The New Vatican Document on Finance: Right Diagnosis, Deadly Cure

Let’s say you go to the doctor with a pain in your gut, and the doctor very astutely discovers that you have been poisoned. He knows how and when it happened. He knows the precise kind of poison that victimized you. Then he gives your prescription: more poison in higher doses.

You would be at once grateful and alarmed.

This is roughly how I feel about the “Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority,” a document just issued by the Vatican’s Pontifical Council for Justice and Peace.

Reading from the top down gave me a real charge. Some people at the Vatican have gotten the message about the dangers of the fiat money system that generates unlimited amount of credit, and even traced it all to the monetary reforms of 40 years ago.

In recent decades, it was the banks that extended credit, which generated money, which in turn sought a further expansion of credit. In this way, the economic system was driven towards an inflationary spiral that inevitably encountered a limit in the risk that credit institutions could accept. They faced the ultimate danger of bankruptcy, with negative consequences for the entire economic and financial system.

Exactly. The dollar was once based in gold, which provides a physical limit to the expansion of credit. All bills had to be paid. The government was limited. The banking system was a real business, not a socialist enterprise that experienced unlimited bailouts. Credit went to the creditworthy. Those who issued fake money paid a price.

Under a gold standard, there can be no creation of money that is not redeemable in something real. This automatically provides a check on both banks and governments — and therefore producers and consumers as well. An over-expansion leads to gold outflows and a restriction on credit expansion at home, as inevitably as night follows day. Therefore you have to live within your means. The bills have to be paid by real stuff.

Then President Nixon decided one day that we weren’t sending our gold anywhere. With that move, he ended the basis of the monetary system that had ruled the governments and banking systems since the ancient world. Every problem we’ve had since — inflation, bubbles, credit addiction, bank racketeering – can be traced to this one act. (This is not to say that Bretton Woods was perfect; what we really need is a system of full, domestic convertibility on demand and in real coins.)

That the Vatican gets this, or seems to, is a very good sign.

 

What’s more, credit is as addictive as any drug:

After World War II, national economies made progress, albeit with enormous sacrifices for millions, indeed billions of people who, as producers and entrepreneurs on the one hand and as savers and consumers on the other, had put their confidence in a regular and progressive expansion of money supply and investment in line with opportunities for real growth of the economy.

Everyone is addicted to paper. Consumers love it. Producers live on it. Competition drives everyone to partake. The real world fades and the make-believe world of paper profits rules the day. This is a false hope. It is like a house built on sand.

Since the 1990s, we have seen that money and credit instruments worldwide have grown more rapidly than revenue, even adjusting for current prices. From this came the formation of pockets of excessive liquidity and speculative bubbles which later turned into a series of solvency and confidence crises that have spread and followed one another over the years.

So very true. The new money doesn’t enter the economy in a neutral way. It creates pockets and bubbles and benefits some at the expense of others. But it can’t last. Reality strikes back.

A first crisis took place in the 1970s until the early 1980s and was related to the sudden sharp rises in oil prices. Subsequently, there was a series of crises in the developing world, for example, the first crisis in Mexico in the 1980s and those in Brazil, Russia and Korea, and then again in Mexico in the 1990s as well as in Thailand and Argentina. The speculative bubble in real estate and the recent financial crisis have the very same origin in the excessive amount of money and the plethora of financial instruments globally.

Again, a short and cogent history of the finance of the last 40 years. It’s been one disaster after another ever since Nixon closed the gold window. The magic of paper was supposed to fix all things. The reverse happened. It sent the world economy into endless cycles of boom and bust.

And with the dollar as the world reserve currency, bad policy in the U.S. has had a contagion effect. Now every country suffers when the U.S. engages in a profligate expansion. It’s true in Europe too. The loose-money countries wreck the economies of tight-money economies, leading to terrible conflicts and tensions.

It is on this basis that the document first begins its attack on “liberalist policies.” Now, hold on a minute here. There is nothing in old-fashioned liberalism (i.e., the free market) that endorses the “freedom” to issue paper forever and call it money. On the contrary, the free market is heavily regulated by a sound money regime. The only freedom banks have here is to operate as normal businesses. Those who expand without limit are going to die and those who maintain sound finance will thrive.

Nonetheless, the document’s identification of loose credit with market liberty is the beginning of the end of the good sense here. From this point, we plunge straight away into a full endorsement of a world central bank, a world political authority, taxes on financial trading, and heavy regulations. The document doesn’t actually call for an end to the free market. On the contrary, it imagines that enlightened world planners will protect, guard, and even “create” what it calls “free and stable markets.”

 

This is beyond naive. It seems to illustrate a near total absence of clear thinking. Centralization of money and credit caused this problem. Centralization of political authority caused this problem. Why would anyone imagine that more centralization is therefore the answer? This approach takes a terrible situation and makes it much worse.

Probably this document had many authors, one of whom gets the Austrian theory of the business cycle. He prevailed in the first section. Another author seems to know nothing about politics and power or the history of the problems of centralized states and central banking. He prevailed in the second section. Tragically, this document is music to the ears of the very institutions that are responsible for our current plight. The document might as well announce to the world: “Give the power and financial elites more power!”

What is the alternative? Sound money needs to be restored. Business and finance need to be subject to profit and loss. The bailouts must stop. The liquidations must be allowed to take place. Governments must be disciplined and controlled, and devolved to the smallest, local units. In other words, we need real free markets and subsidiarity. This is the only path to a responsibly regulated world. Otherwise, we are going to end up creating even more problems down the line.

The Vatican seems to be growing in intellectual sophistication over worldly affairs. Now it gets economic matters half right. Sadly, being half right on something this important can lead to permanent calamity. To return to the original metaphor, the patient should thank the doctor for discovering the illness, but flee the poisonous “cure.”

 

Another view on this Vatican document, by Sean Dailey, editor of Gilbert Magazine, will appear tomorrow.

Jeffrey Tucker

By

Jeffrey Tucker is managing editor of Sacred Music and publications editor of the Church Music Association of America. He writes a bi-weekly column on sacred music and liturgy for Crisis Magazine and also runs the Chant Cafe Blog. Jeffrey@chantcafe.com

  • Gian

    How do you justify the claim that it has been the centralization of money and not oil shocks that have been critical?

    You omit that the proposed world political authority would also be implemented along with Subsidiarity.

    • John Zmirak

      “the proposed world political authority would also be implemented along with Subsidiarity.” They said that about the European Union, which now regulates the odor of cheeses in Lisbon from Brussels….

      The utopia proposed by this Vatican office will work beautifully, “if implemented along with Subsidiarity.” Likewise, Thomas More admitted that his satirical Utopia would work… except for human pride (original sin).

      Subsidiarity is NOT the result of idealistic design, not the fruit of a common faith. It results when local people FIGHT BACK and WIN against centralizers who are trying to take away their autonomy. Want subsidiarity in Europe? Vote to abolish the EU. Those who favor it will fight you, and the compromise that results MIGHT be a fair one. But we should fight the centralizers of power with every ounce of our strength, since they have the institutions and the elites and the Zeitgeist on their side. Luckily, their house of cards (the Euro) is falling in. Let us pray to all the saints whose bones lie in European soil that the EU itself dissolves BEFORE the continent is too far gone to save.

      • Tom

        Like Linus below, I am just an ordinary guy, so forgive my naiveté.
        Regarding the EU and subsidiarity, although Europe is secular, it seems worth pointing out that EU has adopted the very Catholic concept of subsidiarity as its centerpiece. One of the premises of the EU is to prevent tyranny and war. Peace between nations in the last 1/2 century is unprecedented in European history, and is largely a product of the EU. So one has to be fair. Subsidiarity goes both ways: up or down. If it was only positive (up), there would be monopolies, dictatorship and inefficiency, if it was only negative (down), anarchy and chaos. But I agree that EU is now way above its optimal subsidiarity level. A Greek friend told me recently, after returning from Greece, that a farmer complained to him that he was not going to get this year’s all government paid vacation. You can sit in cafes, or have full medical benefits, but you can’t have both.
        Regarding banks and the gold standard, I don’t understand what the issue is. If the free market was allowed to operate truly, unscrupulous “banks” would be left to fail, since they stopped being banks long ago, but instead became ponzy schemes with their “bundling”, “derivatives” and various other “instruments” or “products” that we basically scams. But banking industry appointed government overseers deemed these “too big to fail”. So instead of going to jail, cheaters were rewarded for their cheating, and had their “mistakes” bailed out. This is not the free market, but the rigged market. There is no need for Gold standard, it seems to me, if market forces were truly allowed to operate. And if subsidiarity applies to government, shouldn’t it also apply to banks? So isn’t this Church document in conflict with Church teaching? The Vatican bank is run by people from the Italian and Spanish banking systems, and they are going to lecture the rest of the world?

        • RockvilleQA

          “Peace between nations in the last 1/2 century is unprecedented in European history, and is largely a product of the EU. ” Really? The Balkan War of the late 90s and the recent Libyan War were wars of aggression waged by member states of the European Union, in the first case for the mineral wealth of Kosovo and in the latter for the oil of Libya. So much for the peace of the EU.

          • Tom

            Compared to WW1/2, and prior history, yes.
            The Balkan and Libayn (not part of Europe) wars, were civil wars, small in scacle compared to prior European wars.

      • Sarto

        As soon as I finished the article by Jeffrey Tucker, I asked, who is this guy. Among other things, I discovered he is big in the Mises Institute. Googling that, I learned that Ludwig Von Mises was the founder of what is now called the Austrian theory of economics. Therefore, I have to assume that Mr. Tucker is coming from that perspective.

        I returned to Google, first to understand what the Austrian School is about, and secondly to read its critics. Among other things, I discovered that the Austrian School scorns research and statistics, and relies instead on deductive reasoning.

        The Austrians claim to have their roots in NeoScholastic philosophy. I found this interesting. One reason I abandoned much of Scholastic philosophy was it insistence that, through deduction, we could come to the deepest truths. The problem is, ever deduction is based on some kind of proven truth. But is it a proven truth or only an unverified hypothesis? This means that deduction is a kind of prediction that must be verified by inductive, experimental proof. So I am suspicious of any school of economics that would stress deduction without a long look at the whole logical process.

        My favorite critique of the Austrian School was contained in half a sentence: “Its contributions (to the world of economics) is not distinctive enough to maintain a school of thought.”

        With its individualist, subjective approach, it is a theory beloved by some libertarians. It is agains the protection of the environment, against civil rights, and frowns on giving help to the poor.

        Profoundly “Christian?” But maybe very appealing to Crisis, the Republican Catholic magazine.

        • Zorg

          What an absolutely ridiculous and false representation of Austrian economics. Maybe you should google “hatchet job” and report back.

        • Joseph Fetz

          So, basically you read a wikipedia page. Wow, I wish that I had your extensive research and investigative skills.

          • Sarto

            No actually, I spent several hours reading through a number of articles and blogs…and the judgment I voiced was repeated by trained economists. Of course, my judgment of stressing deduction without proving the validity of the general statement from which the deduction flows is also repeated much in philosophy. I think Charles Sanford Pierce, the American philopher, expressed that most clearly in one of his essays on logic.

        • Tom

          Sarto
          I think you are being a little too hard. I find it rather refreshing when people at least try to use scholastic methods, and argue a point of view. I don’t think anyone that posted so far has any real training as an economist (certainly I don’t). It beats the “no right or wrong”/”all is relative”/”all is a social construct” arguments of the left, and right “gut truthiness” despite all evidence to the contrary.

          • Sarto

            I think it is a matter of the crucial importance of the individual and the crucial importance of the social order, the reality of the common good. In Catholic thinking, the common good has to be recognized and respected. In my mind, this is the most serious objection I saw placed against the Austrian theory.

            As for Scholasticism…. It is was good stuff for its day and still wise in so many ways. But it limps. Its theory of ideogenesis cannot stand up to the discoveries of modern psychology and the science of the brain. And yet it is still taught. And as for its metaphysical theory? For me, metaphyisics strives to be a “theory of everything.” The more it leaves unexplained or misunderstood, the less valid it is. I abandoned this philosophy because the idea of an unchangeable substance leaves no room for the theory of evolution, and because of its tendency to fall into the “essentialist fallacy,” which we see most vividly in the philosophy of Plato, with its notion of eternally existing ideas out there in the stratosphere somewhere. Just because we can think of something doesn’t mean it exists as an independent entity.

          • Tom

            “Just because we can think of something doesn’t mean it exists as an independent entity”
            Sure it can be independent entity.
            Look at math. You can’t BS with math.
            Same goes with virtues. Its not just a “relativistic” “make me feel good” invention.

        • Marlow

          “With its individualist, subjective approach, it is a theory beloved by some libertarians. It is against the protection of the environment, against civil rights, and frowns on giving help to the poor.”

          This is flatly wrong. Libertarians following Austrian economics uphold private property rights and consider that their enforcement under a rule of law is consistent with protecting the environment. As to being “against” civil rights, perhaps you better clarify what you mean by civil rights as I know of no ideology more committed to civil rights, in that governmental coercion, the initiatory use of force, would be banned. Finally, I am unaware of Austrians frowning on helping the poor. They would approve charity as it is characterized by voluntary giving but oppose welfare state handouts as such money is in effect, stolen by government and redistributed.

          Apparently you have a problem with the Austrians deduction from a priori truths. Does not each human act volitionally? Is not such action taken in response to the individual’s values at the time of action? Do not individuals place a higher value on access to a good in the present as opposed to the prospect of obtaining it in the future? Do you have a problem with these ( and other similar) basic observations? Austrian economists deductively spin out the body of economic theory from such a priori truths. I find this methodology greatly preferable to the neoclassical economists treating individuals as if they are rocks, always reacting the same way under the same conditions. But it is precisely because human behavior is not predictable that the mathematical methods of the neoclassical economists are deficient.

  • Linus

    The vatican should stick to the business of saving souls. That is spreading the gospel and helping people to lead spiritual lives. I have always been suspecious of ” justice and peace ” or ” peace and justice ” anything. Though these people deny it, they always strike me as utopian socialists. I don’t really understand economics, that ” dismal ” science. But I would never agree to a world government or a world bank given the fact that most of the world is socialist at best, and dictatorial, violent and oppressive at best. Only the Western world and some parts of North America, South America and Central America even give lip service to freedom, equality, and human rights. How can they seriously suggest a world wide authority for anything under these conditions. They are just dreaming. They should all go out and get a real job somewhere.

    • Sarto

      Linus, every great accomplishment beganwith a dream. Just for the heck of it, do a thought experiment. Imagine that we really are running out of cheap oil. That the atmosphere is more and more polluted. Drinkable water is ever more scarce for a growing world population. Global warming is a reality. In other words, suppose that the science fiction nightmare portrayed by some movies is just around the corner. Think of desperate people on the move, piling up behind national borders that will not give them entrance. Think of violence beyond imagination, and people are dying by the hundreds of millions.

      Now ask yourself: Do you see anything within our present political, economic, and religious imagination that can rescue the world? Democracy? People in democracies famously refuse to vote for sacrifice, and they love scapegoats who can be blamed for all the problems. A capitalist economy, especially the laissez faire economy so beloved by Crisis? Everybody is in it for himself. The strongest will win (as we are seeing now with the growing gap between the obscenely rich and the rest). Religion? The religion of the Right, with its stress on individualism and its inability to see the common good? The cowards on the Left, intimidated into silence by the Right?

      So, what do you offer for a cure? The Word according to Sarto: Democracy is going to give way to some kind of complicated modern feudalism based around warlords. We will have something akin to what we seen in Afghanistan today. The world will go into some kind of unimagineable darkness.

      Unless the impossible dream of the Vatican comes true. Somehow the people of the world learn to live together, cooperating with each other on an international scale.

      But for every Sarto who thinks that way there are a hundred people like Linus. God help the grandchildren and the great grandchildren.

  • BDouglass

    Ha! That’s kind of how I felt, as I read it from the start it was increasing shouts of “yes!” it was very good. I was waiting for Oresme and a call for a gold standard, but no that Banking reform part just made me go huh? What’s that supposed to do to the inflation.

    This quote is wonderful: “A person is not made to serve authority unconditionally. Rather, it is the task of authority to be at the service of the person, consistent with the pre-eminent value of human dignity.”

    Outside of the banking reforms which won’t fix the problems that they point out at the start, the main flaw I see is not with centralization, the document specifically says that the new global political authority would reflect subsidiarity as a central guiding principle of its existence, so it’s basically a new Holy Roman Empire. So, it really wouldn’t be “centralized” per say, I can see a role for things like international arbitration and the like being a legitimate role for such a body.

    The main flaw is that the Vatican will not come out and say that this body MUST be Catholic, must be designed by Catholics, and must be run by Catholics and must be in a world which holds Catholic morals. This is implied by the discussion of how such a body must be created by a conversion and not by force, but they won’t say it…instead they try to pretend that it would work “while respecting minority beliefs.” Well, it won’t. No more than secular materialist Communism works when compared to Monastic Communism.

    • Matt

      “The main flaw is that the Vatican will not come out and say that this body MUST be Catholic, must be designed by Catholics, and must be run by Catholics and must be in a world which holds Catholic morals.”

      All of those conditions were fulfilled during the time when the Church itself functioned in a role very much like the sort of “world government” which is now advocated.

      The Church, given temporal power, became so corrupt as to fuel the fire of heresy and schism across Europe.

      If we are to be governed by fallen men — even devoutly Catholic ones — we must be on alert for the temptations of corruption. If power can corrupt even the Pope (and history shows very clearly that it frequently did just that), then that power must be constrained.

      Subsidiarity is the only tool that works.

  • Blake Helgoth

    Ford, Rockefeller and the Council on Foriegn relations would be proud. The last thing we need is to give the international banksters and corporation more power!

  • digdigby

    My Kingdom is not of this world.

  • MRD

    The Vatican statement is useless. For some unfathomable reason there are bureaucrats in the Vatican who wish to give “world banking authority” to some entity governed by the United Nations. The same UN whose “Human Rights” council has such stalwarts of justice as Cuba, China and Saudi Arabia as members. The same UN who endorsed abortion as a “human right” The same UN which routinely persecutes Israel. Good grief. This move to create a “world financial governing body” reads like some absurd idea from one of the more peculiar end of the world novels popular in some Evangelical Christian circles. The kind where the Vatican exposes its “true colors” by helping to give sweeping powers to some “world government body” which in reality is in league with the Anti-Christ. This body then goes on to establish “one world government” and give everyone the “mark of the beast” ( perhaps a credit card number needed for any financial transaction?) Where did they get this from? It is almost a parody of something one would see on the 700 club.

    The Holy Father needs to take time to go through every office in the Vatican and ask the question.. Does this office contribute anything to the salvation of souls. If the Answer is no, the office can be closed and the money thus saved can be given to the poor or some pro-life efforts. I am sure there are faithful Catholics who would be happy to volunteer to assist in this effort. Count me as one.

  • CJA

    Great piece! I seem to remember reading something about a coming “world” political authority in my Bible … and the first one to come is not going to be a fun time for Christians. What is the Vatican thinking on this???

  • Bill Brady

    The only way that subsidiarity can be forced upon the current banking system is for an all powerful authority over banking to demand the closing of all international and pseudo-national banks and return banking to the hands of the people. As long a corparations run the banks subsidiarity will be the very last thought in their corporate minds.

    O why does the Vatican propose address monsters but in the end the are simply tilting at windmills? Lord Jesus come!

  • Clare Krishan

    As I said over at Jeffrey’s original thread, concerning
    “For some unfathomable reason there are bureaucrats in the Vatican who wish to give “world banking authority” to some entity governed by the United Nations. “
    http://blog.mises.org/18793/vatican-document-discover-disease-and-then-recommends-more-disease/comment-page-1/#comment-806502
    the Vatican is NOT the first to the table. Luminaries such as George Soros (he who went short on Britains FIAT Pounds Sterling and won) and the BRICs have already floated a “basket of currencies” theory of money based on strategic drawing rights (what one could call a ‘Westphalian’ illusion of peace and prosperity). The intellectual heavy-lifters in the conservative movement seem to be slowly coming to their senses… but will they be punctual enough to present a coherent vision for ordered liberty at the G20 next week? No. They’re not at the table. The intellectual heavy-lifters in the liberal movement (well they lifted Nobel prizes, is that heavy enough to qualify?) Krugman et al will be dong the talking….

  • Clare Krishan

    What is poetic about free enterprise, the subjective theory of value? Which portrait of Marilyn best reflects a sense of beauty and order?
    http://andywarholmarilynmonroe.net/wp-content/uploads/colormarilynsportfolio1.jpg
    http://ffffound.com/image/42c5155f20852c7e9ea4a43e6daf0931402a86c5
    http://2.bp.blogspot.com/_KMJlfU5vYb4/TNFRuoFIK0I/AAAAAAAAFrU/vGan_YcxDnU/s400/-+Marilyn+Monroe+%28Ben+Heine%29.jpg

    Polyarchy.
    Anyone agree? [ crickets ]
    Ok, then let’s start with baby steps, illusion vs reality (same Belgian artist, Ben Heine):

    http://www.dailymail.co.uk/news/article-2041426/Ben-Heine-The-incredible-optical-illusions-created-artists-mix-pencil-camera.html

    9 out of 10 readers express a preference for paper money over commodity species, why?

  • Clare Krishan

    n.b. Westphalian illusion (cuius regio, eius religio) has run out of steam when the regio becomes the religio under a tyranny of relativism aka dictatorship of ideology. Instead of so much hot air, we need a true pneumatology of communio et liberatio, techne he poiese.

  • Clare Krishan

    Subsidiarity is built in: its nature’s fractals

    Solidarity can be ruled out: see fractional reserve banking

  • Clare Krishan

    Fracking meanwhile, is the vapid idee d’jour

    “The implications of this shift are very large for geopolitics, energy security, historical military alliances and economic activity. As US reliance on the Middle East continues to drop, Europe is turning more dependent and will likely become more exposed to rent-seeking behaviour from oligopolistic players,” said Mr Blanch.

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8844646/World-power-swings-back-to-America.html

  • John B.

    That Vatican note was written some 40 years ago, full on enthusiam for the european social-democracy. It seems several paragraphs are simply copy-and-paste from John XXIII Pacem in Terris, which is from 1963. Unfortunately, one must also add that it is in line with Caritas in Veritate, written by Benidict XVI two year ago.

  • Charles Woodbury

    This is great! After implementation, no one could buy or sell without the special mark, and God’s kingdom would soon follow!

  • Steve

    The Church is recovering her senses…albeit slowly.

    And yet, this kind of utter nonsense still goes on: while a group of Austrian priests are in total and public rebellion; going to most “Catholic” colleges is hazardous to your faith; catechesis is still often shallow; it goes on and on…

  • http://n/a Ben

    Jeffrey,
    Great message but I have a question; Richard Nixon stopped the gold standard and I can understand how we’ve had problems as a result of it, but didn’t the 1929 stock market collapse happen prior to that? (i.e.- Were we in the ‘Gold Standard’ then because from what I learned in my high school history class, and I may need a refresher on this so you seemed like a good person to ask, I thought the collapse in 1929 happened because banks started lending to people who didn’t have money to buy stock?– How did this happen under the gold standard?)
    …looking forward to your response because I really liked your article and am seeking more understanding of the Vatican’s response to the world’s financial situation…
    Thank you…

    • Frank

      The 1929 stock market crash was the result of excessive fiat money creation and credit expansion in the 1920s. Roosevelt had to devalue (i.e. raise gold price of) the dollar (from $20 to over $30/ounce). That was a clear indication that the US had already abandoned the discipline of the gold standard.
      The Great Depression was the result of ill-advised policies (including protectionist measures that hampered international trade) that were meant to keep failed and failing businesses alive. See
      http://mises.org/resources/694/Americas-Great-Depression
      for an extensive analysis of the genesis of that not-s-great period in American history. Also
      http://mises.org/Books/economics_public_welfare_anderson.pdf

  • Billy Cordova

    It’s obvious that Jeffery has never studied history. There have been boom and bust cycles as long as there has been free enterprise. We were on the gold standard before during and after the Great Depression. Learn some economic theory before spouting nonsense.

    • Tharms

      It’s Mr. Cordova that needs to learn something about “history.” The so-called “Gold Standard” that “we” were on during the Great Depression was one in which a cadre of bankers (the Federal Reserve, est. in 1913), in concert with the Federal government, set the price of gold (through price fixing) in order to allow the Federal Reserve to manipulate interest rates without having to worry about the balancing effect of gold valuation. The Great Depression was a direct effect of the Federal Reserves inexperience in trying to anticipate the consequence of their policies, and the Fed has even admitted this (some several decades have Austrian economists first pointed it out). Before criticizing Tucker’s “history,” which is excellent, one might one to ensure that one’s own survey is complete.

      As for the point regard business cycles, these cycles, which indeed have been with us since the dawn of trading (because they are an effect of human psychology), only become “boom and bust” cycles with the advent of central-banking interest rate manipulations that exacerbated the trends by allowing human exuberances to become bank-sponsored booms, and small diversified losses to become too-big-to-fail busts.

    • Keith

      Good grief boom and busts are only possible under a fiat monetary system.

      Whose books you been reading lately Krugman?? etal

  • http://elblogdelpelon.wordpress.com El Pelón

    I thought that once you enter the realm of religious faith, all talk of impracticality flies out the window. The Church nuances its position for practicality on certain issues, but not others. For example, the Church will bend over backwards to defend any and all embryos and zygotes, no matter how old it is, even though the Church itself has had long debates over when ensoulment takes place. (Though, granted, due to its sexist tendency, it has been consistent in condemning any form of reproductive freedom.) Many would say that the Church would mandate us to vote for a racist or a fascist if his or her position on abortion was the correct one. On this, we have to put blinders on. But when it comes to stuff like feeding the poor or regulating a financial system that is little better than a high stakes poker game with far dumber players, then the whole “well, we have to be practical” or “we have to defend FREEDOM!” talk comes out of the woodwork. As if the Vatican had deep and far-seeing wisdom on such diverse topics as sexuality, culture, and glass-making, yet has no competence in such fields as economics, politics, animal husbandry, and cross-stitching. One should be excused for thinking that a lot of this is arbitrary, or has nothing to do with religion.

    It should also go without saying that the advocacy of a world financial authority on the part of a global authority that claims to have absolute say over whether people will burn for an eternity in hell or not is small potatoes in the grand scheme of things. What is an institution that governs the temporal fate of nations compared to an organization that claims to determine the fate of the entire cosmos? Such an institution would rightfully be a small bureau in the Vatican next to the Pontifical Commission for Surplices and Funny Hats. Why not pontificate on global economics, when you can also pontificate on the fate of the universe? O ye, of little faith…

  • Me^2

    @Billy…I believe you need to dust off your history while at the same time, re-read the article…

    There have been booms & busts throughout history, however they were self-correcting as the article points out.

    “This automatically provides a check on both banks and governments — and therefore producers and consumers as well. An over-expansion leads to gold outflows and a restriction on credit expansion at home, as inevitably as night follows day. Therefore you have to live within your means.”

    Further, ever hear of the Depressions of 1837, or 1907? Those were truly “gold standard” depressions…folks get greedy, overextended, and then corrected by the market. The first centralized currency & government “solution” depression was turned into the “great” one.

    The centralized solutions propped it up, prolonged it, and leveraged it into a World War while the financiers were paid going & coming…from increased government debt AND loans to citizens who saw their life savings and capital evaporate with gold confiscation.

    While fathers and sons were sent to die fighting for “freedom”…for centralized control just like the Vatican is calling for more of.

  • Josue Hernandez

    BDouglass, you’re right on! lol That’s exactly what was going through my mind as I read the document.

    The problem is that it wasn’t honest enough to come out and say that the whole thing requires no less than the reconciliation of the west back to the faith along with the conversion of the rest of the world as just a basic preliminary. Otherwise, to try to implement this at a time in history when the secular west (formerly known as Christendom) seems to be at the height of its apostasy would be no less than to usher in the rule of anti-Christ.

  • Tharms

    It wouldn’t be the first time the Vatican’s cure for a problem has been worse than the disease. In fact, they seem to have made something of a hobby of making things worse by claiming to make things better.

  • http://rewinn.blogspot.com rewinn

    Suffice it to say that the derivative instruments can be created with or without a gold standard for money, and if unregulated, will have the results observed in the Fall of 2008.
    Whether the Vatican’s suggestions are wise or not may be debated, but returning to the gold standard is completely irrelevant as a practical matter. For those who exalt reasoning from first principles over the scientific method, that may not be important.

  • Cephas

    It’s amusing to see “FOX News” Catholics like Mr. Tucker and Fr. John Zuhlsdorf scurry around trying to minimize their allegiance to a statement from the Vatican. Statements of the Curia approved by the Pope, while not part of the papal magisterium per se, nevertheless participate in it. Certainly, the papal documents cited therein should give one pause.

    Thank you, Pontifical Council for Justice and Peace! I hope people will listen to your recommendations.

    • Cord Hamrick

      I don’t know what Fox News has to do with it.

      The principles expressed in the document are mostly in line with Magisterial teaching and thus Mr. Tucker and Fr. Z. approve of them.

      The problem comes in when one proposes specific policies as implementations of those principles, with utter inattention to how such policies as those proposed tend to work out in a fallen world. In the economic sphere, as in the scientific sphere, this policies-and-mechanics aspect is an area where the Magisterium has magisterially declared themselves unable to competently comment: It is outside their charism and their role and they have said so.

      Implementing economic regulatory schemes within a Christian worldview is a job for Catholic economists and legislators, not for Curia dicasteries moonlighting in fields where the combination of their good intentions and their utter inexperience and naïveté in economic policy renders them as harmless as serpents and as wise as doves.

      So the criticism of this old-school blog-post by the Pontifical Council for Justice and Peace has nothing to do with minimizing one’s allegiance to the Holy See or the Magisterial authority of the Church.

      Rather, it is a bit like the wince which the faithful give when they read the earliest recorded papal encyclical or bull: The First Letter of Clement to the Corinthians. This document was so full of orthodoxy and so highly respected as a missive from Peter’s successor, that the Corinthians read it as scripture, in their liturgy, for a century or more until the New Testament canon finally was set between 370 and 400 AD.

      But it is difficult not to wince when one reads Clement’s musings about the phoenix, which he self-evidently believes to be a real creature, living in east Arabia, with a 500-year lifespan, which dies in fire but whose young emerges in a kind of larval form. One reads this and thinks, “Dude! You were doing so well! Why’d you have to suddenly start making zoological assertions?”

      The Pontifical Council is of rather less account than a writing from the hand of a pope. Still, there is this resemblance: One can happily cheer on the whitepaper right up to the point when the Council, oblivious to the myopia of their Brussels-infected bureaucra-philia, start making egregious asses of themselves.

      After that point, enthusiasm understandably wanes. But when one’s home team badly fumbles the ball late in the game, is it really an act of treachery for the home team crowd to groan?

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