Friday, April 2, 2010

Ross Buckley on transaction taxes

In Ross Buckley on Late Night Live I gave a reference to an interview with Australia 21 Fellow Professor Ross Buckley on the ABC Radio National Program Late Night Live, on the subject of an international financial transactions tax.

A written version of Professor Buckley’s views on this important subject may be found here  on the Swinburne Institute for Social Research – Australian National University website Inside Story, 26 March 2010.

Professor Buckley reports that, despite the international financial system suffering in 2008 its biggest crisis since the Great Depression, the only reforms are marginal: increasing bank capital here, tweaking a regulation or two there.

Now however, there is a growing momentum abroad for a financial transactions tax, a reform which is supported by the chancellor of Germany, the president of France, the prime minister of Britain and the foreign minister of Japan, along with the high-profile investors George Soros and Warren Buffet.

Professor Buckley gives three reasons why we need such a tax:

-  Financial transactions have got way out of kilter with “real world” transactions. For instance, the global volume of foreign exchange transactions is seventy times greater than the global trade in goods and services.

-  Second, “technical trading” represents a large and constantly increasing proportion of overall trading. A product of the computer and information revolutions, technical trading is implemented by computer programs automatically on the basis of incoming information, and it can act to disturb the process by which the market sets a price.

-  Third, technical and other very short-term trading is more of a problem than one might think, because it can lead to momentum trading.  This can lead to persistent mispricing which favours speculation over longer-term investment and therefore reduces economic growth and employment.

Professor Buckley goes on to outline five very strong reasons why a financial transactions tax would help to overcome these problems. Read the full article here.

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