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The Idea of Libra Currency
The idea of Facebook's Libra, an attempt to create a new currency made from the architecture that powers Bitcoin, is that the value of new money is not derived from state authority, but a combination of mathematics, global connectivity, and trust that resides in people using Facebook.
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The instruments of trade and finance, like paper money, are groundbreaking inventions, put to use by collective acceptance using authority and seals of trust.
The financial crisis of 2008 showed that the system can buckle anytime and money may not always be worth the same.
As we get hyper-connected, the state-backed authority of currency, and what Money is really worth, is being rethought. Society has historically tried to invent new forms of currency, most recent being Bitcoin, a cryptocurrency.
The King Williams Administration used to borrow large sums of money used for wars and then levied taxes on ship cargo and spirits to pay back the interest. This gave rise to Banks like the Bank of England, and finally Bank Notes, the currency still used today.
Paper Money was pushed as a 'fiat' currency due to an attractive quality: it was guaranteed to trade by the state authority for a specific weight of gold or silver, and couldn't be melted down or devalued.
The financial system in use today is a version of John Law’s system:
Each country in the developed world has a central bank that issues paper money, manages the supply of credit in the interest of commerce, uses fractional-reserve banking, and has joint-stock companies that pay dividends.
- Real money is only gold, and all the other forms of currency in the system are merely different kinds of credit.
- Credit is an indispensable part of a functioning economy, so it continues to thrive even with historical setbacks.
- Gold is the only real 'legal tender'.
RELATED IDEAS
- Ethereum was the most meaningful of the ICOs (initial coin offering). Many other companies followed, such as NXT Neo, Spectrecoin that were often tied to specific businesses and products.
- In 2017, the US Securities and Exchange Commission (the money police) announced that financing events for digital currencies would be regarded as securities under some circumstances.
- But bitcoin left behind its original community of true believers, and in 2017, the price surged more than 1,000 percent.
Digital currencies are tricky when it comes to their value.
Initially, they had value due to their being encrypted and secure, and now there is some fluctuation.
Cryptocurrencies have an intrinsic value mainly because of the mass adoption of the currency and the buyers, who spent old-school money to buy cryptocurrencies, have jointly agreed and decided that there is a value.
- In his first book, "The Theory of Moral Sentiments", Smith proposed the idea of an invisible hand - the tendency of free markets to regulate themselves through competition, supply and demand, and self-interest.
- He is known for creating the gross domestic product (GDP) concept and his theory of compensating wage differentials.
- In 1776, Smith published "An inquiry into the nature and causes of the wealth of nations" shortened to "The wealth of nations."
- In "The Wealth of Nations", Smith popularised many ideas that form the basis for classical economics.