Thread by @EHSANI221

Thread

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