http://bostonreview.net/BR35.1/baker.php Dean Baker again. I also saw him on PBS 2 nights ago and he is forecasting a big W recession. That inspired my last post on a W recession providing a breeding ground for a FTT. Baker needs a doomsday scenario to justify anti-capitalism, government regulation and control and his great FTT Theory. I'll read the above long article tomorrow. Good night. From iPhone
http://m.ft.com/cms/s/0/bcecb612-fa...?catid=2&SID=72a84ee971d4aa4807c3832289b7230e UK PM Brown on very thin ice. The UK FTT is a lame duck.
http://m.ft.com/cms/s/0/1b733a94-fb...?catid=6&SID=fde4df7be416a3994b8bc8493a15d921 http://online.wsj.com/article/SB126283525327919113.html?mod=WSJ_hps_LEFTWhatsNews in wsj too this could be good for no FTT. Linking bank compensation rules like clawbacks to FDIC fee levies better focuses on the problems at hand. Smarter thinking from Congress.
Baker has a book coming out in April. He'll be pushing for interviews wherever he can get them for the next several months. Expect to see more of him for a while.
Damon Silvers, policy director at the AFL-CIO, argues that the tax would encourage long-term investment while discouraging what he called âchurningâ of stock trades. Investors in buy-and-hold index funds would pay far less as a result of the tax than investors in actively managed funds, he said. âThis would be a disincentive to invest in strategies that the public often puts their money in, but experts know don't often work,â he said, referring to actively managed funds. http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20100103/REG/301039993 Investment advice from the AFL-CIO.
I'm afraid it is just wishful thinking - normative economists are again trying to save people from their (our) bad habits. In reality taxing capital creates a clear incentive to reduce its use. And even stock investors can reduce capital use with ease by increasing the very thing Tobin tax proponents want to reduce - volatility. For a day-trader the choice between a standard ETF and its version leveraged 2:1, which would require only 50% capital to achieve the same returns, is rather obvious. So if the Government does not ban leveraged ETFs, short-term traders will switch to these vehicles, reducing aggregate market turnover and transactions tax base accordingly. But it gets even worse with long term fund investors. They cannot use leveraged ETFs, because of the obvious time decay (synthetic theta bleed) associated with long-term performance of these derivative-like 'stocks'. So instead long-term investors will go for the most volatile funds: foreign commodity producers and foreign emerging markets funds. In preference to established, blue-chip American companies, Tobin tax would create an incentive to seek out the most volatile, smallest *foreign* markets and track their indices... making it increasingly difficult for US exchanges to attract new capital (with foreign markets offering better exit returns for early stage investors such as private equity funds). And all that just to maximize volatility of the invested capital, because that would reduce the Tobin tax liability. Even active fund managers are likely to prefer more volatile stocks when they start being punished for their annual turnover. Their elusive alpha will be attacked from three fronts: through increased bid/ask spreads (any exemptions here would be impossible), tax on their non-exempt transactions, and increased preference for risk taking (which decreases risk-adjusted returns, e.g. the abovementioned alpha). Last but not least, running an actively managed mutual fund creates more jobs than running a passive index fund or an ETF. Stock analysts jobs created by active management firms scale much more slowly than ETF capacity. Passive investment strategies scale almost automatically, requiring only minor changes in software development teams and server support staff, these days mostly offshored anyway. So the Tobin tax would target the very place which creates most jobs in the US investment industry, while channelling money to the Japanese-style 'fund factories' (run mostly by banks), ETFs which can be run by the same numer of software engineers, regardless of the fund turnover. Need I only mention that job creation was supposed to be one of the official selling points of this tax... How many investment companies did it require to saturate the market with ETFs? And how many actively managed fund companies are there in the States with how many employees? Ask yourself these questions dear Mr Silvers before you praise a tax on ineffective 'stock churning' ever again...
Wishful thinking, I suspect...none of the main players in the Labour party have the balls to properly stand up to Brown. Also, I think all of the potential replacements (Alan Johnson, Harriet Harmon) would rather take over after Brown is defeated at the election (a clean break with past, easier to re-model the party etc). He'll survive until the election, which he'll hopefully lose. And even if I'm wrong and he is replaced (I would be happy to be wrong, trust me), with a fresh face at the helm that would possibly improve Labour's chances of denying Cameron an election win. Another Labour victory really would be a disaster because it would keep the Trichet-<New Labour leader>-Merkel European socialist trio together at the top of the EU power struggle. So, as hard as it is for me to say this, ironically it might be better if Brown clings on until the election, because that improves Cameron's chances of winning the election.
I agree. I would argue it is similar to Senator Dodd in CT. If he had stayed in office, he most likely would have lost to any Republican this fall. Instead, according to intrade, the Dems are now likely to keep this seat. In addition, I would assume that whoever replaces Brown will also be in favor of the FTT. So, I am thinking that to win the war, we may be better off losing this battle, ie keep Brown in charge of Labour so that his party can much easier get beaten in the election.
An other thing we usually forget to point out is that there are a lot of markets where the majority of volume/money goes OTC. A lot of futures contract are just a "facade" for huge cash/OTC markets... Who trades OTC? Banks. Who will be taxed as OTC is not taxed? Little investors for the most part. Depending on the markets, banks would not even have to trade in an other country as they can still trade OTC... We need to tell the IMF about that.