Financial speculation: a damage for individuals and the real economy
Focus on a damaging and dangerous financial structure
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Financial speculation is used for the pursuit of profit in the short term and is opposite to the concept of investment that is in the long-term period of over 1 year as defined and agreed by Economists and Expert Accountants .
Speculation promotes attachment to money, behavior contrary to religious morality. It can also cause significant damage to the real economy.
The financial speculation causes damage to:
1) the individual;
2) the real economy and the common good.
1) the damage to the individual
I. a wrong behavior of the individual considering the attachment to money; the pursuit of profit in the short term only using money is reprehensible under religious morality.
II. a sort of addiction to this practice trying to profit from the markets; the individual does not recognize his own unethical behavior. It is a dangerous misunderstanding to consider that behaviors that seem legitimate from a legal point of view are also licit in the moral context; it is necessary to remember that international regulations in the financial field are only slowly trying to align the financial activities with ethical principles that consider financial speculative practices in a negative way and to be avoided.
"Because of its connection with a questionable institution, and because of its grave danger to the individual himself, it can never be pronounced licit in the sense that the transactions of ordinary trade are licit. The shadow of immorality is over it always. Every speculative deal is a participation, remote and insignificant, perhaps, in what can without exaggeration be regarded as a social and moral evil, namely, the institution of organized speculation.* Every anticipated profit, almost, is in danger of being promoted by illicit manipulation ; for the well meaning outsider can seldom be certain, even if he tries, that movements of price by which he is the gainer, have not been artificially produced. Every man who yields to the seductive temptation to speculate feeds the passion of avarice, strengthens the ignoble desire to profit by the losses of his fellows, cultivates a dislike for honest, productive labor, and exposes himself to financial ruin".(1)
III. the individual behavior apparently innocuous is a source of potential hurt to the real economy in the combined effect.
2) the damage to the real economy:
I. distorsion in natural price changes;
II. unnatural losses in companies stock values and other assets that can contribute to financial bankruptcies and economic market crisis with long-term consequences;
III. decrease in employment in productive jobs; " speculation absorbs a considerable amount of the community's capital and directive energy. It diverts money from productive enterprises" and the activity of men who should conversely be involved in productive activities (2)
Any reason that induces an individual to get profit through speculation causes negative effects on the individual himself and the common good. It is necessary to ignore any condition or event that can attract an individual to make financial speculation.
Discussion on the damage of financial speculation can be traced to the Catholic religious warnings at the international level.
Economic theories talk about the financial market as if they were talking about something that reflects ordinary trades in the traditional economy but this is not the case; instead, it is a structure artificially organized by man to take advantage of it on the basis of activities that do not grow from the honest productive labour that man is morally obliged to perform for the common good.
"In every case, our gain is dependent upon another's loss; our fortune is somebody's misfortune. We get what was not ours, for which we have rendered no equivalent". (How to behave - Thomas Low Nichols)
Consequently markets must be regulated to prevent any kind of speculative use and behavioral distortion.
"It is impossible to create stable, balanced economies when vast interests within them have every incentive to drag them into instability and imbalance. We need to get this, urgently".(3)
Both financial institutions' operators and individuals must understand they have to use moral discernment and social responsibility in all their activities.
In the message for World Peace Day on January 1, the Pope Benedict XVI said that finance which focused on short term profit was 'a threat to all.'
He also said that "Financial activity is only focused on itself without any consideration of the long term, the common good"
(businessinsider.com/2008/12/pope-still-talking-wall-street-greed-evil-caused-food-shortage? IR=T)
Pope John Paul II - encyclical on the dignity of work, "Centesimus Annus"
"Ownership of the means of production, whether in industry or agriculture, is just and legitimate if it serves useful work. It becomes illegitimate, however, when it is not utilized or when it serves to impede the work of others in an effort to gain a profit which is not the result of the overall expansion of work and the wealth of society, but rather is the result of curbing them or of illicit exploitation, speculation or the breaking of solidarity among working people. Ownership of this kind has no justification and represents an abuse in the sight of God and humanity."
More resources and references
° Ethic and finance Document - CEI - 2000 /Etifin rtf - Working Group at the religious National Office for Social and Labor Affairs-
Journal of Ethics and Social Sciences-University of Saint Thomas
° How to behave - Thomas Low Nichols
° http://www.newadvent.org/cathen/14211a.htm
° A.R. Cuny de la Verryère, F. c., edit. EMS, 2013, p. 122 et s
° http://www.edubourse.com/guide-bourse/investir-comme-chretien.php
° Professor Emilios Avgouleas - lecture of Murray Edwards’
(1)International Journal of Ethics , John A. Ryan., Catholic University of America.
(2)http://www.jstor.org/stable/2376347?seq=1#page_scan_tab_contents
(3)Alex Andreou The Guardian - Wed 20 Nov ‘13
(1)http://www.jstor.org/stable/2376347?seq=1#page_scan_tab_contents