Famed NYU Econ Professor Nouriel Roubini told a German newspaper yesterday that Europe needs to "stop the savings madness." He said that Germany should give its citizens a 1,000 Euro voucher to be used only for vacationing in ailing Southern Europe. He also said that struggling European governments should be lowering taxes and increasing salaries to boost growth rather than insisting on austerity and increased savings. And that anyone who buys a vacation home in a Southern European country should get a tax bonus.
So let me get this straight:
1. Germany should take some of its taxpayers' money and give it back to its taxpayers, but only if they promise to spend it in say Greece. And that'll "boost growth" in Greece??
So what happens when the holiday's over?
2. Struggling countries should be lowering taxes and increasing salaries to boost growth. But in Greece, for example, few pay their taxes already and 2/3rds of its people work for the government - and get full pension at [something like] age 50.
And how's that model been working so far? And how does all this get funded? by Germans taking a holiday in Athens? Really?
3. So if you buy a vacation home in say Greece. You get a tax bonus. I thought anybody moving to Greece has been getting a tax bonus already: since Greece hasn't been collecting its taxes.
And how's this going to get Europe out of this mess?
So let's say Europe heeds the Great Roubini's message. Although he didn't say it, but surely he's camping with Stiglitz and Krugman and would suggest that the time for spending cuts is after all this throwing money at problems results in lasting economic growth, right? But you've seen what happens (Athens literally on fire) when governments try to take back what governments hand out.
Do you think these genius economists would ever prescribe responsibility? Is it human nature to cut back when times are good?