The Holy See Gets It (Mostly) Right
Karl Denninger
The Market Ticker
10-25-11
 I'm sure the haters will come out on this article.
I'll lay my cards on the table face up, because before you read this you should know where my background comes from. Some readers will undoubtedly find this explanation unnecessary but unlike most commentators I believe you deserve to understand the biases of the writer, and refuse to claim I don't have them because all writers and publishers do. Unlike most of the media I wear my positions and beliefs on my sleeve and make no attempt to hide them.
I am a practicing Catholic, but have not always been. I was raised in the Catholic faith but refused confirmation as a teen as I was unwilling to swear before God to something I did not believe in at the time. What followed in my life was a period of agnosticism and interaction with other faiths.
In the mid 1990s I had somewhat of an awakening. The birth of my daughter was undoubtedly partly responsible for this; those who have not been a personal part of creation cannot understand that perspective, but those who have may. Much introspection followed and I chose to go through RCIA, being confirmed in 1998 at Holy Name Cathedral in Chicago.
The sex abuse scandal of the early 2000s along with the concurrent decision of the Church to support "throw-away baby" laws nationally while refusing to recognize the inherent and equal participation and rights of men as parents led me to withdraw my formal support of the Church. My writings on this as transmitted to the Pensacola archdiocese are a matter of record and are still online.
More recently I returned to a more-active stance.
It is my personal belief that one's relationship with God is in the general sense a personal matter and that one can pray anywhere, should one choose to do so. In short, I don't need a Church to have faith or to practice it, although I obviously do in order to partake of the sacraments themselves. I'm fully aware of the Church's stance on what they call a sacramental life and that's fine, but the fact of the matter is that the Church is comprised of men and women and if you are a Christian then you believe that men and women commit sin - including pastors, including Popes and the laity. This means they're not always right on matters of both faith and secular concerns - they are often wrong and your first job as a believer is to practice discernment, not to blindly follow along when, not if, you discern that these alleged "authorities" are wrong. Judgment as to whether you were correct or not in your assessment will be made when it's no longer possible for you to change your mind but deferring your decisions to others remains a choice, and one you will ultimately have to account for.
So with that as context I want to comment on the memo that is all the rage these last few days regarding the Vatican and their views on the global economic challenges before us. A number of scurrilous and blatantly false attacks have come out of the woodwork in the last couple of days; this was, of course, to be expected.
In material goods markets, natural factors and productive capacity as well as labour in all of its many forms set quantitative limits by determining relationships of costs and prices which, under certain conditions, permit an efficient allocation of available resources.
In monetary and financial markets, however, the dynamics are quite different. In recent decades, it was the banks that extended credit, which generated money, which in turn sought a further expansion of credit. In this way, the economic system was driven towards an inflationary spiral that inevitably encountered a limit in the risk that credit institutions could accept. They faced the ultimate danger of bankruptcy, with negative consequences for the entire economic and financial system.
Did you read that? That's a recognition that these actors robbed the people. Recognition of the impossibility of infinite expansion of compound (exponential) growth. A first for any governing body to so state in public, and it came from The Vatican folks.
But the inequalities within and between various countries have also grown significantly. While some of the more industrialized and developed countries and economic zones – the ones that are most industrialized and developed – have seen their income grow considerably, other countries have in fact been excluded from the overall improvement of the economy and their situation has even worsened.
What's left unsaid here (but strongly implied, if you read the entire letter) is that this was an exploitive process. Well, it was. Wage and environmental arbitrage was one of the means by which the economic ponzi schemes were given currency for a "little while longer." It was impossible for this to achieve success in the long run but those who were running the exponential "growth" engine meme didn't care about the long run - they only cared about bilking everyone on both sides of the equation!
This must end - not because we want it to, but because mathematically it must, whether we accept it or not. We have two - and only two - choices before us:
- Accept that these premises were false, accept that, assess and hold to account those who ran this line of crap and stop doing it. That's the right choice. It's not the easy choice, but it's the right choice.
- Refuse to do any of that and keep trying to find a way to bail out the boat. We will fail. The United States Federal Government does not need to contract its spending by 43% as is often said it must cut spending by roughly 60% right here, right now, today in order to restore balance. This is up from single-digits in the early part of the 2000s decade and about 25% in 2007. This is not singularly a Democrat or Republican issue; both have been equally complicit and responsible.
If we choose #2 the mathematics of what we're trying to do will catch up with us and when it does, we will lose the ability to choose.
We had a "dry run" in 2008. Yes folks, that was a dry run. That was not the "worst" or the "expected" outcome, it was a pre-eruption tremor that blew a bit of ash and lava down on the local countryside. The main event pressure continues to build and we have no option other than to accept what we did and what we must do to stop it from blowing up in our faces.
Much of what the Holy See has asked for in the remainder of their text, for example:
A supranational Authority of this kind should have a realistic structure and be set up gradually. It should be favourable to the existence of efficient and effective monetary and financial systems; that is, free and stable markets overseen by a suitable legal framework, well-functioning in support of sustainable development and social progress of all, and inspired by the values of charity and truth. It is a matter of an Authority with a global reach that cannot be imposed by force, coercion or violence, but should be the outcome of a free and shared agreement and a reflection of the permanent and historic needs of the world common good.
is in my opinion unrealistic and idealistic. Of course The Pope is in a rather unique position to put forward such a belief and desire, being as he is a spiritual leader above all others. It is his job to elucidate dreams that he believes comport with the will of God and justice for all.
But on that latter point -- justice for all -- he does have a point. Sustainable development, incidentally, is a phrase that I was first exposed to many, many years ago. It is, at its core, recognition that permanent exponential growth is physically and mathematically impossible and therefore those financial (or physical) structures that are built upon this model will ultimately fail as a matter of certainty.
In this regard The Holy See is correct -- not predicated on faith, not predicated on morals, not predicated on ethics but predicated on the fundamental realities of arithmetic.
I do not find it surprising that the Holy See would find the establishment of some sort of "world political authority" as a nice goal to strive for an advocate upon. But it is unrealistic. National sovereignty is real, it has a perfectly-sound basis, and without full and consensual buy-in by the nations of the world any such "supernational" authority can only rule by force -- the very premise that the Holy See rejects. It does not surprise that the Vatican fails to address this head-on, rather choosing to state that such an establishment must come through peaceful persuasion. However, in doing so it makes clear (should you choose to practice discernment) that a statement of principles is not necessarily a statement of practicalities.
Those who wish to take cheap shots at the premise in this paper should read carefully for content, and pay particular attention to the principle of subsidiarity, upon which the process laid forth resides. Of course most people will read right past that word and then take their cheap shot without bothering to address it. This is an error; that principle is important and must be understood and incorporated into your analysis. I have noted a severe dearth of that in the comments thus far, and in doing so those laying comment have simply exposed their own intellectual dishonesty. This too is rampant in today's hyper-political world.
So before you take your cheap shot look down at the iPad you're probably reading this on, and recognize that it was built with the labor of slaves where nets surround the building so that workers who are tormented are thwarted in their effort to end their own life. Is this the world you truly support with your funds?
It's not so simple as to say "don't buy an iPad and all is ok." It's not. In the United States we have had political leaders that have made promises that cannot be kept. This is mathematical fact. Nobody is talking about this in a frank fashion (other than myself and a few other intrepid bloggers) but it is true whether you wish to discuss it or not. The truth of the matter can no longer be denied and must be faced head-on: That you were promised the impossible does not give you license to try to steal it from someone else; rather, you should direct your wrath at those who made the promise with full knowledge that they were going to fail to perform as promised.
Unfortunately in many cases this means we must turn to not only politicians and union leaders who made these promises we must turn to ourselves and account for our own foolishness. There's plenty to go around and the facts can no longer be evaded.
In the United States we are staring down a budget deficit at the Federal Level that must be cut to zero now. I recognize that people say this is impossible as it would cause immense hardship. But the fact of the matter is that the expansion of credit money, fungible with actual output, is unsustainable. We have willfully and intentionally ignored the warnings for more than two decades and unfortunately the mathematics say that time is running short for us to act. If we fail to act then the decisions will be made for us by the immutable laws of mathematics, and the harm will be greater.
There is still time to do the right thing. The people at the various "OWS" protests have the right target when it comes to who dunnit, but they don't understand the how. That education must come quickly, however, or the proposed remedies will also be in error and exploited by those in power.
For those who currently hold that power and are reading this, be aware of one thing: The immutable laws of arithmetic are not suggestions. Attempting to run the same scam in a different cloth once again will not work because it cannot work. You still have an opportunity, albeit a short one, to come clean and tell the truth to the American people: You made promises that the nation cannot keep, and thus will not occur.
May both we as the body politic and the leaders of our nation make the right choice while there still is a choice to be made.
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