A dramatic collapse in the value of the Lebanese pound has sparked a surge of demonstrations across the country. The fall of the local currency amid mounting economic hardship has obliterated people’s purchasing power.
The New York Times reported a new wave of anti-government protests in multiple cities and the capital Beirut. People blocked roads, burning tires and torching the Central Banks while chanting against the political elite. The country’s Prime Minister Hassan Diab summoned the cabinet for a crisis meeting last Friday to address the crisis.
Little the Government Could Do
The local currency, pegged at L£1,500, sunk to its lowest level in two decades against the U.S. dollar. The Lebanese pound fell to L£6,000 to the dollar on the parallel market on Thursday. Starting the week at L£4,000 to the dollar against the dollar, prices went as low as L£7,000 to the dollar leading to panicked trading. Former Central Bank vice-governor Nasser Saidi said there was little the government could do at this point to stop the slide. He stated:
“This is a cash market, not your usual Forex market. The central bank is no longer able to intervene.”
The protests have persisted common occurrence since last October. The protestors have projected their anger towards banks and have burned and plundered numerous bank buildings in the process. Things deteriorated when the authorities introduced restrictions on the use of hard currency, including the U.S. dollar by banks. The action meant that were denied access to their dollar accounts which should have come to their rescue. A demonstrator told the press:
“We came down to the streets because all that we demanded on 17 October did not get achieved. Today, the dollar has reached 7,000 Lebanese pounds. We can’t afford to eat or pay rent or anything like that. We will stay here until the dollar rate goes down and until all our demands are met.”
Bitcoin to the Rescue
The advent of Covid-19 has created a situation called hyperinflation in many countries. Like what happened in the United States recently, this has led to the same reaction: aggressive expansion of the money supply due to monetary policy. The result is counter-productive as the prices of food and other necessities rise amid lots of valueless money. The lockdowns that have shut businesses, leading to massive job losses have only made matters worse.
With infinite money printing amid hyperinflation, closed borders and capital controls, only bitcoin comes to mind. Cryptocurrency is probably the lifeboat that people who live in previous generations missed. The digital assets’ unique characteristics like being borderless, outside of governments’ manipulation, anti-inflationary, finite supply, decentralized, censorship-resistant are what will beat fiat currency. It worked in Venezuela in 2018, and it should work now.
