Why a Robin Hood tax on filthy rich City types is the very LAST thing needed

Re: @Nick Leaton

@AC - 11:45

Taking my 0.0001% figure (I haven't looked in detail at the actual policy proposals) it would take 10,000 transactions in a supply chain before it made 1% of a difference to the cost (assuming all transactions were for the final value of the product). For a complex product like a car that number of transactions being involved is conceivable but the vast majority of them would be for tiny fractions of the total price so the final result would be much smaller. For a restaurant meal there may be hundreds of transactions (again most/all of them for much less than the value of the meal) adding far far less than 1% to the total price, almost certainly less than 0.1% to the price.

Valid concerns would include what the cost of administering such a system would be and determining what was the proper rate for the transaction tax to optimise between limiting harm to normal business and collecting a return and gathering revenue from high frequency, high volume speculative trading.

Re: @Nick Leaton

The point of FTTs seems to have been lost at some point in this thread. The proposed tax is on purely financial transactions - buying and selling of financial instruments (bonds, stocks, derivatives, options, currency). It would probably not apply to ATM withdrawals. Maybe it would apply to interest accruals.

It would definitely not apply to either a meal at a restaurant nor the supply chain behind that - that's already covered by VAT

Re: @ Squander Two

Yes, stamp duty is a tax on house purchases. So what? VAT is also a tax on purchases. My point was that a transaction tax is a tax on losses, which goes against all principles of fair taxation. House prices were illustrative, but the same applies in other cases too. How about if your small business fails, leaving you mired in debt, and the government taxes you on the cost of selling off your remaining assets for pennies on the pound? After all, those sales are transactions. Such a measure would probably not crash the economy (though it would stop a lot of people risking starting businesses, I'm sure). Does that make it good? Is that really your only criterion here?

And conveyancing is a cost, not a tax, and every bit as unfair as the cost of buying some petrol in order to go to the shops.

> some countries have banks which charge for all kinds of things - and those countries (eg NZ) have somehow escaped financial failure /caused by that/

Er, yes. Your point? I thought we were talking about tax here.

> But then if you put mortgage debt into financial products that could be costlessly traded ... then .. then ... you could do HF house trading, of a sort. I wonder how that would work out?

Then, suddenly, the valuable market information that house prices are too high would find its way into the market and said prices would crash. The problem was that the information arrived in the market suddenly after being prevented from entering for years. Had the information been reflected in the market all along, prices wouldn't have climbed so high in the first place, so wouldn't have crashed so hard. That's exactly what this research is saying.

I might add that the fact that UK house prices are climbing striaght back up again could be argued to reflect the fact that the cause of the crash was that house prices were too high in the US, not here.

> no amount of me getting paid or making a gift to some relatives is ever going to crash the economy. If it was, what with me and the rest of the population acting in sync, I might well expect some rules about what I can and can't do.

And, according to the Parliamentary Committee on Banking Standards' Fourth Report into the crash (run by MPs, who were all at the front of the queue to blame investment bankers -- so not a whitewash), Northern Rock went bust because it lent too much money to people who couldn't pay it back, HBOS went bust because it lent too much money to people who coudn't pay it back, and RBS went bust because it paid too much for ABN and lent too much money to people who coudn't pay it back. So, according to your reasoning there, we need stricter rules about lending, especially mortgages. Maybe a higher tax on lending. Not a transaction tax on investment banking, since investment banking didn't cause the crash, retail banking did.

Re: @ Squander Two

"But then if you put mortgage debt into financial products that could be costlessly traded ... then .. then ... you could do HF house trading, of a sort. I wonder how that would work out?"

Mortgage debt *was* put into financial products (in the US, at least) about 30 or 35 years ago, initially by Salomon Bros. It did not result in any noticeable HFT, but it did make mortgage debt tradable. As one of many effects it allowed investors to spread and hedge their risks which overall made mortgages cheaper, which was a Good Thing(TM).

As any good thing it can be misused and/or abused, but in general liquidity is good and restrictions are bad. The obvious rule that one should not invest in what one does not understand is all too frequently neglected, causing (generally well-meaning but at times power-hungry) bureaucrats to over-regulate "to protect the innocent" (read: those who stupidly invest, sometimes others' money, in things they don't understand), which prevents people from acting in the market whether they are stupid or smart, which causes problems that are noticed too late.

Smart people then invent new and more complex ways to work around the regulations because they want to take action they deem correct. The new and complex instruments are legal, they are also difficult to understand which never stops stupid investors, and there are enough unscrupulous bastards (this is not to say they are the majority) who will exploit the situation.