{"id":62,"date":"2025-05-07T07:37:14","date_gmt":"2025-05-07T11:37:14","guid":{"rendered":"https:\/\/people.bsu.edu\/econbriefs\/?p=62"},"modified":"2025-05-22T08:07:33","modified_gmt":"2025-05-22T12:07:33","slug":"robbing-banks-for-your-own-money-lebanons-financial-tragedy-by-dr-cecil-bohanon-and-dr-john-horowitz","status":"publish","type":"post","link":"https:\/\/people.bsu.edu\/econbriefs\/2025\/05\/07\/robbing-banks-for-your-own-money-lebanons-financial-tragedy-by-dr-cecil-bohanon-and-dr-john-horowitz\/","title":{"rendered":"Robbing Banks for Your Own Money: Lebanon\u2019s Financial Tragedy \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"},"content":{"rendered":"<p><em>Originally written on 3\/14\/2023<\/em><\/p>\n<p><span data-contrast=\"auto\">Fear and trepidation are normal responses to a banking crisis. The impact of the collapse and subsequent government takeover of Silicon Valley and Signature Bank are not fully known. At the time of this writing there has been no widespread panic in financial markets. Many nations endure banking crisis. Our professional colleagues in Lebanon give us insight.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559740&quot;:480}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Between 2019 and 2021, Lebanese GDP per capita dropped by over 36%. The banking sector ceased functioning, neither lending nor taking deposits. When banks allow depositors to withdraw US dollar deposits, it is at rates well below the market value. Ordinary <\/span><a href=\"https:\/\/www.al-monitor.com\/originals\/2023\/02\/lebanon-police-join-robbers-storm-bank-get-their-own-money\"><span data-contrast=\"none\">people, including police officers, are robbing banks<\/span><\/a><span data-contrast=\"auto\"> to withdraw their own money! As usual, however, influential people were able to get their money out of the banks before the collapse.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559731&quot;:720,&quot;335559740&quot;:480}\">\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/www.al-monitor.com\/originals\/2023\/02\/explainer-what-behind-lebanons-new-exchange-rate\"><span data-contrast=\"none\">Lebanon recently devalued its official exchange rate by 90% from 1507 Lebanese pounds per dollar to 15,000 pounds per dollar<\/span><\/a><span data-contrast=\"auto\">. However, colleagues in Lebanon report the black market exchange rate is currently over 90,000 Lebanese pounds per dollar. <\/span><a href=\"https:\/\/data.worldbank.org\/indicator\/FP.CPI.TOTL.ZG?locations=LB\"><span data-contrast=\"none\">Lebanese inflation was about 85% in 2020 and 155% in 2021<\/span><\/a><span data-contrast=\"none\">, so prices change daily<\/span><span data-contrast=\"auto\">. <\/span><a href=\"https:\/\/www.ohchr.org\/en\/press-releases\/2022\/05\/lebanon-un-expert-warns-failing-state-amid-widespread-poverty\"><span data-contrast=\"none\">Much of the country&#8217;s population has become impoverished since the currency&#8217;s value plummeted. The savings of the middle class were wiped out<\/span><\/a><span data-contrast=\"auto\">.\u00a0\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559731&quot;:720,&quot;335559740&quot;:480}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Two of the causes of the crisis include oversized government debt caused by years of government deficits coupled with cronyism between the banking sector and the government. Foreign lenders are unwilling to bail the country out without reforms. The crisis is especially intractable because of the political paralysis between different factions. Reforms that could restore the trust of investors are not adopted.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559731&quot;:720,&quot;335559740&quot;:480}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Even with these hardships, the Lebanese people are resilient. Emigrants send money to their families.\u00a0 Our colleagues tell us people are returning to hotels and restaurants and life goes on. The Lebanese people have an admirable knack for figuring out how to make-do and improvise.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559731&quot;:720,&quot;335559740&quot;:480}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The United States, like Lebanon, has years of government deficits, political polarization, and a ballooning government debt. There are also major differences. Our economy is much larger and we enjoy the exorbitant privilege of the U.S. dollar being the world\u2019s reserve currency.\u00a0 Our debt is in our own dollars rather than in a foreign currency. So as our most recent banking crisis continues to unfold, even in its worst-case scenario, we Americans are unlikely to bear the burden Lebanese citizens have borne. Whatever happens maybe we can tap some of their grit and courage.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559731&quot;:720,&quot;335559740&quot;:480}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Originally written on 3\/14\/2023 Fear and trepidation are normal responses to a banking crisis. The impact of the collapse and subsequent government takeover of Silicon Valley and Signature Bank are not fully known. At the time of this writing there has been no widespread panic in financial markets. Many nations endure banking crisis. Our professional [&hellip;]<\/p>\n","protected":false},"author":112,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[655,649,656,652,42,55,659,658,654,657,224,653,651,650],"class_list":["post-62","post","type-post","status-publish","format-standard","hentry","category-macroeconomics","tag-banking","tag-banking-crisis","tag-cronyism","tag-financial-markets","tag-gdp","tag-government","tag-government-debt","tag-lebanon","tag-middle-class","tag-political-paralysis","tag-poverty","tag-savings","tag-signature-bank","tag-silicon-valley"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Robbing Banks for Your Own Money: Lebanon\u2019s Financial Tragedy \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/people.bsu.edu\/econbriefs\/2025\/05\/07\/robbing-banks-for-your-own-money-lebanons-financial-tragedy-by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Robbing Banks for Your Own Money: Lebanon\u2019s Financial Tragedy \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\" \/>\n<meta property=\"og:description\" content=\"Originally written on 3\/14\/2023 Fear and trepidation are normal responses to a banking crisis. 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