TLR 162 – ‘Hummbling’ along

“Hummbling’ is a term I invented for the specific purpose of describing the current state of the Israeli economy. It has nothing to do with modesty or other personal traits, but rather represents a hybrid form of ‘humming’ and ‘bumbling’ – hence the double m. You would think that to simultaneously hum along whilst bumbling around would be very difficult, if not outright impossible – but you would be wrong.

In many respects, the economy is humming along. Exports are rising again at a healthy clip – and imports are growing too. Unemployment is at record low levels and the labour force continues to expand, while wages – both nominal and real – are rising. The stock market has hit new record highs and both corporate and personal debt is rising, the latter mostly in the form of mortgages to buy apartments. Although this is far from a boom environment and not everything is coming up roses, it is quite satisfactory, especially when you compare it to the situation of most other developed economies.

Yet no-one will admit to being happy and, in many respects, the economy along with the firms and households in it are bumbling around aimlessly. Among the ‘haves’, this is painfully apparent in the rush to buy apartments – because “what else is there to do with money?”, when interest rates are so very low. The same rationale stands behind the upward march of the Tel Aviv Stock Exchange’s equity market, while the flip side of that logic pushes firms to issue bonds, so as to lock in the current ultra-low rates. As for the ‘have-nots’, they are obviously and almost by definition unhappy. Everyone joins together in hand-wringing over the widening gaps in income and wealth, but no-one has any convincing solutions.

The common cry that “something should be done” – whether about rising apartment prices, widening socio-economic inequality, or the overvalued exchange rate – is directed at the government. This is an interesting reflection of how deeply-entrenched the statist-socialist tradition still is in Israel, but it is especially incongruous when the target is the Netanyahu government, whose top leadership echelon  — Netanyahu himself, Lapid, Bennet, Liberman and Livni – are all opposed to Big Government and don’t believe that government can provide the answers. But that’s just in theory; as politicians, they know that they are expected to generate solutions and that failure to do so will result in them and their parties being punished.

These problems and the policy solutions now being debated, proposed, rejected or actually legislated for them, are the subject of this issue, with the focus limited to C: Macro-economics. The political aspects of these same problems, as well as other domestic political issues, are part-and-parcel of the overall discussion and I will review them in the next issue, which will hopefully follow very soon.



C: Macro-economics

a)       GDP: weakness should be made of soggier stuff than this

b)    Fiscal policy: Under control (except defence)

c)     Monetary policy: Stuck in a rut 

d)    Exchange rate policy: The great debate (yawn)  

e)    Where to from here?


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