When Fisher speaks Bernanke takes notes

Bloomberg

After the landing of U.S. Treasury Secretary Timothy Gaytnar in Istanbul to attend the Global Economic Forum on October 2, his first meeting before any talks with finance ministers and central bankers from over 150 countries was a man who controlled the economy, less than that of Missouri.
Presence of a private dinner (details of which are not known to press) a clear signal that the impact of the Governor of Central Bank of Israel Stanley Fisher exceed the impact of Israeli GDP of $ 200 billion 66-year-old Fisher is a former professor at MIT Institute (MIT) and was the mentor of the team of American politicians who are currently trying to bring the world economy from the worst recession in 60 years.
Among his former students, Lawrence Summers, director of the National Economic Council with the administration of President Barack Obama and Federal Reserve Chairman Ben Bernanke, whose thesis Fisher was director of studies in 1979 as First Deputy Managing Director of the International Monetary fund in 90 years has worked with Fisher Gaytnar and Summers, then U.S. officials of the Ministries of Finance in their attempts to authorize the financial crises in Mexico, Russia and Southeast Asia.
„Many people from central banks do appreciate having capacity in central banking and monetary and financial policy,“ says Nobel Prize in Economics Prof. Robert Solow, one of Fisher’s own teachers.

Pioneer in interest rate policy

Fisher has earned a reputation as a pioneer and, after reducing the base rate to Israel by 50 basis points to 3.75 percent on October 7, 2008, ahead of his colleagues in the United States, Britain and the euro area (one basis points to 0,01 percentage point). Subsequently reduced rates seven times to a record low 0.5 percent until April 2009 On 25 August Fisher became the first governor of the central bank in the world who changed course in response to signs of financial recovery and increase the basic rate by a quarter point to 0.75%. Colleagues in Australia and Norway have followed suit.
November 23, Fisher again tightened lending by raising the Fed funds rate by a quarter percentage point to 1 percent.
„Israel’s economic indicators show recovery, but his strength is still uncertain, said in a statement to the Israeli Central Bank. Even after this increase the interest rate in December will be lower – 1%, as a continuation of prisposobitelnata monetary policy to maintain the future economic recovery. “

Expert stimulus

In 2008 Fisher (in an attempt to save the Israeli export-dependent economy) has decided to buy dollars in unprecedented quantities to reduce the amount of shekels. From March 2008 to October 2009 were accrued in foreign currency reserves worth $ 61.2 billion amount previously were only $ 28.5 billion
Scheme to help buy the weakening of shekels to the dollar by 22% over two quarters of contraction of the economy and support companies like Petah Tikva, Teva Pharmaceutical Industries Ltd., Which is based in Israel and is the largest producer of generic medicines in the world. Following the removal of interest and the purchase of dollars Israel has reached a growth of 1 percent in the second quarter of 2009, thus interrupting six-month recession. GDP increased to 2.2 percent in the third quarter.
„Central Bank of Israel has built a solid reputation in the years ahead of schedule because of cycles as well as facilitate and to strengthen, clarify Tyurker Hamzaoglu of Merrill Lynch & Co. of Bank of America Corp.

Alerts

And other central bankers should consider to follow the initiative of the Israeli central bank, says professor of economics at New York University Nuri Rubin, who made the global financial crisis in 2006, the global economy can expect a new credit bubble as investors take advantage of lower U.S. interest rates to borrow in dollars and to buy more high-yield assets such as stocks and raw materials, he said.
„This is a signal to other central banks – says Rubin. – But while they worry about recovery and trying to avoid deflation by maintaining zero interest rates around massive quantitative and facilitation, we risk creating a serial bubble in asset prices and credit. “
Quantitative facilitation is a term that some central banks use the programs, cash flowing into economies ravaged by recession.
Fisher argues that the decision of his former student Bernanke to work actively for pouring money into the U.S. economy is based on his academic experience. „Bernanke graduation thesis was about the Great Depression. She has had a tremendous impact on what we do in the current crisis, because he really understands that period. Confidence in his knowledge is one reason it is so crucial, „said Fisher.

Regulated

However, during Bernanke and colleagues from other central banks to tighten regulation of banks to prevent the next bubble assets, warns Israeli. „We have to finish the things we started tyuhkame that had to do. This refers primarily to repair the financial system – he said. – A battle in the U.S. that seems to be quite long. “
Fisher warned his colleagues, responsible for economic policy, that they still have difficult choices and decisions. „Several countries will have to increase taxes will have to further reduce costs, will shrink outlay well below that at which the society hopes,“ he said during the IMF meeting in Istanbul on October 3.
Fisher (who speaks Hebrew in all its official statements, but with the accent issue that was raised in South Africa) was once considered an outsider in Israel. Now, when the country’s economy is entering a difficult period of healing, some analysts have described as an indispensable figure for the nation.