As is so often true we find ourselves echoing Craig Pirrong here. We can’t really see what problem it is that Facebook’s new Libra solves. There being, to us at least, two major problems with what Libra actually is as well.

It’s a stablecoin - that is, it should have a fixed and static value. This is most useful if we’re to regard it as a method of payment. Except the valuation is to a basket of currencies. Which means that when compared to any one currency it is of course not a stablecoin at all. That translation into real world currency value is thus always changing. Not a useful attribute of a means of payment.

The other is the risk of temptation:

I note in passing that low interest rates destroyed the traditional FCM model which relied on interest income from customer margins as a major revenue stream (as Facebook is proposing here). Ask John Corzine about that, and look to the experience of MF Global.

If there’s a pool of funds which the operator of the pool keeps the interest from there’s always that temptation to chase returns on that pool. Higher returns meaning either greater risk of less liquidity. Which is indeed what happened at MF Global and could be said to be the problem that Neil Woodford’s funds are suffering from.

That we don’t know whether a new adventure will solve a problem or not is precisely the argument in favour of markets and entry into them so we’re obviously not saying that Libra should not happen or not be allowed. But it is true that we can’t quite see what problem will be solved here.