President Barack Obama on Wednesday stepped out from behind the podium, took off his suit jacket and dispensed with the teleprompters to defend his budget, attack Republicans who label him a tax-and-spend Democrat and express outrage at the bonuses paid at insurance giant AIG.
 
Obama, who has made no secret of the fact he chafes in the White House “bubble” and enjoys engaging directly with Americans, headed west to California to hold a town hall meeting in Costa Mesa, a town of about 113,000 in Orange County that has been hard hit by the recession. 
 
Obama’s critics say his comments expressing outrage at the AIG bonuses and other Wall Street scandals lack passion because they are often scripted and read from a teleprompter.
 
But on Wednesday, Obama sounded like he was back on the election campaign trail as he rounded on Republicans for criticizing his $3.5 trillion 2010 budget, which he says is crucial to tackling the worst economic crisis in decades.
 
“Most of these critics presided over a doubling of the national debt. We are inheriting a $1.3 trillion deficit. So they don’t have the standing to make this criticism, I think, given how irresponsible they’ve been,”  he said.
 
Under the glare of hot lights in an uncomfortably warm hall at Costa Mesa’s state fairgrounds, Obama invited his audience to ask him questions and feel free to take him to task and tell him if he was a “bum and doing a bad job”.
 
But there was little danger of that. When he entered the hall, he received a rockstar welcome.
 
Obama at times spoke with passion, his voice rising above the cheers, while he was at times professorial, explaining credit default swaps and mortgage-backed securities and breaking his promise to keep his answers short as he explained how and why America’s economy had plunged to such depths.
 
Despite the fact that he has only been in office two months, one of the first questions he fielded was from a woman asking him if he would run for re-election in four years’ time.
 
“I would rather be a good president taking on the tough issues for four years than a mediocre president for eight years,” he replied.
 
And if he fails to deliver on his promises on health care, education and fixing the economy, then it will be the voters and not he who decides whether he runs again.

For more Reuters political news, click here.

Photo credit: Reuters/Larry Downing (Obama at town hall meeting in California)

    The Indonesian rupiah has lost more than a fifth of its value against the dollar so far this year and on Friday hit its weakest point since August 1998. Authorities swooped in to take over an
insolvent Bank Century, the first such takeover since the Asian financial crisis a decade ago.

   Are things in Southeast Asia’s biggest economy really that dire to prompt comparisons with the chaotic events of a decade ago? Today’s financial crisis is draining liquidity from many banks across the world, including in Indonesia.  And as was the case a decade ago, domestic capital is swarming hot on the heels of foreign capital in fleeing Indonesia.

    It is the kind of vicious circle that characterised the”Asian Contagion” crisis of 1997/98. Currencies depreciate. Foreign investors liquidate their portfolios and swarm to the exits. Creditors call in loans, plunging institutions into insolvency. More people take their money and run, further undermining institutions and weakeninging the currency … And so it goes.

    Ten years ago, I was covering South Korea’s fraught journey into near national bankruptcy. (More echoes of the Asian Contagion crisis: The South Korean won hit lows not seen in a
decade on Friday and analysts forecast the economy will shrink next year for the first time since 1997). 

    My brother and sister-in-law were in Jakarta, where the financial crisis had morphed into a populist movement aimed at overturning the autocratic regime of the late president Suharto.
I had lived in Indonesia in the 1980s and I could hardly believe what was happening in Suharto’s Indonesia.  Food riots swept across Indonesia as the rupiah halved in value in the second half of 1997 — and then halved again in January alone. Panic-buying stripped supermarkets and other
stores of their wares.  ”An army of perfectly coiffed Indonesian matrons stormed the
supermarkets this week and bought out all the rice, flour, sugar and cooking oil,” my sister-in-law Cynthia Mackie wrote in her diary in mid-January 1998. “The foreigners smelled the panic and
got very excited at the idea of their dollars being four times as strong as in July.”

    Suharto was sworn-in for a seventh five-year term after his Golkar party won an incredulous 70 percent of the vote in yet another rigged election of his New Order period.  For years, Indonesians had accepted limits on their political freedoms in exchange for prosperity and growth. Now they had
neither. They turned their rage on ethnic Chinese, who though comprising just 5 percent of the population controlled well over half of the domestic economy.

    The killings of students in pro-democracy demonstrations in May 1998 spawned an orgy of rioting that convulsed Jakarta for two days. Chinatown was gutted. Around 1,200 people died, many of them trapped in burning buildings. Anarchy descended on the capital. Foreign embassies ordered a
mandatory evacuation of their nationals. Convoys of foreigners streamed past burning cars and buildings to the airport, leaving pets and belongings behind, including my brother and his wife.
They would not return for months.

    Indonesia is an altogether different place a decade later, at least politically. The world’s fourth-largest nation arguably has the most liberal democracy in Southeast Asia, a free-wheeling
press, and a legacy of reforms that has decentralised power.  Corruption is still a problem, and an elite class with old ties to the New Order — President Susilo Bambang Yudhoyono was the
head of the armed forces political faction at the time of Suharto’s resignation — dominates politics.     

    But Indonesia has improved its ranking in the corruption tables and people can vent
their frustrations in free and fair elections, due next year.  As John Milton famously said: “Anarchy is the sure consequence of tyranny”. Indonesia is heading into turbulent economic waters,
but don’t expect to see a reign of terror again in the streets.

Posted by Guy Faulconbridge

Not all of Russia’s rich businessmen are queuing up for a loan under a government rescue package offering billions of dollars in state funds to bail out oligarchs who have been badly hit by the global financial crisis.

Russian billionaires Oleg Deripaska and Mikhail Fridman this week got a total of $6.5 billion in loans from a state-owned bank to help them cover foreign debts secured against stakes in major Russian companies, according to industry sources.

But Alexander Lebedev says there is no reason state money should be used to save oligarchs, the name given to a small group of well connected businessmen who made fortunes in the chaos following the fall of the Soviet Union.

“Why is profit private but the losses put on everyone else? I don’t understand that at all. Why should the rich government save rich citizens. It is not right,” Lebedev told Reuters on the sidelines of an investor conference in Moscow.

“The task of the government is affordable housing, to subsidise mortgages, health and so on but not handing out billions of dollars to certain people,” said Lebedev, a former spy who made a fortune through banking deals in the 1990s.

Lebedev was ranked by Forbes in May as Russia’s 39th richest man with a fortune of $3.1 billion. He  said he had not asked for any help from the government.

Some of Russia’s richest men, many of whom borrowed heavily for expansion over recent years, have faced margin calls from banks on loans they took out secured against large stakes in Russian companies.

Wealth cold now be redistributed among Russia’s richest men as the state steps in to save selected businessmen from default.

Moscow stepped in this week to help some businessmen, a bitter-sweet reversal of the asset sales of the 1990s when the near-bankrupt state sold off some of the biggest raw materials companies to the oligarchs at huge discounts.

Deripaska, 40,  was one of the businessmen blessed with a state bailout this week. He was ranked in May as Russia’s richest man by Forbes with an estimated fortune of $28.6 billion.

United Company RUSAL, majority owned by Deripaska, received $4.5 billion from state bank VEB to pay back debt to foreign banks, which it amassed to buy a stake in mining giant Norilsk Nickel, banking sources said.

The 25 percent-plus-two shares stake in Norilsk was used as collateral for the loan and UC RUSAL was at risk of losing it if it failed to pay back the debt.

VEB has also agreed to disburse $2 billion to Fridman’s Alfa Group to help it pay back a loan to Deutsche Bank and rescue Alfa’s large stake in Russia’s No. 2 mobile phone firm, Vimpelcom which was used as collateral with the bank.

“Why did Deripaska get the money? Why did he get $4.5 billion?” said Lebedev.

Russia’s richest men — who say they risked their lives to build private business empires — are viewed with hostility in their own country for buying some of Russia’s biggest companies at a deep discount from the state in the chaos of the 1990s.

Lebedev said a better way to manage a bailout would be to nationalise the stakes and then sell them off at a later date.

“You should just tell the population: ‘You got cheated in the 1990s. They gave it all to some chaps who have now brought it back again,’” he said. ”Then you could then privatise these assets in a few years, but privatise them in the proper way, transparently.”

Lebedev also said he was opposed to the government’s use of VEB to invest directly in Russian stocks, a measure to calm Russia’s equity markets which have lost two thirds of their value this year.

“Why are they we so worried? Who gets hurt from the stock market? There are 800,000 people on that market and 500,000 of them are officials who bet their own money and a few dozen oligarchs.”

Hungary has negotiated a $25 billion economic rescue package with the IMF, the EU and the World Bank. What else is new? As that non-Hungarian philosopher of gamesmanship Yogi Berra put it, it’s ”like déjà vu all over again”.  

Consider the words of historian Paul Lendvai who wrote: ”Its economy in tatters, Hungary accepts a loan of 250 million gold crowns.” “Fiscal stability was restored, a currency reform was introduced…and after a modest upswing the value of industrial production stood 12 percent higher…”

The date? The 1920s. The lender: The League of Nations. Only the details have changed.

Hungary seems never to have encountered a global financial crisis it didn’t jump into head first.

If you want to see pictures of banknotes discarded on the street as trash (one is widely available on the Web) just dig in the archives for photos from post-World War Two Budapest.

Inflation in Zimbabwe has hit astounding heights of 230 million percent, but in 1946 prices in Hungary rose by more than 40 quadrillion percent a month.

Over the past century, Hungary has had three different currencies — the korona, the pengo and the forint, each introduced when the previous tanked.

The perky forint — the same currency that is in a bit of a pickle today — made its debut in 1946 at an exchange rate of one forint equal to 400 octillion pengo — a number that was essentially more than all the pengo then in circulation.

Hungarian inflation today of under 6 percent is not remotely in the ballpark of the 1940s and the chances of total collapse are slim to non existent.

Hungary is a member of the European Union and NATO and its economy is substantial. One of Hungary’s local banks, OTP, is a regional heavyweight. The Audi car plant in Gyor, western Hungary, churns out engines and the hot Audi TT sports car.

But there is cause for concern. Why has Hungary been hit harder than most, putting it in the company of  Pakistan, Ukraine and Belarus which have also been talking to the IMF.

Hungary’s external debt amounted to 89.9 billion euros, or 93.8 percent of gross domestic product (GDP), in the second quarter of 2008. This is not good at a time when banks are reluctant to lend to each other, let alone to a central European country with a history of currency collapse.

A good part of Hungary’s debt is Swiss franc or euro currency loans taken out to buy property or cars. As investors pull money out of Hungary, the forint declines in value and repaying those loans becomes harder.

“What I am paying a month all of a sudden rose above 110,000 forints ($532.80) from 90,000 (forints), so we need to restructure our spending,” a businessman with a mortgage in Swiss francs said.

At the same time, Hungary has gone from golden child of emerging Europe after communism collapsed to laggard in the race to adopt the euro. With chronic budget deficits, including a whopper in 2006 that was triple the EU guideline, Hungary’s joining date has been postponed again and again.

In good times, world leaders talk about globalisation and mutual cooperation. In bad times, everyone tends to scramble for cover.

Hungary’s rescue package is substantial and, as Yogi Berra said, “It ain’t over till it’s over.” But if it is, Hungarians have been there before — and know how to sweep the banknotes into the gutter.

The global financial crisis has produced broad agreement that the world needs a new financial architecture, but world leaders are a long way from reaching agreement on what shape it should take.

Many countries have rescue plans to support banks and unfreeze credit markets. The United States has set in motion reforms to change the relationship between Washington and Wall Street.

But calls are being made for much deeper, coordinated reforms, and a series of global summits is planned to discuss how to reform the financial system. The first of these meetings will be held on Nov. 15 in the United States.

Capitalism as we used to know it may be on its deathbed. Some world leaders have called for a revamp of the 1944 Bretton Woods conference that resulted in the post-World War Two financial order and created the IMF and the World Bank. 

Economists and commentators have been filling newspapers with suggestions about what should be included in the new financial architecture, from more regulation to concerns about climate change and trade.

Some experts say world leaders risk making terrible mistakes of they get it wrong and must stand back and properly assess what went wrong before enacting wholesale reforms. Others say it would be wrong to force one country or region’s vision on another.

There is little doubt we are now, as British Prime Minister Gordon Brown put it, at a “defining moment” for the world economy. But there are more questions than answers.

Can world leaders overcome their differences and live up to the task? Will they have any concrete proposals to discuss on Nov. 15? Will it be more than a big talking shop?

As financial and philanthropist George Soros says, what kind of system will evolve from this is a very open question. 

With the West reeling from the financial crisis and pulling back some of its investment in Africa, could China step into the breach and expand its footprint on the continent - a presence that already worries Western powers?

On the face of it, China, which is relatively unscathed by the crisis, has a golden opportunity to exploit Western disarray and increase its financial and political penetration of the continent. Already there are signs that Africans are starting to look away from the West and towards other emerging markets, especially China, as they watch the banking chaos in the traditional capitalist markets.

This could have a lasting impact on Africa’s perceptions of East and West as they see Asian financial structures surviving better than those in Europe and America.

China’s economy is still robust, despite the turmoil elsewhere, with GDP growth this year expected to reach 8.5 to 9 percent. Its thirst for African commodities, especially oil, is unabated to fuel Beijing’s rapid industrialisation drive. Western governments and aid groups accuse Beijing of turning a blind eye to misrule, corruption and human rights abuses as it invests in Africa, including in controversial countries like Sudan, whose Darfur region is suffering a deep humanitarian crisis. But many Africans welcome China’s refusal to interfere in political issues, in contrast to Western attitudes.

Experts say it is questionable whether China has the capacity to get more deeply involved in Africa economically because of its existing huge exposure and the diversification of investment on the continent to include other emerging market countries like Brazil, India and Russia. Not to mention the huge petrodollar funds of Gulf states. They say that in any case economic contagion will reach China which has vital export links with the West. 

But will the spectacle of the Western capitalist system in disarray push African countries to look even more towards the East, finally breaking their strong ties with former colonial powers in Europe and with the United States. What do you think?