Adonis Diaries

Posts Tagged ‘Argentina

Don’t cry for us Argentina: Financial Situation in Lebanon

I’m trying to understand the mess we’re currently in and I have a rough sketch of a story.

As I understand it, when the WhatsApp revolt sparked, Lebanon was already entangled in a twin-deficit problem: budget and foreign, with significant current account imbalance and dwindling foreign reserves.

Before the 17th of October, banks were already pushing for the conversion of loans in local currencies into US denominated loans:  they were restricting capital outflows and enticing new deposits in US dollars at abnormally high interest rates

At the same time, bank insiders were transferring their funds abroad and removing their cash in dollars from the banks.

When the protests erupted on October 17, banks suddenly closed for two weeks without good reason, triggering when they reopened a generalized bank run.

As a result, banks froze all accounts, suspended the convertibility of bank deposits and imposed an extensive and arbitrary capital control.

These measures led to the creation of two types of dollars: one, inside the banking system, being tied to the Lebanese Lira at a rate of one dollar equal to 1515 Lebanese Lira while the other, outside the banking system, floating and averaging today 2500 Lebanese Lira.

The discount value of inconvertible deposits is the cost depositors are willing to incur to get their money out of the banking system, in light of the impeding risks and the political ineptness and ranges now from 25% to 50%.

In his latest rigged TV interview, the governor of the BDL (Riad Salami) opened the door for the “Lirafication” of bank deposits, measure that will be plausibly followed by the devaluation of the lira.

The post-devaluation exchange rate will depend on the ability of the BDL to defend the local currency at a new level of exchange, i.e., the assessment of the amount of net foreign reserve it holds.

Such an exercise is close to an Enron-style audit with fake holdings, hidden losses and off-the-book accounting.

As the country descends irrevocably into anarchy, Lebanon seems to be abandoned by the international community and the economy is grounded to a virtual halt, a shut down, which led to the breakdown of the system.

This breakdown has been a slow-motion collapse that marched for exactly 29 years, inexorably towards its current catastrophic demise.

The date of its symbolic death goes back to October 13, 2019, when wildfire broke out across Lebanon.

At the cornerstone of the Lebanese economy, was its currency system, known as the “convertibility” policy, which kept the value of one dollar fixed equal to about 1507 lira and allowed Lebanese to use both currencies interchangeably.

It was the basis of a system of legalized corruption for so long and is partly responsible of the impressive meltdown.

In 2001, Argentina defaulted on its public debt while Lebanon was saved by the international community during the Conference of Paris I.

We should have learned at that time lessons from the Argentina experience, but unfortunately, we didn’t.

Monsanto’s mega-plant blocked.  Any Progress on Climate Change?

These are No small time victories for worthy issues.

There’s a lot that’s depressing in the world today, but scroll down and see what our future could look like if we just stick together.

 World issues on climate change, Monsanto, our oceans, the internet, democracy, free speech,  basic human rights, preemptive wars… have to be tackled vigourously.

After the March — Real Progress on Climate Change!! From Europe, the US, and China!

Progress on climate change
One of our 2,600 climate marches!

We desperately needed Europe to kick off a global round of ambitious climate commitments at a recent summit in Brussels, so I felt deflated when I was told by insiders there was “no way” the EU would stand up to big oil and coal to cut carbon emissions by “at least” 40% by 2030. But we didn’t back down, and they did it!

Here’s how we got from “no way” to a big win:

  • Drove the largest climate mobilisation in history with 675,000 people in the streets in 162 countries!
  • Got the UN Secretary General, 18 cabinet ministers, and countless politicians to join the march.
  • Delivered a 2.2 million strong petition calling for 100% clean energy to world leaders including French President Hollande.
  • Held advocacy meetings with the climate and energy ministers of France, Germany, Brazil and the UK.
  • Lobbied Poland, a key blocker on climate action, with an ad campaign that got news coverage throughout Poland and phone calls from Polish Avaazers.
  • Commissioned opinion polls in Germany, France, Poland and the UK right before the decision.
The climate march was a game changer
30,000 marchers in Melbourne!

The climate march was a game changer, cited by president after president in their UN summit speeches. While hundreds of organisations contributed to the march and the win in Europe, our role was crucial. The BBC said: “The marches brought more people on to the streets than ever before, partly thanks to the organizational power of the e-campaign group Avaaz.” And Germany’s Environment minister said: “I would like to thank the millions of people who have joined Avaaz…Without public support it will be impossible to stop climate change.”

US President Obama also responded to the climate march, saying: “Our citizens keep marching. We cannot pretend we do not hear them.”

Following the momentum building win in Europe, Obama met with Chinese President Xi Jinping this week – Obama promised reasonable-sized cuts in emissions, and China promised cuts as well, for the first time ever!

The momentum we desperately needed has begun…

After big oil and coal, what’s the next worst soulless corporate lobby? Yep, Monsanto. And that’s the next big victory that our community has helped win.

Monsanto’s mega-plant blocked!

Monsanto's mega-plant killed!
Protesting Monsanto’s seed factory.

When Monsanto tried to extend its grip over the global food chain with a massive new seed factory in Argentina, Avaaz members stood side by side with a local movement and stopped Latin America’s largest GM seed plant from being built this year.

Monsanto is a $60 billion mega-corporation that plays dirty. Here’s how we helped stop them:

  • Launched a 1 million strong petition and flooded the inboxes of decision makers with thousands of messages.
  • Worked with top lawyers on a briefing that showed Monsanto’s Environmental Assessment was illegal, making a splash in the media.
  • Released a poll showing that 2/3rds of town residents opposed the plant.
  • Supported local residents to build their power and a winning strategy.

Local grassroots leader Celina Molina said: “After more than a million Avaaz members stood with the people of Malvinas Argentinas, we won an important battle in the fight against Monsanto! From gaining access to documents previously denied to us by the authorities to running a game changing opinion poll, Avaaz was important for preventing the largest transgenic seed plant from being built in our backyard.”

Plus Big Wins on Saving our Oceans, the Internet, and Democracy

Big Wins on Saving our Oceans
Open Vote in Brazil
‘Nothing to hide!’ protest, Brasilia.

Thanks to several thousand Avaazers who donate monthly to sustain our small team, we can work on several issues at once. Here are some other big wins in recent weeks:

The Largest Marine Sanctuary in the World Created! – To support this critical reserve, over 1 million of us called on the US government, we commissioned an opinion poll in Hawaii, and more. And in the end, President Obama stood up to the big fishing lobbies and protected an area of the Pacific almost the size of South Africa!

Internet Neutrality Protected in Europe and the US!1.1 million of us lobbied the EU parliament to protect the free and open internet with strong rules on net neutrality.

And against all the efforts of the big telecoms companies, we helped get the win! In the US, Obama just followed suit and took a strong position to protect net neutrality that “stunned” the telecoms companies.

Brazilian Congress Ends Secret Voting! – After several months of steady campaigning with call-ins, activist stunts, media attention and more, Avaazers in Brazil (now 7 million strong!) pressed the Congress to almost completely end the shady practice of “secret voting.” It’s a huge victory for one of the world’s largest democracies.

Counter shock upheaval: the earlier the better (Greece)

            A developing State deciding to default on external debts should default on all its debt; then, it can rest appeased and contented for several reasons: first, defaulting does not occur frequently in any single State; second, the bad credit rating is the same whether a State default on all or partial debts; and third, the State will generate immediate cash flow on unpaid interests that covers its budget deficit.   

            Before Greece, Lithuania, Hungary, and Spain suffered the same fate of a prematurely imposed Euro on States of weak economies. There are many articles analyzing the financial crisis in Greece. I thought that I can make sense in a short post for readers eager to know but would refrain reading lengthy erudite articles.

            There are two main factors for Greece financial problems; there are two resolutions available, equally painful, but one is far better in shortening the pain and healing faster. First, the common currency Euro forced weaker economies to relinquish their sovereignty over issuing money (printing money) in time of shrinking economy to re-launch the inner trade.  Second, the US financial multinationals before the crash infused too much credit in a small economy that did not correspond to normal credit rating behaviors; this quick infusion of money inflated the sense of economic boom and generated laxity in financial control and management.  Greece is awakening to new demands for harsher financial control and imposition of higher taxes to straighten the budget balance sheet.

            The first remedy is inviting the International Monetary Fund (IMF) to intervene and infuse $1.7 billions in the Greek coffer to pay the debts due this spring. This would be a bad decision. It is worse because even the EU is encouraging Greece toward that option. For example:

            Lithuania GNP shrank 18% in the first year the IMF intervened with its draconian conditions: jobless rate climbed to 20%, the high level in health, education, and retirement suffered greatly. Actually, retired persons are bleeding and the socialist political parties lost ground.

            In Hungary, the IMF intervention made sure that the people suffer and the socialist government be replaced by like minded anti-socialist government headed by the former minister of economy. If Greece ends up asking the “help” of the IMF, as the EU wishes too, then the socialist George Papandreou will start packing; a decision that will please Merkle PM of Germany.

            Greece with budget deficit reaching 13% of GNP and growing has a reasonable solution out of this mess if it wants to avoid 10 years of suffering and humiliation. Until the EU comes up with a financial recovery plan then Greece should revert to its national currency the drachma. Greece should regain its sovereignty issuing money in this difficult period: Internal and external trades should not be hampered for lack of liquidity.

            Since Greece imports amount to only 20% of its GNP then better competitive drachma should enhance exports and reduce the loan deficit. With the already strict financial control in place, Greece will be able to shorten the period of its pain.  The EU will accept Greece currency to revert to the Euro in due time in order not to let other Euro member States following Greece decision.

            Greece should learn how Argentina recovered.  After four years insisting of keeping the currency linked to the dollar the economy faltered entirely.  Argentina decided to float its currency and it devalued accordingly. Argentina was able to default on $100 billion of foreign loans. The government insured that bank deposits of consumers keep the same purchasing power by regular re-evaluation and re-fixing of the national currency.  People living in their own properties enjoyed the same financial facility at the rate of pre-devaluation.  Within a single semester, Argentina economy was back to normal and going strong.

            Greece has choices: either the MIF intervention accompanied by ten years of suffering or reverting to the drachma until the economy is back to normal within a semester. If Greece default on all its external debts then, suppose the interest rate on debts is 8% and the debt amount to 140% its GNP, defaulting will generate fresh cash of 9% of Greece GNP which is over its annual current budget deficit. What developing State would decline such solution?  Obviously, the US, Japan, China, Germany, France, and England would refuse to default on the ground that they are actually running world economy.

            Defaulting on bad credits that financial multinational encouraged developing States to taking does not hurt badly or disturb the multinational creditors: they were not supposed to pay taxes on interests as long as debtor governments did not restitute the original entire capital; the financial multinationals have then to pay taxes on the previous 20 years of lending the same capital, minus what they submit as expenses of doing businesses.

            The neoliberal financial ideology and “The Economist” are back on the offensive after the shameful financial crash: they are ordering indebted States to reducing public employment by 10%, reducing salaries, reducing retirement benefit, and elongating the age for retirement.  The financial institutions claim that all these hassles are none of its business, even if they caused the miseries.

            Unless people revolt now with a counter shock to what they are being submitted to then any delay to the next financial crash will hurt them more than the rich classes.  People should demand that taxes be raised and increased to all capitalist transactions, financial administrators and bonuses be taxed high, and dividends to shareholders be delayed until the economy is stabilized.  Waiting for another financial crash to get in action is tantamount to increasing social injustices with a maddening upheaval that runs amuck.

Biter-sweet Euro: Before and after Greece; (Mar. 7, 2010)

Before Greece, you have the States of Lithuania, Hungary, and Ireland that suffered the same fate of a prematurely imposed Euro on States of weak economies. There are many articles analyzing the financial crisis in Greece. I thought that I can make sense in a short post for readers eager to know, but would refrain reading lengthy erudite articles.

There are two main factors for Greece financial problems; and there are two resolutions available, equally painful, but one is far better in shortening the pain and healing faster.

First, the common currency Euro forced weaker economies to relinquish their sovereignty over issuing money in time of shrinking economy in order to re-launch the inner trade.

Second, the US financial multinationals before the crash infused too much credit in a small economy that did not correspond to normal credit rating behaviors. This quick infusion of money inflated the sense of economic boom and generated laxity in financial control and management.  Greece is awakening to new demands for harsher financial control and imposition of higher taxes to straighten the budget balance sheet.

The first remedy is inviting the International Monetary Fund (IMF) to intervene and infuse $1.7 billion in the Greek coffer to pay the debts due this spring. This would be a bad decision. It is a worse alternative because even the EU is encouraging Greece toward that option. For example:

Lithuania GNP shrank 18% in the first year the IMF intervened with its draconian conditions: jobless rate climbed to 20%, the high level in health, education, and retirement suffered greatly. Actually, retired persons are bleeding and the socialist political parties lost ground.

In Hungary, the IMF intervention made sure that the people suffer and the socialist government be replaced by like-minded anti-socialist government headed by the former minister of economy.

If Greece ends up asking the “help” of the IMF, as the EU wishes too, then the socialist George Papandreou will start packing; a decision that will please Merkle PM of Germany.

Greece with budget deficit reaching 13% of GNP and growing, has a reasonable solution out of this mess if it wants to avoid 10 years of suffering and humiliation. Until the EU comes up with a financial recovery plan, Greece should revert to its national currency the drachma. Greece should regain its sovereignty in issuing money in this difficult period: Internal and external trades should not be hampered for lack of liquidity.

Since Greece imports amount to only 20% of its GNP, then better competitive drachma should enhance exports and reduce the loan deficit. With the already strict financial control in place, Greece will be able to shorten the period of its pain.  The EU will accept Greece currency to revert to the Euro in due time in order not to let other Euro member States to follow Greece decision.

Greece should learn how Argentina recovered.  After four years insisting of keeping the currency linked to the dollar, Argentina economy faltered entirely.  Argentina decided to float its currency and it devalued accordingly. Argentina was able to default on $100 billion of foreign loans. The government insured that bank deposits of consumers keep the same purchasing power by regular re-evaluation and re-fixing of the national currency.  People living in their own properties enjoyed the same financial facility at the rate of pre-devaluation.  Within a single semester, Argentina economy was back to normal and going strong.

Greece has choices: either the IMF intervention accompanied by ten years of suffering or reverting to the drachma until the economy is back to normal within a couple of semester.

Note 1:  I suggested in several articles that an internal Euro currency, Euro B, be created for European internal markets. In this case, smaller economies could issue Euro B to keeping liquidity available for their internal market. As the internal economy is functioning and creating jobs, harsh cuts in social budgets will be reduced.

Note 2: Spain, Portugal, and lately Italy have been experiencing bad economical and financial downturns.  If the “Euro B” was adopted, and the current Euro used for just exporting goods and dealing with foreign markets, this Euro would have been in better shape and more immune to currency exchange deals, mostly dominated by the US financial policies.


adonis49

adonis49

adonis49

April 2020
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