Below is an article published in elEconomista, written by Juan Maria Nin, Senior Adviser at LILF, about the changes in economic relations between Europe, United States and China. Please read the article through this link (Spanish only) or below (Translated into English and Chinese).
Facebook versus China Central Bank, Europe versus EEUU/China
We are witnessing an interesting battle for the economic, but above all political, future of our society, which will operate on two axes: the geographical and the public/private. What more could we ask for?
As far as the geographical axis is concerned, I believe that the United States has won the game of the Internet so far. It has Alphabet/Google, Microsoft, Amazon, Facebook, although it is true that China is responding with Wechat and Alibaba. The next game will revolve around Blockchain in which we Europeans have an opportunity to lead and not subordinate again.
As for the public/private game and the growing preeminence of the former, the stakes are high. Here, too, Blockchain will be decisive and, just as it provides an opportunity for Europeans, it will also provide an opportunity for the private world.
Why is Blockchain relevant? Because it is a spontaneous stability, something radically new, which did not exist and now does, and which will remain with us forever. It is a real invention! As money, or business, was in its day, it is of general application and is also radically contemporary, it is ‘cool’ as an Anglo-Saxon would say. The radical changes it enables will apply to many ordinary activities in our lives, for example public and private registers, property, commercial, notarial, custody and deposit of securities, commerce or culture. All this for better efficiency and security with the great improvements in productivity that this entails. It will make our lives easier, except for unjust public use for greater control, if possible, of citizens. A fantastic “general ledger” has been born, private like the intranet or public like the internet, but which is, as we have said, in itself, a radical change. For the time being, the greatest impact may come from the financial world, which has strongly anticipated other sectors. Let’s see: the appearance of Blockchain has allowed the development, unevenly for the moment, of three types of assets.
A new currency/currency that central banks will be able to issue to replace our current dollars, euros and potentially it’s most important innovation, is that it will allow them to efficiently replicate 100% of the basic services that private banks currently offer to individuals (deposits, current accounts, direct debits). But also the appearance, at last, of new international currencies in line with the proposal made by Keynes and the United Kingdom in Bretton Woods, the Bancor. This which failed due to the victory of the US dollar, and the Ducat of Hayek, which was also a failure, as were other less noteworthy attempts, but which are now once again feasible for all thanks to Blockchain and which already have a first proposal, the Facebook Pound. As we said at the beginning, a new public/private dance begins, and geography and politics of blocks versus universal currency without borders.
The second asset is crypto-currency, also made possible by its operational base in Blockchain. They are currencies which operate independently of the Central Banks, with no other reference of value than their utility and the cost of their manufacture, the mining industry, but without real or financial assets which anchor, stabilise and objectify it. Volatility is their monetary essence, which differentiates them from projects such as Libra, which would be a currency anchored in other public currencies which would be their underlying currency. This would make it possible to objectify the rules of their value and reduce volatility below the aforementioned underlying dollars, euros, etc., as well as to limit their supply and, consequently, preserve their value.
The third asset is Tokens, “tokens” as a noun and “symbolic” as an adjective. Also, as with the coins we have already mentioned, they are digital assets thanks to blockchain technology. The first (utility tokens) have been early private initiatives, based on crowdfunding and whose returns are linked to services which generate future rights. The second, the security tokens, are financial securities with a new format, registered only in a public blockchain and, therefore, born and developed as purely digital or also, in a more intermediate area, if they are based on an underlying asset of which they are constituted as a property certificate.
Let’s look at the future of these assets. The possibility of a private universal currency, Libra or whatever, is dawning, with all that this implies in terms of challenges to the established borders of public power and state sovereignty: a challenge to the use of the official currency as an instrument of clientelist policy, of trade and currency war of power, but, fundamentally, it is a challenge because it provides an opportunity to exercise individual freedom in the face of a potentially omnipresent system that watches over everything and is moving very quickly towards a control that has never been experienced before. As Sundar Pichai, Alphabet’s CEO, has warned, he recommends prudence and regulatory reflection in the face of the dazzling advance in the constitution of gigantic corporate databases that contain everything and in which the last step is that of facial recognition. Of course, on the other side of the scale are the problems that such a currency poses to an established system of legal subjection and administrative supervision, since its development, compliance and derived conduct could easily escape the rules of the democratic game and the final rule of justice. Also, and in the same vein, cryptomonies are a force vector that poses a similar challenge, although, in my opinion, lesser than that of a truly universal private currency. But while the great battle is being prepared, some large figures will give us a better perspective of the concepts handled here and their transcendence.
Let’s see some with rounded figures in US dollars. The world’s cash money is 80 trillion, capital market (stocks, bonds and derivatives) 200 trillion, real assets 1 trillion and digital assets 0.3 trillion. In 10 years it is estimated that 10% may be digital assets, Tokens will have the most enormous ledger imaginable thanks to new technology and new invention. 50 trillion worth of Tokens, 50 times the Spanish GDP, noted in the new invention. Yes, it will be transcendent.
Having established the importance of the change that blockchain entails, let us add some final considerations. The first: if sovereign debt, with its current denomination in state currency, does not improve its risk profile, the shift that could take place, through public to private risk arbitration, is very clear: the movement to new currencies that could be perceived as more reliable than public ones could be very significant and as a consequence, the financing of the phenomenal mountain of sovereign debt in which we have installed ourselves and which finances an oversized and partly badly managed public sector thanks to this excessive leverage, would be put in check. The stability of the Welfare State is at stake. It could be a checkmate. The second is that if the Central Banks, as has been pointed out, were to issue crypto-currencies, CDBC’s (Central Bank Digital Currency), the challenge to private banking could be phenomenal and, in the opposite direction to that mentioned, there would be a massive transfer of savings from the private sector to the central banks, entities which are already very powerful today and which, in the case mentioned, would be even more decisive in economic and social life than they have been up to now. Let us remember that these entities are, by definition, independent of political power. Finally, the new centres of power, the large metropolises could issue their own currency. It would not be the first time that a municipality issued money. Third parties in discord in a world of high competition and which already poses a major growing challenge to the current nation-state.
It will be very interesting to see how these issues evolve and the level of diligence of our governments to manage them properly. We Europeans have a lot at stake in this next power struggle. We are beginning to see a major difference between member countries with a clear advantage on the part of some of our partners in the EU. Meanwhile, Chinese and Russian corporate databases are being built up at great speed, with great efficiency and, as we said, with facial recognition as the latest control product. Central banks are also moving rapidly towards issuing their new digital currencies and governments and international bodies are preparing to curb the most powerful private universal currency initiatives in favour of regulation and their own currencies.
In Apple’s 1984 announcement introducing the new Mckintosh invention, a female hammer thrower breaks the unique thinking and bad Orwellian dream of total control through universal communication. Today the same hammer threatens the freedom and universality of citizens through effective corporate databases and blockchain points us relentlessly in a ledger that is currently impenetrable. The battle is set.
一种中央银行将能够发行来取代我们现在的美元、欧元新的货币/外汇，其潜在的最重要的创新之处是，它将允许中央银行百分之百地有效复制私人银行目前为个人提供的基本服务（存款、支票存款账户、直接借记）。但终于也出现了与凯恩斯和英国在布雷顿森林体系中的建议一致新的国际货币。班科（el Bancor）由于美元的胜利、哈耶克的胜利而失败了；达克特（el Ducat）和其他不那么著名的尝试也同样失败了。但现在由于区块链和Facebook的利波拉（Libra）的第一个计划，新的国际货币再次变得可行。就像我们一开始说的，新的公共对私人、地理和政治的区块对无边界的通用货币之舞开始了。
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