The market method again seems challenging: the US central bank buys corporate bonds • And whether in Israel we achieve the required flexibility, or in other words - who will win the fight with the Histadrut

This week (Tuesday) the US Federal Reserve (the Fed) announced a significant expansion of its acquisitions in the secondary market of corporate bonds (bonds of publicly traded companies). According to the statement, this is a tremendous amount of half a trillion dollars, but at this point, about half of that amount was actually allocated to the actual purchases. This move came alongside $ 57 billion in long-term lending programs for small businesses, and this week another $ 32 billion was allocated for long-term loans to large businesses (Main Street). 

This is certainly a test case for the US central bank, and perhaps for the central banks in general. Normally, not during a crisis, we do not think about the possibility that a central bank will intervene directly in real economic activity - in corporate activity. Moreover, it seems completely wrong and unrelated Market perception - the other end of communism A central bank is not the government, but it is part of the government and is certainly not a private player, and if it fulfills its full plan it may hold 6% of the market and it will hold about 3%. From him in the near future - from the private market.

The justification for this, of course, is to preserve the stability of the banks, because if many companies are in crisis, and that seems a completely possible direction now, then the problem will be the banks and the US economy. This is an extreme step that goes far beyond the usual monetary tools we know - changing interest rates, the amount of money. 

About 170 years after Marks wrote the Communist Manifesto, he can seemingly smile in his grave and say: I told you! The private market does not work out, and at the end of the central government will have to take control and manage it. But he was probably even discouraged by this hope after the 1929 and the last 2008 crises. Unlike the great financial crisis of the last century, the central bank is responding very intensely with the hope that the government will not.

In that crisis, the central bank did not function, and it came to light that the government adopted John Maynard Keynes' plan ("The New Deal"), which catapulted the ongoing government intervention, raised taxes, increased the public apparatus and reduced the level of private market freedom to date. . 

Central banks have learned quite a few lessons since that bleak financial crisis. The US Federal Reserve's extreme steps are certainly dangerous. In fact, the Fed sets criteria for the purchase of corporate bonds and any such company it acquires will actually receive some standard, as it will not acquire companies that appear to be unlikely to survive. So not only will demand affect the market, but the identity of the applicant. 

The first task of finance

This week, the Histadrut declared a "general labor dispute in the civil service." According to her announcement, there are 70,000 workers who have struggled against the intention of reducing their wages and numbers, as part of the difficult coping with the Corona crisis. But there are other conflicts: the Employment Service, the Ministry of Health, the "public sector lab workers", the public sector social workers and the psychologists in the authorities. These are all due to burdens and working conditions created by the Corona, and not aimed at cutting wages or standards. 

Only a decade ago, civil service employed less than 56,500 workers - a 25 percent increase over a decade. The increase in the civil service workforce outweighs the population growth, and certainly the growth in the private sector. It is interesting to find that the increase in civil service wages has risen quite similar to the increase in the number of employees - their wages have also risen 25% in the last decade - more than double the increase in private sector wages. In the healthcare system, by the way, average wages have risen by more than 30% between 2007 and 2017 and in the past decade by 33%. 

At the beginning of the previous decade, in 2003, Benjamin Netanyahu explained in the immortal image the problem of the "fat man", the public sector, who rides the "lean man", the private sector. He showed that this is a continuing trend whereby the oil is greasing and the slender denies. The problem is that the trend has continued ever since, and the only reason this skinny is still somehow capable of carrying the oil - is that the skinny is waiting and recruiting high-tech forces to its aid.

The skinny could raise hundreds of billions of dollars from the world, plunge human productivity to new levels in history and enrich the state coffers. But structurally, nothing has changed. We just witnessed a crazy show where the lightweight boxer swings a Sumo boxer and it cries out: Give more to eat and everything will be good. 

The Histadrut never needed moral justification for its activities. Originally, she aspired to the "occupation", with the same narrow and distorted view that there are a number of limited jobs and everyone who is a first kidnapper earns. It sought to replace efficient Arab workers in their infrastructure and segment work with older and inexperienced workers.

The Histadrut itself, at the time, found that Jewish immigration was, in the best cases, one-third of that of Arab workers who replaced it. But that, of course, has never been a relevant consideration for them. And the same is true today: the state is expected to reach a deficit of far more than NIS 100 billion - a huge sum we did not recognize in wars. But the Histadrut intends to reduce government spending as an illegitimate and threatening strike. 

Recently, we have been following the Histadrut's struggle to deal with the deficits it has created for itself and to attach new jobs under its protection. The method: Enter a successful and large company, such as "direct insurance," to identify key employees and offer them senior positions on the future workers' committee - provided, of course, that employees sign an agreement to join; And when one-third of the employees get it, the scandalous law considers it cabbage and thus forces all employees to abandon their representation and pay membership fees to an organization that does not publish its financial reports. 

This government, like its predecessors, would not be able to deal with this crisis without the devastating power of the Histadrut: eliminating the possibility of "identification strikes"; The repeal of Ottoman divisions from the publication of financial reports and the cancellation of the "representative third." There is certainly room for labor organizations and employee representation, there is no room for monopoly in the field, lack of transparency and coercion of representation. The subordination of democratic rules of the game to the Histadrut created a monster that will not allow the Israeli economy to overcome the crisis this. 

We do not yet know how the Corona crisis will end, but it is already clear that it is a crisis that will shock the economy - a fact that could turn out to be a good thing. However, shocks can only be survived with flexibility - in the workforce, in wages and in the nature of the work. The Histadrut is concerned with hardening the economy and preventing the possibility of labor mobility and structural reforms. This is a suicide recipe, certainly for the economy in this magnitude crisis, and also the first challenge of its importance to the finance minister and the government.