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Global hot money flows…

Taxing the Speculators by Paul Krugman

Cate Long
Washington, DC
November 27th, 2009
2:35 pm
Outstanding column Professor Krugman:

Taxing securities transaction already happens in the Unites State under SEC Section 31 fees. These fees for stocks and options are overseen by the SEC and administered by the exchanges and FINRA.

Taxing options, derivatives and foreign currency trades would slow down the “hot money flows” that blast from economy to economy.

These “hot money flows” have little consideration for the damage done to the local economy. And various economies are discussing capital controls along the lines of what Brazil recently instituted.

I call this predatory trading activity “harvesting”.

The speculators in London, New York and other money capitals “harvest” gains that develop in local securities and currency markets and then quickly exit with their profit. They are speculators not investors. They use technology to abuse the local productive capacity. After the gains an economy are depleted they move on to the next target. This is worse than “socially useless” this is predatory economic activity.

This is a substantial downside of globalization.

The idea to tax these transactions at clearinghouses is brilliant. And another reason that all transactions must be put on exchanges and centrally cleared.

Thank you for your support of this tax. Your voice joins many others trying to push back against the power of the banks lobbyists which is substantial.

To learn more about the Tobin tax see Riski, the open source platform for financial markets reform.