#Lebanon ‘s citizens are angry & for good reason

Many have lost their life savings

Many have lost their jobs

Everyone is looking for answers

Everyone is looking to point blame at someone, anyone..

Not surprisingly, Politicians & Bankers have been easy targets

But...

2-As people know by now, #Lebanon had a unique formula

Super educated & wealthy diaspora who escaped the civil war & thrived in their new domicile countries

As the war ended, this diaspora eagerly waited for holidays & summers to go back

They also sent their savings home

3- #Lebanon ‘s modern history always seemed intertwined with banking (see فرعون و شيحا)

But since the end of the civil war, this industry went into overdrive

Govt was offering bonds to borrow for construction

Diaspora was both willing & ready to fund these banks

But why?

4- Whether it was R. Salameh, Bank heads or politicians, it wasn’t that hard to hit the sweet spot

Bank secrecy laws already existed

Next was to offer higher than Avg interest rate (& low taxes)

How high? Just enough to seduce them but not too high to scare them off

5- Both shockingly & unsurprisingly (I know it sounds contradictory), the majority didn’t as or wanted to know what banks were doing with their savings

All they knew was they were getting higher after-tax income than what they could get in Dubai, Paris, London or NY

6- As everyone knows by now, banks were simply acting as brokers

They paid you R

They lend it to Govt & BDL at R+2

Everyone gets this by now

But what is perhaps still not well understood is how and why this went on for this long

Here is the answer ==>

7-Reason the show lasted this long is because it was too good to give up

Politicians were able to sit in their seat for this long because they presided on a system that

Allowed citizens to enjoy importing any item they fancied with no apparent cost or sacrifice

8-These 2 images encapsulate the story of #Lebanon over past few decades

Runaway imports, low flat exports

That would usually cause significant fall in the currency

Yet

LBP was a straight line

Magic

That politicians, banks & the chief maestro Salameh produced jointly

9- #Lebanon ‘s citizens now are angry because the magic show has suddenly stopped

If politicians, bankers and Salameh can no longer provide a stable currency that would give citizens the illusion of prosperity then to hell with all three of them

Heads needs to roll & soon

10-If Banking & Finance is built on trust & confidence then the diaspora have said their goodbye to the system

There will no longer be anyone to bankroll the import bill

The currency will have no support

Inflation will have no cap

Standards of living will fall & fast

11- Is this explanation too simplistic?

Yes and No

The policy was actually part of the law and mandate of the Central bank that successive governments & politicians adhered to under the guise of “stability”

Stability that was funded by someone else’s money & life savings