“Global cash” preserves wealth and savings

Lebanon plunges into a complex crisis; A shattered economy, financial suffocation, and a bleak monetary situation, coinciding with political chaos and social unrest. As a result of this situation, the wealth saved in the assets lost a significant percentage of their value, so a segment of the people acquired the obsession with preserving the remainder of their wealth by converting it into paper money in foreign currency (dollars). Wealth, regardless of its size or shape, is threatened with melting and evaporation, and there is no longer any room for preservation except by converting it into cash, which is called “global wealth.” For decades, Lebanon had extreme fiscal and monetary policies. The most prominent feature of the Lebanese economic model was the elevation of monetary and fiscal policies over the real economy with all its engines. This result came after the decision to stabilize the exchange rate of the lira against the dollar since the end of the civil war, and the matter continued until the collapse at the beginning of this year. The matter reflected a loss of income, savings, and wealth. The average wage in Lebanon has lost more than half of its value, while savings in banks are now restricted by illegal withdrawal and transfer controls, and it is no longer possible to reach them except by withdrawing them within a limited ceiling at an exchange rate of 3900 pounds for every dollar, which is less than the price in the local market About 4,600 liras (the price at the end of last week was 8,500 pounds per dollar). There is a group of savers, whether they are depositors with small deposits or those with large deposits, who withdrew their savings early or part of them, and converted them into paper dollars that can be stored in homes with the aim of preserving their value or using them at their actual market value.
Is transferring wealth from bank savings or from fixed assets to dollar cash a good way to preserve wealth? In theory, there are a number of functions for cash, including its use as a means of payment, or as a means of determining the fair value of the exchange of goods and services, but the most important function is that of preserving wealth. According to the Italian economist Augusto Graziani, there has been a shift in the financial definition of economists after the basic definition focused on cash as a purchasing power. The definition became associated with storing wealth. “If money is used as a purchasing power only, then this means that it must be associated with an indirect interest resulting from the goods that it buys. But if we want money to yield a direct benefit of its own, then it must be a tool for storing wealth.” This is what actually happened in the capitalist economy. In a paper entitled “The Role of Money in Capitalism”, researchers Geoffrey Lau and John Smithin point out that “the accumulation of money under capitalism as a method of obtaining power and influence intersects with the accumulation of land to obtain power and (prestige) under the feudal system.” Thus it appears that the basic function of money in a capitalist economy has transformed from a means of facilitating, exchanging and evaluating goods and services, to a means of preserving wealth. Here is the most important question: Is cash a good way to preserve wealth?

Is transferring wealth from bank savings or from fixed assets to dollar cash a good way to preserve wealth?

Cash is called “cosmic wealth” and the most important issue associated with it is that wealth is preserved with it. Under the capitalist system, everything has been commodified, and therefore it is no longer necessary to keep goods, but rather in value, and money is an indication of an increase or decrease in value. Under this capitalist system, there is no substitute for cash. In this sense, the dollar is today the keeper of global wealth, or a medium for preserving global savings. And because the dollar is issued by the United States of America and has the ability to move it, depreciating or raising the value of the dollar will lead to a similar result in the assets saved through it. Of course, there are many factors that determine the exchange rate of cash, such as the interest rate. Let’s take an example of the value of wealth saved through the dollar: At the end of the second millennium, the US Federal Reserve Governor Ben Bernanke decided to lower the interest rate, which prompted investors to flee from US Treasury bonds towards the commodity market. At that time, all commodity prices rose, including oil, wheat and rice … and as a result of this rise, the costs of producing these commodities nearly tripled. With one decision, all commodities priced in dollars became a portfolio of wealth, additional profits, and huge production costs. Therefore, the motivation for holding cash is important in this context. Paradoxically, keeping money as a means of purchasing goods or services is different from being a way to preserve wealth and benefit from storing it. Cash can be stored in banks in exchange for a certain interest rate, but the profits that may result from this are restricted by a set of goals determined by monetary policies and their interaction with financial and economic policies.
What happened in Lebanon, that is, the rush to convert assets into cash in dollars and store them in homes to save savings and wealth, depends on the level of risk in the market. In Lebanon, the risk of holding wealth in the bank is high. The stakes are lower if it is a paper currency that can be stored at home. Depositing money in the bank transfers part of the risk to the bank. As for resorting to depositing money in homes, it may involve various risks, the most prominent of which is the loss of the rentier profit that money generates in the bank, and the high risk of theft and other things, but it remains a better way to preserve wealth under the imposed restrictions. In banks, on withdrawals and transfers. These restrictions mean that wealth that has lost its freedom of movement is losing its value that is actually circulating in the market.

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