To haircut or not… that is the question

I’m not an economist by any means, I’m only a good observer and researcher, but I have a point to make here.

Many people today are busy worried about haircuts on bank accounts, while their worries are justified, I believe it’s nearly impossible to happen, after all, Lebanon’s banking and economy sector lives off foreign investors, a haircut means they have to kiss their investors goodbye for a very long time since they’ll lose any international credibility they may have built through the years, they won’t let that happen.

Having said that, a haircut is inevitable for the middle and lower classes. I’m contradicting myself, I know, bare with me… here’s the logic behind it.

An investor who has, let’s say, 10 million dollars in Lebanese banks, he most probably has money and businesses in other countries as well, which means he can leave his dollars in Lebanon untouched, while still getting between 6% to 7% interest on his 10 million. But a middle or lower class citizen wouldn’t have accounts in foreign banks, and probably needs the money in his account in Lebanon right now to survive, and with the current limitations on withdrawals in dollars, he’ll be obliged to withdraw in Lebanese pounds at the official rate of 1,520LL and that my dear reader is a haircut of about 30% all by itself, since he’s cashing out 150,000LL for his 100$ while its real value in the market is 250,000LL “as of today”.

As always, the middle and lower classes are footing the bill for yet another crisis caused by a corrupt set of politicians.