Crisis
In the beginning of 1983 a crisis occurred in the free stock market (all the non-bank stocks), and large supplies in all market sectors forced the banks to invest very large sums of money maintaining their stocks' stability. During the months of January through March some regulators, among them the Minister of Treasury, Aridor, and the Governor of the Bank of Israel, Mendelbaum, approached the banks several times, trying to get them to gradually reduce their adjustments. Although some bank managers realized they could not continue this for long, they did not stop. Fearing a market collapse, Ministry of Treasury officials kept knowledge of this from the public.
Failing to stop the banks, Ministry of Treasury heads wished to execute a large devaluation of the Shekel, serving as an excuse to stop the adjustments. However, the August 8% devaluation was far too small for that end. Additionally, the supplies in the stock market grew steadily, and reached new heights in September. The public unremittingly sold bank stocks, and purchased US Dollars.
The crisis erupted fully on October 2. That day, the first day of trade after the Sukkot holiday, the public sold more bank stocks than in the entire month of September. On October 4 the Minister of Treasury appeated on television saying "We will not let the public dictate our moves", to say the large supplies would not bring about a devaluation or change of policy.
During those years the public trust in the Minister of Treasury's promises was non existent. Most of the public assumed the Minister would lie at any time, and gave no attention to his statements. Most of all, Aridor's denial made it clear that at this point the public was dictating the government's moves.
Later Aridor met with the banks' managers, who demanded the government limit the public's purchases of US Dollars, and allow it only for plane tickets. They assumed that without an option to save the money themselves, due to the high inflation, the public would be forced to invest in the banks' stocks. Even if their thesis was correct, one can assume such a move would only fuel the panic, and exacerbate the current crisis.
On October 5 the stock exchange again opened with large numbers of sell offers, and on October 6, 1983, nicknamed "Black Thursday", was an onslaught of sales. It was clear a collapse was a matter of days at most, since the banks declared that day they would be unable to absorb additional supplies without government assistance.
That night, in a meeting in Aridor's home, it was decided that the government would purchase the banks' stocks from the public, to prevent the loss of their investments. On Sunday, October 9, the stock exchange remained closed, and stayed closed till October 24. In the meantime a devaluation of 23% was executed. The stocks sold by the public were bought by the Bank of Israel at an average loss of 17%. 35% of the stocks' value was lost.
Read more about this topic: 1983 Israel Bank Stock Crisis
Famous quotes containing the word crisis:
“A crisis unmasks everyone.”
—Mason Cooley (b. 1927)
“One theme links together these new proposals for family policy—the idea that the family is exceedingly durable. Changes in structure and function and individual roles are not to be confused with the collapse of the family. Families remain more important in the lives of children than other institutions. Family ties are stronger and more vital than many of us imagine in the perennial atmosphere of crisis surrounding the subject.”
—Joseph Featherstone (20th century)
“The people of the United States have been fortunate in many things. One of the things in which we have been most fortunate has been that so far, due perhaps to certain basic virtues in our traditional ways of doing things, we have managed to keep the crisis of western civilization, which has devastated the rest of the world and in which we are as much involved as anybody, more or less at arm’s length.”
—John Dos Passos (1896–1970)