If the Israeli economy were a snake you would see it shed its skin every so often to give the snake a new look. Because the phenomenon seems incomprehensible when you're not used to it, you search for a reason that might give meaning to what you see happen but find no satisfactory explanation. You think about the matter for a while and hit on the notion that there may not be a real economy in Israel after all, and that the whole thing is a sham - more like a make believe piece of theater. You look closely to check your hypothesis and ascertain the reality of the situation and discover that what passes for economy in that strange place they call Israel is an empty shell that can only be construed as the national equivalent of a cross between an Enron house of cards and a Maddof pyramid scheme.
You study the matter in more general terms and find that the reason why it is possible for an Israeli economy, for an Enron balance sheet and for a Maddof portfolio to appear real is that most people do not have the opportunity to see the physical proof of what the economy of a country, the operation of a company or the portfolio of an investment manager are made of. Instead, they rely on the figures supplied to them by the entities they have come to trust or have no choice but trust. Thus, Enron can set up a multitude of shell companies and connect to them with a labyrinth of fictitious deals. Figures are then generated by these deals and entered on the revenue side of the balance sheet without raising the suspicion of shareholders. Likewise, a Maddof portfolio can be made of fictitious trades with fictitious stocks that produce fictitious dividends and capital gains without raising the suspicion of investors. And the minnow economy of Israel is made to look like it can produce whale size goods and services by entering big numbers on a ledger to reflect not the reality of the situation on the ground but the fantasy of the shifty minds behind it all.
The reason why an Enron, a Maddof or an Israel would do such a thing is because it is part of a presentation where they try to convince the world they have an ongoing operation that is so successful it will meet its obligations in full and on time. In doing this, they implicitly promise to pay with interest or with dividend the money they take from investors and thus encourage more investors to come forward and invest with them. When new money comes in, they use a little of it to pay the existing investors and make the operation look as successful as they had promised. They keep the rest of the money for themselves and use it to lead a style of life they never earned. All the while, the operation they preside over remains an empty shell made to look like it is enjoying a steady growth by virtue of the labyrinth, the phony profits and the whale size trades they generate on paper but nowhere else in reality.
But no matter how long it takes, the Enrons and the Maddofs of this world are eventually unmasked because they operate under the legal jurisdiction of a country like America or any other that is governed by law. On the other hand, a sovereign country is difficult to unmask because it lives by its own rules and remains free to do what it wants as long as it pays what comes due to the bondholders on time. Even when people suspect that the payouts come not from the ability of the economy to produce a surplus but from the sale of new bonds, they accept the situation because they know that a country can at times go through a bottleneck before the economy gets back on track and scores a higher rate of growth. In fact, bondholders are usually a patient lot because they are long time investors who look as far into the future as five years or ten or even thirty.
Of course, rating agencies do exist that are supposed to keep an eye on the sovereign bond issuers and the financial institutions which are related to them such as banks and the other issuers of credit. The trouble is that the rating agencies report to the public when in fact they are neither retained by the public nor paid by it. Surprisingly, the agencies work for the entities they report on and get paid by them. For this reason, it is said that to rely on the rating agencies to tell you the truth about their clients is like relying on the lawyers of Mafia bosses to tell you about the shortcomings of those who bankroll them. If on the face of it, this setup looks and smells like a farcical situation, it is because it is exactly that. And the history of the past few years - when triple A ratings were assigned to institutions that were of high yield (junk) status - has shown how damaging to the economies of the world the farce has become.
Now, when it comes to Israel, the fact is that most of the debt that is held by this non-economy is guaranteed by America. Thus the bondholders are not concerned with the level of risk that the issuer of the bond represents because what matters to them is the level of risk that the guarantor represents. This is satisfactory to most investors but if you are not concerned as a bondholder, you should be as a direct investor or if you invest in the stock market of the country because the American guarantee distorts the picture and gives a false reflection of the economy. Thus, while the bond may be safe, nothing else is. Moreover, when you see a negligible country that has been so lucky as to have its bond guaranteed by a powerful economy, you would think that the beneficiary will be grateful enough to operate quietly and try to pay off the debt as quickly as possible. But this is not happening with Israel where they do things in their traditional in-your-face manner and a large dose of chutzpah. This prompts you to look closely at what they do there and find that Israel is using the money guaranteed by America to run a Ponzi scheme of Maddof proportion. And you feel sick to your stomach.
The truth is that Jews can never have a normal country of their own where they would run a normal economy. A lot of people - many of them Jews - will tell you this and give a number of reasons why they think so. At first I did not take this view seriously until something happened that jolted me and got me to look into the matter more closely. What happened was that while freelancing for a number of publications in Montreal I heard a story from several sources that raised my curiosity. The story was about a number of Jewish professors in the English and the French universities who were telling their students the history of what came to be known as the “war of attrition.” This is the six year war that followed the Israeli blitz on Egypt in 1967 and ended when the Egyptians crossed the Suez Canal in 1973 and took back the Sinai Peninsula.
Sometime during that war, the Israelis were able to stage a raid on the Egyptian mainland using helicopters. They dismantled an abandoned transformer and took it back with them. The Jewish professors in Montreal were telling their students that this is what it means to be a Jew. They explained their viewpoint this way: You see something you like, you take it. If you cannot bring yourself to behave in this manner, you are no Jew and have no business following the Jewish tradition. To tell you the truth, my dear reader, although I knew about the theft of the transformer because Israel made a hullabaloo about it when it happened, I still could not believe that Jewish professors in North America would discuss the incident in public the way that I was told they did. But then one day someone brought me the proof in the form of a recording and I was amazed at both the chutzpah and the carelessness of these people.
The operation to steal the transformer reminded me of the time when the Israelis had staged another raid on an Egyptian outpost at Sharm-el-Sheikh where they looted the place there too. Decades have passed since that incident and I can still hear Walter Cronkite describe the operation. The readers who are too young to remember Cronkite should know that he was great because he could internalize the emotions of the people on whom he was reporting and express what they felt with his rich facial expressions and a perfectly modulated locution. In fact, it was said that when you see and hear Cronkite describe someone, you get to know that person intimately and get to feel what they feel. Thus, when he described the raid on the outpost, he expressed the jubilation of the Israelis who were happy to discover that the outpost contained something they valued more than anything else. Cronkite's exact words to this effect were these: “Enough food to feed Israel for a whole year.”
What comes out of this episode is that the search for scraps of food to steal is an important ritual for the Israelis of today as much as it was for the Hebrew tribes of antiquity. And this out-of-control craving to rob someone must have been the motivation behind the raid at Sharm-el-Sheikh and the one on the Egyptian mainland. But this sort of behavior should not surprise anyone because it is typical of the marauding primitive tribes of the Old Testament, those tribes that lived by stealing food from their neighbors and by looting the other things from everyone else. And what all this points to in the final analysis is that the primitives have come back and have revived the old habit of inflicting on humanity the savage old ways of the Stone Age. Indeed, the barbarians are not only at the gate; they have crashed it and no one in the world is safe.
And what is a Maddof scheme if not a way to raid and loot the pockets, the wallets and the bank accounts of your neighbors! This is why such schemes are well suited for the mode of operation practiced by people that came out of the Stone Age but never got the Stone Age out of them. Still, these people live by the laws of the jurisdictions in which they find themselves where they are thrown in the slammer every time they break the law, something they are known to do more often than any other group. But Israel is a sovereign jurisdiction that has erected the semblance of an economy which rests on a pyramid scheme maintained by the Jews who live abroad and sustained by America. This is why Israel has been able to go on for a long time, why it was able to fleece many people without being called to account and why it has managed to cause heavy damage to the finances of those who were unable to defend themselves not knowing what they were supposed to defend against.
But there were those who knew how to defend themselves. The best way to see how a sovereign nation runs a Ponzi scheme and how to defend against it is to see how someone was able to escape being victimized to the end. Here is that story. Sometime in the mid Nineteen Nineties a company agreed to do a natural gas project in Israel where prior to that, a small gas field had been discovered. However, the propaganda that surrounded the small discovery made it sound like Israel was swimming in oil and natural gas where several massive fields, all brimming with hydrocarbon deposits, were said to be ready for development. The company in question bought the propaganda, responded to the call and started to work in Israel. But then it took the company very little time to discover that the whole thing was a sham designed to get foreigners to spend money in Israel which is how a sovereign Ponzi scheme works. Upon this discovery the company dropped the project in mid-stream, swallowed the losses it had incurred up to that point and moved to India in 1996 (if memory serves) thus avoided being severely damaged by an operation that turned out to be not a promising venture but a useless adventure. When the story was publicized, the Israelis stopped talking about the massive fields they had said they discovered because the world now realized how deceitful the claims about Israel's economy truly were.
Naturally, my friend the reader, you are by now curious to know which company fell into the trap but was smart enough to cut its losses and move out on time before losing even more. Well, I'll tell you who that was, my friend, but first make sure you are sitting down before you read the answer. Here it comes: it was none other than Enron. “Enron!” you scream. Yup, like they say, it takes a thief to catch a thief and who was better suited to smell and catch a thieving rat than the rats of Enron! But let's not be too hasty now because you never know; it could well be that up to that time Enron had not yet developed the scheme for which it came to be known but learned all about it from the Israelis and went on to implement it in America. Anything is possible in this dirty business, you know.
Anyway, with this project gone down the drain, the Israeli snake decided to shed the hydrocarbon skin and wear the skin of the dot com which came in vogue right after the oil craze. Here too, lots of companies responded to the propaganda that was designed to sound as if Israel was dot-comed into existence by the Almighty to lead the world into the internet revolution. But the end result was that most of the companies lost their shirt and moved out of there penniless or they died on the spot and were buried without fanfare. Still, because the Ponzi scheme had to be maintained to prevent the Israeli economy from falling into the pit of oblivion, the snake was made to shed the skin of the dot com and wear the new skin of the high tech where it was propagandized that the Almighty had high-teched Israel into being to pioneer a new level of existence that will take mankind to the promised land of futuristic wizardry. But here too more fatalities resulted and the corporate bodies were buried without ceremony or a small prayer or someone to shed a tear. After that came the bio-medical skin of the snake where they said that Israel was mandated by the Almighty to bio-medical humanity into a bionic age of near eternal life, an age that was said to be of infinite vitality. But here too, the hogwash came to naught when it was realized that more business cadavers were generated than there were live bodies standing around and able to vouch that they received as much as a penny in interest or in dividend in recompense for the money they invested in that sorry place they call Israel.
And so now the Israelis have come full circle and they are wearing the hydrocarbon skin of the snake once again. And true to form, they make it sound like more shale oil and more shale gas have been discovered in Israel than there is oil or natural gas in all of Arabia, all of America, all of Canada and all of Africa etc, etc, etc all put together. And the Israelis and their mouthpieces undoubtedly expect that enough suckers from around the world will believe that the Almighty has decided after all to turn Israel into an energy giant. And they hope that these people will want to invest their money where nothing exists that is not deceptive and where nothing grows but the bubble of the bull.
Enough is enough; we need a breather, we need fresh air.