Yikes: Vatican Calls for World Central Bank!

In a new document, the Vatican decries “the idolatry of the market,” and calls for a new “global public authority” and “central world bank” to govern the world’s finances. Reuters reports:

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of a “global public authority” and a “central world bank” to rule over financial institutions that have become outdated and often ineffective in dealing fairly with crises. The document from the Vatican’s Justice and Peace department should please the “Occupy Wall Street” demonstrators and similar movements around the world who have protested against the economic downturn.

“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. “The economic and financial crisis which the world is going through calls everyone, individuals and peoples, to examine in depth the principles and the cultural and moral values at the basis of social coexistence,” it said.

It condemned what it called “the idolatry of the market” as well as a “neo-liberal thinking” that it said looked exclusively at technical solutions to economic problems. “In fact, the crisis has revealed behaviours like selfishness, collective greed and hoarding of goods on a great scale,” it said, adding that world economics needed an “ethic of solidarity” among rich and poor nations.

I’m not sure what the writer was thinking with that offhanded comment about the Occupy Wall Street protesters. A super-centralized, super-insulated, global governing authority that controls and regulates all financial and economic activity? Does the Vatican honestly expect such an arrangement not to work out in favor of the already super wealthy? Just what angels does the Vatican have in mind to staff such a body? Or does the Vatican, with all its theology regarding the inherently sinful nature of man, actually imagine that men can be found to direct the entire world’s finances who will not use that power to benefit the already wealthy in exchange for a little piece of that wealth? And are the Occupy Wall Street protesters also so naive?

In a recent column, economist and historian Tom Woods (who incidentally, is a Roman Catholic) argues that it is not the idolatry of the market that has led to the current economic downturn, but the idolatry of central banking and institutionalized regulatory power:

‘We were assured that the best and the brightest were running the Fed. These were people who told us the rise in housing prices was attributable to strong fundamentals. There was no housing bubble. Alan Greenspan told people to take out adjustable-rate mortgages. Ben Bernanke said in 2006 that lending standards were sound. And so on.

Whenever rising interest rates might have discouraged crazed speculation in real estate, the Fed kept the mania going by maintaining low rates. When the market was trying to send us red lights, in other words, the Fed was turning them all green.

Had we really been engaged in “idolatry of the market,” as the Vatican document suggests, we might have listened to the market. Instead, the central authorities drowned out what the market was trying to tell us.

It’s been idolatry not of the market but of central banks, institutionalized sources of moral hazard and financial instability around the world, that has yielded us the boom-bust cycle. (The aura of infallibility and the cult of personality surrounding Fed chairmen make the language of idolatry more than mere poetic license.)

The widespread misdiagnosis of the crisis now engulfing us has led to the frequent claim that lax regulation, or deregulation, must have caused it, and that better supervision of the system can prevent future crises. This is a delusion, albeit a common one.

In the United States we have 115 agencies that regulate the financial sector, and the Securities and Exchange Commission never had a bigger budget or staff than under George W. Bush. There has been a threefold (inflation-adjusted) increase in funding for financial regulation since 1980.’

Woods’ disagreement with the recent Vatican document might lead non-Catholics (or maybe even some Catholics) to ask whether it’s okay for a Catholic to disagree with the Church on economic matters. Phil Lawler writes at CatholicCulture.org:

‘The Catholic Church does not claim teaching authority on matters of economics and finance. When the Pontifical Council for Justice and Peace issues a statement on the world’s financial markets, faithful Catholics are not bound to accept the economic analysis it contains.’

Meanwhile, Jeffrey Tucker writes at Crisis Magazine to explain that the Vatican has it surprisingly and encouragingly right when it comes to diagnosing the problem, and that the new document simply fails to articulate the effective solution to that problem. Fans of sound money should at least be encouraged that monetary policy is finally actually being discussed openly from protesters in the streets of New York to theologians in the Vatican. This is our opportunity to present our views. This is our opportunity to make a change.