Dollars anyone - part II

The Lebanese economy consistently defies gravity.

What do I mean by that, well, imports exceed exports every month, but the economy grows and the amount of money in the place increases. How can that be? There is a huge Lebanese Diaspora which supports the home country’s economy as the exiles keep sending cash back home. Lebanon has the distinction of being world number one for remittances (the technical term for spare cash sent home) compared to total GDP (that's roughly total income)

The Lebanese dream seems to be to send enough money home to be able to build an apartment block, reside in the penthouse and live on the rents from the flats below. Judging by the number of finished apartment blocks sprouting all over the place, the dream often comes true. Sadly, judging by the number of unfinished ones, sometimes it doesn’t. But I digress.

Now, as explained in the last item most currencies are losing value against the dollar. So the dollar value of the total input into Lebanon from remittances is going to go down, for the simple reason that although some comes from North America, a lot finds its way from Brazil, from Europe and from Africa.

Lebanon is itself a dollar zone, in the sense that the Lebanese Lira is pegged to the dollar. I can understand why Arab countries with oil do that, as oil is traded in dollars, but apart from the Olive variety, Lebanon has not been blessed with much in the way of oil. So on world markets, Lebanese products are set to look more expensive which will push down the revenue to Lebanon from that source too. And if you’re an economist, please send learned papers on elasticity elsewhere, personally I do the simple thing of finding cheaper alternatives for stuff when its price goes up, or just buy less of it.

Whatever way you view it then, the effect of the PIGS and BRICS problems, which as shown yesterday are tending to push a dollar resurgence, is going to be negative as far as the Lebanese economy is concerned.

What’s going to happen? Well, if I could confidently predict that sort of thing I’d be a lot richer, but my guess is that the traditions and skills developed by five thousand years of entrepreneurship and trading will inspire ways to continue to escape Newton’s universal pull to earth.