within a theory of corporate power outlined by Robert Fredona and Sophus A. Reinert entitled Leviathan and Kraken: State, Corporations, and Political Economy. Reinert and Fredona produced this short paper suggesting the political theory bestiary of Leviathan (States) and Squid (Monopolies) was inadequate to conceptualize of what modern multinational corporations have morphed into.
The authors suggest the Kraken should occupy a new space in the political theory bestiary. They describe the monstrous cephalopod as follows, “What they say of floating islands…will be found applicable without any hyperbole to this creature, ‘which is round, flat, and full of arms, or branches.’” Facebook’s attempt to take over the money on an international level, against multiple states, provides a practical depiction of the Kraken’s theoretical representation. Theory meets reality or reality meets theory or some like that.
As explained in Leviathan and Kraken, “‘early modern states and empires were not clearly defined structures but sets of de-centered processes, the product of the fuzzy tension among various legitimate rivals for power and sovereignty that defined early modern empire globally.’ The rivals included then, as they do today, merchants and companies and stateless financial capital. But it is unwise to collapse the Kraken and the Leviathan into one being, especially now, as nation-state-centered discourses of legitimacy — discourses that once, albeit only for a brief period, nearly crowded all others off the conceptual field — are dissolving.”
In 2019, Facebook collided on many fronts with many modern States. The prevailing monopolist-neoliberal ideology that opened the window for Facebook to mount this challenge is in deep crisis. Attempting to detail whether the State or the Corporation is the unstoppable force or the immovable object here is not easy. Ultimately, the corporeal to prevail will be the one not only willing to fling itself into the other with the most force and legal maneuvering, but also by its ability to answer to the will of the public in a rapidly changing political environment. The nation-state has never faced the threat comparable to these modern-day Techno-Krakens represented here by Facebook’s attempt to insert its power and dominance in a realm traditionally reserved for the State.
Gerard provides concise explanations of the ideological and physical origins of cryptocurrencies. He explains that Bitcoin traders love the idea of a limited supply because it harkens back to the gold standard. The “‘Gold standard,’ is a common phrase meaning that something is good and trustworthy — but the actual gold standard, which was adopted by the U.S. Federal Government in the 1790s, didn’t work well at all.” Gerard explains that “Gold standard economies went through manic boom-and-bust cycles.” The gold standard’s demise was woven into the fabric of the Great Depression. The standard was abandoned internationally by the U.S. in 1971 by, among other officials involved, Richard Nixon and his U.S. Treasury Secretary John Connally.
After the historical break of 1971, Gerard briefly explains how the Asian Crisis of 1997–98 created the dynamics of an “impossible trinity” — “where countries tried to keep their local currencies pegged to the US dollar, allow free capital flow, and set their interest rates independently…When the trade balances shifted, and local interest rates dropped, the foreign investors took their money out just as quickly as they’d put it in. Countries such as Thailand ran out of dollars, and had to let their currencies float.”
The above dynamics show how a deeply financialized economy can quickly damage the real economy via massive and immediate capital outflows. Gerard explains, “[Central] banks had to solve an ‘impossible trinity’ — a reasonably stable exchange rate, an independent local monetary policy, and free capital flows. If a country tries to pursue all three at once, things may go well at first, but will soon become unstable.” These brief historical examples given by Gerard provide a much-needed context for just how complex, nuanced, and consequential making any changes to the financial system can be. Should a corporation like Facebook be anywhere around financial system governance? The answer is not obvious, though it naturally hedges towards NO based on Facebook’s behavior over the last decade.
Fifty years after abandoning the Gold Standard, over twenty years since the Asian Crises, and eleven years after the Financial Collapse of 2008, a rewrite of modern finance had quietly begun with little fanfare under the name of Modern Monetary Theory. The financial rewrite had gained legs in the media several years before the start of the pandemic, an event that threw accelerant on an already well-burning fire. In the midst of an emerging set of ideas gaining steam to replace the neoliberal consensus, there was Facebook attempting to take over the money, as Gerard aptly states in his subtitle to Libra Shrugged. It confused its technological sophistication and its raw power for wisdom and vision supplied by theory and evidence. Facebook’s currency ideas are weak and it’s likely any victories the monopoly has in the currency realm will be hard fought, never achieve the impact the company desires, and will ultimately crumble under its own weight.
Gerard explains on page thirty-eight that dangers of Libraisation exist where “countries had lots of Facebook users, and also had unstable currencies.” “A global stablecoin’s reserve might be large enough to affect financial markets — especially if they buy up all the high-quality cash-equivalent assets. Countries with less stable currencies risk sudden Libraisation, i.e. the replacement of their local currencies with Libra — particularly “given the inability to hold sovereign-to-sovereign discussions on the public policy implications of such substitution.”
On page twenty of Libra Shrugged, Libra Association was described by one academic as “‘a club run by like-minded, interconnected elites interested in power and profit.’ Another called it ‘a façade of decentralization,” and thought it likely the members would collude. “The Libra plan came out when Facebook was under increasingly close attention from governments, who were deeply suspicious of the company’s track record on privacy, election manipulation and falsified news.”
“One Congressional official told the Financial Times: ‘Facebook thought they could hide behind the fact that there are twenty-seven other partners in Libra. But members know that this is Facebook’s project…’” (it was understood that the Libra Ass’n was largely a ruse). Similarly, “[Representative] Tlaib also worried how connected the Association members were to Facebook — the overlapping board memberships and investment relationships.”
Somewhere in Libra’s launch there are dual failures put on full display for the world to see: A company allowed to get so large and wily it was now attempting to jump into the place of the government as it blindly flailed around in all directions looking for the boundaries of its existing power, constantly looking to expand into any and everything in society. I mean, why would a monopoly act any differently? They’re already governed by little men with God complexes, so naturally they feel they should be entitled to control the government and use it as their own.
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Everything in this Facebook-takeover scenario of deeply integrating itself into global finance via Libra goes back to trust and the fact that based on its track record of fraud, lies, and deceit, Facebook doesn’t deserve much trust, and it is a company that is definitely not owed the benefit of doubt in regard to anything trust related.
The Libra proposal inspired former UK central banker Mark Carney to suggest that bankers should start a new basket-based international currency — a “Synthetic Hegemonic Currency…perhaps through a network of central bank digital currencies” (melded through antitrust and central bank process that winds up with a new digital currency coin backed by the USD, but transferrable and tradable internationally and managed by a democratically accountable government, not a corporate fiefdom).
Gerard closed out by stating, “The fallacy of Libra, and of cryptocurrency plans in general, is that the problem isn’t that we need a new technology. We know how to move numbers on a computer. The problems with Libra were always going to be regulation — especially when the project came from Facebook.” Everything boils down to trust, but everything Facebook is antitrust.
The political theory paper on Krakens by Reinert and Fredona gleaned this valuable insight: “[The] Leviathan is an emblem of a kind of state that no longer exists and has never existed….[the Leviathan-as-state is a] relentlessly compelling figure that has long blinded historians to alternate sovereignties within, across, and outside the physical territories of states. From stateless financial capital to multinational corporations acting like states on the world stage, such forms of sovereignty are an essential feature of the global politics we are now living.” (emphasis added).
“There are no universally accepted definitions of “sovereignty,” but, in his recent work on partially independent localities, David A. Rezvani has suggested that it can be “described as a polity’s power of de facto and de jure priority in some respects over a territory….From our perspective, the Kraken can serve as a metaphor for alien bodies that operating in fluid realms beyond (even if literally within) the terroirs of Leviathan states, nonetheless acquire power in and over disparate lands or domains.”
Rezvani’s point should be heeded by reglators and governing officials the world over: either put Facebook in check or it is going to undermine your ability to govern your populations, an effort that in recent years has been reserved by the governments themselves. Facebook has put governments around the globe on notice: either you govern these monstrosities that as of today we call technology corporations or we might very well be affixing their imprimatur as a symbol for global governance in the near to medium term future, rather than what it should be reserved for: universal villainy.
