Posted on 09/24/2008 7:58:55 PM PDT by marshmallow
VATICAN CITY (CNS) -- The current financial crisis pummeling the United States and beyond is a sign that the so-called "new economy" and its risky investments have failed, the Vatican newspaper said.
The booming growth of financial markets did not correspond to real growth or concrete development for society because it created an artificially robust gross national product, said a Sept. 24 article in L'Osservatore Romano.
The only real growth registered in this crisis has been "the commissions, profits of the banks and bonuses for the managers," it said.
The article, with the headline "A costly illusion," was written by Ettore Gotti Tedeschi, an Italian economist and professor of financial ethics at the Catholic University of the Sacred Heart in Milan, Italy.
The U.S. financial meltdown has been blamed on "the greed of managers and lack of regulations. But curiously, no one ever refers to the indirect responsibility of the government's economic policy" which, he wrote, tried to cover the lack of any real economic development with a booming Wall Street.
He said the U.S. government's proposed bailout may stave off any worst-case scenario for its troubled financial markets, but it will not repair the root causes of the crisis.
"Despite various attempts, the Western world does not know how to map out a model of development that is capable of guaranteeing stable wealth," the article said.
The West has "not succeeded with its new economy project, it did not succeed with accelerating growth in Asia by transferring low-cost production (there), and it did not succeed after inventing a boom in the GNP through risky financial models that were poorly conceived and badly regulated," it said.
"In order to maintain this sham GNP, the banks financed things that were not guaranteed" and that should not have been financed, like the subprime loans, it said. Financial institutions created an "economic growth out of debt and, therefore, (created something) very risky," it added.
The article said the lesson to be learned is that nations cannot build a healthy economy or experience real development if it is not based on "balanced demographic growth."
It said the world economy also needs to be run responsibly and transparently with precise rules.
The L'Osservatore Romano article ran the same day Rome's Pontifical Gregorian University hosted a seminar.
Sponsored in part by the international investment bank Barclays Capital, the seminar gathered speakers from Italy's religious, political and economic fields to discuss social development, environmental protection and financial markets.
Giulio Gallazzi, founder and president of the financial and business consulting firm Socially Responsible Italia, was one of the conference speakers.
He said when an economy is based predominantly on the health of its financial markets and not on growth in the industrial, manufacturing and service sectors, the bubble of wealth that is generated is more difficult to distribute to the rest of society.
The seemingly paradoxical term "jobless growth," he said, indicates this problem in which a nation's GNP increases without an increase in employment, which means much of the new wealth does not trickle down to the working classes.
Nations need to reconsider now-debunked economic theories from the last century and create new rules that favor long-term growth and investments that involve "measured and manageable risk," he said.
Businesses and stockholders should also engage in "value sharing" in which they choose investment opportunities not solely for their chances at reaping a profit "but as an opportunity to contribute to the common good" and sustainable development.
He and other speakers emphasized the importance of having banking institutions and foundations concentrate on helping the local communities in which they are based.
Besides offering microcredit and small-business loans, local projects should also include scientific, humanistic and cultural initiatives that foster a person's "full development," the speakers said.
I remember a joke going around a couple of years ago, that the biggest export from America was derivatives.
Unfortunately, it was probably true.
What’s new about filthy guberment intervention (look at Rome! Look at Egypt!) by forcing banks to loan money to low life’s. The time is coming for us to do to these filthy socialist despotic scum wads what are ancestors did to the aristocratic Brits. And then we should give the rest of the world a REAL reason to hate us.
Looks like the Catholic Church may have a clue about the failed policy of “bread and circuses.” I wonder where they learned that? Oh well, maybe we should listen to pearls of wisdom, even if it comes from a suspect source, like the Pope.
>...local projects should also include scientific, humanistic and cultural initiatives that foster a person’s “full development,” the speakers said.<
i suppose he’s going to give a grant to some gang member that’s just spray painted his church.
this guy has his head ....
The main driving force behind this crisis was the Fed's insanely lax rate policy from 1996-2006.
If a bank can borrow at 2% and lend at 7%, then it will be able to attract many, many more eager customers for loans than if it were to borrow at 5% and lend at 11%.
And for a decade the Fed said, more or less: banks can borrow almost for free.
As a devoute Catholic I believe the Vatican ought to keep it’s mouth shut when they don’t know what they’re talking about.
For instance, attempting to legislate “blanced demographic growth.”, is EXACTLY the primary driver in this crisis.
The Feds caved in to political pressure to make homes available to people who were not financially qualified for the mortgages. (NINJA loans - No Income, No Job, Approved!)
One thing I do remember clearly. Pope JP II rebuked us on one of his visits here about our consumerism or I don't remember, just that he came from such a poor country and saw our excesses.
Plus not too terribly long ago, I think JP II was still alive, there was a statement about usury and the rates shouldn't be so high. I felt they were right on target about that. If we'd have just listened on that much, this mess might not be nearly so bad.
But uh, the Vatican in its operations is about as far from transparent as it gets, so I had to skip over that.
Still I take to heart a lot of what blows this way from there. I'm kind of surprised they would weigh in on it, maybe they are a little concerned, too. I don't recall their ever opining in recent years about any nation's economic problems. I hope it was meant in a spirit of concern and compassion.
The article stated: the banks financed things that were not guaranteed" and that should not have been financed, like the subprime loans
*Isn't that what you're talking about?*
A while back I created terms to distinguish “real” money from “imaginary” or multi-leveraged money. And right now, it is critical that we as a nation learn to distinguish between the two, because it affects our nation, our business, and us as individuals.
Today’s “easy credit” economy was constructed by the Franklin Roosevelt administration to get America out of the Great Depression. But this new type of economy has a fatal flaw, that is now not only evident, but threatening a major economic collapse both in the US and internationally.
In past, economic problems in the “easy credit” economy could be addressed in two ways. Either growing the US economy out of the problem, as was proposed by President Bush tonight, or by causing inflation, which has been proposed by Obama with the creation of a vast number of new government programs.
But neither of these fixes will work any more. Both were based on the idea of using even more credit to fix the credit problem. But it is a false hope, as much as paying off one maxed out credit card with another card, and still going on a spending spree.
When the post-WWII US government had spent up its tax revenues, it easily created debt by issuing short, medium and long term treasury notes. But this only works when someone is able and willing to buy those notes.
Jimmy Carter tried to get around this problem by just creating money out of thin air. But it was the “Zimbabwe” solution. On top of that, interest rates tracked the new money point for point, neutralizing Carter’s efforts to make free money.
So what will have to be done?
The US government will have to shut down as much as a quarter of the federal government permanently. A balanced budget won’t work, they must create an annual budget surplus of billions of dollars with which to fix the economy.
And to make matters worse, tax revenues can be expected to plummet in the economic downturn. So it is not 25% off the current budget, but 25% off a much small budget.
The emphasis has to be threefold. To protect “real” money corporations from the correction of “artificial” money corporations, and to use US food exports and budget surplus to reverse years of deficit spending while to a great extent returning the US to a “cash” economy with only tightly controlled credit available.
But the most important thing is to insure that the “millions” of unemployed, as Bush suggested tonight, and their families, are fed and housed for the duration of the crisis.
From a personal standpoint, it would be wise to anticipate the cancellation of credit cards, so it would be very good to have a reusable debit card, and plenty of cash in a safe place at home.
There are expected to be any number of bank and other financial institution failures, and if the US government can no longer guarantee its long term t-bills, then it is doubtful if the FDIC will be able to make good on insured bank accounts as well.
The message here is, in the annals of shadowy finance and wealth accumulation, that the Vatican considers Wall Street amateurs and relatively late to the game.
Our standard response when they take issue with some aspect of American policy or culture is "STFU....America knows best!"
Apparently not.
WEll, I tend to agree with the Vatican Report save for they omitted the key idea of “Failure is a needed ingredient in a vibrant economy” without allowing for failure and the misery that accompanies it, there can be no growth and wealth and mobility in a society. The author seems to prefer a bubble wrapped economy over a dynamic one.
More troubling for me is that longterm, the DC Elites do not have the political will to allow America to produce raw materials like Oil and Coal or even Power.
Ten years from now, this bank crisis will be forgotten more or less, however we still will not be drilling off of our coasts, we still will not be generating Nuclear Power and we still will not be liquifying coal, and that trend is deadly to growth and shared prosperity across income levels.
“The love of money”
People often think that the Bible says that money is evil.
But it is the love of money!
Check your Bible!
Are you bashing the Pope and Catholics. He is a very learned man.
Frankly, with the media saying our economy is in the tank, more and more of the amigos illegal will be heading back to Mexico! To me, this is great news for the economy! More jobs for Americans!
DING DING DING DING WE HAVE A WINNER
Too often they promote “giving a man a fish”, when the conservative and more effective solution is to “teach that man to fish”.
Some really need the direct support, but it is important to make the distinction.
“....financed things that were not guaranteed.”
Shows a continued lack of understanding!
“guaranteed” is not the criteria, rather evaluated good risk.
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