The Vatican Said What? [Document calling for 'Central World Bank' has no binding authority]

The important piece of news out of Rome today is that the Vatican has allegedly called for a "central world bank" in reponse to the continuing speculation and instability in the world financial system.

I say "allegedly" because the text in which this call appears is not by Pope Benedict, but by a Vatican office, the Council for Justice and Peace. Such an office can issue papers which do not bear the Pope's "seal of approval" in the same way that a papal encyclical would.

We are dealing here, then, with something on the order of a "position paper," not a text containing authoritative magisterial teaching.

It is a serious document, worth weighing with real attention — and this is why I include the complete text below — but not a document with binding doctrinal authority.

Nevertheless, after the Vatican released the document at a press conference this morning, the internet was abuzz with reports like the following one from Reuters, suggesting that this document's call for some controls over global financial speculation links the Vatican ideologically to the US protest movement "Occupy Wall Street" (!!!).

Text By: Reuters

The Vatican called on Monday for the establishment of a "global public authority" and a "central world bank" to rule over financial institutions that have become outdated and often ineffective in dealing fairly with crises.

A major document from the Vatican's Justice and Peace department should be music to the ears of the "Occupy Wall Street" (OWS) demonstrators and similar movements around the world who have protested against the economic downturn.

The 18-page document, "Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority," was at times very specific, calling, for example, for taxation measures on financial transactions. (...)

It called for the establishment of "a supranational authority" with worldwide scope and "universal jurisdiction" to guide economic policies and decisions.

Such an authority should start with the United Nations as its reference point but later become independent and be endowed with the power to see to it that developed countries were not allowed to wield "excessive power over the weaker countries." (...)

It said the International Monetary Fund (IMF) no longer had the power or ability to stabilize world finance by regulating overall money supply and it was no longer able to watch "over the amount of credit risk taken on by the system."

The world needed a "minimum shared body of rules to manage the global financial market" and "some form of global monetary management."

"In fact, one can see an emerging requirement for a body that will carry out the functions of a kind of 'central world bank' that regulates the flow and system of monetary exchanges similar to the national central banks," it said.

Likewise, in an article in USA Today, entitled "Vatican meets OWS: 'The economy needs ethics'", reporter Cathy Lynn Grossman cites Jesuit Father Thomas Reese, senior fellow at the Woodstock Theological Center, Georgetown University, as saying that the Vatican view is "closer to views of the 'Occupy Wall Street' movement than anyone in the U.S. Congress."

Grossman added: "Reese says it's not only to the left of President Obama, it's 'to the left of Nancy Pelosi.'"

And she repeats the point, writing a second time that "on economic issues, the Pope is to the left of Obama. He is even to the left of liberal Democrats like Nancy Pelosi."

The feisty president of the Catholic League, Bill Donhue, then leaped into the fray, saying the "early chatter" has exaggerated what the document is actually saying.

The Pontifical Council for Justice and Peace issued a document today titled, "Toward Reforming the International Financial and Monetary Systems in the Context of Global Public Authority." Commenting on it is Catholic League president Bill Donohue:

There has been much hyperventilation from some quarters over the release of this document. All of it is unwarranted.

To begin with, the text is not an encyclical, nor is it the work of Pope Benedict XVI. Much of what it says is consistent with long-standing Catholic social teaching: the quest for the common good should guide social and economic policy. It properly calls for "abandoning all forms of petty selfishness and embracing the logic of the global common good."

Much of the early chatter focuses on the document's call for a global authority to render economic justice. It says, "Benedict XVI himself expressed the need to create a world political authority." The reference is to the pope's encyclical, Caritas in Veritate.

The term "world political authority" appears once in the encyclical, the context of which is a plea for "international cooperation" in the pursuit of a more just "political, juridical and economic order." In the very next sentence, the Holy Father stresses that such an authority must "observe consistently the principles of subsidiarity and solidarity."

The document released today also emphasizes the need to follow the Catholic principle of subsidiarity. This means that solutions to social and economic problems should begin at the most local level, not at the national, much less the international, level. Indeed, the pope explicitly said in his 2009 encyclical that "subsidiarity is the most effective antidote against any form of all-encompassing welfare state."

Today's statement uses terms like "supranational Authority" and "supranational Institution." These neologisms are purely the creation of the authors, Cardinal Peter Turkson and Mario Toso. They are not found in the pope's encyclical. No matter, those who are comparing this text to the demands of the "Occupy Wall Street" crowd should first detail what exactly it is the urban campers want.

E-mail: cl@catholicleague.org

I then received an email which expressed outrage about the Vatican's new document, as follows:

I am a practicing Catholic convert, baptized Holy Saturday 2003. I am a Jewish convert. My degrees are in mathematics and statistics but I have a great interest in economics.

I subscribe to the Austrian theory of economics. Many Austrians believe that central banking is at the root of the current financial crisis. The US Federal Reserve is not even a government agency; it is a cartel of privately owned international banking interests that disguises itself as a governmental body. (...)

Centralized banking is not a cure; it is the very disease itself. It was the root cause of the dot com bubble, then the housing bubble. The Federal Reserve is essentially a private piggy bank for Wall Street.

And I wake up to find the Vatican is calling for a WORLD CENTRAL BANK!

Look, the Holy Father is infallible on spiritual matters. But he needs to stay out of central banking. The Vatican is clueless on this matter.

The #1 impoverishment vehicle of the people is the Federal Reserve and other central banks. They are perpetrating the largest transfer of wealth from the bottom to the top in world history. (...)

Central banks need to be taken down, not built up further. We need less central banking, not more.

If Satan is operating anywhere in this world with impunity, central banking is the place where you'll find him. It is sucking the financial life blood from the people to prop up bankers and the global elite, and turning a blind eye to every kind of fraud imaginable. It is the #1 place where the money changers of the world gather.

And the Vatican wants MORE of it!

Unbelievable, absolutely unbelievable.

Regards,

I then placed several calls to see what some of my contacts might have to say about this document.

I concluded that there is one positive thing and one negative thing that can safely be said.

The positive thing: this document, in keeping with all of the Church's social teaching, wishes to defend honesty, transparency, truthfulness and justice in financial dealings over against dishonesty, opacity false representations and injustice.

In this, the document is to be praised, and praised highly. We need honesty and truth-telling in a global economy that is seemingly careening toward a train wreck which will inevitably hurt the poor and weak most of all.

The negative thing: the global economy, and especially the global derivatives market, is big, enormous, in fact, so big, so opaque, so complex, that literally no one knows what the situation really is, or what measures to take to undo the financial detonator that seems ready soon to go off.

In this sense, the Vatican office's policy recommendations are inevitably insufficient.

No one knows what to do about this looming financial train wreck, not even the Vatican.

That said, there is no doubt that the virtues of honesty, truthfulness and fair-dealing must be at the center of any possible global solution, and we all will be well-served if thoughtful, honest, good and competent men and women can be placed in a position where they can help unravel this time-bomb before it detonates, or salvage what is left of our economy after it detonates.

And this is the essential, laudable meaning of the Vatican's suggestions in this document.

The new “white paper” from the Pont. Council Justice and Peace. Fr. Z rants like loon.

Posted on 24 October 2011 by Fr. John Zuhlsdorf

I am reading through the new “white paper” (I won’t dignify it with “document”) from the Pontifical Council for Justice and Peace and trying to keep my blood pressure down.

I have a few things to digest yet, and it takes me a while, since this isn’t exactly my bailiwick. However, I can say this: thanks be to God this “white paper” doesn’t form part of the Holy Father’s Ordinary Magisterium.

Every once in a while the Holy See’s smaller offices, Pontifical Councils and so forth, have to put out a paper to justify their budgets and remind everyone that they take up valuable space. These documents, which do not form part of the Holy Father’s Magisterium, can deal with critical issues like how to be a safe driver, and have seminars on how to play soccer and so forth, and so forth.

Some of my favorite points in the new “white paper” include the suggestion that there should be global monetary management and a “central world bank” to regulate it and that the United Nations should be involved. National banks have, after all, done such a good job that we should now make the effort transnational! And is this the same UN that had nations such as Saudi Arabia and, till recently, Libya on the their human rights commission? Wasn’t there a UN financial corruption investigation still going on? Is this the same UN that is pushing contraception pretty much in every poor country on earth? Was that a different UN?

Another high point in the new “white paper”: “These measures ought to be conceived of as some of the first steps in view of a public Authority with universal jurisdiction; as a first stage in a longer effort by the global community to steer its institutions towards achieving the common good.”

Uh huh.

In the presentation of the “white paper” during the Press Conference, Prof. Leonardo Becchetti (whom I assume was the writer) actually references Dodd-Frank as a starting point.

The MSM is gonna love this “white paper”. I can hear the intelligent, well-informed commentary about the Church even now. It’ll be along the lines of “The Pope says there should be a single world currency controlled by UN” and “Financial advice from people who have paid how many billion in settlements for abuse of children?”

If they can give us the “10 commandments for driving”, perhaps more helpful for our near future would have been pointers on, just off the top of my head, how to make a useful bug-out-bag, how to say the rosary with your family, how to barter things with real value, how to form small communities and help each other when the shelves in stores have been stripped bare, good programs for learning Chinese and Arabic, how to make hiding places for priests when the newly established domestic security forces start hunting them down, how serious liturgical abuses really are mortal sins, how to make a perfect act of contrition when dying without a priest during a global pandemic, what sort of silver and gold will be useful when our fake money no longer has redeemable value.

But, no, we get fantasies about the UN regulating a global monetary supply.

I’m being facetious, of course. The global economy is perfect, there are no super-bugs on a cyclical ascent, and we all love the direction governments are taking when it comes to religious liberty. Of course its a great idea for the Holy See’s office on Justice and Peace to further the cause of one world government.

Seriously, now that my blood pressure is dropping and my little raving nutty is over, I look forward to some good analysis of this “white paper” from the smart people at Acton Institute who might actually understand what the Holy See is proposing. From one conversation I had, I have gleaned that some of the analysis in the “white paper” of the present situation is okay, but the proposals are really bad.

Samuel Gregg on the new “white paper” from the Pont. Con. for Justice and Peace

Posted on 24 October 2011 by Fr. John Zuhlsdorf

From National Review Online comes a piece by the eminent Samuel Gregg, a fine scholar with his head screwed on in the correct direction. He gives some reactions to the new “white paper” as I call it from the Pontifical Council for Justice and Peace. Mr. Gregg is research director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society and Wilhelm Röpke’s Political Economy, and his 2012 forthcoming Becoming Europe: Economic Decline, Culture, and America’s Future. Also, see Economic Thinking for the Theologically Minded.

Be sure to check out the comments at National Review.

My emphases and comments.

Catholics, Finance, and the Perils of Conventional Wisdom
October 24, 2011 12:22 P.M.
By Samuel Gregg

Despite the Catholic Left’s excited hyperventilating that the document released today [Which is our first clue that the "white paper" is bad. And I call it a "white paper", since it doesn't form a part of the Holy Father's Magisterium.] by the Pontifical Council for Justice and Peace (PCJP) would put the Church “to the left of Nancy Pelosi” on economic issues, more careful reading of “Towards Reforming the International Financial and Monetary Systems in the Context of Global Public Authority” soon indicates that it reflects rather conventional contemporary economic thinking. [The phrase "damning with faint praise" comes to mind...] Unfortunately, given the uselessness of much present-day economics, that’s not likely to make it especially helpful in thinking through some of our present financial challenges.

Doctrinally speaking, there’s nothing new to be found in this text. As PCJP officials will themselves tell you, it’s not within this curial body’s competence to make doctrinal statements that bind Catholic consciences. [Did you all get that? This "white paper" is not a document of the Church's Magisterium.] Moreover, the notion that an increasingly integrated world economy requires some type of authority able to make decisions about what the Church calls “the universal common good” has long been a staple of Catholic social teaching. Such references to a global world authority have always been accompanied by an emphasis on the idea of subsidiarity, and the present document is no exception to that rule. This principle maintains that any higher level of government should assist lower forms of political authority and civil-society associations “only when” (as this PCJP text states) “individual, social or financial actors are intrinsically deficient in capacity, or cannot manage by themselves to do what is required of them.”

But putting aside doctrinal questions, this text also makes claims of a more strictly economic nature. Given that these generally fall squarely into the area of prudential judgment for Catholics, it’s quite legitimate for Catholics to discuss and debate some of this document’s claims. So here are just a few questions worth asking.
[1] First, the text makes a legitimate point about the effects of a disjunction between the financial sector and the rest of the economy. It fails, however, to note that one major reason for this disjunction has been the dissolution of any tie between money and an external object of value that regulates the quantity of money and credit in circulation in the “real” economy. [For example, there is no "gold standard".]

Between the late 1870s and 1914, such a linkage existed in the form of the classic gold standard. This gave the world remarkable monetary stability and low inflation without any centralized authority. You needn’t be a Ron Paul disciple to recognize that fiat money’s rise is at least partly responsible for the monetary crises this document correctly laments.
[2] Second, this document displays no recognition of the role played by moral hazard in generating the 2008 crisis or the need to prevent similar situations from arising in the future. Moral hazard describes those situations when people are effectively insulated from the possible negative consequences of their choices. This makes them more likely to take risks they wouldn’t otherwise take — especially with other people’s money. The higher the extent of the guarantee, the greater is the risk of moral hazard. It creates, as the financial journalist Martin Wolf writes, “an overwhelming incentive to privatize gains and socialize losses.”

If PCJP were cognizant of this fact, it might have hesitated before recommending we consider “forms of recapitalization of banks with public funds, making the support conditional on ‘virtuous’ behaviours aimed at developing the ‘real economy.’” Such a recapitalization would simply reinforce the message that Wall Street can always turn to taxpayers to bail them out when their latest impossible-to-understand financial scheme goes south. [NB:] In terms of orthodox Catholic theology, it’s worth reminding ourselves that the one who creates an occasion of sin bears some indirect responsibility for the choices of the person tempted by this situation to do something very imprudent or simply wrong. [There are various ways to participate in and be responsible for the sin of another person. You can see how some things that liberals like to call "structural" sins have their grounding in the choices of individuals.]

[3] Third, given this text’s subject matter, it reflects one very strange omission. Nowhere does it contain a detailed discussion of the high levels of public debt and deficits in many developed economies, the clear-and-present danger they represent to the global financial system, and their negative impact upon the prospects for economic growth (i.e., what gets people out of poverty).
Given these facts, [Quaeritur...] how could governments provide the aforementioned public funds when they are already so heavily in debt and already tottering under the weight of existing fiscal obligations? By raising taxes? Even Bill Clinton thinks that’s not a great idea in an economic slowdown. Indeed, the basic demands of commutative justice indicate that governments need to meet their current obligations to existing creditors before they can even consider contributing to further bailouts.

[4] Fourth, the document calls for the creation of some type of world central bank. Yet its authors seem unaware that much of the blame for our present economic mess is squarely attributable to central banks. Here one need only note that the Federal Reserve’s easy-money policies from 2000 onwards played an indispensable role in creating America’s housing-market bubble, the development of questionable securities products, and the subsequent 2008 meltdown.
Calls for a global central bank aren’t new. Keynes argued for such an organization 75 years ago. But why, given national central banks’ evident failures, should anyone suppose that a global central bank wouldn’t fall prey to the same errors? The folly of a centralized supranational body like the European Central Bank setting a one-size-fits-all interest-rate for economies as different as Greece and Germany should now be evident to everyone who doesn’t live in the fantasy world inhabited by EU bureaucrats. Indeed, it is simply impossible for any one individual or organization to know what is the optimal interest-rate for every country in the EU, let alone the world.

Plenty of other critiques could — and no doubt will — be made of some of the economic claims advanced in this PCJP document. As if in anticipation of this criticism, the document states, “We should not be afraid to propose new ideas.” That is most certainly true. [NB] Unfortunately, many of its authors’ ideas reflect an uncritical assimilation of the views of many of the very same individuals and institutions that helped generate the world’s most serious economic crisis since the Great Depression. For a church with a long tradition of thinking seriously about finance centuries before anyone had ever heard of John Maynard Keynes or Friedrich Hayek, we can surely do better.

A very helpful intro to the “white paper”.

Pope Benedict Calls For “Central World Bank” … Only He Didn’t. Here’s Why.

Thomas Peters

You may have seen this story which was headlined earlier today on the Drudge Report:

The Vatican called on Monday for the establishment of a “global public authority” and a “central world bank” to rule over financial institutions that have become outdated and often ineffective in dealing fairly with crises.
A major document from the Vatican’s Justice and Peace department should be music to the ears of the “Occupy Wall Street” demonstrators and similar movements around the world who have protested against the economic downturn.
The 18-page document, “Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority,” was at times very specific, calling, for example, for taxation measures on financial transactions. [CNBC]

In a scenario which will surely strike some as deja vu, the liberal jesuit Fr. Tom Reese previewed the contents of the document last week, in much the same way that the liberal Fr. Charles Curran “previewed” Humanae Vitae for the mainstream media before the document was actually released (the pope overruled Fr. Curran’s claims that the Church would endorse contraception — but the media had already made up its mind and few bothered to actually read what the pope had to say).

Here’s Fr. Reese on MSNBC “explaining” the news.

Notice that Fr. Reese does NOT correct the news anchor that this document comes from a vatican congregation — not the pope! Fr. Reese seems perfectly happy to help the mainstream media fundamentally misunderstand the authority of teaching this document enjoys. He claims that the pope has “more in common with the people at occupy wallstreet” than the tea party, even though he has to immediately walk back that claim when it is pointed out to him how violent (and anti-Catholic!) the Occupy Rome demonstrations were (as I blogged about last week). I think it’s no surprise that Fr. Reese spends so much time talking about the 60′s — that’s still his cultural frame of reference.

Rather than get into the nitty-gritty of the 18-page document (which I may do at a later point), let me focus on the most important point: framing. Here’s how Cardinal Turkson, President of the Congregation for Justice and Peace, and Bishop Toso, the secretary, explained how the document should be received and read (underlining mine):

…It is in this spirit of discernment that the Holy See, with the note of the Pontifical Council for Justice and Peace, wishes to make a contribution which might be useful to the deliberations of the G-20 meeting”.
Bishop Toso explained that the aim of the note is “suggest possible paths to follow, in line with the most recent social Magisterium, for the implementation of financial and monetary policies…”
The Church does not wish to enter into the technical issues behind the current economic crisis, but remains within the ambit of her religious and ethical functions…

I have nothing to immediately add to that, because the very authors of the document make clear how it should be evaluated: namely, as a “contribution” (as opposed to a mandate), as a “possible path” (as opposed to a moral proscription), in line with the Magisterium’s social teaching (as opposed to introducing a new teaching), without getting into the technical issues (because the Church is an expert in humanity, not economics) while fully staying within the Church’s religious and ethical functions.

Liberal Catholic routinely (and in this case) try to read the Church’s social teaching as dogmatic while choosing to view the Church’s moral and religious teaching as optional. In fact, the Church herself is always careful to make clear that her moral and religious teaching is dogmatic and binding while her social teaching –and particularly her economic teaching– is exhortative and prudential.

With those extremely important guidelines in mind, we can more fruitfully read the text.

That said, I am absolutely sure the media cycle for the coming days and weeks will totally miss all these key points and distill this document down to misleading headlines such as “Pope Benedict Endorses Central World Bank.” But as I explain above, he didn’t.

Fr. Reese and his liberal Catholic friends would be better served acting as messengers of the Church’s teaching as opposed to creators of it.

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