Getting Our Money Back From The Money Boys

It is becoming increasingly clear that we are about to make another transfer of wealth to Wall Street in order to stop them from blowing themselves and us up with their accumulated stocks of bad assets. See Krugman for further discussion and Dowd for a classic populist reaction.

Now Wonks Anonymous likes to maintain an even temper and he has consequently adopted the following philosophy: Don't get mad. Get even. And Wonks Anonymous has a suggestion for getting even.

Right now, when this disaster is fresh in everyone's mind we need to implement a small financial transactions tax. We should charge some fraction of a penny on every dollar worth of money borrowed or loaned. on every security sold and every debt packaged into an exotic derivative.

This will serve two purposes:

It will allow the financial industry to begin to make restitution for all of the damage that they have done to our nation.
Even if this restitution is involuntary it will serve to reduce their burden of bad karma. They may not thank us now but they will be very grateful when they find that they have been spared reincarnation in some nether hell.

It will put a brake on financial transactions which will tend to dampen the noise generated by financial markets and result in more accurate asset valuations. If transactions are costly then daily or hourly speculative maneuvers will become less common. Computer driven trades will become less common and so on.


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  • 1/31/2009 9:32 PM Anonymous wrote:
    Can we just transfer some fricken wealth and be done with it?
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  • 1/31/2009 10:05 PM Anonymous wrote:
    Brokerages already charge for financial transactions. It apparently hasn't stopped speculation. Increasing the charge per transaction may reduce the frequency of transactions but has no guarantee of increasing the accuracy of valuations.

    The simple truth is that someone with a lot of money (or a bunch of groupthinkers with a lot of money) can easily distort prices, knowingly or otherwise, and screw up the rest of the economy. That's the nature of capitalism. It will take a bigger fix than charging for transactions. Transparency isn't quite enough because people can still be willfully ignorant or at least willing to ride a Ponzi roller coaster so long as it's going up.
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