How much of what happened in #Lebanon is “financial” versus “political” is the single most contentious issue when it comes to analyzing & discussing this crisis
As readers can guess by now, i am firmly in the financial camp
Why?
Simple arithmetic & Economics
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Before defending the financial thesis, let's get first into the political part
By political everyone presumably means Hizbollah (HA) and its allies. Story goes that this group runs as a state within a state. They control borders. They allow & practice smuggling
All true
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3-Let's not forget that before 2005, it was #Syria that was main power broker. Presumably, any if not all of #Lebanon 's shortfalls would have been blamed on Damascus (it is now HA)
But
Throughout #Syria 's "control" the currency did not lose 90%. Neither did depositors
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4-Indeed, #Lebanon 's political challenges are not new. It is not like HA landed from Mars in the fall of 2019. It is not like the borders with #Syria have suddenly become porous. Surely, all those sending nearly $ 7 billion a year knew all this
So why now?
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5-Actually, the pressures on #Lebanon 's finances started as early as 2002 with Paris II and then again in 2007 with Paris III. This is why those conferences were made- to shore up the sitting Govt's finances at the time. However, the disbursed funds were quickly spent
Where?
6-Two years into the crisis, it seems many people still don't get the simple arithmetic
With just two years without supporting the peg, see how LBP lost 90% of its value
So how do you think it held to the same value for 23 years straight?
7-Every single morning you brushed your teeth, had your coffee, ate your breakfast & drove your car to work you needed $$ from somewhere to have imported your Crest, Nescafe & fuel. You needed those $ for practically everything else you did that day
But where are $$ coming from
8-As you know by now, @BDL_Lebanon was the source of those $$. It wired them to the banks of the importers. But BDL prints LBP and not $$
And as you also know by now, BDL knew where it could find $$ to hand to the importers
It "borrowed" them from the banks (your deposits)
9-But if @BDL_Lebanon borrowed all these $$, why can't it return them?
How do you think 1507.5 was held all these years
Without this constant flow of $$ from the banks to BDL, you need to sell LBP to source those $$
But, the peg means BDL can't
So it keeps doing same
10-Amount of $$ that @BDL_Lebanon needed to keep this game going for 23 yrs is precisely what any forensic accounting is likely to find once they untangle this so-called balance sheet
And they are going to find something in order of $65-85 billion (own back of envelope calc)
11- Back to political versus financial again now
Had Hizbollah been thrown into the sea in fall of 2019 and had #Syria 's border been tightly shut with zero smuggling, would the above numbers or story have changed?
Nope. The numbers pale in comparison to the real culprit
12-Lastly, are most readers going to be convinced by this thread? Absolutely not
People rarely change their strongly held political views
humans will believe what they want to believe based on their politics, sect & religion and not stupid arithmetic
A word on Syrian refugees & their impact:
There is zero doubt their % of #Lebanon 's population is huge and hence their need for electricity, fuel etc.
When they came during the war, it was thought this was short term as Govt in Damascus was expected to fall soon
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Whether it is now #Lebanon#Jordan#turkey or even #EU facts are that #Syria 's refugees are not going back home anytime soon. Military service, Sanctioned economy & destroyed homes are the 3 main reasons. Being subjected to security questioning is the fourth
The return of #Syria 's refugees is not a magic wand or the unilateral decision of Amman, Ankara, Beirut or Berlin anymore. For the record, history shows refugees of conflicts that last this long hardly ever go back. This is even more so in this case for the reasons cited above
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Against all odds & by proving many pundits & policy experts wrong, Assad has seemingly survived brutal 10 y old war
Yes, he needed & received both the commitment & support of his two allies in this endeavor
But what is he likely to do next?
2-In spite of #Syria ‘s super centralized system that gives the President ultimate power & control over every facet of Governance, it is shocking how little academic & professional psychoanalysis has been performed on the personality of Assad as an individual
3-Having been in power for over 20 years now, most of the coverage on Assad has been shallow, generic & even schizophrenic
He started as educated reformer then was thought to be likely to quickly cut and run, only to ultimately end up as child killer & mass murderer & monster
When one participates in any Eco / Political discussions in multi-Religious / Sectarian regions like the Levant #Lebanon#Syria , one question always emerges:
Can the people of this region Co-exist?
Can they accept / embrace the other side?
By all accounts, answer seems No
2-War in #Syria has rendered the days of heavy top-down Centralized State obsolete. Efforts must now be exclusively directed at formulating a new post war system that takes away power from the center & hands it to the periphery as this is the de facto state of affairs anyway
3-While #Lebanon already had its own civil war, it is not difficult to notice the return of the old sectarian cleavages that never went away. As the pie gets smaller with the current crisis, divisions have intensified & spirit of co-existence is tested in daily commentary
You’ve been bombarded by experts on what #Lebanon ‘s financial crisis is all about
Here is a simple explanation:
Consumers between 1997-2018 outsmarted / screwed current and future Lebanese consumers by using an overvalued currency to fund their purchases
End of story
2-This is not to say this was a deliberate or conscious decision by 1997-2018 to screw or outsmart the future generation of consumers
As one of my friends used to tell me
Living in #Lebanon during that period was too good to be true. He may not have known why but he felt it
3-This friend was huge spender. He lived at one of the city’s 5 star hotels for almost 18 years. He earned enough interest income to fund his lavish life style. He bought real estate. He had a driver. When I met him in late 2019, he said:
1-Israel
2-Oil
3-Counter-Terrorism / War on Terror
Are the broad categories that define U.S strategic interests in the region
Many have attempted to include the Responsibility to Protect (R2P) in above list. Syria has been a case in point ==>
2-Israel & Oil are already secured enough
This has left counter terrorism or war on terror (WOT) as main rationale behind recent U.S interventions
Responsibility to Protect has been getting traction of late but as Syria’s case has shown it’s still work in progress in DC
3-Sep 11 of course capitulated War on Terror to the top of list behind recent U.S interventions in the region. While many may argue this was politically unavoidable in the case of Afghanistan, what about the more recent interventions to help defeat ISIS?