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Aliyah and Interest Rates

Aliyah is the at once mystical and practical "going up" to Zion. Stanley Fischer is one of the very many men and women who have made that journey and are, thus, olim. It was Bibi Netanyahu who, as minister of finance in Ariel Sharon's government, summoned him to the service of the Jewish state and turned around his whole life. Fischer went, then, from the highly polished tables of international finance to the more quotidian business of the Bank of Israel, of which he is governor.

On Friday, a report in the Wall Street Journal indicated that Israel might actually raise interest rates, a sign that its economy was well on its way to recovery but a sign that Fischer warned should not be over read.

Then, this morning, a headline in the Financial Times in fact reports that "Israel increases interests rates in surprise move" (from 0.5% to 0.75%). The FT explains: "Israel--a small, open economy--has different growth and inflation dynamics. In terms of policy, the Bank of Israel looks to be a trailblazer rather than the first in a closely-grouped convoy of central banks embarking on a tightening cycle. Some others are still easing." But the Bank of England, for example, can not ease any further. Its interest rates are already "close to zero."

The FT goes on...

"The Israeli central bank said the most recent data on the economy strengthened the assessment that there had been a turnround, although ‘great uncertainty' remained about the expected rate of economic growth ... The Israeli move will still be closely watched, in large part because Mr Fischer, a former deputy managing director of the International Monetary Fund, is regarded as the elder statesman of the global central banking community."

Yes, Stanley Fischer is a Zionist idealist and a Zionist idealist whose ideas work. Israel was built on such idealism, and it is a tribute to Netanyahu that he has been eager and able to mobilize this. Israel's relative prosperity in these grim times is also part of Bibi's political strength. Which is another reason he is able to resist Obama's pious enticements to peace with forces who are set on war.

By the way, Fischer was Ben Bernanke's Ph.D. thesis adviser at M.I.T.