Jump to content

Libra VS XRP


Guest
 Share

Recommended Posts

2 hours ago, Wandering_Dog said:

(we will ignore negative rates and bonds in the EU for simplicity for now)

This is a big thing to ignore. Where will they have to go to chase profits after 30+ year bond bull? Maybe in 25 years we will LOAO at the company that decided buying government debt was a swell idea "in 2020, of all years". Or could go the other way like you predict and succeed beyond reason. But don't overvalue the correlation with their current size and power. Black swans like that are a net danger to incumbents, not something they can dictate. 

Link to comment
Share on other sites

35 minutes ago, jcdenton said:

This is a big thing to ignore. Where will they have to go to chase profits after 30+ year bond bull? Maybe in 25 years we will LOAO at the company that decided buying government debt was a swell idea "in 2020, of all years". Or could go the other way like you predict and succeed beyond reason. But don't overvalue the correlation with their current size and power. Black swans like that are a net danger to incumbents, not something they can dictate. 

Well, why do negatives rates exist? 

It is a choice. If you let private money creators pump a bubble of zombie debt that will never be repaid, then intervene to protect the price level, and your only policy instrument is reducing rates, then yes, you have to deal with negative rates. 

But again, this is a choice. You can circumvent the entire issue by letting the zombie debt default, performing QE for people to ensure a deflation does not occur, and business with cashflows will survive through consumers spending. 

Alternatively, you can expand gov spending--but, this is restricted by neoclassical economic theory, which acts to inhibit the gov's ability to offset popping that asset bubble of zombie debt. 

The assumption that negative rates are inevitable or unavoidable is self-created, circular, and therefore not valid. 

 

EDIT: the EU bond issue is more complex, because it is unlikely the EU will survive beyond 2021. So, EU bonds are not risk-free, and so long as the EU does not have a sovereign currency I'd be surprised Libra used EU debt at all. 

Edited by Wandering_Dog
Link to comment
Share on other sites

1 hour ago, Wandering_Dog said:

The assumption that negative rates are inevitable or unavoidable is self-created, circular, and therefore not valid. 

All good, but no one was making that assumption... This rant seems off topic as we were discussing risks for Libra. 

Link to comment
Share on other sites

1 hour ago, Wandering_Dog said:

The path dependent outcomes we see today have almost nothing to do with what works best at the time they become adopted. It just ends up happening a certain way and then poof, its a standard we can't escape. I'll say again this is a serious threat to XRP, Ripple is already rich, they can always just go home and retire, so they may not even care

I've always respected your analyses on a range of topics but I'm sure you'll agree that Libra is not a done thing. Not on the tech, the economics, the politics or the rails. The economic and political realities in the relevant countries (particularly the EU) has yet to play out. Judging by the initial feedback here in Australia, the regulators don't appear to have been consulted carefully and will have much to say about FB's plan to create a wide-ranging, global payment system.

On top of this comes the muddle-headed nature of their strategy. The various white-papers and reserve policy are filled with frankly bizarre leaps of faith, sales fluff and contradictions. Is Libra backed 100%? Yes, the paper says. Then no. Then later a thinly veiled confession that Libra will only be fractionally reserved. All done in a way, they confidently tell us, that will avoid a catastrophic run on the reserves and full-blown devaluation. https://libra.org/en-US/about-currency-reserve/#the_reserve

The currency is pegged but, and I quote, "The association does not set monetary policy". That's disingenuous at best but more likely an outright falsehood because founding members have a say in many elements of the arrangement including asset blend and a cut of profits generated from any interest bearing assets from which only they benefit. The incentive structure runs counter to the stated aims of stability and nothing good can come of that.

In short: someone is making decisions about backing "our" currency. The same guys are profiting from those decisions. That's monetary policy with all the downside but none of the upside. To top it off, there are no consequences on members if the Foundation screws up. Exhibit 1: Cambridge Analytica.

As for the bigger picture, nation states which otherwise need a currency to define their statehood and who would otherwise decide monetary policy are being asked to relinquish that essential source of revenue and stabilising influence to an unregulated handful of privately owned corporations. Ironically it will be crypto that becomes the handmaiden for this appropriation by multinationals (not citizens) of a largely peaceful financial world order established out of the roiling cauldron of WWII. I just don't see that happening without a major battle for control that ultimately limits the effectiveness of Libra.

Link to comment
Share on other sites

1 hour ago, Wandering_Dog said:

I'd be interested to know how they plan to handle flows, if at all. They may not need to.

It doesn't feel intuitively right that one company can properly manage all the flow imbalances without a "bridge asset".

I know you can write triangular arbatrage algos to manage FX and flows across many Orderbooks/currencies, but at some point the system/fbook is going to need to interact and trade with an outside party to counter accumulating flow imbalances.

---

On the whole, I dont see this Libra as a significant threat to RippleNet because... 

1. It looks like a closed network, and IoV & XRPL are an open network

2. My above comment about "no bridge asset" and how much computational Complexity that absence introduces into the system's routing/Pathfinding function

3. As you said fbook is basically just operating a bunch of Narrow Banks, and I'm not sure why they even need a blockchain?

I would tend to view fbook as "just another payment network", not unlike an international bank signing up for RippleNet.

Link to comment
Share on other sites

2 hours ago, Pablo said:

I've always respected your analyses on a range of topics but I'm sure you'll agree that Libra is not a done thing. Not on the tech, the economics, the politics or the rails. The economic and political realities in the relevant countries (particularly the EU) has yet to play out. Judging by the initial feedback here in Australia, the regulators don't appear to have been consulted carefully and will have much to say about FB's plan to create a wide-ranging, global payment system.

On top of this comes the muddle-headed nature of their strategy. The various white-papers and reserve policy are filled with frankly bizarre leaps of faith, sales fluff and contradictions. Is Libra backed 100%? Yes, the paper says. Then no. Then later a thinly veiled confession that Libra will only be fractionally reserved. All done in a way, they confidently tell us, that will avoid a catastrophic run on the reserves and full-blown devaluation. https://libra.org/en-US/about-currency-reserve/#the_reserve

The currency is pegged but, and I quote, "The association does not set monetary policy". That's disingenuous at best but more likely an outright falsehood because founding members have a say in many elements of the arrangement including asset blend and a cut of profits generated from any interest bearing assets from which only they benefit. The incentive structure runs counter to the stated aims of stability and nothing good can come of that.

Likewise. And I would agree, certainly, FB can screw up, they have a long history of doing so! I did not mean that the competition was over, but that FB has some serious advantages which should not be ignored. We discuss closed and open systems, but if 90% of the world uses your system already, the "open vs closed" debate becomes somewhat opaque. Especially if they did open validator positions to anyone, which "they said they would". 

The reserve is not well described, absolutely. And I would not be surprised if they tried to get away with whatever they can, as it always goes. And, if they use a fraction reserve, the system will not survive long, as the reserve, connected to the system in some capacity, will need to be "bailed out". And if its not connect to the system, then we aren't talking about a different system than what we've already got! If they use a fully backed reserve system, there are no problems. And, I would not be surprised if their greed to exploit leads to a fraction reserve that experiences a run--but they can technically survive a run, given that the underlying is elastic, they can borrow more. If we impose inelasticity of the underlying, say politically, we may be pushed to other solutions like xrp--but xrp is also unstable, given its fixed supply, so... not much of a solution. 

I don't think anyone can come out and say "we're planning on setting global monetary policy" because you will be destroyed by sovereigns. So, this is a non-statement, just said for the sake of saying it, devoid of any meaning, considering they are releasing a bloody currency over which they have control! 

I don't follow when you say:

Quote

In short: someone is making decisions about backing "our" currency. The same guys are profiting from those decisions. That's monetary policy with all the downside but none of the upside. 

In an xrp system, credit is backed by xrp, its the gold in a gold standard system. And Ripple profits by having created it from nothing. FB is earning the overnight rate in central banks. If xrp was adopted, the return to Ripple would be magnitudes larger than returns to FB in the reserve, especially when you consider time.  

 

Quote

As for the bigger picture, nation states which otherwise need a currency to define their statehood and who would otherwise decide monetary policy are being asked to relinquish that essential source of revenue

This I don't follow, Libra does not require a state to relinquish power over taxation. Or am I missing something?

 

Quote

and stabilising influence to an unregulated handful of privately owned corporations.

This is an interesting statement, because the same applies to xrp, or any standard, does it not?

 

Quote

Ironically it will be crypto that becomes the handmaiden for this appropriation by multinationals (not citizens) of a largely peaceful financial world order established out of the roiling cauldron of WWII. I just don't see that happening without a major battle for control that ultimately limits the effectiveness of Libra.

I certainly agree about a battle, I'm a bit unsure of the world financial order being peaceful, but I don't fully understand the handmaiden statement regarding firms rather than households.

Link to comment
Share on other sites

2 hours ago, KarmaCoverage said:

It doesn't feel intuitively right that one company can properly manage all the flow imbalances without a "bridge asset".

I know you can write triangular arbatrage algos to manage FX and flows across many Orderbooks/currencies, but at some point the system/fbook is going to need to interact and trade with an outside party to counter accumulating flow imbalances.

---

On the whole, I dont see this Libra as a significant threat to RippleNet because... 

1. It looks like a closed network, and IoV & XRPL are an open network

2. My above comment about "no bridge asset" and how much computational Complexity that absence introduces into the system's routing/Pathfinding function

3. As you said fbook is basically just operating a bunch of Narrow Banks, and I'm not sure why they even need a blockchain?

I would tend to view fbook as "just another payment network", not unlike an international bank signing up for RippleNet.

Libra is the bridge asset, what we're asking is what the constraints on Libra creation are, and that's the central banks, who control creation of reserves. So, the system persists if central banks play along, but as they can't technically prohibit a user from operating without explicitly banning them from the system, which would require legal action banning the currency essentially, then FB's system can run on the central banks rails all they want. 

Net flows lead to increasing balances in the reserve of the currency being sent, and decreasing balances of the currency being received. The reserve will have to borrow from the receiving central bank to cover those central bank deposit outflows. How much can the reserve borrow? Well, they have inflows of some currency they can use as collateral. So, the reserve is much like T2, in that German surpluses are Italien deficits, and central banks accept that collateral because no one can leave the system... So, you have persistent imbalances, until the political system imposes balance, as we see now with tariffs etc. Maybe Libra is the Global Euro, lol :dash1:  Still better than a gold standard.  

Link to comment
Share on other sites

1 hour ago, Wandering_Dog said:

Maybe Libra is the Global Euro, lol :dash1:  Still better than a gold standard.  

Why would it be better than a gold standard?

Did you see that Tether "printed" 100m new Tether a few weeks back? Did you know that Ethereum devs premined an additional 72m ETH  for themselves at launch? These devs/projects are like the digital fed, I highly doubt Libra will be much different. I (like many) don't trust FB with my info/data, so why should I (we) trust their "currency"?

Link to comment
Share on other sites

On 6/19/2019 at 3:24 AM, jockeyng said:

I think this is a good thing that Facebook is causing the stir in the mud. Ripple is trying to change the existing banking system for a long time, that's why you see Ripple's executive has been the board members in almost any global monetary organisation. Ripple is doing it in a very soft way, they try to be a "friend" of banks. Facebook is doing it the hard way, they are trying to replace banks/central banks. For those of us who want progress, I want to give a kiss to Facebook to kick all the old butt in the banking industry that has been stagnant for so long. It's time to get out of your comfort zone and embrace the new technology!!!

 

Link to comment
Share on other sites

52 minutes ago, zerocool said:

Why would it be better than a gold standard?

Did you see that Tether "printed" 100m new Tether a few weeks back? Did you know that Ethereum devs premined an additional 72m ETH  for themselves at launch? These devs/projects are like the digital fed, I highly doubt Libra will be much different. I (like many) don't trust FB with my info/data, so why should I (we) trust their "currency"?

If the supply of credit is expanding and the settlement asset is a fixed quantity, there is an insufficient amount of the settlement asset to resolve liquidity crises, by definition. The result is a debt deflation.   

Link to comment
Share on other sites

1 hour ago, Wandering_Dog said:

If the supply of credit is expanding and the settlement asset is a fixed quantity, there is an insufficient amount of the settlement asset to resolve liquidity crises, by definition. The result is a debt deflation.   

It is not about a fixed quantity alone but about a fixed price as well (which existed for Gold from 30 B.C. till the end of Bretton Woods).

Link to comment
Share on other sites

6 hours ago, VanHasen said:

 

I believe it is no coincidence for Ripple to announce the Moneygram deal, the deal should be made during the twitter's rumour. But they wait and wait and wait just before the Facebook coin release the whitepaper. Their PR knew that it will be the biggest wakeup call and signal to bank and FI - See? Facebook is coming for you, and our Ripple ship is leaving as well, which side do you want to join? 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.