Tuesday, January 12, 2010

Guess Who's Helping Fund The US Budget Deficit? Israel!

It's very common for Jew haters like Andrew Sullivan or Michael Scheuer to say that the US 'gets nothing' from its relationship with Israel.

Not only are they absurdly wrong from a strategic and military point of view, but from a simple dollar and cents angle as well.

You see, all threats by Obama and George Mitchell to cut off aid to Israel aside, it's Israel that is helping the US finance its massive deficit,not the other way around:

At the height of the 2002 recession, the Israeli government approached the US Administration and asked that it approve loan guarantees that would enable Jerusalem to raise capital internationally. In exchange for these guarantees, Israel was asked to pay a risk premium in advance

Back then already, Israel did not really need to raise capital abroad. A surplus was emerging in our international balance of payments that only grew in later years. The request from America was made for reasons of political backing and display of trust and support. The guarantees were approved in April 2003 to the tune of $9 billion over three years.

Since October 2004, Israel has made no use of the guarantees, whose validity was extended from time to time. A total of $3.8 billion in unused loan guarantees are just lying there.

A year ago, on the eve of the elections, both Netanyahu and Barak spoke about the possibility of using the guarantees as a lever that would pull the economy out of recession. After the elections they examined the statistics and discovered that Israel has a huge foreign currency surplus relative to our economy’s size. The notion of using the guarantees was abandoned, and rightfully so.

As of September 2009, Israel’s foreign debt totals $28 billion. Meanwhile, the State of Israel’s foreign currency reserves total $60 billion. Most of them are invested in US government bonds. That is, the Israeli government’s foreign debt stands at -$32 billion. Or in other words, at this time we, Israelis, are financing America’s debts – and not the other way around.

Israel is doing the exact same thing for the US economy China is doing, although on a smaller scale.And given the hits the dollar is taking, I have no doubt that at least part of the reason Israel is backing the dollar is on the basis of our alliance with them.

Tell me again how we 'get nothing' from our relationship with Israel.

(h/t Carl)

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