The ultra-Orthodox have to start working, companies have to stop bilking their bondholders and home prices could wind up falling too hard and too fast if the government isn’t careful, Bank of Israel Governor Stanley Fischer said in a stinging address on Wednesday.
Speaking at the Herzliya Conference hosted by the Interdisciplinary Center, Fischer stressed the danger posed by a fast-growing population where work isn’t the norm. “In 30 years, the proportion of the Haredi population will be much bigger,” the governor said. “Most of that community doesn’t work. I respect religion, but a state of affairs in which part of the population growing very fast doesn’t work can’t go on.”
Israel’s demographic trends in general are cause for deep concern, Fischer said. “The proliferation of the Arab and Haredi communities is faster than that of the non-Haredi Jewish population, and their proportion of the general population is increasing,” he said.
“Among the Arabs, population growth has moderated a little, but among the Haredim it’s the opposite. I hold the Haredi community in the highest esteem, but I have to say that continuing growth by a population segment that doesn’t work can’t go on forever. It has to stop.”
Moving on to the latest haircut fashion in the investment world, his address took a caustic turn.
“Haircuts” — when companies partially default on bond debt — have become all too common and casual, Fischer said.
“There is a problem with the way the [Israeli] bond market works,” he said. “The former chairman of the Israel Securities Authority, Zohar Goshen, was perturbed about bondholders being unable to reach reasonable arrangements with defaulting companies. So he invented a new animal: the credit officer. That worked big time,” Fischer said sarcastically.
“Debt arrangements are constantly being reached before it’s necessary. There has been a change in the way the market grasps bonds. A bond is a loan that must be repaid unless you’ve gone bankrupt.”