March 20, 2009

There's no business like no business

US politics these days is a scene from Hieronymus Bosch. The bill of attainder against AIG employees which tears up contract law is the worst legislation I've ever seen. Ok Roe v. Wade is even worse morally and intellectually, but this just makes me gape. Let the names of the 85 Republican congressmen who voted for this go down in US history as bywords for political cowardice. As well as the sheer evil intent of this legislation, it plumbs new depths in stupidity. The story leads the FT:
Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions.

Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.
There were fears that the public backlash triggered by AIG’s payment of $165m (€122m) in bonuses, which followed the US insurer’s taxpayer-funded rescue, would have devastating consequences for the country’s largest banks.

“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”

The banker added: “This is like Russia 15 years ago. It’s like a McCarthy witch-hunt . . . This is the most profoundly anti-American thing I’ve ever seen.”
That's Barney Frank on the high stool, bottom right, dreaming of a windfall tax on Big Oil.

The US is now unpredictable. Change the government and contracts can be voided, alliances disrespected, terrorists rewarded, sheriffs who protect US borders investigated, our descendants suddenly loaded with a mountain of debt. Right now America's best hope is China and China's best hope is to start selling US debt to crash the price ASAP as a piercing alarm to the US government to change course now, right now. I'd buy Credit Default Swaps on the USA except that it's hard to imagine a counter-party with non-correlated risk. That's why gold is strong.

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