Thursday, May 17, 2018

Pope Calls Derivatives Market a ‘Ticking Time Bomb’!

By Robert Wenzel

Yes, like a lunatic from one of those websites that is forecasting the end of the financial world everyday, the anti-capitalist Pope is now commenting on financial derivatives.

He is using the derivatives market as cover to attack all of capitalism.

Bloomberg reports:
In a sweeping critique of global finance released by the Vatican on Thursday, the Holy See singled out derivatives including credit-default swaps for particular scorn. “A ticking time bomb,” the Vatican called them. The unusual rebuke -- derivatives rarely reach the level of religious doctrine -- is in keeping with Francis’s skeptical view of unbridled global capitalism.
“The market of CDS, in the wake of the economic crisis of 2007, was imposing enough to represent almost the equivalent of the GDP of the entire world. The spread of such a kind of contract without proper limits has encouraged the growth of a finance of chance, and of gambling on the failure of others, which is unacceptable from the ethical point of view," the Vatican said in the document...
The Vatican said that in certain areas of the derivatives markets there’s an “ethical void which becomes more serious as these products are negotiated on the so-called markets with less regulation (over the counter) and are exposed more to the markets regulated by chance, if not by fraud, and thus take away vital life-lines and investments to the real economy.”
With all due respect to the Pope, stating there is
an "ethical void" in the derivatives market is like saying there is an ethical void in the shoehorn market.   Derivatives have nothing to do with ethics. They are just financial products. Some may be more useful than others, the way a metal or wooden shoehorn may be better than a plastic one, but you buy what you want.

As for the statement
The market of CDS, in the wake of the economic crisis of 2007, was imposing enough to represent almost the equivalent of the GDP of the entire world.
shows a complete ignorance of the concept of notional value. This is like thinking the Holy Ghost of the Holy Trinity might be Casper the friendly ghost.

The Pope apparently hates the stock market itself based on some kind of twisted Marxian labor theory. From the Holy See's paper:
Capital annuity can trap and supplant the income from work, which is often confined to the margins of the principal interests of the economic system. Consequently, work itself, together with its dignity, is increasingly at risk of losing its value as a “good” for the human person and becoming merely a means of exchange within asymmetrical social relations.
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. It has marginalized great masses of the world’s population, deprived them of decent labor, and left them “without possibilities, without any means of escape”
But then the Pope calls for, get this, low interest rates, which of course is a call for monetary Keynesianism which distorts the economy in favor of capital goods over consumption goods:
[W]e cannot but think of the irreplaceable social function of credit whose performance looms large to qualified and reliable financial intermediaries. In this sphere, it is clear that applying excessively high interest rates, really beyond the range of the borrowers of funds, represents a transaction not only ethically illegitimate, but also harmful to the health of the economic system. 
The Pope is clearly a buffoon when it comes to finance and economics. He understands little but spouts on as if he is a direct descendant of the School of Salamanca. For anyone who understands basic economics and finance, this rant by the Pope may convert them to atheism. This is proof positive there is no God talking to this guy about finance and economics.

Robert Wenzel is Editor & Publisher of and Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Ban .and most recently Foundations of Private Property Society Theory: Anarchism for the Civilized Person Follow him on twitter:@wenzeleconomics and on LinkedIn. His youtube series is here: Robert Wenzel Talks Economics. The Robert Wenzel podcast is on  iphone and stitcher.


  1. Murray Rothbard could teach you the true Catholic faith and morals much better and accurately than from Pope Francis.

    1. And he could also say a true and coherent thought about economics, unlike the pope

  2. The Pope is also a buffoon when it comes to religion as well.

  3. Great commentary, I too read this article and immediately laughed - so now the Pope is a CFA or some kind of economics expert... ok then.