Thomas Seeman is a finance and economics enthusiast. He launched an Arabic-speaking podcast about bitcoin, economics, and Lebanon. Thomas is also an active member of the Lebanese and Arab bitcoin community.
Behind the ruined streets and the emptiness of its city, Beirut has towering skyscrapers that serve as the headquarters of Lebanon’s local banks. The story of Lebanon’s successful banking reputation dates back to the founding of the Lebanese state in 1943. You can point the success of this sector to many different aspects, including, but not limited to, the one-time tight monetary policy of the central bank, acquisitions. Heavy gold in the 20th century makes Lebanon the third largest holder of gold per capita in the world and number one in the Middle East and North of Africa, or banking secrecy laws that mimic the Swiss banking sector that attracted many wealthy individuals. and the corporation to take advantage of it. Furthermore, under the often less developed aspects of the country, lies a vast public sector, which gives the impression of being all about productivity and services, but is actually welfare.
Before 2020, two types of jobs were considered attractive to the average Lebanese citizen: working in banking or working in government. Working in banking means you’re essentially part of a much larger-than-failed industry, while working in government means you get above-average pay, more than regular benefits, and barely any effort. Along with services compensation is received. skill and guaranteed by law that you will never be fired from your position. All this was possible thanks to the third contributor to the formula, the Lebanese banking sector financier.
For the reasons stated above, the Lebanese banking sector was attractive to many investors and was relevant only for a certain period of time. By the time of the country’s civil war (lasting from 1975-1990), most of these reasons are no longer relevant, especially as the world moves away from a gold standard and banking secrecy is no longer a secret. Yes, practically. From the early 2000s to the late 2010s, investors in the banking sector, known as depositors, were lured by higher interest rates, only to purchase even higher-interest government bonds through banks. It was possible In simple terms, the formula went like this: With the government selling high-interest bonds to local banks through the central bank, banks were able to afford and compete by selling high-interest rate deposits to more investors. The depositors were happy to be part of the scheme as long as they were not getting paid the hefty amount on time. While interest rates around the world were zero or near zero, Lebanese depositors were enjoying 10-15% on their deposits. As you might have already guessed, and similar to many shitcoin staking projects, this system was bound to collapse – and it did. At the end of 2019, it was semi-settlement that the depositors would no longer get their full balance. Since the government was essentially unproductive and unable to pay back the banks, the banks were not able to pay back their customers in return. With this imminent reality, central banks began printing money and paying depositors accordingly, leading to the infamous hyperinflation in Lebanon. The Lebanese pound lost almost 90% of its value against the US dollar. At the end of 2019, $1,500 was equal to the Lebanese Pound. At the time of writing, $1 35,000 is equal to the Lebanese Pound.
Lebanon is characterized by terrible infrastructure: terrible roads, terrible electricity infrastructure, even terrible communication lines and the Internet. All these areas are controlled by the government. On top of that, the Lebanese government employs over 300,000 people in the public sector. For a country where about three to four million adults are able to work, the government is essentially employing about 10% of the country’s entire workforce. This is huge for any country, not to mention a country that claims to embrace free market and capitalist principles. For a long time Lebanon was considered a liberal utopia compared to its neighboring region, when in reality it is more like a liberal’s nightmare.
Make no mistake, the average Lebanese citizen was not happy with the situation at all. This economic reality of the country (depending on how you look at it) can be said to be the cause or result of the never ending political tension in the country. From the 2000s to the present day, Lebanese voters have always been striving for political change. Considering the demographic nature of the country, it gave rise to several communal and regional conflicts. The past 20 years in Lebanon have seen numerous protests, political assassinations, shootings, wars with neighboring countries, and migration. It all failed for one simple reason: the people were making a political effort to replace the government, while at the same time funding it through their local banks. Not only was a large part of the nation’s capital being funneled into an obvious Ponzi scheme, but this capital was also used to power even the most inefficient government-controlled economy. When the government fell and was no longer able to pay its obligations, it lost its major funding source. Everything that came under the control of the government has completely collapsed with it. Since the official energy grid in Lebanon has collapsed, people are looking for alternative sources of energy.
Here’s the catch, the average depositor in Lebanese banks did not intend to fund the government. Almost everyone knew that the government was incompetent and there was a general culture of distrust in the government. However, depositors were only lured by a higher interest rate deal, which had been in the works for over a decade. Now that this plan has completely collapsed, and the need for an alternative savings mechanism for Lebanese citizens still remains, the short and clear answer to this problem is and always will be bitcoin.
Even though bitcoin doesn’t care to entice an investor and make promises about future gains, its record speaks for itself. My bitcoiner friend, who was also Lebanese, Haas McCook ran the numbers. With a conservative monetary policy of 21 million coins, using this technology as a savings tool is not a bad idea at all; This may be the only good idea. It is true that bitcoin offers peer-to-peer, borderless settlement around the world, which can be considered beneficial even to the average Lebanese citizen with a currently inefficient banking sector, but it is this lack of savings problem that has led to investors. manipulated and led to the collapse of the economy as a whole.
When money was deposited in the banking sector, it was being used to fund the government in the background. By comparison, the money going into bitcoin is funding an open source, true, decentralized and trustworthy network of independent users who are encouraged to be honest – from miners to full nodes to regular users. Above all, Lebanese citizens can ultimately avoid being forced to fund a corrupt government and, in turn, benefit directly from funding a system that promotes peace and the sovereignty of the individual.
This is a guest post by Thomas Seeman. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.