Sep.11, 2012 | 5:07 AM–

Don’t expect any financial bonanzas for some years. The world’s economic problems are too huge. We need to think how to limit the damage: while the financial pain can’t be prevented, it can be minimized.

One feature of the Israeli market affecting many investors is the inability to direct savings to economic initiatives that require capital, and that could stimulate the economy.

We keep reading about the capital markets drying up. But this isn’t the main problem. With all due respect to opportunities to buy and sell financial assets, the direct benefits of these transactions to the economy are negligible. It doesn’t really matter if the volume of trading on any given day is billions or hundreds of millions of shekels. This trading does little to create new jobs and improve quality of life. Aside from members and employees of the stock exchange, very few benefit from this activity.

The importance of capital markets lies in cash flow serve to bring together investors and borrowers, whose activities drive the economy. This aspect of the markets is in serious trouble, which has implications for the whole economy.

Part of the problem stems from the understandable loss of confidence in the stock exchange. Too much money has gone to businesses that weren’t worth their salt.

Most of the losses were incurred by developers and financiers in the private sector. This flies in the face of conventional wisdom, which holds that waste and losses are associated with government and publicly funded projects, as opposed to the private sector, which is considered much more efficient and productive. Clearly, it isn’t always so.

Building America

You’ve probably heard of the Port Authority of New York and New Jersey. It owns the land on which the collapsed World Trade Towers once stood, and issued tenders for the construction of the replacement towers.

The Port Authority was set up in the 1920s as a joint initiative of the two states in an effort to join forces in the development of the adjoining port areas. Over the years, it became apparent that their common interests were much broader. The authority thus became involved in the construction of tunnels under the Hudson River, as well as the George Washington Bridge over it. The authority currently owns Kennedy, La Guardia and Newark airports, as well as bridges, railway lines and cargo terminals.

From its inception in 1921, the authority has not been legislated to collect fees or taxes from either state. Thus, funding for all new projects and their subsequent upgrades has come from private and institutional investors. Running operational costs and debt repayment are covered by revenues obtained from operating the various assets…Read More>>

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