Bill Mitchell — Progressives should move on from a reliance on ‘Robin Hood’ taxes

There was an article in the International Politics and Society journal (August 27, 2017) – Robin Hood had the right idea – which continues to demonstrate, how in my view the Left has gone down a deadend path with respect to financial market reform and re-establishing a credible progressive agenda. The sub-title of the article ‘Why the left needs to deliver on the financial transaction tax’ indicates that the author, Stephany Griffith-Jones, who has long advocated positions I am sympathetic too (particularly wirht respect to development economics), thinks a financial tax is a viable strategy for the Left to push. The problem is that none of these ‘Robin Hood solutions’ are viable and are based on faulty understandings of the way monetary systems operate....

Bill Mitchell – billy blog
Progressives should move on from a reliance on ‘Robin Hood’ taxes
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Tony Wikrent — Michael Lewis: The Book That Will Save Banking From Itself

During my visit with Jon last month, we both agreed that Michael Lewis is one of the best USA writers living. Here is partial list of some of Lewis's books:

• Liar's Poker: Rising Through the Wreckage of Wall Street (1989)
• Moneyball: The Art of Winning an Unfair Game (2003)
• The Blind Side: Evolution of a Game (2006)
• The Big Short: Inside the Doomsday Machine (2010)

The Big Short was the basis of the movie Jon reviewed here a couple months ago; I reviewed the book back in June 2011.

Since the article below was written by Lewis, I overcame my grave misgivings, and decided to post it here. It is a rather detailed review of a recent book by the former governor of the Bank of England (2003-2013) Mervyn King. The books is entitled The End of Alchemy: Money, Banking, and the Future of the Global Economy, and it presents King's argument that nothing has fundamentally altered the financial system's stupidity, greed, and appetite for high-payoff risks, then King's detailed proposal for what governments and financial regulators should do before the next crisis inevitably hits. 

Normally, I do not believe that highly technocratic financial discussions conduce to furthering an enlightened public discourse. Frankly, such discussions are usually a steaming pile of bovine manure. But now that it appears that our sole choice for USA President is Trumpillary, it seems very likely that the best we can hope for in terms of forcing the banksters to behave civilly is exactly the sort of proposal King is putting forward.…

Good read.

real economics
Michael Lewis: The Book That Will Save Banking From Itself
Tony Wikrent

Jared Bernstein — A financial transaction tax is a Pigouvian tax!

Regulators have various ideas of how to regulate against spoofing, front-running (where flash traders get information on trades milliseconds before the public), and other such high-frequency fun and games; I’ve written about them before. They generally work by creating speed bumps in the trading process, say by moving from continuous trading to “batch trading,” thereby taking away the millisecond advantages of the flashers.

That might work, but it might not. You ask me, an arms race against quants who live to write regulation-beating algorithms is a recipe for more of the same. For example, suppose batch trades across different exchanges are not perfectly synchronized. That’s an opportunity for high-frequency arbitrage.

A better, simpler way—and one with numerous positive externalities—is a financial transaction tax, a small excise tax on the security trades, typically a few basis points (hundredths of a percent) on the value of the trade. A three basis points FTT is scored as raising over $300 billion over 10 years, a score that includes its dampening impact on trades.

Of course, that last bit is a feature, not a bug. We’d have to try it to find out, but it is widely believed that an FTT, even one of the tiny magnitude just noted, would wipe out most high-frequency trading. Though the flash boys can generate huge payouts, the volume of trades they must execute to do so quickly becomes too costly once they’re taxed.

In that regard, the FTT is a Pigouvian tax: a tax that offsets the significant, external costs imposed on the larger society by activities like smoking or polluting. And it does so while generating much needed revenue.

There are, of course, arguments against the FTT—by reducing trading, it dampens liquidity; it pushes traders to other exchanges to escape the tax. I deal with some of these concerns here, as does Dean Baker here. I take these concerns seriously, but my strongly held belief is that the likely benefits outweigh potential costs.…

Jared Bernstein | On the Economy
A financial transaction tax is a Pigouvian tax!
Jared Bernstein

beowulf — Fighting the Bond Vigilantes with Security Theater

The ever-resourceful beowulf comes up with another gem.It's very insightful and also quite funny sardonically.

Monetary Realism

Fighting the Bond Vigilantes with Security Theater
beowulf

Cameron says no to financial transaction tax if not global

Prime Minister David Cameron has said for the first time he would veto a European-wide financial transaction tax unless it was imposed globally, deepening a confrontation with European Union heavyweights France and Germany.

Read it at The Telegraph (UK)

David Cameron: I will veto financial transaction tax

by Reuters
(h/t Credit Writedowns)

"Think globally, act locally."

Financial Transaction Tax gains steam

 Supporters of the tax include the expected -- the AFL-CIO, Democratic benefactor George Soros, economist Dean Baker, one of the few who saw the housing bubble and predicted its bursting, and consumer advocate Ralph Nader. The unexpected include billionaires Bill Gates and Peter G. Peterson; former Goldman Sachs chairman John Whitehead, and former chairman of the Federal Reserve Paul Volcker. Conservative political leaders behind it include German chancellor Angela Merkel and French president Nicolas Sarkozy. Experts promoting it include Nobel Laureates Joseph Stiglitz and Paul Krugman. Moral leaders advocating for it include Archbishop of Canterbury Rowan Williams and the Pontifical Council for Justice and Peace....

The European Commission recommended in September that the 27 European Union member countries adopt a .1 percent tax on financial transactions beginning in 2014. It estimated that the tax would raise $78 billion a year. Europe hesitates to institute the tax without a similar levy in the United States.
Earlier this month, two U.S. lawmakers who have long supported the levy introduced legislation to impose a smaller tax -- .03 percent or 3 cents on $100 in transactions. The tax proposed by U.S. Rep. Peter DeFazio, D-Ore, and Sen. Tom Harkin, D-Iowa, would raise about $350 billion over a decade.

Read the whole post at AlterNet
Crash Tax: Wall Street Should Pay Reparations to the 99%

It's out of paradigm, since national governments with currency sovereignty don't fund themselves through taxation. However, taxation does act as a negative reinforcement of behavior, and it is arguable that a FTF would result in more orderly markets by reducing the "froth" due to "animal spirits."

Financial Transaction Tax (FTT)

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.

Bruce Kasting on a transaction tax

Bruce Krasting warns Dean Baker and the 99%'ers to beware of what they wish for.

Read the post at Zero Hedge, Enlightened Self Interest by Bruce Krasting

Krasting concludes:

I’m half serious and half joking this morning. I’m looking at the TV and all of the OWS stuff that is happening around the world. This is gathering speed very quickly now. Anyone who thinks this is going to go away in a few days is just nuts.

One global response from the “Deciders” to the current protests could be a transaction tax. That would be “popular”. It might just be something that is done as a way of appeasing the crowds. Whatever one thought of the possibility of a transaction tax a month ago, those estimates have to go up today. The bigger the protests, the greater the probability that the tax is implemented.

A transaction tax would be like Prohibition. The Volstead Act just made crooks rich. It cost the government billions in lost revenue. The population came to hate it. It was bad policy that was adopted because of a visible protest movement of that time.

The left side of my brain is with Rogoff. A transaction tax would kill liquidity/capital formation. That would result in a huge spike in volatility. This, in turn, would result in broadly lower equity multiples. The connection between stocks and the economy is too tightly correlated. A very sharp downturn in the economy would have to follow. For these reasons, I’m violently apposed to a transaction tax.

The right side of my brain says, “Bring it on”. I’m confident that I can survive and thrive in that environment. Fortunes were made in the 30’s. What may come will be no different.

I do want to be clear about this. The 99% have been pushing the transaction tax. They may get what they think they want. But in the end it will result in more pain for the 99’ers. The concentration of wealth in America will just get higher and higher up the ladder.

A transaction tax that limits liquidity will not create jobs, it will end up costing the government net tax dollars. But guys like me will do just fine.

Be careful of what you wish for.

Is it the case that "a transaction tax would kill liquidity/capital formation," as Rogoff claims?

Or is the real issue effective demand?

Europe to get financial transactions tax?

Europe looks set to shrug off US objections and go it alone with a financial transactions tax, an EU source said Tuesday, with Brussels due to imminently release proposals likely to raise a storm even within the bloc's ranks.

Brussels to release financial tax plan despite US objections by Agence France-Presse