CANNES - While the Greek bailout and stimulus package dominated discussion among the Group of 20 (G-20) major industrialized and emerging market economies at the high-level summit in Cannes, France, last week, the proposed financial transactions tax (FTT) received meagre attention.
Dubbed by some economists and activists as the "Robin Hood tax" or "Tobin tax", the FTT has enjoyed marginal but sustained support from hard-hitters in the G-20. The purpose of a Tobin tax is to raise money by setting a very low taxation level, of hundredths or thousands of a percent, on a very large number of transactions.
In February, French President Nicolas Sarkozy nudged Microsoft co-founder Bill Gates to prepare a report on the enormous potential of such a tax to jump-start development in poor countries, particularly after the 2008-2009 crash pushed many donor nations to slash their official development assistance to the global south.
A "technical note" from the report, released at the World Bank and International Monetary Fund meetings in Washington in September, claimed that the adoption of an FTT by the G-20 or even the European Union could generate "substantial resources.
According to the note, "Some modeling suggests that even a small tax of 10 bp [basis points] on equities and two bp on bonds would yield about [US$] 48 billion on a G-20-wide basis, or [$]9 billion if confined to larger European economies. Some FTT proposals offer substantially larger estimates, in the [$]100-250 billion [dollar] range, especially if derivatives are included."
Read the rest at Asia Times,
Push on for Tobin tax
by Cleo Fatoorehchi
The significant point about this transaction tax crafted by Bill Gates is that it would recycle funds from the top, where they are primarily saved, to the bottom, where they would be spent, thereby increasing global demand, especially in the developing countries, where demand is lagging most.
Just going from memory here, but I thought the 2005/2006 Citigroup plutonomy report said that the 1% were spending like there's no tomorrow and not saving ?
ReplyDeleteAnyone have current figures on saving rates for rich vs. poor ?
Spending is like blood flow - it must reach all parts of the body.
ReplyDeleteDan, the wealthiest are the biggest spenders, accounting for about 40% of GDP, IIRC., much of that "luxury" purchases.
ReplyDeleteAnd they are also the biggest savers, which is what "wealthy" means.
I'm not usually a fan of taxes except tariffs to prevent leakage but FTT might to some good.
ReplyDeleteI'm more interesting in using a FTT to slow down flashing trading. We don't need another flash crash because a couple algorithms get lock into loops with each other.
As the MMTer knows, the power to tax is the power to destroy and there is certainly many kinds of activity that needs to be destroyed.
My understanding is that MMT says that taxes regulate demand and so any FTT must be thought in terms of what kind of financial transactions should we be limiting demand for.
I believe for any FTT to work we would need someone who really understands the different speculative and necessary financial transaction classes and without Glass Steagal I'm afraid that could rather difficult to know.
And by the way, welcome back Tom. Did anyone see Beowulf's letter to Sanders that was posted over at Traders Crucible?
I thought it was excellent.