Ritchie and Larry were in favour. And this point was made:
Ah yes, but is Will Hutton in favour? That would seal the deal
Yes, he is and the deal is sealed.
Turner thinks that Britain should call for the introduction of an international transactions tax – a bit like stamp duty – on the trading of all international financial securities, assets and derivatives. This so-called Tobin tax, after Nobel Prize winner James Tobin who first proposed it, would reduce the volatility, volumes and general craziness while striking at excess bank profitability and huge bonuses. The proceeds could be used, as Turner said in his Prospect interview, as a nice source of income to finance global public good ranging from poverty alleviation to health.
So yes, we’ve our three leftie luminaries about taxation stating that the way to make markets more efficient is to make them more inefficient.
Well done lads, true genius.
The derivatives markets value is four times larger than the underlying assets they are allegedly hedging.
Oh my word Willy, only just spotted that? Derivatives markets are always hugely larger than the underlying assets. Wheat futures are vastly larger than the entire global wheat crop….secondary traading of shares is vastly larger than primary issuance. In fact, they have to be larger, for what the secondary, futures and derivatives markets are about is shifting, dispersing, risk and you can’t do that effectively if risks are going from a larger pool of money to a smaller one. That’s concentrating risks, precisely not what we’re trying to do.
What is the City doing that is so important that the financial services sector has increased by a third while its share of corporate profits have doubled?
It’s taking part in the international division and specialisation of labour, that’s what it’s doing. Just as Rolls Royce makes a third of all jet engines and turbines globally, Scotland makes 100% of Grand Theft Auto globally (at least I’ve so been told) and China makes 150% of all cheap tatty tchotke, The City has a share of the international financial markets larger than Britain’s share of the global economy.
It is, very simply, David Ricardo in action, stuff we’ve known about since 1817: about time you caught up with modern thinking in economics, ain’t it?
But just imagine how electrifying it would be if Gordon Brown made a speech along Turner’s lines, proposed a royal commission to assess what kind of financial services industry Britain now needs and committed himself to trying to find international consensus on a Tobin tax. Intellectually, the case is unanswerable.
No, it’s not that the case is intellectually unanswerable, there’s a reasonable outline of an answer above. It’s that your case for it is intellectually incoherent. Pointing out that said case comes from Will Hutton would simply be to repeat myself.