June 2nd 2018


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Articles from this issue:

COVER STORY The Greens: the political equivalent of bilgewater

EDITORIAL Malaysian election sends shockwaves across South-East Asia

GENDER AND SPORT Transgender playing in women's football league gains attention

CANBERRA OBSERVED Beyond tomorrow a bridge too far for politicians to plan

ENERGY Why renewables destabilise the power grid

LAW AND FREEDOM Exemptions: at issue with Dr Zimmermann

INTERNATIONAL AFFAIRS Behind the U.S.-North Korea rapprochement

INTERNATIONAL AFFAIRS Two to tango: Where to now for U.S. and China?

LIFE ISSUES So, is this not pro-life?

POLITICS AND CULTURE The West won the world but may lose its soul

MILITARY BIOGRAPHY Commanders: the men who resolve questions of life and death

HUMOUR

MUSIC Eurovision: Wailing and gnashing of teeth

CINEMA Superhero movies: A Chestertonian consideration

BOOK REVIEW A man for all seasons and hemispheres

BOOK REVIEW Mid-century gem of Catholic fiction

POETRY

LETTERS

ECONOMICS Vatican document nails some of the causes of the GFC

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ECONOMICS
Vatican document nails some of the causes of the GFC


by David James

News Weekly, June 2, 2018

n the 1990s Democratic political adviser James Carville quipped that he used to think that if there was reincarnation, he wanted to come back as the president or the Pope. “But now I would like to come back as the bond market. You can intimidate everybody.”

Over a quarter of a century, and a global financial crisis, later Carville’s comment remains horribly relevant, although we might want to add the derivatives market to the bond market.

The intense financialisation of the developed world, which has loaded up the global economy with (unpayable) debt of over 220 per cent of gross dom­estic product (GDP), and has resulted in over $US700 trillion of derivatives sitting above the world like some sort of combination of a giant roulette wheel and an alien space craft, is a clear and present danger to almost every economy on Earth (probably the only places less vulnerable might be North Korea and the highlands of Papua New Guinea).

The financiers, who for the most part have been rewarded for spectacularly parasitic behaviour, have in the last three decades taken over. They did this by exploiting a notion, repeated like a mantra over the last three decades, called “financial deregulation”.

That this phrase is, literally, nonsense did not seem to matter. Finance is regulation; financial systems cannot be de-regulated. All that can happen is that the setting of the rules of money shifts from government to traders, which is exactly what occurred.

When finance commentators, especially devotees of crypto-currencies, rail against “fiat” money (by which they mean government fiat), they are precisely wrong. The problem is that the government no longer controls money; the banks and the traders do.

It was thus welcome that the Vatican weighed in earlier this year, releasing Oeconomicae et pecuniariae quaestiones (Considerations of Economic and Financial Issues). Although the document is attributed to the Congregation for the Doctrine of the Faith and the Dicastery for Promoting Integral Human Development, it was clearly written by some financiers with personal knowledge of the bizarre current system of global capital.

It has some welcome commentary on how pernicious the current situation is, but it unfortunately misses some of the most critical matters.

Most laudable is the exposing of the inversion of money and people, whereby “work itself, together with its dignity, is increasingly at risk of losing its value as a ‘good’ for the human person”, and instead becomes just a means of exchange within asymmetrical social relations.

The cart before horse-ism

As the authors note, this means inverting money and what money is supposed to represent. The cart rules the horse: “Precisely in this inversion of the order between means and ends, where work as a good becomes an ‘instrument’, and money an ‘end’, the reckless and amoral culture of waste finds a fertile ground.”

This is right. What has been entirely forgotten is that money is something that human beings create, mainly a set of rules about value and obligation. It is a social artifact. It is not, as economists and bankers like to tell us, the end in itself, some sort of natural force that resembles water, which “flows” around the world finding market “equilibrium”.

This inversion has resulted in the ridiculous situation of thinking that economic measures, such as GDP, are seen as our purpose, not something that record what we do: “Wellbeing must therefore be measured by criteria far more comprehensive than the gross domestic product of a nation (GDP), and must take into account instead other standards … profit should be pursued but not ‘at any cost’, nor as a totalising objective for economic action.”

We do not exist to make money; and the extent to which we think we do is the extent to which we allow ourselves to descend into a cruel and, ultimately, evil system. Any system that does not put human beings at the centre, whether it is dialectical materialism or the efficiency of markets, will turn savage. Unlike the fictitious rules of modern economics, that really is a principle of nature.

In September 2008, world money almost collapsed in one day. Had the U.S. Treasury not closed all the U.S. markets and underwritten every bank deposit up to $US250,000 (this eventually became the bank guarantee in Australia), then $US6 trillion would have gone out of the American financial system.

Because the system lends out 20 times what it has, that would have meant $US120 trillion vanishing, and global banking would have collapsed.

We have been warned; we have not heeded it. The only policy response has been to reduce interest rates to near zero in the hope that things might be all right. Nothing like kicking a can down the street!

The Vatican document notes the savagery and immorality of what has occurred, and urges that there be some thought given to reinstating some sort of morality in the system – and also suggesting not to be “tempted to abandon ourselves to cynicism”.

This, too, is laudable – hope is never entirely lost, even with bankers. But it is disappointing that the document does not identify the core of the problem: the oxymoron of “financial deregulation”.

That is ultimately the best way to take apart this monstrosity. Attack the logic and show it up for the contradictory fraud that it is. Bankers like to think they are the cleverest people around; nothing like being rich for having a delusion.

They need to be shown that they are anything but clever and they have visited on us, using trickery and illogic, a “ticking time bomb” (derivatives) that is immensely perilous to most human societies.

If they refuse to be shown, then the worst of them should be put in jail, as a danger to society.

David James is a Melbourne business writer and News Weekly music columnist.




























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