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Comment by csomar | Hacker News Reader

> Someone must be left holding the bag, there must be some FX liquidity that they tap into?

You must have missed that 1. Lebanon is very corrupt and 2. there is an official exchange rate. Someone is making a killing selling on the black market and buying with the official rate.

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Yes, this is the interesting part of the story. I was just wondering how it works exactly. Is there a black market lebanese pound / USD? There is no mention of this in the article. Or do they use some kind of offical lebanese pound / USD exchange? If so how does that work, can you just show up at some office somewhere with local currency and get USD?

Yes, there is.

Its about 18,000 to 1 USD, at the moment.

It was 1,500 back in Sept 2019, and as the article states, it was at this rate since the 70s.

Source: https://lirarate.org/

Lebanese reserves of USD and other hard currencies are rapidly dwindling and going LBP -> USD at the official rate is now only permitted for "essential imports." Essentially the central bank will allow you to convert your LBP for USD at the preferred rate only if you are using those dollars to import things like medicines. Of course since Lebanon is incredibly corrupt there are probably people who are "importers" who overstate their imports so they can get more dollars and arbitrage the difference between the rates. Ordinary people can only convert only small amounts of LBP at local banks at a worse-than-official rate so they go to the "black market" which is basically just a bunch of street vendors and guys organizing on WhatsApp (https://www.aljazeera.com/economy/2020/5/29/like-a-drug-deal...).

You are confused (though your username is mathgenius haha). The guy in the article is exactly doing that. He is the black market for Lebanese pound / USD (in this case USDT).

Obviously, he'll need to run a full circle (back from Lebanese pound to USD) to refuel his reserves. In some countries where I have seen this, this is usually done through companies which have some license to buy USD at the government exchange rate to import stuff. Stuff is imported from offshore companies run by these same guys who will sell this product at some crazy markup (usually 100%) and then this profit is dumped through guys like in the article. Rinse and repeat.

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