Bank of International Settlements issues a dire warning “World faces financial meltdown” $80 trillion missing

Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • ‘It’ll wipe out every dollar in the world’ – new crash fears as $80 trillion ‘goes missing’
  • The world faces a staggering financial meltdown with potential losses exceeding the total number of US dollars in circulation.
  • This warning…Comes from the Bank of International Settlements (BIS). This is a body of central bankers based in Basle, Switzerland.
  • Its researchers can predict financial crises three years in advance using machine learning to aggregate predictions from different models.
  • Now they are warning of a crash the scale of which we have never seen before, with a staggering $80trillion (£65trillion) at stake.
  • Reuters reports that pension funds and other “non-bank” financial firms have more than $80trillion of hidden, off-balance sheet dollar debt in FX swaps.
  • [In short] A Dutch pension fund or Japanese insurer could use borrow dollars then lend them as euros or Japanese yen, before later repaying them.
  • Terrifyingly, the $80trillion-plus “hidden” debt estimate is greater than the total stocks of US dollar Treasury bills, repo and commercial paper in circulation combined, BIS said.
  • It has grown from $55trillion to $80trillion in a decade, with daily FX swap deals totaling a massive $5 trillion a day.
  • The world would be helpless in the face of a meltdown on this scale, yet nobody has any control over the market.

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Lebanon in free fall, must not become ‘horror story,’ U.S. senator warns

By Maha El Dahan

BEIRUT (Reuters) – Lebanon is in free fall and must not become a “horror story,” a U.S. senator said during a visit to Beirut on Wednesday, voicing hope that a government would be formed this week to start addressing its destabilizing financial meltdown.

The comment reflected growing concern about the situation in Lebanon, where a financial collapse that began in 2019 hit a crunch point last month with a crippling fuel shortage that sparked security incidents and warnings of worse to come.

Another senator in the U.S. congressional delegation said Iranian fuel being shipped to Lebanon by the heavily armed Shi’ite group Hezbollah would come with strings attached, dismissing it as an attempted “photo-op by the Iranians.”

The financial crisis marks the biggest threat to Lebanon’s stability since the 1975-90 civil war.

More than half of Lebanon’s 6 million people have fallen into poverty. The World Bank says it is one of the sharpest depressions of modern times, with the currency plunging more than 90% and the financial system paralyzed.

“Lebanon is in free fall…We’ve seen this movie before and it’s a horror story…, but the good news is it can, should, and hopefully will be avoided,” Senator Richard Blumenthal told reporters at the end of a two-day visit.

Lebanese politicians, who have failed to do anything to arrest the collapse, have been squabbling for more than a year over the make-up of a new cabinet to replace the one that quit in the aftermath of the Aug. 4, 2020 Beirut port explosion.

A new cabinet capable of implementing reforms is a necessary precursor to foreign aid. The United States is the biggest foreign aid donor to Lebanon.

The congressional delegation met Lebanese leaders including President Michel Aoun, the Maronite Christian head of state, who expressed hope the government would be formed this week, the presidency said in a statement.

Aoun, a Hezbollah ally, has on several occasions expressed optimism about the government being agreed soon.

“We did hear good news today,” Senator Chris Murphy, chairman of the Senate Foreign Relations Committee panel dealing with the Middle East, told reporters, adding he expected a government would be formed by the time he returned home.

Aoun’s adversaries accuse him and his faction, the Free Patriotic Movement, of obstructing the government formation by demanding a third of the seats, or effective veto power.

Aoun denies this. Aoun told the senators “many obstacles had been overcome,” the presidency said.

‘STRINGS ATTACHED’

With the state floundering, Hezbollah, long part of the ruling system, last month announced it was importing fuel oil from Iran, saying it aims to ease the crisis. Its adversaries have said this further undermined the authority of the state and exposed Lebanon to the risk of U.S. sanctions.

Washington designates Hezbollah as a terrorist group.

Lebanon’s caretaker energy minister said on Wednesday that an import permit had not been requested for the fuel shipment.

The United States has been in talks with Egypt and Jordan over a plan to ease Lebanon’s power crisis. The Lebanese presidency has said it involves using Egyptian gas to generate power in Jordan that would be transmitted via Syria, which is under U.S. sanctions including the so-called Caesar act.

“The complication as you know is the transport via Syria,” said Senator Chris Van Hollen. “We are (urgently) looking for ways to address that despite the Caesar act.”

(Writing by Tom Perry; Editing by Mark Heinrich)

Lebanese parliament to discuss fuel crisis on Friday

BEIRUT (Reuters) -The Lebanese parliament will convene on Friday to discuss what to do about a fuel crisis that has brought much of the country to a halt and sparked deadly violence.

Speaker Nabih Berri called the session to discuss “appropriate action” over crippling fuel shortages, a crunch point in a two-year financial meltdown that marks Lebanon’s worst crisis since the 1975-90 civil war.

A rocket-propelled grenade was fired near a Beirut petrol station during a dispute over gasoline, a security source said. Gunmen opened fire on soldiers who had detained a man who tried to fill his car by force. The station caught fire.

The steadily worsening fuel crisis has hit a low in the last week, with power blackouts forcing some hospitals, bakeries, and businesses to scale down or close.

A senior U.N. official said water supplies and essential health services were threatened, warning of a humanitarian catastrophe. “A bad situation only stands to get worse unless an instant solution is found,” said Najat Rochdi, the U.N. humanitarian coordinator for Lebanon.

Last week, the central bank announced it could no longer finance imports of gasoline and diesel at heavily discounted exchange rates, effectively ending a subsidy scheme which promises to increase prices sharply.

Governor Riad Salameh has been at odds with the government over the move, as the government says it should have been done only after the provision of prepaid cash cards for the poor.

Salameh has said he can resume subsidizing imports only if a law is passed allowing him to dip into the mandatory reserves.

The crisis has sparked a renewed push by Lebanon’s squabbling politicians to agree on a cabinet that can start tackling the financial crisis, which has depressed the currency by more than 90%.

“We still have a few meters (yards) left in the race, but god willing we are sorting it out appropriately,” Prime Minister-designate Najib Mikati said after meeting with President Michel Aoun on Tuesday.

Despite deepening poverty, Lebanon’s ruling elite have failed to form a new cabinet since Prime Minister Hassan Diab quit after last year’s devastating Beirut port explosion.

The past week has seen repeated violence at gas stations. At least 28 people were killed in northern Lebanon at the weekend when a fuel tanker exploded as people rushed to get a share.

Asked about local media reports of two new diesel shipments carrying 80 million liters imported at the previous subsidized rate of 3,900 Lebanese pounds to the dollar, Salameh said they had been pre-approved in July.

The parallel market rate on Tuesday was 18,500 pounds to the dollar.

Local broadcasters MTV and al-Jadeed had reported on Tuesday that a third shipment of gasoline had been rejected by the central bank. Salameh said it would have to abide by a new circular.

“The new circular will determine the price of sayrafa as a base for the dollar [letter of credit],” he said.

Sayrafa is the central bank’s currency exchange platform.

Sayyed Hassan Nasrallah, head of the Iran-backed Hezbollah group, said on Sunday it would begin bringing diesel and gasoline from Iran with delivery dates to be announced soon.

(Reporting by Nafisa Eltahir, Laila Bassam, and Tom Perry; Editing by Tom Perry and Mark Heinrich)

Life grinds to a halt in Lebanon’s blackouts

By Nafisa Eltahir and Issam Abdallah

BEIRUT (Reuters) – Lebanon’s worsening fuel crisis has reached a painful crunch point, with bakeries, businesses and hospitals either scaling back operations or shutting down completely, making life even harder for Lebanese already enduring a financial meltdown.

As the fuel oil that powers Lebanon has disappeared from the market, Lebanese have sweltered at home in the summer heat without light or AC, routinely tossing out the contents of fridges while having to set aside hours to fill up the car – if increasingly scarce gasoline can be found.

Many say living conditions are worse than during the 1975-90 civil war.

It marks a new low in the financial crisis that erupted in late 2019, the result of decades of corruption and mismanagement by a ruling elite that has failed to find solutions as more than half the population has sunk into poverty.

In the latest policy failure, the government is sparring with the central bank over its decision to end fuel subsidies, a step that would spell sharply higher prices.

While the stand-off continues, importers told Reuters the country faced a huge shortage of fuel.

“During the civil war, even with how horrible it was, there weren’t any power cuts,” said Hassan Khalife, 50, who owns a small barbecue joint near parliament in Beirut.

“The state, which is supposed to take care of its people, is doing the opposite, it’s trying to humiliate us as much as it can,” he said.

Khalife has downgraded from three refrigerators to one, which he powers via a line from a neighbor’s generator that whirrs loudly across the street. “We’ve become used to the sound, it’s like hearing birds or something,” he said.

On Wednesday, Lebanon’s electricity minister told reporters that the country needs 3,000 megawatts of power but only has enough fuel to produce 750. People say they get one or two hours of electricity from the grid per day, if any.

BLACK MARKET

The shortage of fuel, known as mazout, means people can’t run their own generators to fill the gap.

“In the last three days I can’t find mazout at all, neither black market nor white,” says Metri Flouti, who manages generators for buildings in the upscale Ashrafieh neighborhood, and is forced by the heat at home to sleep in his air conditioned office.

Key businesses are having the same problem.

Ali Ibrahim, head of the bakeries union, said some bakeries had been forced to pause this week. “This is people’s food, you can’t play around with it,” he said.

“Hospitals are going day by day, very few have enough for 2 or 3 days,” said Suleiman Haroun, head of the private hospitals union, adding that medical supplies were low and staff lacked petrol to get to work.

Souad Akl, general manager of Alfa Laboratories which produces saline solution and other medical essentials, told Reuters her factory shut down for the first time in almost 50 years this week.

In a city known for its nightlife, Beirut’s downtown and corniche are plunged into darkness, but still draw some escaping the heat at home. “I feel my home is dark, and it gives you depression,” said homemaker Manar Yassine.

She has emptied her fridge and waits to do laundry in the precious hour of electricity from the grid, trying to cut back on generator costs.

Her husband’s once comfortable salary now only covers their generator subscription, internet, and satellite TV. “I look at my kids, and their futures,” she said. “If someone gave us the means to emigrate, of course we would.”

(Additional reporting by Imad Creidi, Writing by Nafisa Eltahir, editing by Tom Perry and Giles Elgood)

‘God help the country’: Hariri abandons bid to form Lebanese government

By Maha El Dahan and Laila Bassam

BEIRUT (Reuters) -Lebanese politician Saad al-Hariri abandoned his effort to form a new government on Thursday, dimming hopes of a cabinet being agreed any time soon to start rescuing the country from financial meltdown.

Hariri was designated in October to put together a government following the resignation of Prime Minister Hassan Diab’s cabinet in the wake of the catastrophic Beirut port explosion. Lebanon’s deeply divided politicians have failed to agree despite fears of social unrest over worsening living conditions.

“It is clear we will not be able to agree with his Excellency the President,” Hariri told reporters after meeting President Michel Aoun for barely 20 minutes.

“That is why I excuse myself from government formation and God help the country.”

Lebanon is suffering an economic depression the World Bank has described as one of the most severe in modern history. Its currency has lost more than 90% of its value in less than two years, leading to spiraling poverty and crippling shortages.

Hariri’s decision marks the culmination of months of conflict over cabinet posts between him and Aoun, the Maronite Christian head of state who is allied to the Iran-backed Shi’ite group Hezbollah.

There is no obvious alternative for the post, which must be filled by a Sunni Muslim in Lebanon’s sectarian system.

Barring significant changes in the political landscape, politicians and analysts say it now seems very difficult for a government to be formed before parliamentary elections next year, leaving Diab in a caretaker capacity.

Western governments have been piling pressure on Lebanese politicians to form a government that can set about reforming the corrupt state, threatening sanctions and saying financial support will not flow before reforms begin.

Earlier this month, Diab warned that Lebanon was days away from a social explosion, underscoring concerns about social unrest in a country that was shattered by civil war from 1975 to 1990.

Hariri said Aoun had requested fundamental changes to a cabinet line-up he had presented to him on Wednesday. Aoun had told Hariri that they would not be able to agree, Hariri said.

There was no immediate comment from the presidency.

Hariri was designated to form the new government in October. Diab continues in a caretaker capacity.

Aoun will be required to consult MPs over who to designate as a new premier. But analysts doubt that any Sunni politician of standing would accept the role without Hariri’s blessing.

The most influential Sunni politician in Lebanon, Hariri is backed by Lebanon’s Sunni religious establishment and, while his support from Sunni led-Saudi Arabia waned in recent years, he is still backed by other Sunni Arab-led states, including Egypt.

Following the announcement, the Lebanese currency weakened further on the parallel market, where dollars changed hands at more than 20,000 pounds, compared to around 19,000 earlier this morning, a dealer said.

(Reporting By Beirut Bureau, writing by Maha El Dahan/Tom Perry; Editing by Toby Chopra and Philippa Fletcher)

World Bank threatens to cut Lebanon’s vaccine aid over line-jumping

By Ellen Francis and Laila Bassam

BEIRUT (Reuters) – The World Bank threatened on Tuesday to suspend its multi-million dollar financing for Lebanon’s COVID-19 vaccination drive over politicians jumping the line.

The controversy, which echoed favoritism by elites in other countries as the world rushes to inoculate against the coronavirus, added to frustration among Lebanese over delays and violations in the vaccination campaign.

Local media and politicians said that some lawmakers got shots in parliament on Tuesday – despite not necessarily being in priority groups.

“Upon confirmation of violation, World Bank may suspend financing for vaccines and support for COVID19 response across Lebanon!!” the World Bank’s regional director Saroj Kumar Jha tweeted, saying it would be a breach of the national plan.

“I appeal to all, I mean all, regardless of your position, to please register and wait for your turn.”

The World Bank’s reallocation of $34 million has enabled Lebanon to receive its first two batches of about 60,000 Pfizer-BioNTech doses this month. The bank had said it would monitor the vaccine rollout and warned against favoritism in Lebanon, where decades of waste and corruption brought a financial meltdown and protests.

‘SELFISH’

One lawmaker, who asked not to be named, told Reuters that some older current and former lawmakers, as well as administrative staff, were vaccinated in the parliament hall.

“What’s the big deal? … They’re registered,” he said, referring to an online platform for vaccines. He added that doses were also sent last week to the Baabda palace for President Michel Aoun and about 16 others.

Aoun’s office said it would issue a statement.

Deputy parliament speaker Elie Ferzli, who at 71 is not in the first phase priority group, tweeted that he got a shot.

The doctor who heads Lebanon’s COVID-19 vaccination committee, Abdul Rahman Bizri, said it was unaware vaccines would be sent to parliament. “What happened today is unacceptable,” he told reporters.

Around the nation, outrage spread.

“My grandfather is an 85-year-old decent man suffering from heart and cardiovascular problems. My grandfather is a priority and he still did not get the vaccine,” tweeted Jad al-Hamawi.

“What are you? Bunch of hypocrites. Selfish. Criminals.”

Jonathan Dagher added on Facebook: “As our loved ones gasp for oxygen in COVID-19 wards, MPs cut the line today to take the vaccine.”

The health ministry did not immediately comment.

A surge in infections since January has brought Lebanon’s death toll over 4,300.

(Reporting by Ellen Francis and Laila Bassam; Additional reporting by Maha El Dahan; Editing by Andrew Cawthorne)