global agenda 88.
(photo credit: )
Let’s close out the year with an Israel-oriented column.
The rest of the
world is pretty quiet, although that’s a facade and it won’t last much longer.
Even in boring years, January is usually an “interesting” month, especially in
the financial markets.
We do not have the luxury of living in boring
times, and 2011 is not going to be one whit less interesting than 2010. Indeed,
it is more likely to be as high on the “interesting” scale as 2007 or even 2008,
than the relatively placid 2010.
However, the European crisis was THE
story of 2010, and it will continue to unfold next year, while the very patchy
recovery in the United States fades and as growth in China slows and its demand
slackens. In this environment, the deflationary/deleveraging pressures will
become paramount again – and it is unlikely that Federal Reserve Chairman Ben
Bernanke has any rabbits left in his hat, or whether the Tea Party-dominated
Congress will allow him to pull them out, even if he has.
to Israel. As usual, every aspect of life here is open to interpretation in any
way that suits your preferences. The former president was found guilty of rape,
etc.? Well, that’s certainly not pleasant and it doesn’t make good headlines in
But from a public interest/hygiene point of view, it’s
surely preferable to a country where the serving prime minister uses his
parliamentary majority to change the law and thereby avoid being
investigated/charged/tried for various forms of corruption and fraud (think
Or having the incumbent president engage in hair-splitting
casuistry in a speech to the nation to explain the exact nature of his
relationship with his intern (think USA).
The papers today will certainly
be full of pontifications about the Katsav affair, trial and outcome. There will
also be a great deal more blabber about the offshore natural-gas finds and their
impact on the economy. Fortunately, the sane voice of Bank of Israel Governor
Stanley Fischer was heard Thursday above the clamor of the crazed speculators,
noting that: a) it will be many years before the gas is turned into revenues;
and b) in the interim there are huge investments to be made.
also emerged Thursday, in both Tel Aviv and New York, coming from sane analysts
at brokerage firms (apparently there still are some) urging their clients to
sell the shares of the companies that own the Leviathan field at their current
bloated prices – and certainly not to expect additional price gains next year,
after the massive run-up they enjoyed this year.
In the charged
atmosphere surrounding the energy sector, to say that the announcement that
Leviathan had “only” the amount of reserves previously estimated was good news
is to risk being lynched. But I repeat what I wrote earlier this year on this
topic: Israel is very fortunate not to have made any major discoveries of energy
before it became a developed economy – and even now, it is very much to be hoped
that the finds made will be no bigger than estimated (and preferably a bit
smaller). Let me add, that if other would-be explorers are “disincentivized” by
the new tax and royalty regime shortly to be announced, so much the better for
The reason for this negative attitude to natural resources is,
of course, the fear that the economy will be warped and even ruined by them.
During all the hubbub, the Central Bureau of Statistics on Wednesday published
its preliminary assessment of the Israeli economy’s performance this year – and
the data were much better than anyone had anticipated. They may yet be adjusted
downward, but it looks like 2010 was a banner year for the economy in many
respects – without the dubious benefit of oil and gas production.
the numerous positive and very positive items in the statistics bureau data, let
me highlight a few that relate to long-term positive trends. The outgoing year
will see Israel post another very large surplus on its current account –
something that has become a regular feature since 2003 but was unheard of
(except for one freak year) before then. Being a surplus economy means having
more income than outgoings. For Mr. Micawber it spelled happiness, but in more
concrete terms it means you are among the well-to-do, in a world in which
countries already bankrupt or well on the way to that state are proliferating
In this context, 2010 marked the first year in which Israel’s
total overseas assets exceeded its total overseas liabilities. We became net
creditors to the world (it owes us more than we owe it) back in 2002; now our
total foreign assets, including shares and not just bonds, exceed our
Finally, but most importantly, the labor market was strong
again in 2010: more employed persons, fewer unemployed ones and more people
overall in the labor force. The employed also worked more hours, earned higher
wages and, best of all, their output per hour (i.e., their productivity) rose at
a rapid clip.
That’s the real good news – more people doing more work and
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