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Guess who’s bailing out bankrupt western governments now…


July 5, 2012
Jakarta, Indonesia

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

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

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About the author: Born to a Danish father and British mother, in Dar Es Salaam, Tanzania, Tim Staermose has led an international life since the day he was born. Growing up, he also lived in Egypt, Denmark, and Singapore, before eventually settling in Australia, where he completed his education and took out citizenship. Since then he has also lived and worked in Hong Kong, and Manila, Philippines, in the field of equity research — both for a bulge-bracket Wall Street investment bank, and for an independent investment research firm. Today, when not traveling the globe looking for investment and business opportunities for the Sovereign Man community and catching up with his diverse, multinational group of friends, he divides his time between Hong Kong, and the Philippines.

Comments on this entry are closed.

  • Chuck B.

    You hit the nail on the head; the west is unwilling to take it’s medicine as Asia did in the late 90’s. Their plan seems to be more tax, more spend, more laws & regulations that strip the people of their civil and economic freedoms. The very things that caused the problems to begin with.

  • xcitfan

    Indonesia’s democratic transition since 1998 has been one of the most important, least understood and reported-on, events in the world…. thanks for highlighting some of the key points. I was in Jakarta for the first time in five years recently and was blown away by the pace of development. And the innate friendliness of the Indonesian people remains the same as always.

  • JerryCox

    throw all the bums out, Demopublicans, Repulicrats,Inpublicancrats, and this goes to the top down, and maybe we the people could think, and not hear a so called leader say pass it and read later ever again. How about you the people elect me because your to dumb to know whats good for us. think when you vote in Nov. and remember that you don’t need a person spending your money and thinking for you this time around. If you do best not to speak out because you don’t  know what you want and crazy Nancy does. Remember 90% of the elect people were middle to higher class till they got to DC and now there rich and were poorer for electing them. throw the bums out and lets get it right this time.

  • WBC

    The United States will be the last domino to fall – and the one to fall hardest – precisely because it issues the world’s reserve currency.  Indonesia could “take its medicine” only because it had no choice.  Compare that to Japan, which is still stuck with zombie banks and near-zero interest rates 15 years after their meltdown.  The only reason Japan could “afford” to  prop up a Potemkin banking system was the convertibility of the Yen – and there appears to be no end in sight to Japan’s stagnation.

    The United States and Western Europe should take note – but of course they will not.  Bailouts and deficit spending will continue for as long as it is feasible – which will be when U.S. treasury paper no longer attracts foreign lenders and continued quantitative easing (i.e., the Fed making up the difference) drives up inflation.  Interest rates will perforce rise and we will be like Greece – but without any foolish Germans in a position to bail us out.

  • Billharner

    That is part of the “GAME” – a 2 party system so people are fooled constantly into thinking “it’s the other party who screwed things up. They are all whores sucking the lifeblood from working stiffs on a daily basis. Until enough people realize this nothing will change.

    A GREAT education for all can be had from sources below –

    “The Money Masters – How International Bankers
    Take Control”



    It may even make you a Ron Paul believer – at least
    regarding The Fed




    A great book on how the communists have taken over our
    institutions – churches, schools, businesses, government, Military and now our
    court system is

     – The Naked
    Truth: The Naked Communist – Revisited   

    James C. Bowers


    He discusses how W. Cleon Skousen ( author of the 5000
    Year Leap ) was an FBI agent for 16 years and was concerned about the
    implementation of what he felt were the top 45 stated goals of the communists
    at that time. You will be shocked how successfully their plans have been
    completed.  A MUST READ book for any
    freedom loving American. Please pass on to others when done reading – SPREAD


    Also – A MUST SEE – watch the youtube video of Yuri
    Bezmenov, from the 80’s with G. Edward Griffin        ( Jekyll Island author ). A Soviet KGB
    defector, he tells how it was his job to infiltrate these institutions and
    place communist supporters in positions of leadership and power. He was
    successful in doing so. Mind boggling stuff.




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