So far so good (Hamodia, March 20)

Most readers will be very well aware that this Shabbos is rosh chodesh Nisan. Many, however, will be too focused on Pesach preparations to notice that this milestone marks the half-way point for 5775.

This is certainly not the place for an explanation as to why Jews have two calendars working simultaneously, so that “the first month” is actually in the second half of the year. It’s weird, but that’s how the system has been working for some 3,500 years, so learn to live with it…

In any event, it is entirely appropriate to highlight the fact that, in almost every respect, the first half of 5775 has been very favorable for the Israeli economy — and certainly far better than had been feared when the year started. In defence of the consensus negative view six months ago, which found full expression in this column last Elul, it is fair to say that this positive outcome has been caused by completely unexpected developments both at home and abroad.

When 5775 began, Israel had just completed a 50-day military campaign against Hamas which had left the country understandably shaken and somewhat depressed. True, the casualties from the fighting and, especially, from the thousands of missiles fired, had been far fewer than might have been the case — and thank G-d for that — and the damage to property has also been limited. But this was the longest sustained period of fighting in Israeli history and it had directly affect most of the country, including the whole of the Tel Aviv conurbation. Furthermore, it was not at all obvious then which side had emerged from the fighting with greater ‘achievements’, from its point of view.

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Out patient (Jerusalem Post, March 20)

In a sense, it’s all more of the same. In a world in which financial markets no longer function as a mechanism for price discovery, by enabling the free interplay of willing buyers and willing sellers of financial instruments, the prices displayed in these dysfunctional markets no longer represent ‘value’ in any traditional meaning of that term.

Instead, prices in the markets represent estimates of what the participants in the markets think the entities who control the markets intend to do. These entities are, in the first case, the central banks of the world’s largest economies, as well as the central bank of the specific country in which the market is located.

For instance, in Tel-Aviv, the markets react to global developments, but also to the decisions — or speculation as to the likely decisions — taken by the Israeli central bank. Sometimes, when there is a functioning government in Israel, the Israeli financial markets respond to decisions taken by the government. Other times, only governmental agencies run by appointed technocrats are at work and it is these which move the local markets.

What is true for Israel is, in principle, valid for all developed countries, where quasi-independent governmental agencies exist and function. In countries such as Russia, Turkey and Argentina, the local dictators or autocrats — all of whom are ‘elected’, of course — impose their wills on the central banks and other agencies.

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TLR Bulletin – Netanyahu’s agenda


BOTTOM LINE: Binyamin Netanyahu single-handedly swung the election in his favour over the final days of the campaign. By persuading ex-Likud voters in other right and centre-right parties to ‘return home’, he enabled Likud to garner 30 seats, thereby not merely winning a surprise victory, but — more importantly — allowing him to form a stable coalition of centre, centre-right, right and ultra-Orthodox parties. This coalition should last at least three years and could last longer. The question is what — if anything — does Netanyahu want to do in his fourth period in office?

Games of Throwns (Jerusalem Post, March 13)

Everybody used to love Lance Armstrong. After all, the man who recovered from cancer to win the Tour de France — the world’s premier cycling event — a mind-boggling seven successive times from 1999 to 2005, had met all the criteria for being a superhero, so it was only right and proper that he was regarded as one. Then, in 2012, it transpired – as many had suspected but even more had feared – that there were criteria for hero status that Armstrong had not quite met, such as integrity, honesty and fair play. Armstrong finally admitted that he had been taking performance-enhancing drugs all along and this illegal behaviour had obviously contributed to his unprecedented and unbelievable achievements.

So Armstrong was stripped of his titles and banned for life from the sport he had dominated and had done more than anyone else to make a global phenomenon. The long-time hero became, almost overnight, an evil villain, his reputation irreparably destroyed.

That’s a terrible tale, but this week it got worse – much worse.  On Monday (this from an AFP news report) “an independent commission accused top leaders of cycling’s world body of protecting Lance Armstrong and other drug cheats to protect the sports reputation. The commission also said doping remains widespread and called on the International Cycling Union (UCI) to enact widespread changes.”

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Deflation arrives (Hamodia, March 13)

For something supposed to have been made impossible in the modern world, deflation has been doing pretty well recently. This economic ‘disease’, which many economists regard as more dangerous than inflation, has been endemic in Japan for some fifteen years, but now it seems to be spreading round the world, especially to Europe.

In order to understand what deflation is — as usual, there is a machloikes between the mumchim as to the exact definition — it’s easier to start from inflation, since that is much better known. To most people, inflation means rising prices in the shops. A more precise economic definition would be ‘a general rise in the price level’ that affects all sectors of the economy. Thus, if prices are rising only on goods in the shops, or only in the housing market, or only in the financial markets, that is not real inflation.

That’s why the claim that America, at least until recently, was suffering from inflation — because prices of food and energy were rising strongly (in 2013) — was simply wrong. True, food and energy prices were indeed rising then — and so were housing prices, somewhat, while prices of financial assets were rising a lot. But wages — the price of people’s labor — were not rising at all, and without rising wages, the ability of ordinary people to pay higher prices on the goods and services they buy is very limited.

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TLR 168 – Is this leading Anywhere? The Israeli general election of March 2015

Coming against the background of the election campaign that has been underway since December, this issue is devoted solely to Section B: Domestic Politics. True, there is much to write about with regard to C: Macro-economics, where the data are much more positive than had seemed possible only a few months ago, as well as Section D: Corporate Affairs, where there is a great deal happening, much of it rather negative, including in the banking and energy sectors — but elections always take precedence.

That is so even when the election in question has no raison d’etre, no substance and is leading nowhere. Indeed, this extra-long issue begins by asking why there is an election happening at all and goes on to list many of the important topics that are being given little or no attention in the campaign, before concluding, by way of a bottom line, with an explanation of why this election is leading nowhere — at least in the immediate context of generating a government capable of formulating and executing policy in all the key areas of public life.

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Not what they seem (Jerusalem Post, March 6)

The essence of the Purim story is that things are often — usually — not what they seem. That is the rationale normally given for the custom of dressing up, to make that very point. However, this idea is rarely extracted from the abstract and applied to real-life situations in the here-and-now, although it can and certainly should be..

But where better to start than Persia, scene of the Purim story in the country’s imperial heyday — but now known as Iran. As our esteemed Prime Minister pointed out to the worthy members of Congress the other day, we Jews have had considerable experience with nasty Persian potentates down the millennia and centuries. But he made sure not to mention –although he surely knows, that Iran is not at all what it seems. The late unlamented Mao Zedong would have quickly identified it as a ‘paper tiger’, yet it would be difficult to find even faint echoes of this in the millions of words of analysis poured forth by the legions of commentators before, during and after Netanyahu’s speech.

Behind the ballistic missiles and whirring centrifuges, Iran is facing a demographic implosion of massive proportions, with the birth rate plunging from its pre-Islamic revolution levels of some 7 births per woman down to European or sub-replacement levels today. This information, as Bibi would have said, is not obtainable only thanks to daring espionage operations or sophisticated intelligence gathering. It is openly accessible from UN and even from Iranian sources. Indeed, the Iranian leadership — you know, those awful ayatollahs — talk about it quite openly ad make no attempt to hide the fact that they view it as a major national crisis and a potentially devastating threat. No doubt they blame the Jews for causing it, but so far nothing the government has tried has succeeded in turning the tide.

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Debt slavery (Hamodia, March 6)

“The borrower is the servant to the lender” is a well-known verse from Mishle (Proverbs), cited frequently in the Gemara and later rabbinic literature — as often in a moral context as a halachic one.

Although lending — ideally without any charge, let alone formal interest — is strongly encouraged in Jewish thought and practice, borrowing is definitely not. Rather, its financial and moral disadvantages are highlighted, perhaps nowhere more so than in the pasuk quoted above.

This background is important in seeking an explanation for one of the most extraordinary, but least-known and hence rarely mentioned features of the Israeli economy. This is the very low level of consumer credit, both in absolute terms and, especially, by comparison with many Western economies.

The United States has developed into the consumer-driven economy par excellence, with its bias to consumption fuelled by the massive growth of consumer credit over recent decades. Other developed economies have trod a parallel path — notably the UK, but also countries as distant and seemingly different as Spain and South Korea.

But not all. Continental European economies, notably Germany, eschewed consumer spending as the main driver of growth, especially if this was based on borrowing to spend. Clearly, the very different structure of the financial system in continental countries vis-à-vis the Anglo-Saxon model influenced this outcome, but is this the ultimate reason — or is the reticence to borrow actually a much deeper cultural trait?

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The race to the bottom (Jerusalem Post, February 27)

On Monday this week (23/2) the Bank of Israel became the twentieth central bank in the world, so far this year, to make a move in the direction of easing monetary policy. That’s twenty banks in 54 days – and those 20 include countries of every shape and size:  rich developed economies and poor undeveloped ones; large and populous countries (both China and India are on the list) as well as small or thinly-populated ones; every continent is represented along with governing systems of every stripe.

All these central banks have one thing in common, and that is their determination to devalue their currencies. That is their goal, whereas the actual measures – lowering interest rates, reducing reserve requirement for banks, buying bonds in the market, or all of the above – are merely means to that end.

In some cases, the reduction of interest rates is also expected to have some stimulative effect on the country’s economy: Australia can serve as an example, because its rates are still measured in whole percentage points (plural) rather than slivers of a single percentage point. In most cases, however – and Israel is an excellent example – rates were already so low that pushing them down slightly further has no practical implications for either borrowers or lenders. Depositors in banks were already getting nothing and lenders were paying next to nothing, so that a few less basis points (hundredths of a percent) is neither here nor there.

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Looking up (Hamodia, February 27)

Don’t confuse me with the facts. That seems to be the theme of the Israeli elections and of public discourse generally. The election campaign, as has been widely noted, is intensely negative — with almost all the parties engaged not merely in explaining why their opponents are incompetent, corrupt, stupid or all of the above but, in addition, joining in the general clamor about how bad the state of the country is.

There is room for disagreement as to exactly whom is responsible for that poor state of affairs — each party has its own candidate for responsibility for the problems, but none of them admit to having any share of it themselves. But there is no disagreement at all, not the merest shadow of doubt, as to the basic fact, namely that the state of affairs is bad and getting worse.

This common wisdom is trumpeted by almost every media vehicle — newspapers and other print journalism, radio stations, TV channels and internet sites — on a daily basis. To suggest otherwise, for instance that maybe things are not so bad, is to risk being branded an imbecile or of being totally detached from reality.

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