Why Prof Roubini And Ferguson Weekend FT Op-Ed Cure Is Academic Hot Air..
When I read an op-ed like “Berlin Ignoring The Lesson Of The 1930′s” by Prof Roubini and Ferguson it is impossible to remain silent. So full of themselves and full of it..these two academics talk theory well but seem to have little understanding of what actually drives human behavior. When I read their history lesson and Germany must do prescription I think it absurd. More so to blame Germany’s “too little to late policy” as part of the problem ignores the real problem completely. The problem is clearly ego, vanity and disingenuous fraud ..on the part of EU leaders (Sovs and Banks) and perhaps the esteemed professor’s.
First The Professors
Would either risk 50% of his net worth now and promise 50% of the next 10 years (at risk) earnings power to save a distant financially irresponsible relative? How about 5 different distant relatives that all speak different languages and their families? And of course the economic reality these relatives can not possibly change their existing debt load, operating expense structure, production capability..
Reminds of Warren Buffet’s pay more taxes so the US government can become larger, more cumbersome and useless as he then donates the majority of his net worth to avoid the same government flushing the fruit of his life’s work down the good intention toilet.
So like Warren Buffett does not do what he says others should do ..So to the Professors would not do what they say Germany should do. Spending other peoples money in op-ed print is fun… but what about the meat of the rest of their educated prescriptions. Here they fail also.
#1 ->“First, there needs to be a programme of direct recapitalisation” ..would love to be able to make that wrong answer sound used on game shows ..but in print I have to settle for just writing the word .. WRONG..in capitals.
No recap program will work without first quantifying the size and scope of writing down the bad loans. This needs to be done for most every single bank in EU. To do this would require removing the opaque nature of most of the bank balance sheets. Why would this be avoided at all costs? This would destroy most of the EU leaders life’s work (ego’s) as the truth ..insolvency, impossible expectations heaped onto the badly designed structure of the EURO, absurd risk management assumptions, fraud, bureaucratic corruption and inability to really accomplish anything would be stated as ..FACT.
#2 -> “Second, to avoid a run on eurozone banks – a certainty in the case of a Greek exit and likely in any case – an EU-wide system of deposit insurance needs to be created.”
The above statement and when I read the rest of their number 2 prescription, equally makes me laugh and cry.. in effect paraphrased of course
..what the burning building needs is a fire escape ..and a fireproof safe room to be installed now..while the fire is raging out of control ..to be funded by the people jumping out the windows to escape the fire.. then when they do land safe but broke and shaken .. they need to take a class on building fire escapes and fireproof rooms..then design and build it by committee..
At least the installation should be easy..by then..the fire will be out and the building an empty shell..the next sentence was great ..
“Structural reforms that boost productivity growth should be accelerated. And economic growth needs to be jump-started”
Let me paraphrase ..invent the Iphone..create a huge marketing buzz, build a world wide manufacturing and distribution center then develop a completely new type of retail experience..or cure cancer..
#3-> “Finally, given the unsustainably high public debts and borrowing costs of certain member states, we see no alternative to some kind of debt mutualisation.”
Paraphrased .. the kid likes to watch TV, sleep, play video games, smoke pot, eat pizza.. and will not be out of bed before noon… just shut up and pay the bills..you adopted him.