Ramat gan buildings 521.
(photo credit: courtesy)
It would be nice to end the year with an upbeat piece, highlighting the positive
aspects or prospects... or some such thing. To do so, however, would be a
distortion of reality and hence a grave disservice to readers.
rather urge the opposite approach: If and when you use this period of
introspection to mull over the state of the world, the country or you
personally, don’t fob yourself off with the good news – such as that the Israeli
economy’s situation is relatively good and is certainly much better than that of
its peers in Western Europe and North America, not to mention the immediate
geographic neighborhood. That is true, and we can and should hope that this
remains the case. But given where everyone else is going, to be better off than
them is small comfort indeed.
Thinking truthfully about what might lie
ahead requires an honest look back, so let’s admit that for most of the world,
this has been a terrible year. It started out OK, and there was a widespread
expectation that things would improve further in most areas, but instead it has
been one of relentless deterioration. Looking forward, the likelihood of things
getting worse is much greater than that of their improving, so that assuming
that they will get better is delusional. If ever there was a case in which the
adage “plan for the worst, hope for the best” applied, this is it.
is already a thriving section of the blogosphere focused on “worst-case
scenarios,” but these are mostly useless and irrelevant for people living in
Israel. Storing canned foods in mountain lodges in Montana, for example, is
neither useful nor relevant to the overwhelming majority of Americans, let alone
residents of Ra’anana or Ramat Beit Shemesh.
Nor is there much point in
wasting time on geopolitical speculations, as we have learned these past few
days: After months of buildup and endless hype, the fearsome “Black September”
diplomatic tsunami to be triggered by a UN vote recognizing a Palestinian state
failed to materialize.
Maybe it will, and maybe the Iranians will nuke
us, or little green creatures from Alpha Centauri will invade Planet Earth; in
any and all of these events, there ain’t much you can do.
focused on the big issues that not only impact you and yours directly, but that
you can do something about. The global financial crisis is one such area. It is
back and getting worse, which for most people suggests that stock markets will
crash. People invested in stocks should exit them now. But many people
erroneously believe that they are not exposed to the markets, when in fact a
large chunk of their biggest financial asset – their pension – is invested in
stocks and another chunk is in corporate bonds. American and British pension
funds have especially large exposure to equities, but people using flexible
pension structures that allow them to construct their own portfolios can
surmount that problem.
In Israel, too, a recent amendment allows savers
in Israeli pension or provident funds, and even in life-insurance programs, to
switch to a structure in which all the money is invested in government bonds, or
in other safe(r) asset classes. Since you can do this, you should, and don’t let
your bank or insurance agent tell you that you can’t.
Apropos to your
bank and insurance company, you should give some thought to whether they will
still be around a year hence. Many of the largest banks in Europe will need to
be nationalized as the sovereign-debt crisis continues on its inexorable course,
and their British and American peers may well go the same way. Unlike the
relatively gentle treatment meted out in 2008, this time governments intervening
to save the banks will wipe out stockholders and most probably at least some
classes of bondholders, too.
But will governments prevent losses to
depositors? All depositors? For any amount? All governments? We will get the
answers in due course, but you should be watching from the sidelines rather than
from the inside. The great financial question of the day is: Where are the
sidelines? They certainly are not in Switzerland any more.
But for most people, more important than their bank deposits
and even their pension is their job. I have repeatedly argued here that the
labor market is the true focus of the current crisis, and by extension, the area
in which Israel has stood out with respect to Europe and the US is in the
strength of the domestic labor market and the weakness of those overseas. Yet
even that strength is now waning, and, as the crisis extends and deepens, the
jobs situation is likely to get worse everywhere.
Looking after your
source of employment should be the most important item on everyone’s personal
economic agenda in the coming year. That includes realistically assessing the
risk to your employer and to yourself and, even if you feel comfortable, having
a plan ready to implement for what to do if you find yourself out of work. In a
world in which the new normal is the formerly unthinkable, that is the least you