Here's my setup script:

def setup_pgsql():
    run('apt-get install -y postgresql python-psycopg2 postgresql-contrib')
    sudo('psql -c "ALTER USER postgres WITH ENCRYPTED PASSWORD \'%(pw)s\';"' 
% env, user='postgres')
    sudo('psql -c "CREATE DATABASE %(db)s WITH OWNER postgres"' % env, 
user='postgres')
    run('/etc/init.d/postgresql-8.4 restart')

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