Olive Tree Planters Wanted

How is a successful civilization like a good golfer? By its ability to come out of the rough and land on the green. If it was only that simple. The golfer is playing against himself. A nation, a country, a civilization is so much more complicated.

Are we all rowing in the same direction? Yesterday the Federal Reserve Bank, our central bank, in collaboration with other central banks around the world injected our banking system with an additional $200 billion. The nitty gritty of what and how they did this is not important. The important thing to know is that they are trying to create new ways to relieve the liquidity crisis that is running through the country. But, what I think I am reading between the lines of the articles about their efforts is disappointing.

The Fed is giving the large commercial banks and investment banks an opportunity to put up bonds that there is no market for as collateral and receive Government bonds in there place. The Fed thinking behind this move is that the commercial banks will then be able to continue to lend money and help us out of the current credit crisis. But, I have read that this may not work because the banks want to shore up their balance sheets. Now there is nothing wrong with banks shoring up their balance sheets except that is not the purpose the Fed made the bond swaps available.

It is not nice to think bad thoughts especially if there is no proof of wrong doing, but I am wondering why the banks are not using the liquidity being given to them to help those businesses and borrowers that need help. After all the Fed is doing to get us through this crisis of confidence, and that is exactly what it is, a crisis of confidence, these bankers are thinking more about their bonuses than they are about what is good for the country?

Yesterday the stock market greeted the efforts by the Fed with a big rally. The news reports said it was the biggest one-day point gain since July 29, 2002. The Dow Jones industrials jumped 416.66 points. What changed? Nothing changed, it is all in their collective little heads. But, that’s important because it is the collective little heads on Wall Street that make markets. If markets do not function they are not markets. The Fed stepped in with a big shot of adrenaline so the markets would function. Chairman Bernanke and his staff are coming up with creative ways to repair the damage to the confidence of the market makers, but why are some banks not using this added liquidity to bridge the crisis?

Time for a story. There once was this Roman soldier who came across an old man planting an olive tree. The Roman soldier said to the old man, “why are you planting an olive tree old man, you are so old surely will never see this tree bear fruit?” The old man answered the Roman soldier, "men planted olive trees generations ago so I would have olives and olive oil, and like the previous generations, I am planting olive trees for the following generations.”

Now contrast that story with politicians today whose time horizon is the next election or executives today whose time horizon is the next corporate quarterly report. Unfortunately, there are not enough people planting olive trees out there. A civilization, a nation, a country will survive or fall on the character of its leaders, and the unselfishness of its people that have the power to effect change. Stay tuned.