The human body, weak economies and Israel

The human body is a complex item. Even today, we do not fully understand how the brain operates, and we are full of proteins that have yet to be identified. We are told that only 20% of everyday tablets like asprin ever reach the target spot.

Much the same can be said about national economies. They are nearly impossible to micro-manage. You have to treat all parts with respect and still keep monitoring just in case.

Greece, Ireland, Portugal and even Spain are classic examples of countries, which relied on the “good times never ending”. And there are fears that Belgium may join the list. The Economist has led a discussion of senior analystson the topic; even under a restructuring policy, some of these economies (and their citizens) have a lot more hardship to endure before they see happy days again. The doctors had failed

Why is the Israeli economy different?

Zvi Eckstein is the deputy governor of the Bank of Israel. Speaking at a conference in London earlier this month, he listed the strong points of the economy. These included: –

  • The strength of the high tech sector
  • Decreasing debt ratio
  • Controlled use of interest rates in monetary policy
  • High savings ratio

I would add to that the discovery of commercial quantities of gas. Let us be clear, this will not be available for selling for several years, and very little is suitable for the local market. What is of note is that the Israeli government has stood firm against obvious vested interests, and will levy taxes on the profits. The main beneficiary should be a cash-strapped local infrastructure.

Dangers still loom large. The shekel has appreciated to violently over the past year, partially as a result of speculators. Last week, the Bank of Israel counter attacked, issuing a series of measures ensuring greater accountability and transparency on large transactions. The result has been a 2.5% depreciation within a few days.

Israel has to accept that it has a strong economy. As such, investors are going to want to hold its currency, a major change from the previous 60 years. The managers – politicians and civil servants alike – will have to observe and guide the Israeli economy closely as it matures into manhood, just as they will look after their own individual health.

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