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talkpoliticsThere are millions of people around the world (yes, not just in the US) demanding changes in the way the financial sector operates, right? Okay, most of them might not be very clear about the ways that's supposed to happen and what changes exactly they want, but they do want Change, here and now. Well, let's look at an idea that's been floating around the European corridors of power lately, and the university halls. The question they're asking (or have been pressed by their constituents to ask) is: would the financial sector, be made to pay its "fair share" of responsibility for having a role in causing the global crisis - or not? And how? At least in Europe that question is very relevant, and it's discussed in ways that go beyond just shouting at each other. You know - those Euros!
For some very well known reasons, in the last 2-3 years both the governments and those ordinary tax-payers who haven't been tempted by speculative dealings (and why not the ordinary street crooks themselves) have started looking at the high financial sector and its huge profits with increased distrust (and probably envy). After the torrent of financial "rescue measures" that EU was compelled to adopt up to this moment, the institutions have logically looked for a scenario of (at least partial) refund of these amounts, not so much because they somehow feel that it's "fair" this way, but because otherwise they'd be in even deeper financial trouble very soon. This scenario was supposed to look nice and acceptable on paper, to at least have some theoretical chance to convince the populace that it's really addressing the issue of speculative trade, this new bogeyman.
Because direct taxation happens to be the exclusive prerogative of the national sovereignty, an indirect tax was proposed on most financial transactions - one that would have to be adopted throughout the whole EU territory. No matter how we define those measures, in reality it was clear that the purpose was towards imposing a kind of an indirect tax on financial transactions, as proposed by Keynes and Tobin at various moments of crisis throughout history (see Tobin tax for example). Meanwhile, the issue about the VAT-exempt financial deals resurfaced yet again, which is no coincidence.
Both ideas of course met the staunch resistance of all financial players, and a resolute "NO" from London, which for the fourth year in a row is topping the ranking of the biggest financial centres in the world (despite the competition from New York and Zürich).
According to the base contract describing how the EU functions, an unanimous approval is required for the adoption of an indirect tax on all financial services, and because of this, Britain's "No" practically means that bankers and speculators will continue to trade unimpeded and with what many argue is too little oversight.
But still, even if this tax on all EU financial transactions never comes to be, what's the actual idea behind it? It's important to clarify that this tax has everything to do with the types of deals that are being made - their size and their subject. In other words, such a tax (whose adoption could only happen in 2 years at least by the way), would mostly affect secondary trading (including the single-time purchases, repo deals, and loans).
It's intentional that the taxed base that's being proposed is as broad as possible - it includes bonds, shares, stocks and derivatives, and it excludes such things like currency swaps on the street and the operations of the central banks.
No exceptions are proposed for deals made within the same economic group. The minimal size of the tax is supposed to be 0.1% of the tax base (i.e. the price of the financial instruments other than derivatives, that's being negotiated between the sides), and 0.01% for the derivative deals, based on the nominal amount that's being negotiated between all member states; with no limit for the maximum size.
All these measures are aimed at putting a relatively adequate regulation on the markets and the dealings with financial instruments at least within EU. It's designed to significantly change the logic and size of these markets. The bottom line is that the recipients of this tax are not physical entities, but the financial institutions in the broadest sense, regardless of whether the deals are being made at their expense or we're talking of brokerage; because of this, the end result is the so-called "cascade effect".
In the cases when some intermediary like a trustee bank, a market-maker, a clearing house etc is also included somewhere along the chain, the effect of this tax gets multiplied, depending on the number of participants, the idea being that all participants correspond to the definition of "financial institution" and share responsibility.
Now obviously, there are two main motives for this tax: a punitive one (let the financial institutions pay their "fair share" for the financial crisis they've contributed for), and a preventive one (let's limit the speculative deals with financial instruments so they don't cause another artificial balloon). It's exactly the second motive that's causing the heated discussion whether the effect of this tax would be less liquidity and depth of the financial markets and hence stagnation on the markets, or just on the contrary - a healthy cleansing from "apparent" and shallow liquidity, that's caused by the excessive amount of speculations that practically contribute with nothing to the economy.
This "pumping up" of the tax burden because of the character of these deals with financial instruments is making the opponents of this proposal very vocal about the hidden costs that would appear, including in the pension funds and other unintended places. It's this cascade effect from the tax that distinguishes it from the classic "stamp duty reserve tax" on the stocks deals, which has been present in UK for ages - that tax is not so much aimed at the professional brokerage and speculators, but at the stocks purchasers.
The main difference with the proposed tax on financial transactions, and the core reason for Britain's resistance to it is that at the moment the "professionals" (i.e. the banks and investment mediators) are exempt from the national tax, but would be included by the EU tax, if it's ever adopted. Granted, the new tax would still be collected by the same tax institutions that already exist in UK, while the current tax on transactions overseas is collected by a much broader array of institutions. This means more centralisation coupled with globalisation (or regionalisation) of this tax.
In addition, as a leading financial centre in the world, London will probably be most affected by this tax, because it's possible that it'd lead to relocation of entire financial institutions to other, more favourable centres, and respectively all the relevant income from that activity that's currently feeding the British financial system, would move elsewhere - be it somewhere in the EU or even overseas. But still, out of politeness, London is still keeping the door ajar for a possible revision of their "No", in case such a tax gets widely favoured worldwide. The British don't want to be left somewhere at the back of the queue of irrelevancy, after all, because that would again reflect on their coveted role as the world's financial hub.
Because most analysts think such a global tax is not a very achievable scenario at this point, given the clumsy institutional mechanism of decision-making about indirect taxation, the future of this EU tax in its current version is still very much in doubt. But if things continue to go from bad to worse, that option might well become the main meal on the table - the same way "controlled default" (in Greece's case) moved from being a taboo phrase into an acceptable scenario.
For some very well known reasons, in the last 2-3 years both the governments and those ordinary tax-payers who haven't been tempted by speculative dealings (and why not the ordinary street crooks themselves) have started looking at the high financial sector and its huge profits with increased distrust (and probably envy). After the torrent of financial "rescue measures" that EU was compelled to adopt up to this moment, the institutions have logically looked for a scenario of (at least partial) refund of these amounts, not so much because they somehow feel that it's "fair" this way, but because otherwise they'd be in even deeper financial trouble very soon. This scenario was supposed to look nice and acceptable on paper, to at least have some theoretical chance to convince the populace that it's really addressing the issue of speculative trade, this new bogeyman.
Because direct taxation happens to be the exclusive prerogative of the national sovereignty, an indirect tax was proposed on most financial transactions - one that would have to be adopted throughout the whole EU territory. No matter how we define those measures, in reality it was clear that the purpose was towards imposing a kind of an indirect tax on financial transactions, as proposed by Keynes and Tobin at various moments of crisis throughout history (see Tobin tax for example). Meanwhile, the issue about the VAT-exempt financial deals resurfaced yet again, which is no coincidence.
Both ideas of course met the staunch resistance of all financial players, and a resolute "NO" from London, which for the fourth year in a row is topping the ranking of the biggest financial centres in the world (despite the competition from New York and Zürich).
According to the base contract describing how the EU functions, an unanimous approval is required for the adoption of an indirect tax on all financial services, and because of this, Britain's "No" practically means that bankers and speculators will continue to trade unimpeded and with what many argue is too little oversight.
But still, even if this tax on all EU financial transactions never comes to be, what's the actual idea behind it? It's important to clarify that this tax has everything to do with the types of deals that are being made - their size and their subject. In other words, such a tax (whose adoption could only happen in 2 years at least by the way), would mostly affect secondary trading (including the single-time purchases, repo deals, and loans).
It's intentional that the taxed base that's being proposed is as broad as possible - it includes bonds, shares, stocks and derivatives, and it excludes such things like currency swaps on the street and the operations of the central banks.
No exceptions are proposed for deals made within the same economic group. The minimal size of the tax is supposed to be 0.1% of the tax base (i.e. the price of the financial instruments other than derivatives, that's being negotiated between the sides), and 0.01% for the derivative deals, based on the nominal amount that's being negotiated between all member states; with no limit for the maximum size.
All these measures are aimed at putting a relatively adequate regulation on the markets and the dealings with financial instruments at least within EU. It's designed to significantly change the logic and size of these markets. The bottom line is that the recipients of this tax are not physical entities, but the financial institutions in the broadest sense, regardless of whether the deals are being made at their expense or we're talking of brokerage; because of this, the end result is the so-called "cascade effect".
In the cases when some intermediary like a trustee bank, a market-maker, a clearing house etc is also included somewhere along the chain, the effect of this tax gets multiplied, depending on the number of participants, the idea being that all participants correspond to the definition of "financial institution" and share responsibility.
Now obviously, there are two main motives for this tax: a punitive one (let the financial institutions pay their "fair share" for the financial crisis they've contributed for), and a preventive one (let's limit the speculative deals with financial instruments so they don't cause another artificial balloon). It's exactly the second motive that's causing the heated discussion whether the effect of this tax would be less liquidity and depth of the financial markets and hence stagnation on the markets, or just on the contrary - a healthy cleansing from "apparent" and shallow liquidity, that's caused by the excessive amount of speculations that practically contribute with nothing to the economy.
This "pumping up" of the tax burden because of the character of these deals with financial instruments is making the opponents of this proposal very vocal about the hidden costs that would appear, including in the pension funds and other unintended places. It's this cascade effect from the tax that distinguishes it from the classic "stamp duty reserve tax" on the stocks deals, which has been present in UK for ages - that tax is not so much aimed at the professional brokerage and speculators, but at the stocks purchasers.
The main difference with the proposed tax on financial transactions, and the core reason for Britain's resistance to it is that at the moment the "professionals" (i.e. the banks and investment mediators) are exempt from the national tax, but would be included by the EU tax, if it's ever adopted. Granted, the new tax would still be collected by the same tax institutions that already exist in UK, while the current tax on transactions overseas is collected by a much broader array of institutions. This means more centralisation coupled with globalisation (or regionalisation) of this tax.
In addition, as a leading financial centre in the world, London will probably be most affected by this tax, because it's possible that it'd lead to relocation of entire financial institutions to other, more favourable centres, and respectively all the relevant income from that activity that's currently feeding the British financial system, would move elsewhere - be it somewhere in the EU or even overseas. But still, out of politeness, London is still keeping the door ajar for a possible revision of their "No", in case such a tax gets widely favoured worldwide. The British don't want to be left somewhere at the back of the queue of irrelevancy, after all, because that would again reflect on their coveted role as the world's financial hub.
Because most analysts think such a global tax is not a very achievable scenario at this point, given the clumsy institutional mechanism of decision-making about indirect taxation, the future of this EU tax in its current version is still very much in doubt. But if things continue to go from bad to worse, that option might well become the main meal on the table - the same way "controlled default" (in Greece's case) moved from being a taboo phrase into an acceptable scenario.
(no subject)
Date: 15/11/11 19:33 (UTC)(no subject)
Date: 16/11/11 03:31 (UTC)(no subject)
Date: 15/11/11 20:03 (UTC)(no subject)
Date: 15/11/11 20:07 (UTC)(no subject)
Date: 15/11/11 20:10 (UTC)(no subject)
Date: 15/11/11 20:11 (UTC)(no subject)
Date: 15/11/11 20:15 (UTC)real estatearcanely securitized mortgage debt.ftfy
(no subject)
Date: 15/11/11 20:20 (UTC)But that is precisely how I feel about this stuff. Very few people actually win, since the entire structure of this market is finding suckers for bad bets.
(no subject)
Date: 15/11/11 20:30 (UTC)(no subject)
Date: 15/11/11 20:31 (UTC)(no subject)
Date: 15/11/11 20:39 (UTC)(no subject)
Date: 15/11/11 21:01 (UTC)(no subject)
Date: 15/11/11 20:14 (UTC)(no subject)
Date: 15/11/11 20:15 (UTC)(no subject)
Date: 15/11/11 20:15 (UTC)(no subject)
Date: 15/11/11 20:16 (UTC)(no subject)
Date: 15/11/11 20:17 (UTC)(no subject)
Date: 15/11/11 21:10 (UTC)(no subject)
Date: 15/11/11 21:20 (UTC)(no subject)
Date: 16/11/11 01:26 (UTC)(no subject)
Date: 16/11/11 01:22 (UTC)lol that's sooo pretentious. You need to man up and drink the same mutagens from the tap that us peasants do, ya rich elitist bastard. :p
(no subject)
Date: 16/11/11 07:55 (UTC)(no subject)
Date: 16/11/11 10:41 (UTC)Because the United States does not recognize gambling as legal debt. That is why chips are used and money is required to be taken up front and cashed in out the rear.
(no subject)
Date: 15/11/11 20:08 (UTC)(no subject)
Date: 15/11/11 20:09 (UTC)(no subject)
Date: 15/11/11 20:37 (UTC)Ultimately, we shouldn't forget that we're all funding that hollow liquidity by paying for it through the higher inflation it creates, plus all these bailouts that stem directly from our wallets. It's high time that the politicians let the above mentioned suckers to get what they deserve - i.e., failure. Yes, it'll be messy, but the mess could be contained for them and them mainly. The alternative is continuing this leaping from one recession into another at least once in every decade or so.
(no subject)
Date: 15/11/11 21:11 (UTC)(no subject)
Date: 15/11/11 21:15 (UTC)(no subject)
Date: 16/11/11 04:35 (UTC)