By revealing that halting the Bank of Israel's purchases of dollars will cause 20,000 layoffs in industry, National Economic Council head Prof. Avi Simhon is giving the Bank of Israel almost absolute immunity from political pressure to halt its foreign currency purchases. If Simhon was trying to recruit political support in order to put pressure on the Bank of Israel, he achieved the exact opposite. No sane politician will get anywhere near this explosive issue and risk being tagged with involvement in the firing of tens of thousands of industrial workers.
That is a pity, because Simhon's arguments are daring and thought provoking. His willingness to challenge the Bank of Israel's conceptual hegemony is rare - probably the result of a complete lack of political instincts. More and more independent economists are joining the growing criticism of the mountain of foreign currency being added to the Bank of Israel's balance sheet at the rate of $500 million a month. More and more economists are asking why the Bank of Israel should manage almost $100 billion invested in, among other things, stocks in the Far East and Chinese government bonds. Are the foreign currency purchases really helping the economy and industry, or are they nothing more than a distortion - a subsidy for industry with no economic justification? Will postponing the end of this industry not cost us dearly and blow up in our faces at the worst possible time?
We can therefore only grieve at the premature death of the Simhon initiative and the damage to the prestige of the National Economic Council, an important additional voice in the economic discourse dominated by the Bank of Israel and the Ministry of Finance.
Published by Globes [online], Israel business news - www.globes-online.com - on June 2, 2016
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