Did you not notice the gigantic financial crisis?
The crisis was the result of complex mortgage-backed assets, insurance companies writing suicidal credit default swaps and highly leveraged banks – and nothing to do with short-term share trading. The exception is the overnight repurchase market, which suffered the equivalent of bank runs and involves short-term trading. But the repo market is excluded from the new European Commission proposal. So the FTT is at best irrelevant to financial stability.But surely you’re not saying we shouldn’t tax banks and bankers?
Of course we should. I’m with the IMF on this: the FTT is feasible but we have better options, including value added tax on financial services or taxing balance-sheet debt to reduce leverage. To invert an old saying, the FTT is the best possible tax on banks – apart from all the other ones that have been tried.
It’s simply a horribly bad idea.
4 responses so far ↓
1 Matthew L // Feb 2, 2013 at 1:54 pm
Some ghastly socialist came to halls of residence when I was a second year to talk to us about her party’s policies. Central was an FTT and she couldn’t explain why it was worth it, except “more money for the poor”.
2 MellorSJ // Feb 3, 2013 at 5:58 am
Ghastly? You must be English.
3 3x2 // Feb 4, 2013 at 8:11 pm
I think it depends upon the level of the tax and hence its purpose. If it is designed to damage HFT then they have my vote.
I would go as far as suggesting that unless HFT is stamped out nobody, outside the major players, in their right mind would enter ‘the markets’. Ultimately this problem spreads into larger players such as pension funds. At that point – where do they invest?
4 Management of credit risk and the financial crisis – the credit default swaps of debt? · MyInfoBlogg.COM // Feb 5, 2013 at 7:49 am
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