presented an open letter to U.S. President Barack Obama and members of Congress regarding passage of a Tobin tax.
The simple solution of a Tobin tax handles three of the U.S. government's biggest challenges: It resolves the controversy over expiring Bush tax cuts, helps reduce the federal budget deficit, and offers more regulation over controversial Wall Street profits.
Hutchinson said a Tobin tax – a tax on financial transactions – is the one tax increase that would not damage the already fragile U.S. economy.
Tobin Tax
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Money Morning Mailbag: Tobin Tax a Healthy Solution to Wall Street Greed
Money Morning Mailbag: Tobin Tax the Only Solution to Problems Posed by High Frequency Trading
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The "60 Minutes" piece prompted this letter from a reader wondering if the technological shift means it's time to readjust investment strategy.
Sunday night on "60 Minutes" they had a story about high-speed computers that are out-trading humans. Is it time to refocus on the world stage and find tangible rather than paper investments to put your money in? A partnership in a retail or manufacturing venue surely is more transparent than the stock market.
--Roman
Money Morning has been examining the effects of high frequency trading for years. In August 2009 Contributing Editor Martin Hutchinson said high frequency trading systems were front-running the market.The Tobin Tax: The Deficit-Busting Levy Wall Street Hates
After the Nov. 2 midterm elections, the Obama administration and Congress are going to have to scramble to fill a trillion-dollar hole in the U.S budget, and tax increases may be the only option.
A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.
With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.
But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.
It's called a "Tobin tax."
To see how a reasonably set "Tobin tax" could help U.S. leaders to fix the nation's finances, please read on...
A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.
With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.
But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.
It's called a "Tobin tax."
To see how a reasonably set "Tobin tax" could help U.S. leaders to fix the nation's finances, please read on...
The Tobin Tax: The Fix-It Plan Wall Street Hates … But Can't Seem to Kill
German Chancellor Angela Merkel recently came out in favor of a "Tobin tax" - a small tax on financial transactions, proportionate to the size of the transaction. The Tobin tax idea also has been proposed by Britain's former prime minister, Gordon Brown, and was proposed in Congress by U.S. Rep. Peter DeFazio, D-OR.
Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.
Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.
Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.
Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.
To understand how the Tobin tax can benefit investors, please read on...
Thursday's Wild Stock Market Ride Spotlights 'High-Frequency Trading' as the Latest Worry For Investors
Back on April 14, U.S. stocks advanced for the fifth day in a row, causing the U.S. Standard & Poor's 500 Index to close above the 1,200 level for the first time in more than 18 months.
Traders said that a growing confidence in the strength of the U.S. rebound was a key rally catalyst.
But Money Morning's Shah Gilani was worried.
Traders said that a growing confidence in the strength of the U.S. rebound was a key rally catalyst.
But Money Morning's Shah Gilani was worried.
Financial Reform: Three Ways to Fix Wall Street
The financial-reform bill introduced by U.S. Sen. Christopher J. Dodd, D-CT, seems likely to pass both houses without all that much alteration.
And that should immediately raise our suspicions. After all, the U.S. financial-services business has a very effective lobby, so if there isn't huge opposition to the legislation, it probably won't achieve all that much.
It won't fix Wall Street.
But there's another issue here: It's also not clear to me that we know just what we want the financial-reform initiative to achieve. By that, I mean: What banking-sector reforms would we implement in an ideal world, to reduce the danger from the sector while preserving the essentials of a free market?
And that should immediately raise our suspicions. After all, the U.S. financial-services business has a very effective lobby, so if there isn't huge opposition to the legislation, it probably won't achieve all that much.
It won't fix Wall Street.
But there's another issue here: It's also not clear to me that we know just what we want the financial-reform initiative to achieve. By that, I mean: What banking-sector reforms would we implement in an ideal world, to reduce the danger from the sector while preserving the essentials of a free market?
To see Martin Hutchinson's blueprint for fixing Wall Street, please read on...
Why the Volcker Plan Doesn't Go Far Enough
I don't often agree with the Obama administration. So I have to say that I was surprised when I heard it had a plan to reduce the risk of another banking crisis. It wants to prohibit banks that are protected by deposit insurance from engaging in risky, proprietary trading, and it wants to break up some of the very largest banks.
I made both those recommendations in my forthcoming book "Alchemists of Loss" (Wiley 2010). The book, written jointly with Kevin Dowd, a British finance professor, should debut sometime late this spring(we sent the manuscript to the publisher last weekend - what a relief!). But after I studied the Obama plan further, I realized that I shouldn't have been surprised - the idea's sponsor was former U.S. Federal Reserve Chairman Paul A. Volcker.
I made both those recommendations in my forthcoming book "Alchemists of Loss" (Wiley 2010). The book, written jointly with Kevin Dowd, a British finance professor, should debut sometime late this spring(we sent the manuscript to the publisher last weekend - what a relief!). But after I studied the Obama plan further, I realized that I shouldn't have been surprised - the idea's sponsor was former U.S. Federal Reserve Chairman Paul A. Volcker.
Why Volcker's plan doesn’t go far enough...
Why You Should Mark January 13 on Your Calendar
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On that day, at least two seminal events are scheduled to take place:
- The U.S. Congress' Financial Crisis Inquiry Commission (FCIC) - the ten-member commission appointed with goal of investigating the causes of the financial crisis - will begin its first public hearing.
- And the European Parliament will hold a confirmation hearing for Michel Barnier - the French politician who has been appointed to oversee the regulation of the European Union's (EU) financial services sector.
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