FaithWorld

Monetary policy these days is complicated, ineffective, and quite possibly immoral. The complexity is inevitable; there is no simple way to ensure that the supply of money and credit is appropriate in a large modern economy. The ineffectiveness is evident: central bankers let that supply grow too fast before the 2008 financial crisis, and have unable to return monetary conditions to normal since then.

The moral lapses may be subtle, but I believe the lack of attention to the common good in the management of interest rates and the monetary system causes three serious problems.

 1) Dangerous freedom

Imagine a world in which anyone can use anything as a currency. This perfect monetary freedom would be a disaster. With strangers, I would only be willing to deal in gold, or some other scarce substance that could be carefully measured, because I would have no way of evaluating verbal or written promises to deal fairly. I might be able to trust members of my social group in economic transactions, but only because our monetary freedom was balanced by strong social constraints; they would be punished if they tried to cheat me.

The example is extreme, but it brings out the dangers that come with all monetary freedom. Money is always a token of value, but the value of the token is hard to determine. Invincible ignorance is one issue. No individual can hope to know how much a dollar, or an ounce of gold, should be able to buy at any time, and even monetary authorities struggle to keep track of the supply of both money and the things that money can buy.

But greed is even more dangerous than ignorance, and the freedom to create money - as banks do by lending out deposits, or as anyone can do by issuing promissory notes - is an invitation to greed. The borrower or the issuer is constantly tempted to acquire more spending power than justice would allow.

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The failure of the Vatican bank to comply with the basic rule of the Sacrament of Penance is odd. The Holy See’s financial arm has been seeking absolution for past sins for two years, but remains reluctant to confess to what it did wrong. Of all institutions, it should understand that one cannot go without the other.

According to Italian newspapers, JPMorgan Chase is closing the account of the bank formerly known as Istituto per le Opere di Religione (IOR) because of concerns about a lack of transparency. The move comes a few weeks after the U.S. State Department added the Vatican to the list of countries it considers vulnerable to money laundering.

Last month's special report “For some professors, disclosure is academic” has been making waves in the academic world, as this story shows:

Economists urge AEA to adopt ethics code: letter

By Kristina Cooke

NEW YORK (Reuters) - Almost three hundred economists have signed a letter to the American Economic Association "strongly" urging it to adopt a code of ethics requiring disclosure of potential conflicts of interests.

The 135-year-old American Economic Association, or AEA, does not have a code of conduct for its approximately 18,000 members. Over half of its members are academics, according to its website.

Two of the Gulf’s top Islamic finance scholars spoke out against efforts to reduce the number of boards they and their peers are allowed to sit on, challenging industry attempts to improve corporate governance. Bankers in the emerging $1 trillion Islamic finance industry say the concentration of hundreds of board positions in the hands of a few sharia scholars leads to conflicts of interest and hampers appropriate supervision. (Photo: Islamic bank ATM machines in Dubai, January 28, 2008/Jumana El Heloueh)

Bahrain-based industry body AAOIFI is drafting rules to regulate scholars’ shareholdings and the number of sharia supervisory boards a single scholar can sit on. “There is no need to limit the number of boards,” Sheikh Nizam Yaquby, one of the most revered Islamic finance scholars in the Gulf Arab region, told a conference in Manama. He sits on several dozen sharia supervisory boards.

He said there was no similar criticism of other groups such as lawyers or accounting firms working for several banks: “Why should (sharia scholars) not be treated like other professionals in the field?”

(Photos: One of Dubai Islamic Bank’s women-only branches in Deira, October 26, 2010./Jumana El-Heloueh)

Emirati housewife Sarah Alzarouni brushed past a group of women clad in floor-length black robes, some with only their eyes showing, to enter through the frosted doors of one of Dubai Islamic Bank’s women-only branches. Clutching a Louis Vuitton bag to match her designer head scarf, Alzarouni greeted the female tellers and bank manager with three kisses on the cheek and sat down to do business.

“I am much more comfortable working with ladies than in a mixed environment,” Alzarouni, 27, said. “When I come here, I feel like one of them. They understand my needs and I can move freely, not having to always think where I am and whether my (scarf) has moved. As a Muslim, it is really important for me to deal with an Islamic bank. “

Many affluent Muslim women share Alzarouni’s sentiments and they are increasingly turning to Islamic banks to manage their money. These women are looking beyond basic banking services to sophisticated products to grow their wealth while complying with Islamic principals that include a ban on interest.

Germany has signalled it is ready to pay a thief who stole secret bank data in Switzerland in order to collect a small fortune in taxes and fines for tax evasion. According to media reports, the data may relate to money held by 1,500 Germans dodging taxes by hiding their money in Swiss bank accounts.

But is it right for a state based on the rule of law to pay for stolen data? Is it a question of the ends justifying the means (exitus acta probat)? Or is it simply a modern form of bank robbery, like a Swiss lawmaker called it so colorfully on Tuesday?

It's a question that has caused a stir on both sides of the German-Swiss border. Do two wrongs make a right? Can stolen data be used as evidence in court? Or is acceptable for a state to reward a thief in the pursuit of the greater good of fighting tax evasion -- seen as a more serious crime?

Germans understandably have a deep suspicion about invasion of privacy after their ominous past experience with the Nazi's Gestapo and the East German Stasi security police.  And Switzerland has historical hang ups about about Germany. There have been spirited debates on the moral pros and cons of the latest immoral offer for days.

(Photo: Poster to vote ”yes” to minaret ban in a Swiss meadow, 13 Nov 2009/Dario Bianchi)

A threatening image dominates Switzerland’s streets in the form of a dark woman dressed in a Muslim niqab veil, looming over a Swiss flag covered with missile-like minarets with a call to vote “yes” in a referendum on Sunday to ban minarets on mosques here. The posters clearly seek to tap into the concerns of the country’s traditionally Christian majority about increased immigration from Muslim countries.

“I find the nature of these posters very provocative against the Islamic world. The presentation and the way the minarets are presented like rockets is unbelievable. Also the colours — with all the black — look very threatening,” says 34-year-old air traffic controller Judith Baumer.  “I assume that it’s supposed to trigger strong emotions or fear in the population.”

The poster, described by the Swiss race commission as demonising Muslims and provoking religious tensions, has been banned in some cities but seems omnipresent in others.