I added my below Comment to the WSJ article.
http://online.wsj.com/article/SB10001424053111903639404576514442074736706.html
Excellent analysis and writing about the FTT. Iâve written about this subject a lot and this writer captured it very well in a fairly short space.
Just because Europe is becoming more desperate by the day â which is months for them when it comes to action - in dealing with its sovereign-debt crisis, doesnât make the ludicrous FTT argument any less ludicrous. Yes, it does make Europe more tax hungry and it feeds their populist anger against the financial services industry and traders.
Putting your hands in the tax cookie jar, and trying to bake in FTT tax cookies will be the end for the greedy politicians involved. FTT will not happen because itâs financial market suicide. It will cause a flash crash in Europe overnight with market-makers fleeing the electronic markets. There wonât be speculative buyers for PIIGS debt at distressed prices. There wonât be market-makers providing liquidity and hedging opportunities to farmers, airlines, other corporations, pension funds and retail investors. Financial markets will become dysfunctional, volatile, dangerous, more expensive and less competitive.
Europe wonât collect even a tiny fraction of their big-hungry-stomach projections and they will lose much more in income taxes on financial service industry and trading losses. They will lose jobs and it will be the final nail in the EU-further integration coffin.
Whenever Europe is paralyzed to act in the continuing meltdown saga since 2008, it raises the FTT card to appease the angry and politically-powerful left. Europe is dealing with real austerity unlike much of America yet. Itâs painful and Europeans are more bank-unfriendly in general than Americans are. Many in the EU â outside of the UK - view traders as parasite speculators (an ignorant view) and theyâve been quick to ban short selling too. FTT is a placeholder to keep the left at bay and for political maneuvering.
The only real threat for an EU-wide FTT is that itâs viewed as a convenient new EU federal tax. EU federalists will push it with desperation, but this EU crisis is too severe at this juncture for its consideration. This EU federal âtaxation without representationâ â how many EU country taxpayers consider it - will generate Tea Party type fractures to EU federalization at this juncture. Rather than buttressing the left, it will buttress dangerous far-right nationalists.
First, fix this crisis and mess directly, rather than try to turn this crisis into an opportunity for Germany and France to take over the center of Europe, and kick out the fringe weaker countries. EU officials donât take this poisonous FTT bait, you will regret it.
