Pope Benedict XVI delivered his message for peace day that included a call for a new economic model & “ethical regulations” of markets.
His competence as a biblical scholar & his expertise on Church doctrine may be unquestioned. But one has to wonder how he missed one of the greatest shifts in the history of mankind that took place in the late 20th Century & up to now … ?
Has he not heard of the failed social experiments in the Soviet Union or in Mao’s China. And what about the moribund economies of European welfare states that threaten to underwrite the same stagnation of the US economy … ?
His comments show that he accepts the canard that the global financial crisis offers evidence of the failure of capitalism. Equally troubling, he suggested that markets do not protect the weakest members of the community.
Whatever the rhetoric of Statists that support government regulations & interventions in the name of the poor, there has been no greater friend of the poor than the recent wave of globalization that lifted 1/2 billion people out of poverty. Capitalism, NOT the welfare state, performed this miracle.
While governments may not have interfered with the spread of globalization, few saw it as the greater force for the lessening of poverty in the history of man.
In his missive, Pope Benedict also issued a condemnation of something that the world has never actually known, “unregulated capitalism”:
” … the prevalence of a selfish & individualistic mindset which also finds expression in an unregulated capitalism, various forms of terrorism & criminality.”
Ignoring the extensive web of government regulations overseen by domestic & international functionaries that prohibit or control so many aspects of life requires an amazing, perhaps willful, blindness to reality.
Do you care about economic & financial stability … ?
If so, you should always shudder in horror & disbelief when central bankers use words like “unlimited” or “do whatever is necessary” … !
Should you be worried about economic & financial stability … ?
Well, the unconventional monetary policy pursued by the European Central Bank (ECB) is a cause for deep concern. For its part, the ECB has expanded monthly asset purchases to amount to €60 billion worth of bonds issued by euro area central governments, agencies and European institutions & plans to continue until at least September 2016.
Ignoring the failure of similar steps taken in the UK, Japan & the USA, the ECB added sovereign bonds to its existing private sector asset purchase program in hopes that its actions will stimulate economic growth where it failed elsewhere.
The ECB is purchasing bonds issued by euro-area governments as well as those of agencies & institutions of the EU in the secondary market using central bank money.
Although key ECB interest rates are at their lower bound, artificially-cheap credit has not induced more borrowing to expand economic activity in manufacturing or small businesses.
An underlying purpose of the ECBs asset-backed securities purchase program (ABSPP) & the covered bond purchase program (CBPP3) is to lessen the likelihood of “contagion” effects of a Grexit.
But note how these steps play out. The ECB is essentially trading pieces of paper called euros for pieces of paper called bonds. Or it is trading pieces of paper called short-term bonds for pieces of paper called long-term bonds.
You are right to be worried that Mario Draghi believes that ex nihlio creation of bit of colorful paper will be a substitute for the actions of entrepreneurs to engage in sustainable investments based on economic fundamentals.
Be afraid; be very afraid. Our economic & financial future is in the hands of MadMen.