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Guest Post: Guess Who’s Bailing Out Bankrupt Western Governments Now...
Submitted by Tim Staermose of Sovereign Man blog,
Fourteen years ago during the Asian financial crisis, Indonesia endured a currency collapse, a severe 2-year recession, and an embarrassing IMF bailout.
Western bureaucrats wagged their fingers incessantly at Indonesia, lecturing the country about the dangers of excess and fiscal irresponsibility.
How sweet the irony is. In a stunning rags-to-riches story, Indonesia contributed US$1 billion to the IMF last week in order to help bail out bankrupt Western nations.
As I’ve written before, unlike Japan, the US, and Europe — which all seem to think the answer to an economic bust brought on by a debt-binge is to borrow and spend even more money– Indonesia took its medicine when its economy collapsed back in 1998.
The government cut spending. The economy was de-regulated and thrown open to more foreign investment.
The banking system was restructured, and after a difficult and admittedly very painful two years, the foundation was laid for new economic expansion, which continues to this day.
To be sure, the 1998 collapse of the Indonesian economy cost the incumbent political elite here their cushy positions. President Suharto’s three-decade long iron-grip came to an ignominious end. There were riots in the streets, and he was literally turfed out of office.
But so what? That’s EXACTLY what was needed. Part of the renewal process should always be to ship out the dead wood.
Wandering the streets of Menteng this week, Jakarta’s most up-market residential suburb, it’s as though the Suharto era never existed. The street where he used to live is just another non-descript, quiet, residential street in this leafy inner-city suburb.
Ironically, US President Barack Obama spent some of his childhood in this same suburb of Jakarta.
Unfortunately, as he pulls out all stops to cling to power for a second term, the kind of tough decisions that could help the US emerge from its economic malaise have no chance of being made.
Lest anyone accuse me of being “anti-Obama” or, shock-horror, FOR the Republicans, let me state emphatically that the PROBLEM is not one side of the aisle or the other. In fact, whoever coined the terms “Demopublicans” and “Repulicrats,” is right on the money in my book.
It’s the ENTIRE system that’s the problem. And that goes for nearly every Western, “free market,” democracy out there.
I use the term “free market” reluctantly, because these economies are anything but. There has not been a true free market economy anywhere in the Western world for many decades.
The most important price of all — that of MONEY — is completely rigged by a small band of dark-suited men who sit around an impressive boardroom table and DECREE what interest rates should be. It is a farce.
Moreover, politicians from opposing sides of the political spectrum may disagree in public and harangue each other in the press.
But, at the end of the day, they’re generally all members of the same club– a cabal of privileged, self-righteous individuals who think they know how to spend your money better than you do.
This system has a vice grip on society, and nothing short of a revolution– such as what Indonesia experienced in 1998– will force any change.
That leaves most people with a rather interesting choice—stay at home in a declining, bankrupt, insolvent nation and hope that a social and political revolution comes quickly…
… or head to greener pastures, to a place that’s stable, thriving, and has already swallowed its medicine.
Here at Sovereign Man, we strongly urge you to come on in. The water’s fine, and the view is much better from this side.
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It’s the ENTIRE system that’s the problem. And that goes for nearly every Western, “free market,” democracy out there.
"and were gonna smoke an ounce to that...G's up Ho's down....."
No doubt.
Simon (whatever his last name really is) is a complete idiot. Where's the water better? In Indonesia? Having spent many years in Indonesia, let me inform you all that Indonesia is perhaps the worst place in the world to do business. You have zero rights as a foreigner. In legal disputes, you lose. Period. Why? Because you're not from around here. Nor can you own a house. Sorry, that's for locals. And if you're not accustomed to bribing everyone, everywhere -- please don't expect to get anything done.
The water's fine?
It's nice that your tour group gave you a couple free hours to blog Simon, but really: You should get back on the bus. Sorry you didn't get a chance to pick up any souvenirs.
This is a blog I did ranking the "D's" and "R's" on spending. As anyone can see both suck
One of the political debates that dominate social media web sites like FaceBook is which president had what deficit. There are a lot of urban myths.
While everyone agrees George W. Bush was a big spender Ronald Reagan is touted as another Thomas Jefferson. The political reality and myth are two completely different creatures.
Here are the facts from the Department of Commercewith official and not so official inflation adjustments.
For example Eisenhower went into office in 1953 with the federal government spending $65.8 billion or officially $568.59 billion in 2012 dollars. Using an alternate consumer price index (CPI) Eisenhower spent $3155.4 billion in today’s dollars or 20.4% of the Gross Domestic Product (GDP).
The CPI discrepancy is better explained by economist John Williams of Shadow Stats. I looked at his calculations and decided to use my own for the unofficial inflation adjustments. For an explanation of the CPI modification, most notably in 1980 and 1990, here is a link to John Williams’ web site explaining these changes in detail.
RONALD REAGAN COULD DELIVER THE GREATEST SPEECHES ABOUT SMALL GOVERNMENT BUT HIS RECORD WAS ATROCIOUS.
The motivation for the federal government to change the CPI to lower the inflation rate is to make it appear there is less inflation for political reasons and to lower federal payments based on cost of living allowances for most notably retirees.
Moving from decade to decade is almost impossible with inflation. Its clear the official CPI has been tapered with severely over the decades. Still the presidents can be ranked on a spending per year basis to allow for the different tenures as president.
Here are the presidents from Eisenhower to Obama and their fiscal records:
1. Eisenhower – No surprise that Ike was pretty frugal with the public purse. He added, what would be unheard of today, a minuscule $25.6 billion (2012 dollars) in debt per year. Even with my unofficial inflation conversion factor, worse case scenario, Ike would have added a minuscule $121.8 billion yearly to the debt compared to $1.3 billion today. Eisenhower is what Reagan professed to be.
2. LBJ – The president that ushered in the welfare state and expanded the Vietnam War was able to keep the debt reasonable with a scorching hot economy and tax collections. His debt per year was $59.7 billion or $178.5 billion with the unofficial conversion.
3. Kennedy – Kennedy does not get enough credit for being a fiscal conservative and calling for tax cuts to stimulate the economy. Kennedy averaged $66.9 billion per year, $252.2 billion unofficially, in his two year presidency.
4. Nixon – Simply put a walking disaster. Soviet style price and wage controls, gasoline shortages, defeat in Vietnam, Watergate, Bretton Woods, if there was a pile of dog squeeze within a mile of Nixon he found it and smeared it everywhere. The official number is $116.5 billion per year officially and $274.2 unofficially.
5. Carter – Yes Jimmy Carter was tighter with the purse strings than Ronald Reagan. Carter averaged $190.5 billion in debt per year and $386.7 billion unofficially.
6. Clinton – The last fiscally sane president the USA may ever see. Wouldn’t it be nice to be spending only 18% of the GDP on the federal government these days instead of 24%? Clinton did what Reagan pretended to do, reduce the size of the federal government from 22.1% of the GDP to 18.2% of the GDP and balanced the budget. Clinton averaged $232.8 billion officially and $288.7 billion unofficially. Unofficially Clinton would rank higher than Carter.
7. Ford – His advisors were Keynesians and that means when the recession hits spend, spend, spend. Bad advice, he should have hired the late, great economist Murray Rothbard and maybe he would have been elected president. Ford averaged $291.4 billion annually and $608.9 billion unofficially.
8. Reagan – He was the Obama of his day. He set post WWII deficit records and the faithful still sing his “small government” rhetoric to this day. Why he is held up as a fiscally conservative small government president is beyond comprehension. The faithful respond Reagan won the cold war, but the USSR’s imminent economic collapse was well known by1981, at least in military circles. Shhhh…please don’t bust me NSA. The USSR would have crashed with or without the USA defense build up. Reagan averaged $444.3 billion and unofficially $768.6 billion.
9. H. W. Bush – He had the unfortunate timing of inheriting the Savings and Loan monetary expansion from Reagan, and the real culprits Paul Volker and Alan Greenspan, and residing over the collapse. That and his “read my lips, no new taxes” pledge sealed his fate as a one term president. Officially he ran deficits of $597.6 billion annually and $860.5 billion unofficially.
If H. W. would have appointed Murray Rothbard instead of Nicholas Brady as Treasury Secretary he would have gotten that second term. It amazes me that these power hungry politicians would let some clueless economists steer them into re-unelected retirement.
10. Bush II – No surprise here. Two wars, prescription drug entitlement program, homeland defense spending, housing boom, Keynesian economics on steroids, it was all one big party until the liqueur, cheap money, ran out. Bush can blame Alan Greenspan but Bush re-appointed him. Bush averaged $728.5 billion per year and $801.4 unofficially per year.
11 – Obama
$1,505.7 billion in debt per year official CPI conversion and $1,565.9 billion unofficial.
Is he a communist?
Is he stupid?
Does he really believe in Cloward and Piven?
Is he the Manchurian Candidate?
All the above?
Who knows and does it really matter?
IT SHOULD NOT COME AS A SURPRISE TO ANYONE AWAKE THE LAST 3 1/2 YEARS OBAMA FINISHES 11TH OUT OF 11 IN FISCAL RESPONSIBILITY.
Obama has the USA on the same path the USSR went down not so long ago. To quote a PhD that goes by the name of Stuck on Zero
“The massive Soviet Military rusted into hulks so fast everyone was amazed. Soldiers and sailors of the USSR who were stationed overseas had to buy their own tickets to get home when the system collapsed. Generals with chests full of medals, private limousines, and dachas were suddenly standing on street corners selling pencils. It all happens very, very fast when it goes. ”
The damage has already been done by the Federal Reserve, Alan Greenspan, Ben Bernanke, Bush and Obama. There are only four paths left for the USA.
1. Austerity. Massive cut backs in government spending and payment of debt. Politically impossible.
2. Bankruptcy. The best option. The sooner the better. Iceland did it in 2008 and the sun still comes up in the morning.
3. War. The USA starts a war with Iran, Russia, or China. War always diverts attention away from economic realities of the day. Syria is exploring trying this option with Turkey.
4. Inflation. The Federal Reserve prints the USA into economic extinction. The USSR chose this option. Rome went out with an inflationary whimper.
Communist the world over swear by this method of destroying governments and seizing power. It wipes out the middle and upper classes concentrating wealth into the hands of the few with the education, intelligence, connections, and ruthlessness to destroy other people’s lives. The biggest winners with inflation are the biggest debtors, the elites and government. Inflation is the perfect way to create various forms of dictatorships.
Germany in the 1920s transformed from a civilized society into the Third Reich in large part due to hyperinflation.
After decades of double digit inflation Venezuela has turned into a war zone, 19,336 people killed in 2011. After a decade of fighting the casualties of both Iraq and Afghanistan number 6,440.
Inflation makes people crazy, literally.
Try paying $13 for a Big Mac meal, sorry no refills on that Coke, $23 for a bland spaghetti dinner at a restaurant, or $9.60 for a pound of hamburger, while feeding and clothing a family. Watch as your paycheck disappears year after year after year to invisible thieves. No matter how hard or long you work the invisible thieves are there to steal your labor. That’s the reality in Venezuelans have been living in since 1973.
The best option for peace, prosperity, and a return to normalcy is to return to money issued by private banks backed by gold and silver. End the Federal Reserve, sell the 8,400 tons of gold stored to pay off some of the federal debt, and tear up the $1.6 trillion in federal debt the Federal Reserve holds in federal financial instruments.
. Clinton – The last fiscally sane president the USA may ever see
ONLY because the GOP had him by the SCROTUM.
Balance the budget by:
- creative maneuvering of SSTF
- dot bomb bubble
- Glass Steagal rewind
- mothball military after end of cold war
~~~
So easy a caveman could do it...
Clinton never balanced the budget. The debt never stopped during his years but it was a good accounting trick and propaganda as economist Gary North explains better than I do. The reason I use the Clinton balanced budget myth is it is one of the few economic bright spots in the last 48 years. Really if you want to be accurate about it the last 48 years have been a shit sandwich brought about by the progressive movement and greedy pos.
There is that better?
"ONLY because the GOP had him by the SCROTUM"
would have been nice if the GOP had had their own Presidents by the scrota. And we'll see how the GOP "hands to the scrotum" works with Romney, if he get in there.
Popo, I agree with most of your analysis -- don't drink the water, no rights as foreigner, etc. -- and I think the IMF donation was a (typically) foolhardy move borne out of a perpetual inferiority complex, but on the flipside, it is something of a libertarians wet dream here:
I often wish those seeking a small government would come and visit: to drive the crumbling roads, to have no police interested in investigating a case without a proper fee, to see how a perfect world liberated from governmental repression would operate.
Bottom line, it is difficult to compare to life in the modernized democracy, so many pluses and minuses as those who have/do live here are aware. I am what you would call middle class, and for that I get:
Personally, I wouldn't trade my past 10 years here for anything that I experienced back in the US, but that's me -- to each his own.
Yeah, except Indonesia is in a property bubble right now, like much of the rest of Asia. The IMF "medicine" is just more corporatism and banksterism. Sovereign Man should know better. We need free markets, not IMF diktats.
Yep
If they, Indonesia, are smart they will take their medicine again.
Seriously. India made a 10 Billion dollar commitment. We have a Former IMF'er at the helm here.
Such a joke. Can't feed their own, but will feed into the trough of their former masters.
ori
phew, im so glad we have indonesia to rely on when the u.s. goes under......................now i feel better..................
Quite.
Prez of Indonesia in Oz this week and was practically begging to become one of Australia's top-ten trading partners, some time soon-ish.
People need to be careful with the economic kool-aide. I'm glad to see Indonesia doing better but they're very far from having it all worked out. They're in some ways like a poor-man's China, in miniature (which is rather huge still), by which I mean, a massively overpopulated and terribly under-resourced impoverished country.
At least the Indonesians aren't trying to fool themselves or everyone else that they're a super-duper-power.
Interesting that Indonesia is not yet included in the Trans-Pacific Partnership!
They've got 240 million people (fuck ... that many!?! ... I was about to type 100 million then checked first!) ... they've got oil and other natural resources ... they like to trade ... they're in the Pacific ... What's the go?!
Indeed i-dog,
The Trans-Pacific contraption seems fairly obviously an inclusive quid-pro-quo arrangement for these states volunteering to become the next front-line battle ground states in the bottling up of China.
It's not clear that Indonesia is going to be a willing part in that, for one thing, Indonesia and China have the same population pressures and resource importation needs.
Seems to me they are of necessity going to become quite pragmatic about addressing their interests and needs, if/when push comes to shove.
I'd say they will periodically play both sides off, run hot and cold, to get what they want.
And Indonesia was not at all happy when it was announced last year that US troops were going to be based at Australian operated military facilities in the Northern Territory (a few minutes flight time from Indonesia, as they are extremely reactive to the possibility of losing West Papua, like they lost East Timor ... it's got the largest operating gold mine on earth you see ...).
Indonesia was one of the former non-aligned movement states, who had to fight a war to kick out the former European colonial masters, and that legacy means they're never going to like a situation in which their Sovereignty is being subordinated to 'European' power's foreign policy.
And I think they are entirely right to take that sort of stance, given all the US has been up to, for the past 100 years.
Most people don't fully grasp that Indonesia has a truly gigantic population, and as you can imagine, we're acutely aware of this. And that's sorta why we have the world's most advanced uranium enrichment technology and actually want US Marines hanging around the place, and doing lots of training here. Unlike most other parts of the world, we simply must, and absolutely will remain fully-entrenched in a US-Australia defence alliance. Even with nukes, we would have to subordinate ourselves to what are mostly very distasteful and disagreeable US foreign policies and behaviours.
It's tough being a welded-on US strategic pawn, all the time, but the nuke option is there, but not to hitting China, or Indonesia, but to make sure the US fully understands, that if Washington ever "fucked us", ... we could bring the curtain crashing down, in so many ways.
Washington knows the score and is willing to operate on these terms of a composite global and Pacific Basin strategy, because it also has next to no choice, but to do so, at this point.
C'mon Sowrong Man. indonesia? Powder keg nation. Military rule is just a mini-crisis away. The Aceh massacre says a lot about who is in control and, poor country, it's got oil too.
Islam + oil. Bad news in the current set-up.
ori
yep
FYI Indonesia hit freefall because they are the poster child of the Export Land Model -- in which an oil exporting country subsidizes domestic use.
Then their oil production passed its peak and they discovered that they could not remove those subsidies because the populace would not allow it. So their export revs got smashed, and domestic use continued to grow.
And presto, Indonesia was forced to leave OPEC, the Organization of Petroleum Exporting Countries, because in the early 2000s they ceased to be an oil exporter. Now they are trying to survive shipping LNG to Japan.
Only oil matters. The rest is handwaving.
Don't forget their coal, iron ore and huge gold deposits, and tourism of course.
That said, as recently as ten years ago we called Indonesia the core component in the SEA "Arc of Instability".
And as little as ten years ago there were Islamic radicals (that sprang up everywhere after the 1998 collapse and weakness) were beheading Christians by the hundreds daily on Halmahera Island, Maluku (north of Timor).
http://www.religioustolerance.org/rt_indon.htm
http://www.oocities.org/ambon67/noframe/jubilee2k_2.htm
http://www.contenderministries.org/articles/indonesia.php
But the really serious violence began only after INTERFET troops landed in East Timor, to try to prevent the massive ransacking and burning going on there as well (in other words INTERFET did not deter shocking violence occurring close by, quite the reverse occurred in fact).
So people should not get all starry-eyed about recent successes. I hope it will be lasting, but don't underestimate the long-term realities, difficulties and trends in that country. In the end it's a country that will continue to struggle, because the population explosion there has been stupendous, and painfully unsustainable.
That is not a recipe for stability to follow.
If I were Indonesia I would not donate a friggin cent to the corrupt Western ponzi clownshow.
The food is good there. I will tell you that! I would probably say the same about most parts in Asia. If you can handle the spices that is!
you mean most Asia excluding China?
Jeez Simon... It took me half my fortune to obtain a New Zealand passport, then half of what was left for me to re-consider & move to Central America... Most recently, it was former Soviet Georgia...
This had better be it, because if not, you're going to have to start recommending some good bridges to live under...
The more I think about the more I think the monks have it right. Just go find a quiet place to live say some ohmms and screw everything else.
say some ohms ... they must be battling with inner resistance, I guess.
this guy has been reading ZH and its posts for the last 3 years, and thats it, apart from the greener pastures which won't remain so, if all first world went there to run away from home reality.
The buck stops at Rome. Thats where the people have to go to get their future back. A nation has as home where its roots lie. Forget the twelve tribes. First world is not a barren place with a burnt temple destroyed by an Empire. First world IS the empire.
Asia and Africa don't have to invent new products to grow. They simply have to adopt what has already been invented. Hence austerity will work for them. However Western economy has to create new products and systems to grow. Austerity throttles creativity by throttling the economy. So austerity will not work here.
How much Japan, Greece and co have contributed to the various bailouts?
Dozens of billions?
Making history at each second, US citizens.
Sell, sell, sell.
Speak, speak, speak.
Write anything.
US citizenism.
I liked this song better when RATM sang it.
My favorite band of all time, I disagree with alot of what they say, but at least they make you think.. Them and System of A Down.
The rest of today's music is just a compendium of ninnys and crappy lyrics, who are somehow "talented".
I call BS
Making roadside turds at each second, Chinese Citizenism citizens.
Crap crap crap.
Troll troll troll!
Project own sins onto others.
Self-deny at all opportunities.
Babble anything to self-justify.
Blame it on nonexistent 'US Citizenism'.
Trolls!
akak will slice you to ribbons! He has an excellent track record of clearing out pests..
LOL! + 1
It's a sad and lonely job, but one which comes with its own rewards.
;-)
Can you really pat a country on the back for exposing it's hindquarters to the developed world to a degree that it could be betrayed to the point of having to reset its entire economy?
That's like congratulating the junkie on moving up to needles and going to rehab.
Funny how the identity and fascism of those behind the curtain doesn't change though. Dare I say, same as it ever was.
yet still one grade below investment grade
Isn't America's President a citizen of Indonesia?
yeah, soverign man...
i have a profound love for this country; and i consider the fight for its future incumbent of all patriots. but, there is the little matter of counting the costs. the faith of the people in this concept of 'democracy' is bound up in its current two-party manifestation -- a bleak and bastardized contortion of its incipient principals. the debate on whether or not we should return to the naecent notions of our founding fathers is, well, moot...it's like pondering the feasability of restoring a withered nag to its former triple-crown-winnin glory.
the ole grey mare just ain't what she used to be.
to me, america is not a form of government; it is not a promise of ceaseless growth; it is not a house on the hill girded by a white picket fence; it is not an idea; it is not a system...america is a group of people. and, to my mind, they are a spectacularly awesome lot. but, and this is the rub, their faith in 'the system' is tantamount to that of the religious. it's as if they've conflated the act of voting and that of prayer.
these greedy little gimps and gollums -- politicians, preachers & professahs -- are but the dingleberries of our collective constipation. they need to be wiped clean and flushed into the great abyss. but, if we're feelin merciful, maybe work-camps...so they can close their counterproductive days on this earth knowing that they've, at long last, added something to the world they've heretofore polluted.
i do often think of a few spots in central & south america; and there some spots out east that do still tempt (but i can't take humidity any longer)...all the same; i am an american, and i figure this nation is worth one last stand.
these diminutive wizards waddling behind a brocade curtain of lies, fraud and wanton-wickedness are just that; callow and craven lil imps. when these high-priests of deceit are at long last dragged into the public square and forced to face their long-overdue reckoning, that is when the tower of babel is razed and ruined. at that point everything will go...the whole gambit: corporatism, churchianity, our stellah edumakation-system, police-state-feardom, military adventurism...it's all inexorably wed together...all an incestuous and interdependent collective of crooks. damn them to hell. i'll have no mercy on any who cling to its old and dying ways.
to all those who look longingly after this depraved and dismal world, remember the story of Lot's wife. she looked back.
don't look back.
http://www.youtube.com/watch?v=-sjHHT2vHxU&feature=related
you must leave now/
take what you need you think will last/
but whatever you wish to keep/
you bettah grab it fast/
yonder stands your orphan with his gun/
crying like a fire in the sun/
look out the saints are commin through,
janus
Social Security is the largest holder of U.S. Debt
http://www.businessinsider.com/who-owns-us-debt-2011-7?op=1
Why the Senate Won’t Touch Jamie Dimon: JPM Derivatives Prop Up U.S. Debt
http://webofdebt.wordpress.com/2012/06/19/why-the-senate-wont-touch-jamie-dimon-jpm-derivatives-prop-up-u-s-debt/
Still waiting on the scans of the passport.
I'm not convinced Simon has ever left the lower 48