October 2023 – FinAsst

Why Middle East Always at War

Tensions in the Middle East have been a longstanding and complex issue, rooted in historical, political, economic, and religious factors. The region has been marked by several significant conflicts and disputes. Here are some of the key sources of tension in the Middle East:

1. Israeli-Palestinian Conflict:

Ongoing tensions between Israelis and Palestinians over issues such as borders, refugees, and the status of Jerusalem have led to numerous conflicts and peace negotiations.

2. Iran and Nuclear Concerns:

The international community, particularly Western countries, has expressed concerns about Iran’s nuclear program. Talks and agreements, such as the Joint Comprehensive Plan of Action (JCPOA), have been central to diplomatic efforts regarding Iran’s nuclear ambitions.

3. Syrian Civil War:

The Syrian conflict, which began in 2011, has led to one of the most devastating humanitarian crises of the 21st century. Multiple factions, including the Syrian government, various rebel groups, and ISIS, have been involved in the conflict.

4. Yemeni Civil War:

Yemen has been embroiled in a civil war involving Houthi rebels, who are backed by Iran, and the internationally recognized government, supported by a coalition led by Saudi Arabia and the United Arab Emirates.

5. Rivalries in the Gulf:

There are longstanding tensions between Gulf countries, particularly between Sunni-majority Saudi Arabia and Shia-majority Iran. This rivalry often plays out in proxy conflicts in other countries.

6. ISIS and Terrorism:

The rise of ISIS (Islamic State of Iraq and Syria) and other extremist groups has created significant security concerns in the region. Efforts to counter terrorism and extremism remain a top priority for many Middle Eastern countries.

7. Resource Conflicts:

The region’s vast oil reserves have historically led to competition and, in some cases, conflict over control and access to these resources.

8. Political Unrest:

Several countries in the region have experienced political unrest and popular uprisings, such as the Arab Spring movements, which have had far-reaching effects on the political landscape.

It’s important to note that the situation in the Middle East is highly dynamic, and new developments may have occurred since my last update in September 2021. For the most recent and detailed information, I recommend consulting reputable news sources and international relations analyses.

For Financial Stability Bank of Israel Maintained Interest Rates

The Bank of Israel is responsible for formulating and implementing monetary policy in Israel. It uses various tools, including interest rate adjustments, to control inflation and stabilize the economy during the war.

Now The Bank of Israel kept short-borrowing interest rates at 4.75% and the rates are maintained this level for the third time. It may help to avoid the inflation and weakened economy.

Currency Issuance:

The Bank of Israel is the sole issuer of the Israeli New Shekel, the country’s currency. It manages the country’s foreign exchange reserves and participates in currency markets to influence the exchange rate of the Israeli New Shekel.

Foreign Exchange Reserves:

The Bank of Israel manages the country’s foreign exchange reserves, which are held in various currencies. These reserves are important for stabilizing the local currency and ensuring economic stability.

Leadership:

The Bank of Israel is headed by a Governor, who is supported by a Monetary Committee. The Governor and the committee members are responsible for making key decisions related to monetary policy, interest rates, and other important financial matters.

Connection between War and Currency

War and currency have a complex relationship, and historical examples as well as economic theories provide insight into this connection:

Impact of War on Currency:
- Inflation: Wars can lead to inflation due to increased government spending on military efforts. When a government spends more money, it often prints more currency, which can devalue the currency and lead to inflation.
- Uncertainty: Wars create economic uncertainty. Investors and businesses might lose confidence in the stability of a country’s economy during wartime, leading to fluctuations in currency value.
- Trade Balance: Wars can disrupt trade, affecting a nation’s balance of trade. A country might import more goods (especially military equipment) than it exports, leading to trade imbalances and affecting the value of its currency.
Role of Currency in Financing Wars:
- Debt: Countries often take on significant debt to finance wars. Governments issue bonds, and sometimes they borrow money from other countries, which can influence the value of their currency.
- War Bonds: Governments might issue war bonds to citizens, essentially borrowing money from the public. This can impact the money supply and, consequently, inflation and currency value.
  
  In conclusion, war and currency are intricately linked. Wars can lead to economic instability through inflation, uncertainty, and trade imbalances. The way governments manage their currency, debt, and economic policies during and after wars significantly influences how currencies are affected.