zdreg i was about to type the exact same thing you said before reading yours. when i read the volker rule is doa i said they'll now attack the weakest link which is the trader who has little power to fight.obama keeps throwing out ideas and the one that has the least resistance and he knows he can jam threw and get victory he will do. in the end all obama cares about is victory. he's a narcissist . look at health care reform. any time there was resistance he folded and all he wanted was some bill to declare victory.
1/4% Tax on all stock trades pushed in NY Times today
- Thread starter seasideheights
- Start date
I disagree. The Volcker rule only calls for an end to prop trading at banks, etc (it has nothing to do with taxes). The bank tax on liabilities is still very much on the table as well as an insurance type levy that I'm quite sure the IMF is going to recommend. It seems to me that a bank tax or insuranace type levy is most likely to happen. No way a FTT happens...
-Guru
Let me make one thing clear, just to avoid internal divisions like this one. Bankers are on the same boat: there would be no exemptions for their 'all important' market-making activities. Customer or firm, everyone would pay up the FTT. They called it "the principle of broadest possible applicability".
There are two reasons why I think this is the case. First, both sides of each equity transaction are assumed to be taxed all the way - for every transaction, not merely customer to customer.
But there is one more reason. Baker said so in no uncertain terms - only you have missed it. I have missed it as well until very recently. There is actually one published paper where Baker's name features out of alphabetical order as a celebrity co-author. And in contrast to 84/88 of his (self-)publication list (http://ideas.repec.org/f/pba441.html), it was published in an actual (peer-reviewed) journal!
The journal is called "Eastern Economic Journal", and is being published by Eastern Economic Association (headquartered until very recently in the Anisfield School of Business, Ramapo College, New Jersey, and previously at Iona College, URL: http://www.iona.edu/eea/ - so it looks like they were expelled after the FTT bill was introduced
The Executive Committee of the Eastern Economic Association includes these very famous Nobel-winning scholars:
- Paul Krugman (author of a paper on currency crises, showing that fixed exchange rate regimes are unlikely to end smoothly: instead, they end in a sudden speculative attack)
- formerly Joseph Stiglitz (critic of the free market, of the IMF, and of globalization, arguing in favor of corrective government policies and claiming that financial crises are too costly and too frequent, and that the rich countries have done too little to address these problems)
Some of the Eckstein prize-winning articles previuously published in this Journal include:
(with Otto Eckstein being the creator of 'core' inflation, excluding 'particularly volatile commodities, e.g. oil)'):
- "The Effect of Changes in the Composition of Financial Aid on College Enrollments"
- "Why Were Investment Ratios so High in Soviet-type Economies? A Public Choice Approach"
- "Property Rights as a Cause of the Tragedy of the Commons: Institutional and the Pastoral Maasai in Kenya"
- "Can Rescheduling Explain the New Jersey Minimum Wage Studies?"
- "Securities Transaction Taxes for U.S. Financial Markets" (possibly?)
The paper's references include modern economists such as:
- Keynes, J.M. (the original inventor of the tax on speculators, excl. his Chest Fund)
- Tobin, J. (twice)
as well as:
- Shiller, R. (of "excessive volatility" and "irrational exuberance" fame)
- Stiglitz, J. (see above)
and indeed one of the authors:
- Pollin, R. (twice)
So, after this introduction you know what heavyweight stuff must lurk within (you might see it for yourself here: http://ideas.repec.org/a/eej/eeconj/v29y2003i4p527-558.html ). So here are some of the most interesting quotes:
- "This is because arbitrage is risky [sic!], costly, and therefore limited. For example, when stock prices are inflated relative to fundamentals, arbitrageurs who choose to sell short face potential losses from prices moving still higher"
- "thick but unregulated financial markets operate inefficiently and irrationally"
-"standard fiscal and monetary policy tools cannot bring the economy to a full employment equilibrium when financial markets are highly speculative."
- "because financial market trading is heavily dominated by the relatively wealthy, the tax incidence will be highly progressive."
- "measures to create a less liquid futures market reduce stock market volatility in the short run,"
- "The cost of capital should fall if the STET [FTT] succeeds in creating a less risky financial environment, therefore lowering the risk/return tradeoffs for investors."
-"it is not obvious that more risk management activities by nonfinancial firms [hedging] contributed to a higher rate of real investment growth"
-"Swedish tax was narrowly targeted, applying only to trades executed through Swedish brokerage firms and did not apply to foreign trades of domestic taxpayers, even if they were of Swedish financial instruments [so the US citizens would be chased around the world, thus:] "the tax would apply equally to foreign transactions of U.S. nationals and corporations, as was the case with Denmarkâs STET [Shin 1989]. Finally, the U.S. STET would apply to trades of U.S. securities by foreigners in non U.S. markets. Even though such trades take place outside U.S. jurisdiction, holding a legal claim on the asset and income stream generated by the trade would still require legal endorsement within the U.S. Thus again, the stamp tax approach would create strong disincentives against noncompliance even for trades in foreign markets. [and it gets even less fair for foreign residents:] "To maintain the principle of broadest possible applicability, we propose that the U.S. STET apply to all traders in U.S. financial markets of both domestic and foreign residents."
- and here we come, banks or not banks - we would all be equally affected:
"The tax should apply to all trades and transfers. This would include trades by specialty brokers and market makers. This eliminates the ambiguity involved in determining who exactly is a market-maker in an over-the-counter market and in distinguishing between trades that are carried through to take a position as opposed to trades for the purpose of maintaining liquidity in the market."
- and I literally stopped reading after this revelation:
"an exchange-based trade of the largest market cap firm for the smallest trade amount will entail, on average, a .62 percent transaction cost. The 0.5 percent STET will add 81 percent to transaction costs. But even here, the STET is not out of the range of existing transaction costs." [yes they used the transaction costs estimates from 1990 in a 2003 paper, and included in it: a) commissions, b) bid ask spreads, and c) market impact / slippage / missed opportunity costs / chasing the stock. And remember that they applied this cost to market makers...
So, my friend, you had better be wrong, because if your thesis (that someone must suffer) is true, then Eastern Europe is coming soon to an ECN near you.... and it wasn't funny I tell you - not your champagne socialist Eastern Europe... the real, empty-shelved one.
Tobin Transaction Tax Idea Opposed By 93% Of Companies:Survey
http://online.wsj.com/article/BT-CO-20100202-707960.html?mod=WSJ_latestheadlines
LONDON (Dow Jones)--Several European countries have put their weight behind a proposed global tax on financial transactions as a means to pay for future crises but the idea is almost universally opposed by financial institutions, according to Greenwich Associates, the research company.
The company said a survey it conducted showed that 93% of companies and financial institutions oppose the idea of a transaction tax, often known as a Tobin tax after Nobel-winning economist James Tobin who proposed a tax on foreign-currency transactions to reduce volatility in the 1970s.
The greatest support for the idea lies among European companies where 12% of those surveyed were in favor while, in some other regions, opposition reached almost 100% of companies, according to Greenwich Associates which polled 190 companies in North America, Europe and Asia from Jan. 11 to Jan. 15.
"In all regions, corporations and financials believe the imposition of a Tobin/transaction tax would have a sharply negative impact on investment returns, market liquidity and pricing and on companies' ability to raise capital," said Andrew Awad, consultant at Greenwich Associates.
U.K. Prime Minister Gordon Brown proposed to other countries in the Group of 20 industrialized and developing nations in November that a Tobin tax should be developed on wholesale market transactions to pay for the costs of bailing out banks in future. Germany and France have signaled their support for the idea.
A global agreement on a Tobin tax is less likely, however, since the U.S. administration outlined plans to introduce its own levy on bank lending risks to pay for costs of the current turmoil. This means the government is unlikely to want to burden its banks with another tax , say some regulatory consultants.
http://online.wsj.com/article/BT-CO-20100202-707960.html?mod=WSJ_latestheadlines
LONDON (Dow Jones)--Several European countries have put their weight behind a proposed global tax on financial transactions as a means to pay for future crises but the idea is almost universally opposed by financial institutions, according to Greenwich Associates, the research company.
The company said a survey it conducted showed that 93% of companies and financial institutions oppose the idea of a transaction tax, often known as a Tobin tax after Nobel-winning economist James Tobin who proposed a tax on foreign-currency transactions to reduce volatility in the 1970s.
The greatest support for the idea lies among European companies where 12% of those surveyed were in favor while, in some other regions, opposition reached almost 100% of companies, according to Greenwich Associates which polled 190 companies in North America, Europe and Asia from Jan. 11 to Jan. 15.
"In all regions, corporations and financials believe the imposition of a Tobin/transaction tax would have a sharply negative impact on investment returns, market liquidity and pricing and on companies' ability to raise capital," said Andrew Awad, consultant at Greenwich Associates.
U.K. Prime Minister Gordon Brown proposed to other countries in the Group of 20 industrialized and developing nations in November that a Tobin tax should be developed on wholesale market transactions to pay for the costs of bailing out banks in future. Germany and France have signaled their support for the idea.
A global agreement on a Tobin tax is less likely, however, since the U.S. administration outlined plans to introduce its own levy on bank lending risks to pay for costs of the current turmoil. This means the government is unlikely to want to burden its banks with another tax , say some regulatory consultants.
So even in Socialist Europe only 12% of companies favor a 'Tobin Tax.' I think this speaks volumes (literally) lol. This tax needs to buried alongside Mr Tobin himself
-Guru
Taxing stock trades will kill the stock market.
If they really want to target speculation that caused problems like the housing bust they need to go to the source of the problems. They need to go after bank and mortgage companies recklessly lending money to people.
The way mortgage companies and banks value homes has absolutely no basis in reality. It is quite different from the way commercial property is valued. If homes were valued like commercial property I doubt the housing bust would have happened.
I think the solution would be to increase taxes on interest based income. I believe the current economic mess has been caused by interest based loans. When interest based loans exist in the economy massive amounts of money is created and then massive amounts of money is removed. These cycles create booms and busts. We are currently in one of the down cycles and no fury is known like the wrath of interest.
If they really want to target speculation that caused problems like the housing bust they need to go to the source of the problems. They need to go after bank and mortgage companies recklessly lending money to people.
The way mortgage companies and banks value homes has absolutely no basis in reality. It is quite different from the way commercial property is valued. If homes were valued like commercial property I doubt the housing bust would have happened.
I think the solution would be to increase taxes on interest based income. I believe the current economic mess has been caused by interest based loans. When interest based loans exist in the economy massive amounts of money is created and then massive amounts of money is removed. These cycles create booms and busts. We are currently in one of the down cycles and no fury is known like the wrath of interest.
Breakfast with Baker. How about an autograph?
------------------------------------------
Taxing Wall Street
February 9, 2010, 9:00am â 10:30am
About This Event.................
Featured Speakers:
Michael Ettlinger, Vice President for Economic Policy, Center for American Progress
Dean Baker, Co-Director, Center for Economic and Policy Research
Breakfast will be served at 8:30 a.m.
americanprogress.org/events/2010/02/ftt.html
------------------------------------------
Taxing Wall Street
February 9, 2010, 9:00am â 10:30am
About This Event.................
Featured Speakers:
Michael Ettlinger, Vice President for Economic Policy, Center for American Progress
Dean Baker, Co-Director, Center for Economic and Policy Research
Breakfast will be served at 8:30 a.m.
americanprogress.org/events/2010/02/ftt.html