Chaim Katzman on the Economy

Thank you for having me.

You know, Maya, we own close to 200 shopping centers in the United States, stretching from South Florida to the West Coast in the San Francisco area, and then back in the New York area, Boston, and other places. And I think that what we gather is that the economy is improving, painstakingly slow, but it does. And we are on this first line where new businesses are being formed, because when somebody wants to start a new business, the first thing he needs to do is to rent some space in order to run his business, and that's what we do. So we have a good feel as to how the economy is doing and how businesses are being formed. So while in the last few years we've seen a phenomenon where the big got bigger, at last now we start seeing that the little guys, the moms and pops as we call them, are starting to form businesses. And by the way, this is the driving force behind job creation, because think about it: if somebody starts a new business, then he needs to hire a cashier or somebody to groom the dogs if he starts a pet store, or whatever they do. But this is really job creation. This is really how jobs are being created. So I think that overall, the economy is improving slowly, very slowly. And again, it's kind of spotted. I mean, you see much better recovery in the West Coast, in the San Francisco area, with the high-tech and biotech and all the other new industries that are popping up over there. You see good performance in the Northeast, and you see somewhat weaker recovery in the Southeast, especially here in Northern Florida and so on.

Well, we are coming out of probably the biggest crisis since the Great Depression of the late '20s, early '30s, as far as home prices are concerned. And why you don't see a full recovery, and again, the shape and pace of recovery is different from one part of the country to another, it's not homogenic, it's not one-size-fits-all. I think that generally speaking, there is a recovery in home prices. And again, it should not come as a big surprise. This country is growing by about 3 million people every year. We are probably the only Western country that has true population growth every year. And with 3 million more people every year, there is a natural need for new homes and so on. Combined that with the fact that there's been almost minimal or no construction of new homes in the last four to five years, the inventory gets eaten up, and you can feel it. Still, there is a huge problem of foreclosures and mortgages that are not being paid, homes being what we call 'underwater,' where the mortgage is more than the value of the home. So that still presents an issue. But I think that over time, this problem is getting solved, and it would not be overly surprising if in a year or two years we're going to start seeing home prices starting to creep up again.

Look, we are living in the era of a global village, if you will. I mean, the whole world is very much one big unit with different shades around it. And I think that we just talked about the U.S., but Europe is struggling with its own issues, the Euro crisis. There are certain countries who lived beyond their means, and we know what that means. I mean, if each of us lives beyond our means, there comes a day when you have to pay the bills. And this day came for those countries, and they have to pay the bills now. But again, Europe is not an impoverished continent that ran out of money. It is just a matter of who's going to pay what for what, and they're going to figure it out. Things are being sorted out in Europe, in my view. It would not be fast because politicians have this tendency of not solving issues, because usually it is painful, but rather they would kick the can down the road in hopes that nothing comes back to haunt them during their term, which may or may not happen as the case may be. But generally speaking, I think that Europe is figuring out ways to recover, and I think we will see some recovery taking place in Europe as well. As far as Israel is concerned, Israel is a tiny little country, we all need to understand it, but it has done remarkably well. The banking system held up and still is very strong. The economy did well, growing 4-5% annually. So Israel did well through the financial crisis. I think that Israel is moving more or less to the tune of a different drummer. And while I think that the whole world is going through a recovery, Israel is moving in the opposite direction in many regards, which translated to more focus on, call it, a social budget that created some deficits, and deficits are not a good thing. Basically, there's been also a slowdown because of some popular social movements that drove the government to change policies. Like for instance, they increased corporate tax in Israel, and it was against the government's policy of actually over time reducing corporate tax in order to attract more businesses to come to Israel and open shop, like Intel and other big names. And those businesses in turn are creating jobs, which would further help the Israeli economy. So that process, I think, definitely should or did already slow down. So there are some clouds hanging over the Israeli economy right now, and I believe that we're going to see elections coming soon, and then of course things will be decided and probably hopefully will change. But in the meantime, I think that Israel is moving towards a slowdown in its economy and back from some of its major achievements in recent years.

Well, it can be attributed to various factors. Number one, you know, we say that need is the mother of all inventions. And when you are living in a country and you are surrounded with a sea of enemies, you need to become very creative in order to survive. If you add to that that you don't have any resources to speak of, you don't have oil, until recently you did not have any source of energy, you're living in a constant state of drought and so on, then you have to become very creative. This is why Israel is number one in the world in irrigation. It's not because somebody looked at all these streams and rivers, but because people figured out that there's not enough water, so we need to somehow manage with what we got. So they came up with all those great systems of irrigation in parts of the world that are the likes of Israel, and became the number one in the world in other systems that have to do with improving the productivity of agriculture, fertilizers, pesticides, and so on. And again, this is a need, it was need-driven. You had to do it in Israel in order to survive, and then it became a great idea also to export it. I think the same is happening with other innovations in Israel. On the military side, of course, needless to explain why we became so creative. And some would say it has to do with the Jewish genius. Basically, we've been scholars throughout the years, way above our proportion in the world's population. But I think that for many, many years, Israel had a great education system that was really responsible for good parts of the Israeli achievements in the last 50 years. Unfortunately, I think that there's not enough investment going and not enough effort is done to maintain Israel's predominance in education, especially in math, physics, chemistry. Even though Israel now can boast two or three Nobel laureates in the field of chemistry, but that is not a guarantee that future generations will do just as well. These people are really the result of a great education system in the '50s, '60s, and '70s. Now you need to worry about the new generation. So you need to adopt the same systems and make the same or even greater investments in education for future generations to be just as good or even better.

Thank you, Maya.