The Libra has the potential to mark the start of something because if widely used, it will open the eyes of the global population to a truth about money: it works best when its value is stable, plus it needn’t be a government creation.
Cryptocurrencies are a different sort of financial technology from bank deposits, yet they are being shoehorned into the same category for regulatory purposes.
Facebook's Libra is easily and probably rightly criticized by crypto purists as a halfway house that makes too many concessions to legacy systems and plays too nicely with the existing regulatory system. All true. But that’s not where the story ends.
The origin of money, the history of central banks, the operation and destruction of the gold standard, the rise of inflation and massive government debt, the disastrous bailouts of 2008 – it's all covered in an outstanding hour-long documentary appearing on PBS stations called In Money We Trust.
The greatest risk to the US dollar may, in fact, come from within. The imposition of tariffs and sanctions create an opportunity for other countries to engage in bilateral trade. The decision to withdraw from the free trade initiatives such as the TPP and T-TIP weakens not only the prospects for US trade but also the preeminent position of the US dollar.
For both social contract theory and monetary theory, theorists are considering something that never happened in the past and that they have no reason to believe will happen in the future. No such considerations are useful.
Right now, we have a disordered and dysfunctional money system. This poses very acute risks and dangers that because of the nature or money can have system-wide effects. We should look at how monetary systems have been reformed in previous times, and also rethink the way money is commonly taught and thought about.
What we’ve learned is that money can be privately produced. Hayek’s dream of choice in currency can be reality. What form it will take in the future no one can know for sure. What’s more, there is no end game here. The process of innovation will never stop.
Hayek’s commodity reserve standard would automatically serve to stabilize prices and output. In our discussion of rule-based monetary policy and sound money, the mechanics and principles guiding Hayek’s proposal deserve careful consideration.