Waiting for the Fed

Waiting for the Fed

You read it here first: The Federal Reserve will not lower interest rates when its policy committee meets Sept. 18.

That's not to say it couldn't lower rates before Sept. 18 if financial markets experience another meltdown or if there is credible evidence of a dramatic slowdown in the overall economy. Or any time after Sept. 18, for that matter.

But it ought to be clear to anyone who has been listening to Bernanke & Co. that the last thing they want to do on Sept. 18 is be seen as giving in to the pleading of overpaid traders, bankers and fund managers desperate not to confront the consequences of their own mistakes.

In truth, it probably doesn't matter what the Fed does on Sept. 18. It was not primarily the Fed that created the credit bubble -- it was the traders, investment bankers and fund managers, working through unregulated global financial markets. And now that all that market-created credit and liquidity has suddenly disappeared, there is little the Fed can do to replace it, even if it wanted to. Which it doesn't.

Sarkonomics

You don't have to agree with everything French President Nicolas Sarkozy said to an employer group last week to admire the boldness and clarity of his economic vision.

The new president dared to tell his fellow Frenchmen that they have to learn to play the globalization game rather than continue to fight it. For Sarkozy, that means bidding adieu to excess labor taxes and regulations that make it virtually impossible to lay off employees in response to changing business conditions. It also means allowing stores in Paris to open on Sundays, along with the end of the 35-hour workweek, which Sarkozy declared to have been an "immense economic mistake."

At the same time, Sarkozy said it would be naive for European countries to forswear the use of industrial policy, trade policy and exchange policy to protect the interest of French workers and firms, especially while other countries were using state-owned companies and industrial subsidies to good competitive advantage. And he distinguished opening the country up to global competition from acquiescing to the dictatorship of speculators and asset-strippers.

It was notable that Sarkozy delivered his speech at a business school, which even today is looked down upon by France's economic and business elite. More noteworthy still was his declaration that there should be "no shame in success and money," a direct challenge to the cultural prejudice that animates the socialist impulse in France.

Watch this guy, Sarkozy. He's good.

Why We Love to Fly

In their struggle to survive, major airlines now consider it a "best practice" to lavish top managers with rich compensation packages even while repeatedly laying off rank-and-file workers and cutting pay and benefits for those who are left.

The latest is Delta, just out of bankruptcy, which offered its new chief executive, Richard Anderson, $15 million in incentive pay over the next three years in addition to his $900,000 in base pay and routine bonus. Anderson, not surprisingly, is a former chief at rival Northwest, which in two trips through bankruptcy court developed the Marie Antoinette pay strategy into an art form.

Come to think of it, do you suppose this has something to do with the fact that the major airlines now compete fiercely on the basis of price and scheduling but never on the basis of service quality?

Nah, it's probably just a coincidence.