Monday, August 30, 2010

Russia Will Boost Oil Exports to China With New Pipeline From East Siberia, Turkmens, Afghans struggle to realize pipeline dream....

“This is an important project because we are beginning to diversify the delivery of our energy resources,” Putin said at today’s opening of the pipeline in Skovorodino in Russia’s Far Eastern Amur region, in comments posted on his official website. “Thus far, shipments were made to our European partners.”

Putin said Russia is currently pumping 120 million to 130 million tons of oil to Europe and only “a small amount to Asia Pacific,” according to comments on his site.

“The China-Pacific pipeline is the most important energy project in Russia since the opening of the gas pipeline to Europe,” said Chris Weafer, chief strategist at UralSib Financial Corp., in e-mailed comments today. “It means that Russia’s strategic importance to China has increased considerably.”

Construction of the 64-kilometer (40-mile) pipeline on the Russian side was launched by OAO Transneft, the oil pipeline monopoly, in April 2009, according to state-run Vesti-24 television. From the border, the pipeline will run a further 960 kilometers to the Chinese town of Daqing, located in the country’s northeast. China will begin testing after completion of its section of the pipeline in late September, Vesti added.

The pipeline will initially carry 30 million tons of oil a year, which may expand to 50 million tons, Vesti reported Putin as saying.

Igor Sechin, Putin’s deputy for energy, said Russia would also open 500 gas stations across China, Vesti added.....

31 08 2010

[For some reason, the powers that be are allowing Turkmenistan, Afghanistan and Pakistan to pretend on their world stage that there is a chance in hell that the TAPI pipeline can be built.... It even serves American destabilization plans to allow the players to pretend that Iranian gas can be part of the solution, just as they pretend that Iran can help fill Nabucco... As always, the pipeline will remain just a pipe dream until Afghanistan is tamed....

Perhaps an even greater obstacle than the Taliban is the Balouch insurgency. Pakistan may be able to force some kind of deal with their clients, the Taliban, but it has so far been unable to demolish the tenacious Balouch resistance. The Army has so been unable to protect Pakistan's small gas transmission lines, let alone the dozens of large diameter pipes tied to Central Asia.

Balouchistan can only be made safe for international pipelines in one of two possible methods, either by giving in completely to demands for an independent Balouch nation, or by bombing the areas that support the resistance back into the stone age (daily life for the Balouchs is barely above that level now). If Pakistan is willing to accept American B-52 and B-1 bombers over the country, repeating the tactics used at Tora Bora, or if all the players are willing to accept global condemnation for this criminal bombing campaign, then it could theoretically be done. But have American leaders become so desperate that they are accelerating their plans to this, the final stage of no-holds-barred military action? Are they now willing to throw-off the cloak of respectability and openly make such a bold move for world conquest?

If the Beast has become this desperate, then there will be no restraining force of popular opinion to prevent the alleged defender of "democracy" from using its entire arsenal to solve the equation, even tactical neutron bombs (you know, the neat little nukes that kill, but leave property intact?).

"Pipelineistan" will never succeed until America is ready to let the mask fall.]


The violence in Afghanistan, one of the world’s most opaque regimes in Turkmenistan and miserable Pakistan-India relations risk the decade-long pipeline plans to deliver natural gas from Turkmenistan through Afghanistan to Pakistan and India. Analysts are skeptical that anyone can succeed in raising the pipeline off the desert floor

Plans for a pipeline to deliver natural gas from Turkmenistan through Afghanistan to Pakistan and India are picking up steam but the decade-long dream still risks never leaving the drawing board.

The Turkmenistan-Afghanistan-Pakistan-India, or TAPI, pipeline has featured prominently in recent talks among regional leaders eager to jumpstart the faltering project for reasons of economics or security.

But with spiraling violence in Afghanistan, one of the world’s most opaque regimes in Turkmenistan and miserable Pakistan-India relations, analysts remain skeptical that anyone can succeed in raising the pipeline off the desert floor.

Recent noises from Ashgabat, which may lack the volume to fill the pipeline, are at best wishful thinking, said Evan Feigenbaum, a senior fellow at the Council on Foreign Relations and ex-assistant deputy U.S. secretary of state.

“Their roadshows periodically include every pipeline idea under the sun, so in theory they’d like to do lots of things. In reality, they probably can’t and almost certainly won’t,” he said. That, he added, is even before any discussion of Afghan President Hamid Karzai’s increasingly-embattled government in Kabul or the thorny issue of India-Pakistan relations. “(I) sense that the U.S. puts this on the agenda with Karzai now and again to keep the Afghans happy,” he said. “I just don’t see this in the cards, even in Ashgabat.”

But with Turkmenistan desperate to diversify its export routes following a punishing gas row with Russia last year – and with Afghanistan, Pakistan and India hungry for energy – all cards appear to be on the table again.

“What is being done on this project fits into the framework strategy for getting Turkmen gas to world markets and in this sense, it is normal,” said Valery Nesterov, an energy analyst with Russian investment bank Troika Dialog.

TAPI was first floated by the governments of Turkmenistan and Pakistan in embryonic form as the Trans-Afghanistan Pipeline in 1995 at the height of the Afghan civil war that followed the withdrawal of the Soviet Army in 1989.

A host of western energy firms spent the next six years negotiating with anyone they could find – including Afghanistan’s Taliban government – before NATO forces invaded Afghanistan in the wake of the Sept. 11, 2001 terrorist attacks.

Finally, in 2002 the concerned governments agreed to build a 1,700-kilometer pipeline to deliver Turkmen gas to Pakistan and India via Afghanistan but the project stalled because of the raging Taliban insurgency.

The pipeline aims to transport over 30 billion cubic meters of gas annually from the Dauletabad gas fields in southeast Turkmenistan, creating a potentially massive windfall for Afghanistan in the form of transit fees.

Despite receiving financing from the Asian Development Bank, or ADB, the project has been held up by a number of problems, not least of them the security along the proposed route inside Afghanistan.

The pipeline’s route would take it straight through the region’s most turbulent locales, including conflict-torn Helmand and Kandahar provinces in Afghanistan as well as Quetta in Pakistan, where tribal unrest is common.

But there are growing signs that these governments are eager to push ahead with TAPI in the hopes the potentially enormous rewards outweigh the very real obstacles in its path.

Last week Turkmen President Gurbanguly Berdymukhamedov and his Afghan counterpart Hamid Karzai agreed in telephone talks to meet at September’s U.N. General Assembly in New York to unstuck the lagging project.

Days later Pakistan seemed to signal its willingness to move ahead during a meeting between the Turkmen and Pakistani foreign ministers, who agreed a meeting of the pipeline’s steering committee to be held in Ashgabat next month.

A spokesman for Afghanistan’s presidential administration insisted Kabul was ready to guarantee the security of the pipeline, which he said would “yield enormous profits for Afghanistan.”

“We have a specific plan for security of this pipeline, if all sides involved in this project manage to strike a deal, we would do our utmost to ensure security of it in the best way possible,” spokesman Siamak Herawi said.

From their side, a senior official in the Turkmen ministry of oil and gas, speaking on the condition of anonymity, said a consensus had been reached that the pipeline would bring security, not the other way round.

“Everyone is clear that the joint implementation of a gas pipeline that will connect the shared interests and goals of the four states will contribute to a better mutual understanding and trust between them,” he said. “And (it) will definitely improve the situation not only in the region, but also in Central Asia,” he added.

The accelerated pace of discussions leaves little doubt that the parties are interested in moving ahead, said Nesterov. Still, he warned that where Turkmenistan was involved, energy deals were best approached on a wait-and-see basis. “I think that this project, as often happens, will be used primarily as part of the negotiation process and political games of Turkmenistan,” he said.....

Sunday, August 29, 2010

The national debt and the runaway humongous deficits are the single biggest threat to US national security

The national debt and the runaway humongous deficits in USA are the single biggest threat to US national security....after the utter corruption to the core...which is beyond redemption....

WTO, where governments collude in private against their domestic pressure groups....I have Been hearing rumors that administration is striking a deal with the Chinese to sell parts of the San Joaquin Valley to the Chinese as repayment of debt.... Must be nice work selling America off the special interests one parcel at a time.

Yes, that's how it's done. I must sound like a broken record by now...our economy was broken cleverly and deliberately. Banks tied their nooses. Psy ops were run. Various groups were stirred up. False flags were run. War and collapse and murder in the streets came in a roaring inferno. The elites and UN came in and decided how to divide and resettle us and did exactly that. The country finally was broken to pieces and sold to special interest one parcel at a time, parts in wholesale global auction. Pay very close attention to this description and see the evolution here. It is the Soros and Illuminati way of doing things. Yes, I see it here. Very clearly. As you stated, too. America 2010 is feeling more and more like 1990 Yugoslavia 5 minutes before midnight and everyone felt it dying and being destroyed....
I do believe that I will one more time look back on a country where I once lived that no longer exists. This time, it will be called USA.

Global Collapse of the Fiat Money System: Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011

The economy is collapsing faster than the Arctic glaciers, Barry is flying killer drones over Yemen, Agfhanistan is a mess with 7 new dead overnight, BarryCare helpfully increased the rolls of Medicaid to 50 million and going stronger than Hurricane Danielle in destruction, Obama says he is tired of plastering his fake CIA/birth certificate... to his forehead any longer, the Beck rally was disappointingly not racist properly mine it for political propaganda fodder(Link here), California students get first federal tracking devices (yes, it's true, Link here....there are TPTB to talk about and dragons to slay and pretty pics of Dear Leader to post here today...and CIA/MOSSAD/MI6/DGSE/BND/CSIS.... etc., shenanigans continue unabated worldwide...

Excellent summary of the coming tax increases - should please all the O'pologists....:

In February 2009, the head of U.S. intelligence - Dennis Blair - said that the global financial crisis was the largest threat to America's national security. All of America's intelligence agencies apparently agreed.

The same month, the chairman of the Joint Chiefs of Staff - Admiral Mullen - also agreed.

Now, Mullen is focusing on a specific economic threat. Specifically, Mullen is focusing on the debt:

The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.

“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.

But at least war is good for the economy, right? At least spending on defense will help the economy recover and climb out of this pit of debt, no?

Actually, no.

Nobel-prize winning economist Joseph Stiglitz has said that war can be very bad for the economy. For example, in 2003, Stiglitz wrote:

War is widely thought to be linked to economic good times. The second world war is often said to have brought the world out of depression, and war has since enhanced its reputation as a spur to economic growth. Some even suggest that capitalism needs wars, that without them, recession would always lurk on the horizon.

Today, we know that this is nonsense. The 1990s boom showed that peace is economically far better than war. The Gulf war of 1991 demonstrated that wars can actually be bad for an economy.
Stiglitz has said that this decade's Iraq war has been very bad for the economy. See this, this and this.

And as the New Republic noted last year:

Conservative Harvard economist Robert Barro has argued that increased military spending during WWII actually depressed other parts of the economy.

Also from the right, Robert Higgs has done good work showing that military spending wasn't the primary source of the recovery and that GDP growth during WWII has been "greatly exaggerated."

And from the left, Larry Summers and Brad Delong argued back in 1988 that "five-sixths of the decline in output relative to the trend that occurred during the Depression had been made up before 1942."

As I noted in January:

All of the spending on unnecessary wars adds up.

The U.S. is adding trillions to its debt burden to finance its multiple wars in Iraq, Afghanistan, Yemen, etc.

Two top American economists - Carmen Reinhart and Kenneth Rogoff - show that the more indebted a country is, with a government debt/GDP ratio of 0.9, and external debt/GDP of 0.6 being critical thresholds, the more GDP growth drops materially.

Specifically, Reinhart and Rogoff write:

The relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies...
Indeed, it should be obvious to anyone who looks at the issue that deficits do matter.

A PhD economist told me:
War always causes recession. Well, if it is a very short war, then it may stimulate the economy in the short-run. But if there is not a quick victory and it drags on, then wars always put the nation waging war into a recession and hurt its economy.
You know about America's unemployment problem. You may have even heard that the U.S. may very well have suffered a permanent destruction of jobs.

But did you know that the defense employment sector is booming?

As I pointed out in August, public sector spending - and mainly defense spending - has accounted for virtually all of the new job creation in the past 10 years:
The U.S. has largely been financing job creation for ten years. Specifically, as the chief economist for BusinessWeek, Michael Mandel, points out, public spending has accounted for virtually all new job creation in the past 10 years:

Private sector job growth was almost non-existent over the past ten years. Take a look at this horrifying chart:


Between May 1999 and May 2009, employment in the private sector sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period.

It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years. Take a look at this chart:


Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.

But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.


Most of the industries which had positive job growth over the past ten years were in the HealthEdGov sector. In fact, financial job growth was nearly nonexistent once we take out the health insurers.

Let me finish with a final chart.


Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back.

Indeed, Robert Reich lamented this month:
America’s biggest — and only major — jobs program is the U.S. military.
Back to my January essay:
Raw Story argues that the U.S. is building a largely military economy:

The use of the military-industrial complex as a quick, if dubious, way of jump-starting the economy is nothing new, but what is amazing is the divergence between the military economy and the civilian economy, as shown by this New York Times chart.

In the past nine years, non-industrial production in the US has declined by some 19 percent. It took about four years for manufacturing to return to levels seen before the 2001 recession -- and all those gains were wiped out in the current recession.

By contrast, military manufacturing is now 123 percent greater than it was in 2000 -- it has more than doubled while the rest of the manufacturing sector has been shrinking...

It's important to note the trajectory -- the military economy is nearly three times as large, proportionally to the rest of the economy, as it was at the beginning of the Bush administration. And it is the only manufacturing sector showing any growth. Extrapolate that trend, and what do you get?

The change in leadership in Washington does not appear to be abating that trend...[121]
So most of the job creation has been by the public sector. But because the job creation has been financed with loans from China and private banks, trillions in unnecessary interest charges have been incurred by the U.S.And this shows military versus non-military durable goods shipments:

[Click here to view full image.]

So we're running up our debt (which will eventually decrease economic growth), but the only jobs we're creating are military and other public sector jobs.

PhD economist Dean Baker points out that America's massive military spending on unnecessary and unpopular wars lowers economic growth and increases unemployment:
Defense spending means that the government is pulling away resources from the uses determined by the market and instead using them to buy weapons and supplies and to pay for soldiers and other military personnel. In standard economic models, defense spending is a direct drain on the economy, reducing efficiency, slowing growth and costing jobs.
A few years ago, the Center for Economic and Policy Research commissioned Global Insight, one of the leading economic modeling firms, to project the impact of a sustained increase in defense spending equal to 1.0 percentage point of GDP. This was roughly equal to the cost of the Iraq War.

Global Insight’s model projected that after 20 years the economy would be about 0.6 percentage points smaller as a result of the additional defense spending. Slower growth would imply a loss of almost 700,000 jobs compared to a situation in which defense spending had not been increased. Construction and manufacturing were especially big job losers in the projections, losing 210,000 and 90,000 jobs, respectively.

The scenario we asked Global Insight [recognized as the most consistently accurate forecasting company in the world] to model turned out to have vastly underestimated the increase in defense spending associated with current policy. In the most recent quarter, defense spending was equal to 5.6 percent of GDP. By comparison, before the September 11th attacks, the Congressional Budget Office projected that defense spending in 2009 would be equal to just 2.4 percent of GDP. Our post-September 11th build-up was equal to 3.2 percentage points of GDP compared to the pre-attack baseline. This means that the Global Insight projections of job loss are far too low...

The projected job loss from this increase in defense spending would be close to 2 million. In other words, the standard economic models that project job loss from efforts to stem global warming also project that the increase in defense spending since 2000 will cost the economy close to 2 million jobs in the long run.
The Political Economy Research Institute at the University of Massachusetts, Amherst has also shown that non-military spending creates more jobs than military spending.

So we're running up our debt - which will eventually decrease economic growth - and creating many fewer jobs than if we spent the money on non-military purposes.
As I wrote last month:

It is ironic that America's huge military spending is what made us an empire ... but our huge military is what is bankrupting us ... thus destroying our status as an empire.

Even Admiral Mullen seems to agree:

The Pentagon needs to cut back on spending.

“We’re going to have to do that if it’s going to survive at all,” Mullen said, “and do it in a way that is predictable.”

Indeed, Mullen said:
For industry and adequate defense funding to survive ... the two must work together. Otherwise, he added, “this wave of debt” will carry over from year to year, and eventually, the defense budget will be cut just to facilitate the debt.
Secretary of Defense Robert Gates agrees as well. As David Ignatius wrote in the Washington Post in May:

After a decade of war and financial crisis, America has run up debts that pose a national security problem, not just an economic one.


One of the strongest voices arguing for fiscal responsibility as a national security issue has been Defense Secretary Bob Gates. He gave a landmark speech in Kansas on May 8, invoking President Dwight Eisenhower's warnings about the dangers of an imbalanced military-industrial state.

"Eisenhower was wary of seeing his beloved republic turn into a muscle-bound, garrison state -- militarily strong, but economically stagnant and strategically insolvent," Gates said. He warned that America was in a "parlous fiscal condition" and that the "gusher" of military spending that followed Sept. 11, 2001, must be capped. "We can't have a strong military if we have a weak economy," Gates told reporters who covered the Kansas speech.

On Thursday the defense secretary reiterated his pitch that Congress must stop shoveling money at the military, telling Pentagon reporters: "The defense budget process should no longer be characterized by 'business as usual' within this building -- or outside of it."

Forecasting the development of the crisis.....

So far and even in the first world financial crisis, the attempts at a solution of the world financial bubble have not been sufficient to eliminate the crisis potential. More than half of the toxic waste products and the public debts, notably in the US, remain unsolved and are still to be corrected. So we have to reckon with a second stage of the crisis (“double dip”).
A next drastic correction of the dollar is overdue. Confidence in the dollar has been shaken due to the mass manipulation by the FED and the American high street banks. Presently the dollar is only accepted because the Americans have brought about a Euro-crisis and so shaken confidence in the Euro as well. But this diversionary tactic will not help for long. The US are not only overly indebted but also threatened with insolvency. Because of their international war and import obligations the US need, after all, more than 360 billion dollars inflow from all over the world or glut of money from the FED to just stay solvent. If this inflow comes to a standstill, insolvency and probably currency reforms are due.
Indeed, the US have already twice been able to utilize mega-crises of their country for economic recovery by means of their participation in world wars, by selling the output of their military production and by afterwards commandeering the spoils of war (German gold, German patents, occupation costs). This could inveigle the current government to try the same method again. After all, war preparations against Iran are already made, only an 9/11 is still missing.
So a currency reform, which is in itself necessary, could be deferred by war for a while, but afterwards it would be all the stronger.
In Europe we got off lightly – though not at all cheaply – in the first banking crisis and might have been well on track for correction, had not the Greek crisis inveigled politicians for a second time to assume bank debts to be paid by their tax payers and to assume mutual liability for ailing states in the EU (transfer union).These extremely irresponsible schemes of fiscal policy have taken place in the last months. In one country, we have postponed and replaced state bankruptcy, but by doing this we have brought other countries to a level of indebtedness, that might no longer be manageable by public saving or inflation.
Now it appears that the alleged “European Solidarity” is being misused by the lazy, the unreliable and the criminal elements to exploit the hardworking, the reliable and the upright people. The euro zone might break apart partly or wholly because of this, maybe even the European Union.
Had Greece been allowed to unwind by means of insolvency (state bankruptcy), this would have been the more solid, the simpler, and the cheaper way. Our politicians’ bustle has not solved the problem; it has only passed on the damage from the banks to the tax payers – mostly the German ones. Thus in the next two years we will witness dramatic financial conflicts in Europe, possibly also a Euro-currency reform together with or followed by the US. Yet maybe a short and painful operation like a currency reform is still better and cheaper than a longer crisis period. A currency reform might even spare us recession or even depression which will otherwise be sure to come.•.....

On International Trade imbalance and WTO....

More deft diplomacy’ envisioned by many for so long... is NOT going to balance the global trade imbalances any more than King Kanube could stop the tides from coming in.

All nations act according to what they perceive to be in their best interest at any given point in time.

China and Germany will continue their export machine operating at full speed since that is the only way they can assure employment for their workers.

The time has to come when the countries with huge trade deficits such as US and Europe (minus Germany) have to say enough is enough and no more and hence send WTO to dustbin of history. Deft diplomacy can not solve a problem when national economic interests are at stake for both - China and Germany with trade surpluses on one hand and US and EU (minus Germany) with trade deficits on the other.

Diplomatic talks about China’s ever increasing trade surpluses has been around for a long time without any tangible concrete action that reverses the trend.

Only way out is for US and EU to look after their own national economic interests before it is too late to be able to do anything about it....

As for the USA....

The sheeple will never connect the dots even if your local paper says they just sold all the city, county and state land to the feds because they were broke.

This land is your land. This land was my land. This land is THEIR land now.]Leaked Memo Uncovers Obama Land Grab

The CLEAR Act of Another Federal Land Grab

White House Land Grab

Admin document reveals big change in federal land mgmt (colossal land grab by executive fiat?)

Federal Land Grab Will Bypass Congress

Excellent preparedness post for the Aware:

Final Survival Preparations

Those with faith in the USG, don't bother.....


It's the 15th anniversary of " The Money Masters - How International Bankers Gained Control of America ". We can only imagine what would have happened if 10's of millions of Americans had seen this instead of just 10's of thousands . Still, it's a 'must watch' if you've never seen it.

Friday, August 27, 2010

Japan's new round of musical chairs....and the USA's shenanigans in East ASIA....

Japan's new round of musical chairs
....and the USA's shenanigans in East ASIA....

By Kosuke Takahashi

TOKYO - Around the globe, poor economies are weakening already vulnerable governments and causing political changes. This was so in the United Kingdom in May and is likely to be reflected in the November mid-term elections in the United States.
Japan is no exception. With the country facing a rising yen, sluggish domestic demand and unstoppable deflation - all significant contributing factors to the sinking of the world's long-time second-largest economy, musical chairs with the top job may possibly burden the nation with its third premier in a year.

Political kingpin Ichiro Ozawa, 68, a member of the governing Democratic Party of Japan (DPJ), on August 26 took on Prime Minister Naoto Kan, 63, declaring his candidacy for the party leadership. The outcome of that race will essentially decide Japan's next leader.

The government on Friday offered a pessimistic view of the economy. Japan's consumer prices continued to decline in July for the 17th straight month, another sign that the economy remains mired in a deflationary spiral that is pushing down prices, wages and demand. The yen hovered near a 15-year-high against the US dollar, trading at 84.64 yen a dollar at 4:50 pm in Tokyo.

The fate of the DPJ presidential race has far-reaching implications beyond the domestic arena of politics. Ozawa has said that the US 7th Fleet, based in Yokosuka, Kanagawa prefecture, would be enough to secure the US presence in the Far East from a strategic viewpoint - suggesting that he supports withdrawal of all other US forces from Japan, including the controversial US Marines Corps base in Okinawa.

In December, Ozawa, then secretary general of the DPJ, accompanied more than 600 people, including 143 DPJ lawmakers from the upper and lower houses of the Diet (parliament), to Beijing - showing his pro-China stance as a direct successor of former prime minister the late Kakuei Tanaka, who broke the ice to normalize Japan-China relations in the early 1970s.

The Destroyer

Ozawa, a shrewd veteran lawmaker and former Liberal Democratic Party secretary general, has earned himself the nickname "The Destroyer", a Japanese version of the Hindu god Shiva the Destroyer, for his record of creating and breaking up parties and for crushing personal ties and letting go of many talented aides.

He stepped down as DPJ secretary general in June, wounded by a political donation scandal that has already led to the arrest of his three secretaries, along with the party's then-leader and prime minister, Yukio Hatoyama.

Ozawa still has past accounting violations at his political fundraising organization, or Rikuzankai, hanging over his head. He could be brought to trial, depending on a ruling by a citizens' panel expected as early as October. But should he become the next prime minister, the law could protect him from indictment for the duration of his tenure for a questionable land transaction by his implicated fundraising body.

Strong-arm tactics and risk-taking
Although he conjures up tainted images as a politician among ordinary people, more than a few lawmakers and some business leaders expect Ozawa to boldly address national problems through his strong-arm tactics and risk-taking - by confronting and reining in the bloated bureaucracy, including the Ministry of Finance and the Bank of Japan, and then taking more pump-priming measures.

Ozawa decided to throw his hat into the ring for the presidency of the DPJ as he felt a restless urge about the future of his fading political influence, Minoru Morita, a noted political analyst based in Tokyo, said.

"Heading into the party election, Kan refused to accept Ozawa’s demands, such as the dismissal of chief cabinet secretary Yoshito Sengoku and current secretary general Yukio Edano, both Ozawa foes," Morita told Asia Times Online on Friday. "This made Ozawa decide to run for the election. For sure, he is damned if he does so because he resigned as the DPJ's secretary general less than three months ago. But he would also by damned if he doesn't, because he surely faces the end to his career by losing his political power."

"If the presidential election were held today, Kan would beat Ozawa because of the strength of the incumbent premier holding power and position," Morita said. "But in the DPJ presidential election scheduled for September 14, there would have been a major reversal in this situation. Ozawa may win."

Japanese economists and market participants are divided over the prospects of the economy should Ozawa take over as prime minister.

Critics view Ozawa as a fiscal expansionist by sticking to the party's 2009 platform that was criticized as rampant spending. They predict extra spending could trigger selling in Japanese bonds and the yen, just like with Greek bonds and the euro.

Proponents, meanwhile, say Ozawa would be better to tackle the rising yen and falling Japanese stocks by taking aggressive measures, much more so than Kan, who seems to have fallen behind the curve since taking over in June this year, even though Kan was a finance minister.

A Japanese proverb says, "One poison drives out another." Ozawa may be a tainted hero who could cause major political and economic change. People are increasingly focusing on the DPJ presidential race - it could be a good measures of how much ordinary people want a leader to revive the fading country, once called an "Economic Animal" and now facing a "lost three decades".

Goldfinger - the sequel

Goldfinger - the sequel
By The Mogambo Guru

I remember the good old days of the Cold War when the Russians were humorless robots who could always manage to catch James Bond, a British secret agent better known by his "License to Kill" number - 007.

U.S. Postal Service Starts Quoting SDR to Dollar Conversion Rates, and IMF Endorses Replacing Dollars with SDRs

But the clumsy, doltish Russians could never hold onto him, and in the process, a lot of Russian secret agents, soldiers, miscellaneous employees, assorted
affiliates and innocent bystanders died, usually in a blaze of gunfire or explosions of some kind.

I remember it especially well because I noticed that Really Hot Babes (RHB) were always practically throwing themselves into James
Bonds' arms, talking in vague, strangely forbidden double entendres, husky whispers promising pleasures a-plenty coming from Really Hot Babes (RHB) whose barely parted, glistening red lips cried out to be kissed, hard, and your brawny arm roughly encircles her dainty waist, pulling her harder and harder against your manly chest as you kissed her, deeply, hungrily, dominating her with raw machismo until she is breathless with desire and crying out for more, begging, "James! Oh, James!", unlike Sandra.
You are probably wondering why I segue from James Bond, back to the evil Russians, then to Sandra, a teenage crush from years ago who, as it turns out, wanted to be kissed neither deeply nor hungrily, and who had a certain intense antipathy at being made breathless with desire, too, then to the Berlin Wall being taken down, then to the USSR collapsing under the weight of its stupidity and corruption, becoming just another of history's failed experiments by another stupid country trying a ridiculous command-and-control economic system with a fiat currency, which always fail with the same disastrous result of ruining everyone and destroying the standard of living, rather than leaving the economy alone to experience the joys of free enterprise and capitalism with a stable
currency anchored by gold, which always succeeds in providing a higher standard of living to everyone.

The reason I bring this up is that, apparently, these sneaky, vodka-swilling, Bond-fumbling, Rooskie bastards are up to something! I infer this from Ed Steer's Gold & Silver Daily newsletter, which reports that the Russian Federation, as of July, "increased their gold holdings by a further 500,000 troy ounces, bringing their total holdings to date up to 23.3 million ounces ... or 724.7 tonnes."

In fact, he says, "So far this year they have socked away 2.8 million ounces of the stuff .., over 10% of their entire holdings in just the last seven months! These guys are serious!!!"

Being a paranoid, scared, creepy little guy who is sure that We're Freaking Doomed (WFD) by the staggering, massive creations of money by the Federal Reserve, especially so that the government can borrow the staggering, massive amounts of
money to deficit-spend, increasing the national debt so that we slide inexorably into the economic black-hole of un-payable bankruptcy, receivership and ruination, I instantly recognize the wisdom of what these slippery Russians are doing, as emphasized by Mr Steer's clever use of three exclamation points! They're buying gold!

And when you add up all the tons and tons of gold being bought up by
banks and people and funds everywhere around the world, you can easily "connect the dots" to show that alien beings from outer space are shooting mysterious brain-control rays into our heads, aimed at us from their secret base under the north pole, which is where Santa Claus lives.

Or maybe it is Santa Claus himself shooting these strange rays at us. Or maybe it is even his mysterious wife, Mrs Santa Claus, who strangely has no first name of her own, and for whom nothing else is known, as if she never existed until suddenly appearing as Santa's wife. Strange, but true!

Anyway, the whole point is not that Santa Claus is a dangerous lunatic, or that Ben Bernanke of the Federal Reserve is a dangerous lunatic who actually believes his stupid neo-Keynesian econometric theories despite their utter, utter failure. I mean, look around! Does this seem to be the result of a good economic theory in the hands of competent people to you? Hahaha! Me neither!

No, the point is that these are indeed very weird times, and a lot of strange, terrifying, unbelievable, nonsensical, suicidal, desperation-fueled fiscal and monetary idiocies are going on, and new ones appear with each passing day.

I am So Freaked Out (SFO) that my tiny little brain can think of nothing better than buying gold, silver and oil, which is entirely fortunate for me and other tiny-brained guys out here who can never actually seem to grasp what is going on, much less understand it, because buying gold, silver and oil is exactly the right thing to do! Whee!

Many countries are doing like Greece these days......

Secret path to riches....
By The Mogambo Guru

Since I am known as something of a gold bug, a lot of people write to me about gold, but since I am a paranoid lunatic, I don't read their letters, mostly because I now call myself Marvelous Macho Grande (MMG), figuring that an established alias could potentially come in handy when the prices of gold, silver and oil shoot higher and higher as inflation in consumer prices starts going parabolic as a result of the despicable Federal Reserve creating so, so, so much money, especially so that the despicable federal government can borrow and spend that selfsame so, so, so much money.

So, you can see how a dramatic, romantic new name like Marvelous Macho Grande (MMG) would perfectly suit a guy like me, that is a guy with a theoretical massive coming increase in wealth from
investing according to The Mogambo Perfect Portfolio (TMPP), which uses the Austrian school of economics (see and the last few thousands of years of history as Absolutely Compelling Reasons (ACR) to invest in gold, silver and oil when the government is acting so insanely bizarre, as does ours now, blithely deficit-spending a monstrous 11% of GDP, now with a national debt nearing a heart-stopping 100% of GDP, and allowing the Federal Reserve to continue to create So Freaking Much (SFM) money that, like creating too much money always does, it creates booms and bubbles that predictably, inevitably, unstoppably, disastrously go bust, leaving you, sadly, worse off than before.

So, you can see how I am not in the mood to answer emails from people who, deep down in their hearts, are pleading, "Oh, please help me, Masterful Mogambo Guru, or Marvelous Macho Grande (MMG), or whatever in the hell your name is this week: Sadly, I have not been following your terrific advice to buy gold, silver and oil as the One True Way (OTW) to end up with a lot of money without working for it, and now I need one of your famous Secret Investment Plans (SIP) to make up for lost time, else I am reduced to being the widow of a rich Nigerian banker who needs to sneak $100 million out of Nigeria and into your country. In that case, I will give you $50 million after you give me your bank account number and $5,000 in cash to pay various fees, expenses and bribes."

Alas, I don't have $5,000 to invest in this terrific opportunity to make a quick $50 million, as likewise there are no Secret Investment Plans (SIP), although I have spent a lifetime looking for one.

Fortunately, constantly buying gold, silver and oil is always the smart thing to do when your stupid, desperate, half-witted, corrupt, clutching-at-straws government is acting like all the other stupid, desperate, half-witted, corrupt, clutching-at-straws governments that created too much
money and destroyed themselves over the last 4,500 years.

And if you don't believe me, then maybe you will listen to the famous Richard Russell of the Dow Theory Letters, who writes, "
Investors sometimes get caught up in the day to day and week to week movements in gold and silver. Don't waste your time or energy on that, just accumulate. Standing in front of us is the greatest transfer of wealth in history. When the dust settles, those holding the gold will make the rules."

And "just accumulate" sounds so easy because it is so easy, which is why I say, as I always say until you are tired of hearing me say it, "Whee! This investing stuff is easy!"

Thursday, August 26, 2010

Indonesia to keep shining.....

Indonesia to keep shining.....if CIA/MOSSAD and DIA/OSP keeping hands off....

By Robert M Cutler

MONTREAL - Jakarta's principal stock market index has more than doubled since President Susilo Bambang Yudhoyono won the July 2009 presidential elections with a margin that made a run-off unnecessary.

Yudhoyono's comfortable victory came three months after his Democratic Party coalition won 314 of the 560 seats up for election to the People's Representative Council, the country's legislature. The stage was set for a period of political stability that has encouraged investment by local and overseas companies, including South Korean steel giant POSCO, and consumer spending.

The economy in the second quarter grew 6.2% compared with a year earlier and expanded at a rate 2.8% faster than in the previous three months, according to the country's Central Bureau of Statistics. Yudhoyono has set a 6.6% goal for annual economic growth, and the consensus is that this will probably reach at least 6.0%.

Exports, capital investment, and the consumer sector all contributed to the advance. Domestic consumption, though, was the main driver, accounting for over two-thirds of the country's growth, an atypically high figure for the region. Domestic automobile and motorcycle sales are a backbone of the consumer spending statistic, and gains there translate into stock market strength - local automaker Astra International accounts for no less than 8% of the capitalization-weighted Jakarta Stock Exchange Composite Index (JCI).

The Indonesian stock market has been one of Asia's stand-outs, with the JCI powering up from 1,111 last October to 3,141 as of Wednesday's close. This growth is equivalent to a compounded rise of almost 4.84% per month consistently for nearly two years. The performance includes a recovery from 2,614 near the end of May to the present level, itself equivalent to a 1.42% compounded weekly increase over the last three months.

The JCI surpassed its previous (mid-January 2008) all-time high of 2,810 in early April this year, then fell back, passed it again in early June and has not looked back since. It has been showing short-term strength for the last two-and-a-half weeks, and this is continuing. That previous all-time high came from the basis of a level at 361 in mid-October 2002, itself a record of over five years of consistent growth of 3.37% compounded monthly.

The JCI has significantly outperformed the country’s other major market index, the LQ45, which is (as Bloomberg News explains) "a capitalization-weighted index of the 45 most heavily traded stocks on the Jakarta Stock Exchange", whereas the JCI is "a modified capitalization-weighted index of all stocks listed on the regular board of the Indonesia Stock Exchange". For example, over the past five years, the JCI has vaulted 216%, but the LQ45 is up "only" 174% during the same period.

Jakarta's stock market capitalization remains relatively small, given the size of the country. The market cap is only one-third of Taiwan's even though Indonesia's population is 10 times as large. At the same time, the country has well-established regional and global political links through membership of organizations such as the Association of Southeast Asian Nations and the Group of 20.

Like many Asian economies, Indonesia's is less financially intermediated by the international banking institutions that find themselves under continuing, if no longer immediate, threat. Its investment regulations are still seen as unfriendly in comparison with many Asian peers, and administrative steps have been under way for some time to improve the climate for foreign capital. Endemic red tape, corruption, and poor infrastructure complicate attempts to realize the potential of the country’s natural resource base.

HSBC economist Wellian Wiranto nevertheless remarked this month that "[F]oreign direct investment may be contributing more and more to growth, judging from the gathering interest among international companies seeing Indonesia as a big market with a large pool of labor force, right where the raw materials are", as quoted by India's Economic Times. POSCO, South Korea’s largest steelmaker, is only one of the latest to sign an agreement with an Indonesian firm for a new industrial plant (a steel mill in West Java with Krakatau Steel).

Relatively low interest rates are spurring consumption, although with annual inflation reaching a 15-month high of 6.22% in July, up from 5.05% a month earlier, those rates may be increased. Still, companies are plowing profits back into investment.

The only cause for worry would be the increasing unemployment rate, although even this has not worsened as much as feared. About half of the country's total employment remains in the agricultural sector, although it is not clear what proportion of those formally counted in agriculture may migrate seasonally to the cities. The high degree of informal-sector employment is a worry to economists and reformers, but it does provide a cushion of sorts.

At the same time, the country's export structure has the advantage of being more oriented toward Asian economies and therefore less dependent upon the vagaries of the Western consumer resilience. That does not make it immune from following global markets in the wake of periodic financial-crisis downturns, but these tend to be transitory waves of market emotion and not based on fundamental economic realities.

For these and other reasons, it is foreseeable that the Jakarta stock market will continue its stellar performance, other things being equal, even if it suffers the occasional inevitable hiccup. In the short term, for example, it is looking a bit overbought, even if volume has lately been impressive and a number of short-term technical indicators remain favorable. It is attempting to confirm its surmounting of a long-term ascending-tops trend line while it is at the same time at the top of a medium-term ascending-tops trend line.....

Lack of 'moral courage' in Indonesia....???
By Gary LaMoshi

DENPASAR, Bali - Six years ago, academic Greg Barton understood why Indonesian moderates were reluctant to clash with the country's radical Islamist minority.

Then, Barton contended that the public relations savvy of Muslim extremists combined with ambiguous election results, varied platforms of so-called Islamic parties, and political coalition-building made it difficult for moderates to challenge them effectively. "With the objective data painting such a complex picture, is it any wonder that it has elicited such a confused response?" the author of Indonesia’s Struggle: Jemaah Islamiyah and the Soul of Islam he said. (See A mainstream embrace for extremism, Asia Times, December 11, 2004).

Now, Barton has a simpler answer for the failure of Indonesia's
leadership to confront radicals: a "lack of moral courage" that starts at the very top of the government.

Herb Feith Research Professor for the study of Indonesia at Melbourne's Monash University, Barton's authorized biography of Indonesia's first post-reform president Abdurrahman Wahid won him notice beyond academic circles in Australia and Indonesia. His next book, Islam’s Other Nation: Faith in a Democratic Indonesia, is due out next year.

A former faculty member at the Pentagon's Asia-Pacific Center for Security Studies in Hawaii, where he remains an adjunct, Barton also currently serves as director of the Center for Islam and the Modern World and deputy United Nations Educational, Scientific and Cultural Organization chair in Interreligious and Intercultural Relations-Asia Pacific at Monash. His next project is to examine progressive Islam and social currents in Indonesia and another pivotal secular Muslim majority nation, Turkey.

He spoke to Asia Times Online while visiting Indonesia as a member of the inaugural Presidential Friends of Indonesia study program that brought academics from 15 countries to Yogyakarta and Jakarta. Interview excerpts follow:

Asia Times Online: Since we last talked six years ago - to paraphrase your book's title - who's winning the struggle for the soul of Islam in Indonesia? Under President Susilo Bambang Yudhoyono, are things moving in a positive direction, negative direction, or sideways?

Greg Barton: In general, things are moving in a positive direction. There's a moderate mainstream center that's holding. There's an equilibrium, but it's a dynamic equilibrium. We're going to see a constant state of contestation. There's going to be a struggle between groups to see who controls the middle.

ATOL: What are signs to watch for indicating which side is winning?

GB: If we saw progressive groups being inhibited, that would change the dynamic.

ATOL: What would indicate that progressives are being sidelined?

GB: The anti-pornography law that was passed over objections from non-Muslims is one example. There's also a proposed anti-blasphemy law. In Pakistan, the anti-blasphemy law has been used in a pernicious, cynical fashion. These laws can be used to stir up a mass reaction.

Indonesian activists look north at Malaysia, which has laws against conversion from Islam and apostasy. Malaysia has religious police going around during Ramadan enforcing the fast. It has religious courts that take precedence over civil courts for Muslims. That's the sort of thing that worries Indonesian moderates. Indonesia isn't going to become a Muslim state like Iran.

ATOL: Is the trend toward Islamization growing in Indonesia?

GB: If you look at the elections, PKS [Prosperous Justice Party] got 9% of the vote. The preeminent radical Muslim party hit a glass ceiling. When it comes to hard choices, people don't choose radicalism.

However, a large portion of society is sympathetic toward some of the radicals' positions. A majority of Indonesian Muslims support banning Amadiyah [a breakaway Muslim sect]. Because of that support, the government is reluctant to crack down on FPI [the Islamic Defenders Front that uses violence against its targets in the name of Islam].

If the government had the moral courage to stand up to these guys, it wouldn't face a broad backlash, in my opinion. These groups have very limited support - less than 10%.

ATOL: So why doesn't the government stand up to them? What is behind that reluctance?

GB: I believe it's a lack of moral courage. The president is a decent man, but not courageous politically. Also, his cabinet includes members of Islamic parties, and his governing coalition is dependent on PKS and it manages to wield its influence in disproportion to its numbers. If he [Yudhoyono] did speak up, he'd find society on his side.

It's not just the president - police and local politicians are also reluctant to act against radicals. The problem is not unique to Indonesia. Look at the issue of gun control in the US. Privately, people and politicians acknowledge it's necessary. But they don't want to face the consequences from a vocal minority. The minority is very clever at bringing their power to bear on the debate.

ATOL: Do you fear that the reluctance to speak out could lead to a dictatorship again, this time under the flag of Islam?

GB: First, I think you have to remember that the Suharto regime didn't happen in a vacuum. It was the Cold War era. Suharto came to power with the backing of the US, and its allies supported it.

Today in Indonesia, the level of education is higher, so there's less likelihood of people simply following along. Many people do speak out today against intolerance.

If we did see an extended period of political uncertainty, it could lead to a politician playing the Islamic card. It happened in Malaysia. [Former premier] Mahathir Mohamad was an ultranationalist who shifted to religious language, not because he believed it, but because it was convenient and served his purpose.

In the realm of secularist national politics in Indonesia, if someone tries to play the populist card, it can do damage. But populist politics are a regular feature of democratic society everywhere in the world. It's not unique to Indonesia.

ATOL: In our interview six years ago, you said, "Thoughtful engagement with the Indonesian police and, arguably, with carefully chosen sections of the military is necessary and important, but discredited units such as Kopassus [an elite commando unit frequently used to quell political dissent under former president Suharto] should be avoided at all costs."

As I'm sure you know, last month the US resumed military ties with Kopassus. What do you think of the decision?

GB: It's one of those areas where the devil is in the details. Things have changed with the armed forces, there has been a shift. The military has decisively moved away from politics. There has also been a generational change, a new crop of officers that weren't part of the Suharto era. It's good that they have international engagement as part of a positive drive toward professionalism.

But there needs to be careful scrutiny and control of who participates. The main thing is that it's not a free-for-all.

ATOL: You're doing research about Turkey and comparing it with Indonesia. What are some of your key findings?

GB: It's good to see that the two countries are drawing closer. They have a cultural connection. Islam came to Indonesia via merchants from India. But their Islam was a very Persian form of Islam. Islam in Turkey is also very Persian. It's a quiescent, pluralist form of Islam that helped both countries evolve into secular democracies.

Over the past 15 years, Turkey's government has gotten more representative. Society is generally socially conservative and religious, and government now reflects that.

Indonesia and Turkey are stable, secular democracies where Islam plays a major role in public life. But in both countries, people don't want an overt link between state and religion. That augurs well for the future.

There's been a perception that the Arab world is the center of Islam. Turkey and Indonesia represent progressive developments on the geographic periphery of Islam.

ATOL: But on the other hand, Indonesia has seen a recent spate of church burnings.

GB: It's shameful that Lutheran Bataks [people from the Lake Toba region in Sumatra] can't worship in peace in Jakarta. As long as the government stands up to these fringe groups, it's fine. When it doesn't, there's trouble. Thuggish behavior is from guys trying to see how far they can go.

The overall sentiment here is to live in harmony but we're seeing some cowardly behavior from the president's office on down. What's comforting is that some of the most strident voices speaking out for tolerance are from Muslims as well as religious minorities. There's never going to be a situation where these sorts of things are not contested. What's important is that progressive elements speak up and the majority comes onside. As I said, it's an ongoing dynamic equilibrium.

ATOL: You're participating in the Ubud Writers Festival this year. Are events like that a unifying force, or are they divisive, highlighting that Bali with its Hindu culture is outside the Indonesian mainstream?

GB: When you ask people in Jakarta where they're going on holiday, they say Bali. There's a feeling that's strengthened in recent years that Bali is a national treasure.

It's worth noting the absence of international literary festivals in Yogyakarta, the cultural capital, and Jakarta, the national capital. Ideally, over time, the Ubud festival will show the way for festivals in Yogyakarta and Jakarta. Ubud's [festival] theme this year, Unity in Diversity, the national motto, is a good model to show the way.....

BRIC ambitions for Indonesia
By Sara Schonhardta

JAKARTA - With Indonesia's economic growth among the strongest in Southeast Asia and brightening future prospects for the resource-rich country, economists are weighing whether it should be the next country added to the BRIC grouping of fast-growing emerging economies comprising Brazil, Russia, India and China.

When US investment bank Goldman Sachs came up with the BRIC acronym in 2001, it projected that the combined economic size of the four countries would be bigger than all Group of 7 countries except the United States by 2050, according to Milan Zavadjil, country director at the International Monetary Fund's (IMF) Indonesia office. (The other G-7 countries being Japan, Germany, the United Kingdom, France, Italy and Canada.)

Sticking to that definition, Indonesia is arguably ripe for inclusion
to the club. For some financial analysts, Indonesia's BRIC designation would be symbolic of the gathering global shift in economic power away from the developed G-7 economies and towards faster-growing emerging ones. It would also give a boost to President Susilo Bambang Yudhoyono's economic management credentials.

Indonesia still lacks certain BRIC indicators, including large-scale foreign capital inflows, which until now has allowed the government to maintain a relatively hands-off approach to rising inflationary pressures. If capital inflows were to rise significantly above current levels, Bank Indonesia, the central bank, would be put to an important test, economists say.

There are limits to building up foreign reserves and allowing the exchange rate to appreciate, said Zavadjil, who believes sustained investor interest in Indonesia will depend more on achieving investment grade credit ratings than BRIC admission. In January, Fitch Ratings upgraded Indonesia's sovereign credit rating to BB+, based on improvements in the country's public finances and the economy's resilience to the global crisis. Fitch research estimates that Indonesian banks enjoy some of the strongest lending margins in Asia, and limited competition means that yields should remain strong over the medium term.

The stable rating is still one level below investment grade. Ai Ling Ngiam, the lead analyst covering Indonesia at Fitch in Singapore, said reservations remain about upgrading Indonesia to the coveted A rating, which would signal to investors that Indonesia is capable of meeting its financial commitments even in adverse economic conditions.

"The growth side has been acknowledged," said Ngiam. "But what has been lacking is infrastructure improvements and cooperation from local governments to get projects underway." She says the government often says the right things, but then fails to act.

Indonesia's past crisis responses may justify the need for caution. By not factoring in the risk of rising inflation, the government would have to move quickly if sudden vulnerabilities arise that would call for strong policy adjustments, said Ngiam. She argues that more pre-emptive measures are needed to hedge against fast fluctuating foreign capital flows in and out of the country's illiquid financial markets.

That said, many economists believe that Indonesia is now in an economic sweet spot, with economic growth poised to hit 6% this year after gross domestic product (GDP) rose 6.2% year on year in the second quarter. President Yudhoyono is even more bullish, predicting that economic growth will reach 6.6% by year's end.

The Jakarta Composite Index, Asia's second-best performing stock exchange so far this year after Japan, has reflected the bullishness, hitting a record high on July 29 following the appointment of Darmin Nasution as Bank Indonesia's new head, ending a 14-month impasse over the central bank's leadership and signaling to the market a move towards prudent macro-economic management.

Foreign direct investment (FDI), meanwhile, hit $7.8 billion in the first half of the year, a 49% gain over the same period in 2009. Indonesia's investment coordinating board now predicts FDI could reach $13.1 billion by the end of the year.

Resilient in crisis
When the global economy started to unravel in early 2008, some economists and investors worried that Indonesia would repeat the tailspin that devastated its economy and emptied the national coffers during the 1997-98 Asian financial crisis.

The government responded to that crisis by raising interest rates and tightening fiscal policy, but those interventions failed to stop the rupiah from plunging 85% against the US dollar. The subsequent double-digit inflation triggered steep gains in the prices of key staples such as rice and cooking oil, and sparked the riots that eventually forced then president Suharto to resign.

When the 2008 global recession hit, Indonesia was better prepared. The central bank had built up adequate foreign exchange reserves to cushion against foreign fund outflows and expansionary fiscal policies stoked strong domestic demand. Abundant natural resources, such as palm oil, coal and timber, have also allowed Indonesia to manage the downturn with only a moderate slowdown in economic growth thanks to steady demand from places like China, which is increasingly relying on Indonesia to help meet its growing energy needs.

Investors have since watched Indonesia's recovery with interest. Rapid population growth, a growing middle class, abundant natural resources and low levels of government and household debt give the $690 billion economy - Southeast Asia's largest - an advantage as an investment destination over mature economies such as the United States and Europe, said Zavadjil. "In a not very bright global economic story, Indonesia stands out," he said.

Yet short-term risks remain, namely rising inflation, which has accelerated to 6.98% year on year after an unexpected jump to 6.22% in July. While most of Asia’s major economies have raised interest rates to stem inflationary pressures - India has raised its rate four times since the start of 2010 - Indonesia has taken a different tack, holding its benchmark interest rate at a record-low of 6.5% for the 12th month in a row.

Some economists say Bank Indonesia will need to raise rates to 7% before the end of the year to keep inflation within its targeted 4-6% band and to strengthen its own credibility in international markets. BI governor Nasution says that for now, the government prefers to emphasize economic growth over stability.

Last month, he blamed the up-tick in inflation on unseasonably wet weather that has hurt harvests and forced up the cost of vegetables and spices. That means an increase in interest rates would have little impact on the price of these goods, which Nasution predicts will fall after the Muslim fasting month of Ramadan. The cost of goods typically rises during Ramadan when food consumption increases due to the fast-breaking events and charity that mark the holiday.

In the longer term, analysts say income inequality could prove more problematic since Indonesia still trails far behind the BRICs on per capita investment in major infrastructure and human capital.

"The government has failed to perform the most basic functions to support economic growth," economist Jonathan Pincus wrote in an e-mail to Asia Times Online. "Infrastructure development is slow, particularly in power and transport; the education system is failing to provide people with basic skills and to prepare them to acquire more advanced technological skills; the legal and judicial system are dysfunctional."

Pincus, dean of the Fulbright Economic Teaching Program in Ho Chi Minh City, Vietnam, recently co-authored a report, "From Reformasi to Institutional Transition" that argued Indonesia's economic strategy relies too heavily on natural resource exploitation and is lagging behind competitors in the region in manufacturing exports and employment growth.

"Negative [Suharto era] New Order legacies have left Indonesia with a political and administrative system that creates obstacles to enterprise and innovation," Pincus wrote. He also argued that overcoming entrenched nepotism and corruption will require much deeper reform and investment, and warned that investor sentiment is not a good indicator of the country's long-term growth prospects.

Still Indonesia's relatively cheap labor force and perceived political stability under Yudhoyono is attracting multinational companies that are looking to establish production bases in Southeast Asia. Indonesian authorities expect to lure more foreign funds as manufacturers expand their existing operations to take advantage of the rising purchasing power of Indonesia's growing middle class.

Zavadjil says companies that do not have a presence in Indonesia are taking a look for the first time and some small companies are looking to upgrade their activities. Indeed, corporate giants from Japan, China and South Korea are all making new investments in the country. For instance, Panasonic has started to redesign certain of its products to appeal to the Indonesian market and Nissan has outlined plans to more than quadruple its local sales by 2013.

There is no denying the strong fundamentals offered by Indonesia's market of 240 million people, and economists say the foundations are largely in place for the country to continue down the path to sustained growth regardless of short-term inflationary pressures. But at least for now, those building blocks may not be solid enough to be considered among the BRIC countries.