Newspaper Page Text
Grim game
Israelis have their hands full, pockets
empty, trying to stay ahead of inflation
by Carl Alpert
HAIFA — If prices go up
monthly at an average of around
seven percent that’s an annual
inflation rate of between 70 and 80
percent. And that’s the situation in
Israel today. It is difficult for those
not living under such conditions to
realize how daily life is affected,
and how all our conceptions of
savings, economy and standards
are changed as a result.
If a businessman (or a bank)
makes a loan of 1L. 1,000 and the
money is repaid a year later, the IL.
1,000 which comes back now has a
purchasing power about 70
percent less, because prices have in
the interim gone up by that much.
Therefore if the bank charges an
interest rate of 70 percent (for a
one year loan) that rate is not at all
usurious. It barely serves to cover
the value of the capital,loan in
terms of purchasing power.
An Israeli who puts 1L. 1,000
under his mattress, for a rainy day,
finds that his saving has become
eroded and a year later will buy
only 25 or 30 percent of what it
would have bought 12 months
earlier.
When prices go up that rapidly
how do salaried people live? Very
simple: practically all salaries and
wages are linked automatically to
the Cost of Living Index. When
the index goes up, salaries rise
almost to the same extent. The
annual lag between the two is
usually more than made up by
labor negotiations which extract
rises on the basic salary, on which
the subsequent automatic
increases are thereafter based.
All that extra money paid out in
salaries is immediately spent by the
recipients. Who wants to save cash
\fhen it shrinks so rapidly? And the
pouring of that money into
circulation creates a vast consumer
demand that at once makes prices
rise, which in turn triggers off a
new set of automatic wage
increases. The biggest employer of
all is the government, and when it
has to pay out billions more in
wages—it has no choice but to
print the funds required.
Don’t people save at all? Sure,
but they put their money into
investments that are “linked."
That’s the magic word. Most are
linked to the Cost of Living.
Government bonds are linked, so a
IL. 1,000 bond bought this year is
automatically worth, say, IL. 1,800
in a year.
With government support the
banks offer special savings plans,
the most popular of which at the
moment operates as follows: the
Israeli deposits IL, 90,000 in the
“120 Savings Plan.” The bank
gives him a bonus gift of 21 percent
(IL. 18,900) so his savings account
is at once worth IL. 108,900 on the
day he opens it. It will earn only
around 3 percent interest but the
whole thing the deposit, plus the
bonus plus the accumulating
interest are all linked to the Cost of
Living. The value of the deposit
may rise in value annually by 70or
50 or 90 percent or by whatever the
index rise is for that year. The
catch is that the account is frozen
for a full six years. If the Israeli
breaks the freeze by withdrawing
his money he loses the bonus, and
even the linkage is figured on only
a part of his saving.
There’s another way Israelis can
save: to keep their money in
foreign currency. Those who earn
dollars may keep them on deposit
in dollars, and when they need
money, cash them in at whatever
the exchange rate is on that day. In
October 1977, a dollar bought 10
Israel Pounds. Today a dollar will
buy 24 Pounds.
Some Israelis have tried the
local stock market, and though
many burned their fingers, there’s
still a lot of loose money going into
stocks. The latter are not “linked”
to anything, but their speculative
value is supposed to boom with
inflation. It doesn't always do so,
however.
It’s a grim game that the average
Israeli citizen plays, trying to keep
ahead of the game. And the name
of the game is inflation.
TRY US!
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r City Wide Blood Drive
120th Consecutive Quarterly Blood Drive
SPONSORED BY
ATLANTA POST 112 JEWISH WAR FULTON
VETERANS & LADIES AUXILIARY
Sunday, August 5th, 1979
9 a.m. — 2 p.m.
at
Ahavath Achixn Synagogue
600 Peachtree Battle Avenue N. W.
Continental breakfast will be served to all donors
Give a pint of Mood in honor of our 30
years of service to the Red Cross
Blood Bank.
Jewish War Veterans extends thanks to the following co-sponsors for their help and participation.
Jerry H. Fields, Coordinator
Congregation Shearith Israel R e d Devils Congregation Or VeShalom
Ahavath Achim Synagogue American Legion Posts 233 & 77 TJ 1 ' Temple
Congregation Beth Jacob B’nai B’rith Lodges
Elliott Goldberg, Chairman, Jewish War Veterans Julia Butler, Chairman, J.W.V. Auxiliary
Paid for by The Charity Fund of th« Mark Frank*! Atlanta Fast 112 Jsuiljh War Veterans
Contributions to this blood program eon be moiled to the J.W.V. / Fulton Lodge Blood Bank
F. O. Bom 4974, Atlanta, Georgla 30701
£
MASONIC LODGE
NO. 216 F&AM
Page 9 THE SOUTHERN ISRAELITE August 3, 1979