![]() ![]() ![]() Traders known as “market makers” who buy from sellers and then sell to buyers, lubricating the market by making desirable prices quickly available, would find their job more difficult and costly to perform. In Reality: The marginal cost of any liquidity reduction would be small, and the policy is as likely to benefit financial markets by suppressing costly latency arbitrage.įTT opponents warn that a transaction tax would cause the “bid-ask spread” between what buyers offer and sellers demand to widen. Claim #1: An FTT will reduce market liquidity. Some of them seem on balance less intended to persuade than to provide cover for the generic impulse that financial markets shall not be impinged upon. Opponents of an FTT offer a number of arguments. The net effect of shifting the incidence of taxation from investment and profit to relatively useless securities transactions represents a boost to the rewards for more productive economic activities. However, this concern ignores not only the reality that financial markets are currently doing an inadequate job directing capital to productive investment, but also the opportunity to use an FTT’s revenue to improve tax policy elsewhere or otherwise support investment and growth. All else being equal, a new tax imposed on securities trades could conceivably have some negative effect on investment levels. ![]() Second, securities trades provide an ideal tax base within the financial system. A suitably low FTT discourages trades that contribute little to the long-term prosperity of the nation, while having little effect on the value-creating investments that the financial sector exists to facilitate. An FTT “throws sand in the gears” of the financial system’s least useful contraptions, to steal a phrase from Nobel laureate economist James Tobin, and skims speculative froth from the market. It increases volatility, distorts price signals, and draws capital and talent away from more productive pursuits. Why consider an FTT on securities trades in the secondary market?įirst, short-term speculation in financial markets has negative economic value. For our own good.įTTs vary in their specifics but generally entail a small fee-say, 10 basis points (i.e., 0.10%)-imposed on the buyer or seller of a security such as a stock, bond, or derivative. Pay no attention to Jack Bogle, founder of the Vanguard Group and legendary advocate for low-fee retirement investing, responding to the idea with: “I love it.” Finance, the financiers insist, must be left alone. Never mind that the United Kingdom and Hong Kong, two of the world’s pre-eminent financial centers, levy such taxes, as do many other nations. The argument that a financial transaction tax (FTT) will impoverish us all is a classic of the genre. But other more serious symptoms can occur.Discussions of common-sense financial regulation inevitably evoke dire warnings of impending catastrophe. The symptoms of impaction are similar to the symptoms of constipation. lack of exercise over a long period of time.side effects from painkilling medicines.The main causes of faecal impaction are similar to those of constipation. You must talk to your doctor or nurse before taking anything. If you’ve had severe constipation and then develop diarrhoea you should not take anti diarrhoea medicines. ![]()
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