Dollar Doldrums (Extract)

Extract of an article in Issue 8, August 4, 2008 of The Jerusalem Report. To subscribe to The Jerusalem Report click here. Israelis living on greenbacks are feeling the pinch as the U.S. currency continues its nosedive When Ira Skop left Brooklyn, New York to immigrate to Israel with his wife and three sons in August 2006, he thought he had a nice financial arrangement. He continued working as an independent risk management consultant for the same New York company, using email, Skype and the phone, billing his clients on an hourly basis. But since then, Skop, 47, has seen his income plummet 25 percent. Skop, who lives in a spacious apartment in Jerusalem's Arnona neighborhood, was earning 4.4 shekels to the dollar two years ago; now he gets 3.3 shekels, and no one knows how much lower the U.S. currency could drop. In the last year, many in Israel have found themselves threatened by the weakening dollar. Export companies earn dollars but pay salaries and other expenses in shekels, an increasingly robust currency. Israel's central bank has tried to help them by buying large amounts of American currency, so far with only limited effect. Also in deep trouble are the many non-profit organizations and charities that raise funds in dollars but pay for their activities in shekels. But it is individuals and families whose incomes are in greenbacks who are feeling the pinch at its hardest. It's particularly worrisome for American retirees, living on fixed amounts of social security, investments and savings. "I do have additional income coming in from a rental property in the U.S., which I was hoping to use for savings or to pay off a home equity loan, but we haven't been able to because of my reduced earnings here," says Skop, whose company specializes in risk management information systems. "Bottom line, living off of a dollar-based income, especially as someone who budgeted their life a year ago in dollars, means a 30 percent to 40 percent loss in spending power," explains Jacob Ner-David, an entrepreneur and venture capitalist who has also been experiencing the dollar crunch in recent months. A founder and managing partner of Jerusalem Capital, a local venture capital fund, Ner-David, formerly from Long Island, New York, lives in Jerusalem with his wife Haviva and six children, aged 10 months to 15. He has built and managed four technology companies in Israel, including Delta Three, a NASDAQ-listed telecommunications company, and Double Fusion, a startup that provides advertising for video games. With savings plus income in dollars, and living partly off those savings, Ner-David and his wife decided recently to reappraise their budget and forecast for the future. "We realize we can't base our life on dollar savings," he says. "Every day, we keep hoping the situation will turn around but it hasn't - it just keeps getting worse." They live in a comfortable Jerusalem home and don't have to worry about putting food on the table, but they feel the impact of the dropping dollar in other ways. "A vacation here in Israel is suddenly a lot more expensive than we thought it would be, so we'll take a cheaper vacation," says Ner-David. The drop in the dollar has prompted some to question many of their assumptions and work-related decisions. Chaim Kram, a software developer, made aliyah four years ago with his wife, Ariella Zeller, and four children, from Ann Arbor, Michigan, and now lives in Modi'in. Kram still works for his former American employer, the University of Michigan, earning dollars, and working only half-time, 20 hours a week, four hours a day. In 2004, he was earning as much as he would have in a full-time Israeli job. Now, however, given that his salary is in dollars, he could be earning far more in a full time position, with an Israeli company. "Before the dollar change, I never thought about looking for a job here, and I haven't done anything about it yet," says Kram. "But I have friends here earning far more than I am, and even though I'm working half-time, there's no way to slice that difference." Fortunately, his wife earns a shekel income as a bar/bat mitzvah tutor and English teacher. "The change in the dollar doesn't affect us in the short term, but what it has done is that with Ariella earning money in shekels, we are making an active attempt to use the shekels and not our dollars," says Kram referring to his dollar-based salary and the couple's dollar-based savings. They hope that the dollar will eventually recover, but with an American economy battered by mortgage bank failures and soaring oil prices, indications don't look good. Phyllis Levenson and her husband moved to Jerusalem from Portland, Oregon 15 years ago, when they were 48 and 50 and weren't quite ready to retire. At the time, Levenson's husband commuted back and forth to their business in Portland, and continued to do so for ten years. Now that they're both retired, they are living on social security and investments that are still "paying off," says Levenson, "so we're not feeling the crunch." What they are concerned about is their ability to purchase apartments for their two married sons in Israel, both of whom have children and could use the financial help. "We wanted to help out, but that's getting harder because of the rise in housing prices and the devaluation of the dollar," says Levenson. "We're just not sure we're going to be able to do it." Until recently, most real estate deals - both rentals and sales - were figured in dollars, given the historic instability of the shekel. Now, says Steve Toberman, a realtor who has been selling, renting and managing properties in Jerusalem for 20 years, "everybody in the real estate market has been going crazy with shekels, changing to shekel contracts for rentals and sales for the last year." Even Toberman changed his own management fee to shekels from dollars because he was losing approximately 30 percent per client. Since the dollar began weakening, landlords have been changing their dollar-denominated rental and sales contracts to shekels, and what's more, figuring the shekel amount according to the once-higher rate, such as 4.5 or 4.6 to the dollar. "I have a client who was paying $570 a month for three years," Toberman relates. "Now the landlord wants to charge NIS 2,600, which is the equivalent of nearly $800, if you divide NIS 2600 by 3.3. All the landlords are doing that; changing to shekels but according to the rates of a year ago." Extract of an article in Issue 8, August 4, 2008 of The Jerusalem Report. 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