Last week, the finance ministers of France and Germany wrote to the European Commission to voice their continued support for an EU Financial Transaction Tax (FTT), an instrument similar to the so-called “Robin Hood tax” being proposed by NGOs and activists as a way to tackle financial speculation. Commission President José Manuel Barroso is in favour of such a tax – particularly as the money raised could potentially go toward the EU’s budget (PDF) – and the Commission is due to publish its proposal for introducing such a tax within the next few weeks.
Debating Europe had a comment sent in from Luca from Italy supporting the proposed tax. Luca argues that an FTT could be used to help combat speculators by making short-term financial transfers marginally more expensive. We took this suggestion to Professor Stephany Griffith-Jones, currently the Financial Markets Program Director at the Initiative for Policy Dialogue at Columbia University, for her reaction. We asked her if an EU Financial Transactions Tax was really viable, given staunch resistance from countries such as the UK:
Well, I think it’s more possible now than ever, because we now have the official support of the heads of state of France and Germany, President Barroso supporting it plus, of course, civil society and so on. We know that it’s technically feasible. I was part of a commission working for France, Germany, Brazil, UK and many others, and we came out with a report that showed these taxes were very feasible.
Feasible for reducing speculation? Would an FTT really be an effective instrument or is it just an excuse for the European Commission to raise its own resources?
The extent that it could curb speculation depends on the level of the tax. Whether it is a main tool for curbing speculation, I’m not sure. I would prefer it combined with other measures. But I think it’s a good idea and it’s part of a kind of rebalancing of the global financial system.
One of the most often-heard arguments against an FTT is that investors would simply take their business elsewhere. It could be incredibly damaging for the City of London, for example, if the EU instituted an FTT and many London-based financial services relocated to Hong Kong or Singapore.
You don’t have to tax all financial transactions, you could limit it to currency transactions, particularly if its an important currency, like the Euro or the Yen… The kind of tax we are talking about – as little as 0.005% – would not cause so much movement out of Europe. In addition, you have to remember that there are also costs associated with moving a company, and people need to be in Europe.
Earlier, we spoke to Andrew Watt, senior researcher at the European Trade Union Institute, and also asked his opinion on an FTT. He argued that similar taxes have been implemented in the past, even in the UK, without damaging competitiveness:
There was a significant tax on finacial share trading, and that hasn’t prevented London being one of the most important financial centres of the world. Also, some of the riskier trading we could happily do without, so if some of it did go offshore we would have a healthier financial sector anyway… But of course, those people who are saying unless we can introduce it at the global level we shouldn’t do it should be more honest. What they mean is we shouldn’t do it at all.
Others are less than convinced. Jim O’Neill, Chairman of Goldman Sachs Asset Management, told us he thinks the idea is misguided:
I’m afraid to say, I think that’s quite naive. Speculation is not necessarily a bad thing. Speculators can be right as well as wrong, and I think in this instance we could do with a few more speculators. The policy-makers are scaring market participants with this sort of talk and contributing to the sense of uncertainty.
It’s a complicated issue with much at stake. The last thing Europe needs right now is to scare investors further. However, the ripples from the 2008 financial crisis are still being felt today, and perhaps a new financial “rulebook” might be what’s needed – including instruments to discourage more damaging forms of speculation.
What do YOU think about the issue? Would a “Robin Hood tax” help control financial speculation? Or would it encourage investors to abandon Europe and take their business to other markets? Are speculators really to blame for the current crisis, or is it rather governments that got us into this mess? And should the money raised by such a tax go to the EU or, as Oxfam argues, should it rather go to help tackle global poverty? Let us know in the form below.
A Financial Transactions Tax, the Robin Hood Tax, apologies to those who haven’t been thinking, but this is an entirely insane idea. No, really, flat out and clear lunacy.
There are all sorts of technical points that can be made, that one on currency trading would probably be illegal under current EU laws (it would interfere with the free movement of capital), that speculation itself reduces price volatility, not increases it, that passing tax revenues to the unelected has never proven historically sound, even the effects of those FTTs that do exist (the UK one on share transactions is known to reduce pensions and raise the cost of capital to companies, neither being desirable outcomes).
But the largest and most important point is that of “tax incidence”. If you don’t know what this means then you’re not competent to be taking part in this debate. But because I’m a nice guy I’ll explain it for any politicians or other ignorants who happen to pass by.
Who hands over the cheque for a tax is often not the person who is really carrying the economic burden of a tax. Studying who really does carry that economic burden is known as the study of tax incidence. Economists have been doing this for a long time: we’ve known since 1899 (Seligman) that it absolutely is not a company which pays corporate taxation for example. For a company is only a legal fiction: a tax must, in the end, mean some lesser amount of money in the pocket of some live human being.
So, we’ve known for over a century that whoever ends up paying the FTT it absolutely will not be the banks. Banks are, as you may have noticed, companies, and companies cannot and do not pay taxes.
So, everyone shouting that “the banks must pay” and that an FTT will make them pay is either deluded or ignorant. Or a politician, but I repeat myself.
So who will actually pay this tax, carry the economic burden? We’re left with three possible groups: the shareholders in the banks, the workers in the banks or the consumers of the products of the banks. Rather than take you through all of the various arguments I’ll just recommend that you read the various IMF, OECD and EU reports on this idea. All of them make exactly the same point. The people who will pay this tax will be the consumers of financial products.
That’s you and me, that’s us, the average man and woman in the street. The banks don’t end up paying this tax, it’s not even the bankers, it’s us.
Two further technical points: Sir James Mirrlees (you know, Nobel Laureate, man who knows what he’s talking about on tax) tells us that we should not use transactions taxes when there are other methods of achieving the same goals. This is because transactions taxes cascade through the economy and in doing so multiply. Joe Stiglitz (another NL, worth listening to on matters economic) has shown that the incidence of a tax can be higher than 100% (he was talking specifically about the corporate income tax but that’s quite similar to this FTT). That is, that the amount that you and I have to pay is greater than the amount of money actually collected in tax revenue.
And yes, it’s a trivially easy process to show that this is likely to be true of an FTT.
So, the Financial Transactions Tax. It’s not banks who pay it, it’s the citizenry. We will almost certainly end up paying more than the tax will actually raise. It’s an absolutely terrible tax except for one unfortunate point.
The politicians will tell us that it’s the banks being taxed and we’ll often believe them even as they pick our own pockets for that money.
Bad economics and great politics. No wonder politicians love the idea.
I heartily condone everything Tim Worstall has said.
Tim Worstall has nailed it. Anyone care to debate against him?
Tim Worstall has a habit of blowing away the smoke and shattering the mirrors. I’ve no doubt that the Left will push for FFT, as the Left has long decided that the electorate hangs on to far too much of it’s own money. The EU, having spent money like a drunken sailor on shore leave, is desperate for any revenue. This looney idea will be passed though, further damaging the European economy.
A financial transaction tax (FTT) is a plausible idea as it offers the impression of “taxing” the rich to “feed” the poor. However it is never that simple and in our case the FTT confuses virtue with vice. Of course the cocktail parties and the bonuses of those who make billions in profit should not be paid by the the other parts of the income distribution as is the case today, however a FTT might not be a social measure as some wish to present it. To understand why that is most probably the case we need to consider two very important parameters that can make the FTT yet another measure that will deprive the vast society from a portion of its income.
First parameter is the scope of application of the FTT. Should the tax be implemented on all financial transactions it will directly affect almost everyone in the society, from the business community, which includes both small family businesses and large corporations, to the ordinary depositor and even to the ordinary tourist (if the tax is applied on currency exchange). So it is important to know which transactions will be affected and to what degree.
I cannot think of any transaction that is purely confined within the banking sector, thus so far it seems to me that this tax treats all parts of the income distribution and all sectors of the economy, horizontally, unless there will be progressive taxation which is quite complex and not easy to implement and again the results are dubious.
Second parameter is the geographic application of this new tax. There are two possible scenarios. A eurozone-wide application or an EU-wide application. If it is confined withing the eurozone, then what will happen is that the 17 countries of the eurozone will openly adopt a “beggar thy neighbor policy” on all the rest European economies that comprise the EU. That will firstly make everyone outside of the euro area, who trades with that area, worser-off but at the same time it will render the euro area a less favorable destination for investment, thus making it less competitive on the global level.
The first scenario will create a two-tier EU with countries in and out of the Euro having huge dissimilarities while being part of the same market.
The second scenario, that of an EU-wide application, which will make the Union a far less competitive on the global level, where capital moves freely and knows no “homelands”. So it will further worsen the position in which European countries are now into, by preventing a considerable amount of foreign capital from entering Europe. I am sure you all heard/read that emerging economies are now willing to invest in Europe so it would be unwise to discourage them.
Geographic application is of cardinal importance in today’s globalized world. But then again do not forget that banks just like any other company will see the tax as a cost that they can easily pass on to the consumer (so in the end the extra tax is paid by everyone not just the banks).
These are some issues that need to be taken into serious consideration. However I am afraid that we all get stuck in the nice rhetoric politicians tend to use and in the smart use of popular myths such as “Robin Hood Tax” and fail to see that most of it is only serving for the campaigns of certain politicians who will soon have to run for elections.
I personally am in favor of placing stable rules and regulations in our ill regulated European banking system, yet I am afraid that an FTT does nothing to regulate the system and produces adverse effects for the society and the economy.
As for speculation: in our current case speculation exists because the European banking system is in a mess (filled with toxic paper), because our leaders are failing to understand the systemic nature of the crisis and because their policies so far been ineffective in containing the crisis and preventing it from spreading to the core of the euro.
The citizens, the poor, the workers -everyone- will be better off when our leaders solve the real problems that plague Europe. An FTT will not solve any of these problems, it will only accumulate more of them.
Although I am not in principle against a Financial Transaction Tax or FTT, it comes down to compliance. If all of the major trading countries agree to take part such that there is no benefit in a company or exchange fleeing to Zurich (or wherever) to bypass the tax then it may achieve its ends.
However, until there is global agreement on the implementation across the major trading nations then it will remain a pipe dream.
“However, until there is global agreement on the implementation across the major trading nations…”
Sorry, Jeremy, but it’s somewhat of a mystery what you mean by this.
If this was a regulation one could understand why it might be desirable but it’s a tax. I can understand why the EU apparatchiks might want to get their hands on some lose change & possibly Obama & a few other spendaholics but what happens to countries who don’t want to raise more taxes? Why should the Independent Nation of Zog have to filch from its citizens pockets money that it doesn’t need simply to cater to Europeans who can’t balance their books. That seems pretty close to theft to me. Unless it’s going to redistribute the money back to the Zogese it’s taken it from, which rather defeats the object of the exercise.
Jeremy Baxter: why are you not in principle against it? The compliance issue would seem to be a secondary concern once you’ve decided to implement it. If you are not in principle against it, which bit of the first comment above did you disagree with specifically? Because I could not come up with a single counter point.
I left this over on Tim’s site as well (where he highlighted the link) The Robin Hood Tax is also [resented as one that can raise lots of money for politicians to give to their friends without really hurting anybody. The reality is that the things it tries to tax – high frequency trading and FX will simply move out of its range and destroy the financial service industry where they do try and apply it, thus raising zero tax but losing lots of income and other tax. Even worse, the one thing that can not easily move – interbank lending – will become prohibitively expensive (try compounding up even 0.005% overnight on your liquid balances for a year) with huge consequences for liquidity in the economy as a whole. So net result is kill liquidity, kill jobs and raise no money. Genius.
Rather than categorising along the old (and frankly obsolete) ‘left’ and ‘right’ lines, why not take a glance at Worstall’s credentials and interests and compare these to his many superiors, who promote working on a Tobin tax. Clever, but simple of him to say ‘banks don’t pay tax’, as if others aren’t making mega profits from international financial transactions. Let’s ask ‘why don’t certain parties want an FTT?’
“why not take a glance at Worstall’s credentials and interests and compare these to his many superiors, who promote working on a Tobin tax. Clever, but simple of him to say ‘banks don’t pay tax’,”
How about this as an even better idea? Why not deal with the actual argument presented? You know, instead of haring off down after “cui bono?” style insults?
1) Do corporations pay tax?
2)If they don’t who does?
3) Who will end up paying the FTT therefore?
Of course, if you’d rather play dirty with rhetoric and insinuation, I’m game. I assure you I’m better at it than you are.
It is important to consider the experience of Sweden in the late 1980s. The imposition of a FTT on equities and bonds was a total disaster as trading simply moved overseas. Bond trading collapsed, with implications for govt financing. It is for this reason that Sweden (along with the UK) is one of the main EU opponents of an FTT.
We did not expect the Finance Industry to cheer in the wings while governments discuss taxing financial transactions. But we do hope that they are willing to undertake some self-reflection on their role in society.
Finance is an instrument directed towards improved wealth creation that should finally serve to sustain true development. True development enables human potential to unfold to its fullest, without damaging the environment which we depend on to survive and thrive. The FTT is the opportunity for the financial sector to have a major positive impact on people’s well-being and that of the planet, as a recent CIDSE report ‘The FTT for people and the planet- financing climate justice’ (http://bit.ly/m35LL4) sets out. CIDSE is an international alliance of Catholic development agencies.
It is beyond a shade of a doubt that the FTT does need to be designed carefully, drawing on the lessons from past and existing taxes of a similar nature. Designers of the FTT should rely on technical expertise and the years of academic research on the subject that has been comprehensively compiled in a recent piece of research by Neil McCulloch from the UK’s IDS (http://bit.ly/niLdrP). All stakeholders -and I mean not only the financial sector, but also those whose jobs and livelihoods are directly and indirectly impacted by the FTT (which I would argue would by and large be positive impacts) also need to be involved at some stage of the policy formulation.
So, rather than screaming doom and gloom, if our friends from the big trading houses that claim that they stand to lose so much from the FTT were to constructively engage in designing the FTT…
And beyond the FTT, if they were to spend some time to rediscover the genuinely ethical foundation of their activities…
…We would not need any Robin Hoods anymore.
CIDSE Policy and Advocacy Officer
Please have a look to this page –
the UE must consider seriously how to introduce a FTT without
Tim Worstall’s statements (not the FTT) are arrogant and unbalanced…actually clear lunacy (his own words). He uses techno-speak to frighten-off the non competent reader. This recalls the practice of many bankers who made use of technical mambo-jumbo in order to convince their clients to engage in speculation damaging to their personal finance without the bankers themselves understanding their own advice.
So far we have had bad economics as well as bad politics. Bankers have their share of responsibility and sought risky private profits counting on governments and taxpayers to socialize their subsequent losses. Banks used to be intermediaries between savers and investors. They have become speculators with their clients and also with their own money, have betrayed the trust society had put in them, and weakened the capitalist system. They are sawing the very capitalist branch we are all sitting on.
To your questions. Speculators (notably banks) are to blame for the current crisis, but they are by no means the only culprits. So are Governments who did not propose, and indeed many citizens who would not have accepted, the introduction of the necessary corrective measures. Bankers are perhaps the biggest obstacle for measures improving the efficiency and transparency of financial markets, alleging Armageddon for additional financial market regulation as well as the introduction of a FTT (e.g. that high frequency trading would emigrate destroying the financial service industry where the FTT is applied).
Admittedly, FTT alone, without regulatory reform, would not control speculation, but would be at least a signal that excessive short-term speculation is unhealthy; it would recognize that Keynes’ warnings against liberalizing world financial markets were justified, that the related uncertainties for the budgets and finance of whole countries can have catastrophic consequences and disrupt national and regional economies, if not the world economy; and that the FTT-related revenues would be the smoothest way to deal with widespread budgetary problems worldwide. The alternative out of the current mess might be to inflate the world economy in order to solve the worst debt problems. Wouldn’t this be the worst “cure”.
Financial markets (like other markets) are incapable of regulating themselves, but respond to regulatory plans with doomsday scenarios. If those actually paying the FTT would be the consumers, let them decide (the majority don’t have the means to be consumers of the financial products banks offer to financial investors).
To conclude, if done properly, a Financial Transaction Tax is good politics as well as good economics. It could notably help governments affected by insufficient economic growth to grow out of the mess, developing countries to reduce poverty and undernourishment, and the EU to find an own resource (as stipulated by the EU Treaties), which would have wide popular support, preventing governments from continuing to act as shop-keepers with a calculating machine to check the net- contributing or net-receiving effect of every EU decision. If bankers then succeeded to pass on the tax to the consumers, governments should intervene on the latter’s behalf, starting with decent limits on bonuses of bank leaders unrelated to performance.
Come on, Tim Worstall, how can a 0.005% FTT have the mammoth impact on the economy that you predict? Whose interests are you defending with your spurious arguments? As Jean Letitia Saldanka commented, I hope that the finance industry reflects on its role in society before it is to late for all of us, including that industry itself.
“Tim Worstall’s statements (not the FTT) are arrogant and unbalanced…actually clear lunacy (his own words).”
Ah, the insult direct. Good, this is getting interesting.
“He uses techno-speak to frighten-off the non competent reader. ”
Try again. I go to great lengths to explain technical matters in language accessible to the general, non-specialist, reader.
“So far we have had bad economics as well as bad politics. ”
Detailing the incidence of a tax is not bad economics. It is simply economics. My apologies is this point hasn’t quite reached Continental Europe yet but economics is a science. We can use it to predict certain things. One of those being who will actually carry the economic burden of a tax. That you do not like the answer is of no more import than your not liking Newton’s Equations would be important. Apples will still fall out of trees whatever your personal prejudices on the matter.
“Bankers have their share of responsibility and sought risky private profits counting on governments and taxpayers to socialize their subsequent losses.”
The connection between this and an FTT is not apparent. In fact there is no connection: the answer to the socialisation of losses is of course not to socialise them. Let failing banks go bust. Still nothing to do with an FTT of course.
“Banks used to be intermediaries between savers and investors. They have become speculators with their clients and also with their own money, have betrayed the trust society had put in them, and weakened the capitalist system. They are sawing the very capitalist branch we are all sitting on.”
This all might be entirely true but so what? It’s irrelevant.
“Bankers are perhaps the biggest obstacle for measures improving the efficiency and transparency of financial markets, alleging Armageddon for additional financial market regulation as well as the introduction of a FTT (e.g. that high frequency trading would emigrate destroying the financial service industry where the FTT is applied).”
Gosh, that’s an interesting one. an FTT will remove liquidity from the markets, widen spreads, increase price volatility and cost consumers vastly more than it will raise in revenues. Yet you say that an FTT will increase efficiency? More volatile more expensive capital markets will be more efficient? Clearly the last couple of centuries’ worth of work on markets and the joys of them haven’t quite reached parts of the European Mainland as yet.
“Admittedly, FTT alone, without regulatory reform, would not control speculation, but would be at least a signal that excessive short-term speculation is unhealthy;”
This is something that you must prove, not assert. And as yet, no one has shown that it is even possibly true, let alone vcertainly so, to the satisfaction of economists. You know, economists, the people who are the experts in the science of economics? Just like you go to the physics wallahs if you want to know why apples fall down out of trees?
Speculation increases liquidity and reduces price volatility. Both highly desirable things.
“it would recognize that Keynes’ warnings against liberalizing world financial markets were justified,”
That’s the Keynes who spent decades speculating in the commodities markets, is it? That one?
“that the related uncertainties for the budgets and finance of whole countries can have catastrophic consequences and disrupt national and regional economies, if not the world economy;”
Eh? That governments are spending money like drunken sailors on shore leave is a result of those dastardly speculators? Not the result of politicians be constitutionally fiscally incontinent? We have a useful word in English to describe such a position: “nonsense”.
“and that the FTT-related revenues would be the smoothest way to deal with widespread budgetary problems worldwide.”
What? Haven’t you seen the revenue projections from the EU document about the FTT? There will be no additional revenue! A bit comes in from the tax, yes, but it shrinks EU GDP by 1.7%. Meaning that all other tax revenues *fall*. By more than the new revenue. The FTT simply does not provide any extra revenues at all: it shrinks revenues. And no, not even in European economics is a fall in tax revenues a method of dealing with budgetary problems.
“If those actually paying the FTT would be the consumers, let them decide (the majority don’t have the means to be consumers of the financial products banks offer to financial investors).”
Make the tax voluntary? Now there’s an idea. That would be letting the consumers decide, yes. Pity no one thought of that before imposing income tax on us all, eh?
“It could notably help governments affected by insufficient economic growth to grow out of the mess,”
No, you haven’t read the EU report, have you? It says that an FTT will shrink the European economy.
“and the EU to find an own resource”
That’s not something that is convincingly in favour of any tax you know. “Let’s send money to an unelected supra-national bureaucracy” is not known as being a wise move. Quite apart from it being undemocratic of course.
“which would have wide popular support, preventing governments from continuing to act as shop-keepers with a calculating machine to check the net- contributing or net-receiving effect of every EU decision.”
Well, quite, an “oqwn resource” would mean that no one at all was looking over the shoulder of that bureaucracy. This might be how it’s done in Padua, or Potsdam, Senor, but it’s not the way that we are used to dealing with our affairs.
English political history has been described as a 1,000 years of our gaining the power to insist that the State ask us nicely for our tax money, ask for it every year, tell us where it goes and give us an opportunity to say “No”. Quite why we should have to give that up just so that Germany doesn’t invade France again I’m not sure. Perhaps you could explain why keeping a bureaucracy accountable would increase the risk of war?
“If bankers then succeeded to pass on the tax to the consumers, governments should intervene on the latter’s behalf, starting with decent limits on bonuses of bank leaders unrelated to performance.”
You’ve entirely missed the point of tax incidence. Please go and read Seligman (1899) so that you can see what is being said. There is no conscious attempt to “pass on” a tax. Rather, people’s behaviour changes as a result of the existence of the tax. This change in behaviour leads to certain people having less money in their pockets than they would in the absence of the tax. Thus these people with less money are those who bear the incidence of the tax.
My apologies, but really, what are you doing commenting upon the incidence of taxation when you don’t have the very first inkling of a suspicion of an idea of what is being talked about? Is this how things are done in your corner of the Continent? That the ignorant are asked to make public policy?
“Come on, Tim Worstall, how can a 0.005% FTT have the mammoth impact on the economy that you predict?”
Sigh. The FTT is variously predicted to raise €50 billion (some EU estimates, before the tax losses from a shrinking economy) to $400 billion (Robin Hood Tax people). Anyone who thinks that you can raise $400 billion in tax revenues without changing the way the world works just isn’t thinking, are they? You know, even in government circles $400 billion a year is though of as pretty fat money. If we stuck $400 billion on cigarettes we’d all assume there’d be some change in behaviour, wouldn’t we?
“Whose interests are you defending with your spurious arguments?”
Actually, mine. No, not as a producer of anything, but as a consumer. As one of the people that is going to have to pay this tax. I’ll end up paying £10 so that £1 can be raised in tax for Mr. Rumpypumpy to spend as he pleases. This does not please me, I do not think that this is good public policy. In fact, as I say at the top, I think that this is insane.
“As Jean Letitia Saldanka commented, I hope that the finance industry reflects on its role in society before it is to late for all of us, including that industry itself.”
Myself I hope that the political classes and their shills and lickspittles stop trying to impose entirely insane, expensive and counter-productive taxes on us.
@Corrado Pirzio-Biroli – so many fallacies in your defence of the proposed FTT, it’s hard to know where to start. Tim Worstall has done most of the job for me, but several points need to be addressed.
‘So far we have had bad economics as well as bad politics. Bankers have their share of responsibility and sought risky private profits counting on governments and taxpayers to socialize their subsequent losses.’
In that case why did the EU not act when the previous government intervened to bail out first Northern Rock, and latterly Lloyds/HBOS? This would seem contrary to Eu rules on state-funding, but nevertheless I recall very little from the Commissariat at the time – why was that? If the government deems the banks ‘too big to fail’, surely it is little wonder that those banks engage in speculative behaviour knowing that if they find themselves short of funds, the government, or ultimately the taxpayer will bail them out?
‘To your questions. Speculators (notably banks) are to blame for the current crisis, but they are by no means the only culprits. So are Governments who did not propose, and indeed many citizens who would not have accepted, the introduction of the necessary corrective measures.’
I’d think given the EU’s disastrous record in the fields of Agriculture and Fisheries, in particular, the latter area where the CFP has contributed to arguably one of the greatest environmental catastrophes on record, you’d be ill advised to advocate it venturing into any new fields of competence. The CFP is thus far the first and most glaring example of how a Federal Europe would work in practice – it has been an unmitigated disaster, on economic and environmental grounds. With this ‘record’ is it any wonder people with somewhat less of a vested interest than yourself are highly suspicious of the potential efficacy of the EU taking over regulation of the European financial sector?
I would have preferred to stop commenting, but the lack of information and spurious arguments of Van Patten lead me to make a few more comments.
Van Patten may wish to read yesterday’s FT article “Bankers versus Basel” with the subtitle “The industry is preparing a full-on assault on a deal regulators see as the best way to prevent future financial meltdown – and the question is whether the accord will be left with enough teeth”…(andl help – the article adds) to reshape banking fundamentally – or cease to be worth the paper it is written on”. The FT adds: “As the bankers see it, they are preserving the already shaky world economy and the global financial system. Forcing them to hold more capital and low-yielding liquidity will, they say, make many of their business lines unprofitable and drive up costs for customers…Regulators see it differently. To them the real threat comes from an unreconstructed industry still addicted to short-term funding that can dry up at the drop of a hat. They also argue that profits remain too dependent on risky derivatives and proprietary trading. Their “impact studies” suggest that enforcing a build up of capital would trim up growth only mildly in the short term”. A UK representative is quoted commenting: “The crisis is akin to a heart attack for banks. Some people would like to go on smoking and drinking, but what we are asking banks to do is to have the same market discipline as non-banks…Supervisors are also adamant that forcing banks to shore up their capital over time, rather than paying out earnings in staff bonuses and shareholder dividends, is the correct thing to do”.
It would seem that there is no lack of supporters of my views (as indeed of Van Patten’s). But let me add just a few points to Van Patten euro-skeptic questions:
• That the EU did not act enough about previous banking bail outs is due to the lack of supervisory instruments for that purpose. If trade globalisation requires stronger WTO rules because there is no free trade without market discipline, by the same token financial globalisation requires stronger financial market regulations because recent events have proven that financial institutions fail to regulate themselves. The “too big to fail” problem is not just a European, but also a national problem, not to speak about its global aspect.
• To refer to the CAP and the CFP, which are totally unrelated to our subject, shows a hysteric opposition to regional cooperation. Without common fisheries policies, ideally at world level, how can we promote conservation of fishing stocks? No fishermen are prepared to limit fishing unless their neighbours do the same. As I happen to have been in charge of the CFP, let me tell Van Patten how difficult it was and still is to convince European fishermen and hence their governments (fearful of losing votes) to accept limiting their catches. We had to resort to the support of green NGOs to push for conservation in order to convince European Governments (all of them but the UK had opposed more conservation) to yield because of fears of criticism by public opinion. Does Van Patten truly think that letting every country in Europe and indeed in the world legislate on fishing without coordinating its positions with others would improve conservation? I doubt he understands how complex policy making has become with growing interdependence, and how difficult it has become to ensure at world level the market discipline that allowed national economies to work smoothly and relatively fairly in the past.”
“Without common fisheries policies, ideally at world level, how can we promote conservation of fishing stocks?”
You might want to catch up on some more economics there. Garret Hardin back in the 60s pointed it out and Elinor Ostrom won last year’s economics Nobel for elaborating on the theory.
We could in fact do what has saved, as an example, the alaskan halibut fishery. Tradeable individual quotas. Not dissimilar from what Norway, Iceland and the Faroes (all safely outside your absurd CFP) do.
It works and doesn’t require bureaucrats to be pompous about it all. Who could possibly be opposed to it?
A correctly designed FTT will be paid disproportionately by high-frequency traders who make a lot of money providing liquidity when the market doesn’t need it.
I’d like to go back to what could be the root of the debate : the unbalance of our economic system.
Let me check my understanding with you:
97% of transactions purely financial, only 3% are actually based on Goods and services. Correct ?
70% of transactions in the US are done by robots ( 50% in Europe) so are purely speculative, (most options on transactions are not completed and are withdrawn) correct?
Transactions on real products and services are taxed. Average 18% and up to 66% (as tax on oil in France) correct.
so our government finance themselves by taxing transaction based on real work while 97% of transactions are purely financial and are not taxed.
Is that correct?
Please help me make sure that my data are accurate and adjust them.
If it were to be more or less the case
how does this situation make sense to you?
Oh and I forgot of course to point out that in the current state of affair, governments tax value added -workbased transaction at say 19,6% ( in France) and that the debate with strong pros and con’s is only on a 0,005% FTT tax?
is my understanding correct?
Since the last 30 years the financial sector grows and grows. But it don’t produce any values, maybe on the paper but in real. It gives nothing back to society, it dont build schools, streets or parks. And who feeds this greedy machine, this cash-hunry monster? We all, the 99 per cent. But why we don’t feed our own children, the growing of the youth, why we dont save our all future. They made us blind, gave us pills, but it’ enough.
Lets stop the blowing of the bubble, let us support the last few reliable politician, lets make our own movement, gave us back the world, it’s our future.