A year or so ago I made some money. It was quite simple really. I noticed that the stock market was going through a period of mild depression. So I bought an investment whose value was defined by the value of leading shares – the FTSE100. Three months later the market recovered, and I sold the shares. I won’t tell you what my profit was, but it was unquestionably worthwhile. I was simply playing the market and, provided that I could choose when I sold them, I was virtually certain to get a good return – at least eventually. It was merely an instance of the advice, anecdotally attributed to Nathan Rothschild: “Buy when the blood runs in the streets, sell when the trumpet sounds.”
I thought back to St Thomas’s view that money should not breed. He was talking about lending money at interest. He used, as an analogy, a man who sold some wine and then charged his customer for using it. That would be to sell it twice and thus an injustice. My little adventure was not usurious, but it was manipulating money for profit. The underlying value of the shares was irrelevant to me; I was only concerned with the movement of them. I was using money to breed money.
The Church’s medieval condemnation of usury is quoted as an instance where the Church was later to change a grave moral teaching. The historian John Noonan paraded this change, but Cardinal Avery Dulles argued that it was no more than a development of doctrine where changed circumstances justified a changed rule. I will examine the principles here on another occasion.
My flutter would scarcely have rocked the universe, but it may be surprising to learn the degree to which big investment houses and hedge funds base their investments on such changes. Here is money breeding money with a vengeance. And similar methodologies are used by banks and pension funds – yours and mine.
In the last 10 years the crowd of shouting stockbrokers on the floor of the Exchange has been replaced by far fewer people working with sophisticated computer systems, housed in row upon row of servers. They are no longer the experts in valuing the prospects of a business but mathematicians and engineers.
The key to their work is the algorithm: decision-making programmes which automatically, not in a second but in milliseconds, buy and sell stocks and shares, according to chosen rules. On some stock exchanges, 70 per cent of the trading is done in this way. It is a little more spritely than me telephoning my broker in order to trade a share. Perhaps your pension fund will have traded several hundred times since you got up this morning.
The operation of these high frequency traders depends on the ability of their systems to note the prices of shares on all the myriad stock markets of the world, and, when a share price differs from one market to another, the computer pounces. It buys on one and sells on the other – and makes a turn. It’s hard to lose. The gain may be infinitesimal, but when it is done at the speed of light, in huge volumes and several times a minute, real money is made. Some idea of the scale may be gauged by the fact that the electronic trading facility of the New York Exchange alone is housed out of town and covers 10 acres.
The computers used by investment houses to make the trades are tended by boffins who moderate their trading activity by tweaking the algorithms and monitoring the degree of risk. And indeed momentary disasters have been recorded. No more than a blip, but it can hazard billions. Note that these boffins – and they are really smart – have no professional interest in the nature of the shares being traded. Only price and difference in price is of consequence: that – and speed. There is a perpetual arms race to get the information first, for winner takes all. For instance, before these developments, it was convenient to route information by a variety of different ways. But at the speed of light, the straightest and therefore shortest route gets there first. The heavy investment in optimal routing is chicken feed compared to the potential profit.
I am left somewhat concerned at all of this. I find that a huge industry based on artificial movements of money very questionable. There is something unhealthy about the way that large individual earnings can be made not by contributing to society, but by the flicker of a computer screen.
But you may disagree. In that case, persuade your children and grandchildren to obtain first-class degrees in mathematics and advanced diplomas in programming. Then let them name their price. But one day they will need to ask themselves in what way their expert manoeuverings have benefited human welfare.
My thanks to Robert Peston of the BBC for bringing me up to date.
secondsightblogdotnet 
I have no objection at all to the principle of stocks and shares: an entrepreneur making use of someone else’s money to fund his own project should certainly pay appropriately for the privilege. However, the kind of financial dealing that you describe is deeply distasteful, not only on the principle that money should not breed, but because the profits so made must in some way be at the expense of those putting real value into the world. Or is that a hopelessly naive view?
Not just deeply distasteful but absolutely terrifying, – when you think that the livelihood of people growing (for example) coffee on a small scale, or dependent on day-to-day fishing, can be directly affected by this sort of activity.
Exploiting people is bad enough when the exploiter is aware of what s/he is doing and has some direct contact with those being exploited. When it becomes a disregarded side-effect of a decision based on a complex and abstract calculation, all human feeling seems to have disappeared completely from the transaction.
Not for the first time there are a series of contradictions in the Gospels if one was to try and find a scriptural answer to this issue.
Jesus uses the parables of the dishonest steward and the talents hid in the ground as opposed to being profitably used to increase the value, and yet on the other hand we are urged to lend without hope of being paid back etc.
Quentin, despite what Iona says (I always agree with Iona) I cannot find a reason to censure your conduct. You bought shares which it seemed to you were bound to go up. They went up, and you sold them. You consider that your profit is unearned – and so, in a sense, it is. But what harm have you done? In fact, you have done good. You bought the shares from a willing seller – who, possibly, desperately needed the cash to do something more important with it. Had others scrupled to bid for them, on perhaps dubious moral grounds, the seller would have obtained a worse price, if indeed he could sell them at all. Would that have been just?
I have however to caution you against the sin of pride. You backed your judgement, and it proved correct. But (with hindsight, knowing what happened) you are regarding as certain what was in fact no more than probable (at best). Because shares are low, this doesn’t mean they can’t go lower. The market is not predictable.
No doubt there are abuses on the Stock Exchange (as there are elsewhere). But is instantaneous trading one of them? Arbitrage means the equalisation of prices, which is surely more just than arbitrary differences?
It’s the casino mentality. Betting has not been condemned by the Catholic Church, unlike other denominations. However, betting with your own money is more acceptable than betting with someone else’s money. Much of the gambling on the stock market or foreign exchanges is done by dealers who don’t lose their own money; they just get a smaller bonus if they lose.
Certain Catholic dioceses in England have been know to play on the over-night money markets. I don’t approve of this even if the money gained is used for missionary work, as John Nolan claimed in an earlier post. They lose money as well and it is not their money to lose; it belongs to the contributors who don’t expect church auhorities to gambling with their money. They may as well put it on a horse.
A couple of friends came to see me yesterday and who live in the UK but from Ireland originally and go home often.
I was shocked at what they were telling me about priests who retire in Ireland (some from UK, who have built and live in very large expensive houses.
They said this was going on for years. The subject came up when they were speaking about the Holy Father telling priests to live humbly etc..
I can’t believe that they would take advantage of parishioners money and those who are rich..
Much like investment, everyone knows that money makes money. If making money with money is both legal and ethical, is there an unacknowledged moral problem amongst this activity? I am not so sure. I believe that this issue can best be measured against appropriateness and social value, without legally proscribing such activity.
Money can be placed in a high interest account or term deposit, and given time and interest; money makes money. Money can be employed to purchase shares or commercial real-estate, with the object being appreciation of value and its sale in order to make money. Commercial property can also be maintained for the purpose of leasing office space for businesses, or the leasing of apartments for families and individuals in order to live there.
Money can also be the basis of investing in a business enterprise. As businesses are the social and economic building blocks of our culture, this is probably the most valuable economic activity that money can be employed towards. It abides enormous risk, and if successful, will probably pay more than the share market and interest bearing deposits put together. Examples that come to mind are Apple, Microsoft, General Electric, etc. Here is a list of the most valuable companies in the world by revenue earned.
http://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue
While the clever use of computers, algorithms, and programing in order to make money will probably never be stopped, the use of funds in order to invest in genuine business activity is by far the most valuable use of people, time and money. I hope that there will be a greater emphasis in our societies towards businesses that are co-operatives and mutual organisations.
The political economy is nearly everything that we strive to maintain and improve. Without businesses, good business people running them, and continued business investment, our social and economic system will unravel. The fair and just use of the taxation system, in order to fund infrastructure and the welfare state, is a key issue of the political economy.
Growing income disparity between the wealthiest among us and the poorest of families is a monumental scandal. There is an overriding set of goals that all governments must never lose sight. Justice, public health and security in our communities, together with the amelioration of unemployment and poverty, are key issues for all fair societies and democratic governments.
There is a giant mismatch between the value to a company of any CEO, and the salary that he or she draws from that company. The exorbitant cost of CEO salaries can partly be explained by the powerlessness of shareholders. More power must be placed in the hands of ordinary shareholders, in order to better control the natural tendency towards selfishness and corruption by some, if not most, company board members.
What binds us together as a society is partly based on the proper and fair collection of taxes, reducing unemployment through business investment as well as public works by governments, and scaling back the scandal of skyrocketing incomes of CEOs and the disparity between them and the poorest in our community. Extreme income disparity in our communities is a social blight on all of us.
I would now like to leave you with two quotes to ponder over. One is by a clergyman and the other is a noted businessman of yesteryear.
‘A business that makes nothing but money is a poor business.’ Henry Ford.
‘The opportunity to make enormous sums of money is enormously corrupting.’ Anglican Archbishop of Westminster, Justin Welby.
http://www.theguardian.com/uk-news/video/2013/jul/25/archbishop-canterbury-payday-lenders-video
John, I never agree with you, on principle, but here I shall have to make an exception. Except that Dr Welby is Archbishop of Canterbury, rather than Westminster. (It is reported that when Pope Francis met Dr Welby, the Pope said “I am senior to you!”, at which Dr Welby was a little taken aback. But the Pope said: “Yes – by three days!”).
I think that the rewards attached to working in the financial sector, are much too high, which distorts the whole economy and the field of employment, though it has always undeniably been a very stimulating and challenging field in which to work, as we can see through several family members, and one in particular, who chose it in preference to using his first class engineering degree. However, now that it is changing in the way you describe I am not so sure.
As a generalisation, it seems that the latest technical and sophisticated skills in any age are almost always valued socially and financially above more basic survival skills however vital they may be, the dilemma of Progress versus the Luddite mentality, and as Iona has said, the unfairness of primary producers being paid so relatively little. The Fairtrade movement aims to address this inbalance, and it would be wonderful to see it having a major impact.
I hope we have better prospects than a choice between living like the Amish, though that has its attractions, and the future envisaged by Susan Greenfield, for the “developped ” world that is.
I think that a comparison with the betting industry may reveal some factors. The punter is making bets against the bookie. The bookie modifies his odds according to the bets being placed. He too uses an algorithm, although it may not be a computer one. But the algorithm ensures that he will always make money in the long run. The bookie need not be an expert on horse racing but, when setting his initial odds, he will use his experience to judge how initial bets will come in. After that, he will be in a very competitive market. If his odds are better than the average bookie, he may get lots of business but with additional risk. And vice versa, of course. he will also use the technique of laying off odds — that it, he bets with other bookies to reduce his potential liability.
While the punters as a whole will lose out to a competent bookie, the occasional individual, who knows his onions better than the average punter, can make money. (And that punter, like the boffins mentioned by Quentin will choose the bookie who offers the best odds).
I don’t think that this sort of gambling has any virtue, or any vice. It does not edify. But it gives many people pleasure. Of course there are punters who can ruin their lives through imprudent addiction to betting, but we cannot cater for that any more than the wine maker has responsibility for the drunkenness of his customers.
I learnt a lesson from a friend when I was moaning to him about some shares which had crashed in price. He said: “If you live by the sword, youl die by the sword.” Fair enough, I fear.
St Joseph
No so long ago I wouldn’t have believed that priests would salt away parishioners’ money for a comfortable retirement, but I do now due to information received recently. And I don’t think the hierarchy are ignorant of this. They will justify it on the grounds that “a labourer is worthy of his hire”. They’ve always got excuses just like the child-abuse scandals and the subsequent cover-ups. They are just like MPs; they live in bubble totally removed from reality and they never do anything wrong.
I have stopped putting money into the general church collections. I now give to selected charities. I just hope that they are not creaming off the top.
I feel desperately sorry for those good priests who are being tainted by association; but God knows the truth.
Geordie, it is unbelievable and so sad.!Have they no conscience.
Does anyone know how realistic is the conduct of the character Alex in the Telegraph business section cartoon series (the only part of that section to interest me)? An investment banker who will stoop to any petty corporate villainy he can get away with to raise his income or self-importance.
Now please pardon a total irrelevance: did anyone else notice in today’s “Telegraph”, page 15, foot of column 3 of a piece on the Ohio kidnapper, the comment that “… there were no tears for the child that he murdered inside Miss Knight’s womb.” Thank goodness someone has seen it as it is!
Peter D. Wilson.
I don’t read the Telegraph or any paper now.
But I am pleased you brought the comment on the Ohio kidnapper,
It needs to be called what it is ‘Murder’
That is money that is flowing with the blood of the innocent. Rachael’s tears. crying out to Heaven for vengeance.
I think (and hope) that Alex is grossly exaggerated for effect. But, sadly, a few people may not realise this, and take him as a role model.
Priests “salting away parishioners’ money for a comfortable retirement”?
I hope we’re talking about a tiny minority of priests?
(It has to be remembered that they don’t retire until they’re 75, which means they are likely to have a shorter period of comfortable retirement than most of us. This is not an excuse, of course).
Iona lets hope it is only a tiny minority..If true.
If money is given to a priest as it is as gifts then they can do what they like with it, and perhaps then leave their investments in the property they have had built in Ireland and big cars back to the Church.
However when priests take on chastity poverty and celibacy, they are not expected to live worldly I think that is what Pope Francis is telling them. to live humbly without causing scandal..
Why did the Pope bring the subject up ,he must have thought there was a need.
I did not know that clergy retired-but do expect them to have a quieter life serving the Church without the responsibility of a parish.,in the more important aspects of their vocation to the religious life.
That’s true; Easter and Christmas offerings are direct gifts to the parish priest. Though to my surprise, they can be gift-aided (I asked).
Iona.
I don’t know much about Gift Aid. But thought it was for a charity.
When my daughter takes her clothes to the Cotswold Hospice Charity shop she Gift
aids them. Is the Church a Charity?.
I remember back in the 1960s parishioners being urged to sign a ‘covenant’ so that the church could claim back the income tax. It’s now called Gift Aid, but it’s the same thing.
John, yes I remember that too, which we did. as a family.I suppose it will be the same..
St. Joseph, Gift Aid is a comparatively easy way for any money given by a taxpayer to an organisation which is legally classified as a charity, to have an extra percentage added to the amount by the government. This is the tax payable on that amount which goes to the charity instead. I am not sure of the exact figure but for a basic taxpayer I think it is 17% or maybe 20%. It makes a huge difference to the charity for minimal effort.
Sometimes, for a one off donation to a good cause, it seems a nuisance to provide one`s name, address etc., and then receive streams of letters and further appeals, but for regular giving it is well worth doing.
“Salting away parishioners’ money for a comfortable retirement”? Doesn’t sound well. ‘Prudently investing in a modest pension’ sounds much better. Of course, it depends what is meant by “parishioners’ money”. This is money given by parishioners (so, their money only in origin). If it is given for the general running of the church, use for the priest’s private purposes is embezzlement – but if it is from the Christmas or Easter offering, it is entirely up to the priest what he does with it, assuming he doesn’t cause scandal. We know (alas) that priests are as capable of sin as the rest of us.
Sensible professional people do not retire – they just slow down to what they can cope with. Our parish is sustained by frequent visits from an 80-year-old who fills in when our priest is away – we’d be lost without him!
Interesting (and rather surprising) that Easter Offerings can be tax-deductible. Presumably the priest has to pay tax on them (if his income is large enough).
Money has always been pretty-much the shadiest things that humans have to deal with on a regular basis. How morally acceptable is one thing over another? Am I buying goods that have been produced by child slaves or adult workers paid a reasonable amount and working in a safe environment? If I do X transaction is it moral?
We do have collections for retired priests once a year in my Diocese, and priests also receive a pension.I suppose they will be able to live in a certain amount of comfort..
Lots of priests come over to Cheltenham once a year and I know it it only a saying but people say’ there are no priests in Ireland on the Gold Cup week’..
I would like to make it clear my comment about priests retiring’ that they retired in Ireland and built Big houses and drove Big cars-that is the point I was making.- When the Holy Father was asking them to live humbly .
It seemed to me that Tim was reading more into it.I apologise if I read you wrong Tim.
Housing has been on of the biggest generators of money since at least the 1960`s, when prices started to escalate far in excess of inflation, and developpers and financial institutions have made huge profits out of what is a basic necessity. My parents used to mention houses selling for £300, which now cost £300,000. The increase has been even greater in London, where my grandparents modest house was on sale two years ago for nearly £800,000.
You might want to remember that these high house values had their uses. For some it was a way to fund improvements or educate their children, for others the value could provide a pension, for others again, it enabled them to see their lives out in a decent nursing home. All money back into the market. But if none of these applied, then at death Inheritance Tax would take a bite. In your grandparents’ case, that would be £320,000 . And what was left was usable for the younger generation to get a start on the housing ladder. And they’d better hope the prices continue to rise because their pensions will depend on it, given what Quentin has told us about this elsewhere..
Vincent, to clarify, I should have said, “a house which had belonged to my grandparents,” up to the 1950`s, when they died.
It isn`t so good for young people whose parents are not home owners is it? I think a system with stable house prices, such as exists in Germany, would be much better.
Priests have family too don’t they? Family money gets passed on does it not? We said goodbye recently to a priest who has a home in Ireland, at 80 years of age why should he not have a home – to which he kindly invites all of us budding deacons to come and stay in if we want.The labourer is, as I remember worthy of his wages. Why should a priest-knowing that he will need housing buy a property and scratch and scrape to fund it-put a tenant in or something like the rest of us? That means we don’t have to pay his keep in some religious house or another after he gets too old to work….
Sorry, should say ‘why shouldn’t a priest’
We don;t have to pay his keep in some religious house or another after he gets too old to work.. He could pay for his keep by being a service to those by Celebrating Holy Mass and other Sacraments.
That is why the Priesthood is a Vocation and not a job.
Perhaps that is the reason why we have a shortage-a lack of Vocations.
By and large they do. I keep bumping into priests at retreat houses or in convalescent homes or seminary still gamely giving of themselves at well over retirement age despite poor health, they can do this regardless of whether they own homes or not. Most of the aged ones I’ve met over this past couple of years (probably a dozen or so) seem to me like hero’s rather than villains. Perhaps the shortage of vocations is partly to do with the daily and incessant sniping they have to endure from within the church-certainly if this blog had bullets we’d have shot more than a few by now.
Mike Horsnall.
Read my words properly
‘That is why the Priesthood is a Vocation and not a job’
The emphasis being on Vocation.
Jesus said give everything up and follow me.! That is why the rich young man turned away.
My two eldest grandsons were discussing one of their friends who was going into the Seminary and the eldest one said ‘it would not be for me’! I would be a priest when I am 50′, my younger one who was 18 at the time said to him’No it would not suit you, as you would want the people to serve you,instead of you serving them!.
The younger one to my mind had it right,then on second thought felt so did the eldest (who is engaged now) as he probably understood more-because he knew he would have to give all up the things he wished for, and that would have been difficult Many are called but few are chose, On Gods terms not ours..