The Vatican Department of Justice and Peace released a report this week that weighs in on some the issues around the recent and current global economic crises, and what this body believes is a current institutional and political structure that is inadequate to deal effectively and fairly with them.
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."Ignoring what I believe to be an error in their ideas about what the purpose of the IMF is; here it is revealed that monetarist dogma has indeed infiltrated the Vatican.
The article generally indicates that at least this body within the Vatican advocates for more globalization and global coordination of world finance; establishment of a "supranational authority"; but yet credits this body with the following position:
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.
Perhaps something is being lost in the translation from Reuters here. But if I take the article at face value, I can't help but think that these policy analysts at the Vatican are in way over their heads on these issues about global macro economics and how they relate to 'justice and peace'.
8 comments:
Hm... to me, it seemed that the document endorses a Bretton Woods styled system based on stricter capital controls and international governance of financial markets and institutions (even if it adopted some monetarist ideas).
maybe it is too early to say for me at least, but looks like they are saying " there shall be no vampires or draculas for halloween " ... but then turn around and form an international school for blood sucking.
i am pro-vatican with respect to social capital directed towards the common good in transparent ways
but they are asking for a global currency and there is no mention of austerity being trumped by the triumph of maintaining social capital by means of SOVEREIGN currency ... instead of being tied up into another global institution
WHAT IS A MONETARIst ?
krugman is reverberating Mike Norman 4 years ago
"it doesn't have to be this way"
Goog it starts here with Milton Friedman: "Inflation is always and everywhere a monetary phenomenon" and goes downhill from there...
Dan, it seems to me they are missing what is right in front of their noses right on the front stoop of Europe in Greece; this type of chaos is guaranteed when you have a system that combines monetary systems without corresponding political/fiscal union.
It is basically the same thing here in the US wrt China. We have de facto monetary union with China (they peg to USD and zealously seek USDs) but obviously no political/fiscal union. Chaos is guaranteed to ensue via these "open borders" or "free trade" type of arrangements.
And this group in the Vatican seems to be advocating to take this chaos and make it official and institute it globally. I think this type of advocacy has to come at core from a strict monetarist dogma there; a false belief that somehow they key to managing all of this is to control the 'global money supply' or some such nonsense; and they ignore the political/fiscal aspects. This is why I think they are over their heads here and relying on a pure monetarist basis for their policy proposals here. IE "they know not what they do".
Then I dont know how they square their position with Paul here Romans 13: "1 Let every soul be subject to the superior authorities, for there is no authority except under God. Now those which are, have been set under God,
2 so that he who is resisting an authority has withstood God's mandate."
Advocating that an individual nation surrender it's critical monetary authority to some sort of nameless and faceless "supranational authority" is resisting a true government authority and hence God's mandate.
They seemed to mostly concerned with the growth in financial transactions and the build up of credit worldwide, which they view as one of the symptom of global "power" imbalance (read: non neutral balance of trade).
Their idea of having a stabilization fund to help developing countries and an international banking system that helps oversee financial transactions (while also helping countries work to set rules governing financial markets) is strikingly similar to Keynes' proposal at Bretton Woods in 1944 with the bancor as the international currency and the establishment of the International Clearing Union to ensure neutrality in countries' balance of payments.
Now, I agree that any system where you allow countries to maintain an independent monetary policy and fixed exchange rates will face conflicts of interest (as was true under Bretton Woods, though their were other flaws in the system's design that further complicated this issue). And I agree that the discussion is overly focused on the extension credit. But in any case, their their proposal for active government management of currency transactions and distrust of self-correcting markets hardly strikes me as a monetarist proposal.
Dan,
If the Reuters article is correct and there are elements within the Vatican who believe we need new international entity to 'REGULATE OVERALL MONEY SUPPLY' then there are monetarists in the Vatican.
To expand on this basic point, where is there any mention in any of this of a Nation's fiscal authority? It's all focused on international banking, etc.. It may be a stretch but you could see how this body at the Vatican here thinks that if we could just get a global central bank to go around and increase or decrease the "money supply" in Nations things would be much better... so this is all absurd from beginning to end.
Establishing a 'supranational authority' to facilitate a "poor" Nation's signing up to debts denominated in an external currency, ie a currency that said Nation is not monetarily sovereign in, is not a just policy.
This body at the Vatican is in over their heads here ie "they know not what they do".
Thanks for responding again.
I understand your basic point in regards to why joint monetary policy absent major fiscal reforms presents would present an issue (which should have been more obvious or at least an explicit part of the call for reform). But again, I don't see how that makes the document monetarist. Friedman would have opposed such calls for fixed exchange rates and the associated loss of monetary independence. Friedman opposed the Eurozone against Mundell on this very basis.
The Vatican's document is decrying the "gradual decline in efficacy of the Bretton Woods institutions beginning in the early 1970s." The very monetary arrangements Friedman and other monetarists rose in opposition to. The call for fixed exchange rates, stronger capital controls, neutrality in the balance of payments, and more regulation over International transactions (along with the denunciations of "neo-liberalism" and "the idolatry of the markets) doesn't strike me as monetarism by the simple fact it mentioned the money supply (even if it does show confusion in their thinking).
Dan,
I see your broader points wrt policies other than 'money supply'. And yes the Vatican seems very confused in this; Bretton Woods was conducted under regimes of convertable (gold) currencies so that makes a construct such as BW completely inapplicable to today.
If states were to just recognize that non-govt sector has savings desires, and adjust fiscal policy to accomodate both domestic and external savings desires, I think we could get a long way towards outcomes that are much much nearer full employment and output.
But this is from wiki:
Monetarism is a tendency in economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view within monetary economics that variation in the money supply has major influences on national output in the short run and the price level over longer periods and that objectives of monetary policy are best met by targeting the growth rate of the money supply.[1]
Monetarism today is mainly associated with the work of Milton Friedman, who was among the generation of economists to accept Keynesian economics and then criticize it on its own terms. Friedman and Anna Schwartz wrote an influential book, A Monetary History of the United States, 1867-1960, and argued that "inflation is always and everywhere a monetary phenomenon." Friedman advocated a central bank policy aimed at keeping the supply and demand for money at equilibrium, as measured by growth in productivity and demand. The former head of the United States Federal Reserve, Alan Greenspan, is generally regarded as monetarist in his policy orientation. The European Central Bank officially bases its monetary policy on money supply targets."
This is generally how I define "monetarism" (it may have wider definitional aspects as you address I suppose).
I think it a big deal that it has finally been exposed over this policy cycle as a complete and utter falsehood in today's systems of Free Floating, Non-convertible state currencies... but this is not being reported/exposed to an appropriate extent within the media and academia.
So I do what I can to bring attention and ridicule to this false dogma, and try to expose it where I see it surface... such as here at a very confused internal economic body at the Vatican.
Resp,
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