Lebanese economic crisis: a real example of bank freeze, inflation and devaluation
Imagine, you have all your life savings in dollars, and in just a few months, they lose 90% of their value, without anything you could do. And all of that due to a crisis that just seemed transitory like any other crisis. Well, that’s my story, and the story of many Lebanese, and it will probably happen soon in other countries just as we are seeing in Turkey right now. Let me tell you how it happened, and what you should do to protect yourself!
1st Lesson: having different currencies to protect yourself
One of the first lessons that you learn when you try to protect yourself is to have different currencies instead of only one. Having multiple currencies will serve as a hedge. Usually, a hedge against devaluation of the local currency. Actually, even if you had both Lebanese pounds and dollars to protect yourself, it failed almost immediately in Lebanon.
Withdrawal limit to limit a bank run
At first, the banks applied a withdrawal limit of cash to prevent a bank run. It started initially at around $1000 a week, then some several hundred dollars every 2 weeks and in fact quite quickly the dollars became totally frozen. This is not for nothing that Lebanese feel like they were robbed by the banks. You could frequently see in the large demonstrations that everyone saw on the televisions that the Lebanese people were “stolen”. Still, demonstrations remained mostly peaceful when the people got 90% of their net worth stolen. Lebanese people are really remarkable.
As Lebanon was worried of foreign currencies like the dollar leaving the country, banks have frozen the accounts in foreign currencies. But the local currency, the Lebanese pound, had also for some time a withdrawal limit.
90% loss on my life savings
My whole life savings or the one of my father are in dollars in Lebanese bank accounts that are frozen. So, almost, since the beginning of the crisis, we are not able to retrieve our dollars. Unless, if we accept to retrieve them as Lebanese pound, but at a fixed bank rate much lower than the real exchange rate. And here it’s a clever trick from the banksters. The bank rate is much lower than the real exchange rate because the local currency has devaluated by more than 90% since the beginning of the crisis. But banks are behaving like the Lebanese pound was not devaluated.
I know, this is complicated, so here is the same idea but with real numbers. It will be much easier to understand. Currently, if you try to change in real life $1 you get 23 000LBP, but the bank rate is fixed at $1 equals to 3900LBP. That’s more or less the current situation.
Now, my 20 000 dollars life savings that are in the bank will be given to me as 78 000 000LBP by the banks, using the bank rate. But as the currency continues to devaluates, I will of course exchange these Lebanese Pounds to real dollars. But given that I am not a bank, I will have to do this conversion of Lebanese pounds to dollars at the real exchange rate. So the 78 000 000LBP given to me by the banks are now worth in reality 78 000 000LBP divided by 23 000LBP which is around 3000 dollars.
This is a net loss of around 90%. You usually hear such loss in the crypto space, but here it is on life savings in dollars, in a real country…
Just for your information, we used 1dollars equal 23000LBP in this video because it is easier to compute. But nowadays it is up to 27000LBP, and for sure, these numbers won’t be accurate anymore by next months. not even in a few weeks.
Specifities of the lebanese situation: the lollars (i.e. the frozen dollars) vs “fresh dollars”
Here are a few interesting details regarding the dollar situation in Lebanon.
The “freeze” affects dollars that were on accounts, before October 2019. The dollars on these accounts are now called “lollars”. Lebanon may be a dead country, but at least we are still funny.
So, as we already said, lollars can’t be withdrawn without a cut, due to the exchange rate offered by banks, an exchange rate much lower than the real exchange rate on the market. For dollars arriving on bank accounts after October 2019, they are called “fresh dollars”.
The fresh dollars can supposedly be used as normally intended. I just said “supposedly”. People receiving their salaries in US dollars, are able to withdraw with a credit card all their US dollars salary every month, as soon as they receive it. However, I know some people who receive their salaries in US dollars, but they did not have a credit card before the crisis and their banks don’t let them now withdraw their fresh dollars. Why? No idea
You could be wondering if these lollars are really frozen. Well yes. You can’t do anything with them. Transfers of the lollars are not allowed to anywhere whether it’s to crypto exchanges, gold brokers or even newly fresh dollar accounts.
Of course, but I probably don’t need to say it, these rules apply to common people. I and we don’t have any proofs, but for sure, with the right connections, in this country everything is possible, your lollars might not be suffering the same fate as common people lollars.
Now, for people that followed closely the Lebanese situation or for my fellow Lebanese people, you must have realized that my numbers are not really up to date anymore. As you all know, the bank rate is 1$ for 3900LBP, however, the official rate is still $1 for 1500LBP. Currently we are able to withdraw lollars at the bank rate and not at the official rate.
But lately, as you might have seen, these developments are a dancing show between the central bank and the politicians, each trying to reverse the decision of the other. So, for the sake of clarity, I don’t go into these details yet. But actually, the latest development since this video was shot is the change of the bank rate to $1 for 8000 LBP
So, what’s the moral of the story? No idea. However, at least, thanks to my experience, and every Lebanese experience, we can correct for you the first lesson.
1st lesson corrected
It is true that you should have different currencies, but not all in banks, some at your place for example, and for larger amounts that you don’t want to hold at your place, use banks that are not all in the same country. Sounds easy and simple, right? Well, as always, it’s easier said than done! It’s highly impractical for 90% of people. Or it used to be until recently.
Crypto to avoid bank freeze
Crypto now offer the possibility for everyone to easily have dollars. With crypto exchanges like Binance, or ftx, it’s easy to buy some stablecoins that are pegged to the dollar. These platforms could be considered as abroad banks in the case you can’t really open a bank account abroad. With crypto you can even store your stablecoin outside of any platforms, and directly hold them yourself in a ledger for example-. With this solution, you won’t ever suffer from a frozen account to prevent a bank run.
Well, this is the point of this channel, I will share with you other lessons from Lebanon and how to survive inflation, hyperinflation, how some people thrive from it, how to protect your money, how actually to earn some money thanks to the hyperinflation. You can already find more content on The-Crypto-Post.com. We will cover on our website and on this channel, all the tools to protect your money from hyperinflation, such as crypto, be it bitcoin, stablecoins or NFTs, gold, stocks, or even real items and businesses.
By the way, what do you think about the Lebanese situation? Could it happen in your country? What are your plans? Don’t hesitate to let us know by leaving a comment in the dedicated space just below this video.
We actually want to help the maximum number of people, because no one should suffer from what I and Lebanese people are suffering currently. So please, share subscribe and like this video to spread the knowledge and protect ourselves from banksters.