Global Macro EconoMonitor.
http://www.roubini.com/globalmacro-monitor/260019/time_for_a_financial_transaction_tax
As a matter fact, 23 countries around the world have adopted a financial transaction tax (FTT), mostly as a means to cover the operating costs of domestic ...
Green comments:
Roubini is an economist professing to base his thinking on reason and logic. I find errors in his logic on the FTT. He seems more bent on emotion and intuition than sound reasoning against FTT.
Roubini blames financial toxic assets comparing them to his pollution tax argument.
The real culprit is the underlying economy and bad debtors not paying their bills. Without financial products and actively-traded financial markets, those bad debtors won't get credit, which dries up the economy. After Dodd-Frank Fin Reg and bailout chills, what Roubiniâs solutions will deliver are whatâs in effect now â less credit and fewer transactions â which is hurting the recovery. If you don't like what you see now - lack of credit - you won't like a permanent extension of credit and liquidity impairment caused by a draconian-version of a global FTT.
Roubini admits a FTT could dry up liquidity and fall unduly on small savers. Thatâs also Secretary Geithnerâs conclusions too. Roubini thinks an FTT dries up financial pollution too. But this liquidity-impairment actually dries up the entire river of water, so people can't drink clean water when they want to. Liquidity providers are better compared to the flow of water in the river, not to the polluters of complex financial products. Plus, complex financial products are not industrial waste or dirty water; they are like insurance and waste cleaning filters. Traders donât create financial products, investment and commercial bankers and insurance companies do.
Again, the real problem is with debtors not paying their bills. Governments and consumers have been spending far too much money based on debt, which the government enables consumers to use with their unreformed GSEs. Thatâs the dirty polluting aspect of financial toxic assets, which is floated in our rivers. Banks creating and stationing life preservers up and down the river are clean and safe.
Roubini calls the financial markets âtoxic liquidityâ and a âtragic mirage.â He plays the moral hazard card too, comparing financial products to home insurance. But only arsonistsâ burn down a house for insurance money, not banks and traders on their own portfolios.
Roubini says that Bear Stearns had way too many trades in the past few years and thatâs probably a connecting factor to the financial market meltdown. Wrong again. Bear Stearns was very strong as the leader in clearing business on Wall Street and thatâs why they had lots of counterparties and trading relationships. What brought down Bear Stearns was their straying into other risk on Wall Street, entering new businesses like longer-term investments in real estate assets through their own poorly-managed hedge funds. When the real estate prices dropped-off a cliff, Bear was caught in a liquidity trap and was not able to trade their way out of it. Trading and liquidity would have helped save Bear Stearns. Roubiniâs FTT would have made Bearâs problem worse, with even less liquidity drained by FTT.
Roubini doesnât make a compelling case for advocating a global FTT; in fact he does a better job laying out the counter arguments against a FTT.
I agree with Roubini that an FTT needs to be addressed on its own merits, not as a savior to the worldâs poor. On its own, FTT still makes no sense, unless you want to severely impinge on the efficient-want-to-be markets. Yes, financial markets arenât perfect and they are not purely-efficient as some claim, but they strive for efficiency and thatâs a whole lot better than caving into China-style government central-planning with price and liquidity controls. An FTT is liquidity controls to control market pricing and thatâs illegal and un-American.
http://www.roubini.com/globalmacro-monitor/260019/time_for_a_financial_transaction_tax
As a matter fact, 23 countries around the world have adopted a financial transaction tax (FTT), mostly as a means to cover the operating costs of domestic ...
Green comments:
Roubini is an economist professing to base his thinking on reason and logic. I find errors in his logic on the FTT. He seems more bent on emotion and intuition than sound reasoning against FTT.
Roubini blames financial toxic assets comparing them to his pollution tax argument.
The real culprit is the underlying economy and bad debtors not paying their bills. Without financial products and actively-traded financial markets, those bad debtors won't get credit, which dries up the economy. After Dodd-Frank Fin Reg and bailout chills, what Roubiniâs solutions will deliver are whatâs in effect now â less credit and fewer transactions â which is hurting the recovery. If you don't like what you see now - lack of credit - you won't like a permanent extension of credit and liquidity impairment caused by a draconian-version of a global FTT.
Roubini admits a FTT could dry up liquidity and fall unduly on small savers. Thatâs also Secretary Geithnerâs conclusions too. Roubini thinks an FTT dries up financial pollution too. But this liquidity-impairment actually dries up the entire river of water, so people can't drink clean water when they want to. Liquidity providers are better compared to the flow of water in the river, not to the polluters of complex financial products. Plus, complex financial products are not industrial waste or dirty water; they are like insurance and waste cleaning filters. Traders donât create financial products, investment and commercial bankers and insurance companies do.
Again, the real problem is with debtors not paying their bills. Governments and consumers have been spending far too much money based on debt, which the government enables consumers to use with their unreformed GSEs. Thatâs the dirty polluting aspect of financial toxic assets, which is floated in our rivers. Banks creating and stationing life preservers up and down the river are clean and safe.
Roubini calls the financial markets âtoxic liquidityâ and a âtragic mirage.â He plays the moral hazard card too, comparing financial products to home insurance. But only arsonistsâ burn down a house for insurance money, not banks and traders on their own portfolios.
Roubini says that Bear Stearns had way too many trades in the past few years and thatâs probably a connecting factor to the financial market meltdown. Wrong again. Bear Stearns was very strong as the leader in clearing business on Wall Street and thatâs why they had lots of counterparties and trading relationships. What brought down Bear Stearns was their straying into other risk on Wall Street, entering new businesses like longer-term investments in real estate assets through their own poorly-managed hedge funds. When the real estate prices dropped-off a cliff, Bear was caught in a liquidity trap and was not able to trade their way out of it. Trading and liquidity would have helped save Bear Stearns. Roubiniâs FTT would have made Bearâs problem worse, with even less liquidity drained by FTT.
Roubini doesnât make a compelling case for advocating a global FTT; in fact he does a better job laying out the counter arguments against a FTT.
I agree with Roubini that an FTT needs to be addressed on its own merits, not as a savior to the worldâs poor. On its own, FTT still makes no sense, unless you want to severely impinge on the efficient-want-to-be markets. Yes, financial markets arenât perfect and they are not purely-efficient as some claim, but they strive for efficiency and thatâs a whole lot better than caving into China-style government central-planning with price and liquidity controls. An FTT is liquidity controls to control market pricing and thatâs illegal and un-American.
