This week I have been travelling a lot and I am surprised by the construction activity going on. Roads are being widened, bridges built, new industrial complexes, etc. What is going on? The papers and the TV is full of talk of crisis, but the GNP is growing some 5% and people seem to be very prosperous. Judging on the basis of what I see with my two eyes, I believe in no crisis and no recession, the economic situation is rather good in Israel. We are going on vacations to London.
Stanley Fisher, the head of the Central Bank, reduced the interest rate to 3.25% which is almost the Japanese level. He is also buying dollars in the free market and increasing Israel's reserves. Some say that the meaning of this aggressive monetary policy is that he is preparing the country for a strong world recession.
Such is the level of disaster mongering surrounding the latest phase of the eight-month-old world wide credit crisis that you could be forgiven for thinking we will all soon be hoarding food and reverting to a barter economy. At the very least, the media paints a collapse akin to 1929's stock market crash and the Great Depression that followed. But with investors already positioning for a worst case'' scenario, fund managers are overweight cash and they just need a catalyst to know when it is safe to go back into the stock markets. I for one believe the pendulum is about to swing.