Numbers are Murrel Kohn's business. A graduate of the Wharton School of Finance and a certified public accountant in Israel and the United States, he can do more than balance the family checkbook. But recently, Kohn has seen numbers that have left him reeling.
"The textbooks have not been written yet on how to deal with this type of economy," he said.
He was speaking of the Israeli economy, which has come to resemble a creation of the Mad Hatter. At 7 p.m. Tuesday, the government announced a new round of cuts in its subsidies of basic food commodities, setting off a wild scramble that night and early the next morning to buy out existing stocks at the lower subsidized prices.
Men raced through one downtown Jerusalem supermarket carrying slabs of beef on their shoulders. A man who reportedly bought more than $600 in meat at the lower prices was quoted as boasting that he had "fixed the government's wagon."
A woman shopper, out with the crowds on the night of the subsidy cuts, said, "People will kill for frozen chicken."
When inflation reaches an annual level of 1,000 percent -- which is where it is estimated to stand today in Israel -- everything speeds up in a mad dash to beat the price rises and the daily decline in the value of the national currency, the shekel.
Workers, paid at the end of the month, began in recent months to clean out the supermarkets in the first few days of the next month. Many stores countered by raising prices steeply on the first of the month. Histadrut, Israel's giant trade union federation, then sent out roving teams of price watchers who reported rampant cases of price gouging.
The inflation serves as an accelerator on all forms of economic activity.
The monthly rise in the consumer price index is now so high that Israeli workers, by prior agreement, are entitled to a cost-of-living adjustment of their salaries every month rather than quarterly. This in turn requires equally frequent adjustments in tax brackets and the monthly publication of new income tax withholding schedules by the government
Even Israel's greatest hero and first prime minister, David Ben-Gurion, has fallen victim to the economic decline. Ben-Gurion's image adorns the 50 shekel banknote. Two years ago, when 50 shekels were worth more than $2, the Bank of Israel printed currency in only two denominations -- 50 and 100 shekel notes.
But today 500, 1,000 and 5,000 shekel notes are in circulation, while faded and worn 50 shekel notes, now worth about a dime, are gradually being replaced by coins.
It is in this bizarre economic atmosphere that Kohn, 45, is attempting to function both as an independent small businessman (his accounting firm has 10 employes) and a father (he and his wife, Irit, a lawyer, have three children).
It is an economy not only of rampant inflation, but of great uncertainty.
When will the government subsidies be cut next? Is a major currency devaluation coming soon? Are savings safe from various government schemes that are occasionally floated as desperate measures?
Keeping up with all of this can be a time-consuming business, diverting people from more productive activities.
The task is not made any easier by a banking system that, although becoming more automated, is enormously complex and frequently inefficient. Kohn, who estimates that he spends an hour a day keeping track of bank and other financial-related matters, is among those who believe that the amount of time and energy Israelis spend maneuvering through the chaotic economy is one of the reasons for the country's decline in productivity, which in turn is a key element in its current economic crisis.
"Money management is very important," he said. "The problem is that it is taking a disproportionate amount of every businessman's time . . . . People spend half their lives standing in lines at the bank."
One thing that must be tracked closely is the amount of money in shekel checking accounts. These accounts are not linked to the value of the U.S. dollar, and as a result lose value every day as the shekel declines. The trick, as Kohn and other Israelis know, is to convert dollars or money from dollar-linked accounts into shekels only when they are needed to cover expenses.
"It is almost as expensive to have shekels in your account as to have a bank overdraft," Kohn said. "The optimum situation is to have a zero balance in your shekel account."
You must also watch for unexpected opportunities and pounce when the time is right.
For Kohn and thousands of others, such an opportunity came last month when the government devalued the shekel by 9 percent. They rushed to the banks, which stayed open into the night to handle the stampede, to put money into a savings account plan linking the money to the dollar at the previous week's exchange rate. Thus, Kohn made his investment at an exchange rate of 348 shekels to $1, not the 390 shekels to $1 rate that existed immediately after the devaluation.
A year ago, the finance minister, Yoram Aridor, was forced to resign when news leaked of his plan to link the entire Israeli economy to the dollar and make the U.S. currency legal tender here. Perhaps with the uproar created by the Aridor plan in mind, the government of Prime Minister Shimon Peres this week rejected a so-called "dollarization" scheme to curb inflation and opted for a more traditional approach involving subsidy cuts and a proposed price freeze.
But most Israelis are not waiting for the government to institute their own personal "dollarization" plans. More and more, it is the stable value of the U.S. dollar that rules the Israeli economy. Histadrut's price-watching patrols reported that more than half the stores they visited posted prices in dollars, which technically is illegal.
For individuals, the safest haven for savings is a Patam bank account, in which desposits are linked to the dollar. If $1 is worth 500 shekels on the day of desposit and l,000 shekels a year later when withdrawn, the saver gets 1,000 shekels for each dollar's worth of the original deposit.
The alternative is what is known as a "Pablat" account, an acronym for the Hebrew phrase "deposit under the floor tiles." This refers to the immense amount of U.S. currency that Israelis are hoarding in their homes as protection against the daily decline in the value of their own currency. When needed for expenses, the cash can be converted into shekels by the street corner black market operators in downtown Tel Aviv, or at licensed Arab money-changers in East Jerusalem and the Old City.
Like most businessmen here, Kohn long has been operating on a dollar basis. With the daily changes in the shekel rate of exchange, it is the only way to keep track of real expenses and income.
"If I have a profit of 300,000 shekels, what does that mean?" he said. "But if you tell me I have a profit of $10,000, that means something."
Three years ago, when inflation was running at the modest rate of about 100 percent a year, Kohn began billing his clients in dollars. They could pay in shekels, at the rate of exchange on the day of payment.
Six months ago, Kohn's employes demanded and won the same treatment. Their salaries are now set in dollars, and paid in shekels at the rate of exchange at the end of the month.
Kohn is spending much more time attempting to keep down both business and living expenses because of a fundamental change in the Israeli economy as it affects consumers.
Last fall, the artificially high prices of Israeli bank stocks on the Tel Aviv Stock Exchange collapsed. The shaken bankers decided that they had to make their institutions more profitable.
One step they took was to increase greatly the charges for overdrafts on checking accounts. With that, the era of free consumer spending in Israel began to come to an end.
The overdraft had become an accepted national institution, a form of consumer credit.
"The whole standard of living was increased because people were living off the overdraft, which was smart to do as long as the overdraft charges were less than inflation," Kohn said.
But now bank overdraft charges can exceed 25 percent a month. Even with a 21 percent rise in the consumer price index last month, it no longer makes economic sense to live off the overdraft.
Even relatively well off families are feeling the pinch as much as business. At home, the Kohn family is entertaining less, eating less meat, shopping much more carefully.
"To have a bottle of Coca-Cola is a special thing for the kids now," the accountant said.
The situation is likely to get much worse before it gets better. Israelis appear to realize this and, with black humor, to accept the inevitable so far.
Kohn recalled waiting outside a theater recently. The line for tickets was moving slowly when the man behind him tapped him on the shoulder and with a smile said, "Would you hurry and buy your ticket before the price goes up."$130Chart, Inflation in Israel. By Gail McGrory -- The Washington Post