"The beauty of a Tobin tax is that it would discourage short-term speculation without having much adverse effect on long-term international investment decisions. Consider, for example, a tax of 0.25% applied to all cross-border financial transactions. Such a tax would instantaneously kill the intra-day trading that takes place in pursuit of profit margins much smaller than this, as well as the longer-term trades designed to exploit minute differentials across markets. . . . Meanwhile, investors with longer time horizons going after significant returns would not be much deterred by the tax.
Besides technical questions about how to implement the tax internationally, the offshore argument probably presents the most serious challenge. Should a Tobin tax pass in the U.S., investors would be likely to move to other markets beyond the reach of taxation. The U.S. could penalize traders for doing business abroad, but governments in major markets like Germany and London would no doubt need to endorse the tax for any meaningful shift to be seen. Some experts have argued that the Tobin tax would be best implemented by an international institution such as the United Nations. But other observers see any international tax as a move toward further strengthening the power of the global financial oligarchs. Just the fact that the United Nations, the G20, and the Bank for International Settlements are discussing this option, however, suggests that we the people need to jump in and stake out our claim, before we lose the tax money to international bodies controlled by global bankers. The tax needs to be collected by the U.S. Treasury and go into U.S. coffers. It needs to reach Main Street, where it can be used to stimulate local business and investment.
Officials from the International Monetary Fund insist that implementing a Tobin tax would be logistically impossible. But Joseph Stiglitz, a Nobel Prize winning economist and former World Bank leader, disagrees. In Istanbul in early October, he said that a Tobin tax was not only necessary but, thanks to modern technology, would be easier to implement than ever before. "The financial sector polluted the global economy with toxic assets, he said, "and now they ought to clean it out.
Economist Hazel Henderson proposes a computerized system for imposing a graduated tax, designed to kill "bear raids (organized attacks by short sellers). Bear raids directed at vulnerable currencies have been known to collapse economies. She writes:
"Such a currency exchange tax would be simple to collect using a computerized system, which can be installed on trading screens, such as the Foreign Exchange Transaction Reporting System (FXTRS). This system operates like an electronic version of Wall Street's venerable ˜uptick rule' . . . to curb naked short-selling. The FXTRS computerized uptick rule would gradually raise the tax up to a maximum of 1% whenever a bear raid starts attacking a weak currency. Such bear raids are rarely to ˜discipline' a country's policies, as traders claim, but rather to make quick profits.
Henderson notes that world economies have become so interlinked that such win-lose strategies are no longer sustainable:
"In systems terms, the global economy, by virtue of its real-time technological inter-linkages, has become a de facto global commons, a common resource of all its users. Such commons require win-win agreements, rules and standards applicable to all users. If normal competitive behavior (win-lose) continues, the result is lose-lose as competition between players leads to sub-optimization and the system itself absorbs risks and eventually can break down, as witnessed in the current crisis.
The financial rescue operations to date have been win-lose, with Main Street being sacrificed at the altar of Wall Street. Some 48 states have faced budget crises in the past year, forcing them to cut libraries, schools, and police forces, and to raise taxes on income and sales. A sales tax on the exotic financial products responsible for precipitating the economic crisis could help level the playing field and put some points on the populist side of the scoreboard.
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