Oct. 6, 2008
Don't just do something - stand there. That's probably still the best advice economists can offer policymakers as Israel navigates its way through the global credit crisis.
Some of the uncertainty Israelis are experiencing is attributable to the country's political vacuum. A deeply unpopular prime minister has resigned and no successor is yet in place. Nor is there a figure of stature who can reassure the country, FDR-like, that "there is nothing to fear but fear itself."
This past Sunday's cabinet meeting addressed the economic crisis perfunctorily. On his way to Moscow, the premier allowed that the source of the problem was external. In a globalized world, however, this "insight" is small comfort.
Meanwhile, economists can't agree whether government spending next year should be increased beyond the planned 1.7 percent. If it is, the times demand that the additional monies contribute to growth and not be squandered on political payoffs.
Some of the uncertainty is psychological. With the word "panic" dominating US and European media coverage of the banking and credit crisis, Israelis can't help feeling a sense of spillover queasiness.
We went into Rosh Hashana with tabloid headlines screaming about how much the country's richest personalities - Shari Arison, Lev Leviev, Nochi Danker, Yitzhak Tshuva and the Offer brothers - had lost on their global investments. Implication: Their pain would trickle down.
So it was predictable that shares would take a beating when trading resumed Sunday on the Tel Aviv Stock Market. Yesterday the market also closed down across the board.
Sunday's losses were the worst in close to a decade. In fact, since January 2008 real estate shares have lost 67% of their value. Market gains elsewhere achieved over the past two years were largely wiped out.
GRANTED, it is hard for local policymakers to address the effects of the worldwide crisis on Israel when no one can yet fathom its scope.
But if the current global crisis has taught us anything, it is that calling for complete governmental noninterference with business is just as dopey as advocating a centrally planned economy.
Crucially, those charged with making economic decisions for the country need to do a better job of agreeing among themselves and communicating a coherent message - not just to big business, finance and the stock market, but to average Israelis as well.
We need to be hearing more from the top professional echelon at the Finance Ministry, the Israel Securities Authority and the Bank of Israel, among others. The media must resist the temptation to sensationalize the situation even as they keep Israelis abreast of developments. Finance Ministry Director-General Yarom Ariav's reassuring interview Monday morning on Army Radio is an example of the responsible coverage needed.
Israelis everywhere are watching developments. Those who run small businesses worry that it will be harder to obtain bank loans; those about to buy new homes hope mortgages will remain within reach. From builders to hoteliers, sectors dependent on overseas customers are watching to see how the crisis in Europe and America will affect them.
Israeli employers pay into a tax-exempt keren hishtalmut account - a sort of rainy day fund maintained for their employees. This money is invested until tapped cyclically. With the market down, so too is the value of these keren hishtalmut accounts, as consumer spending will probably soon reflect.
Many Israelis also belong to a pension scheme - kupat gemel - to which both they and their employers contribute. These funds, too, are invested in the market. Nine percent of pension savings have reportedly been lost since the beginning of the year.
Just about every Israeli has a bank account. But unlike in the US where the FDIC insures deposits - Israelis have no such insurance. Fortunately, Bank of Israel Governor Stanley Fischer assures us that the country's banks are stable - that no one expects a run on the banks.
Nevertheless, developing a plan to protect the deposits of average Israelis should figure high on the agenda of the next government.
Israelis need reassuring that those charged with regulating the country's business, finance, markets and economy are effectively looking out for their interests, even as they encourage efficient growth and investment.
Sunday, October 12, 2008
Politico-Strategic Briefing... Enhance and deepen your understanding of Israel...Go beyond the 24/7 news cycle... Elliot Jager is a Jerusalem-based journalist, former NYU political science lecturer and a senior editor at The Jerusalem Report. He is a former editorial page editor at The Jerusalem Post and was founding managing editor of Jewish Ideas Daily (Mosaic). His 2017 book, The Balfour Declaration Sixty-Seven Words – 100 Years of Conflict told the story of what is, arguably, the most important political letter of the 20th century and why it still matters. Elliot will customize his briefings to suit your interests and schedule. He can meet you over breakfast before you start your day of touring or when you are back at your hotel.
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