Car? What Car?

Fully accessorized car....

Till Debt Do Us Part

The last time the words "crisis", "cabinet reshuffle", "drastic depreciation" were deployed in Indonesian politics, a president fell from grace. Ten years and four presidents later, my fellow correspondents might be waiting with glee for a chance to employ these in their lexicons again.
But this article is not about that rumour of a senior minister plotting to deport another senior minister (whose welfare not as equal). It is however about the current crisis , once thought only will engulf the U.S. Of A but not WOUSA (world outside the USA). In particular, this crisis is about whether indeed in our case, capitalism is at bay.
Unless you have been staying in a deserted island since early October, you would have heard whispers of pure poison about the rise and fall of capitalism and that the time of socialism is upon you. The Economist, that bastion of free market and democratic reform has predictably put a case arguing that infact capitalism should still be the preferred model, because it has been responsible for all the wealth creation that the world has ever seen. It has also argued that speculators , the favourite bad guy making the rounds these days are in fact not responsible at all for this crisis.
So should we in Indonesia flog capitalism at the next market and try our luck with Cooperatives?
Cooperatives in Indonesia - much to its acknowledged "father", co-proclamator Hatta's dismay- never really found the market equilibrium.
Even in the bad old days of the Krismon, we never looked back and continue to worship at the temple of capitalism...

Back to the Future

One more way to reduce pollution ...

Great Expectations

Jakarta, on one of the more beautiful days. My dearest wish is that this picture does not create such high expectations, bound to dissappoint would-be visitors ...

A change in the climate ?

Will the recent global market rout mean less money for the climate change fighting efforts ? At least this question was felt to be important enough that Messr. Sarkozy felt needed to be laid to rest at Thursday's announcement in Brussels.

The impact of the rout should not be understated. A recent special report suggested that a staggering USD 10 trillion of value could be wiped out between now and 2009. For comparison, this is 10 % of the annual US ' Gross Domestic Product.

There is a temptation to focus on wealth maintenance rather than health maintenance. Indeed your correspondent felt compelled to understand the answer to this question.

Though Mr. Sarkozy have confirmed that the funds earmarked to save the laissez fare economy will not result in less fund available to fight climate change, the details have not been immediately available. It is difficult though to comprehend that there won't be an impact. By now, the US have added USD 700 billion to their USD 435 trillion budget deficit, all in the name of saving the US economy. The UK have confirmed that it will spend GBP 250 billion to nationalize household names such as Lloyd's TSB and HBOS. The EU - old and new - does not want to be left behind and have pledged EUR 350 billion, also to nationalise troubled banks.

Our dear government meanwhile have indeed taken some steps. However at the time this newspaper went to press, there has been no discussion with regards to if less funds will be made available to fend off climate change. Upon closer inspection however - given the very low number of projects planned-the impact appreared to be unsurprisingly negligible.

The crux of the activities have not been expected to be funded or coming by the government. They have been expected to be a result of a change in the behaviour of each and every individual's. Plenty of these also did not require investment.

Therefore please continue to
* B2W (less pollution)
* Switch off the lights when you leave the room (less coal being burnt)
* Convert those energy guzzler light bulbs (ditto)
* Be as paperless at work as possible (be a tree hugger)
* Continue to print on used paper
* Don't send unnecessarily large attachments with your email (less use of your bandwidth, therefore less energy consumed)
* Design those houses who are easy on the sunlights
* Set those aircons on timers

Keep those ideas flowing in ...

The Week From Hell

A week is a long time in politics, but apparently it was even longer in world finance. This was the week that your correspondent had planned to be a week filled with leisurely walk with the missus and the kids at malls, trialing that new oma fiets recently bought and perhaps even a sip or two of the nouvoeu vines bought recently. Alas that did not exactly happen.

As would become rather obvious by now, instead the week was spent glued to the telly and or surfing that bastion of western newsmedia, CNN.com. The last time your correspondent formed such attachments to the twin tubes of tv and internet was during the September 11 attacks. Though the causes are markedly different, the sinking feeling is oddly similar.

To make things worse, there does not seem to be light at the end of the tunnel. The worrying thing is that this crisis seems to have a life of its own. The oft-cited "the index has hit its lowest level since somany years" well hit a new low the day after. Why buy now when you can buy it cheaper tomorrow?

Such is the life of the monster though that the governments seemed powerlesss to put a stop to it. It is also frustrating to see that the governments have even gone to the extend of nationalizing insurance companies, investment banks and building society. At least this has not been the tactic chosen by our dear president and let's hope he is not tempted. Governments across the world don't have a good track record of running insurance companies for example. Is this the time for them to dabble their hands into the companies ?

Friends I spoke to have advised to keep our seatbelts on. Most seemed to agree that though this situation maybe a holding pattern, the ground is not visible yet. A thick fog of uncertainty and panic is blanketing the situation and the best thing to do may well be not to make any rush decisions. Alas the irrational exuberance of panic investors may well be the fitting match to the same irrational exuberance which started this giddying crisis in the first place.

Laugh at First Sight

If your insurance company have just received USD 85 billion from the government, and in return, the government nationalized your company, what is the first thing you would do? Well -naturally - you would take your best sales reps to a resort, celebrate what a good year it has been so far and spend the better part of USD 400, 000।

That , at any rate, was apparently what American Insurance Group (AIG), an insurance company, was doing around last week. At this point let me declare a potential conflict of interest : I own an AIA Life Insurance policy, so I do have an interest in seeing the company is still around when my policy expires.

I am guessing there were plenty of glee around the table of business ethics wonks when news of this sales conference spread. They have a new set of ammunition when this morning it was reported AIG would receive an additional USD 35 billion. It is this correspondent's feverish hope that AIG would not be tempted to splash it on another junket trip (not even on a smaller resort, just because the new funds is less than the first injection).

Given the barrage of less than good news , it is quite likely that the AIG sales reps in the holiday resort will be joined by central bankers , ex employees of Lehman Brothers and the common people like you and me (though by this time - with all these people - the resort should be rather full)।

This turn of events is a big pity for the development of the insurance market for Indonesia. There are plenty of my fellow citizens who must be wishing they bought more handbags than insurance policies. But the reality is more and more people were gambling their future on insurance.

I remember a close friend of mine who is working on the sideline as an insurance agent. He laughed outloud when he knew how small my policy was. He immediately offered me a policy which would have meant I need to pay Rp. 3.5 million per month. Strangely enough I have never heard from him again since the last time we spoke , which was ,er, just before the crisis begin

I don't think he is still laughing at me now. But I also am not laughing either. On paper , I am not sure what is the return on my stock market-linked policy. But at least my portfolio is not all in insurance.

For all our sakes, this downturn had better be not too severe and not too long. However as we know we did not get to where we are overnight. Getting out won't be an overnight trip either, though spending it in a resort might ease the pain.

Nightmare on our Street

Within days of your correspondent's "House of Cards" feature being published in this newspaper, a number of Indonesian cabinet ministers and renowned economists began to fret about the same topic : what is the impact of the US Economic Crisis on our own economy. Though on one hand it is gratifying to note other, more established experts have the same train of thought, on the other hand, it is unnerving to read on their comments and feels a lack of confidence in the preparation level.

We do not have the time to go through the usual motion resulting in the nation back to square one after, say, 3 months. All the usual players, legislators, policymakers and the commentariat ranks need to start from the same page. The stakes are frankly too high to continue play politics as usual. If there is a time to play as a team, this is it. Where is the Lembaga Penjamin? Where is the DPP Real Estate Indonesia ?

The reality is though that with the elections around the corner, there is a possibility that , in fact, it will be politics as usual. The MPs will play safe and not taking any risks with a potentially budget busting policies. The central bank and the financial institutions are probably reluctant to support any monetary expansion by a (potentially) lameduck administration.

Short of suggesting all the stakeholders is in need of changes of their living organ inside of their cranial, it does not appear there is much that can be done overnight.

So what is there that can be done ? This newspaper has a few suggestions :
1)The central bank to impose a new policy disincentivising the banking industry to extend loans to the people who can not have a mortgage. This newspaper does not have access to the extent to which mortgage accounts for banking loans but it may be quite significant.

2)The central bank to increase the industry's capital adequacy ratio (CAR) for a definite period of time. This additional breathing space can be used for the central bank either to nudge banks to conduct self audit or if forced to externally audit the suspected banks.

3)Commission a quick study to get a feel of the interconnectedness between the local portfolio and those of the now infamous CDs and all the other exotic acronyms spewn by the U.S.

It is your correspondent's fervent hope and wishes that our country and tax payers like you and me do not need to bear the burden of a bailout to help the fat cats who were grossly overpaid and grossly incompetent.

Selamat Lebaran

Your correspondent would like to wish the readers a Selamat Lebaran. May your lives become more meaningful, may you found your trueself and may you always be protected under the auspices of the creator.