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comment by dbingham
dbingham  ·  4805 days ago  ·  link  ·    ·  parent  ·  post: What is a Tobin Tax?
I'd never heard of this before, but now that I have I love the idea. A tax on all financial transactions? Expected to curb high speed trading, speculation and big financial bonuses? Perfect! Sounds like this would be a perfect way the curb many of the excesses of the market. It would increase the cost of trading and make people more carefully consider their trades. It would create an incentive for a smaller volume of longer term trades. Sounds like that's what we want!




craig  ·  4805 days ago  ·  link  ·  
God forbid we actually try and fix the real problems behind the euro crises, tax those evil traders, that will fix it! This has been tried before, suffice it to say, there were 'unintended consequences'. Sarkozy is just trying to deflect attention away from his mismanagement of the French economy, anyone who thinks the same politicians who got the euro-zone into this mess know how to get it out need to get their heads examined. The markets make easy political scapegoats due to the general lack of understanding of what role they actually play.
dbingham  ·  4805 days ago  ·  link  ·  
What were those 'unintended consequences' of which you speak?
craig  ·  4805 days ago  ·  link  ·  
You put a tax on a financial market, liquidity drains out of the market as there is always a cheaper place to do business. What you end up with are thin markets with increased volatility and getting far less than you anticipated in tax return due to the lower participation rates caused by the introduction of the tax, plus probably putting a bunch of people out of work in the process. It solves nothing, transaction taxes would not have stopped the 2007/2008 fiasco either, it's not about the amount you regulate, it's about what you regulate. Euro-zone countries spending more than they make has nothing to do with financial markets and everything to do with short sited political decision making.
dbingham  ·  4804 days ago  ·  link  ·  
You implied this was tried with known unintended consequences. Where and when was it tried and what, exactly, happened? Do you have citations?
mk  ·  4805 days ago  ·  link  ·  
>Euro-zone countries spending more than they make has nothing to do with financial markets and everything to do with short sited political decision making.

I think you are right about unintended consequences of a Tobin tax. I think it'd be more effective to simply put a minimum amount of time that you must hold any given asset. Trades are timestamped, so it would be easy. Even 1 hour would probably be an improvement.

Anyway, the fact that Greece could get low interest loans because they use the same currency as Germany is root of the problem, more than any political decisions, IMHO. It was too easy for Greek politicians to take the easy road when Germany's good credit was feeding their addiction. I really don't see the EU coming under one effective fiscal policy, and I think that is the only real solution. For that reason, I think the Euro is probably going to die.

craig  ·  4805 days ago  ·  link  ·  
>I think you are right about unintended consequences of a Tobin tax. I think it'd be more effective to simply put a minimum amount of time that you must hold any given asset. Trades are timestamped, so it would be easy. Even 1 hour would probably be an improvement.

Doing this would cause massive volatility, everybody would be stampeding in and out of assets at the same time. If you really want to stop HFT (which on the evidence available is actually nothing to do will the current market woes) you could simply make order cancellations more expensive, this would stop them all in their tracks. But I think this would solve nothing in the longer term.

>IMHO. It was too easy for Greek politicians to take the easy road when Germany's good credit was feeding their addiction. I really don't see the EU coming under one effective fiscal policy, and I think that is the only real solution. For that reason, I think the Euro is probably going to die.

Still seems like a political decision to me, the whole reason for the crises lunching from drama to drama is the refusal to let the euro die. But of course politicians would rather do any amount of damage than see their power bases eroded.

martin  ·  4528 days ago  ·  link  ·  
Curious if you still feel the Euro is going to die? Are they just prolonging the inevitable? A long painful death instead of a quick painful death?
mk  ·  4805 days ago  ·  link  ·  
Doing this would cause massive volatility, everybody would be stampeding in and out of assets at the same time.

If it was 1hr after the individual buy, it shouldn't synchronize sales. The buys are at different times, so the sales will be too.

If you really want to stop HFT (which on the evidence available is actually nothing to do will the current market woes) you could simply make order cancellations more expensive, this would stop them all in their tracks.

Maybe, but it might be difficult to make them expensive enough that it had an effect without other unintended consequences.

Still seems like a political decision to me, the whole reason for the crises lunching from drama to drama is the refusal to let the euro die. But of course politicians would rather do any amount of damage than see their power bases eroded.

And yet, saving the Euro (by centralizing the EU fiscal policy) would be a big erosion of power for member-state politicians. I think they are just not willing to face what it will mean for the EU, even as it looks more and more inevitable.

AnonymousCoward  ·  4805 days ago  ·  link  ·  
>Doing this would cause massive volatility, everybody would be stampeding in and out of assets at the same time. If you really want to stop HFT (which on the evidence available is actually nothing to do will the current market woes) you could simply make order cancellations more expensive, this would stop them all in their tracks. But I think this would solve nothing in the longer term.

I don't think he's saying they'd all be able to be sold or bought at the same time, just that 1 hour after it was bought, it could be sold.

Something bought at 8:30 could be sold at 9:30. It wouldn't make buying or selling only possible on the hour.

craig  ·  4805 days ago  ·  link  ·  
As anybody who knows day trading will tell you most traders trade at the start and the end of the day, but anyway I don't know for sure what the effect would be, nobody does.
craig  ·  4805 days ago  ·  link  ·  
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