Two functional "official" exchange rates in #Lebanon. The ~1500 LBP/USD of banks and the ~2000 LBP/USD of exchange houses. Venezuela 2014. Let me elaborate 👇
@GinoRaidy @LeNajib @Beirutspring @dan_azzi @LebaneseLira
@GinoRaidy @LeNajib @Beirutspring @dan_azzi @LebaneseLira
In 2014, Venezuela had 3 official exchange rates, plus the black market rate, called CADIVI (6.4 BsF/USD), SICAD 2 (13.5/$), SIMADI (200/$) and "DolarToday" black market (250+ /$). SICAD2 was already dysfunctional, let's discard it.
CADIVI, our 1500: You go to the bank, tell them here are 100$, you'll get without any problem 640 BsF, which are actual 3$. Would you give your 1$ for 1500LBP? No. CADIVI was only used for essential imports (flour, oil..). Banque du Liban is securing the 1500 rate for oil, meds..
Since no one would sell his $ at 6.4 BsF, no new $ would flow into the country to maintain the CADIVI rate, and central bank would have to subsidize essential imports at CADIVI (hint: huge corruption scheme, applicable to Lebanon, obviously) from own reserves, depleting them
SIMADI, our exchanger's 2000. You would go to the bank (an exchanger), give them 1$, and get 200 BsF. Not smart, because you could get 250 BsF on the Black Market. You could try to go to the bank, give them 200 BsF and ask for 1$, but it's quite hard to find a counterparty.
If you find the counterparty, which means there is that 1$ at the bank, you're very lucky, and you get your 1$ for 200 BsF. Else, if you desperately need $, let's say because you are traveling (emigrating), you go to a "Black Market" guy and get only 0.8$ for those 200 BsF.
Now let's go back to Lebanon. Less and less $ will be available at Exchange houses because everyone would love to get $ at the fixed 2000 LBP/$ rate. A minute or another, no $ will be available at the exchange place. High $ demand, Low $ supply.
A "Black Market" guy would be whispering outside exchange place: "Do you want dollars? I have, but I'd take 2100 LBP for 1$, not 2000." Day 2, no dollars at exchange, and that guy would be like "Now 2100 for 1$" and so on.
Conclusions:
1- By implementing 2 exchange rates, Lebanese corrupt politicians are amplifying corruption, they'll get richer and you poorer. They'll get their $ at 1500 through shady businesses (like oil import) and you'll get $ @ 2000 (if lucky at exchanger) or @ 2100+ (black)
1- By implementing 2 exchange rates, Lebanese corrupt politicians are amplifying corruption, they'll get richer and you poorer. They'll get their $ at 1500 through shady businesses (like oil import) and you'll get $ @ 2000 (if lucky at exchanger) or @ 2100+ (black)
2- The "bank run" was avoided by the capital controls they imposed (the 300$/week etc). They can't stop a "Sorraf run". Go to the exchanger and get all the $/£/€/¥ (...) you can, because 2000 LBP/USD is the cheapest you'll ever get from now on. #Thawra
Bonus: that 250 BsF/USD of early 2014 is now 760 MILLION BsF/USD. After every peak, there would be a stabilization period (rate ~20% less than peak), but then another higher peak. Cycles, but always rising.
A little correction. On day 2, the black market guy would wisper "Now 2200 for 1$"
