We have all heard specialists like Dan Azzi mention Ponzi’s word when describing the banking sector; what is a Ponzi scheme about? You might rightfully ask.
The Lira rate of Lebanon is a hot international news topic for sure. Every major news outlet on the planet is talking about our currency weekly. Quite astonishing the amount of coverage that a 10,452 km2 country is getting.
Our politicians have done a great job reaching an unprecedented level of corruption and ignorance seen nowhere else.
It is no wonder our economy has collapsed, and our currency has fallen to reach 9,000 LBP for 1 USD.
From GCC news outlets to the far west, our banking system is described and called a “Ponzi Scheme” many of you wonder what a Ponzi Scheme is?
In this post, we will describe what and who is Ponzi, along with an overview of articles written by the most famous media channels on the planet: BBC, New York Times, CNN, Fox News, France 2, TV5, TF1, Reuters, Al Arabiya, Al Jazeera.
Buckle your seatbelts as we will take you on a ride of scandal and amazement.
Who Is Charles Ponzi & What Is A “Ponzi”?
Charles Ponzi is an Italien born USD citizen born on March 3, 1882. Up to his death in 1949, he was notoriously known as a conman and a swindler in the US & Canada.
In the early 1920s, Charles became famous in the USA and Canada for his money-generating schemes; he did so by luring many individuals to invest for a 50% profit within 45 days or 100% ROI within 90 days. He was actually selling a dream.
What Ponzi was actually doing is to pay later investors with the funds of earlier investors. In reality, no income or investment was taking place; the money coming in was paying out other investors, and the cycle goes on and on.
This is a Ponzi Scheme; yes, it existed way before Charles Ponzi. Still, he was so successful applying it that his name became the definition of the scheme itself.
His scheme ran for about a year before it went down, costing his “clients” $20 million worth today a staggering $2.6 billion.
Like all con artists, Ponzi used the money for his own personal needs; he owned a mansion in Lexington, Massachusetts, and had several bank accounts. He held the most expensive car at the time, a Locomobile, always traveling first-class and many other luxurious amenities.
Moreover, Charles Ponzi bought many businesses to repay his investors from the profit generated by these businesses.
Always, such behavior draws attention, especially of financial experts and Law enforcement authorities.
The first attempt to discredit Ponzi failed, and Ponzi won $500,000 in damages because the burden of proof was placed on the financial experts or any other accuser.
Things get even better for Charles as he places an ad and favorable post in The Boston Post, stating his 50% ROI in 45 days, just under a bank advertisement of a 5% annual return.
The next day, thousands flocked his office, almost begging to invest in his scheme.
Fortunately, such schemes do not last long, especially when they become under the media and experts’ spotlight and scrutiny.
The Post newspaper started a series of investigative articles tackling Charles Ponzi and his money-making scheme.
The series caused a crowd to run on Charles’s Securities company, which in return distributed pastries and coffee as a sign of confidence and paid out $2 million in 3 days to cool down the crowd all while reassuring his “investors” that there is nothing to worry about!
The fiasco attracted the United States Attorney’s attention, Daniel Gallagher.
He commissioned Edwin Pride to audit the Company’s accounting books, which wasn’t an easy task.
Cornered, Charles Ponzi hired publicists to clear his public image and re-gain his investor’s trust and acquire new investors.
Soon enough, those publicists stopped working for him as they became suspicious themselves of his shady practices.
With more and more legal and banking authorities closing in on him, all came crashing down on August 11 after a front-page story on the Post detailing his criminal activities in Montreal a decade earlier.
On November 1, 1920, Ponzi pleaded guilty to 86 charges of mail fraud and was sentenced to 5 years in Federal Prison, which is considered a harsh punishment due to these prisons’ conditions back in the day.
Now, you might ask yourself, what does all this has to do with the Lebanese Banking system and Lira rate crash?
Our banking and the fiscal system were run based on a Ponzi scheme. The international media has identified it. Just like the Post, and even went further to describe it as the biggest Ponzi scheme of all time.
BBC Article On The Lebanese Pyramid Scheme:
On August 5, 2020, a day after the devastating Beirut post-explosion, the BBC published an article describing Lebanon’s overall situation.
In its brief but excellent description of why Lebanon’s economy collapsed, the BBC states that Lebanon was headed to a crash even before the coronavirus and the revolution.
It goes on by explaining that our public debt-to-gross domestic product ( our debts versus what we generate) is the third-highest in the world, a 25% unemployment rate, and a third of our population living under the poverty line.
The article continues by stating that as of Late 2019, financial analysts and specialists described our economic and banking system as a state-sponsored pyramid or Ponzi scheme run by the Lebanese Central Bank itself.
Also, the post explains that the ruling elite is heavily involved in the Central Bank’s activity.
Do you see the similarity of what happened to the Securities Exchange Company of Charles Ponzi?
NY Times The Great Lebanese Ponzi Scheme:
On December 2, 2019, The New York Times published an article titled: “The Great Lebanese Ponzi Scheme.”
The article explains the sheer humiliation that every Lebanese citizen suffered when the banks started a “shaded” capital control on fresh Dollar withdrawals.
The article writer herself describes how the bank staff treated her and most of the USD account holders in Lebanon.
She continues to detail the bank’s branch managers’ attitude, disregarding the customers that reflect on the banking system as a whole.
Accordingly, they attracted clients by paying very high interest rates to high amounts depositors. The Lebanese banks lent out the money to the state.
In conclusion, the NY Times articles describe the Lebanese economy as a giant Ponzi scheme.
Reuters Article On The Lebanese Central Bank Governor:
On November 15, 2020, Tom Arnold from Reuters published an article giving a full overview of the Lebanese banking sector.
Arnold describes how the Lebanese and international community hailed the governor Riad Salameh as a banking god.
Moreover, Reuters articles go further into explaining the negative effect of the so-called “Financial Engineering” and goes on to quote the former Vice Governor and minister of the economy Nasser Saidi the following:
“Nasser Saidi, a former central bank vice governor in the early part of Salameh’s tenure, has described financial engineering as a “Ponzi scheme” as it relies on fresh borrowing to pay back the existing debt.
The charge has been echoed by Nassim Nicholas Taleb, a Lebanese-American and professor of risk engineering at New York University.”
Al Arabiya Articles On The Lira Currency Mirage:
On Friday, October 30, 2020, Al Arabiya reporter Makram Rabah published an article on the Lira titled: “Lebanon’s currency recovery since Hariri’s return is a mirage.”
The post analyzes why the Lira rate gained value since the new Lebanese Government prime minister Saad Al Hariri’s nomination.
The conclusion is that the gain in value is only a mirage—an illusion of recovery. For the currency to recover seriously, many political, financial, and fiscal measures have to occur. Saad Al Hariri’s presence is nowhere near enough to see a serious and palpable currency recovery.
Al Jazeera Articles On The Lebanese Banking System:
On May 23, 2020, Habib Battah published an article on Aljazeera titled: “Who is to blame for Lebanon’s crisis? “.
According to Habib Battah, half of Lebanon’s population is projected to go below the poverty line by the end of this year. Also, 75 percent of the population will need government intervention or NGO assistance of some sort to be able to go on.
Battah quotes the Economist list of weakest economies worldwide, where Lebanon is one of the lowest only before Venezuela!
He continues by stating that the Wall Street insider linked the 2008 crash to a massive Ponzi scheme. Still, there was no power shortage, currency collapse, or run on the USA banks. The point is, our system is much more significant a Ponzi than that of the USA.
Dan Azzi’s Views & Thoughts On Our Corrupt System:
Dan Azzi is a well-renowned and vocal Lebanese banker; he was the first to call the Ponzi system. Moreover, he also invented the word “Lollar, ” a combination of the two words: Locked and Dollar.
The word describes the situation of every one of us who holds bank accounts in USD and who are unable to withdraw, wire transfer, or use these Dollars. The USD in these accounts became locked, thus the term.
You can hardly run by an interview, article, or social media post by Dan Azzi without mentioning the scheme, Lollar, and recently the “Bira,” combining two words: Bank and Lira.
Below is a video worth a million words from Dan Azzi:
A Clearer Picture!
After this overview article, we hope you have a clear picture of what is a Ponzi scheme about and how it relates to our disastrous economic and fiscal situation.
“Lira rate Lebanon,” a keyword searched for 800 times on Bing per day and 5000 times per day on Google, the Lira topic is our daily bread and butter.
A malicious, devilish scheme brought us to where we are today, covered by politicians, orchestrated by our Central Bank, and covered even by the international community for such a long time that one asks himself: Is this all pre-planned to happen? Or are we governed by idiots in ties?
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