Tags: Economic- Crisis | Vatican | Bank | Tedeschi | downgrade

Vatican Bank Chief: 'Pointless to Insist US in Decline'

Thursday, 18 August 2011 09:05 AM Current | Bio | Archive

The U.S. economy should not be written off, but growth will be achieved only if the United States comes together with other nations on implementing austerity measures.

This is the opinion of Ettore Gotti Tedeschi, president of the Vatican Bank, on the economic fallout following Standard and Poor's recent downgrade.

Writing in the Vatican newspaper L'Osservatore Romano August 9, the Italian financier said it was “pointless to insist that the situation in the United States is one of a nation in decline” or that it has been “struck to the core.”

He also said it was useless, in this emergency, “to attempt to assign responsibility for errors committed.” Rather it is better “to use creative resources in a productive way.”

Tedeschi noted the United States “remains the most technologically advanced country in the world with the highest GDP, surpassing one and a half times that of Europe, four times that of China, and 10 times that of Italy.”

S&P's ratings downgrade won't therefore “flatten it to the ground” but it will probably cause the country “to be more humble and open to collaborating with Europe,” he said.

To recover from this crisis, Gotti Tedeschi believes the world's largest economies must “stop looking for individual solutions which contrast with each other” and instead have a summit meeting “with a precise agenda” on recovery. A common consensus was needed on a period of austerity, managed in a integral way, he said, as this “can be the real key for returning to growth.”

The Vatican Bank president, once a director of Santander Bank, also played down the economic importance of China, saying its GDP is “not much higher than that of Germany” and it must confront a series of challenging problems including rising production costs and inflation.

Looking ahead, he believes countries best placed for growth are those which have “family savings”, an “efficient system of small-medium size business”, and strong banks. He proposed those savings should be used to reinforce medium-sized business through the use of 10-year convertible bonds.

He also suggested that, faced with serious economic emergencies, a percentage of public debt could be “frozen for an acceptable period at a rate which preserves it only from inflation.”

But Gotti Tedeschi's generally optimistic view aside, some were disappointed that he refrained from citing banking mistakes as a principle cause of the economic crisis.

Benjamin Harnwell, chairman of the Dignitatis Humanae Institute, a Rome-based think tank, said the financier's comments reminded him of Ronald Reagan’s famous observation: “The more the plans fail, the more the planners plan.”

Harnwell would have liked instead to have seen the Vatican Bank president question “whether it is the international banking industry itself that is causing the very problems it thinks it is uniquely positioned to solve.”

“We go from boom to bust, to larger boom to even larger bust, crushing families and shattering local communities in the process, and central banks’ manipulation of the money supply and interest rates are responsible for creating this recurring phenomenon,” Harnwell argued.

He added that “vested interests are now so great in perpetuating the cycle, the root cause goes unaddressed.”

Citing comparisons between West Germany and East Germany, or South Korea and North Korea, he noted that central planners never delivered anything other than a miserable failure.

Harnwell also highlighted that, according to recently revealed figures, President Obama added more to the national debt (in real terms) over just four days this month than Presidents Truman and Eisenhower racked up over the entire 1950-1960 decade — a period that included the Korean War.

“The last few years have seen the U.S. monetary base balloon by hyperinflationary proportions,” Harnwell said. “Gotti Tedeschi is one of the few men in the Vatican — if not the only one — who truly understands and appreciates the inevitable consequences of these policies.

"He has a unique role to play in the unfolding of upcoming events. He should, therefore, find the courage to be a little franker in exposing the responsibility of international central banking in facilitating the catastrophic damage to the common good,” Harnwell added.

Sound and objective economic analysis is crucial as it is economics that often “directly diminishes human dignity in the world today,” Harnwell said.

Gotti Tedeschi, 66, has held several high-profile posts in business, banking and academia. Pope Benedict XVI appointed him in 2009 to head the Vatican Bank, a body whose primary purpose is to manage Church charity funds.

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The U.S. economy should not be written off, but growth will be achieved only if the United States comes together with other nations on implementing austerity measures. This is the opinion of Ettore Gotti Tedeschi, president of the Vatican Bank, on the economic fallout...
Thursday, 18 August 2011 09:05 AM
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