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Stanley Fischer, Supported by Fayyad, Turned Down by IMF as Leader Candidate

Governor of the Bank of Israel, Stanley Fischer, is credited with assisting Israel through the 2008 global financial crisis; he is criticized for funding Hamas in the Gaza Strip.

Recently, Mr. Fischer formally announced his candidacy to lead the International Monetary Fund. While the selection process is a political one, Mr. Fischer has received support from Finance Minister Yuval Steinitz, who said:

“Were it purely professional it would be hard-pressed to find a better person than Fischer.”

Salam Fayyad disputed Palestinian Authority Prime Minister supported Mr. Fischer, saying the Israeli would make a ”great managing director” for the IMF and is:

“A superb human being…He is supremely qualified for the job. Indeed, it’s difficult to see how one can be more qualified…”

On a side note, Hamas has refused to recognize Fayyad, a political independent, as Prime Minister. Fayyad received his PhD in economics from the University of Texas, as well as working for the IMF in the 1980s; so he is a good man to ask.

As mentioned, the recently announced “reconciliation” between the government in the West Bank, led by Fatah and the terrorist group Hamas in control of the Gaza Strip is threatening Fayyad’s political status.

But Monday night Fischer was notified that his candidacy was disqualified because of his age, 67. IMF rules state the Managing Director must be under 65 when taking office for the five-year position. Fischer was hoping the IMF board would waive the restriction, saying it is “not relevant today.”

Fischer is in the second year of his second five-year term as the chariman of Israel’s bank. He was hoping to take over at the IMF for Dominique Strauss-Kahn of France, who resigned on May 14 after his arrest on charges of attempted rape of a maid in a New York hotel.

Fischer had this to say:

“I will proudly and happily continue in my role as Governor of the Bank of Israel, to deal with the challenges facing the Bank of Israel and the Israeli economy. I would like to thank the Prime Minister and the Minister of Finance for their unconditional support when I decided to submit my candidacy, and for their expressed hope that I will continue to serve as the Governor of the Bank of Israel – as I shall happily do…”

The finance minister of France, Christine Lagarde, is considered to be the front-runner in the IMF race. The final decision will be made toward the end of the month.

Fischer was the thesis adviser to Ben Bernanke, chairman of the U.S. Federal Reserve, when he was pursuing his doctorate in economics from MIT and is a former deputy managing director of the IMF.

Mazal Tov Israel

On Thursday, the Bank of Israel increased its 2011 GDP growth forecast to 5.2 percent from 4.5 percent and lowered its unemployment rate forecast to 5.8 percent – lowest ever

The Bank of Israel’s growth forecast is in fact lower than the OECD forecast – 5.4 percent – announced earlier in the week. They are also predicting 4.2 percent GDP growth in the coming year and no change in the impressive unemployment rate.

The bank issued a statement saying:

“The rapid growth of GDP and use of resources in the first quarter, and in particular the surge in exports and fixed investment, resulted in an upward revision of most items. Despite the rapid increase in exports, the surplus in the current account of the balance of payments is expected to be significantly smaller than in the previous forecast, because of a faster increase in imports and a more severe deterioration in the terms of trade. The quarterly rates of growth are expected to slow a little in the course of the year as the economy converges to a full employment situation.”

And as for 2012:

“Exports are expected to continue increasing, at a rate slightly below that of world trade, due to both external forces – the deterioration in the terms of trade – and the level of the real exchange rate. The steep increase in capital stock, the result of the expansion of investment in 2011; and the continued rise in the rate of participation in the labor force to 58%, are expected to contribute to a growth rate in 2012 in excess of the potential rate, despite the fact that the economy is in a full employment environment.”

The prediction is 4 percent growth in private consumption for both this year and next; export growth (excluding diamonds) of 6.3 percent this year and 6.2 percent in 2012, import growth (not including defense and diamonds) of 11.5 percent and 6.7 percent respectively, and investment in fixed assets growth of 15.4 percent and 6.8 percent.

The forecast is evidence of stability in Israel’s geopolitical situation and continued smooth riding – knock on wood – in the global economy with no serious fiscal crises developing.

Meanwhile, in IMD’s World Competitiveness Yearbook (WCY) in 2011, Israel is number one in the world in total expenditures of R&D as percentage of GDP, central bank policy, entrepreneurship and scientific research. Also, in 2011 Israel was ranked by IMD, the second in the world in access to venture capital and public expenditure for education.

Fischer Criticized For Not Changing Interest Rates

Market analysts hurried to comment on Governor of the Bank of Israel, Professor Stanley Fischer’s decision earlier this week to keep the country’s interest rate unchanged at 2%.

Stanley FischerThe decision was in harmony with market expectations, given the crisis in Europe and the U.S. economic slowdown, which is actually beginning to affect Israel, whose GDP growth decelerated to 3.8% growth in the third fiscal quarter from 4.6% in the first quarter.

The stall in the central bank’s return to “normal” interest rates could result in increasingly swift interest rate hikes in the future.

DS Brokerage chief economist Alex Zabezhinsky said:

“Inflation is beginning to be felt not only in apartment prices, and because of international factors, such as commodities prices, but also as a result of domestic demand caused by falling unemployment and the full use of production capacity. Although the rise in the latest CPI was in line with expectations, were it not for the unexpected drop in the housing item (rent), which we think was ephemeral, the CPI would have greatly exceeded forecasts due to higher prices for a long line of goods and services. In addition, the continuing rise in home prices leads us to conclude that the risk of an inflationary outbreak has risen, and today’s decision by the Bank of Israel does not help calm things down.”

Bringing Down Israel’s Debt and More Financial Scoop

This week the International Monetary Fund (IMF) urged Israel to phase out an unconventional monetary policy – by which it intended the Bank of Israel’s habit of intervening in the country’s forex market.

Actually, the Bank of Israel had ceased this activity during a two-month hiatus but just began again by buying between $100 million to $200 million. By mid-day the buying pulled the dollar’s exchange rate from NIS 3.77 to NIS 3.80.

Market sources said that the central bank’s move was designed to “soak up a surplus supply of foreign currency” which had caused a sharp appreciation in the “basket of currencies.”
The IMF also called on Jerusalem to put together a plan which would sharply reduce Israel’s high public debt burden.

Recent increases in short-term interest rates, in both August and December, were “appropriate” to prevent an uptick of inflation as the economy recovers from recession; and Israel applauds herself on her handling of the fiscal disaster.

However the IMF urged the central bank to stop intervening in the foreign exchange market and to restore the shekel’s status as a free-floating currency.

Regarding Israel’s debt, the IMF recommends that the country reduce its ratio of debt to gross domestic product, to 70% by the middle of the next decade, and aspire to a ceiling of 60% by 2020. It is expected that the ratio will “edge up” to 80% by the end of 2010.

Moorish Hacks Bank of Israel Site

Bank of Israel Site hackedThe Bank of Israel site was hacked yesterday by a hacker calling himself “The Moorish”. The Moors were black Muslim invaders of the middle ages (remember Morgan Freeman in “Robin Hood Prince of Thievs”?). “The Moorish” is allegedly associated with a group of Algerian hackers called Team DZ.

The hacker signs off by quoting Malcolm X: “I’m nonviolent with those who are nonviolent with me.” and a link to a YouTube video featuring an armed uniformed movement. The flags being waved in the video bear the Muslim declaration of belief, the Shahada (disambiguation), in ornate lettering.

“As an anti-colonial Muslim, I fully support the armed resistance of the Palestinians, Iraqis and Lebanese against the US and Israel. I am serious about the liberation! By any means rendered necessary!”

“This is the only way by which oppressed people can emancipate themselves than from the Zionist and American oppressors…the oppressors have not conceded to non-violent measures; therefore, their victims have no commitment to non-violent resistance…”

Image: Ynet

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