16th September 2017.

Current Events

Random Encounters

Actual Message sent September 14, 2017, from the US Consulate in Beirut to its citizens: Due to ongoing threats to locations such as the Casino Du Liban in Jounieh, Lebanon, the US Embassy in Beirut has barred any movement of US government staff to that Casino. As always, the U.S. Embassy will continue to evaluate the movements of its […]

16th September 2017.

Lebanon

Gentrification in Beirut

When you think of wars, to most people they seem so theoretical, so academic, so “high school history.” Like when you’re walking through the ruins in Rome and being told about Roman history and its vast empire. Like when you’re walking through a tour of Gettysburg and being shown where General Lee was applying his brilliant tactics […]

16th September 2017.

Lebanese Culture

Nouveau Riche & Lebanese Culture

If you want to understand Lebanese culture, you can start by examining some of the idioms. Let’s look at the term “nouveau riche” which, in Lebanon, is a derogatory term, meaning someone who is recently wealthy, as opposed to inherited wealth, and therefore does not behave properly like people who are accustomed to wealth. The […]

16th September 2017.

Wisdom

The Ovarian Lottery or Lucky Sperm Club

So over 99.99999% of life is luck. Anything in this book that can be construed as advice is really addressing the 0.00001%. Warren Buffet coined the term “Ovarian Lottery” to describe the role of luck in our success and it struck a nerve with me, having been born, in a third world country myself. Other people have referred to similar […]

30th September 2018.

An-Nahar Articles

Lebanon’s rentier economy and Creative Destruction

(Originally published in An-Nahar September 2018) When Judgment Day for our country arrives, and it’s very close, the results will be cataclysmic and painful, but we should stand ready to exploit this and unleash Schumpeter’s Creative Destruction process. BEIRUT: Last week, a state of apprehension proliferated in the economic and banking […]

8th October 2018

An-Nahar Articles

Dissecting deposits: The case of Lebanon’s missing $70 Billion

(Originally published in An-Nahar October 2018) Most so-called local economic reports read more like (bad) poetry, rather than providing actionable intelligence. One such report on real estate, from a few years ago, said: [...]

19 October 2018

An-Nahar Articles

Happy Dependence Day: a letter to my grandfather

(Originally published in An-Nahar November 19, 2018) November 22, Any Year Dear Jiddo, You’ve been deceased for 30 years, but I’m hoping one day a time machine would deliver this urgent message. I pray it gets to you before you join the demonstration against the French mandate, 75 years ago. As we celebrate this day with the mandatory [...]

22th October 2018

An-Nahar Articles

Dollars — The Latest Lebanese Vegetable

(First published in An-Nahar October 22, 2018) “Remember, if you believe it, it’s not a lie.” George Costanza Most people don’t know that a tomato is actually a fruit not a vegetable. It took my attending a Botany course at AUB for me to learn this very useful tidbit of information, which comes in handy when I’m short cash and need to [...]

30th October 2018

An-Nahar Articles

Mabrouk. A new government is formed with 50% women.

(First published in An-Nahar October 30, 2018) A couple of years ago a major political party had a monumental change of leadership. Mind you, this wasn’t due to an expiration of his term limit, because of a clause in the party’s constitution. In typical Lebanese fashion, this was because of the previous leader dying or moving to bigger [...]

9th November 2018

An-Nahar Articles

That they may have life and have it less abundantly

(First published in An-Nahar Nov 9, 2018) Last week, a Halloween party by a group of American University of Beirut students was canceled. The party was titled “Queer Mixer / Speed Dating Night.” After some significant verbal and physical harassment, the students released a communiqué stating that the decision was because their “safety [...]

12th November 2018

An-Nahar Articles

Swearing and Proverbs as a Window to Lebanese Culture

(Originally published in An-Nahar November 12, 2018) I was out in a bar the other day. My friends were drinking heavily, unlike me, because last time I got drunk, I woke up the next day married. This affliction curses me with being alert and aware of other people’s actions, while they unwind and loosen up. So they were having massive [...]

25th November 2018

An-Nahar Articles

One Trump Tweet from Armageddon

[This article was originally published in An-Nahar November 25, 2018] BEIRUT: Last week we received a cable from President Donald J. Trump, congratulating Lebanon on its Independence. Local analysts poured over the 38 words, searching for some major policy shift or statement of support. The following is a dramatization of this [...]

3rd December 2018

An-Nahar Articles

Undiplomatic Diplomats

(Originally published in An-Nahar December 3, 2019) I had dinner the other day with a senior British ambassador to the GCC. We got to talking and I affectionately mentioned a young diplomat who became very popular after his farewell letter to the Lebanese people. And here’s where he surprised me. He was quite negative about his colleague [...]

10th December 2018

An-Nahar Articles

Then and Now

(Originally published in An-Nahar on December 10, 2018) During the Civil War entertainment options were limited. There was no ABC mall, no Bikfaya peach festival, no Marina, no Achrafieh 2020 carless roads, no organic market in Beirut Souks … no Beirut Souks, period. No Sky Bar or Music Hall or Rodge. As teenagers, Espace 2000 was [...]

30th December 2018

Al-Nahar Articles

Nights in Heaven and Hell

[This article was first published in An-Nahar in December 2018] So the other day I died, which got me into a bit of a pickle, as I found myself standing in line at the Gates of Heaven. I never thought much about the afterlife, but, surprisingly, my image had turned out quite accurate. There was a long line, with blond, burly guys at the [...]

3rd February 2019

Al-Nahar Articles

Exorbitant Privilege

[This article was originally published in An-Nahar on February 2, 2019] The United States buys a Japanese Toyota, German BMW, Korean Kia, or Chinese Dongfeng, made of steel, leather, glass, computer chips, engines, and significant workmanship and design. They pay using pieces of paper (water-proof cotton, to be precise); with “In God We [...]

24th February 2019

An-Nahar Articles

Moral Hazard and the Banking Sector

[This article was published in An-Nahar 24 February, 2019] When I worked on Wall Street a few years ago, I could sense that something was wrong in our compensation mechanism. We got huge bonuses if things went well that year, but the downside was always limited. Take a trader who committed firm capital, a bet, if you will, on a certain [...]

24th March 2019

An-Nahar Articles

Where did the $22 billion go?

[This article was originally published in An-Nahar on March 24, 2019 and created a media frenzy such as this report attacking me] Adventures in Forensic Accounting: Last Monday I received an excel spreadsheet from MJ, a bright young man, a couple of years out of college, whom I met last year at a controversial lecture at AUB (LINK HERE). [...]

An-Nahar Articles

21st April 2019

The Curse of Oil and Gas

[This article was first published in An-Nahar on April 21, 2019.] Imagine the Arabian deserts, centuries ago, before the first oil field was struck. People had to hike for hours in the scorching sun, foraging for food and water, with nothing to protect them from the elements, but a handmade piece of cloth covering their sunburnt head and [...]

29th May 2019

An-Nahar Articles

The Painting

[This article was first published in An-Nahar on May 29, 2019] It was a blotch that literally looked like someone had dipped a brush in red paint and splashed the empty canvas, then with orange, and finally some black — an explosion of random colors, aka modern art. I’m no expert, but the whole thing would take my five-year-old kid three [...]

15th November 2020

An-Nahar Articles

Till Death Do Us Part

[This article was first published in An-Nahar in April 2019. This is a work of fiction. Any similarities between actual wives and events is purely coincidental] We were young. We were poor. We fell in love. We got married. We had two beautiful children. We rose up the socioeconomic ladder. We went on phenomenal vacations. We saw the [...]

11th November 2020

An-Nahar Articles

Al Qard el Hassan ATM Machines

The idea for this article was never published. It was submitted to the top two English language news outlets in Lebanon and was politely turned down, with something to the effect, “Stick to Economics.” It was subsequently turned into a YouTube video titled “Hummos Economics Episode 1 on my YouTube channel, posted Thursday December 24, [...]

31st December 2019

An-Nahar Articles

Welcome to Lebanon Carlos-San

[This article was originally published in An-Nahar on December 31, 2019] Let’s say a certain hugely successful Lebanese automotive executive ran into legal troubles in a country which has an usually convoluted judicial system, which tends towards “guilty until proven innocent.” Staying back to fight and salvage his international [...]

14th October 2019

An-Nahar Articles

What is Riad Salameh thinking?

Disclaimer: This is a work of fiction. Any similarities between actual people and events is purely coincidental. A version of this article was first published in Arabic in Akhbar newspaper October 14, 2019. ———————————————————————————————————— “If you want to understand a man, walk a mile in his shoes.” Riad Salameh sat in his plush [...]

22nd September 2019

An-Nahar Articles

The Dollar Crisis

[This article was originally published in An-Nahar September 22, 2019] It’s pretty clear that we’re now in an urgent race, like being on a treadmill, whose speed keeps accelerating, but has no off-switch. No matter how tough and fit you are, eventually you’ll have to stop running … unlike the treadmill, which keeps going. You can [...]

21st July 2019

An-Nahar Articles

The devaluation of the Lebanese Dollar

[This article was first published in An-Nahar in July 2019] I know what you’re thinking — my editor missed a typo and the title should be “Devaluation of the Lebanese Lira.” It’s pretty clear, with the balance of payment (BoP) deficit (binging on imports, i.e. US dollars leaking outside the country month after month); that we’re heading [...]

14th July 2019

An-Nahar Articles

Where’s my damn money?

[First published in An-Nahar and Yerepouni News on July 14, 2019] BEIRUT: “… We have a new product for deposits with a minimum of $20 million, paying a 14% annual rate … but now we’re opening this great offer for the general population at much smaller amounts, but only for dollars coming from outside Lebanon …. We put your money with the [...]

21st June 2019

An-Nahar Articles

Ode to Hamra Street

[This article was first published in An-Nahar on June 21, 2019] Today’s urban hike is from Achrafieh to #Hamra Street, four kilometers away. Ten minutes in, I reach the Green Line, splitting Beirut into two warring zones in the civil war. During the war, it felt like it was much further away. East Beirut versus West [...]

16th June 2019

An-Nahar Articles

An Explosive Time at a Beirut Nightclub

(Originally published in An-Nahar June 16, 2019, 14 months before the Port Explosion) There’s no question that our nightlife is one of the best in the world, and, having been to 80 countries, I can authoritatively make that claim. Obviously, you usually go to these joints at night, where the darkness and lighting add to the trendy design [...]

2nd June 2019

An-Nahar Articles

A tale of two Lebanons

(This article was originally published in An-Nahar on June 2, 2019) I heard that one of my favorite restaurants is closing. I love that place, not because you can glimpse the who’s who in the country, but the food and service are great, and the charming manager reminds me of a bygone era. I dress like I don’t belong there, so one waiter, [...]

Share

5 Min Read

Current Events

Random Encounters

Actual Message sent September 14, 2017, from the US Consulate in Beirut to its citizens: Due to ongoing threats to locations such as the Casino Du Liban in Jounieh, Lebanon, the US Embassy in Beirut has barred any movement of US government staff to that Casino. As always, the U.S. Embassy will continue to evaluate the movements of its […]

Dan Azzi

16th September 2017.
5 Min Read

Lebanon

Gentrification in Beirut

When you think of wars, to most people they seem so theoretical, so academic, so “high school history.” Like when you’re walking through the ruins in Rome and being told about Roman history and its vast empire. Like when you’re walking through a tour of Gettysburg and being shown where General Lee was applying his brilliant tactics […]

Dan Azzi

16th September 2017.
4 Min Read

Lebanese Culture

Nouveau Riche & Lebanese Culture

If you want to understand Lebanese culture, you can start by examining some of the idioms. Let’s look at the term “nouveau riche” which, in Lebanon, is a derogatory term, meaning someone who is recently wealthy, as opposed to inherited wealth, and therefore does not behave properly like people who are accustomed to wealth. The […]

Dan Azzi

16th September 2017.
2 Min Read

Wisdom

The Ovarian Lottery or Lucky Sperm Club

So over 99.99999% of life is luck. Anything in this book that can be construed as advice is really addressing the 0.00001%. Warren Buffet coined the term “Ovarian Lottery” to describe the role of luck in our success and it struck a nerve with me, having been born, in a third world country myself. Other people have referred to similar […]

Dan Azzi

Share

An-Nahar Articles

• 4 Min Read

• 15th November 2020

Till Death Do Us Part

[This article was first published in An-Nahar in April 2019. This is a work of fiction. Any similarities between actual wives and events is purely coincidental] We were young. We were poor. We fell in love. We got married. We had two beautiful children. We rose up the socioeconomic ladder. We went on phenomenal vacations. We saw the [...]

An-Nahar Articles

• 5 Min Read

• 11th November 2020

Al Qard el Hassan ATM Machines

The idea for this article was never published. It was submitted to the top two English language news outlets in Lebanon and was politely turned down, with something to the effect, “Stick to Economics.” It was subsequently turned into a YouTube video titled “Hummos Economics Episode 1 on my YouTube channel, posted Thursday December 24, [...]

An-Nahar Articles

• 7 Min Read

• 31st December 2019

Welcome to Lebanon Carlos-San

[This article was originally published in An-Nahar on December 31, 2019] Let’s say a certain hugely successful Lebanese automotive executive ran into legal troubles in a country which has an usually convoluted judicial system, which tends towards “guilty until proven innocent.” Staying back to fight and salvage his international [...]

Dan Azzi

An-Nahar Articles

• 26 Min Read

• 14th October 2019

What is Riad Salameh thinking?

Disclaimer: This is a work of fiction. Any similarities between actual people and events is purely coincidental. A version of this article was first published in Arabic in Akhbar newspaper October 14, 2019. ———————————————————————————————————— “If you want to understand a man, walk a mile in his shoes.” Riad Salameh sat in his plush [...]

Dan Azzi

An-Nahar Articles

• 8 Min Read

• 22nd September 2019

The Dollar Crisis

[This article was originally published in An-Nahar September 22, 2019] It’s pretty clear that we’re now in an urgent race, like being on a treadmill, whose speed keeps accelerating, but has no off-switch. No matter how tough and fit you are, eventually you’ll have to stop running … unlike the treadmill, which keeps going. You can [...]

An-Nahar Articles

• 9 Min Read

• 21st July 2019

The devaluation of the Lebanese Dollar

[This article was first published in An-Nahar in July 2019] I know what you’re thinking — my editor missed a typo and the title should be “Devaluation of the Lebanese Lira.” It’s pretty clear, with the balance of payment (BoP) deficit (binging on imports, i.e. US dollars leaking outside the country month after month); that we’re heading [...]

An-Nahar Articles

• 7 Min Read

• 14th July 2019

Where’s my damn money?

[First published in An-Nahar and Yerepouni News on July 14, 2019] BEIRUT: “… We have a new product for deposits with a minimum of $20 million, paying a 14% annual rate … but now we’re opening this great offer for the general population at much smaller amounts, but only for dollars coming from outside Lebanon …. We put your money with the [...]

Dan Azzi

An-Nahar Articles

• 11 Min Read

• 21st June 2019

Ode to Hamra Street

[This article was first published in An-Nahar on June 21, 2019] Today’s urban hike is from Achrafieh to #Hamra Street, four kilometers away. Ten minutes in, I reach the Green Line, splitting Beirut into two warring zones in the civil war. During the war, it felt like it was much further away. East Beirut versus West [...]

Dan Azzi

An-Nahar Articles

• 4 Min Read

• 16th June 2019

An Explosive Time at a Beirut Nightclub

(Originally published in An-Nahar June 16, 2019, 14 months before the Port Explosion) There’s no question that our nightlife is one of the best in the world, and, having been to 80 countries, I can authoritatively make that claim. Obviously, you usually go to these joints at night, where the darkness and lighting add to the trendy design [...]

Dan Azzi

An-Nahar Articles

• 9 Min Read

• 2nd June 2019

A tale of two Lebanons

(This article was originally published in An-Nahar on June 2, 2019) I heard that one of my favorite restaurants is closing. I love that place, not because you can glimpse the who’s who in the country, but the food and service are great, and the charming manager reminds me of a bygone era. I dress like I don’t belong there, so one waiter, [...]

An-Nahar Articles

• 15 Min Read

• 29th May 2019

The Painting

[This article was first published in An-Nahar on May 29, 2019] It was a blotch that literally looked like someone had dipped a brush in red paint and splashed the empty canvas, then with orange, and finally some black — an explosion of random colors, aka modern art. I’m no expert, but the whole thing would take my five-year-old kid three [...]

Dan Azzi

An-Nahar Articles

• 6 Min Read

• 21st April 2019

The Curse of Oil and Gas

[This article was first published in An-Nahar on April 21, 2019.] Imagine the Arabian deserts, centuries ago, before the first oil field was struck. People had to hike for hours in the scorching sun, foraging for food and water, with nothing to protect them from the elements, but a handmade piece of cloth covering their sunburnt head and [...]

An-Nahar Articles

• 9 Min Read

• 24th March 2019

Where did the $22 billion go?

[This article was originally published in An-Nahar on March 24, 2019 and created a media frenzy such as this report attacking me] Adventures in Forensic Accounting: Last Monday I received an excel spreadsheet from MJ, a bright young man, a couple of years out of college, whom I met last year at a controversial lecture at AUB (LINK HERE). [...]

An-Nahar Articles

• 9 Min Read

• 24th February 2019

Moral Hazard and the Banking Sector

[This article was published in An-Nahar 24 February, 2019] When I worked on Wall Street a few years ago, I could sense that something was wrong in our compensation mechanism. We got huge bonuses if things went well that year, but the downside was always limited. Take a trader who committed firm capital, a bet, if you will, on a certain [...]

Dan Azzi

An-Nahar Articles

• 10 Min Read

• 3rd February 2019

Exorbitant Privilege

[This article was originally published in An-Nahar on February 2, 2019] The United States buys a Japanese Toyota, German BMW, Korean Kia, or Chinese Dongfeng, made of steel, leather, glass, computer chips, engines, and significant workmanship and design. They pay using pieces of paper (water-proof cotton, to be precise); with “In God We [...]

Dan Azzi

An-Nahar Articles

• 14 Min Read

• 30th December 2018

Nights in Heaven and Hell

[This article was first published in An-Nahar in December 2018] So the other day I died, which got me into a bit of a pickle, as I found myself standing in line at the Gates of Heaven. I never thought much about the afterlife, but, surprisingly, my image had turned out quite accurate. There was a long line, with blond, burly guys at the [...]

Dan Azzi

An-Nahar Articles

• 10 Min Read

• 10th December 2018

Then and Now

(Originally published in An-Nahar on December 10, 2018) During the Civil War entertainment options were limited. There was no ABC mall, no Bikfaya peach festival, no Marina, no Achrafieh 2020 carless roads, no organic market in Beirut Souks … no Beirut Souks, period. No Sky Bar or Music Hall or Rodge. As teenagers, Espace 2000 was [...]

Dan Azzi

An-Nahar Articles

• 10 Min Read

• 3rd December 2018

Undiplomatic Diplomats

(Originally published in An-Nahar December 3, 2019) I had dinner the other day with a senior British ambassador to the GCC. We got to talking and I affectionately mentioned a young diplomat who became very popular after his farewell letter to the Lebanese people. And here’s where he surprised me. He was quite negative about his colleague [...]

Dan Azzi

An-Nahar Articles

• 11 Min Read

• 25th November 2018

One Trump Tweet from Armageddon

[This article was originally published in An-Nahar November 25, 2018] BEIRUT: Last week we received a cable from President Donald J. Trump, congratulating Lebanon on its Independence. Local analysts poured over the 38 words, searching for some major policy shift or statement of support. The following is a dramatization of this [...]

Dan Azzi

An-Nahar Articles

• 9 Min Read

• 12th November 2018

Swearing and Proverbs as a Window to Lebanese Culture

(Originally published in An-Nahar November 12, 2018) I was out in a bar the other day. My friends were drinking heavily, unlike me, because last time I got drunk, I woke up the next day married. This affliction curses me with being alert and aware of other people’s actions, while they unwind and loosen up. So they were having massive [...]

Dan Azzi

An-Nahar Articles

• 7 Min Read

• 9th November 2018

That they may have life and have it less abundantly

(First published in An-Nahar Nov 9, 2018) Last week, a Halloween party by a group of American University of Beirut students was canceled. The party was titled “Queer Mixer / Speed Dating Night.” After some significant verbal and physical harassment, the students released a communiqué stating that the decision was because their “safety [...]

Dan Azzi

An-Nahar Articles

• 7 Min Read

• 30th October 2018

Mabrouk. A new government is formed with 50% women.

(First published in An-Nahar October 30, 2018) A couple of years ago a major political party had a monumental change of leadership. Mind you, this wasn’t due to an expiration of his term limit, because of a clause in the party’s constitution. In typical Lebanese fashion, this was because of the previous leader dying or moving to bigger [...]

Dan Azzi

An-Nahar Articles

• 7 Min Read

• 22nd October 2018

Dollars — The Latest Lebanese Vegetable

(First published in An-Nahar October 22, 2018) “Remember, if you believe it, it’s not a lie.” George Costanza Most people don’t know that a tomato is actually a fruit not a vegetable. It took my attending a Botany course at AUB for me to learn this very useful tidbit of information, which comes in handy when I’m short cash and need to [...]

Dan Azzi

An-Nahar Articles

• 9 Min Read

• 19th October 2018

Happy Dependence Day: a letter to my grandfather

(Originally published in An-Nahar November 19, 2018) November 22, Any Year Dear Jiddo, You’ve been deceased for 30 years, but I’m hoping one day a time machine would deliver this urgent message. I pray it gets to you before you join the demonstration against the French mandate, 75 years ago. As we celebrate this day with the mandatory [...]

An-Nahar Articles

• 9 Min Read

• 19th October 2018

Happy Dependence Day: a letter to my grandfather

(Originally published in An-Nahar November 19, 2018) November 22, Any Year Dear Jiddo, You’ve been deceased for 30 years, but I’m hoping one day a time machine would deliver this urgent message. I pray it gets to you before you join the demonstration against the French mandate, 75 years ago. As we celebrate this day with the mandatory [...]

An-Nahar Articles

• 11 Min Read

• 8th October 2018

Dissecting deposits: The case of Lebanon’s missing $70 Billion

(Originally published in An-Nahar October 2018) Most so-called local economic reports read more like (bad) poetry, rather than providing actionable intelligence. One such report on real estate, from a few years ago, said: [...]

Dan Azzi

An-Nahar Articles

• 9 Min Read

• 30th September 2018

Lebanon’s rentier economy and Creative Destruction

(Originally published in An-Nahar September 2018) When Judgment Day for our country arrives, and it’s very close, the results will be cataclysmic and painful, but we should stand ready to exploit this and unleash Schumpeter’s Creative Destruction process. BEIRUT: Last week, a state of apprehension proliferated in the economic and banking [...]

Dan Azzi

Motive, Means, and Opportunity – Mechanics of the Lira Manipulation

BBC Report on Lira Shortage

Welcome to Lebanon Carlos-San

[This article was originally published in An-Nahar on December 31, 2019] Let’s say a certain hugely successful Lebanese automotive executive ran into legal troubles in a country which has an usually convoluted judicial system, which tends towards “guilty until proven innocent.” Staying back to fight and salvage his international [...]

A tale of two Lebanons

(This article was originally published in An-Nahar on June 2, 2019) I heard that one of my favorite restaurants is closing. I love that place, not because you can glimpse the who’s who in the country, but the food and service are great, and the charming manager reminds me of a bygone era. I dress like I don’t belong there, so one waiter, [...]

Random Encounters

Actual Message sent September 14, 2017, from the US Consulate in Beirut to its citizens: Due to ongoing threats to locations such as the Casino Du Liban in Jounieh, Lebanon, the US Embassy in Beirut has barred any movement of US government staff to that Casino. As always, the U.S. Embassy will continue to evaluate the movements of its [...]

• 5 Min Read

• 16th September 2017

Random Encounters

Actual Message sent September 14, 2017, from the US Consulate in Beirut to its citizens: Due to ongoing threats to locations such as the Casino Du Liban in Jounieh, Lebanon, the US Embassy in Beirut has barred any movement of US government staff to that Casino. As always, the U.S. Embassy will continue to evaluate the movements of its [...]

Dan Azzi

Lebanon

• 5 Min Read

• 16th September 2017

Gentrification in Beirut

When you think of wars, to most people they seem so theoretical, so academic, so “high school history.” Like when you’re walking through the ruins in Rome and being told about Roman history and its vast empire. Like when you’re walking through a tour of Gettysburg and being shown where General Lee was applying his brilliant tactics [...]

Dan Azzi

Lebanese Culture

• 4 Min Read

• 16th September 2017

Nouveau Riche & Lebanese Culture

If you want to understand Lebanese culture, you can start by examining some of the idioms. Let’s look at the term “nouveau riche” which, in Lebanon, is a derogatory term, meaning someone who is recently wealthy, as opposed to inherited wealth, and therefore does not behave properly like people who are accustomed to wealth. The [...]

Dan Azzi

Wisdom

• 2 Min Read

• 14th September 2017

The Ovarian Lottery or Lucky Sperm Club

So over 99.99999% of life is luck. Anything in this book that can be construed as advice is really addressing the 0.00001%. Warren Buffet coined the term “Ovarian Lottery” to describe the role of luck in our success and it struck a nerve with me, having been born, in a third world country myself. Other people have referred to similar [...]

Dan Azzi

• 5 Min Read

• 16th September 2017

Random Encounters

Actual Message sent September 14, 2017, from the US Consulate in Beirut to its citizens: Due to ongoing threats to locations such as the Casino Du Liban in Jounieh, Lebanon, the US Embassy in Beirut has barred any movement of US government staff to that Casino. As always, the U.S. Embassy will continue to evaluate the movements of its [...]

Dan Azzi


Lebanon

• 5 Min Read

• 16th September 2017

Gentrification in Beirut

When you think of wars, to most people they seem so theoretical, so academic, so “high school history.” Like when you’re walking through the ruins in Rome and being told about Roman history and its vast empire. Like when you’re walking through a tour of Gettysburg and being shown where General Lee was applying his brilliant tactics [...]

Dan Azzi

Lebanese Culture

• 4 Min Read

• 16th September 2017

Nouveau Riche & Lebanese Culture

If you want to understand Lebanese culture, you can start by examining some of the idioms. Let’s look at the term “nouveau riche” which, in Lebanon, is a derogatory term, meaning someone who is recently wealthy, as opposed to inherited wealth, and therefore does not behave properly like people who are accustomed to wealth. The [...]

Dan Azzi

Wisdom

• 2 Min Read

• 14th September 2017

The Ovarian Lottery or Lucky Sperm Club

So over 99.99999% of life is luck. Anything in this book that can be construed as advice is really addressing the 0.00001%. Warren Buffet coined the term “Ovarian Lottery” to describe the role of luck in our success and it struck a nerve with me, having been born, in a third world country myself. Other people have referred to similar [...]

Dan Azzi

[This article was first published in An-Nahar in April 2019. This is a work of fiction. Any similarities between actual wives and events is purely coincidental]

We were young.

We were poor.

We fell in love.

We got married.

We had two beautiful children.

We rose up the socioeconomic ladder.

We went on phenomenal vacations.

We saw the world.

We enjoyed life.

We enjoyed each other.

We hit midlife.

Then we started to worry, even though our life expectancy was still quite respectable. Does money buy you happiness? To a certain extent, sure. According to a paper by Daniel Kahneman and Angus Deaton, there’s a direct, almost linear, correlation between happiness and income, up to a salary of around $6,000 per month, then it plateaus and you’re on your own in your quest for happiness and self-fulfillment.

But money doesn’t buy you immortality, or that’s what I thought, until my geeky brother Alex told me about something called cryogenics. The idea is simple. When you die, they freeze you, and for a monthly fee they maintain your dead body in a hermetically sealed pod, protecting it from putrefying, until the technology catches up. That’s when you get revived and just continue life wherever you left off.

I was older than her, so I died first, in the year 2050, because that’s the life expectancy of a 45 year old male. She died in the year 2060, because she was 6 years younger and women have a life expectancy 4 years longer than men. Then in the year 2100, they revived us. We’d agreed that I would be revived first, to make sure it worked as advertised. I woke up and found myself extremely rich. I had picked some good investments before I died and the compounded rate of return did its thing, especially that being dead is conducive to minimizing your non-cryogenic expenses. So my fortune grew from a measly $100,000 in 2050 to $11.739 million in 2100.

When I was revived, I didn’t like my looks, which were a bit too senior citizen for the times, so I went to my favorite plastic surgeon, Dr. Abraham Blond, and did some aesthetic tuning. I now looked like I was in my late twenties.

Not bad.

I started dating some “truly” young girls, attracted to me for my rugged good looks and charm, and maybe a little because of the $11.7 million.

My wife was revived next, and she went straight to our penthouse wearing her medical robe, with the slit in the back, and found me in the Jacuzzi, naked with a couple of young models. A hundred years ago my wife was hot, but now at 126, after being frozen for 40 years, and without doing the beautifying procedures I had just done, frankly, she looked like sh*t.

Then she started shrieking.

“What the f***! You’re married to me and you’re with these whores?!!!”

I was dreading this moment, but was well prepared.

“Honey, welcome to the future. Read the fine print in our marriage contract. It says ‘till death do us part.’ Technically, we’re no longer married.”

“I’ll show you what no longer married is!”

And that’s when she shot me in the face and I died again.

The idea for this article was never published. It was submitted to the top two English language news outlets in Lebanon and was politely turned down, with something to the effect, “Stick to Economics.” It was subsequently turned into a YouTube video titled “Hummos Economics Episode 1 on my YouTube channel, posted Thursday December 24, 2020.

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Pictures of Qard el Hassan (QH) Automatic Teller Machines (ATM), dispensing cash in dollars, have proliferated on the internet and twitter, with even some mainstream media reports reporting on it. There’s no question that QH is giving loans — but let’s look at the other part — are they also dispensing cash though ATM machines?

Before we discuss this, let’s look at what it takes to get this done.

If you’re a sanctioned outfit, you need depositors with real cash to place money in this banking system, which they can withdraw at will. You would need to invest most of these deposits in loans that produced enough of a spread to justify the costs (and pay depositors), through some type of profit that is Sharia-compliant (no interest) … unless you’re running a nonprofit operation for your own considerations. These two parts are not too difficult. If you had a sufficient flow of cash (the bigger challenge), and a corresponding demand for loans (much easier), you could get it done quite easily.

What about the technological side? You’d have to install an ATM machine with a camera (to take a picture of every customer withdrawing cash to fight fraud and theft). You’d also need a networked connection to a central database to double check that the customer has the money in his account that he’s trying to withdraw. You’d also need the plastic ATM debit cards with the computer chip that check the pin stored in another central database. These plastic debit cards, with computer chips, are actually quite complicated to make. A company like Gemalto would have to make them. This means that either QH sold Gemalto, or an equivalent company, a contract for these to be made by this European company. Of course, this company would be violating US sanctions, but even if they weren’t, it would make it very convenient for DGSE to have access to the names of all the customers.

Underground military organizations that need to keep their operations secret, and the identities of their members secret, derive their strength from operating on the low end of the technological evolutionary ladder, because if they move up the ladder, they’re no match for the likes of the NSA or GCHQ that have huge budgets and high tech gadgets specifically designed for this type of thing. For example, Oussama Bin Laden, at one point, was tracked down precisely through the triangulation of his satellite phone. Once he discovered that, he went back to communications techniques from centuries ago, using couriers and what not, which delayed his demise several years. It would not be unreasonable to assume that at least some, if not most, of the customers of QH are members of Hizbullah, or their families.

Thus, if QH is now using an ATM network with a camera taking snapshots of all its customers, and connected to a central database with all its customers, a simple tap of one of the machines by NSA or GCHQ (or others) would yield a treasure trove of information — names, pictures, addresses, account sizes, phone numbers, and other convenient identification information. With that information, they can identify passports, bug phone numbers, and track movements for every person in that database. Therefore, either they made a huge blunder in their operational security procedures or it’s highly unlikely that this story is accurate.

[This article was originally published in An-Nahar on December 31, 2019]

Let’s say a certain hugely successful Lebanese automotive executive ran into legal troubles in a country which has an usually convoluted judicial system, which tends towards “guilty until proven innocent.” Staying back to fight and salvage his international reputation and legacy entails wasting a chunk of valuable years from his life expectancy at 65, with no guarantee of exoneration in the seemingly rigged Japanese system. After weighing the pros and cons, he makes a fateful, controversial decision to skip bail and hightail it out of Dodge. He lands in Beirut, where he has a big, fat bank account, protected by Lebanese secrecy laws, unmatched anywhere in the world. Bank accounts in other countries might be in a precarious position because of a potential Interpol warrant. But he doesn’t care — he’s got a lot of cash stashed in his country of birth. He’s happy, even though he holds several passports. Finally, his Lebanese citizenship will come in handy, after years of neglect, allowing him to live out the rest of his days in luxury and where people with legal troubles routinely end up as ministers or political leaders. He might even consider that later.

But first things first.

After a few nights of rest and catching up with friends and family, and popping expensive champagne bottles, he goes down to his bank to withdraw some money. They always treated him like royalty there, ushering him straight to the manager’s office, where they serve him shitty Turkish coffee that he never liked. He asks them to withdraw a small amount, $50,000 in “walking around” money from his multi-million dollar account, which has grown handsomely over the years, because of unbeatable interest rates, produced by Lebanese banking geniuses.

Cash is good and not traceable like credit card transactions, which the Koanchosa-cho (Japanese Intelligence Service) would undoubtedly track. However, the senior banker opens with:

“Welcome, sir. It’s an honor to meet you. We’re very sorry, but we’re only allowed to give $200 per week, but you’re an esteemed customer. You can have $2000 to start, but don’t get used to it.”

“WHAT! WHAT THE HELL ARE YOU TALKING ABOUT?!!”

He calls his lawyer, who’s considered one of the top legal minds in the country, but he mainly likes him because he has a beautiful first name.

“What’s all this bullsh*t about a quota for taking out my own damn money? Someone sent me an article by this guy Dan Azzizzi or Azzouzzi or Something, saying that there will be a haircut on deposits. Is this guy legit?”

“I met Dan, and he’s an assh***. Can you believe he shows up at my favorite restaurant, Balthus, dressed like a slob, while everyone is dressed in impeccable suits …”

“Stop gibbering about fashion and tell me about my money. Is what this guy is saying true?”

“Look, he might be on to something, but don’t worry. They won’t allow Lebanon to fall. The Americans will send us a lot of money and then we can go back to living the old way. It’s just temporary.”

“OK, thank you for your geopolitical analysis. Now tell me how the hell I can liberate my money from the account … just in case the American Sixth Fleet doesn’t come to the rescue like you’re predicting. Surely my being a board member of a bank would help me.”

“Look, I hate to break it to you, but I can’t imagine they’d be able to keep you on the board, even here in Lebanon, but let me put you in touch with some people who specialize in this type of thing.”

He’s meticulous, using the same skillset that propelled him to the top of the automotive world where he turned around Renault-Nissan and ended up a hero in Japanese comics. So he starts reading and doing some research. He soon learns about new unique Lebanese concepts. The old concepts were “Lebanon is different” and “Lebanon bends but doesn’t break” … and Lebanese resilience. Oh, resilience. Always resilience. It’s in all the marketing brochures. This time the Lebanese concepts are different, annoying, and full of doublespeak. He learns what a Haircut is, about Lollar, Capital Controls (without Capital Controls), and devaluation of the Lira (without devaluation).

He then discovers a new concept called “Haircut Trading.” People buying imprisoned Lollar accounts for a discount of around 30%, for cash in the country or an overseas account. He’s smart enough to understand that the guy buying it is doing it to pay off a loan in Lebanon or to get a discount on a house he’s always fancied. Makes sense. That must mean the probability of the eventual haircut is larger. He considers doing it, but can’t risk getting the money as a transfer outside the country — not before he solves his Samurai problems — no bank will accept it, and if it does, he risks it being frozen by the authorities. It has to be cash. How the hell will they give him millions of dollars in cash for his account? That’s the real Lebanese resilience. Might make sense to pay it. Last thing he needs is to get stuck here without money. It would be like house imprisonment but in a bigger area. In fact, being stuck in Lebanon without money is worse than a Japanese prison.

For second, he wonders to himself, is it better to be imprisoned in Japan with free cash or free in Lebanon with improvised cash?

(Originally published in An-Nahar November 19, 2018)

November 22, Any Year

Dear Jiddo,

You’ve been deceased for 30 years, but I’m hoping one day a time machine would deliver this urgent message. I pray it gets to you before you join the demonstration against the French mandate, 75 years ago. As we celebrate this day with the mandatory national anthem playing twenty times a day when we make a phone call, I can’t help but wonder if we’d be better off had you and your compatriots stayed home that day.

We would now be EU citizens, like our lucky Cypriot neighbors, 200 kilometers away, carrying a passport that allows unfettered access to 174 countries, instead of 37 countries, many of which only an aspiring terrorist would visit. At least our passport would not be six times the price.

We would not have a garbage crisis today. We would have 24-hour electricity. We would have running, potable water in our homes. We would have proper sewage systems that don’t dump waste around us … or in the sea where we swim … in between bouts of pretentious bronzage, while we conveniently ignore the stench. We could throw toilet paper in the lavatory without clogging the pipes. We would have paved roads, without giant potholes, and with functioning light-posts that are on at night, instead of day. We would have traffic lights … and people would actually stop. We would have cars give way to pedestrians crossing on zebra walkways. There would be no noise pollution through honking of cars as a mode of cursing or announcing one’s existence. There would be no pollution, period.

We would politely wait our turn in a queue instead of trying to “nitzeka.” In a two-lane road, if traffic slows, we would not create a third lane, and then a fourth lane, clogging up both ways. We could obtain an official document quickly, because our taxes already paid the salary of the guy working on it, not because we had to bribe him to do his job. We would park on the street not on the sidewalk, blocking pedestrians and forcing them to walk dangerously among cars. We would have Carnival Cruise ships in front of our shores, not ugly electric generator ships or military frigates.

There would be no governmental and extra-governmental armed checkpoints … and if there ever were, we would be surprised … and then outraged, at this invasion of our privacy.

We would have a robust public transportation system, with underground trains, electric buses, trams, and rail systems linking the whole country. We would not have monopolies, like the cell phone industry and electricity generators, making us pay some of the highest communication and energy costs in the world. We would not have a debt to GDP ratio putting us in the worst three countries in the world, with nothing to show for it. We would have proper zoning rules that prevent haphazard construction from Akoura to Anjar, destroying the natural forestry, including our national symbol, the cedar tree. When the cedar trees become extinct, Jiddo, would our flag just be red and white?

We would not be converting our majestic mountains to kissarat, digging them up, and carting them off for easy profit — literally wiping them off the map. We would have zoning rules outside big cities that only allow houses with gardens, while building skyscrapers in Beirut, Tripoli, and Sidon.

We would not have swaths of land outside the control of the central government. We would not have had an Israeli invasion in 1978, 1982, and 2006. We would not have had a Syrian occupation for thirty years … oops, I mean “wisaya.” We would not have an armed chunk of the Lebanese population under a flimsy pretext … with its own foreign policy, independent from the central government, interfering in the affairs of other states.

We would not be branded at birth like sheep, with a religion and sect that limits our aspirations, ambitions, and government posts that we can attain. We would not have the same shepherds and their incompetent, despotic descendants continuing to rule, exploit, and rob the country. We would no longer follow them, and when we did, we would hold them accountable.

There would be no wasta.

We would no longer strive to build the world’s largest Hummus plate or giant Manoucheh, and excitedly call the Guinness Book of Records. We would no longer have to analyze Shakira’s or Paul Anka’s ethnicity to get a “tartoucheh” of pride in our superior DNA.

We would have free medical care. A retirement plan for every citizen funded in euros, not Monopoly money, which people in their 30’s, 40’s, and 50’s will never see. Free education. Free healthcare. No flooding every time it rains, while we have to buy water for our houses … or shower in brown sludge.

We would not have an epidemic brain drain to any country that will accept us … or get ourselves born there because our prescient mother flew somewhere in her 9th month to exploit a citizenship loophole.

We would no longer have tears rolling down our cheeks as we listen to Fairouz singing “Bhibbak ya Lubnan” in a Las Vegas concert. We would no longer believe Wadih el Safi when he croons “We are staying here in our mountain” as he repeatedly points his non-Oud-playing finger at the ground below him … on the Champs-Élysées.

We would not need the help of the President of France to host our prime minister when he’s exiled after a misunderstanding with the Wisaya … or to release him when someone decides to Hotel California his a##. We would not need France’s help to go begging for money in various conferences to save us from a financial demise of our own making.

We would not have chronic traffic jams aggravated by a week of parade rehearsals, sealed off from the general public, with only VIP dignitaries invited — some of whom, the same ones who ran the country into the ground after inheriting the Paris of the Middle East from the Paris of Europe.

We would not be celebrating an Independence Day earned by only one martyr. You heard right. Just one. Hassan Abdel Sater, from the village of Laat, 5 kilometers outside Baalbek, whom nobody’s heard of today … while the Algerians earned their independence with a million martyrs … which can only mean that the French were all too happy to leave. We would simply visit Abdel Sater’s daughter, Zainab, and give her our sincere condolences.

So please, Jiddo, when you get this letter, stay the f### home and do not demonstrate against the French. Signed: Your grandson, from the future.

Disclaimer: This is a work of fiction. Any similarities between actual people and events is purely coincidental.

A version of this article was first published in Arabic in Akhbar newspaper October 14, 2019.

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“If you want to understand a man, walk a mile in his shoes.”

Riad Salameh sat in his plush office, with silk Persian carpets blanketing the floors, smoking his favorite Cuban cigar, as he blew concentric circles in the air, while reading the daily press reports. He didn’t like reading on a computer screen, so his long-term assistant Madame “Hallak” brought newspapers or printouts of online-only articles. Madame Hallak is one of the most important employees at the Central Bank (BDL); because she’s the filter who controls access to him. If measured by his salary and BDL’s $136 billion balance sheet, Salameh would undoubtedly be the most important man in Lebanon. People who tried to breach Madame Hallak’s elaborate defense lines for her boss varied from chairmen of banks all the way down to “selfie with the governor” aspirants.

He cringed as he read some of the scathing criticism in the mainstream media that historically revered him. President Michel Aoun had renewed his fifth term 3 years ago, after a bitter fight among his advisors. Salameh scraped through, due to sound advice from market experts who warned the President that any change would be detrimental to monetary confidence.

He was now governor for 26 years. Whatever you may think of him, he had become indispensable. BDL was Salameh and Salameh was BDL.

Salameh’s approval rating stood at nearly 90% in 2016, triple that of any public official, attributed primarily to maintaining the Lira peg at 1507.5 per dollar for two decades. He was the most admired man in Lebanon through most of his tenure.

Salameh was briefly among the three frontrunners for president in 2016, but regional geopolitics and local deal-striking formed unimaginable alliances, leading to the election of President Aoun in 2016.

As he read more bad news, Salameh had an irresistible urge to call his most trusted lieutenant, a senior, highly-dedicated public servant “Semaan” who’s the unsung hero, quietly fighting the tactical battles. He asks him for the Reserves number. This is the dollar value of gross foreign currency reserves, which stood at $38.6 billion, or nearly $50 billion, if you include the gold stash, much of which is held for safe-keeping in Fort Knox, Kentucky. Salameh repeatedly conveys this number to the press, with his calm voice and slow drawl, in sharp contrast to the loud and animated Lebanese macho stereotype. Nonetheless, he oozed with confidence, and panicky visitors left his office calm, even ready to go long Lira and short dollar. He was the consummate salesman, a skill honed during his Merrill Lynch days 1973-1993, as a financial advisor for the wealthy, which is how he met late Prime Minister Rafiq Harriri. It was the beginning of a beautiful friendship culminating in his current position.

As he thought back to his legacy under attack, Salameh put on his suit jacket. He never left it behind, because of a sensitive key hidden in a secret, specially tailored pocket, which he carried on his person at all times. As he walked towards the waiting room, he stopped to admire pictures of his predecessors. Elias Sarkis was his favorite. He was the one who made the decision to buy gold, worth $14 billion today. Despite the fact that he’s forbidden to touch it by law, it gave him, and the country, excessive self-confidence, although he knew that it was unusable — selling even one gram would require a ministerial decree, but the signaling effect would be like yelling “fire” in a crowded theatre.

He also admired President Sarkis for his courage 1976-1982, when the country disintegrated into a brutal civil war. Sarkis witnessed the PLO setting up a state within a state, two Israeli invasions, the Syrian occupation of most of the country, while keeping the Lira stable in a tight band between 3.22 and 3.92 to the dollar.

He looked up at the picture, whispering, “Tell me, Elias, what should I do now?”

His thoughts are suddenly interrupted by loud chanting outside. He looks out a corridor window, as his office is designed to prevent someone outside from looking in (or someone inside look out). In the good times, it afforded privacy. Today it projected a sense of siege, like he was in a bunker. Demonstrators outside were screaming vitriolic slogans against him and the central bank. He wondered why they hated him instead of the impotent government. Didn’t he give them 22 years of prosperity? 22 years of a strong purchasing power and a higher standard of living than any Arab country in this neighborhood? Why are they so ungrateful? Will they now erase 22 years of legacy?

Salameh knew that $38.6 billion, practically-speaking, wasn’t relevant. The real number is one of the nation’s most guarded secrets, right up there with SHN’s undisclosed location. Estimated at around $30 billion, it was still monumental for such a tiny country. The savvy governor knew that it was not all deployable to protect the peg. He had to maintain a cushion to import essentials like grain, fuel, and medicine, to avoid Venezuela scenarios. He had maybe $6-$12 billion in usable reserves, and at the current leakage rate, wasn’t a lot of ammo.

Did those demonstrators know what he was up against?

He knew where this was going … but what about his legacy? He was Mr. Lira. He then recalled 2016 and wondered why he stayed on. He could have left as the Alan Greenspan of Lebanon, the Maestro of the East, the best central banker in the history of the country. He could have completed his memoirs, suntanning on the Côte D’Azur, or writing critical articles in An-Nahar, like all those back-seat generals questioning his judgment today, from the safety of their non-positions. He recalled the Wall Street expression from his days at Merrill Lynch: “You are your last trade.” He refused to be his last trade, but he needed a miracle.

Salameh was used to miracles. He’d seen the country teeter on the edge, and through a combination of skillful maneuvering, luck, and loyal friends of Lebanon, was able to avert disaster multiple times.

During the 2008 global credit crisis, when the West was facing Armageddon, Lebanon had a reverse capital flight to our perceived safety, an ironic twist of fate. Rich Lebanese expats stopped trusting top foreign banks, and moved their money to local banks, culminating in a Balance of Payment surplus of $20 billion between 2006 and 2010. This surplus was squandered on real estate development and government waste, resulting in a bubble, whose remnants can be seen in the shiny, vacant towers dotting the Beirut skyline.

In 2011, the surplus morphed into a persistent deficit every year until now. In 2016, Salameh recognized the danger signs. This was the fork in the road when he could have considered alternative unpopular measures, which he discarded in favor of continuing to “feed the beast” … but the beast got bigger and hungrier. That summer he made a fateful decision to execute what he called a “financial engineering” transaction, which paid banks an obscene amount in Lira, in exchange for “fresh” dollars obtained from overseas, seduced by mythological rates of interest. Banks booked billions in profit, partially to offset losses in misguided diversification attempts in Turkey, Egypt, Syria, and Iraq. They lost money in every single expansion overseas, which cannot be attributed to bad luck alone, and Salameh, like a guardian angel, was there to help them pick up the pieces, but opted not to slap them with a moral hazard penalty. Some people started throwing around words like Ponzi and Madoff. Even the venerable Economist magazine, described it “like a pyramid scheme … works only with a constant supply of new money.”

Salameh conducted more than a dozen more financial engineering transactions over the next three years, capturing $65 billion of bank dollar deposits (one out of every two US dollars).

In August, everyone blurted a sigh of relief, when S&P maintained our credit rating. While everyone was still popping corks of Champagne, Fitch threw a curveball, and downgraded us, when they calculated BDL’s net foreign reserves at negative $32 billion. The central bank now had more dollar debt than the Lebanese government itself.

Salameh realized that the trade deficit (net imports of almost $20 billion per year) was depleting his reserves. Before 2011, remittances, tourism, and FDI, more or less, covered this import binge, but not anymore. While his FE was covering the “supply side,” providing dollars for the continued import binge, it was costing him dearly in future risk. A few months ago, he finally attacked the demand side, by sucking liquidity out of the market, both in dollars and Lira, because around 70 piasters of every Lira spent eventually ends up converted to dollars for imports … hemorrhaging out of the country. The liquidity embargo, while effective for protecting the Lira, was catastrophic for the economy, causing growth to drop to zero, businesses to fail, and unemployment to rise. This was still not enough, so he curtailed transfers from Lira to dollars or transfers out of the country (by further restricting dollar liquidity). This overflow seeped into the real world, because customers had to go to exchange houses to buy fiat (physical) dollars.

A black market quickly developed, with the dollar trading up to 1800, for the first time in 22 years, jumping outside the band of 1500-1515.

The absence of any economic planning in the country meant that monetary policy was what lead the economy, instead of the reverse. This major flaw in the country had finally caught up with him. He recognized that any decision he makes directly affected the protestors below. It affected their livelihood, standard of living, employment, and quality of life. It also affected the ubiquitous security personnel, who were the ones who would be called to forcefully quell them, if they ever reached the critical mass to threaten the system. It also affected the top 1%, the elite who owned the country.

So any deliberate, drastic measures created too many simultaneous enemies.

However, the problem was too big for one man, and required a concerted effort from everyone in a position of authority. But even then, there was no magic pill to make the pain go away. It was really a choice between a soft (or softer) landing versus all-out chaos. Many of the decision makers, who were political appointees, did not understand the issues, and thus were incapable of offering a solution. Their expertise was in being loyal to their sponsor and giving media soundbites.

Most Lebanese economic analysts were TV media personalities, who had no training or experience in the cancer we were facing. Many of them were helpful for a while, lavishing praise on him and polishing his brand — ‘useful idiots’ during the good times. But today, the country needed something different— leadership. He needed those economists to stop sycophantically praising him, and instead convey the hard message to mobilize the country towards a form of “economic resistance.” Extreme measures were coming anyway, and it was really a choice between doing it at a time and place of our choosing … or having it done to us. He wished that the media had never depicted him as this omnipotent heroic figure, as if he could snap his fingers and stop the gathering storm in its tracks. He recalled the sycophants chanting, “As long as Riad Salameh is in charge, the Lira is fine.” He used to feel pride whenever he heard it, but today he realized that the country’s fate should never depend on any one man — not even him — but needed to be a nation of institutions. He knew the Lira was sick, and that chant was coming back to haunt him now — it put him in a corner and took away the obvious choice, especially that the ruling class had subcontracted this problem to him for so long.

Sometimes, the right choice is not politically palatable. The answer lay at the intersection of economics and politics. Any solution would strike at the constituency supporting a specific political party. Who was going to be the politician to tell his supporters that they have to give up entitlements?

Salameh closed his eyes to think. The country appeared in his imagination as a bus, driving towards a cliff, with its passengers arguing over the number of seats each can take, instead of trying to steer away from the edge.

The bleeding of dollars due to the twin budget and fiscal deficits was now consuming bank deposits. It was like quelling your hunger by eating your own foot. The solutions all involved some type of brutal dollar diet. Maybe he should have floated the Lira in 2008-2010 when massive surpluses were flowing into the country. The Lira would have risen to 1,000 per dollar, and as the balance of payment surplus turned negative in 2011, the Lira would depreciate slowly, back down to 1,500, and then even 2,000 today, allowing a gradual and soft landing. But retrospective vision is 20/20. Who’s the genius who could honestly claim today that he could have seen that in real time? Analyzing a battle in history books isn’t the same as being the General making life and death decisions in the fog of war. He was starting to question the financial engineering. He wondered if he had given the banks so much that their top management actually believed it was real — that their profits were due to their banking acumen and skills. They certainly paid bonuses and bought Fakra chalets like they were investment geniuses, instead of guys who failed at every expansion outside Lebanon, where they competed with real bankers, with real business models, instead of the Disneyworld, for which he was partially responsible, and where they earned free money for no added value. He wondered if he could have pulled off an equity stake in the banks he bailed out, preventing any banker from earning a bonus until every last penny was returned to the Lebanese taxpayer and depositors. He got angrier as he thought about them keeping the eurobond coupons he just paid them outside the country.

The FE transactions started out rare, then increased in frequency. The banks were like junkies, excited every time he announced one, waiting to snort the delicious white powder of phantom profits, but now, when he looked at their balance sheets, he could see the bags under their eyes, the slurred speech, the red nose …. they were badly in need of rehabilitation.

Salameh knew they needed drastic intrusive surgery to extract the country out of the coming abyss. He had to weigh protecting his legacy, and stretching the reserves for 3 more years, until his tenure ended, making it the next guy’s problem, or dealing with the long term-problem now. It was really a political, as much as an economic problem. In some sense, it was the consideration that every political leader in the country was calculating. It was much easier to play the blame game or find a scapegoat than to make a tough decision that’s good for the country but that damaged your personal reputation. Like the fires burning in Mechref and Damour. What’s easier, to extinguish them or issue outraged press releases?

He remembered Nietzsche, “If you stare into the abyss, the abyss will stare onto you.” He now stared deep into the abyss of possibilities: devaluation, haircuts, default. Every single option was catastrophic, and nobody in power wanted to face the abyss that was staring back at them, so they all left it to him, while they find a scapegoat. He remembered the idiom, “If you look around the poker table and can’t tell who the putz is, then it’s you.”

Ask a hundred Lebanese about the reason for the devaluation of the 1980’s and you’ll get a hundred different answers. It was a “Force Majeure” … like an earthquake. Nobody was held accountable. Nobody remembers who the governor was. Google “Governor of the Central Bank of Lebanon” and he’s the only one who appears, as if no governor existed before 1993. He was like Adam and Eve of BDL. He didn’t have the advantage of anonymity now. His past success was his worst enemy today.

Success has a hundred fathers and defeat is an orphan.

Salameh looked out the window at the demonstrators, took a deep breath as he contemplated his options, and thought, “It’s lonely at the top.”

In an interview with CNN, he announced how dire the situation was … days away from a crisis. It was a conscious decision, high-risk, deviating from his “everything is fine and under control” message that he had consistently and convincingly delivered for 26 years. It was the first time that he sounded gloomy. But he had to do it. He had to light a fire under the decision makers to move. His statement shocked the market and the Lebanese people. They had never heard anything like this from the Superman of Lebanon. But Salameh gambled because banks were closed, so there was no chance of a run on them or the Lira. But there was collateral damage. Yields on eurobonds climbed to 37-60%, a level not seen in the history of the nation. So he had to backtrack from his statement somewhat, by issuing a clarification that ended up like the difference between “restructure” and “reschedule.” The next day prime minister Harriri resigned, granting a victory to the protestors, who were cursing Salameh, thinking that his CNN statement was aimed against them.

Salameh looked at his watch. It was 7pm, not the latest he’s ever worked, but he was still jet lagged from his trip to the United States, and he wanted to get some rest. He informed his lone bodyguard and driver that he was leaving. He didn’t have multiple bodyguards like many others in senior positions, because he was always well-loved by everyone, although he was wondering if that was still wise today. He believed that when your time came, no amount of bodyguards could protect you against a well-funded and committed group. He recalled his friend, the late Rafiq Harriri, with all his security resources, which didn’t change his fate.

As they drove out, there were some stragglers from the demonstrators. His tinted window was open. One of them, with a bandana on his head, stood right outside his window. They were a meter apart. They looked straight at each other, eye to eye — a symbol of the masses in pain and a symbol of the Lebanese capitalist system. He thought he would start yelling for the rest and they would mob his car, but maybe the demonstrator detected the sadness in his eyes. He gave the Governor his bandana, then just turned and walked back to the rest of the mob while hurling more insults at him and the central bank.

[This article was originally published in An-Nahar September 22, 2019]

It’s pretty clear that we’re now in an urgent race, like being on a treadmill, whose speed keeps accelerating, but has no off-switch. No matter how tough and fit you are, eventually you’ll have to stop running … unlike the treadmill, which keeps going.

You can see this in the acute shortage of dollars in the market, the tightening of dollar withdrawals, stoppages of online currency exchange, slow slippage in the Lira black market rate, and more and more merchants refusing Lira payments.

This is putting pressure on some essentials in the country, like the fuel strike this week. I’m told that grain supplies, which by law are supposed to stay above 4 months of supply, are now down to less than half that.

Someone described it as “The Dollar Crisis. Let’s start by setting the record straight. The dollar doesn’t have a crisis — it’s doing fine. A more accurate term is “The Lira Crisis.”

Gibran Khalil Gibran described our situation accurately over a century ago:

Pity the nation that wears cloth it does not weave,

and eats bread it does not harvest.

Pity the nation that acclaims the bully as hero,

and that deems the glittering conqueror bountiful.”

Even the comedian Naim Halawi gets it, through his revised current version, “Pity the nation that earns Lira and spends dollars.”

So what’s happening?

Capital flight, since the beginning of the year, has picked up and deposits are now being transferred outside the country at a rate of around $1 billion per month. Add to that the balance of payment deficit (our addiction to imports that I’ve written about before). Add to that the dollarization rate which has now crossed 73%. This is the percentage of bank deposits that are in dollars — it was many billions lower, only last year. The official reported rate is 71%, with the 2% discrepancy coming from the fact that for some of you who transferred Lira to dollars, you got a piece of paper from the cashier saying it was done, while they wait days, maybe weeks, before executing, until they get their quota from the central bank. This is because the central bank is limiting the supply of dollars to banks. In the business, we call that “keeping the risk on their books.”

The average Youssef has figured out an arbitrage opportunity that I tweeted about a month ago [LINK HERE

https://twitter.com/danifromic/status/1164174571060301824?s=21].

He buys dollars from the banks at 1519 or so and sells it to the Sarraf at 1550. Earns a risk-free 30-40 Liras — call it Financial Engineering for the Proletariat. As a result, banks have all but stopped all kinds of transfers and ATM withdrawals, which has aggravated the situation and escalated the panic.

There’s a lot of additional risk that we’re taking recently. For example, some of my friends used to be asked 20 questions when they deposited $10,000 in cash — not so much anymore — banks have more important things to worry about now. Desperation leads to reckless behavior.

Meanwhile, I hear that market players are negotiating hard with another billionaire, to get a new deposit like the $1.5 billion that was done a few weeks ago. News reports are also circulating that negotiations are ongoing with Saudi Arabia for an off-market $2 billion eurobond issuance with below market interest rates. So $3 billion total. What does that buy us? At best 3 months, most probably less. Depends if the outbound traffic of capital flow keeps accelerating.

If the Saudis, or someone else does an off market eurobond transaction, it guarantees them a front-row seat to any future restructuring.

The billionaire would want to negotiate a similar material adverse clause (MAC) “comme l’autre.”

Think of yourself wanting to go see a really good movie that only plays in this one old movie theatre. You know there’s a fire hazard, but you still want to go, so how do you mitigate the risks? You might pay extra to get yourself a seat right next to the exit. So the second billionaire would want the same thing, but the best seat is taken — he might have to settle for the second best seat, behind the other guy, or maybe right next to him, but one thing is certain, they will run out of those seats very soon, because not everyone can fit next to the exit. A real eurobond issuance may want to understand this seating arrangement, like where they are in the pecking order for the Reserves, which are the only source for any eurobond payments.

Of course, there’s another issue — LIFO — Last In First Out. In these latest transactions, the new guys are getting more flexible exit terms, and taking less risk, than the ones who were riding the bull the whole time, for the last 5 or 10 years. It’s counterintuitive — like standing in a queue waiting for something, but somehow you’re better off by being the last guy to get there.

The advantages to this new game in town is obvious — we’re getting urgent funds to keep the country going, and at rates way less than market, but what are the disadvantages? Assuming these guys have some sort of MAC, giving them effective seniority, which is almost certainly true, that means they can pull their money out very quickly. So if the new $1 billion comes in, that’s $2.5 billion that can pull out very quickly, maybe with 30 days notice. So if a first shock occurs that triggers the MAC, we immediately get another shock of consuming $2.5 billon of the reserves — that’s 8% of the reserves in one shot.

That would be one hell of a double-shock to the system.

[This article was first published in An-Nahar in July 2019]

I know what you’re thinking — my editor missed a typo and the title should be “Devaluation of the Lebanese Lira.”

It’s pretty clear, with the balance of payment (BoP) deficit (binging on imports, i.e. US dollars leaking outside the country month after month); that we’re heading towards a steep cliff. True, every now and then, we are momentarily able to plug this hole through the so-called financial engineering transactions, paying exorbitant interest rates, but this just kicks the can down the road for a few weeks or months.

The last FE paid banks a 21% interest rate, of which they offered a portion to rich, but less savvy clients. 14.2% annual interest, masquerading as 40% over 3 years, with some bells and whistles, like the 10% upfront payment, to obscure the actual rate and the fact that they were keeping 7% annually for themselves. More financially sophisticated rich folks realized that they had the upper hand, and negotiated, thus reducing bank margins, and extracted higher rates, like 16% or more.

Either way, people who are familiar with the global market levels, in which many junk bonds are now yielding negative rates, realize that there’s something wrong with this picture. Thus, current subscribers to these products are making a bet, that when the game of musical chairs ends, they’ll still have a chair to sit on, or that in 3 years, new players will be seduced, adding more chairs, allowing the old subscribers to exit the game, leaving the new players holding the (empty) bag — the “greater fool theory” à la Libanaise.

The government executed a valiant effort to plug the hole in the fiscal deficit, not exactly addressing the crux of the problem, but tangentially related. However, employee strikes and road closures proved that in typical Lebanese fashion, everyone was saying “solve the problem elsewhere, but don’t touch my own entitlements.” I gave some suggestions on how to deal with the BoP deficit in a previous article, but, again, the affected segments all lobbied to be excluded.

Policymakers have politically trapped themselves in removing (or more precisely, postponing) the one option from the table that deals with this problem in one clean swoop, which means that at the rate we’re going, capital controls are coming, because there isn’t a sufficient supply of dollars to cover our demand for imports, conversions from Lira to dollars, and the steady capital flight to overseas accounts.

Today, it’s a trickle, and at this rate we might have a couple of years, based on published reserve numbers, but if it accelerates, which is looking likely, D-Day would strike in 2020. We’ve already experienced some of the distortions of this situation. Try to transfer money overseas and your banker will give you a dozen excuses why he can’t do it, or, postpones it a few days or weeks, but after a lot of screaming or threats or wasta, finally executes it. Similarly for conversions from Lira to dollars (making people “freeze” their converted dollars 6-9 months). This conjures up images of the war years and waiting in line to buy a “rabta” of bread. An average citizen waited in a queue for hours to get his quota, while, every now and then, an armed militiaman (the “screamer”) jumped the line and stole his quota and that of a dozen others.

However, if you write a check to another person, no problem, they’ll cash it (as long as it’s deposited). Do an online conversion from dollars to Lira and presto, you get 1514.5, the upper limit of the peg band, but nevertheless within the band established by the central bank. Try to do a conversion at a Sarraf, for cash and you might get a rate of 1525-1540. Why? Because, the Sarraf transaction is for real dollars not ether dollars. The online transaction is an accounting entry, similarly to the check. The check cashing is a computer entry that changes the ownership of the amount from you to the other guy, but net net, Lebanon’s deposits have remained the same.

As Sherlock Holmes said, “Once you eliminate all other possibilities, whatever is left, no matter how unlikely, is the truth.” So let’s analyze a scenario where cash withdrawals are rationed and overseas transfers are curtailed, in a triage, with the highest priority to buy fuel (for heating and electricity); then necessities, then luxuries. You can write as many checks as you want from your account as long as it’s deposited in another local bank, so what happens to our economy then? It becomes similar to the board game Monopoly. You can buy Park Place or Pennsylvania Avenue or a train station on the board game, from anyone else playing the game. You can use Monopoly money to avoid going to jail. You can do any deal you like with other players. You can go and have a great day at the beach. But can you take the Monopoly money and spend it in Paris at the fancy Le Cinq Restaurant? Nope. The owner of that restaurant isn’t a player in our board game.

You could write a check to a guy here and buy his apartment in Solidere for “$2 million.” He can only deposit the check in his bank but can’t take it out. He can buy a large piece of land in Faraya or an apartment in Achrafieh. Conceivably, that apartment can even go for $10 million — after all, it’s Monopoly money, that can’t be used anywhere outside the Lebanese board game. In some sense, our economy becomes largely based on bartering, like what happened in Russia after the collapse of the Soviet Union. Of course, if you pay for the apartment in real dollars, not Monopoly money (i.e. from an account outside Lebanon to an account outside Lebanon or in cash); you can get the same apartment for $500,000. Thus it’s even imaginable to see a mini-boom in real estate, as more and more rich people (or people who thought they were rich) decide that it’s safer to have their wealth in something tangible and stop believing the numbers printed on their bank statements. A very sharp friend of mine, Ramzi A., who’s a portfolio manager, told me the other day that he can envision a scenario in which banks, who have a lot of illiquid repossessed real estate, could even offer depositors choice apartments to clean their book, in return for deposits that their clients can’t withdraw. Offer him the choice that his deposit is stuck with them due to capital controls or taking ownership of a shiny new apartment, with no further claim on the bank, and he might just go for it.

The end result would be a two-tier system, with a dollar in an account outside the country worth 3 times a dollar trapped in the country, that can only be spent in the Lebanese Monopoly board game. But don’t worry, the Lira hasn’t been devalued; it’s still at 1507.5 to the dollar … or is it?

[First published in An-Nahar and Yerepouni News on July 14, 2019]

BEIRUT: “… We have a new product for deposits with a minimum of $20 million, paying a 14% annual rate … but now we’re opening this great offer for the general population at much smaller amounts, but only for dollars coming from outside Lebanon …. We put your money with the central bank, and we don’t know what he does with it, but, rest assured, that as far as you’re concerned, the money is with our bank.”

Excerpt of a WhatsApp voice Message, from a branch manager to a Lebanese citizen.

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The top banks in Lebanon were established a century ago, even before the country. Banking in the good old days, of my parents and grandparents, was simple. It operated on the 3-6-3 principle. Pay 3% for deposits, lend out to customers (auto loans, business loans, mortgages) at 6%, and go play golf at 3 pm. It was a conservative model — the customer knew where his money was, the banker knew were the money was being invested (and the risk of getting it back), and so did the owner of the bank, as these banks were privately held. That’s why they survived two world wars, several invasions, and a few civil wars and skirmishes.

Engineering in those days conjured up an image of an AUB graduate, like my dad, wearing a white hardhat, examining blueprints of a building, supervising workers with shovels, mixing sand, cement powder, and water, in the right ratios, thereby transforming into an olive-colored sludge, which subsequently coagulated into a solid — floors, walls, and roofs for well-constructed buildings. Like the Holiday Inn, still standing majestically, in the middle of downtown. It survived bullets, RPG rockets, and mortar rounds riddling its outside structure, and still stands there now, smirking at the new flimsy Botox buildings, masking the low quality construction of today.

In those days, engineering was civil, electrical, or mechanical … not financial.

I had dinner recently with one of the most senior and savvy bankers in the country, who gave me a half complementary, half critical assessment, saying, “I believe you are among the few who understand the real mechanics of what is happening, though it might be counterproductive to be out loud with the general public.”

His critique is not uncommon, with many preferring that the system keep getting these overseas dollars, like sensitive documents fed into a shredder, even though they are all aware what the final outcome is. Fresh overseas dollars means that the risk is born by Lebanese expats working for years and decades overseas and sending their hard-earned savings to the country, seduced by unmatchable rates anywhere in the world. Too good to be true. So, implicitly, the premise is that if they’re that gullible, why should anyone care?

Let’s help out this banker, as well as her client, who both don’t know what is being done with the money. Say the client gives her $100, which makes its way to the central bank, and joins the pile of reserves. The central bank issues an “I owe you $100” certificate of deposit to the bank, which earns a higher interest rate than the 14% she’s paying this client. Some of this interest is in Lira, and remains at the central bank, because if it were released into the economy, it would eventually get converted to dollars, depleting the reserves even faster than now. Let’s say she gets paid a salary in Lira. She goes to a gas station to fill up her car with gasoline. She gives the gas station attendant 15,000 Lira for the gas. He takes the 15,000 Lira and gives it to the gas station owner, who in turn converts it to 10 US dollars, which comes from the central bank’s reserves. He then sends $10 overseas to replenish the gas she just put in your car. The BDL reserves get reduced by $10. In other words, the client’s $100 that he deposited in the account has now been reduced by $10 to subsidize our addiction to imports.

A year later, the client gets a statement saying he now has $114 in his account (14% on his $100). He’s happy. He’s richer … on paper. His business in Saudi Arabia certainly doesn’t generate that kind of return, nor do our government bonds. Even Turkish and Argentine bonds yield only 7% and 12%, but that’s understandable — they’re not as smart as we are.

Another year goes by. The client gets another statement. He now has $130 in his account (14% on the $114), according to the statement. He’s just experienced the power of compounding. Meanwhile, the central bank reserves got depleted by another $10 to buy imports, so there’s only $80 of his original $100 available for withdrawal. On the third and final year of this magical product, our friend’s statement reads that he has $149, while there’s now only $70 of his original $100, available for withdrawal, even though his claims on the system have now grown to $149.

The client doesn’t know this. He’s ecstatic. His hard work and frugal lifestyle in Saudi Arabia are really paying off. $500,000 at that rate would turn into $1.9 million in 10 years. Another few years working his ass off in the desert and he’ll be a millionaire. He’s dreaming of going back to Lebanon one day to retire in his village, thanks to his hard work and the safe high-return deposit that his banker enticed him into. He has grand plans. He’ll build a mansion in his village, overlooking the sea, and live off the unending interest that he receives. The highest low-risk return in the world. He’ll be the envy of his neighbors, friends, and family.

[This article was first published in An-Nahar on June 21, 2019]

Today’s urban hike is from Achrafieh to #Hamra Street, four kilometers away. Ten minutes in, I reach the Green Line, splitting Beirut into two warring zones in the civil war. During the war, it felt like it was much further away. East Beirut versus West Beirut. It got its name because a jungle of trees grew there among the landmines protected by the tranquility of war. It was one of the only areas of significant greenery in the city. Beirut’s Central Park, but with only ghosts. Anywhere else in the world, concrete structures displaced forests and trees, but here, the reverse occurred. A decisive environmental victory. The cleanest air in the city … if you dared venture there.

I navigate my way through the imaginary militia checkpoints, slitting throats based on your sect, as stated on your national ID Card, mandatory to carry and evidence in your improvised trial and death sentence — an image etched in my brain from childhood, which I can never purge.

As I cross into West Beirut, the street names abruptly change from something like the French-sounding Général Jean Misiklier Avenue to the guttural-sounding Abdul-Hamid Shrimbo Street, a reflection of shifting ideologies and allegiances.

I pass a familiar old building. I can almost still see my aunt Najat on the balcony letting down the straw basket tied with a string all the way down to a guy’s cart. He would put vegetables in the basket and take the cash — all this happening while they’re negotiating loudly across several floors — old school home delivery.

A few minutes later, I reach Hamra. The blue property in the old Lebanese version of the Monopoly board game — probably wouldn’t be blue if they constructed the board game today. Maybe Rabieh or Solidere would be blue today.

Now, I’m having my morning coffee near where Costa Cafe used to be, site of an attempted suicide bombing a couple of years ago. Even in a calloused country like Lebanon, that story dominated the airwaves for several days. I wonder if Costa employees got raises. Did that incident increase or decrease business. Are suicide bombers like lightning, never striking the same spot twice?

The news reports stated that a bomber dispatched by ISIS — we don’t use none of that “alleged” sh*t here in Lebanon — entered the joint late, but may not have wanted to waste the explosives, nails, and shrapnel on the sparse patrons at that hour. So what’s a terrorist to do to kill time, while he waits to kill innocent civilians? He politely stood in line, ordered a coffee from the barista, and sat at a table next to one with a customer on his laptop surfing the net or maybe writing an article. He sipped his coffee while more of Costa’s, and his own, customers arrive. But then, some heroic members of our abundant security apparatus engulfed him, disrupting his own “heroic” endeavor. They couldn’t shoot, of course, so a hand-to-hand fight ensued, just like on those American TV shows, after which the bad guy was subdued and carted away. The security guys were wearing civilian clothes, Oakley sunglasses, and that dark blue vest, but with Arabic markings, instead of the yellow “FBI” etched on the back.

While everyone was shocked at a near-miss here, people were pleased with how this portion, at least, of our taxpayer funds added value.

The media, and its consumers, were thirsty for more detail, so more juicy stuff started to flow with every iteration of the story, no doubt leaked from inside — a scoop given to the leaker’s favorite reporter. Like the fact that the bomber was from Sidon. The tourist brochures would tell you that it’s the eighth oldest continuously inhabited city in the world, going back 6,000 years.

Another leak comes. They had infiltrated this branch of ISIS in Sidon, so had actionable intelligence, and sprinkled agents all around Costa, waiting for him. As I sat there, I couldn’t help but marvel at their bravery, but, nevertheless, wondered how someone charges a suicide bomber wearing explosives. Then, I started to wonder why they intercepted him at the end point of the attack, when there were so many people around. I mean if they already had the information, they could have interdicted the attack at several nodes earlier in the process. They could have raided his house in Sidon before he left, or rushed him as he was walking out to the car, or anywhere along the forty kilometer trip from Sidon to Hamra, perhaps on a deserted section of the highway, with some snipers in place. But no, they decided to do it at his final destination, the last possible opportunity to thwart the attack, at Costa, in one of the most crowded neighborhoods in town.

I start to daydream, projecting myself to another era in Hamra’s history. I can almost see the revolutionaries from decades ago, with their long, thick sideburns, and shirts unbuttoned to their belly buttons, showing heavy gold chains and smaller, but no less heavy, gold wrist “plaques.” Liberating occupied territories with their mouths, running them off mercilessly in the cafes, back in Hamra’s heyday. If you look carefully today, you can still see the remnants of intellectuals, journalists, spies, and exiled opposition from neighboring countries, sipping their cappuccino and solving the world’s problems. Opposition to what? Everything, but as in the golden age, no practical solutions. Still the same problems and same putrid system.

Kim Philby, the highest ranking defector from MI6 (British Intelligence) to the Soviet Union, lived a couple of blocks from here in 1963. Israeli soldiers, occupying Beirut during the 1982 invasion, were attacked as they were sipping coffees near this very spot. Terry Anderson, the longest held hostage during the civil war, was kidnapped a few blocks away. Sarkis Soghanalian, on whom was based the composite character played by Nicolas Cage in the 2005 movie Lord of War, made part of his $1.6 billion net worth on this very street. The largest bank heist in history (until then); was executed in 1976 near here on the British Bank of the #Middle East (now HSBC). The armed robbery yielded an estimated $50 million for the perpetrators and landed us in the Guinness Book of Records, before we had to settle for the wimpy largest hummos plate award like these days.

My mother’s uncle died in a car bomb a few hundred meters from here. I heard the giant explosion as I sat in history class in school, studying the achievements of Arab empires over a millennium ago. I didn’t realize at that moment that I was listening to him die … or that I was witnessing real history, the most important history, for my relatively insignificant life. A history not taught in schools, but only in arghile cafes, by uncles, parents, grandparents, and other old folks, reciting their versions of heroic feats in our inexplicable civil war, which ended in 1990 … but never ended.

Hamra, the former Champs-Élysées of Beirut. I somehow remember this street as being much more grandiose and gigantic. It looks like an alleyway today. Either I’ve grown too much or it has shrunk. I’m not sure.

And where’s Modca and Horsehoe and Wimpy and Toyland? And what are all these ubiquitous franchises doing polluting the old culture of the place?

The waiter comes, “Bonjour.”

Why is he speaking French to me? Is something identifying me as coming from the French-speaking Canton?

“Where are you from?” I ask.

“#Syria“, he says. I’m surprised he admitted it so readily. Most Syrians are told to say they’re from Akkar to avoid a racist backlash. Turns out he’s a university graduate in Fine Arts from Damascus, escaping his own war and intruding on mine … and melting into the anonymity of Hamra Street.

Why do I only get inspired in this neighborhood? It jolts and awakens innermost emotions, fears, terror, insecurities, and aspirations that I forgot existed.

Hamra will always be a blue property to me.

————————

Afterword:

Four thousand years ago, this area was inhabited by Canaanites who were wiped out by God, according to the bible, but the LA Times in 2017 reported that DNA tests had shown that 93% of Lebanese were Canaanites. If we can survive the wrath of God, surely we can survive anything. Wherever you are, happy birthday Uncle Riad.

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There’s no question that our nightlife is one of the best in the world, and, having been to 80 countries, I can authoritatively make that claim. Obviously, you usually go to these joints at night, where the darkness and lighting add to the trendy design effect.

It doesn’t help your situational awareness or concentration to watch all the hot, scantily-clad patrons saunter in front of you, while the valet parking attendant parks all the fancy Ferraris, Porsches, Bentleys, and black Jeep Cherokee, within a distance proportional to the price tag (and probable tip). If you own a Kia, he might ask you to park your own damn car. So let’s just say that although I’ve been to this club a couple of times, I might have been too distracted to notice what I’m writing about today.

I’ve also had occasion to visit a nightclub during the day for some business reason, when the sun shines its disinfecting light, dispersing the optical illusion brilliantly generated the night before. That’s when a cool “New York-style loft” pipe metamorphoses into an exposed pipe like you’d see in an abandoned building.

The contrast between night and day was never more apparent than when I was driving by the other day, and I saw that, adjacent to one of the top nightclubs in the country, was a fuel storage facility, densely planted with huge containers of gasoline, diesel, liquid gas, and other highly flammable substances.

Each container has a capacity of 8,000 cubic meters or 2.1 million gallons. According to Purdue News, each gallon has the explosive power of up to 83 sticks of dynamite. So the large 8,000 cubic meter container would generate the explosive power of 174 million sticks of dynamite. And they had several of them. To give you an idea of that destructive force, according to the Department of Physics at the University of Illinois, a small atomic bomb, like the one dropped on Hiroshima in 1945, is equivalent to 30,000 sticks of dynamite.

Granted, there are multiple factors that go into maximizing the destructive power of an explosion other than sticks of dynamite equivalency, like pressure, space confinement, and other parameters, but regardless, and in case you think this stuff is theoretical or exaggerated, check out this video for the last time something like this happened.

Right next door to this facility, is one of our best night clubs, with an occupancy of maybe 500-1000 people. Lots of people who are at various stages of inebriation, in a hot, crowded, and confined space, which is an ideal combination for a fistfight. And what happens every ten fistfights in Lebanon? That’s right. They evolve into a firefight, sometimes using automatic weapons, in this case right next to thousands of tons of various types of fuel. Like what happened in kaslik a couple of nights ago when a young man didn’t like the service provided, thus gave them a bad review in the form of emptying a 30-round clip of an automatic assault rifle inside the packed establishment.

The good news is that the night club next to the fuel storage drums has functional smoke detectors … I think.

So the question that comes to mind is how does our government give a license to open something like this in this location? How does a fuel storage facility get located in between two highways, and several office and residential buildings?

Fuel for thought.

(This article was originally published in An-Nahar on June 2, 2019)

I heard that one of my favorite restaurants is closing. I love that place, not because you can glimpse the who’s who in the country, but the food and service are great, and the charming manager reminds me of a bygone era.

I dress like I don’t belong there, so one waiter, Fouad, with whom I established familiarity, told me that when he saw me the first time, with my T-shirt, shorts, and backpack, whispered to his buddy, “This guy will end up doing dishes today.” Frankly, when I got the bill, I contemplated offering them my dishwashing services.

The manager, always dressed impeccably, and sporting trendy, quadrilateral-shaped glasses, like they were from the 1960’s, would always receive me with enthusiasm, despite my hopeless failure to meet her dress code standards.

One time, I was having lunch with my uncle Nasser, and we struck up a conversation with her.

“I’m a fan of your restaurant because your customers represent all the socioeconomic classes in Lebanon.”

She looked at me quizzingly.

“I mean it is frequented by the rich, the very rich, and the super rich.”

She burst out laughing and whispered, “That’s right, those two over there are super rich, ‘mitl afdalkon.’”

That’s when I corrected her, “No, ma’am. We’re the just the ‘mere’ rich.”

Another time I was having lunch with a friend of mine, Naaman, one of the most prominent Lebanese bankers. I ordered my usual gigantic côte de bœuf for two … for just me. Normally, the Chef cuts it up, making it look a civilized, but I always ask them to keep it intact — a huge, thick piece of meat, wrapped around a humongous bone, like a giant chicken drumstick. He, being vegetarian, ordered some lettuce with a couple of unidentified leaves, the contrast embarrassingly exposing my barbarous choice. So I fell to counterattack:

“Hey Naaman, do you realize that my order is an aphrodisiac?”

“What do you mean?”

“Well, when women see me eating something like this, it attracts them, because it brings out the old raw instincts from the stone-age days, when a powerful man would kill a mammoth or Ursus Spelaeus, and drag it back to the cave, eat a raw piece of meat, while grunting and holding it by the giant bone.”

“Don’t be ridiculous. You look like a caveman.”

And just as he said that, two stunning girls sitting next to us interrupt and ask me:

“Excuse me Monsieur, what kind of meat is that?”

“Côte de bœuf for two.”

“Wow. Will you eat that all alone?”

I turn to Naaman and wink with that ‘I rest my case’ look.” But despite the experiential sales pitch, he’s still vegetarian.

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So who is the clientele who frequent all the different expensive downtown restaurants? Let’s examine that market segment.

According to one of the most respected Swiss private banks (banks that specialize in high net-worth individuals), 3 per 1000 of Lebanon’s population are millionaires. That would be 13,500 millionaires. Unlike the stereotypical Lebanese definition, professionals define a millionaire as someone whose net worth is $1 million excluding their primary home. So if you live in a $10 million mansion and have $10,000 in cash, you’re not a millionaire. This may seem strange to the typical Lebanese, but from an economic perspective, if you haven’t sold your mansion and bought a smaller one, and upgraded your lifestyle, your effect on the economy is negligible (and you won’t be seen at the typical downtown restaurant). Thus, a large chunk of these 13,500 are the same group who alternates between the different expensive restaurants. Generally, you’ll recognize them because they’re always running into each other and you’ll see them exchange kisses and “Weinak mich mbayyan?” even though they just ran into each other in the restaurant next door the week before.

You could also validate this estimate by analyzing deposits in banks. According to BDL data, less than 1% of depositors own more than 52% of deposits; and 8% of depositors own 85% of deposits.

Based on MoF data, 60% of Lebanese makes less than $1000 per month and 82% make less than $3,333. That makes the middle class around 13%. You will sometimes run into these guys at the fancy restaurants, trying to play “keeping up with the Joneses.” You can’t really tell the difference from just looking, which one is the 0.3% and which one is the 13%. Both groups will wear the Rolex, Chanel bag, and Hermès belt. Texans call the latter “Big Hat, No Cattle.” There’s a subtle hint, though — they will recognize and kiss each other less often, because they don’t frequent the places as much as the 0.3%.

If you hang out exclusively in this world, watching sunsets at Iris or enjoying a show at Music Hall, you’ll be forgiven for believing the country is doing fine, because your economic analysis is derived from that personal experience. “What are you talking about? There’s a recession? Yesterday I couldn’t get a reservation at Latest Rooftop a week in advance.” The truth is that there are two Lebanons, Marie-Antoinette’s “They have no bread, let them eat brioche” Lebanon and Nadine Labaki’s Capernaum Lebanon. They both exist, simultaneously, but in parallel universes, and rarely shall the two interact meaningfully. Maybe when you’re valet parking or get to know your waiter better or stuck at a traffic light, full of panhandlers … or watching the movie Capernaum, nominated for a prize at the Cannes Film Festival. That nomination generated ambivalent feelings among most Lebanese — pride in Nadine’s (or our) nomination, but shame in not wanting to display our dirty underwear to the rest of the world.

If you make $6,666 per month, that puts you in the top 1.4% in the country; however, after school tuition of $20,000 per year, mortgage payments, car payments, two electricity bills, and a water bill, this is not sufficient for you to go to a fancy restaurant with a $200 bill, more than once or twice a month. Thus even if your income is at the edge of the top 1%, you’d barely be able to eek out a middle class existence.

In the old days, the 0.3% were fairly immune to downturns, because their income was generated from stable sources, like the Gulf, monopolies, and existing, inherited safe wealth; safe, but for the stupidity of the next generation blowing it on conspicuous consumption or dumb investments they got talked into by a smooth operator, lower on the pyramid — the economic Piranha of Lebanese society.

Today, only a third of the 0.3% fall into the category of stable wealth. The rest made their money through the bubbles, get rich quick schemes, artificially high interest rates, and other temporary phenomena, that today are unwinding, with much of their wealth tied up in illiquid real estate and very ominous and regular debt payments.

Maybe that’s why my favorite restaurant, which survived seemingly darker days, could be closing now.

[This article was first published in An-Nahar on May 29, 2019]

It was a blotch that literally looked like someone had dipped a brush in red paint and splashed the empty canvas, then with orange, and finally some black — an explosion of random colors, aka modern art. I’m no expert, but the whole thing would take my five-year-old kid three minutes to replicate. Of course, my nouveau riche wife loved it. It cost $100,000, which grinds on me, but I convinced myself that it was OK, because it was part of a charity event. The practical side of my brain valued the painting at $100, or whatever the price of a frame goes for these days, but it was for a worthy cause, funding a scholarship in my alma mater … and my wife looked so hot in that tight skirt the night she made me buy it.

I always envisioned myself dying in an exciting, heroic fashion, on top of Mount Everest or in an intense firefight as a commando. Enemy forces would surround me and, and after killing dozens of them, they close in and shoot me in the leg. But I would limp away, still fighting. I was totally impervious to pain, mind you. Finally, one of them would approach me and look me in the eye, while this is being broadcast live on CNN, and I would courageously say, “Go ahead. Do it, Motherfu**er.”

And then it was lights out.

I’m not really sure why I envisioned dying this way. After all, I’ve never climbed a mountain or served in the military. Hell, I don’t even jog. I studied accounting in university. I wear thick glasses. I work for one of the Big Three, analyzing balance sheets, income statements, debits, and credits. And I actually enjoy it. Most people find this stuff boring, but to me numbers tell exciting stories. They leap from the pages and talk to me. I see Italian operas, epics, and sonnets in financial statements.

From when I was a kid, I was involved in exciting activities at school like the Chess Club, Artificial Intelligence Club, and, my personal favorite, the Forensic Accounting Club. When I grew up, people expected me to major in Computer Science or Mathematics, but I wanted excitement, so accounting was my calling.

It was pretty clear that I had a gift for that stuff and could look at a balance sheet and income statement and, instantaneously identify probable embezzlement, without ever visiting the company’s offices or meeting its executives. I received multiple offers from the best accounting firms and was snapped up immediately by the top firm in the country. You might even call me a geek, if you’re superficial.

So, you might not find it surprising that I married a stunningly beautiful girl. Susan was my high school sweetheart, and from the moment I met her, it was love at first sight … for me, as in those days, the relationship was one-way. Frankly, and I know this is hard to believe, but she could never even remember my name. Back then, she was really popular, and, before she saw the light, she was into the captain of the football team and other jocks, and never noticed me.

A few years later, those jocks were unemployed or clerks at the local supermarket. Meanwhile, I was making a six-figure salary in my early 20’s. I ran into her at our five-year high school reunion and this time I must have made a huge impression. We started dating, and one thing led to another, and I proposed in the most romantic setting you can imagine, the Accounting Museum. I explained to her the artifacts one by one, especially my favorite, double-entry book-keeping, I felt that the scene was set and she was ripe. I got down on one knee and presented her with a 5.27-carat diamond engagement ring, because I had met her on May 27, five years earlier. She accepted immediately and we were married 5.27 months later.

I was doing well at work, so I splurged on a brand new tricked out Kia, because I was the minimizing emissions type. Susan was a bit more ostentatious, so I bought her a brand new bright red fully loaded Porsche convertible. I was a perfectly responsible provider, maxing out our savings plan, optimizing the portfolio mix of stocks and bonds, using the efficient frontier to maximize return and minimize risk. Susan worked as a debutante and spent her days supervising the nannies taking care of our children, going to the gym, and at fancy brunches with other socialites. Once a year, our family would spend a 10-day vacation in our timeshare in Cyprus.

Things were perfect, until one day as I was driving back from work, I got this text message from a client, and I know I’m not supposed to text and drive, but he was saying something that would infuriate anybody. He thought that you could deduct the principal payment of your mortgage, even though paragraph 2 of page 1,243 of the tax code was pretty clear about that. So I had to answer this idiot right away, and right then, this cab stops in the middle of the road to pick up a passenger. Now the Kia is a great commuting vehicle, phenomenal for balancing human existence with the environment, that is, if you don’t have an accident where you run full speed into the back of a not-Kia.

The next thing you know I’m in a coma, with my soul hovering near the ceiling, looking at myself lying there, with my wife and her personal trainer by my bed. What a nice guy. My parents aren’t here and this guy is by my side in my time of need. I always felt that he put a lot of effort into training my wife and didn’t seem like he did it just for the money, although at a rate of $100 an hour, you might be forgiven for reaching a different conclusion. Coucou was an extremely competent personal trainer. He had a size 28 waist, with a wide V-shaped chest, and huge muscles trying to liberate themselves from his tight clothing. His thigh was as thick as my midsection. He trained every inch of his body. Even his toes had muscles. Coucou looked like the Incredible Hulk, after a two-minute conversation with Jack Mcgee, notwithstanding his nickname, which seemed more appropriate for a fashion designer.

Flying yourself around a room may seem easy, but it’s really like flying a remote control drone for the first time. So I was bouncing against the walls and hit my head against the ceiling a few times, but I soon got the hang of it. I reduced altitude, hovering above them to listen in on the macabre conversation. Susan and Coucou were discussing unplugging me from the life support machine. WTF! I’ve been in a coma for a few hours and they’re already giving up?!

I tried to haunt the room by making the curtains blow or by moving furniture around, but I just didn’t have the requisite mind-over-matter skills.

The attending physician walks in and they tell him to unplug me.

“Oh, don’t worry, Mrs. Choueiri, it’s not that kind of coma. In fact, you can take him home with you tonight. He’ll be in a vegetable state for the rest of his life, but by your side for quite a long time, probably 30 or 40 years.”

Susan and Coucou let out a gasp of horror.

Soon after, I was sitting in our living room, with her and Coucou cuddling on my damn couch, watching my 110 inch Ultra-HD TV, while I was in my wheelchair watching them. I tried to frown real hard, and maybe they sensed it, because that was when Coucou got up and kicked my wheel-chair. After it spun around six times, Coucou placed his tree-trunk sized leg on the side of my wheelchair, bringing it to an abrupt stop, with me now looking at the wall. I was dizzy for several seconds and couldn’t see well. As I regained my focus, I began to discern a red square shape, which I now recognized as that shitty painting we overpaid for. It wasn’t really very entertaining, so after an hour, I noticed a spider in the corner, constructing its cobweb. There was a fly caught in the web, buzzing frantically in a futile attempt to get away. The spider calmly made its way towards the fly. I started to wish I was the spider and Coucou was a fly. A giant fly, because of his giant, overgrown, useless muscles. Then the spider slowly consumed the fly. I breathed out a sigh of satisfaction.

That part of the living room became the limit of my existence during waking hours. Whenever Susan and Coucou were out, our domestic helper Isabella would gently turn me around. We would watch Mexican soap operas together all day long, in between her short breaks cleaning the house. After a while, I really wanted to know if Rosario would go back to Pablo, after he had slept with her sister Rosalina. Isabella would turn me around to face the wall as soon as she heard the roar of the 443 hp engine as their Porsche pulled into the driveway. I would then spend the rest of my time watching that spider. Every few days, it would catch a new prey, although in my mind, each of them was Coucou. Sometimes, in my imagination, the prey would be Susan.

Every night, Coucou would carry Susan in one arm and his beer in the other, belching all the way to our old bedroom. That’s when Isabella would turn me around and feed me fluids through a straw. I now weighed around 40kg, down from my original 80kg. She would then wheel me down to the converted basement closet and place me in my tiny bed, which I inherited from my kid, and I would fall asleep. Every morning, after Susan and Coucou left to do their socializing or gym, Isabella would carry me into the wheelchair and push me into the living room, facing the TV when they were gone, or facing the wall and spider, when they were there. God, how I loved Isabella and that spider. For years, I would vicariously get my revenge through the heroic feats of that beautiful spider.

One day, Susan noticed the cobweb, so she called Isabella to clean it. I started to scream “NOOOOOOO!” but nothing came out. Isabella used a long stick and rag and destroyed Charlotte and its web. I could feel a tear roll down my cheek, but since then I grew to appreciate modern art, and I now absolutely adore that painting.

Disclaimer: This is part of a fictional series conceived by a demented mind. Any similarities between actual people or events is purely coincidental. In fact, the names are spelled differently, just to make sure.

Imagine the Arabian deserts, centuries ago, before the first oil field was struck. People had to hike for hours in the scorching sun, foraging for food and water, with nothing to protect them from the elements, but a handmade piece of cloth covering their sunburnt head and face.

A camel was designed to survive in the desert by regurgitating and eating its food twice. A marvelous adaptation of nature, notwithstanding the cliché thrown out at business conferences in Europe or America: “A camel is a horse designed by committee.” A witty but superficial judgment derived from favoring esthetics over function. From a Darwinian perspective, just like the camel, those Arabs were unquestionably some of the toughest and bravest human beings, physically and mentally.

Desert Arabs had to be slim, fit, and able to brave the elements in the harshest environment on the planet, with a remarkable ability to withstand torturous conditions, and possessing an unmatched resilience, leading them to conquer a large chunk of the old world.

Then came the Twentieth Century. The discovery of oil provided sudden and extreme wealth, increasing standards of living to one of the highest in the world, to the extent that they were able to outsource most of the medial, and not so medial, jobs to foreigners.

It also allowed an existence the exact opposite of previous centuries and suspended reality. You could now have stuff that simply doesn’t belong in that ecosystem and cannot exist without a tremendous expenditure of resources.

Air-conditioned zoos, indoor ski range on man-made snow, with outside temperatures upwards of 45 degrees Celsius. Artificial islands, and canals with Italian gondolas rowing through them. But behind that apparent utopia lurks another story. An obesity epidemic as high as 70% among male citizens, very high unemployment or underemployment, a bloated public sector, unmet and excessive expectations, a majority of foreign labor, sometimes including mercenary police and military, with a massive potential social problem when the faucet runs dry.

If we go outside Arabia, most other countries with huge oil discoveries, like Nigeria or Venezuela, didn’t fare so well, either. The trouble is that countries set budgets assuming current market prices and production, and they become dependent, thus when oil revenue drops precipitously, catastrophe ensues. Like Colombia in 2015.

One notable exception is Norway, which foresaw this problem, avoided the momentary spending splurge of similar countries with large natural resources. It set up the Norwegian sovereign wealth fund, which, at $1 trillion, is the largest in the world, with $200,000 for every man, woman, and child, making every family virtually a millionaire, in a country with the same population as ours.

Some of the leadership in the Gulf has wisely recognized this problem, with several trying to diversify away from oil and gas. Probably the most successful is Dubai, despite some mishaps along the way. It now has an economy effectively independent of oil and one of the most attractive destination for expats. In fact, for any global company deciding on the selection of a location for its headquarters in the Middle East, Dubai is the number one choice.

30-40 years ago, when my dad’s generation worked in the Gulf, there wasn’t much to spend on, so they would save most of their income, sometimes up to 80%, which they sent back to their countries, like Lebanon. Today, my younger friends working in Dubai, get enticed by Cavalli Club or Nikki Beach or Zuma, and their discretionary income is eaten up before it ever gets into their savings account. A friend of mine making $250,000 a year, a handsome tax-free sum by any measure, saves nothing, quite typical of many expats there. This design now traps funds and they remain in Dubai, thereby helping their economy grow even bigger and better.

In Lebanon, where we had no natural resources to sell, this forced us to rely on education to “get us out of the hood.” We had one of the best high school and college education systems in the world, equipping us to find lucrative jobs, especially overseas. This was a major source of income for our country, pumping over $7 billion per year into the economy, around half of which is from the Gulf.

Many people are hanging high hopes on our offshore gas “discovery.” Assuming we find it, and that it doesn’t get robbed or wasted like everything else in the country, is this a good thing or will this cause us to go the way of other countries that got into a drunken stupor?

I remember the silly billboard ads 10 years ago promising all kinds of benefits for the people from oil and gas, but our track record hasn’t been great.

[This article was originally published in An-Nahar on March 24, 2019 and created a media frenzy such as this report attacking me]

Adventures in Forensic Accounting: Last Monday I received an excel spreadsheet from MJ, a bright young man, a couple of years out of college, whom I met last year at a controversial lecture at AUB (LINK HERE). The lecture was overflowing with people, which I initially attributed to my rugged good looks and charismatic charm, but, alas, it turns out that only my mother and I feel that way. The real reason it was that crowded was that AUB received several menacing phone calls from important types to try to cancel it, which they courageously politely declined. The unintended consequences was that it actually created more buzz for such a seemingly boring topic and the auditorium was so full that they had to use other rooms to which the lecture was transmitted through CCTV.

In his message, MJ said he noticed a huge change in deposits in the latest balance sheet published by BDL. I’m the first to admit that I’m not an accounting guru. The best non-accountant accountant I know is Michael Milken, who had the uncanny ability to detect fraud or problems in a company just by examining their financial statements, without ever meeting anyone from that company or even setting foot there. However, in my case, I look at accounting issues similarly to what Judge Potter Stuart said about pornography, “I can’t define it, but I know it when I see it.”

Most of the entries on this spreadsheet are flat, like gold at around $12 billion. The exceptions are the ‘Securities Portfolio’ entry (which I presume is the eurobonds or dollar denominated debt of the government). It’s been trending upwards over the last couple of years to reach $31 billion, which means the vast majority of our dollar debt is owned by the central bank, not investors or foreigners. On the bright side, this means that we get to control the pricing better and it reduces the likelihood that we get a nasty article about our bonds or Credit Default Swaps in The Economist or FT. However, it also means that nobody wants to lend us money anymore, except maybe a sliver by Qatar. This report also shows that the foreign currency reserves are down from $44 billion (that everyone still remembers from ubiquitous TV interviews) in the summer, to $38 billion now.

But the doozy is what MJ pointed out and when he said “huge” he wasn’t exaggerating. This balance sheet had shrunk by around $22 billion in two weeks, namely in the ‘Deposits by Banks’ and ‘Loans to Banks’ entries. To give you an idea of how huge, if every single Arab country decided to subscribe the same amount as Qatar generously committed to during the Arab summit, their aggregate total would be half this move. It is bigger than the entire annual budget of the Lebanese government and around 40% of our GDP. These entries on the BDL spreadsheet are offset by similar entries on all the large banks’ balance sheets. In my article Moral Hazard, I had done a back-of-the-envelope estimation of this aggregate to be $75-100 billion. Boy was I wrong! It turns out that it was $145 billion in mid February, which is over 80% of bank deposits in the country.

OK, you still don’t know what that means. Here’s an analogy. The balance sheet of the Federal Reserve (The Central bank of the US) is $4 trillion, which is 40% of the total bank deposits or the same as the US government’s annual budget or 25% of US GDP. This is even though they have the ability to print — create our of thin air — unlimited amounts of dollars. The balance sheet of our central bank in February was almost 3 times our GDP or almost 10 times the government budget.

People have asked me to theorize on this. The honest truth is that I don’t know, but I’ll take a stab at it. Since these entries are offset by similar ones by banks, this could have been done to improve their balance sheets prior to their quarterly reports coming out in a couple of weeks. This would be similar to someone asking me how much money I have. So I take out a $100 bill and show them and say I have a $100. Then they turn to my father and ask him the same question. So I surreptitiously slip him the $100 and then he pulls it out and says he has $100. Together, we now look like we have $200, even though we’re double counting the same $100.

Let me be clear. There doesn’t have to be a nefarious reason for this and there could be a very reasonable and innocent explanation, but it’s the size and nonchalance that’s troubling. When the United States authorized the bailout after the 2008 credit crisis, the size of the Troubled Asset Recovery Plan (TARP), the largest bailout in history, allocated 3% of US GDP spent over several years. So when we have a move that’s 40% of our GDP, shouldn’t there be some type of explanation? Maybe a question from parliament? The press? Maybe they’re too busy with something more important, like investigating spending $9,000 by the foreign ministry in the VIP Lounge at Heathrow Airport.

Had enough scary news? Well, let me give you some good news. They still publish the numbers, even though if they stopped, nobody would probably object or notice. The numbers are probably accurate or they would have been massaged better. I’m guessing part of the reason is a reliance on our short attention span in the twitter age, especially the Lebanese public, who doesn’t read much more than the title of an article. And when they read they don’t retain … and when they retain they don’t react … and when they react, they forget …

I know you can’t define it, but do you know it when you see it now?

Afterward: MJ is a self-made, extremely bright young man, who started out in bland schools, but ended up with a Master’s from our most prestigious university, AUB, but he’s unemployed, just like 37% of our youth. If the world were fair, he should have been snapped up by any of our banks or management consulting companies. I would love to identify him, but I’m afraid this will hurt him, as potential employers may not like young people who think outside the box … or who even think. They want someone who can attract “fresh” dollars to continue fueling the racket, hoping nobody will notice. One day, if he’s lucky, he’ll emigrate somewhere where they’ll appreciate his skillset and we’ll never see him again and he’ll end up one more statistic in our chronic brain drain.