Op-Ed Columnist - Taxing the Speculators - NYTimes.com.
Should we use taxes to deter financial speculation? Yes, say top British officials, who oversee the City of London, one of the world’s two great banking centers. Other European governments agree — and they’re right.
Unfortunately, United States officials — especially Timothy Geithner, the Treasury secretary — are dead set against the proposal. Let’s hope they reconsider: a financial transactions tax is an idea whose time has come.
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presumably because Krugman is a mainstream economist who uses a whole discredited system of thought and useless methodology, you’re not going to pay the slightest attention to him, right?
see also Tyler Cowen and Greg Mankiw on same topic.
I read Krugmans article , the problem with it is that this Tobin tax would almost certainly be a huge negative for the UK , the UK employs a huge number of people in the foreign exchange business it is one industry where we are truly global leaders
The banking crisis had no impact on this business and indeed the revenues from foreign exchange has kept many banks in much better shape than the otherwise would be, None of this crisis has anything to do with the FX business which for banks is low risk and uses little capital , unlike trading of bonds credit derivatives or making loans. A foreign bank like Deutsche bank has many hundreds of staff working in London who would be forced to move offshore if the tax were introduced unilaterally.
Any attempt to tax this business will simply move the jobs associated with the trade offshore, where there is regulation in FX what tends to happen is rather than trade deliverable FX an offshore NDF ( non deliverable forward ) market tends to develop, so for currencies like Korean won or Malaysian Rinngit the major markets for those currencies are offshore and not settled domestically. If the UK introduced the tobin tax , unless it could persuade all countries in the world to likewise adopt such a tax it would raise little revenue and only serve to force many jobs offshore, this would be the biggest gift the UK could ever make to Switzerland , Hong Kong and Singapore