Yes I understand why we have an electoral college, I am a former history major. It's was merely an attempt to point out some of the rather un-democratic things in the US.
I know that's why it won't happen until the pain is great enough for ppl. to rise up. Right now the avg. American cares more about his favorite tv program, IMO, than foreign affairs. We don't take the time to question much of anything, we accept that our leaders know best. This is scary. I have friends and some family in Canada. One of the major differences hear from talking to them is that the first response is " Why are we doing this "? Not so in America. Ppl. just accept that our leaders do what's best for us. Never mind the millions they take in handouts and kickbacks. You probably think I don't love America, far from it, but it's depressing thinking about how different our country has strayed from the original goal of the founding fathers. These days I joke the only difference Mexico and America, is in Mexico they ask for a $20 on the road side for speeding in America they ask for a $2,500 contribution to "the party". Our corruption is simply more sophisticated than theirs. I cautiously optimistic that there will be some changes, however small.
Sky, with all due respect, do you honestly think that liquidity has no benefits? What markets do you trade? My guess is that you trade very liquid markets.
Of course it doesnt' have an efficient market. There is no such thing as an efficient market, only more or less efficient ones. The UK definitely has less liquidity and efficiency than the US for equivalent size stocks. Have you actually traded small-cap stocks in the UK? I did for several years, believe me I would have *killed* to have had a dozen daytraders in each of those stocks, and no 0.5% tax. I remember in 1996 I was up about 22% on the year, if I had been able to buy at the mid-price instead of on the offer, I would have been up 40%. That's an 18% loss of return due to wide spreads and illiquidity.
Professional economists pretty much agree that daytraders and other short-term speculators play an important role in the markets, with respect to liquidity provision and price discovery. Every day I get bids and offers hit that are 1 or more ticks better than the person on the other side would have got if I were not there. When I'm exiting a trade, the person on the other side often gets a 5-10 ticks better price compared to the next bid down or offer up if I was not there. Multiply that by 250 trading days a year, 30-50 round turns per day, and you are talking 20k-60k ticks (that's about 200k-600k) saved per year by investors, just from me alone. Multiply that by what, 5000-10000 professional daytraders, plus floor traders, screen traders doing futures, algos, high-frequency hedge funds, many of them much much bigger size than me. It adds up to a LOT of money.
It also gives price discovery i.e. making sure the price is clear and most accurately reflects the sum of all available news and information as often as possible. The more active speculators competing for profit, the more efficient the price will be on average, thus the greater the chance that an investor/hedger gets a fair price rather than an artificially high or low one. If a market trades by appointment and has a 10% wide bid-offer spread, any private investor buying or selling gets raped i) on the spread ii) because the price is opaque and he has no idea if news is out and reflected in the price iii) because he can't do volume without shifting the price. An active community of short-term traders in the stock means a narrow spread, a clear and more accurate price updated in seconds not minutes or hours, and more volume to be able to trade with. Liquidity also affects end-users of markets. Illiquid assets almost always trade at a significant discount to liquid assets. People prefer something they can cash in at close to fair value if they need to, over something that might take ages to sell, and distort the price heavily if any big volume were done. Thus illiquid shares will trade at lower valuations than liquid ones. This means companies who issue shares will now have to do so at lower valuations to compensate for the illiquidity. That makes capital more expensive, which means lower investment, lower productivity, lower employment, and lower growth. Is this worth it across the whole market economy and stock/futures markets, for a measly $100 bln? The economic effects would amount to way more than that, and the tax may actually *reduce* overall government revenue, thus not only making the tax worthless, but destructive. If you can't see the benefit of that, you need to study more about markets, economics, investment and their benefits. That's why the west is rich and N Korea and Cuba are poor. The richest countries have the largest number of speculators, traders, hedge funds, financiers etc. That's not a coincidence. Finally, there's the not inconsiderable point that it would destroy the livelihoods of hundreds of thousands of people who trade markets actively or work for institutions that rely on and facilitate that business. THis would also have major knock-on effects on the local economies of financial centres, and the USA's pre-eminence as a world financial centre. It also has serious moral implications - you are putting people and families out on the street, when they have done nothing wrong. They pay their taxes and follow the rules like anyone else, why should they get hit when they have a viable occupation? Daytraders didn't make LEH or BSC or AIG make insane gambles with 30-1 leverage, why should they get the brunt of the punishment?
A group of House Democrats is proposing to make Wall Street companies and investors pay more of the cost of any financial rescue plan through a new tax. LOVE Him or hate him when was the last time bush signed a new tax into law? i think Paulson and bush our on our side this time.
You would think that if it was a real possiblility then the stock of the New York Exchange and Nasdaq would have sold off much worst then it did the last few days.