Shalom Life | October 25, 2014

Stanley Fischer: Professional Navigator in an Economic Storm

Bank of Israel Governor named governor of the year.

By: Yosef Tastassa

Published: October 14th, 2010 in Business » Israel

Stanley Fischer: Professional Navigator in an Economic Storm

Stanley Fischer, one of the world's best economists and the Governor of the Bank of Israel since May 2005, was declared this week central bank governor of the year by Euromoney, an important and influential magazine. Stanley Fischer, like his other colleagues in the world, had to carefully and bravely maneuver his ship in very stormy waters.

The world economic crisis, which began in 2008, brought fear, uncertainty and confusion to governments around the globe and also caused panic and emotional behaviour in the capital markets. The Sub-Prime crisis which began in the US was the first "Domino Stone" which brought an inevitable closure of over 130 banks in the US, an increase in unemployment rates and massive intervention by a regime that always believed in the laws of the free market – until markets unexpectedly collapse.

The tidal waves of the economic crisis quickly reached the European economy. We heard about liquidity problems and reduction in financial rates in the PIGS (Portugal, Ireland, Greece, and Spain) states, who still suffer from tremendous internal debts, high unemployment rates (20% in Spain), possibility of bankruptcy (Greece) and the disappearance of the mighty Euro.

During these unbelievable once in a century shocking economic events, Stanley Fischer's ship has managed to maneuver through the economic mighty tidal waves and finally reach safe and quiet waters.

It was Fischer's policy that prepared the tiny economy of the State of Israel to show one of the world's best financial performances during that crisis. Under his leadership and wise advice, the Government of Israel reduced its debts and approved responsible and balanced budgets for each of Israel's fiscal years.

Fischer was brave enough to reduce the Bank of Israel interest rates to an historical minimum of 0.5 per cent between April and August 2009. Fischer's monetary policy helped the Israeli industry to survive the global economic crisis by enabling manufacturers and other private sectors to enjoy low interest rates for loans.

However, the stable Israeli economy has brought lots of foreign capital to be deposited in Israeli banks, and a massive foreign purchase of Israeli Government Bonds by foreign banks and investors who were seeking for high and safe yield for their money.

The capital flow has caused a rapid appreciation of the Shekel (NIS) to 3.2 Shekels per one US Dollar (USD).

In the beginning, the Central Bank of Israel did not intervene in the currency markets and the policy was ‘let the market decide’. The importers celebrated, but the exporters, who were used to get over 4 Shekels per Dollar, defined the situation as a near to irreversible catastrophe to the Israeli industry.

In an unexpected move Fischer declared a new goal which is to increase the Bank of Israel’s reserves to 40 Billion US Dollars. The increase in the interest rates made it hard for Fischer to keep the exchange rates high, and currently the Bank of Israel's reserves are over 60 Billion US Dollars.

Fischer is criticized by Government members and senior Israeli economists that his policy cannot last forever and that finally he will have to give up with his massive acquisition of the "Green Bill".

In addition, the low interests of the Central Bank rates are considered to be one of the major reasons for the "madness of prices" in the real estate markets, and for the increase in the inflation rates.

It seems that there is no one solution to economic problems at any given time. One thing is for sure - Stanley Fischer's policy has brought much more stability than uncertainty to the Israeli economy.

Wix Named 'Hottest Middle Eastern Startup' Wix Named 'Hottest Middle Eastern Startup' TrendingStartup Club: Hello Doctor Startup Club: Hello Doctor TrendingPÜR Gum Makes Long Lasting Impression on Dragon's Den PÜR Gum Makes Long Lasting Impression on Dragon's Den Trending
 

Seinfeld Finally Joins Facebook and Instagram [VIDEO]

October 24, 2014 | By Ashley Baylen
Seinfeld Finally Joins Facebook and Instagram [VIDEO]

A hilarious video shows Michael Richards asking Seinfeld to take out Netflix and Hulu.

Read More

Seth Rogen and Megan Fox Join James Franco’s ‘Zeroville’

October 24, 2014 | By Ashley Baylen
Seth Rogen and Megan Fox Join James Franco’s ‘Zeroville’

Rogen and Fox will be co-starring alongside Will Ferrell, Danny McBride and Dave Franco

Read More

Mila Kunis Dolls Are Coming To a Store Near You

October 24, 2014 | By Ashley Baylen
Mila Kunis Dolls Are Coming To a Store Near You

Adorable dolls featuring Mila Kunis and Channing Tatum in 'Jupiter Ascending' are coming out in January

Read More

Jews Around the World to Take Part in the Shabbat Project

October 24, 2014 | By Daniel Koren
Jews Around the World to Take Part in the Shabbat Project

Jews in 460 cities across the world to take part in the inspirational Jewish initiative, including Paula Abdul and Mayim Bialik

Read More

Wix Named 'Hottest Middle Eastern Startup'

October 24, 2014 | By Viva Sarah Press
Wix Named 'Hottest Middle Eastern Startup'

Inc. magazine credits Israeli DIY website creation platform with taking a complicated task and making it enjoyable

Read More

‘Fury’ A Blistering Account of World War II—Sans the Holocaust

October 24, 2014 | By Jason Stack, JNS.org
‘Fury’ A Blistering Account of World War II—Sans the Holocaust

The Brad Pitt and Shia LaBeouf-starring film essentially omits the brunt of the Holocaust from World War II

Read More

Israeli Company Shows that Energy Does in Fact Grow on Trees

October 24, 2014 | By NoCamels Team
Israeli Company Shows that Energy Does in Fact Grow on Trees

The eTree is a solar-powered urban habitat that is constructed from metal pipes and topped with solar panels

Read More

For the First Time Ever, Women of the Wall Hold Torah Reading at the Kotel

October 24, 2014 | By Kobi Nachshoni
For the First Time Ever, Women of the Wall Hold Torah Reading at the Kotel

Western Wall rabbi says "This will never happen again" after the group managed to smuggle a tiny scroll into the women's section of the Western Wall

Read More

More Headlines