Financial transaction taxes defend democracy

Posted on / FT's rolling global market overview - Worries over Greece send euro tumbling.

The FT notes:

Action in the forex markets triggered a fresh bout of nerves among investors on Thursday, after the euro tumbled to a one-year low against the yen, sparking fears that a flight into perceived haven assets was again under way.

The renewed slump in the euro came as traders absorbed the threat by credit rating agency Standard & Poor’s to downgrade Greece’s sovereign debt.

Remember that S & P was one of the three rating agencies that brought the world economy to its knees by mis-rating subprime and other junk debt.

Is it now seeking to do the same again?

Of course Greece has issues, but let's be clear, by issue market signals it gives foreign exchange dealers the perfect opportunity to exploit the situation for profit, which they will be doing.

In the process they seek to do three things:

1) Undermine the well being of most in Europe

2) Threaten the political strability of Europe

3) Drive countries like Greece back to totalitarianism.

They may deny that: they may say that is a by product of their actions. I wonder, but whether true or not it is clear that speculation of this sort is immensel harmful.

There are those who argue the incidence of financial transaction taxes are harmful. The issue will rage on for some time to come. But those who do so do almost entirely from one perspective alone: to defend the right of capital not to be taxed.

My argument, which I'll elaborate later, is that this ignores the real incidence issues that we face, and so is wholly inappropriate as a basis for making decisions.

In the meantime if financial transaction taxes are embraced for having the effect Tobin suggested they would, in putting sand in the motion of foreign exchange dealing - and my report on this issue does embrace that idea, wholeheartedly, then they are undoubtedly bastions to defend us against abuse from bankers, they do defend currencies as means of exchange, and they are a defence for democracy.

How does one measure the incidence of that?

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