Wall Street in turmoil, American real estate loans going into foreclosure, oil nearly reaching $100 per barrel, and the Dollar dropping like a penny thrown into a bottomless pit. All of this news is bewildering for many Israelis, and even good news for others – especially who plan trips to the U.S. or plan on purchasing American good such as computers, cars, cosmetics, and other consumer items. With the New Shekel now pegged at a rate of around 3.92 to the Dollar, those who switched from Dollar based to Shekel based investments have profited. This includes many have purchased properties where purchase prices were linked to the Dollar; and for those in the middle of long term Dollar linked rental contracts the Greenback’s softening has been especially helpful.
In the long run, however, what is going on in America will have a big effect on the economic situation in Israel. And that effect will not be one to many peoples’ liking.
For years, the Israeli economy has had a close relationship with the American economy. Ever since Israelis were finally allowed to invest in stock exchanges abroad (under strict restrictions, of course); and with the success of many Israeli companies on stock exchanges such as the NASDAQ whatever happens in the U.S. economy is eventually felt over here. If the Dow Jones or NASDAQ on Wall Street takes a tumble, as it has recently, Israeli securities that are listed on these exchanges also head “south” instead of “north”. From a consumer standpoint, Israelis still purchase a considerable amount of goods from European countries, and thousands of Israelis travel frequently to Europe on either business or pleasure. With the European Union’s adoption of a standard currency, the Euro, not matter where one travels to on “the Continent”, and not matter what the economic situation may be in the country of destination, with very few exceptions the currency in use there will be the Euro, now trading at an all time high of 1.47 US Dollars. Some Scandinavian countries still retain their old currencies, but even so, the Euro is still the unofficial currency of choice in counties like Denmark, Norway, and Sweden. Other countries like Switzerland and the U.K. have strong local currencies, making goods and services more expensive in US Dollars are converted into Pounds Sterling or Swiss Francs
The Dollar’s weakness is pushing up the price of Oil, which is affecting everyone. Airline tickets have become more expensive and fuel surcharges more dear; due to the high price of oil. Fuel prices in Israel have risen significantly due to rising oil prices and this has resulted in an interest in purchasing the new ‘hybrid’ cars which have both an electric and gasoline engine. Many Israelis are also purchasing smaller, more fuel efficient cars, and this also applies to companies that provide a lease car to their employees as part of an overall salary package. The cost of using one of these vehicles has also gone up sharply with the government levying increased taxes for this privilege.
Where all of this is going to end is still not entirely clear. But one thing is for certain; and that in regard to those who live in Israel on fixed, Dollar based pensions, or are here in relocation or diplomatic assignments and receive sums in U.S. Dollars, the money they receive will go less further than before. Many people also wonder if rents and other prices presently linked to the Dollar will now be linked to the Euro instead.
There is a bright side, especially for people coming here from Europe or the U.K. and are purchasing flats and other real estate. They are getting the deal of their life. All I can say to them is “enjoy it while you can”!