What happens when the basket of currencies backing Libra is less stable than the stablecoin?

Hi it’s Keir Finlow-Bates here. So I was
reading up more about the Facebook Libra
and also about things like Bristol LETS
and I think something called Minnesota
dollars if I remember correctly – might
have been a different US state – where
different groups not connected with
governments launched their own
currencies in order to allow people to
pay each other for goods and services,
and it started me thinking: what happens
if Facebook’s
coin does take off and it becomes the
global de-facto standard for trading
stuff. We’re already seeing sports stars
asking to be paid in Bitcoin rather than
in dollars, for example, and it’s
happening and some of the states are now
willing to accept tax payments in
cryptocurrency rather than in dollars.
So the difference between a Bitcoin and
Libre is that Libra is meant to be a
stable coin, is going to be backed by
fiat currencies, and so it’s not meant to
be a speculation instrument, whereas
Bitcoin has a market determined price,
mainly at the moment based on
speculation as to how much it’s going to
be worth in the end, and Bitcoin does
seem to be setting itself up to become
the digital gold. And one way of looking
at Libra is seeing it as becoming the
digital, sort of, global dollar – so what
happens to all these currencies that are
held in the reserve as Libra gets bigger
and bigger? Now I don’t know the answer
to this, because I’m not an economist, and
what’s more when I went and looked
online I couldn’t find any really good
articles explaining what happens, or
maybe the reason why they’re not there
is because it has not happened, but I
couldn’t even see any hypotheses of what
would happen if slowly over time more
and more of us do more and more of our
transactions with Libra until eventually
the fiat currencies that are supposed to
be backing it are actually lesser, and
then this digital currency – so I’m sort
of thinking here of a world in which
slowly various national currencies of
smaller countries with troubled
economies just effectively disappear,
because now everybody’s using Libra. Why
would they use the currency of their
local country? And of course governments
would then try and make that illegal but
it’s gonna be very very hard to enforce
and then slowly some of the bigger ones
start to tumble so the pound and then
you know the yen and possibly the euro
and so on until eventually the basket
that is supposedly providing the
stability to the currency is actually
less stable than the currency itself.
Excuse me –
a lot of bugs in the air here. So what
happens then? Firstly – is this the
plan, is that is there some kind of
long-term plan on the roadmap of Libra?
And secondly, if there isn’t – why isn’t
there? And thirdly – does anybody know
where it could end up? I mean, is it
possible that eventually all currencies
will disappear and there will be one
global digital currency? Now I don’t know
the answers to this – as I said I’m
primarily a technologist; I know that
it’s technically possible to have a
global digital currency and from a
technical point of view it makes perfect
much more efficient than having large
numbers of confusing currencies where
you get ripped off if you go to Budapest
for example and have to pay for your
taxi in forints and you have no idea
what whether ten thousand of them is ten
euros or a hundred euros: and I’m talking
from personal example here. So anyway any
of you out there with a reasonable
amount of economic knowledge please do
comment below, let me know: is it possible
that Libra could replace all other
currencies and exactly what process
happens when that does occur? I look
forward to some interesting answers, and
see you in the next video soon.
Bye for now.

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