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"The dire predictions haven't come to pass. The dollar hasn't collapsed; the yen hasn't appreciated dramatically; oil has not reached $100 ... Protectionism didn't win," he declared, adding that the worst-case scenarios didn't come about. That doesn't mean that crises can't occur, but the world has gone global; broad, deep financial markets enable corrections to be effected in a more relaxed and neater way. One could almost say that we have become immune to bad economic management because of the sheer strength of the financial markets, he argued.

"He" is Jacob Frenkel, vice chairman of AIG and former governor of the Bank of Israel. He made the above comments at the World Economic Forum conference in Davos, on January 24, 2007. Six times in a row, Frenkel beat the pessimists at Davos. Six times he took a bullish tone at the annual conference's opening forum - and six times, he was right.

He walked all over Steve Roach, the former chief economist at Morgan Stanley, who kept warning that the American credit bubble would burst, and who was wrong year after year. By 2007 Roach had had enough of the annual rite of humiliation, and evacuated his pessimist's perch in favor of Prof. Nouriel Roubini, who preached that three bears lurked in wait for the global economy: the housing market, the monetary rate hikes which would lead to a credit crunch, and rising oil prices. He warned of too much complacency in the markets, and noted that his greatest fear was the absence of fear in the financial markets.

Why did Roubini choose three bears as his motif? Because of the phrase "Goldilocks economy," coined to describe America's economy, which had finally found a "porridge" to its liking: not too cold, not too hot, but just right. And bears symbolize markets in retreat.

Frenkel thought Roubini's lurking bears were a great giggle: "We see a lot of ugly bears growing horns and becoming bulls," he quipped, to the amusement of the crowd. His perennial optimism was based on the global markets being clever and pricing risk properly, and also on their possession of auto-correction mechanisms that would avert a protracted crisis in the financial and the real spheres. "A slowdown in housing degenerates into a recession only when the banking sector's balance sector sheets are weak, which is not the case now," he said back then.

Then was in January, 2007. By August, a great big drooling grizzly had emerged from the forest: the subprime crisis, $1.3 trillion in loans to Americans of dubious credit-worthiness. Some of zero credit-worthiness, actually. It was a crisis born of the American borrowing spree, which Roach had been warning about for years. As the months passed, it turned out that Roubini's fear of no fear in the markets was justified.

Now the subprime crisis threatens to pass from the financial to the real sphere, and into a recession in the United States, although not all think so.

The balance sheets at the big banks, which a year ago had boasted of their best situation ever, suddenly look very different. In the last month the biggest banks on Wall Street were forced to admit equity write-offs amounting to tens of billions of dollars. They were reduced to hastily raising capital from the Middle East and Eastern Asia to shore up their financial foundations.

Next Wednesday, the world's economic leaders will be convening once again, as every year, on the snowy slopes of the Swiss ski resort. The mood is going to be very different this time. One bear - the subprime crisis - is out there, savaging investors, CEOs, borrowers and lenders. The question is whether the next bear, the recession in America, will break out of the forest, too, along with maybe an even scarier bear: a crisis in China.

What won't be breaking out of the forest in Davos, or rather "who" won't be breaking out, are the CEOs of Citigroup, Charles Prince, and of Merrill Lynch, Stanley O'Neal, because the first bear devoured them.

Or, they were forced to resign because of their institutions' huge losses on investments in subprime vehicles. Instead of clicking cocktail glasses at the annual reception they used to hold at Davos, they have to bone up for their next major public appearance: before Congress, where they'll be asked why they received retirement packages worth hundreds of millions after causing their banks losses worth billions.

"The dollar crashes and the finance minister stays silent. This morning I spoke with the finance minister, with pain, trying to convey the pain of the manufacturers, and asked for an emergency discussion on the dollar. The finance minister told me: I don't mean to do a thing. I couldn't believe it. If the finance minister doesn't mean to do anything when we're talking about closing down dozens of production lines, I don't understand where the state's responsibility lies" - Shraga Brosh, president of the Manufacturers Association, last week.

What kind of finance minister do we have?

The dollar is sinking, Big Industry calls and he ... does nothing. Surely a serious Israeli finance minister would have leaped into action. He would have phoned George W. Bush and given the U.S. president 48 hours to balance federal spending, solve the credit problem and clean up the banks' balance sheets on Wall Street.

A serious finance minister would then have sent warning letters to 7,000 international hedge fund, pension and investment managers, who've spent the last year exchanging dollars for euros, and ordered them to cease and desist.

He would then have banned foreign investment in Israel: not in companies, not in property and, heaven forfend, not in the financial markets, because these activities require massive exchange of dollars into shekels, which causes the shekel to appreciate against the dollar in the local forex market.

Then the finance minister would order the Bank of Israel to ignore the spike in inflation and keep local interest rates on the proud Zionist shekel much lower than on the dollar.

Yet there sits Roni Bar-On, mum. He sees us as part of the global currency market, which is a free, wild, globe-spanning thing, in which asset prices are set day in and day out by millions of investors, based on actual economic developments in hundreds of countries involving hundreds of thousands of investment companies - none of which ask Israel's finance minister for his blessing before they move. Odd duck, our finance minister.