If we adopt the perspective of liquidity, the losses may seem huge, because it is the liquidity that moves depositors, and it has come to mean “real dollars.” Losses occur when two conditions are met: the first, negative differences between the liquid values corresponding to the creditor’s debt bonds, and the second if the institutional framework that takes care of these expectations or promises is no longer considered, because any financial liability is nothing but a promise to pay, acceptable to both the creditor and the debtor.
It was the duty of the Governor of Banque du Liban to make a decision between reducing the differences between debts and their corresponding values, and strengthening the credibility of the institutional framework on which the comparisons take place in order to postpone their term, which may lead to an inflation of the size of receivables. This may conflict with seeking to enhance the growth of the corresponding values, which may also lead them to inflate the size of payables.
There is no doubt that the amount of foreign currency from available external assets, with the remainder of gold, in addition to the promised external financing will control the choice between the various possible monetary formulas. But what has become constant is that “dollarization” must be abandoned once and for all, because it leads to the loss of all monetary policy’s ability to influence the economy, and a trade-off will have to be made between sharply shrinking consumption and urgently needed investments.