No matter what happens, there is always one clear winner in Lebanon:
In its study titled “International Expansions Not Priced In,” Cairo-based EFG-Hermes stressed the buoyancy of Lebanese banks. The report, which was published in Banque Audi Saradar’s weekly bulletin on Monday, noted that customer deposits witnessed year-on-year growth of 4 percent in 2005 and 6 percent in 2006, while deposit outflows were short-lived and limited.
Funny, this was already the conclusion of economist Georges Corm in a latest interview. The Central Bank is still sinking in its FOREIGN exchange liquidity, and so there is no loss of confidence. But you know what is the price to pay for this liquidity? More debt: the accumulation of this foreign liquidity was done by substituting local currency debt to foreign. In sum, this raises the value of the debt. Who wins? The banks.
Oh and by the way, there is also the idea that ‘consumers’ put their money in banks because they are not spending. You mostly save because you are reluctant to spend. Not spending partly reduces economic activity. Then, Banks take this money and do not create economic activity with it either because they either buy debt from the State or put the money outside of the country. Nevermind.
Meanwhile, the banks create their own confidence. The nexus, banks-Central Bank-Ministry of Finance (Bks-CB-MoF) make sure ‘everybody’ is happy. See, the whole concept of “confidence” is a tricky issue in economics. But I don’t want to open the discussion here. Suffice it to say that it is a very dark world filled with IMF and other international institutions bureaucrats and political assurances here and there that “it’ll be fine, put your money folks and we’ll make sure it will multiply”.
I like how this flies against any hard-economic rationale. Normally the rule is simple. If there is political instability then you get your money out quick. but if ‘everybody’ (mm say, Hariri and co for example, seconded by Saudi investor’s assurance).
I say simply that those who ‘put money’ in the Lebanese economy, of course I mean those who really do make a change, have political guarantees and are part of the same network. It seems that with regards to the banking sector (and I stress only the banking sector), there is a solid system in place. A system that involves few actors but a lot of money, unconcerned by the rest of the Lebanese economy. Because at the end of the day, it is not the Lebanese economy per se that is at the heart of concerns, but some kind of fictive ‘confidence-based’ economy created by a bleeding public financial system being eaten away by lazy local banks who if they don’t put their money in fatly remunerated TBills go invest outside of Lebanon. Why would a war then destabilize this system?