The year 2008 will be remembered as the year of the great crash. It also has an exact date - September 15, 2008, the day investment giant Lehman Brothers went bankrupt and the American administration failed to come to its aid. That was the day when the stock exchanges of the world began to collapse. That was "Black Monday," when the savings of hundreds of millions of citizens throughout the world started to fall and dropped by dozens of percentage points.
The last large crisis took place 80 years earlier, on October 24, 1929, "Black Thursday," when the New York Stock Exchange collapsed. But the plummeting of rates that day was merely a warning sign for the Great Depression that took place in the United States and then Europe throughout the 1930s.
In the U.S., about one half of the banks went bankrupt. Businesses were wiped out, wages dropped to a historic low point of five cents per hour, unemployment soared to 25 percent, savings evaporated, people committed suicide, and there was widespread hunger and malnutrition.
We are certainly not in the same straits. This crisis will be less dramatic. The world economy is much stronger today and there is no danger that we will deteriorate into a prolonged depression of the kind experienced in the 1930s. But the crisis is sufficiently deep and scary that the false prophets and those with vested interests will lie to the public and tell it false fables in order to exploit the situation for personal or political gain.
Here are five of the most obvious myths:
1. The safety net fable: Many politicians have told the public how necessary a "safety net" is to save pension money which is about to disappear, leaving retirees without a cent. But the facts show that the provident funds lost 18 percent in 2008, a loss that came on the heels of a 66 percent profit in the five years that preceded 2008. That is to say, in the past six years, a good profit remained. That is why there was no good reason for the huge campaign of intimidation which brought in its wake an unnecessary "safety net" that had only one objective - to serve the interests of the politicians, bankers, investment houses and tycoons.
2. The Obama fable: They tell us to take an example from Barack Obama, the president-elect of the United States. He has already announced that he will allocate hundreds of billions of dollars to change the face of American capitalism so that it will be more social. Therefore we are obliged also to enlarge the state budget, for exactly the same reason.
The problem is that Israel is in a very different position from the capitalism of America. Here the government spends 44 percent of the GNP while in the U.S. they spend only 35 percent of it. In Israel, the marginal tax rate is 46 percent while there it is 36 percent; that is to say, the Israeli tax system is more progressive. In Israel, there is health insurance for everyone, even someone who has not paid a cent for it. In the U.S., health insurance is private and some 50 million citizens have no coverage at all.
In Israel, education is public and egalitarian. There, some pay expensive prices for private schooling. Here there are stipends for having children and a guaranteed minimal income, while there they only distribute food stamps.
That is to say, the government in Israel is more deeply and more socially involved in the economy, and therefore we have nothing to learn from Obama. He must learn from us.
3. The fable of the experts: The public is told that they must listen to the experts from the investment houses who know where to invest because they are experienced stock exchange people.
Well, what did IBI CEO Zvi Lubetzky say in April 2008? "There is no bubble in the share market, the bank shares are a fantastic bargain." And what did Migdal Capital Markets CEO Yaakov Weinstein say in May 2008? "The climax of the crisis is already behind us." And what did Meitav chairman Zvi Stepak say in January 2008? "The attractiveness of the shares market is increasing."
Since then, the markets have collapsed and anyone who listened to these experts lost a great deal of money. What is the conclusion? That one must never listen to investment houses. They are speaking from their own point of view. From inside the pocket where the management fees are put.
4. The fable of the tycoons: And what did those who were chosen in previous years as "businessman of the year" have to say? For example, Lev Leviev in February 2008. "If we examine the assets of Africa Israel, we will see that right now that is the best share on the market." Since then, it has plummeted by 80 percent.
And what did Yitzhak Tshuva say in March 2008? "The real estate crisis in the U.S. will pass by the end of the year and the third quarter will be excellent." That sounds completely crazy today. Therefore one must not listen to tycoons either.
5. The fable of capitalism and globalization: They tell us that piggish capitalism, together with cruel globalization, are responsible for causing the huge crash, and therefore the system must be changed and we must go back to good old socialism.
The accusers forget that a market economy, free enterprise and international commerce are what led to world growth, a rise in the standard of living and a drop in unemployment throughout the world in the past 20 years. It is true that these are systems that are not perfect; the collapse of September 15 proved that. But nevertheless, and despite everything, we are referring to systems that are much better than the alternative.
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