A fifty-year history of Facebook’s Libra

JP Koning in this superb blogpost (as  always) points idea of Libra is hardly new. There have been several attempts in the past both private and public to create a similar currency unit:

Interestingly, the Libra isn’t the world’s first private unit-of-account. Back in the 1960s and 1970s, several financial institutions came up with their own bespoke units. I learnt about this strange and fascinating episode courtesy of a very readable paper by two economists, Joseph Aschheim and Y.S. Park.

John Paul Koning@jp_koning

Libra isn’t the world’s first private currency basket. This paper https://ies.princeton.edu/pdf/E114.pdf  discusses four earlier attempts…
-Eurco (1973) Rothschild & Sons
-B-Unit (’74) Barclays
-Arcru (’74) Hambros Bank
-International Financial Unit (’75) Credit Lyonnais
Good luck, Libra!

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As I gathered from the paper, the first private artificial currency unit was Luxembourg-based Kredietbank’s European Accounting Unit (EUA). Originally devised in 1961 as 0.88867 grams of fine gold, the EUA was soon used to denominate a bond issue by SACOR, a Portuguese oil company. Over the next two decades, Aschheim & Park claim that around sixty or so bond issues would rely on Kredietbank’s EUA as their accounting unit.

Between 1968 and 1971, the U.S. Treasury ceased to redeem dollars with gold. When the Smithsonian Agreement—a band-aid attempt to re-cement all currencies to the U.S. dollar—collapsed in 1973, the post WWII system of fixed currencies came to its final end. To help people cope with the sudden babble of floating currencies, several new private units-of-account joined Kreietbank’s EUA.

N.M. Rothschild & Sons kicked things off in 1973 with its European Composite Unit, or Eurco. The Eurco was made up of nine currencies issued by members of the European Community, including Deutsche marks, French francs, and Danish kronor. According to Aschheim & Park, Rothshild developed the Eurco “to elicit investors’ confidence” in long-term bonds, but as of 1976 only three bond issues had been denominated in Eurcos.

In 1974 Hambros Bank introduced the Arab Currency-Related Unit, or Arcru. The Arcru was comprised of twelve Arab currencies and designed to appeal to Arab investors flush with oil profits. The next year Credit Lyonnais created a bouquet of the ten currencies, both European and non-European, and dubbed it the International Financial Unit, or IFU. This was a far more broad-based unit than the Arcru or Eurco, the relative weights of the IFU’s component currencies being based on each country’s share of international trade.

Barclays Bank also got into the game in 1974 with the Barclays Unit, or the B-Unit. The B-Unit was made up of five currencies: the U.S. dollar, the British pound, the German mark, the French franc, and the Swiss franc. Aschheim & Park note that whereas the Arcru, IFU, and Eurco were primarily intended for denominating bonds, the B-Unit was designed to be used for making international payments.

Which makes the B-Unit a direct predecessor of the Libra unit.

Look around you today, however, and not one of these private units-of-account listed below exists. Anyone want to pay me in B-Units? I didn’t think so. I think this says something quite fundamental about the market’s demand for artificial currency units. Businesses and consumers don’t really like to use them.

Hmm..

Usually all new things in money are not really new. There usually exists a similar idea in the past. After all, humans have worked out several ways to figure this thing called money…

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