Israel 4Q GDP Fell at 20% Rate; Downward Trajectory Set to Continue as War Drags On and Israel Readies Lebanon Invasion

The Financial Times report on the fall of Israel’s economy in the fourth quarter was briefly the lead story and was oddly shuffled quickly off the landing page. The article gives a terse but incomplete tally of the factors that contributed to a decline at a 20% rate in the final quarter, which was markedly worse than most experts expected. Note by contrast that John Helmer was posting on the wide-ranging damage of the conflict on Israel’s economy. His sense of how badly things were faring seems to have been more on target than economists anticipated.

As we’ll soon examine (and informed reader comment encouraged), many of these adverse conditions are likely to stay in place and get worse as the war drags on; others were only starting to take hold in this measurement period. Thus it is reasonable to expect another big decline in the first quarter, even if not necessarily this large.1

Mind you, as we’ll address in due course, not only is the GDP decline set to continue merely based on current pressures continuing and in some cases intensifying, but as we warned, Israel looks to be escalating into a full bore campaign into Lebanon, to try to push citizens there from their homes back to the Litani River. Hezbollah warned it won’t let that happen and most military experts believe that Hezbollah can make that stick.

On top of that, Scott Ritter has pointed out that Hezbollah learned from the Israel 2006 invasion, which it eventually did beat back, that letting a war occur on your territory is a bad idea, and that if Israel attacks, Hezbollah will quickly take the battle into Israel and is set to take Galilee.

Key sections from the Financial Times account:

GDP declined by an annualised 19.4 per cent compared with the third quarter. On a pure quarter-by-quarter basis, the economy contracted 5.2 per cent compared with the previous three months.

The sharp drop was caused in part by the call-up of 300,000 reservists, who had to leave behind their workplaces and businesses to embark on months of army service, the Central Bureau of Statistics said.

Other factors to hit the economy included the government’s sponsorship of housing for more than 120,000 Israelis evacuated from the northern and southern border areas of the country.

Yves here. To interject, the claim that additional government spending on temporary housing would be GDP-depressing is incoherent. I assume the issue is that the economic activity of these communities went to zero, and the extra housing spending was much less than a full offset.

Back to the highlights from the story:

Following the October 7 attack, Israel also imposed tough restrictions on the movement of Palestinian workers from the West Bank into the country. The move hit the construction sector, causing labour shortages that became an additional drag on economic growth, the bureau said.

The war has triggered a steep increase in government spending, which rose 88 per cent in the three months after the outbreak of war compared with the preceding quarter. Consumers, meanwhile, were spending 27 per cent less.

Imports of goods and services fell 42 per cent, the report said, while exports dropped 18 per cent.

The piece also mentions the Moody’s downgrade earlier this month, which was fiercely criticized by Israeli officials. The GDP release confirms it was entirely warranted.

Consider additional negatives omitted from this recap:

Nearly 500,000 citizens left Israel by December 2023, out of a total population of 9 million. One has to assume this group skewed affluent. People without means can’t readily move to another country on a temporary or long-term basis. Even if one has a dual passport and accommodating relatives, these exiles would presumably have to live independently in their new locale at some point. From Anadolu Agency on December 7:

Nearly half a million Israelis have left the country since the outbreak of the Gaza conflict on Oct. 7, according to a local newspaper on Thursday.

The Population and Immigration Authority estimates that 370,000 people left Israel in the past two months, including 230,309 in October and 139,839 in November, Zman magazine said.

According to the magazine, approximately 600,000 Israelis traveled abroad for vacation before the outbreak of the Gaza war, while nearly 370,000 others departed after the conflict.

Nearly 301,982 Israelis returned to Israel in October and 194,016 in November.

“The figures show that the number of Israelis who left and did not return is estimated at around 470,000,” Zman said.

“Therefore, there is a negative migration of about half a million people, and this does not include thousands of foreign workers, refugees, and diplomats who left the country,” it added.

The article also pointed out that immigration had fallen by over 70%.

Admittedly this group could include techies who in theory could return…but would they? Like work from home, if they had successfully set themselves up with their employers/clients to operate from a different locale, it’s not clear they would want to return until the war was clearly over and they could assess how attractive it was to go back. And this cohort probably includes some liberals who are not on board with the Palestinian extermination project.

Effect of Houthi attacks on shipping. Recall that the Houthis are seeking to blockade Israel ports, among other aims. That means choking both imports and exports. Even though the Houthis started their campaign on October 19, my impression is that the attacks did not immediately pose a serious threat, but that by mid-November, both insurers and shipping lines were wrestling with what to do. The announcement of Operation Prosperity Guardian, on December 18, and it quickly proving to be ineffective (actually arguably counterproductive since confirming the Red Sea as a war zone would further alarm carriers and insurers) confirmed the Houthi operation had had a big effect, and not just in the region.

In other words, a crude look at the shipping industry’s reaction to the Houthi initiative suggests that Israel was not feeling its full effects for all of the fourth quarter. So unless there is a miraculous turn of events in early 2024 (and we have yet to see one), an additional GDP decline for the first quarter is baked in due to Israel bearing the full impact of the Houthi shipping strangulation.

Fall in tourism. The European Commission estimated tourism, strictly defined, to account for 2.8% of Israel’s GDP, but including its secondary effects, to contribute nearly 6% of GDP. That activity has to be in free fall. One offset is that settlers who were evacuated from the Lebanon border area are being housed at government expense, one assumes in way-under-capacity hotels.

Loss of demand from Gaza. Gaza’s GDP fell an estimated 24% in 2023, which would have reduced demand at least somewhat in Israel. The Financial Times and other sources, such as a January AlJazeeera story, focus on the immediate effect of the loss of Palestinian labor, which was important in the construction sector. Gaza’s GDP was an estimated $27.8 billion versus $500 billion for Israel. But Gaza is supplied close to entirely by Israel, so at the margin, the loss of its demand would have a measurable, if not large, impact on Israel GDP.

Some observers contend that Israel’s economy is so small that the US could keep it on permanent life support if needed. What cheery views like this miss is that the longer the war goes on, the more permanent the damage to the productive capacity of the economy becomes. Businesses that are shuttered more than a little while do not come back. If nothing else, the employees have to find other ways to live. Anyone in real estate will tell you vacant homes decay quickly, and I trust the same is true of commercial properties (that seems to be the case where I am now, which has tourism as a big but not sole driver of the local economy; the buildings who lost their tenants during Covid look so shabby as to be tear-downs).

In other words, what happens if Israel’s future is to become Gaza-lite, effectively dependent on foreign welfare?

To return briefly to Israel launching a big operation into Lebanon, Alastair Crooke has been warning that this was a given for some time, that Israel was determined to clear Hezbollah, as in the Lebanese population, from the border area with Israel so that the settlers who were evacuated felt comfortable about returning. In his latest Judge Napolitano interview, yesterday, Larry Johnson said his contacts confirmed that an Israel invasion of Lebanon was imminent.

Events seem to be quickly proving Johnson to be correct. An marked increase in Israeli bombings of Lebanon looks like a softening-up operation:

A report in the Irish Times show that Israel claims that one of the strikes was on Hezbollah munitions storage, while Lebanon said it was a tire factory.

Crooke had contended that housing the settlers elsewhere is not sustainable (he may mean politically as opposed to economically). He has also argued repeatedly that an overarching objective of Israel is to restore its sense of security, and that means cowing its neighbors with its military might.

But what is missing from this calculation is that what has held back Arab and Muslim states from mixing it up is that Palestine and Israel is an internal affair. I doubt anyone would read the Genocide Convention as providing a basis for armed intervention.

And if anyone were so bold as to try to intervene, the logistics are not favorable. By contrast, Donbass is on Russia’s border, and most wags forget that the 2014 civil war did become Russia’s problem by virtue of it taking in 1 million refugees (this per the UN). That is before getting to the wee matter of the security threat.

Ritter has warned that a bare-knuckle fight with Hezbollah would go badly for Israel and could even threaten the survival of the state, at least along current lines. Crooke has cited discussions, presumably in the Hebrew press, of misgivings that the IDF is not up to a hot conflict with Lebanon. But the right wing is determined to advance its vision of seizing Biblical Israel, which extends beyond Israel’s current territory, while it thinks the time is propitious. And the rest of the population seems to be so seized with anti-Muslim blood lust as to be willing to go along for the ride.


1 This is before getting to reporting/camputation games so as not to spook the Confidence Fairy any more than necessary, so if anything, even this result could be flattering. For example, in the 2008 financial crisis, the US “advance estimate” of the fourth quarter GDP decline was 3.8%. The final print was a decline of 8.5%.

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  1. lyman alpha blob

    Not to worry. If IDF snipers are careful and make clean headshots when they dispatch all those children, there’s big revenue potential for all the subsequently harvested organs, what with so many Zionists completely lacking a heart already.

    1. DMK

      Is this comment appropriate? I am no supporter of Israel, but dehumanizing a group, even Zionists, is the first step in deciding that any thing done against them is permissible. I do not want civilians anywhere being killed, and that includes both Palestinians and Israelis.

      “Big revenue potential” in harvested organs? Certainly no evidence of that and remarks like that give credence to Jewish claims that all anti-Zionists are anti-semites. Not helpful in voicing opposition to Israel’s war in Gaza.

      1. Librarian Guy

        There are many credible reports of organ-harvesting from Palestinian victims. Look at sources such as the Grayzone, Electronic Intifada, etc. How can anyone deny that the mass killing of civilians, primarily women and children, is not a war crime consistent with Genocide? Zionists give away the game with all their rhetoric about “all Palestinians are terrorists”, “There are no Christians in Palestine,” “human animals” (to be dealt with as such), they are “Amelek” etc.

        When Zionists tell you who they are and what their “values” are, believe them!!

        Even “Snopes” very reluctantly admits the Israeli lust to “exterminate” the indigenous people, see

      2. Em

        There’s nothing more anti-semitic than conflating Jews with Zionists. There are plenty of anti-Zionist Jews who opposed the state of Israel. There are non-Jewish Zionist ghouls like Joe Biden who either support Israel as America’s dagger in West Asia or because they believe rebuilding the third temple will bring the end times (when basically everybody but them will die horribly).

        Even the most “liberal” Zionist thinks it’s okay to steal indigenous land through a campaign of murder, rape, and terror, then establish a discriminatory system that deny Palestinians full citizenship rights or the right of return.

        So you getting triggered by the usage of Zionist says more about you than the person saying it.

  2. Beachwalker

    GDP figures are useful but sketchy metrics for assessing overall economic impact. One area they don’t address is the varying economic impacts among the per capita income deciles. How much more is the economic distress affecting the poor than the non-poor and to what extent will it undermine social cohesion?

    1. Yves Smith Post author

      That is not germane here. Everyone has united behind the war. The only disagreements are around that, like the priority given to getting the hostages back. The war is seen as existential, so bread and butter issues are not important now as long as you are not starving. The people who are mercenary presumably left.

      1. Em

        I hear chatters online of Israelis planning to leave in the next year. We shouldn’t assume that all the “weak sisters” have left, as many may need to get their affairs in order or kept a wait and see attitude until going gets really tough.

        There’s a big gulf between being willing to kill others (especially by the hand of your military and not personally) for your cause and being willing to die for your cause. Americans are mostly fine with killing people in wars far away for “reasons” but a lot less okay with the blowback of maimed vets, bloated national debt, and deteriorating domestic conditions.

        The Jewish Israelis have displayed near universal fervor for killing the “other”, but note that 200,000 of presumably some of the most fervent Zionists (as you have to be to be illegal settlers on the Lebanese or Gazan borders) immediately evacuated their homes and refused to go back until they feel perfectly safe.

        Afghanistan and Vietnam shows that the side that typically triumphs is not the side most willing to kill for their cause but the side that’s most willing to die for it.

  3. The Rev Kev

    I am very much surprised to see that 1 in 18 Israelis ditched that country when the war broke out. The western media was jubilant when all those Russians left their country so as not to be able to be called up for military service but this Israeli outflow has received scant coverage in the media. Things can’t be going too well as I heard a story of an Israeli brigade which refused to go back into Gaza and that was only a few days ago.

    Those deep strikes into Lebanon are bad news as it sounds like Israel has decided to go for broke and take on Hezbollah. Is that wise? I suppose the idea is to crash through or crash but I am fairly certain that it will be the later. If Hezbollah enters Israel proper, they will really freak out. But I think that Netanyahu still has the support of the Israelis as 70% think it a great idea to invade Lebanon right now. A coupla weeks ago I thought that it would be a contest between who stands the longest – Netanyahu or Hamas. But if they take on Hezbollah, its game over, man.

    1. NotTimothyGeithner

      Tel Aviv has likely realized that the US won’t deliver economic aid just military assistance which is being redirected to Suez which matters unlike the Israel vanity project and with a conflict continuing many of the projects Colonel Smithers colleagues expect to start aren’t going to happen anytime soon. Taking the potential energy resources and selling to Europe is probably the last path forward. Syria and Iraq were wrecked, but Iran became a regional power. The Abraham Accords were blown up, and no amount of dippy US Senators waving “coexist” bumper stickers and explaining who Abraham is will bring them back. The India-Iraq proposed trade route is dead. And the US can’t even bribe Ecuador.

      1. Darius

        My only quibble with your comment is that, because of the stranglehold of the Israel lobby. the US president and Congress will always prioritize Israel over practical considerations until some catastrophic event fractures that hold and establishes a different paradigm. The US is all-in for Israel. The president has wiggle room to influence this situation. A different president than the intellectually challenged, corruptible and corrupted, and enfeebled Biden may have taken advantage of this wiggle room to try to reconfigure the field of play more to our advantage. But there is no leadership, even for just pure self-interest, coming from the US.

    2. Em

      Actually it’s 1 in 14 Jewish Israelis since presumably very few Palestinian “citizens” are able to leave.

      Not sure Hezbollah would want to invade Israel as that draws them into unfamiliar areas without properly dug in cover. Offense is costly and they don’t have Russia or Iran’s endless reserves. I assume they will simply shoot missiles at critical infrastructure in Haifa and Tel Aviv until Israel unilaterally declares a face saving victory and goes home.

      Crooke is sympathetic to Palestinians but still thinking in the old paradigm where Israel has supreme escalatory dominance and any future peace will be largely dictated on Israeli terms. I don’t think Iran and the Axis of Resistance believes that to be the case anymore. They rightfully fear destruction of their cities and the Samson Option, but they are determined to get Israel and the US out of West Asia as soon as possible.

      1. John Zelnicker

        Em – Hezbollah is a well-trained, well-equipped army.

        It is not a bunch of rag-tag locals in sandals.

        See Scott Ritter: (His Substack home page.)

        Ritter’s best analysis can be found in his recent interviews with Judge Napolitano, IMO.

        1. Em

          I would never say that they’re unprofessional and in fact I am saying the opposite. They’ve been battle hardened and tested in Syria, so they learned a lot about patience and shaping battlegrounds to their advantage. They’re precisely not like the Israelis who act impulsively, undisciplined, and without achievable objectives in mind.

          Hezbollah demonstrated the patience and discipline to wait for the right moment to enter the fight and fight on their own terms.

      2. Yves Smith Post author

        You are badly misrepresenting Crooke;. I listen to him every week. He has said no such thing. In fact, he has reported that there are reports in the Israel press that at least some in the IDF regard taking on Hezbollah as a potentially fatal mistake. Crooke has ALSO explicitly said that Israel relied on being or being perceived by its neighbors to be the dominant military power, but that is no longer the case. Crooke has stressed that the forces in the region are much better than they were and that they are also much more united.

        1. Em

          How do what I say go against what you hear from Crooke? Yes he notes that Hezbollah are strong and Israeli stated objectives are not realistically affordable, but then goes on to define what’s doable politically and military in Israeli terms. He doesn’t discuss the possibility that this conflict may in fact be the end of Israel, which is the long term objective of Soleimani’ Axis of Resistance.

          He is defining the Resistance to Israel in entirely reactive terms when they are actively working to end Israel and Israel is doing much of their work for them in the last 4.5 months.

          1. Em

            Thinking more on this point, it may be mostly a case of reacting to Crooke’s framing where right or wrong, the Israelis are *our* team. To a greater or lesser extent, all of JudgeNap’s guests except maybe Jeff Sachs and Ray McGovern, suffers from this framing. By doing so, Crooke does not sufficiently take into account Hezbollah or Iranian agency in how the events following 10/7 unfolded.

    3. Not Qualified to Comment

      “I heard a story of an Israeli brigade which refused to go back into Gaza”

      Would be nice to think this was due to a sudden attack of conscence.

    4. Fazal Majid

      My previous (tech) employer was Israeli in all but name (nominally headquartered in San Francisco). Quite a few of their brightest engineers used it as an opportunity to migrate to the US then change jobs.

      I think what is going on is secular, educated Israelis despairing of their country’s slow but inexorable takeover by the ultra-orthodox who have much higher birth rates than either secular Jews or Arabs. October 7th was probably a psychological tipping point that crystallized a decision to depart that had been long in the making. When you see Netanyahu’s own wastrel son safely ensconced in Miami, the old taboo against reverse aliyah seems to be falling by the wayside.

      Needless to say, this is far more worrisome for the future prospects of the Israeli economy than a sharp but ultimately short-lived war shock.

      1. John k

        Yes. I’ve been thinking the same lines. Seculars leaving is disastrous, amazing that so many left so soon. Imo it’s likely more have/will leave. I’ve heard the right wingers put down women, their leaving bring their men with them.
        Wonder how many will leave this q? Must have been some that couldn’t leave immediately.
        And invading Lebanon will not encourage the remaining seculars to stay. The remainder will be a weakened far right crowd.

        1. Lambert Strether

          > The remainder will be a weakened far right crowd.

          They will, however, think they are stronger; more pure, more blessed, not constrained by whinging liberals, etc. Not good.

          1. John k

            I hadn’t reflected on what they might think their best option would be if their coming lebanon adventure goes tits up.

          2. Arkady Bogdanov

            If you read the accounts of French Algeria, Israel is following the exact same path. The ethical people were the first to leave, then the moderates. The colonial government used propaganda in the French homeland to bring in replacements, and these were ideological and racial supremacists, so the French Algerian colonial population grew ever more ideologically pure, more racist, and therefore, more outwardly violent toward the indigenous population. This drove increasing levels of insurgency and turned ever more people abroad against the colonial project- eventually making the colonists’ position untenable. Israel is toast, even without this war with Lebanon IMO. It’s just a matter of time when the collapse occurs and the Zionists all either flee en masse, or succumb to pressure to very serious structural reforms that grant Palestinians equal rights (and huge numbers of Zionists will still flee).

            1. Em

              Except that unlike postwar France where there are likely millions drawn by better financial prospects of emigrating to Algeria, Israel doesn’t have a large Metropole to pull population from and their postwar economy is not going to be a draw (even assuming that they can safely access the trillion dollars or so of gas and oil reserves under Palestinian land).

              On the other hand, French were never close to being a majority in Algeria but so far Jews are about 50 percent of the population in the areas occupied by Israel and they’re working on ethnically cleansing Gaza and the West Bank, so the dynamics are going to be pretty different from Algeria.

              Also, DeGaulle was almost toppled by a coup over giving up on Algeria. He only saved himself through his public statue and extreme ruthlessness against his opponents. There’s nobody of similar stature in Israel or the West today.

  4. vao

    The war caused an exodus of foreign workers (10000, mostly from Thailand) working in agriculture, that was partly and temporarily compensated by an influx of Jewish volunteers from all over the world.

    Although the population of foreign agricultural workers returned to about two thirds of its pre-war numbers, thanks to immigration from India, Kenya, and Malawi, there is still a shortfall amounting to 30000 people, compounded by the end of work permits for Palestinians. The Israeli government has therefore decided to increase the quota for such agricultural workers by 10000 and hopes that offered conditions will also lure workers from Sri Lanka and Vietnam,

    All in all, these are small figures; agriculture is economically a limited sector in Israel (1.3% GDP, much less than tourism, with food imports 4 times larger than exports), but its socio-cultural importance cannot be neglected.

      1. Daniil Adamov

        I’m told by Israeli relatives that there were attempts to make up for this by having volunteers from among the general population go to gather harvests. Although I think the civic enthusiasm of at least some parts of the Israeli population should not be underestimated, this approach doesn’t seem sustainable in the longer run.

        1. Yves Smith Post author

          I read reports that they did not get enough volunteers. By a long shot. I must confess to being unwilling to wrestle with a search engine to confirm if that continued to be true.

    1. Em

      I wonder what will happen if Hezbollah hits packing plants and warehouses for Israeli produce. Because they will be easy targets if Israel keeps escalating in southern Lebanon.

      I hope RSA and other diamond producers are looking into prohibiting export of raw diamonds and requiring all cutting and processing of diamonds to occur domestically. That would both cripple Israel’s diamond cutting industry and be a genuine looking term positive for diamond producer economies.

      1. vao

        Targeting Ashkelon, namely its oil terminal and its terminal for the EMG gas pipeline would be far, far more devastating.

        However, Ashkelon is some 10km North of the Gaza strip — so perhaps this is too far South for the missiles of Hezbollah.

        1. Em

          I would be very surprised if they lack the range to cover all of Israel. They get their weapons tech from Iran, who now gets it’s weapons tech from Russia. Even though US and Israel disrupts the weapons pipeline through their period bombing of Syrian airports, I’m betting that enough gets through and they also have indigenous production capabilities.

          And for anything built next to the water, submarine drones and attacking shipping traffic may also be an option.

  5. Michael Fiorillo

    Can’t wait to have all those Azov Nazis and Israeli religious fanatics/gangsters “invading” NYC and elsewhere. Or are they humanitarian refugees? I’m so confused! Well, at least there will be new restaurants to swoon over in the pages of the NY Times – see today’s self-parody article about the Ukrainian tattoo artist relocated to Williamsburg (!) – and they’ll soon add their inimitable je ne c’est quoi to the local political climate…

    1. Librarian Guy

      Wolfsangel, Bandera & Black Sun tattoos will be very popular among a certain sector of aspirational “Bad Boys” & “Bad Girls” I’m sure. And naming their children Adolf.

      1. Em

        There is one made for them on the Sino-Russian border that doesn’t involve dispossessing and systematically oppressing the indigenous population. They can move there.

  6. Alex

    By way of comparison Russian gdp shrank by 4% in the first quarter of the war. Of course Israel mobilised a much higher % of its people, so the effect should be greater. Otoh, Russia was hit by sanctions.

    I find it hard to believe that 600k left Israel since the war started. That would be one of out of 15, and it would be impossible to miss. In contrast I know a lot of people who have been mobilised (there are 300k of them) so it doesn’t make sense.

    Zman doesn’t tell where they got these numbers so I can’t check them. Either they are missing smth or the sample I observe is completely unrepresetative

    1. North Patagonia

      “I find it hard to believe that 600k left Israel since the war started”… Not when you realize that almost a million “Israelis” are of Russian descent, another 700,000 from Europe, 700,000 from Africa, 600,000 from the Middle East and almost 300,000 from the U.S… yeah, its a fake country based on the make believe “right to return” policy.

      1. Daniil Adamov

        That’s probably a large factor in the Israeli population’s usual and current geographic mobility. Much of the population has more than one citizenship and homes and relatives in other countries. Of course they’d tend to travel back and forth. The war exacerbates an existing tendency.

    2. Daniil Adamov

      “I find it hard to believe that 600k left Israel since the war started.”

      You would be right not to believe that, since the article says that “approximately 600,000 Israelis traveled abroad for vacation before the outbreak of the Gaza war”.

      The question is how many people left earlier and won’t return now. Also, some people left after the war and did return, or intend to do so later. Hard to get a clear count.

  7. Vicky Cookies

    Israel also deported 18,000 Gazan ‘guest workers’ in, iirc, November, so they could be bombed. What a contemptible country.

  8. Morongobill

    My gut feeling is that Hesbollah is a coiled rattlesnake, not rattling though, waiting for the right moment to strike. They will not allow the 3 IDF divisions to setup in Southern Lebanon.

    The IDF will relearn the 2006 lesson, fighting Hesbollah is not the same as beating up on civilians.

    The Israelis are itching for a fight, and the former champ will get his ass beat like a drum this time.

  9. V V Gerasimov

    Most of the competent analysts of the Ukraine SMO have pointed out how existential wars very often tend to escalate to extents that very few thought possible at the beginning of the conflicts. In the case of the SMO, they point out that the lenient terms Ukraine rejected in early 2022 in Turkey are nowhere close to the harsh demands that are going to be imposed on it now.

    Alastair Crooke has over time become more and more pessimistic about the current war in the Middle East, and now states that he believes it has literally become existential for both Israel and the Palestinians. In a recent interview with Judge Napolitano he said that when the dust finally clears either the Palestinians will be totally removed from their homeland, or else Israel as it currently exists will disappear. There is simply no longer any possibility of any sort of arrangement of the two peoples continuing to exist in the same space.

    The parallels between Ukraine and Israel are morbidly fascinating. In each case the populations and their leaders went completely berserk, descending to incredible depths of satanic bloodlust resulting from insane megalomania. What’s most interesting is their complete delusion regarding their actual vs their perceived capabilities to conquer their enemies. In the case of Israel, its ability to successfully take on the entire Muslim umma is even less than that of Ukraine to defeat Russia. Yet neither people let those facts stand in the way of their determination to plunge into the abyss and utterly destroy themselves…..

    Over the millennia countless nations have appeared and then disappeared from the world map, often in the middle of “civilized” Europe. Quite recently major countries like Czechoslovakia and Yugoslavia have vanished there. The longer the wars in Ukraine and Israel drag on and escalate, the greater the likelihood that these countries will join the long list of countries that have disappeared from the world map.

    1. Yves Smith Post author

      I don’t mean to sound like I am defending Ukraine but the US and NATO bears a lot of responsibility for feeding the delusion. Remember the repeated insistence that the Russian military was primitive, that its army was unwilling conscripts forced to engage in human wave tactics, that it was having to raid washing machines for chips and was about to run out of missiles?

      1. CA

        Remember the repeated insistence that the Russian military was primitive, that it army was unwilling conscripts forced to engage in human wave tactics, that it was having to raid washing machines for chips and was about to run out of missiles?

        [ This has been a repeated and insistent analysis in the New York Times since at least August 2008 and the Georgian assault on and invasion of Ossetia which was being protected by Russian peacekeepers. Ossetia borders Russia and a successful invasion would have represented an existential threat to Russia…

        August 20, 2008

        Russia Never Wanted a War


        THE acute phase of the crisis provoked by the Georgian forces’ assault on Tskhinvali, the capital of South Ossetia, is now behind us. But how can one erase from memory the horrifying scenes of the nighttime rocket attack on a peaceful town, the razing of entire city blocks, the deaths of people taking cover in basements, the destruction of ancient monuments and ancestral graves?

        Russia did not want this crisis. The Russian leadership is in a strong enough position domestically; it did not need a little victorious war. Russia was dragged into the fray by the recklessness of the Georgian president, Mikheil Saakashvili. He would not have dared to attack without outside support. Once he did, Russia could not afford inaction… ]

      2. V V Gerasimov

        Yves, everything you cite is the megalomania and delusion of the West (US/UK/Europe) believing their own propaganda and fooling themselves, and it certainly fed into and reinforced the same odious traits already evident in Ukraine. A more granular analysis would differentiate the western Ukraine (primarily Galicia) from the eastern part of the country. Galicia was always in the orbit of Central Europe, usually Poland and after its partition the Austrian Empire up until WW I. Thus during the period of rising nationalism in Europe — the 1800s — Galicia was heavily influenced by Western culture, even extending to the Orthodox churches there having accepted the rule of the Pope in Rome and becoming the so-called Uniate Church (the infamous Stepan Bandera was himself the son of a Uniate priest).

        So Galicia became a hotbed of radicals that over the course of the 20th century waged war first against Austria, then Poland, then the USSR. The Galicians collaborated with the Nazis during WW II, and after 1945 with the US and UK intelligence agencies to wage a guerilla campaign against the Soviet Union that lasted into the early 1950s.

        Suppressed for awhile, the Galicians resumed their malevolent ways with the fall of the USSR in 1991. The disturbing puzzle is how such a rabid minority managed to completely take over such a large, populous, resource-rich country and impose their nauseating agenda. However, they were already well into their depraved delusion before the US and NATO stepped in — it’s apparently something in their DNA….

        1. Yves Smith Post author

          Again, we helped a lot.

          The figure I recall is despite the Banderites representing only ~2% of the population, they had 15% of the government positions in the post-Maidan government, and critically in domestic security, meaning they were in slots where they could terrorize ethnic Russians.

          I saw an in-person of George Soros by Chrystia Freeland (gah!). Soros bragged that his Open Society had provided a grant either directly or to an immediate family member to everyone (meaning everyone holding a bureau-leading position) in the Ukraine government.

          And of course they tried depicting Russians as Nazis to sidestep the fact that Soros was funding Nazis.

          The room was a crowd of Europeans and this was ~ 2017. From the mutterings as the meeting ended, pretty much no one was buying what Soros was selling. But that was a long time ago with respect to this conflict.

    2. Em

      In Ukraine’s partial defense, they did vote in Zelensky as a peace candidate and I don’t think it ever reached 95 percent of the “non-Russian” population approving genocide of Eastern Ukrainians.

  10. Rural unhandy man

    Maybe I’m a little slow, but if Israel starts a hot war with Lebanon is there anything besides finger wagging which will stop them from using nuclear weapons? It’s not like finger wagging has stopped them before.

    1. Not Qualified to Comment

      Well, re the nuclear weapons it’s a bit scary to reflect that if this whole affair is based on the beliefs of Zionists that they are entitled to this land because the Bible says so, there is also this jolly little Biblical tale about Armageddon – also mentioned in the Moslem Hadith as “the Great Battle” being located of course – blow the seven trumpets – at Megiddo in northern Israel.

      However Armageddon puts in its appearance in Revelations, – a sort of Lonely Planet guide to the End of the World – which is in the New bit of the Bible so I don’t think it carries the same weight with the Zealots..

      1. ex-PFC Chuck

        ” . .I don’t think it carries the same weight with the Zealots..” Unfortunately it carries a lot of weight with some on the extreme right of the Christian zealots here in the US of A.

  11. Eclair

    ” … the loss of Palestinian labor, which was important in the (Israel’s) construction sector.”

    So, is (was?) Gaza Israel’s own little Mexico (where the term ‘Mexicans’ includes Mexican, Central and South American workers)? For a modern industrialized nation, if Mexico doesn’t exist, you have to create it.

    After they rub out the Palestinians, there will be thousands of other desperate workers to import, ones who won’t press their claims to the land.

  12. Verifyfirst

    I know about nothing about all this, but if Hezbollah takes the fight into Israel, as suggested above, isn’t that a guarantee the US will become an active combatant on the side of Israel? Of course, that may be the goal for Israel, it worked pretty good to draw the US in vis a vis the Houthis (Israel threat to US–if you don’t do X, we will, and you won’t like what that looks like–basically what happened with Houthis, no?).

    1. Anon

      The consensus by the professional speculators, is that the odds are not on the allied side, meaning groups as disparate as the Houthis have the capability to inflict existential (militarily and reputationally) harm on the forces we project. Iran and Hezbollah could presumably lay waste to the rest, to include Israel, remotely. Hence rumblings of sincere backpedaling from coach biden.

  13. T Martin

    At first, I thought Biden was being led around by the nose by Netanyahu. Now I am not so sure. From another perspective, it seems that, perhaps, the US is using Israel as a proxy in order to advance some policy objective (with a genocide being acceptable’colleteral damage). The ladies and gentlemen with their Oxford and Ivy League degrees can let the handmaidens do the dirty work , thus avoiding soiling their tailored suits.

    If the US simply pulled funding in cash and munitions from the Likud party, how much more would the Israeli economy tank beyond the 20% decrease it has experienced. This leads into a cost/benefit analyis. What is the gain for the loss of prestige that will acompany the promoter of a genocide. This gain would have to be both enormous and assured or why take the risk?

    The logic seems to indicate that either the US has abdicated to Netanyahu or Netanyahu is being used by the US. Other than my US taxes are involved, it’s a mystery to me.

  14. ISL

    One thing I have researched a little – oil crossing Turkey used to get by boat across the Red Sea to the Port of Eliat – which is something that will start to hit the Israeli economy as petroleum stores are depleted and/or Hezbollah hits storage tanks, internal pipelines, refineries, etc.

    Also, those expats presumably are withdrawing savings to live abroad, which it seems to me is a negative.

    I fully agree with the decay from attrophy – consumables become worthless, undriven cars/truck’s gunk up, business connections get lost, rats and other pests invade, etc., etc., etc. you cant eat dollars if you cant import food, consumables, etc..

    In any war with Hezbollah, the electric grid of Israel, ports, refineries, and all the things that make a modern economy function would be cratered, and cannot be replaced in any timely manner that would lead to refugee camps for israeli’s – its not grandaddy’s kibutzim Israel, neoconservatism is the rule.

    meanwhile Yemen showed Hezbollah can enforce a total blockade of israel except dod airlift.

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