–Economists say that Israel has achieved two contradictory world records–in inflation and in personal savings–which do not usually happen together, as inflation tends to wipe out savings.
Israel’s inflationary rate last year was 130 percent, but savings at the end of 1980, represented by the amount of “free dollars”–the sum left from gross earnings after deduction of taxes–amounted to 23.5 percent. The percentage in the U.S. was one of the lowest, 4.5 percent. Israel’s savings rate was followed by Japan, with 20 percent; France and Britain, each 16 percent; and Germany, 14 percent.
According to Moshe Saguy, savings expert in the Ministry of Finance, Israel’s record savings are due to its institutional form of employers deductions for pensions and savings schemes and widespread bank programs for similar monthly savings from businessmen and workers. These deductions are encouraged by tax rebates or freedom from taxation on long-term savings deposits.
All the funds are linked by escalator clauses to the cost of living index and are thus fully hedged against inflation.
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