Lebanese Money Plunging While Bitcoin Rises – Trustnodes

Lebanese Money Plunging While Bitcoin Rises


The situation in Lebanon is nearing out of control with the value of the Lebanese Pound (LBP) plunging from 1500 per usd to now requiring 4500 LBP for one dollar.

That’s a 70% drop in a short period of time with inflation rising from 1% in October to now 10% as of January. There’s no data since then, with inflation expected to be far higher as of May.

Previous monetary mismanagement led Lebanon to dollar peg their currency to regain some trust in the value of their national money.

The government however has been over-borrowing in usd and has been borrowing from its own banks, with the government now technically bankrupt as they can’t pay back the dollars they owe.

That has led to a shortage of dollars, with commercial banks placing strict limits on how much can be withdrawn.

The peg was maintained for decades by the central bank buying or selling dollars as required to keep it at 1,500 LBP per usd.

The central bank reserves however are running dry. So they’re now trying to maintain the peg in an unusual way by forcing money changers to sell usd for no more than 3,200 LBP or face arrest.

Regional media reports “financial prosecutor Ali Ibrahim¬†has ordered the arrest of several dozen exchange dealers in recent weeks.”

They have also arrested central bank officials with foreign workers there now seeking repatriation, while a jewish paper says “IDF Shoots Man Attempting to Enter Israel From Lebanon.”

This collapse of the peg system spells trouble for the country as it is not clear how they can restore some financial stability when even a peg didn’t maintain it.

They’re seeking $20 billion in foreign aid, but it’s not clear whether that would last for long with this whole story now becoming far too familiar.

Indeed even the United States is printing like it doesn’t matter, something that is true in the very short term, but once you get comfortable getting away with naughty things you tend to do them until you can’t get away anymore.

Hence the rise of bitcoin, which has a fixed limit that can’t be changes unless all globally agree otherwise, with it acting as a hedge against the ever more frequent monetary mismanagement.

Bitcoin's price, May 2020
Bitcoin’s price, May 2020

Bitcoin has now recovered from the March shock will all waiting to see whether it will make a new local high.

For that it needs to take $10,000 first, which for those 2010 pizzas is a very cheap price as in current bitcoin value even millions are not enough for two yummy papa johns pepperonis enjoyed nearly exactly a decade ago.

Then it needs to overtake $14,000 if it goes in that direction, and then obviously the big one is overtaking $20,000 which presumably gets the party started perhaps like it did in the roaring 20s following the then Spanish flu pandemic.

Copyrights Trustnodes.com

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>