Inflation is back - and this time it's only the government's fault - voila! money

Prime Minister against the background of the protests. When a football coach talks about the referees, the injured stars and the boos from the stands that dampen the players' confidence, we know that his days on the job are numbered/image processing, Reuven Castro, Shlomi Gabbay

Say what you will about the Governor of the Bank of Israel, Prof. Amir Yaron, in economics he understands. In an interview given to Yehuda Sharoni, Walla, and Maariv, shortly before the holiday (even before the CPI was published), he estimated that the annual inflation rate would return to around 4 percent, 1 percent higher than the upper threshold of the inflation target and twice the desired target.

It seems that even the Governor was aiming for an increase of 0.4 percent, so that even he was negatively surprised by the half-percentage point increase, but at the same time he also disclosed the reason for the increase: the depreciation of the shekel against the dollar, entirely under the influence of legal legislation and the subsequent destabilization of Israel.

Let's go back in time almost a year and a half. The government of change still survives, but inflation is already a fact. Its main focus is on global reasons, such as the increase in private consumption in the post-COVID-<> era, in parallel with a dramatic increase in energy prices due to Russia's invasion of Ukraine.

There were also local reasons related to the amount of money in the technology industries, which naturally radiated more on Israel and its high-tech industry (and raised mainly real estate prices), but in general – the rise in inflation around the world almost simultaneously indicates that neither the Bennett-Lapid government nor the Netanyahu government is to blame, nor former Finance Minister Avigdor Lieberman "the enemy of the ultra-Orthodox" nor their "savior" - Finance Minister Bezalel Smotrich. Israel was simply an island in the flow of global inflation.

The prices of most products did not rise, Israelis moderated consumption - so how come the index rose, and how does this relate to legal legislation?/ShutterStock

There are many injustices of the current Israeli government in the field of economics, the main one being the provision of unprecedented incentives for evading work – and even worse (even if related) to evading the acquisition of basic skills for integration into the world of employment in the future, but subject to the previous paragraph, at least the burden of rising inflation could not be controlled.

Moreover, during her tenure there was a halt in inflation and even a decline. It is true that this had nothing to do with the government's actions, but with the economic personality most attacked by it – the governor of the Bank of Israel and his interest rate policy, which was slandered by ministers whose understanding of the economy is questionable.

At the same time, and despite all of the above, the rule that applies to football coaches is also true for politicians - if the team won, even though it played poorly, the coach deserves to enjoy the glory of the three points, if only because we would call for his dismissal in the event of defeat.

So here comes a loss – and another one that comes the day before Rosh Hashanah (perhaps for the benefit of the government and its economic leadership, since most of the people of Israel were busy arranging the holiday table – thus sparing the coalition from dealing with a news item that on any other day would have become a headline).

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Finance Minister Bezalel Smotrich: Like a football team quartermaster who breaks a block of ice on the beam to expel the manchus/image processing, Haim Goldberg/Flash 90

When examining the data, it turns out that the entire loss this time is the fault of the government (football fans are entitled to draw a direct line to the unfortunate defender, Shimic, of the champion Maccabi Haifa, who was to blame for all three goals his team conceded in the surprise loss). Why? Because most of the prices actually went down.

How can this be? Well, the expensive money (because of the high interest rate, although it was not updated in the Governor's last two decisions) combined with the price increases that have already risen and the sharp jump in rental prices (which are not reflected in the CPI), caused us to keep our wallets a little deeper in our pockets. Even the holiday specials, some of which began in late August, did not cause the Israeli public, in general, to purchase more.

Therefore, those who could lower prices did so. So how come the index hasn't fallen? Mainly due to an increase in the prices of imported goods, which are rapidly affected by the depreciation of the shekel against the dollar in any other segment. The effect was not always direct. In the prices of frozen fish, for example, most of which were imported to Israel before the depreciation of the shekel accelerated, there was an increase stemming from importers' desire to "insure" themselves against the future blow.

If there is no dramatic contraction in the September CPI, in a month the Governor will be forced to raise the interest rate/image processing again, Flash 90; none

In any case, if we isolate the depreciation of the shekel and its effects, the main cause of the increase in the CPI is revealed. Economists agree that the consistent erosion of the shekel, the creeping depreciation that has already accumulated to a very significant percentage, is detached from any economic parameter.

So what is it affected by? From the legal legislation. The government also understands this, but since they do not want to stop (or be perceived as weak and delaying the legislation by agreement), they place the blame on the protest movement. Beyond the fact that this is not true, there is a complete escape from responsibility: since when are citizens responsible for significant economic parameters?

And here we return with your permission to the coach and the rule that in the event of a prolonged defeat, the entire squad cannot be replaced, only the coach. So far we have heard from the Prime Minister and the Minister of Finance a combination of lies and excuses:

lies such as free education for ages 0-3, lies about fighting the elements that are causing the cost of living to rise (and don't get me wrong, the adoption of the European standard and a few other steps that have been taken are welcome, but like a drop in the ocean from those who promised to declare war on the cost of living!) or excuses, the most popular of which is blaming the previous government (which has not been in office for almost 9 months, In other words, even the seed of calamity that gave rise to the rise in the cost of living was sown after the elections (to borrow an association from elsewhere, given this time period).

When the coach starts talking about the referees, the injured players and the fact that boos from the stands impair performance, every football fan knows that his days on the job are numbered. So the government tells stories about the previous government, about the protests, about what's happening in the world - and the citizens of Israel who pay the price at the supermarket checkout are in this parable The fans who go home are humiliated, especially the burnt fans, Likud voters, who, with all their hatred for "Small", know in their hearts that the government they elected is the one that does not deliver the goods - and that the finance minister who talks about "an economy with God's help" is like a quartermaster who breaks a block of ice on the gate beam, Or replacing the mezuzot at the entrance to the dressing room to chase away the manchus...

The bad news: If there is no real change in the public atmosphere in Israel (and it is doubtful whether there will be, after the prime minister's "greeting" before he leaves for the US, even if his frustration is understandable), the worst is yet to come: On October 23, the Governor is due to deliver his next interest rate decision, and without a radical change in the September data, it is doubtful whether he will be able not to raise it. If this happens, the overdraft that many Israeli citizens are sinking into will only become more expensive, as will mortgages and credit to small businesses.

The economy whose basic data is one of the best in the world (really!) is crashing, because he was sick that all his tests were normal, but his condition is getting worse by the minute. So call it reform or call it revolution – as far as the Israeli economy is concerned, it's a predatory bacterium.

• More on the subject:
• Benjamin Netanyahu
• inflation
• Amir Yaron
• Governor of the Bank of Israel
• index
• Consumer Price Index