TLR 188- Goldilocks has Left the Building

November 23, 2018

After weeks of quiet, thanks to the summer holidays and the Jewish holiday season running virtually back-to-back in August and September, Israel has reverted to intensive news generation. However, the striking thing about the developments over recent weeks is their content – what is in the headlines versus what is not, as well as what should be.

 

In the regional context, Iran has faded into the background, along with Russia and Turkey, while Gaza/Hamas has seized centre stage once again, with Oman/ Gulf States, Egypt and Jordan also featuring. That does not mean Iran and Russia have become unimportant, rather that they have been temporarily overshadowed by developments on the Gaza front.

 

Domestically, after a desultory summer, party politics and coalition constructing and de-constructing have become the central focus,. Yet at this time of writing, and despite the recent series of political dramas, it is not clear if the general election due in November 2019 will be brought forward  — and if so, will it be in March (becoming steadily less likely) or May (still entirely possible).  In any event, the local elections held on October 30 — which saw increased turnout and several significant developments bearing national implications — have been forgotten as the military and political dramas during November dominated the headlines.

 

The crumbling of the coalition in October/ November, when parliamentary business resumed after the long recess, was entirely predictable — and I claim no special credit for predicting that outcome. However, along with the resumption of the political/ military news flow has come genuinely new news from a different direction.

 

After years in which the Israeli economy has generated a steady — and hence tedious, even if admirable — flow of good tidings, the worm has turned. Both the ‘news’, in the sense of persona and policies, as well as much of the hard data, have turned negative. This news is reported, in terms of specific events and data, and has even attracted some comment, but the general complacency and sense of well-being has hardly been scratched, let alone shattered.

 

Yet this change was discernible in advance — and in April I devoted an entire issue of TLR to the impending implosion in the fiscal situation and also noted the developing clash between the Treasury and the Bank of Israel. As for monetary policy, I have long been highlighting the potential problems inherent in years of unchanged, near-zero interest rates.

 

Now, these and other neglected issues in economic policy and management are coming home to roost — at the worst possible time, as the country moves into political limbo and the global economy seems to be deteriorating. This issue therefore focuses solely on the outlook for the economy, leaving the still-fluid domestic political scene and the tense and fragile geo-political situation for discussion in meetings and conference calls.

Contents

 

 

C: Macro-economics   

 

  1. Where we left off

 

  1. The continued breakdown of fiscal policy

 

  1. Monetary policy awry

 

  1. What lies behind the change of Governor — and what lies ahead?

 

 

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