Clive Peedell is one of my new heroes. He's a consultant clinical oncologist. He's also on the British Medical Association council. And he's done some great tweeting that shows he has the courage that many inb his chosen specialism need to address really important issues, like life and death.
The State used to control Market. Then Market controlled State. Now financial sector controls Market & State. Any solution?
And my answer is yes, there are.
I'm going to have to say this comment here is only brief: much of what I have to say on this will be in my forthcoming book. But there are things that can be done.
We can tackle tax havens used to mount organised attacks on democratic governments. I explain how in my report for PCS on this issue.
We can demand capital be accountable wherever it is - check out country by country reporting on the briefings page of this blog to see how.
We can demand and get automatic information exchange on tax so tac cheats will never be hidden from view again - there's a briefing on how to do that too.
We can split banks so that the payment management system is split from speculation.
We can nationalise the payments management system and simply licence it's use to banks so we are never again at rick of it failing because of bank failure.
We can and should have a nationalised bank to ensure everyone has access to banking. Call it a Post Bank. Call it a Trustees Savings Bank? Call it what you want. Make it work.
We can ensure pension funds are restricted in the assets they can use for speculation.
We could ban automated trading on share and foreign currency exchanges that can exploit tiny differentials in fractions of seconds.
We could have a financial transactions tax to make differential trading unprofitable - as it is for the world at large.
We could require settlement of all trading every hour - instead of every fortnight or so - making short selling nigh on impossible. I especially like this idea which is why I expect lots of opposition to it.
We could impose capital controls - yes we could say large movements of cash to certain places require permission. Alternatively we could say of course you can move cash at will - so long as you deduct basic rate tax at source from the payment made before doing so. The targets would be offshore, mainly.
We could, as Samuel Brittany suggested recently in the FT require that our nationalised banks act in the public interest and in the interest of small business.
We could increase the fax rate on financial services to recognise the harm they do.
We could increase employer's national insurance in financial services.
We could have a bonus tax.
We could disallow all salary payments of more than £250,000 a year for corporation tax purposes.
We could stop the carry forward of state subsidised bank losses for tax.
Never doubt there is a lot we can do to put feral banking back in the box where it belongs and where, once again, it becomes our servant.
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While you’re at the Labour Party conference, Richard (I assume from your tweets you are), maybe you could find out why so few of these immenently sensible suggestions don’t feature in either of the two Eds policy proposals. Instead what we have is admissions of ‘guilt’ – most of it guilt by association I have to say – and tinkering at the edges. The corporates and feral rich must be laughing all the way to the bank. Here we have ex-ministers admitting they were shafted by the financial sector and big business, and all they can suggest by way of policy if they ever get another try at government is a slight slap on the wrist for those who so plainly shafted them. Embarrasing and shameful.
Will be there soon
Will raise these points!
Richard: – As always you have the PSG’s unequivocal support …
Not least and in particular :-
“We can tackle tax havens used to mount organised attacks on democratic governments.”
These are really important issues, like life and death — and for millions of people tax havens literally mean death! Every four secionds someone, somewhere dies of starvation.
Richard, could you explain how 1hr settlement would work? This would surely be impossible. And also, it would have no impact on short selling.
If you had to settle in an hour you’d need more capital to trade or would trade less
And short selling would be much much harder with such a settlement period as stock borrowing would be harder, I think
But if I am wrong tell me why
The issue is actually having systems set up to handle such a fast flow of trading, with info flowing from the trader to the back office, then to the counterparties back office etc.
But even if it was possible, it would have no impact on frequency of trading or short selling. Prior to trading most capital is already in place (or credit) and the same goes for most short selling (ie the stock borrowing is already arranged).
If you want to stop short selling then banning stock lending would be the first step. It always amazes me when large pension funds lend out their stock to the shorts, because if the shorts are right the stock will fall thus hurting the pension fund.
Agreed entirely on pension fund stock lending
“We could impose capital controls — yes we could say large movements of cash to certain places require permission. Alternatively we could say of course you can move cash at will — so long as you deduct basic rate tax at source from the payment made before doing so. The targets would be offshore, mainly.”
Like it, like it, like it! 🙂 There is too much capital flowing out of this country on a whim!
Paul Krugman blog June 9, 2011, ‘Kenneth Arrow Was Here’:
“Some readers ask why my argument that relatively centralized systems work better for health care than the “free market” isn’t an argument for government ownership of everything. The answer is that health care is different: it’s a sector in which basically every market failure you can think of takes place. And we’ve known that since Kenneth Arrow’s classic analysis half a century ago. It’s shocking, though not surprising, that we keep having to relearn this basic point.”
Why is short selling bad? In times of extreme downward price movements, it is the short sellers that come into to cover their positions and stop the price fall. Unlike long-only buyers, they have to be buyers at some price.
Positions of extreme downward pricing are usually indication of irrational behaviour best tackled through the Spahn variety of financial transaction tax
I don’t believe short selling is bad, and betting on companies shouldnt have to be a one way bet. Short selling also doesn’t have any where near the impact the anti-shorting brigade beleive it to have (just as the commentators who write about the effect of speculation on commodity prices are as equally mis-guided).
However, there are valid (theoretical) worries about shorting bank-stocks and possible “runs” on banks, which is why the current ban on naked short selling of certain European financials is in place.
As I stated previously, making it a lot harder to lend stock would reduce the practice, but there are a great many other ways to acheive a short position on a bank such as buying the CDS. (Often a CDS will trade in a greater volume than the underlying instruments it is meant to protect).
Thank you for comment. I have added it to the blog as I presume you have offered it in good faith but I would add that I do not agree with or endorse it in doing so but do not have the time to explain why here having done so on many occasions already on this blog over the last few years.