Credit crunch proves no test for papal infallibility

Pope Benedict XVI, who recently reminded those panicked by the economic crisis that "money vanishes, it is nothing," predicted the credit crunch more than 20 years ago, it was claimed this week.

In a speech at a university in Milan, Italian finance minister Giulio Tremonti said: "The prediction that an undisciplined economy would collapse by its own rules can be found" in a paper written by the then Cardinal Joseph Ratzinger in English and presented at a Rome symposium in 1985.

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Entitled "Market Economy and Ethics", the paper by Dr Ratzinger, who for more than two decades was Pope John Paul II's adviser on theology, challenges the assumption of liberal economists from Adam Smith onwards that "the natural laws of the market are in essence good... and necessarily work for the good, whatever may be true of the morality of individuals."

The cardinal claimed that the growing misery of poor countries "which now identify the ground of their misery in the market economy", belied this claim of innate goodness. But the damage caused by the lack of morality of market players could end up being fatal for the system itself. "The decline of such discipline" – the moral discipline which is the product of "strong religious convictions" – "can actually cause the laws of the market to collapse."

Mr Tremonti has recently been trumpeting his anti-market ideas. Well before the recent collapse he was attacking the sins of globalisation, and demanding a return to the values of "God, fatherland and family."