“Which brings me to your long point on FTTs: tell me what the real cost of a 10bp margin is and who will really lose.”
OK. Taking the numbers you’ve given me here.
Before the tax we have a 2 bps margin. We add the 0.5 bps tax. We then have a 10 bps margin. Those are the numbers you’ve given me.
Take one more number. The approximately $30 billion you say such a 0.5 bps tax will raise from the FX market.
Margins have been raised by 8 bps as a result of the tax. That is 16 times the revenues from the 0.5 bps tax. That is $480 billion.
Note that this is indeed already including the effect of lower transaction volumes: for your estimate of the tax revenues already includes this.
All users of the financial system are thus carrying a burden of $510 billion (the tax plus the rise in margins) in order to gain $30 billion in tax revenue.
The losers here are the users of the financial system by some half a trillion dollars. Those who gain, well, it looks to me like the bankers actually. They’ve got $480 billion in higher margins to play with.
The net effect of this tax therefore is a huge transfer from us the consumers of financial products to the providers of financial products.
Doesn’t sound what like any of us is trying to do really. Certainly the outcome is exactly the opposite of what you say you’re trying to achieve.