Tim Staermose: 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.
Tim Staermose
Chief Investment Strategist
Sovereign Man
Chief Investment Strategist
Sovereign Man
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