Lebanese lira to USD exchange

joe2k17 wroteFew Points I like to mention ,after some own research to understand what is happening,as i hear too many conflicting theories., and I am not a Financial/Economics Experts :

Point1:
Here's how much US currency there is in circulation. There is a total of about $1.5 trillion in U.S. physical currency in circulation.
Roughly 80% of this value comes from the 11.5 billion $100 notes. Each year, 70% of new bills are used to replace older notes going out of circulation.
(Ref: https://www.businessinsider.com/heres-how-much-us-currency-there-is-in-circulation-2018-4)

Dividing this number by the value of M2, we see that actual cash comprises a bit more than 10.2 percent of the total money.
This means that almost 89.8 percent of the money in the United States is not in the form of cash.

Point2:
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How does bank create Money in Modern World , Also interesting to watch:
https://www.youtube.com/watch?v=b6_SLwReMqo&feature=youtu.be


Point1:
A bank can never be able to pay all the money in cash , even if he want to

Point2:
the Main issue that a Good bank should have not borrowed the Government Money , because they know it cannot Pay it back, so the Money was created and may not exist.

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No one is expecting them to pay all the deposits in cash, Our banks have 130 billion dollars in total deposits, and they are on the brink of collpase because 3 billion dollars was withdrawn and they stopped allowing the digital transfer of money to other banks. That is a joke...

The international Basel rules that our banks claim to follow demand that banks own 6% of the money they lend out(that means have them ready for cases like this, anything below 6% reserves and the bank is considered to be in default), and Audi bank claims they have 13% reserve money(in their yearly investor report, which I used to read and get fooled by), and yet when 2% of Audi's money was withdrawn the bank started crying?

You have another issue the owners of the banks and their friends and families you think are restricted like everyone ? we live in lebanon you know so i can assume they are restricting normal people like us from withdrawing our money while they can sleep and feel safe with their money. I say we should find a way and fast to withdraw our $ money some way without them noticing or should i say overcoming their hard game.

It was not in a month, people have been withdrawing throughout the year. The last 2 months they barely opened, and when they did open the allowed rate was 1000$ at most with no foreign transfers. BTW if my language seems angry or dry, it's because I am angry at the banks not at you... Reasonable people, not just banks, but reasonable people, diversify their net worth, they own some houses, some cars, some money, some jewelry. Our incompetent lebanese banks halted all investments, all private loans everything, and put it all in the hands of the government. All they own is the lebanese government bonds, which have crashed in prices and are too cheap to sell. I will explain below how bonds work so we all understand each other. But that is mostly why they have nothing to sell to get money and why they owe people more than they have


[how bonds work and the story of our government and banks]

Lets say I want to borrow 1000$ for 10 years, I promise to pay you 50$ a year until I pay it back and you agree. I issue you a bond, the bond is a paper that says "whoever holds this paper shall be entitled to receive 1000$ in November 2029" it also has coupons, like premade checks, of 50$ payments dated for every year from now till 2029(you can only collect them at their dates). So far so good, it all seems safe.
Now lets say I lose my job and I start doing heroin. Naturally you will get nervous. How is a jobless drug addict going to come up with 1000$ in 10 years? So you decide to try and sell the note now to someone else rather than wait, you tell people this note will entitle them to collect 50$ a year every year and then 1000$, and you want to sell it for 1000$. But no one will buy, I am perceived as unreliable. So you lower the price to 500$, now people buy.
From the perspective of the person buying my debt for 500$, he will get paid 50$ a year and then get 1000$ in 10 years. So there is a big reward of potentially doubling his money, but the risk is high. For 500$ people will risk buying that debt, but for more they would not.

Now how does that hurt me? I borrowed 1000$, i will pay 50$ a year, and then I will repay 1000$. From the outside it does not look like the decrease of my debt has a bad impact on me. But if I want to borrow money again, if I want another 1000$, no one will lend me 1000$ for a 5% interest. They will say why should we buy a bond from you that pays 5% when we could buy your old bond on the exchange and make 10% a year and then double our money? (get it? Because my bond that I issued to you is being sold at the cheap, anything new I issue and any new borrowing I try to do has to compete with the shitty price of my old bond)

And this is the Lebanese crisis. The government is now seen as unreliable, the old bonds are trading so low that their interest rate given their reduced price is now around 30%, any new borrowing the government tries to do they have to offer people a 30% interest.

How is this hurting the banks? The banks bought the bonds from the government when the government issued it at its full price. And the banks were holding these bonds for the interest. Now these bond prices fell to almost half their value because the government is now seen as unreliable, so the bank used 1000$ of the depositor's money to buy something that now is worth 500$, the bank has no way of getting the full money of the depositors back unless the time comes and the government repays. The problem is the time on some of these is far, like 2021 and 2029. The other problem is that since our government cannot borrow new money, it might not be able to repay old money.

Depositors want to get out, but the banks are stuck because if they try to sell their bonds they will lose 50% of all the money...

And that kids is why you don't put all your eggs in one basket...

It's tricky I guess. Government bonds paid a good interest, if a bank decides not to go heavy on government bonds they will have to give their clients a smaller interest rate. And then depositors would move on to the one giving the bigger rate who is heavy on government bonds... Combined with politicians wanted the banks to keep bankrolling the corruption machine and they made sure regardless of what happens bank interests are paid. If you think about it, the government hospitals and schools are not properly funded, all its sectors are not properly funded, but the one thing the government always funded fully and on time were the interest rates.

But the game got out of hand. Eventually there was not enough fresh money coming in to buy the ever increasing supply of bonds, and the government did not grow its revenues in any real way (we are not exporting anything or attracting any tourists)
Side note, the millions of "tourists" a year is a big fat lie. People who are coming in are 70% Lebanese and Syrians coming home to visit families, they do not use hotels, they do not eat in fancy restaurants. The Khalijis that really pay are maybe 5% of all tourists...

Where I blame the banks is that they should have taken 10% of all that money and set it aside for emergency. They could have bought US government bonds with them, collected 2% interest and called it emergency money. What I expect they did is they bought Lebanese government euro bonds with their emergency money and claimed that we can just sell these if we need to, and of course that did not work out. Too much greed...

I bought Euros in Dora because they would not give me any USD. Rate was 1930 LBP to the USD.
The rates on businessnews.com.lb appear to be accurate.