Endgame (Eretz Acheret, January 26)

Originally published in Eretz Acheret under the title ‘the Exodus from Europe 2015′.

Israel is a European country.

This fundamental fact is the essential starting point for any analysis of the current crisis of European Jewry and of its impact on Israel.

Yet many Israelis do not consciously recognize this fact. It is so much part of their mindset and cultural milieu that many never stop to think where lie the roots of their country and society.

Similarly, the overwhelming majority of American Jews have no understanding, let alone appreciation, of this basic characteristic of the Jewish state. Consequently, their ability to understand Israel and most aspects of Israeli society is severely impaired and the gulf between Israeli and American Jews widens inexorably.

Israel’s European-ness is almost all-embracing. The people who invented political Zionism, founded and led the Zionist movement and, eventually, created and built the Zionist state, were overwhelmingly of European origin, mostly central and eastern European.

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Volatility (Jerusalem Post, February 6)

Volatility across asset markets … has fallen to record lows. Low volatility – in itself not an unusual phenomenon in the middle of business cycles – reflects the low level of perceived risks among investors.

That is the opening paragraph from an analysis published by a leading investment and asset management firm — in July 2014. The analyst went on to note that “The implied volatility in equity, bonds and currency markets has declined across the board, with the average  now falling below its previous low in February 2007.”

That note and hundreds of similar analyses published in the summer months sought to ascertain the significance, if any, of the phenomenon of extremely low volatility. The general conclusion was that although low volatility could be seen as a positive indicator that reflected a benign economic and financial backdrop, the historical record was clear-cut: periods of very low volatility were almost always followed by spikes in volatility. Not always spelled out in these analyses was the unpleasant fact that the spikes were generally accompanied by — indeed, were an intrinsic aspect of — sharply falling markets.

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A message from The View from Jerusalem

Dear readers,

I have recently begun writing a new weekly column in English for Hamodia, focusing on economic and business-related issues in Israel and in Europe.

Going forward, I’ll be posting new additions on a weekly basis, along with the usual articles from the Jerusalem Post, which focus on global economic and financial issues.

All The articles I’ve written for the new column can now be found on my blog, at http://pinchaslandau.com/category/hamodia/

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Tourism derailed (Hamodia, January 2)

The tourism industry in its widest sense — including hotels, restaurants, tour guides and other ancillary sectors — is a vital part of the Israeli economy. It is the largest single source of employment in the private sector, because it is very labor-intensive. True, most of the jobs are low-paying, but that makes them all the more important for people with low educational and other qualifications, especially if they live in the country’s peripheral regions.

Tourism is also a major earner of foreign currency, not just in quantity but also in quality — what economists term “added value”, meaning the difference between what it costs to generate income and the income actually generated. Because tourist services don’t need big capital investments and use relatively cheap labor, the economic profit they generate from each dollar of income is very high.

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Fallout (Hamodia, December 26)

The collapse in the price of oil was the focus of last week’s column — and of this week’s. There are other things to talk about, but they don’t begin to compare in importance and impact to the fallout from the oil price crash.

There are two aspects of what has happened — so far, because we are only in the middle of this mega-development. One is the size of the crash, which is clear enough.  West Texas Intermediate, the benchmark for the US oil industry, peaked at over $100 per barrel and is (at this time of writing) around $58 — down a cool 45%. .

But it’s not just the scale of the collapse, it’s also the speed. The $100+ peak occurred in late June. Yet three months later, when you were in shul on Rosh Hashana, the price was still in the mid-nineties, a small enough drop to be considered a normal development.

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Terms of trade (Hamodia, December 19)

The collapse in the price of oil is, for Israel and most other countries in the world, a huge Chanuka present. Of course, the oil I’m talking about is not the kind that most people use in their menorahs — although it’s ‘kosher’ for that purpose, but not recommended. Nor is the massive fall in price, in excess of 40% since the price peaked at the end of June, a genuine miracle, since it accurately reflects the changing balance between supply and demand on the global market.

But the fact remains that none of the people whose business it is to analyse the oil market predicted anything like this. More than likely, none of them even imagined it possible — for if you read the material being produced in mid-year, the expectation was for higher prices and the fear was that there would be a sharp spike. That sounded very reasonable, given all the geopolitical problems developing at that time — ISIS in Iraq, Libya being torn apart and, above all, Russia causing problems in Ukraine.

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The real issue (Hamodia, December 12)

The column of November 14, entitled “Rudderless”, noted that “this government has begun to crumble” and examined the implications of that state of affairs. But in mid-November, virtually no-one envisaged that the crumbling process would be finished by December 1 and the Knesset would dissolve itself a week later.

But that is how the cookie — and the government — crumbled. Yet even the political analysts, let alone the man in the street, don’t know what these elections are about or why they are necessary.

What is certain is that the early demise of the third Netanyahu government has prevented many initiatives and reform programs from being executed and, in many cases, even from being legislated. Whether that is a good or bad thing depends on whether you view those specific initiatives favorably or not. For example, Haredi politicians and voters will view the dismissal of Yair Lapid very favorably — but so will many economists, because they found his flagship initiative of exempting first-time home-buyers from the 18% value-added tax ((VAT) as lacking any economic logic.

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Swiss bank heist (Hamodia, December 5)

“Now, when Hashem asks me ‘nu, did you see my Switzerland?’, I will be able to give a proper answer”. That is what the ageing R. Samson Raphael Hirsch supposedly said on his return to Germany, from a trip convalescing in Switzerland. Accurate or apocryphal, it’s a nice story, with a clear message.

But we can be pretty certain that R. Hirsch’s visit was what would today be called ‘health tourism’ — an area which the Swiss pioneered, as they did for many aspects of tourism. His motivation was health, not wealth — he was not there to meet with his Swiss bankers, or to check how his money was doing. But looking after other people’s money, securely and prudently, was another business that Switzerland pioneered and came to excel at.

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The sun also rises (Hamodia, November 28)

On Sunday, July 6, 2014 (8 Tammuz), Toshimitsu Motegi, Japan’s Minister of the Economy, Trade and Industry, arrived in Israel for an official visit.

Normally, where diplomatic, trade and cultural relations have existed between two countries for several decades, a visit by a minister of country A to country B would be an unexceptional event. The host country’s media might give it some coverage, while in the minister’s country it would probably pass unnoticed.

So it proved with Mr Motegi’s visit. It generated some news items in Israel — mainly in the financial media, because he and his Israeli counterpart, Naftali Bennett, signed an agreement whereby each country will provide support for joint R&D projects undertaken by Israeli and Japanese companies. That sounds useful and maybe important, although Israel has quite a number of agreements of this sort, with countries from the US to Singapore.

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The half full glass (Hamodia, November 21)

With the Israeli government increasingly riven by internal feuds and even the country’s security forces engaged in squabbling between themselves, it is hardly surprising that most Israelis are dissatisfied with their leadership and concerned about the way things are going — for the country and for themselves.

However, the way people feel on these issues is primarily determined by what they see, hear and read in the media. Although it is facile and basically wrong to say “the media is to blame” — because the media doesn’t generally make stuff up and because intelligent adults should be able to think on their own — the fact remains that the public mood, as distinct from reality, is largely created by the media. The facts are as they are, but the media tend to portray them in a biased manner — and the people, intelligent or otherwise, are mostly too lazy to make the effort needed to see beyond the headlines.

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