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Tuesday, August 9, 2011

How Obama Can Win The Fall


The Man Who Predicted This Crash

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9 August 2011
Nouriel Roubini has been proven right once again.
At this most difficult of times it is not surprising that we are getting deluged with opinions. Some people are telling us to buy, some are telling us to sell, and some are telling us to sit tight -- they can't all be right.
In the search for the best answer, wouldn't it make sense to listen to someone who has a track record of getting these calls right? But what if this person's views are negative, so negative in fact that he is typically derided as a 'doom-monger'? Should you reject his views as too extreme, or should you take a deep breath, suspend your disbelief, and listen?

Dr Doom

Well, the person I am talking about is Nouriel Roubini. Of Turkish origin, he is not short of intellect, being a professor of economics at New York Stern with a doctorate from Harvard. His bearish tendencies have gained him the nickname 'Dr Doom'.
During his long academic career, Roubini spent a considerable amount of time studying the emerging market crises in Asia and Latin America. In particular, he worked at the IMF in 2001 as it battled the financial meltdown in Argentina.
These experiences were crucial in his calling the credit crunch. "I've been studying emerging markets for 20 years, and saw the same signs in the US that I saw then, which was that we were in a massive credit bubble," he said.

Calling the crunch

On 7 September 2006 Roubini stood before an audience of economists at the IMF and announced that a crisis was brewing. He warned that, in the coming months and years, the United States would suffer a massive housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession.
He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of pounds worth of mortgage-backed securities unravelling worldwide and the global financial system shuddering to a halt. These developments would cripple or destroy hedge funds, investment banks and other major financial institutions.
After his presentation people were dismissive -- the moderator of the event even joked, "I think perhaps we will need a stiff drink after that." Two years later, I don't think anyone was laughing. You don't need me to tell you Roubini was shown to be on the money in spectacular fashion.
Roubini's success in predicting the credit crunch turned him from an obscure academic to a major figure in the debate about the world economy. He had become a prophet: a prophet of doom.

Predicting the crisis of 2011

So fast forward to 2010. Despite recovering economies and stock markets, Roubini said that the crisis was not over: "We are just at the next stage. This is where we move from a private to a public debt problem... We socialised part of the private losses by bailing out financial institutions and providing fiscal stimulus to avoid the great recession from turning into a depression. But rising public debt is never a free lunch, eventually you have to pay for it."
Then, in May 2010, the first Greek debt crisis hit. Here was Roubini's take on the situation: "We have to start to worry about the solvency of governments. What is happening today in Greece is the tip of the iceberg of rising sovereign debt problems in the eurozone, in the UK, in Japan and in the US. This... is going to be the next issue in the global financial crisis."
Roubini had called the financial crisis, the second leg of the Credit Crunch, that is just emerging at the moment.

So, what next?

So, you may be interested in hearing what Nouriel Roubini is predicting right now.
Firstly, is the US and Europe's economic slowdown just a 'soft patch', or is it something worse?
Roubini is clear -- we are likely to enter a second recession. "The first half of 2011 showed a slowdown of growth -- if not outright contraction -- in most advanced economies. Optimists said this was a temporary soft patch. This delusion has been dashed. Even before last week's panic, the US and other advanced economies were odds-on for a second severe recession."
What about the European debt crisis? "...the eurozone periphery is now contracting, or barely growing at best. The risk that Italy or Spain -- and perhaps both -- will lose access to debt markets is now very high. Unlike Greece, Portugal and Ireland these two countries are too big to be bailed out."
So what can we do? Well Roubini recommends short-term fiscal stimulus, rather than the fiscal tightening that is occurring in most countries, followed by medium-term fiscal austerity. He also recommends further quantitative easing and the European Central Bank cutting interest rates to zero.
Perhaps most revealingly, he says: "Another recession may not be preventable. But policy can stop a second depression. That is reason enough for swift and targeted action."
Now, everyone is fallible, and Roubini has got some of his calls wrong in the past, but I am minded to agree with his view that things are going to get worse before they get better. I don't know about you, but I am battening down the hatches.

Fed to keep rates low for two years, stocks jump


WASHINGTON | Tue Aug 9, 2011 7:41pm EDT
(Reuters) - The Federal Reserve on Tuesday took the unprecedented step of promising to keep interest rates near zero for at least two more years and said it would consider further steps to help growth, sparking a rebound in stocks.
The Fed painted a gloomy picture, saying that U.S. economic growth was proving considerably weaker than expected, inflation should remain contained for the foreseeable and unemployment, currently at 9.1 percent, would come down only gradually.
An unusually divided central bank pledged to hold benchmark rates at rock-bottom lows until mid 2013, and opened the door to other tools to support growth. The announcement demonstrated just how long the central bank expects it will take before a flagging economy can gather significant momentum.
"The statement was extremely negative in its outlook on the economy," said Omer Esiner, chief markets analyst at Commonwealth Foreign Exchange in Washington.
"By pegging the extraordinarily low interest rates to a date in the distant future, the Fed has essentially said that they see the current level of weakness lasting far longer than previously expected."
Financial markets, hungry for support from the Fed after bruising losses the past eight days that wiped $3.8 trillion from global stock portfolios, were jolted by the news.
U.S. stocks sank initially and then see-sawed wildly before a strong rally. The Dow ended up 4 percent at 429.92. Treasury yields sank with the 2-year note plunging to a record low of 0.1647 percent and the dollar sinking.
But there was doubt over how long the rally might last given the weak outlook. In a Reuters poll of primary dealers who trade directly with Fed, an increased number said they expected that the central bank will have to fire off another gun before long -- buying bonds to lower rates even further, known as quantitative easing.
The poll found that 37.5 percent now see the Fed resuming bond-buying within the next six months, compared with 27.5 percent who had expected more QE within two years when they were polled last Friday.
"If they have to act, they will," said Alberto Bernal, head of emerging markets fixed-income research at Bulltick Capital Markets. "They didn't act today because they didn't want to send a specific message of panic."
The Fed said that three policymakers dissented, the biggest such rebellion since 1992, pointing to unusual uncertainty about the outlook and reticence within the Fed about the effectiveness of unconventional policy.
NEXT CLUE
Markets will now be looking to Fed Chairman Ben Bernanke's yearly speech at the upcoming Jackson Hole meeting for further clues into any additional policy easing the Fed might consider at its next policy meeting, in September.
There is plenty of doubt about the Fed's power to stimulate the economy with rates already so low.Japan provides a disheartening example of a country that has kept borrowing costs low for many years without any notable spike in growth.
Dissenting against the decision were Richard Fisher of the Dallas Fed, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia, who wanted to avoid any specific time reference on the low-rates pledge.
"The committee currently anticipates that economic conditions -- including low rates of resource utilization and a subdued outlook for inflation over the medium run -- are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013," the Fed said.
It also reiterated its policy of reinvesting the proceeds from bonds maturing in its portfolio, though it did not state a specific timeframe for such actions.
One analyst said the Fed's language left open the possibility of a third round of bond-buying, referred to as quantitative easing.
"They certainly didn't close the door on QE3," said Michael Yoshikami, chief investment strategist at YCM Net Advisors in Walnut Creek, California.
IS IT ENOUGH?
The Fed's decision comes amid financial market turmoil as worries about the global economy escalate after an embarrassing downgrade of U.S. debt. In addition, fears remain that European efforts to put a safety net under heavily indebted Italy and Spain may not suffice to avert wider credit market disruptions.
In an attempt to tamp down market volatility, finance ministers and central bankers of the Group of Seven major world economies held a telephone conference on Sunday and then issued a statement saying they were ready to act to ensure global stability.
Officials had been pinning hopes for an acceleration of U.S. growth in the second half of the year on a healing of supply chain disruptions from Japan's natural disasters, a calming of Europe's debt problems as governments committed to more sustainable fiscal paths and steady gains in business and consumer confidence in the United States.
But those expectations, along with the Fed's forecast for a growth rate of between 2.7 percent and 2.9 percent in 2011, have appeared increasingly over-optimistic in recent weeks.

Nouriel Roubini thinks there is a chance for a double dip recession



Nouriel Roubini on economic growth


Piers Morgan|Added on undefined 08, 2011
Stern School's 

6 Shady Right-Wing Groups Pouring Money Into Today's Wisconsin Recall

AlterNet


By Sarah Jaffe, AlterNet
Posted on August 8, 2011, Printed on August 9, 2011
Today will see the recall elections of six Wisconsin state senators who supported Republican Governor Scott Walker's budget cuts, and specifically his attacks on the right of workers to bargain collectively.
The state has become a focal point for national politics, pitting Democrats—14 of whom fled the state in order to stall a vote on the union-busting bill—against Republicans, who with Tea Party support have been enacting Shock Doctrine-style slash and burn policies instead of delivering the promised jobs to the state's workers.
In a foretaste of what Election 2012 will look like, the recalls have shattered spending records on both sides. Mike McCabe from the Wisconsin Democracy Campaign estimated $31 million had been spent already—nearly 10 times the $3.75 million spent on all the state races in 2010. But more importantly, they've seen a flood of so-called "dark money" from groups that don't have to disclose their donors thanks to the Citizens United ruling.
With all the interest from outside of the state, it's natural that political groups on a national scale have poured money and volunteers into the election. Progressive organizations like the Progressive Change Campaign Committee, Democracy for America and women's groups like Emily's List are buying ads and recruiting volunteers to make phone calls for the Democratic challengers in the six recall districts.
But as McCabe noted, the difference is in the disclosure. While, as Greg Sargent at the Washington Post pointed out, this has rightly been labor's fight since the beginning, the sudden influx of conservative groups from all over the country means a lot of untraceable money. Here are six of the groups putting their money on the line in hopes of Republican victories.
1. Club for Growth
According to Greg Sargent, Club for Growth Wisconsin has pumped at least $1.5 million into the recalls, $400,000 of it just in support of Alberta Darling, the powerful co-chair of the legislature's Joint Finance Committee.
So who are they?
“The Club” markets itself as a sort of free-market fanclub. Its website says “Club for Growth is a national network of thousands of pro-growth Americans, from all walks of life, who believe that prosperity and opportunity come through economic freedom.”
Its political action committee pushes for lower taxes, “school choice” (code for privatization), candidates who support a flat tax, deregulation, tort reform, and “free” trade. Founded in 1999 by a group including Cato Institute president Ed Crane and National Review president Dusty Rhodes, Club for Growth helped elect Scott Walker (R.J. Johnson was a campaign adviser for Walker and now is an adviser to the Club). Before recalls were even a question, the Club aired ads in the state in favor of Walker's union-busting bill.
Johnson has repeatedly refused to disclose where the club gets its funding.
2. ALEC
If you want to find the source of many of the conservative proposals put forward in Wisconsin and around the country, you need look no further than the American Legislative Exchange Council, which Wisconsin Democratic State Rep. Mark Pocan called “much like a dating service, only with legislators and special interests.” Pocan attended the ALEC meeting in New Orleans recently, wrote for the Progressive, “It matches them up, builds a relationship, culminates with the birth of special interest legislation and ends happily ever after. That’s happy for the special corporate interests, that is.”
As Common Cause reported:
“In Wisconsin, the $304,607 leading ALEC companies put into 2010 campaigns was felt far beyond Gov. Walker’s anti-union budget initiatives. State legislators also agreed this year to cap – along lines suggested by ALEC -- the “punitive” damages that can be assessed in personal injury lawsuits. The caps could save millions of dollars for ALEC’s corporate members. And despite pleas from consumer groups, Wisconsin lawmakers voted to deregulate the telecommunications industry, also along lines promoted by ALEC.”
Scott Walker was an active ALEC member when he was a legislator, and so are a couple of the senators up for recall. Is it any wonder they've gotten money from the ALEC corporations? Alberta Darling has gotten $10,205 in direct donations since 2000, and Randy Hopper $4,294. And that's just the money that can be traced—finding the money coming from ALEC member companies like Wal-Mart, Coca-Cola, AT&T and Koch Industries is much harder, thanks to new disclosure rules after Citizens United.
3. Wisconsin Family Action
According to the Center for Media and Democracy, Wisconsin Family Action has spent $500,000 on the recalls thus far. The group, formerly a small religious right organization that opposes abortion and same-sex marriage as well as pornography, gambling and taxes, has now teamed up with bigger corporate groups. Adele Stan reported that misleading absentee ballots with the wrong return date also had directions to mail them back to Wisconsin Family Action's headquarters.
The Center for Media and Democracy noted, though, that the ads being run by WFA in the recalls make little mention of the social issues they support, and instead focus on, for instance, Democrat Fred Clark's driving record.
The Wisconsin Gazette, an LGBT newspaper, reported that Wisconsin political veterans are surprised about the amount of money WFA suddenly has to put into election spending. Wisconsin Democratic Party chairman Mike Tate told them:
“All of a sudden this little, tiny anti-gay outfit becomes a major player on the political scene? Come on. They’ve become a front group for somebody’s dirty cash.”
Though there's no way to know where that money comes from, the Gazette speculates it might be coming from Focus on the Family—or from the Kochs.
4. American Federation for Children
Betsy DeVos is the chair of the American Federation for Children—and the sister of Erik Prince, founder of Blackwater, the infamous private security firm. She also served as chair of the Michigan Republican Party and finance chair of the National Republican Senatorial Committee. Her husband Dick DeVos is co-founder of Amway, and through a network of family foundations (the Richard and Helen DeVos foundation, the Dick and Betsy DeVos foundation) gives away a lot of money to conservative Christian organizations like Focus on the Family, the Foundation for Traditional Values, and the Traditional Values Coalition.
The American Federation for Children touts itself as a “school choice” organization. “School choice” advocates support federal dollars going to private and religious schools through taxpayer-funded vouchers—in other words, it's all about privatizing education, with some nice words thrown in about low-income children being able to go to posh schools.
According to the Wisconsin Democracy Campaign:
“This organization spent an estimated $820,000 on independent expenditures and phony issue ad activity in the 2010 fall legislative races. The group is an offshoot of the Michigan-based All Children Matter which spent an estimated $2.5 million on phony issue ad activity in legislative races from 2004 through 2008, and in the 2006 governor’s race.”
5. Faith Family Freedom
Another of the social conservative groups jumping into what was supposedly an economic fight, the Faith Family Freedom Fund is a political action committee controlled by the Family Research Council, which was founded in 1983 by James Dobson and is now headed by Tony Perkins. In 2010, the Southern Poverty Law Center designated the FRC a hate group.
The FRC first got involved in Wisconsin's Supreme Court election earlier this year, supporting incumbent (and eventual winner) David Prosser against Democratic challenger JoAnne Kloppenburg. Josh Harkinson at Mother Jones noted:
“The FRC's anti-labor campaign in Wisconsin is part of its larger agenda to meld fiscal conservatism with its family-values message. Its recent priorities have included fighting health care reform, new taxes on the wealthy, and President Obama's budget proposals.”
The Faith Family Freedom Fund is buying radio ads on Christian and talk radio in support of Dan Kapanke, one of the six Republicans being recalled.
6. Americans for Prosperity
Americans for Prosperity is the 900-pound gorilla of the front groups in Wisconsin. It has shelled out over $240,000 for TV ads alone, and also sent out absentee ballots telling citizens to return them two days after the election date.
AFP is the main front group for billionaire brothers David and Charles Koch and one of the biggest backers of the Tea Party movement. Andy Kroll at Mother Jones noted that the union-busting bill that launched Wisconsin's protest movement “is right out of the Koch brothers' playbook,” and that their money helped greatly in putting him in office in the first place.
Like many of the big-money corporate groups, AFP has been involved in Wisconsin politics since before the 2010 elections, and has been accused of shady dealings behind the elections of Walker and Senator Ron Johnson, who defeated progressive champion Russ Feingold. AFP launched a $342,000 ad campaign in support of Walker's union-busting bill, and is now fighting hard to keep Republicans in control of the state senate.
Walker is so indebted to the Kochs that he accepted a call from a blogger posing as David Koch, and bragged about his union-busting skills, comparing himself to Ronald Reagan and his move to Reagan's busting of the air traffic controllers' union.
Alberta Darling in particular is a recipient of the Kochs' largesse—she's received a 100 percent rating from Americans for Prosperity, according to the Wisconsin Gazette, and Kelly Steele of We Are Wisconsin told that paper, “Darling has unlimited money,” via Koch. “There are outside resources that are going to come in for her in unlimited fashion."
Sarah Jaffe is an associate editor at AlterNet, a rabblerouser and frequent Twitterer. You can follow her at @seasonothebitch.

American Dream hangs in balance


Gordon Gekko, left played by Michael Douglass, better exemplifies the U.S. than John Wayne, Scarborough writes. | AP Photo/20th Century Fox


By: Joe Scarborough
August 9, 2011 04:35 AM EDT
My mom and dad were born in the middle of the Great Depression, came of age during World War II and graduated college when Eisenhower was president. American power was at its zenith, millions of troops were joining the work force, our old rivals’ factories lay in ruins and interstate highways were springing up across the USA.

America’s remarkable ascent in the middle of the 20th century framed my parents’ worldview while I was growing up in towns ranging from northwest Florida to upstate New York.

Regardless of my family’s financial challenges, my mother and father always believed that in America there were no such things as short cuts, hard work was always rewarded and the good guys always won in the end.

Dad was a true-blue member of what historian Garry Wills called John Wayne’s America. But unlike Wills, Dad saw no dark undertones in a country that had blessed him with a job, a home in the suburbs and a Buick in the driveway.

Even when Dad was unemployed for 18 months, his faith in America never wavered. He still believed that hard work and prayer could knock down any obstacle standing in his way.

I remember our Sunday mornings in Meridian, Miss., when Dad was searching for a good-paying job while Mom was trying to help pay the bills working as a music teacher and church organist. The route that took us from our neighborhood to First Baptist Church in Meridian took us down a long, winding street called Country Club Drive.

It was the kind of street you would see in most Southern towns in 1970, with beautiful homes framed by perfectly manicured lawns. The garages of those houses usually held more Cadillacs than Buicks, and the golf course that wrapped around that neighborhood was the type my brother and I were never allowed to play on because our family had no chance of becoming members.

Today, I still remember those Sunday morning trips to church — not because my parents were striking out at the inequities of a system that created such economic winners (them) and losers (us) — but because of what my mom would say as we drove past the glorious homes of doctors, bankers and lawyers.

“You see that house, Joey?”

“Yes ma’am.”

“If you work hard in school and keep fighting every day to improve yourself, you can live in a place like that when you grow up,” Mom would say with admiration in her voice.

My Mom and Dad believed in the American Dream even when they were dealt a pretty bad hand themselves. And their faith in America paid off, not only for themselves but for their children as well.
I spent this past weekend driving through neighborhoods much like the type my parents took me through on those Sunday mornings so long ago. But the large homes with driveways filled with Mercedes and BMWs seemed like relics from a different age — much like the $1,500 shoes that The New York Times recently reported were flying off the shelves of certain Manhattan boutiques.

The images of these massive homes and $100,000 cars seemed to clash with the morning headlines announcing a downgrade of the United States’ credit rating and the death of 30 U.S. troops in an endless, expensive war. And while America stumbles toward default, millions of Americans are unemployed and the middle class keeps getting squeezed.

In late 2009, Business Week reported that the divide in corporate America was only getting worse: “While we’re seeing record-low budgeting for base salaries, we’re seeing record-high budgeting for bonuses.”

The article showed evidence that CEO bonuses were at their highest levels in the 33 years the data have been recorded.

“What’s counterintuitive,” according to a compensation expert interviewed by Business Week, “is that the highest level of funding for bonuses is occurring in the heart of the recession.”

“Counterintuitive” seems to be a bit of an understatement. Shortsighted and stupid better describes a trend that cannot be seen as good for the long-term health of America’s economy.

While these income disparity trends were bad under George W. Bush, they have only gotten worse over the last three years.

Since 1970, executive pay has increased 430 percent while workers’ wages have crept up at a pace that barely kept up with inflation. The average executive’s pay has jumped over that time period to 158 times that of the average worker’s pay in those companies. It’s no wonder that the top 0.1 percent of income earners get richer by the day while millions of Americans are seeing their situations get worse.

This is not John Wayne’s America. This is Gordon Gekko’s America.

In fact, I’m pretty sure that if the Duke faced one of these CEOs in a John Ford film, he’d kick some ass and force the leech to start treating his workers fair. And you can bet that my Republican father would be cheering him on from the front row of the theater.

That’s not to say that Dad would ever want the government to step in and tell companies what to pay their executives. He wouldn’t — not in a million years. But he would ask what became of the America that he knew, where working hard and playing by the rules always paid off.

This weekend I began to wonder, 40 years after those Sunday morning drives, whether parents across the country still embrace the American Dream with the evangelical fervor that made a 7-year-old boy sitting in the back of a Buick believe that in America, anything is possible.
A guest columnist for POLITICO, Joe Scarborough hosts “Morning Joe” on MSNBC and represented Florida’s 1st Congressional District in the House of Representatives from 1995 to 2001.

Jill Biden trip focuses on plight of Somalis

East Africa

alt-tag
Street children swim in a flooded road after heavy rain in Kolkata. The June-to-September monsoons are vital to hundreds of millions of farmers and to economic growth in Asia’s third-largest economy.

Hundreds of thousands of Somali children could die in East Africa’s famine unless more help arrives, a top U.S. official warned Monday in the starkest death toll prediction yet. To highlight the crisis, the wife of Vice President Biden visited a refugee camp in Kenya filed with hungry Somalis.
Jill Biden is the highest-profile U.S. visitor to East Africa since the number of refugees coming across the Somali border dramatically increased in July. Washington is preparing to announce roughly $100 million in new famine aid, said two U.S. officials who spoke on the condition of anonymity because an official announcement has not been made.
Raj Shah, administrator of the U.S. Agency for International Development, who accompanied Biden, said hundreds of thousands of children could die from the famine.
Aid is reaching only about 20 percent of the 2.6 million Somalis who need it, Mark Bowden, the United Nations’ top humanitarian official for Somalia, said on a visit Monday to Mogadishu, the capital. The situation is better in Mogadishu, where about half the city’s 600,000 inhabitants are receiving aid, he said.
Transport and security are the two main problems, he said, and it is unclear what the effect will be of Islamist insurgents’ pullout from the capital on Saturday.
In other developments, the U.N. refugee agency on Monday flew 31 metric tons of shelter materials into Mogadishu, the first UNHCR aid flight into the city in five years. UNHCR says about 100,000 people have fled there in the past two months.
— Associated Press

Beheading fuels backlash in Indonesia





Rigid Saudi strand of Islam criticized after maid’s death in Mecca

By Andrew Higgins, Monday, August 08,10:06 PM


JAKARTA, Indonesia — As leader of Indonesia’s — and the world’s — largest Muslim organization, Said Aqil Siraj used to get pelted with angry e-mails and text messages whenever he questioned Saudi Arabia’s rigid, ultra-puritanical take on Islam.


An Indonesian migrant worker who is bound for Saudi Arabia covers her face during an inspection by police after a raid at a shelter in Bekasi, West Java, Indonesia.


Een Nuraeni, the daughter of an Indonesian housemaid who was beheaded in Saudi Arabia for the killing of her employer, cries during a protest outside the Saudi Arabian Embassy in Jakarta.

But the often menacing messages recently stopped — cut off by a single stroke from a Saudi executioner’s sword to the neck of an Indonesian maid in Mecca.

“Now I don’t get sent anything,” Siraj said. He is glad to be out of the firing line, at least for the moment, but is appalled that it took the beheading of a 54-year-old Indonesian grandmother to quiet abuse by supporters of Saudi-style Islam.

The beheading of Ruyati binti Satubi —executed in June for the killing of an allegedly abusive Saudi employer — stirred such revulsion here that even the most strictly observant Indonesian Muslims now ask how the guardians of Islam’s most sacred sites can be so heedless of their faith’s call for compassion.

At least 20 Indonesians, nearly all women, are on death row in the Persian Gulf kingdom.

While few doubt that Satubi stabbed her boss, the mother of three is widely viewed as a martyr — the victim of a harsh and often xenophobic justice and social system rooted in Saudi Arabia’s Wahhabi creed, a highly dogmatic and intolerant strand of Islam that, in its most extreme forms, helped provide the theological underpinnings for jihadi militants.

“Some Indonesians began to think that Wahhabism is the true teaching of Islam, but thanks to God, there has been a change of thinking,” said Siraj, who heads Nahdlatul Ulama, an organization with about 50 million members and 28,000 Islamic boarding schools.

The beheading, which triggered protests outside the Saudi Embassy and elsewhere, “has had a good influence” by accelerating a backlash against harsh imported strains of Islam, Siraj said.

“Mecca is a holy place, but the people who live there are very uncivilized,” said the executed maid’s daughter, Een Nuraeni, who prays regularly and wears a veil pulled tightly over her hair. “There is nothing in Islamic law that says you can torture or rape your housemaid.”

Her mother, desperate for money, had worked for three families in Saudi Arabia since taking her first job there in 1998. On trips home, Nuraeni said, she complained of being spat at in the face, beaten, deprived of food and other mistreatment, but kept going back “for the sake of her children.”

Migrant Care, an Indonesian group that lobbies on behalf of workers abroad, said it has this year already received 6,500 reports of violence, sexual harassment, rape and other abuses against Indonesians in Saudi Arabia. Eighty percent of the more than 1.2 million Indonesians working there are women, mostly maids.

Indonesia’s government, complaining that it received no advance notice of Satubi’s execution, recalled its ambassador from Riyadh and announced a moratorium from Aug. 1 on labor exports to the Gulf kingdom. Police set up a special unit at Jakarta’s main airport to enforce the order.

The acrimonious rift between the birthplace of the prophet Muhammad and Indonesia, home to the largest community of his followers, even led to calls for a boycott of Mecca by hajj pilgrims.

The mood became so testy that when Indonesian Foreign Minister Marty Natalegawa announced that he had received an apology over the beheading from the Saudi ambassador in Jakarta, the kingdom’s usually mute embassy promptly issued a statement that accused the minister of lying.

Indonesia has traditionally embraced mostly relaxed forms of Islam. But starting in the 1970s under then-dictator Suharto, a flood of money from Saudi Arabia to fund mosques and other ventures helped boost a Wahhabi-tinged form of Islam known as Salafism, which sometimes veered into violent extremism.

The Bali bombings in 2002 and subsequent attacks in Jakarta were carried out by militants inspired by Salafi extremists such as Osama bin Laden. Nonviolent Salafis, meanwhile, emerged as a political force, helping to found the Islamist Justice and Prosperity Party, or PKS, which won nearly 8 percent of the vote in 2009 .

Both strands are now in trouble. A wave of arrests and killings by security forces has largely uprooted the organizational foundations of Salafi jihad ideology, although it lives on thanks to the Internet. Abubakar Baasyir, the spiritual leader of Jemaah Islamiah, was sentenced in June to five years in prison for terrorism.

Meanwhile, the PKS, part of the governing coalition, has been tainted by allegations of corruption and has been torn by internal strife between purists and moderates. Some of its more hard-line members have been purged. “We threw them out” because they “always wanted 100 percent pure values of Islam” and couldn’t compromise, said Fahri Hamzah, a PKS member of parliament.

Siraj, the leader of the Nahdlatul Ulama organization, studied in Saudi Arabia for 13 years and came to despise the kingdom’s religious and political order, which he describes as “jahiliyyah” — the period of ignorance and hypocrisy that, according to the Koran, prevailed there before the arrival of the prophet Muhammad.

Salafis, he said, are by no means all violent and many eschew politics, but they “are very hard in the way they think.” He recently wrote the foreword to a new book, “The Bloody History of the Salafi-Wahhabi Sect.”

Hizb ut-Tahir, a nonviolent organization that wants an Islamic state or caliphate, defended the beheading as legal under Islamic law but called for an investigation into whether Satubi committed murder in self-defense. Ismail Yusanto, the group’s spokesman, said the problem is not strict Islamic justice but the poverty that drives women to work abroad when “their main place is the home.”

Saudi Arabia, worried by the spread of extremist thinking at home and damage to its reputation abroad since the attacks of Sept. 11, 2001, has tried in recent years to check the export of militant Salafi ideas.

But what the Saudi government now condemns as mutant strains have nonetheless put down thin but tenacious roots on the margins in Indonesia, shielded in the past by a reluctance by many to criticize views supposedly rooted in the land of Muhammad’s birth.

“Saudi Arabia is the holy land, so people always used to make excuses for it,” said Wahyu Susilo, a policy analyst for Migrant Care. “They now realize that Saudi Islam is not the right image of Islam.” To protest the June beheading, his group printed thousands of posters saying: “Saudi Arabia — the killing fields for Indonesian women migrant workers.”

The Indonesian government, under fire for not doing enough to protect its citizens, last month secured the release of an Indonesian maid on death row in Saudi Arabia. It did this by paying compensation of $538,000 to the family of her employer, whom she killed after he allegedly tried to rape her.

Arab News, a newspaper based in Jiddah, Saudi Arabia, reported last week that Saudi authorities have agreed to spare two more Indonesian maids from beheading, including one convicted of using black magic to hurt her employer.

At her family’s village near Bekasi, east of Jakarta, Nuraeni, the daughter of the beheaded maid, has received a procession of visitors offering condolences and angry views on Saudi Arabia. Scores of women in the village have spent time working in the kingdom and shared stories of their travails there.

Even Nuraeni’s elderly grandfather, a sternly devout Muslim who has memorized the Koran and made a hajj trip to Mecca, wants nothing to do with the kingdom. “He now hates Saudi Arabia,” Nuraeni said.