Tuesday, February 19, 2008

The Gedolim say the dollar is worth 4 shekels

Even though the official exchange rate is only about 3.6.

A little background (based on Look Before You Leap).

Not so long ago the Charedi world addressed the plague of tragedies involving the loss of parents of young children, often after long and agonizing illnesses.

Many of the stricken families are left without even the money for basic necessities, not to mention resources to cover all the extra help required in the wake of such tragedies. About money to help the orphans marry, we need not even speak.

In virtually every case, the deceased parent had no life or health insurance. So the family is left without any recourse other than to turn to the already overburdened community, and to ask strangers to open their hearts and purses.

The current system of ad hoc appeals is not working and they came up with the idea of creating large groups of ten thousand or more families, whose members would in effect self-insure one another. The initial plan promised approximately $50,000 to every unmarried child, upon the death of a parent in one of the participating families. This is what is called Areivim (and is the basis for the ad that appears above).

In truth, this plan does not actually work from a financial standpoint. Actuaries expressed their view that the numbers did not make sense. Indeed the developers of the plan did not even have the information available upon which to make informed actuarial decisions – such as the age of those covered by the program and the number of children who would be eligible for payments. Finally, they noted a number of ways in which the plan might be in violation of Israeli insurance law. In short, this is a sophisticated tzedakah plan, not insurance.

In any case the plan has enrolled over 20,000 people.

The problem is that as I mentioned a few days ago, the Charedi world prices everything in dollars. With the decline of the dollar, the $50,000 promised is now worth only 180,000 shekel a significant decline. Therefore the Gedolim in charge have decided that the dollar will be worth no less then 4 shekel when paying out. The ad doesn't say how to figure out the $18 monthly contribution, if that is based on the official exchange rate then there is going to be a serious funds shortage in the plan.

This is like a dream world. Price things in dollars but when the dollar goes down (or up) make up an arbitrary value for the dollar. This begs the question, why not just price everything in shekels?


Rafi G. said...

ya know, since their initial publicity and announcement, I have not seen anything from areivim. I was wondering recently if they disappeared or still exist.

The main reason I was wondering about them is because when they first came otu they said the goal is to get rid of all the colored flyers and leaflets collecting money for people who have died. Areivim would get rid of all that and it would just go through them.
I have not noticed a decrease of these types of flyers (tzedaka spam as I call them), and was wondering if the whole areivim thing is a scam... I guess they are still around...

why not shekel? I have been wondering that for a while.... I guess though that with all the money they are raising in Israel, they are still probably hoping or directing the campaign that most of the fundraising money will come from abroad. Then advertising in dollars is much more understandable..

but from what you say, they are heading for a major problem..

Mighty Garnel Ironheart said...

I can understand the dollars thing:
1) Using shekels acknowledges Israel exists and they'd never do that.
2) A lot of Israelis use US dollars, for example for apartment rental and house sales. They're just using it more consistently.

Still, it'll be interesting to see how far this goes. After all, the Gedolim think the dollar should fetch 4 shekels and everything they think is right so will the market continue to be an apikorsus or will it come in line?

QA Legend said...

want to make some easy money?

Go to the bank (yes even the bank) and buy dollars for 3.6 and then sell them back to shekels for 4 each.