Denial shall not rescue the corrupt and incompetent of the political class.

The economic crisis in Lebanon is careening out of control, casting a pall of despair over its citizens as they confront the evaporation of their savings and the devaluation of their incomes. Central to this maelstrom is the volatile exchange rate between the U.S. dollar and the Lebanese pound, which has become a lightning rod for blame. The forthcoming 2024 budget signals yet more turbulence, despite attempts to detoxify the currency market from the stain of political malfeasance. But this tumult in the foreign exchange is merely a manifestation of a deeper malady: the systemic corruption that has consistently derailed reform, despite the efforts of international allies like the IMF and the World Bank.

The core malaise of Lebanon lies in a political system steeped in graft, perpetuating nationwide suffering. This endemic corruption has corroded trust in Lebanon’s financial institutions, leading to a widespread rejection of the national currency for daily transactions. The absence of a solid monetary framework threatens to unravel the economy’s complex web. A healthy economy depends on the circulation of money, serving not only as a medium of exchange and a store of value but also fulfilling several other vital roles. Lebanon’s once-admirable multi-currency system is now cursed by political venality. The financial upheaval that began in late 2019, marked by public dissent and dubious banking practices, and culminated in a chaotic default in early 2020, has decimated the financial safety net, with banks imposing severe restrictions on dollar transactions.

In response, Lebanon’s leaders have resorted to printing money to finance government spending, a desperate move that has led to a precipitous drop in the Lebanese pound’s purchasing power. This debt monetization, favored by corrupt officials, has only deepened the economic crisis.

The interplay between corruption and debt monetization lies at the heart of Lebanon’s dysfunctional system. Governments that can issue their currency have, in theory, no monetary limits, constrained only by legal and institutional frameworks. Yet when corrupt hands control the money supply, the temptation to debase the currency is overwhelming.

The danger of unrestrained monetary expansion is clear: it can trigger inflation, even hyperinflation, leading to the currency’s collapse. Lebanon, where the national currency has been all but abandoned, exemplifies this peril. With limited economic resources, unchecked government spending can dominate the economy, a phenomenon known as ‘crowding out,’ which drives up the cost of resources and poses formidable challenges.

Traditionally, independent central banks control money issuance to separate it from political influence and ensure economic stability. Central banks aim to maintain price stability and should not serve as piggy banks for government spending. Yet, in Lebanon, the Central Bank’s independence has been compromised, succumbing to political pressure and contributing to the currency’s devaluation.

A government that issues debt beyond its means to repay through taxation is considered a risky investment, leading to higher interest rates. Lebanon’s excessive government debt, combined with banks’ overexposure to this debt, has made the country vulnerable, exacerbating economic instability and eroding financial trust. The mishandling of both corruption and debt monetization compounds the nation’s fiscal troubles.

As Lebanon ventures down the path of debt monetization, we must ask: what becomes of our money? Money, in essence, is anything universally accepted for goods and services and can settle obligations. It is defined by its functions, chiefly as a medium of exchange. This includes fiat money, which lacks intrinsic value but is backed by government decree, and bank money, represented by deposits and digital forms, which are accepted based on trust in financial institutions.

The essence of reliable money is its general acceptability and stability. The Lebanese currency crisis makes it evident that even dollars fail to assure stability. The value of money lies in its utility, a concept now clouded with uncertainty among Lebanese citizens and investors. A sound monetary system requires a stable and accepted medium of exchange, yet the real issue is the nature of money itself. The journey to economic recovery is entwined with restoring our money’s true worth. Without trust, the very concept of money disintegrates.

The root of Lebanon’s challenges is the governmental failure to act. The financial crisis could have been mitigated, and the economic slump softened, had the government enacted timely reforms and communicated effectively with stakeholders.

In the complex interplay of corruption and financial mismanagement, Lebanon’s economic descent has revealed a grim truth: the essence of money—its stability, acceptability, and value—has been systematically undermined. The fate of our money, so vital to societal function, now hangs in the balance, caught in a web of distrust and instability.

Money’s true nature transcends its physical form; it is founded on a collective belief in its ability to serve as a credible medium of exchange, unit of account, and store of value. Yet, in Lebanon’s current state, this foundational trust has crumbled, fostering widespread uncertainty. In the wake of debt monetization, the corrupt pathways have cast Lebanon into a void where currency and money blur indistinguishably. Reclaiming the essence of money, both fiat and bank, requires a profound restoration of trust, necessitating fiscal prudence, governance reforms, and clear communication.

Lebanon’s predicament is a stark reminder of how the specter of corruption obstructs economic renewal. To recover the true value of our currency, a renaissance of trust and ethical governance is imperative. The path to redemption demands more than policy shifts; it calls for a radical overhaul of moral standards. Without sincere reform and a commitment to rebuild trust, Lebanon’s economy will continue to languish in uncertainty. The future of our money is bound to our determination to tackle corruption and forge a future where stability, integrity, and trust form the bedrock of a revitalized financial system, one where the true nature of money is both respected and protected.