From Naked Capitalism….

Over a weekend, word leaked out that AIG is paying yet more retention bonuses. This move is making a complete and utter sham of the supposed punitive elements of the rescue. But clearly, there was not enough of an adverse reaction to the earlier announcements of retention bonuses to deter the giant insurer. A few Congressmen saying bad things hasn’t deterred exhorbitant CEO pay, so why should it be more effective here?

Some readers have written in to say they have friends or family at AIG who had worked very hard for many years and continued to work hard, and deserved better.

I hate to say it, but the party line on capitalism is that the participants are supposed to bear both risk and reward. Top people at AIG were very well paid just on a cash basis. Yes, it is sad if savings in the form of stock holdings are wiped out, but the government is not supposed to be in the business of saving private enterprise from its bad decisions. There were hardworkng people at Enron and Bear who were not at all culpable in the demise of those firms, but they had their savings wiped out.

I lot of people have made some good arguments in the comment section that some people at AIG needs to be paid bonuses or the business will just collapse. This may or may not be true. I don’t know enough to say for sure.

I have to say that even though many of the people arguing in favor of some of the bonus seem like intelligent and knowledgeable people, I have hard time buying their argument. I can’t help but notice that white collared people are quick to get outraged at the high wages that the blue collar auto workers make. But when it comes to bankers they think that it is critical that they keep their high pay come hell or high water.

My gut feeling is that if a operation can’t be run by paying people the same kinds of wages and benefits that they would get for government work, the the government should not be running an operation. Put it another way, if you have to pay people at AIG more money then you pay the head of the Federal Reserves, then it must be that AIG is to complex for the Federal Reserves to bail out.

But what do I know? I never wanted AIG to be bailed out to begin with.

From the Economist….

Instead of glass prisms, Icelanders are looking forward to a different Chinese cargo in the dying weeks of the year: fireworks. They set off more per person each new year than any other country in the world. Such is the demand that the Chinese manufacturers are making a special loan to Icelanders to buy them, according to a local newspaper.

Almost no other private creditor is lending them anything; Iceland has turned instead to the IMF.

This little throw away line buried in a story about Iceland’s problems demonstrates how insane the Chinese business model is. As the broader article makes clear, the other shoe has not dropped yet as far as Iceland is concerned. Iceland owes the world a lot of money that is never going to be repaid.

So what are the Chinese manufactures dong loaning money to Iceland for fireworks? I can only think that they are determined to keep their exports from dropping off. But really, how short sighted can you get? There is a reason why nobody else is loaning Iceland money.

From Alpha Sources….

On several occasions have we heard rants about the profligacy of the deficit nations and how, in more polemic circles, the surplus countries were holding the deficit countries by the, erm, b’lls. Of course, once you stop to think about it is not certain who is holding whose private parts here.

The point Claus Vistesen makes is basically the same one as I made here.

From Bloomberg….

For the burgeoning middle class, investments of choice range from electronics to gold jewelry. Evroset, Russia’s largest mobile-phone chain, is telling people to buy anything they can.

“It’s better to feel happy that you own something than to fear losing the money you have earned,” Chairman Yevgeny Chichvarkin says in a letter posted at 5,200 Evroset stores. “If you need a car, buy a car! If you need an apartment, buy an apartment! If you need a fur coat, buy a fur coat!”

Sales at Technosila, the third-biggest consumer electronics chain, have doubled since September as customers rush to swap rubles for flat-screen TVs and laptops, spokeswoman Nadezhda Senyuk said by phone from Moscow, where the company is based.

Jewelry sales are also accelerating, particularly items made of gold and diamonds, said Vladimir Stankevich, advertising director at Adamas, Russia’s third-largest jewelry retailer.