NYTimes magazine article - Will Israel Attack Iran?

neither tech nor R&D related, but a pretty solid way to keep from studying macro for 30-40 minutes:

http://www.nytimes.com/2012/01/29/magazine/will-israel-attack-iran.html?pagewanted=1&_r=1&ref=magazine

Israel Seems Less Affected by Credit Crunch

 

Anja Hochberg, Head Economics & FX

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22.12.2008The ongoing financial crisis affects all countries through various channels: Most directly via the credit crunch, which gridlocked money and credit markets, but also through export links and the loss of purchasing power. The extent to which countries suffer from the crisis, varies significantly. Israel is a country that could be less vulnerable.

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"Israel will be Affected by the Global Recession"

Compared with countries on a similar development path, the Israeli currency - the shekel - has lost considerably less ground versus the dollar since the intensification of the credit crisis in summer 2008. Other emerging market currencies have suffered comparably more than the shekel as result of the ongoing forced global deleveraging process. Why? Because the Israeli equity and debt markets are substantially less exposed to foreign investors than other emerging markets. This is beneficial in a situation of uncertainty on the financial markets, when the home bias generally is dominant, leading foreign investors to liquidate their positions abroad.

Currency Movements

From an economic point of view, the Israeli economy is nevertheless set to weaken from above potential growth rates to a real gross domestic product (GDP) growth rate of 1 percent to 2 percent over the next 12 months. Exports have already lost steam and this will affect the small and very open Israeli economy, which has a 63 percent share of its exports going to the US and Europe. However, as most of the exports are medium- to high-technology goods, Israeli exports are geared to buoyant industries and not toward the downtrading US consumers.

Aggressive Rate Cuts

In addition, the Israeli central bank, the Bank of Israel (BoI), has cut interest rates aggressively. At the time of writing, we have seen another 50 basis points cut to a level of 2.5 percent. Before September 2008, inflation expectations were rather high so the BoI tended to show a rather hawkish stance. Given the pronounced change in inflation expectations and the significant slowdown in global growth, the BoI has reacted quickly to bring down the cost of credit in order to strengthen the economy's ability to deal with the very challenging economic situation.

On top of this monetary policy support, fiscal policy initiatives will also back the country's economy. The rather high share of public spending can certainly help getting such programmes quickly into action. The often mentioned "catching up" in certain areas of infrastructure could not only prove to stabilize the economy in the short term. It could also support potential growth in the longer term. At the same time, the region ranks first in various "Doing Business" surveys, indicating a very stimulating business environment. The global financial crisis will affect Israel's economic development. The prevailing set of business conditions, industry orientation, monetary and fiscal policy support should, however, limit the economy's downside potential.

Global Deleveraging

As large losses have been registered on assets in major markets, and as money market conditions tightened, there has been forced deleveraging of positions around the world affecting all asset classes. The consequence of this deleveraging is that market participants are liquidating their emerging market investments. They either repatriate their capital or use the proceeds to cover their loans. This is creating considerable outflows, particularly from countries that had been enjoying strong portfolio inflows during the previous credit boom such as South Africa, Brazil and many Eastern European countries.

Defense R&D

This article made me think about a whole other area of R&D we haven't touched upon...

http://www.washingtonpost.com/world/middle-east/israel-tests-radar-in-arrow-defense-system-designed-to-intercept-missiles-fired-from-iran/2012/02/10/gIQAHsxj3Q_story.html

I found this site that has downloadable data on the macro economy of Israel that could be of interest for the Macro Assignment, if you haven't already finished. Otherwise, it just might be of general interest.

http://www.tradingeconomics.com/israel/gdp-growth-annual

Link to a PDF / Google Doc with summary info.

  

Israel is planning a sovereign wealth fund to turn natural gas to gold

Israel planning investment fund to turn natural gas to gold

By Amy Teibel, Associated Press

Updated 1/24/2012 4:18 PM

JERUSALEM – Israel is putting together a plan for a national investment fund that would put to work an anticipated natural gas bonanza to fuel both an export-geared economy and provide a nest egg of $10 billion for future generations in less than a decade.

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  Albatross Aerial Perspective /AP
  The Tamar Lease natural gas rig, 90km west of the city of Haifa, Israel.

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Albatross Aerial Perspective /AP

The Tamar Lease natural gas rig, 90km west of the city of Haifa, Israel.

The proposed Israeli sovereign wealth fund is still in the planning phase, but officials have said some of the revenue would be invested in critical areas such as education and health.

Also being discussed is using some of the proceeds to endow a new set of export-oriented, technology-based industries that would build on what has traditionally been the country's greatest resource: human capital.

The fund would mark the beginning of a strategic development for the Jewish state in an oil-rich region where it has few friends and has had to rely on its own industry and outside aid for economic growth. It would also make it the latest member of a club whose members have typically been energy exporting titans such as Saudi Arabia, the United Arab Emirates and Norway.

Israel would become "a role model of a developing economy that moved into developed economy status," said Glenn Yago, senior director at the Milken Instituteeconomic think tank. The institute was enlisted by the Israeli government to map out alternative structures for a sovereign wealth fund, drawing on the experiences of other nations with similar investment vehicles.

The driving force behind the fund was the 2009 discovery of two large offshore natural gas fields with estimated reserves of 25 trillion cubic meters of gas. The fields were a boon for resource-poor Israel. The late Prime Minister Golda Meir famously lamented that Moses "took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil."

A consortium headed by U.S.-based Noble Energy has said it will begin extracting gas from the deepwater gas fields in about a year, with production expected to far exceed Israel's domestic gas needs.

Officials estimate that gas receipts will bring in between $2 billion to $3 billion per year. And they are working on what to do with the proceeds.

Based on Bank of Israel and Finance Ministry assessments, an investment fund could be managing $10 billion by 2021, with revenue starting to accumulate by 2015, said Yago.

Recommendations for the fund's structure were recently submitted to the office of Prime Minister Benjamin Netanyahu, but no decision has yet been taken on who will manage the fund and where the investments will go, officials said.

Once a proposal is final, it would need parliamentary approval. A Finance Ministry official noted it would likely take until the end of the decade for the fund to start building a critical mass. The official spoke on condition of anonymity because no formal decisions had yet been taken.

"We are looking at sharing this wealth with future generations and at the same time creating a safety cushion," Eugene Kandel, the head of Israel's national economic council, told reporters last year.

In comparison to its regional neighbors, Israel's sovereign wealth fund would be minuscule. Saudi Arabia, the world's largest oil exporter, has reserves of more than $500 billion while even civil war-scarred Libya has an investment fund and reserves estimated at $70 billion to $110 billion.

Given its limitations, Israel appears to be setting modest goals for the fund.

To avoid typical pitfalls like inflation that face countries when large amounts of cash are injected into their economies, the Israeli fund would likely invest most of its revenue abroad. Returns from those investments — not the principal — would then be channeled into the Israeli economy for purposes like education.

It would also further stimulate an economy that was able to weather the worst of the global financial crisis in 2009, but must grow much more rapidly if it is to narrow income gaps that helped stoke mass protests across the country last summer.

Some senior Israeli officials have proposed using some of the money to develop new industries rich in intellectual property, life sciences, water and alternative energy.

That sector has helped boost the broader economy, which has seen per capita GDPnearly triple over the past 20 years to roughly $30,000 — near the European Union's average.

Milken's Yago estimates economic growth would have to double its projected 2012 rate of 2.8% to bridge income divides that have strained Israel's social fabric.

"You can only do that if you increase the level of growth by increasing the level of exports," not only in existing industries but new, knowledge-based ones, he said.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

New art museum in Tel Aviv

There's a new-ish art museum in Tel Aviv that's getting attention from the architecture community.  (Jonas?  Thoughts?)

More here.

Jerusalem's Armenians outraged as city approves Jews-only parking lot in Old City

Link

Israel Documentaries Wins Prize at Sundance Festival

I just came across an article on the Jerusalem Post - Israel did very well in the documentary category at the Sundance Festival, scoring two major awards.

http://www.jpost.com/ArtsAndCulture/Entertainment/Article.aspx?id=255574