Tobin Tax. Anyone want to help me build the Tobin Tax website?

[Anonymous]

niemivh they may have been a time between the crackdown on insider trading and the development of flash trading when it was possible for a human being to trade securities profitably.  My feeling is those days are gone forever - machine based trading is not going away.  So really the tax only makes sense if we want the revenue.  And then the question will arise whether or not this is the most effective way of raising revenue?

Tax havens are so prevalent in our modern time that this seems like a great place to raise revenue.  In addition there is no problem with trading with algorithms or computers per se, but HFT is parasitical.  Please Google Goldman Sach's trading schemes and tell me how this should be allowed to persist.

Revenue for what? Ineffective bureaucracies? Violence and war?

Computers are just tools that allow people to trade THEIR property as they please! You have no say in how it is traded nor do you have say in how man produces with his own labor!

[manuelgar]

Hi niemivh,

Algo trading and flash trading is just the old arbitrage business adapted to the market´s new technology.  That´s all.  This has been happening since the first bourse was born, the timeframes were longer, the spreads wider and the trades less frequent.  But the business was exactly the same.  The timeframe of the trades does not make any ethical or moral difference to me.

Speculators play a crucial role in free markets, they provide liquidity.  Liquidity is a very important need (ask the people in Spain who are stuck trying to sell their houses).  No matter that HFT cancel their trades very quickly, they provide epehemeral liquidity if you want, but liquidity after all.  Technology makes things go faster, speculators are just keeping pace with technology.

Tobin tax is an aberration.  It´s a dirty patch for a much more profound problem.  If you want a solution fix the root of the problem, not its symptoms.

[AyeYo]

Why not just straight up ban HFT?  

http://www.freakonomics.com/2011/03/28/should-high-frequency-trading-be-banned-one-nobel-winner-thinks-so/

Technically its difficult as it can move a lot of trade into the shadow banking system.  But retail investors are being gouged by the system right now so hopefully some way can be found to handle it, ideally in the exchanges themselves.

The thing to understand is that HFT is a forced, private tax by the parasites against the real economy.  By imposing a 1% tax on transactions legitimate business would be benefited as the HFT wouldn't be allowed to occur.  And if the HFT moved into the shadow banking system who would they be sucking off of?  They can't simply all suck off each other as HFT is reliant upon the real economy to provide its 'host capital'.  A shadow trading exchange without a Tobin Tax (after it was implemented) would be so filled with HFT that no legitimate trader would touch it.

I understand this 100%, but how are you figuring that a laughably small 1% tax (I'm assuming that'd be 2% round trip) is going to curb HFT?  2% knocked off of tens of billions of dollars still leaves them with tens of billions of dollars.  That's like shooting a firecracker at an aircraft carrier and expecting it to sink.

Yes, it'll most certainly pay for itself and generate revenue, there's no doubt about that.  I just don't see how it's going to even put a dent in HFT.  If we're really going to make an honest effort to stop HFT, rather than just share a tiny portion of the profits with the public, then let's try a little harder.  Why affect an across the board transaction tax at a fixed 1% when we could have no transaction tax for securties/currency held for more than say, one day, maybe a 2% round trip tax on securties held less than one day, a 5% tax on securities held less than one hour, and some very high, say 50%, on transactions that round trip in under 10 seconds.  These taxes could be round-trip fees and charged on the completion of the trade, just to keep things simple.

IMO, that would eliminate HFT or sharply curb it.  Due to this, it would probably generate less revenue than the Tobin Tax, but I don't think this should be about revenue, I think it should be about eliminating HFT.

[AyeYo]

niemivh they may have been a time between the crackdown on insider trading and the development of flash trading when it was possible for a human being to trade securities profitably.  My feeling is those days are gone forever - machine based trading is not going away.  So really the tax only makes sense if we want the revenue.  And then the question will arise whether or not this is the most effective way of raising revenue?

Tax havens are so prevalent in our modern time that this seems like a great place to raise revenue.  In addition there is no problem with trading with algorithms or computers per se, but HFT is parasitical.  Please Google Goldman Sach's trading schemes and tell me how this should be allowed to persist.

Revenue for what? Ineffective bureaucracies? Violence and war?

Computers are just tools that allow people to trade THEIR property as they please! You have no say in how it is traded nor do you have say in how man produces with his own labor!

[tomcollins]

I'd love for someone to tell my why speculation is bad.

I sense a thread derail coming, but yeah I don't see why speculation is so bad.

Apparently that's because both of you aren't aware of how much of it is going on, at least I hope that is the answer.  Before I write a 10 page history on this I'll test the waters: do you think that there is any amount of speculation that would be 'too much' or is it fine to have 50 times GDP of a country flowing in and out of that countries capital markets annually?

No, I don't think there is the concept of "too much".  Maybe you can explain why.  Even just a short summary.

I don't know if the Tobin tax is a good idea but the problem it addresses is huge.

When you try to buy or sell securities, hypertrading is a way that allows the big players to find the maximum price you are willing to pay.  They do it by placing and cancelling sales 1000s of times per second when a new buy order appears.  The effect is that us peons always pay close to the max we are willing to pay while the Goldman Sachs type institutions pocket the difference between that max and the price the security could be acquired at.

Its thought that transaction tax to eliminate those trades would be helpful.  If it provided a buffer for the "too big to fail" banks, so much the better.

Personally I'd worry that the exchange would simply take place somewhere else.  I don't know if the tax would work.

So the problem is someone else makes money?  Oh noes, how horrible.  I pay what I am willing to pay, how horrible.

[niemivh]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

Most free-marketeers don't see are unable to see the incredible bias of all economists.  They believe that free markets are the solution to all our woes and that all economists (at least on their side) have no stake in the fight.  

Can I see some of those studies?  It's likely that I've seen them before and that they are totally wrong, well not 'wrong' just biased in favor of those who produce nothing and suck of the real economy (not referring to speculation in general, just HFT).  The resistance to a Tobin tax is not some benign triviality, it is through a lack of this tax that the system is largely gamed at present and there are people making an incredible pile of money in the process.

Let the people make a pile of money. Wealth is not limited unless you set it up that way from the start.  

So it's ok for people to make money off of other people without their knowledge or benefit at all?  And that somehow trading money back and forth with algorithms to exploit technicalities in an exchange system is creating "wealth"? 

[tomcollins]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

Most free-marketeers don't see are unable to see the incredible bias of all economists.  They believe that free markets are the solution to all our woes and that all economists (at least on their side) have no stake in the fight.  

Can I see some of those studies?  It's likely that I've seen them before and that they are totally wrong, well not 'wrong' just biased in favor of those who produce nothing and suck of the real economy (not referring to speculation in general, just HFT).  The resistance to a Tobin tax is not some benign triviality, it is through a lack of this tax that the system is largely gamed at present and there are people making an incredible pile of money in the process.

Let the people make a pile of money. Wealth is not limited unless you set it up that way from the start.  

So it's ok for people to make money off of other people without their knowledge or benefit at all?  And that somehow trading money back and forth with algorithms to exploit technicalities in an exchange system is creating "wealth"? 

People make money "off" people without their knowledge all the time.  Why is that wrong?  For example, my mortgage was sold to another company.  Someone else is making money off of me! Oh noes!  The benefit is liquidity.  No one is forcing people to sell at these prices, no one is given special access to make bids or asks.

Do you favor banning poker since some people might be better than others and "take money" from them?

[amincd]

Speculation helps the market react more quickly to changes in supply and demand conditions, which leads to more efficient allocation of investment resources.

[niemivh]

niemivh they may have been a time between the crackdown on insider trading and the development of flash trading when it was possible for a human being to trade securities profitably.  My feeling is those days are gone forever - machine based trading is not going away.  So really the tax only makes sense if we want the revenue.  And then the question will arise whether or not this is the most effective way of raising revenue?

Tax havens are so prevalent in our modern time that this seems like a great place to raise revenue.  In addition there is no problem with trading with algorithms or computers per se, but HFT is parasitical.  Please Google Goldman Sach's trading schemes and tell me how this should be allowed to persist.

Revenue for what? Ineffective bureaucracies? Violence and war?

Computers are just tools that allow people to trade THEIR property as they please! You have no say in how it is traded nor do you have say in how man produces with his own labor!

Revenue for all the features of a modern nation-state.  I'm not even sure we agree that government should exist, much less how revenue should be gathered for it.  Treating people that trade in other people's money and 30 to 1 leverage in hyper trading doesn't seem like 'labor' to me.  These are not Howard Roark's of your imagination but brutal exploitationists.

It must be easy to be a libertarian, I remember when i used to be it certainly was.  All you had to have is this vague notion of 'freedom' and 'liberty' without any proven track record of market success in the use of those principles.  Unfortunately when you start to dive into the real history of economic development things become much more complicated that any of us would like them to be.

Everything you said so far leads me to believe that you think that there shouldn't be any government at all, or at the most a very bare minimum of law.  What this bare minimum is left to our imaginations, unless you can point me in the direction of an actual structure of law or what country, philosophy, structure laid out somewhere, etc. that we can go off of.  In addition to your past comments your name is Atlas, can we safely assume that Atlas Shrugged is a good reference for what you see as an ideal government?  

[niemivh]

Hi niemivh,

Algo trading and flash trading is just the old arbitrage business adapted to the market´s new technology.  That´s all.  This has been happening since the first bourse was born, the timeframes were longer, the spreads wider and the trades less frequent.  But the business was exactly the same.  The timeframe of the trades does not make any ethical or moral difference to me.

Speculators play a crucial role in free markets, they provide liquidity.  Liquidity is a very important need (ask the people in Spain who are stuck trying to sell their houses).  No matter that HFT cancel their trades very quickly, they provide epehemeral liquidity if you want, but liquidity after all.  Technology makes things go faster, speculators are just keeping pace with technology.

Tobin tax is an aberration.  It´s a dirty patch for a much more profound problem.  If you want a solution fix the root of the problem, not its symptoms.

And in your opinion, what is the "problem"?

[amincd]

Treating people that trade in other people's money and 30 to 1 leverage in hyper trading doesn't seem like 'labor' to me.  These are not Howard Roark's of your imagination but brutal exploitationists.

It's up to investors to do their due diligence and not let people who leverage the money under their management 30 to 1 control their money.

When you reduce investment risk by prohibiting or penalizing potentially risky trading practices, you are also eliminating the benefits that those trading practices provide.

A market where profit/loss is not socialized, and participants have complete contractual freedom, leads to the most efficient allocation of resources.

[niemivh]

Why not just straight up ban HFT?  

http://www.freakonomics.com/2011/03/28/should-high-frequency-trading-be-banned-one-nobel-winner-thinks-so/

Technically its difficult as it can move a lot of trade into the shadow banking system.  But retail investors are being gouged by the system right now so hopefully some way can be found to handle it, ideally in the exchanges themselves.

The thing to understand is that HFT is a forced, private tax by the parasites against the real economy.  By imposing a 1% tax on transactions legitimate business would be benefited as the HFT wouldn't be allowed to occur.  And if the HFT moved into the shadow banking system who would they be sucking off of?  They can't simply all suck off each other as HFT is reliant upon the real economy to provide its 'host capital'.  A shadow trading exchange without a Tobin Tax (after it was implemented) would be so filled with HFT that no legitimate trader would touch it.

I understand this 100%, but how are you figuring that a laughably small 1% tax (I'm assuming that'd be 2% round trip) is going to curb HFT?  2% knocked off of tens of billions of dollars still leaves them with tens of billions of dollars.  That's like shooting a firecracker at an aircraft carrier and expecting it to sink.

Yes, it'll most certainly pay for itself and generate revenue, there's no doubt about that.  I just don't see how it's going to even put a dent in HFT.  If we're really going to make an honest effort to stop HFT, rather than just share a tiny portion of the profits with the public, then let's try a little harder.  Why affect an across the board transaction tax at a fixed 1% when we could have no transaction tax for securties/currency held for more than say, one day, maybe a 2% round trip tax on securties held less than one day, a 5% tax on securities held less than one hour, and some very high, say 50%, on transactions that round trip in under 10 seconds.  These taxes could be round-trip fees and charged on the completion of the trade, just to keep things simple.

IMO, that would eliminate HFT or sharply curb it.  Due to this, it would probably generate less revenue than the Tobin Tax, but I don't think this should be about revenue, I think it should be about eliminating HFT.

They are using HFT to garner a tiny fraction of a percent of profit on the trade.  Each trade in a hyper-trading trade, yields a miniscule fraction of a percent in profit, point being much less than 1% that the tax would take on each transaction.  If you are going to make a trade that would yield you a 0.0034% profit and you're going to have to pay a 1% tax on that transaction it becomes obvious that only people making long term investments would be trading, which is what we want (if we want a functioning, productive economy).

[niemivh]

I'd love for someone to tell my why speculation is bad.

I sense a thread derail coming, but yeah I don't see why speculation is so bad.

Apparently that's because both of you aren't aware of how much of it is going on, at least I hope that is the answer.  Before I write a 10 page history on this I'll test the waters: do you think that there is any amount of speculation that would be 'too much' or is it fine to have 50 times GDP of a country flowing in and out of that countries capital markets annually?

No, I don't think there is the concept of "too much".  Maybe you can explain why.  Even just a short summary.

I don't know if the Tobin tax is a good idea but the problem it addresses is huge.

When you try to buy or sell securities, hypertrading is a way that allows the big players to find the maximum price you are willing to pay.  They do it by placing and cancelling sales 1000s of times per second when a new buy order appears.  The effect is that us peons always pay close to the max we are willing to pay while the Goldman Sachs type institutions pocket the difference between that max and the price the security could be acquired at.

Its thought that transaction tax to eliminate those trades would be helpful.  If it provided a buffer for the "too big to fail" banks, so much the better.

Personally I'd worry that the exchange would simply take place somewhere else.  I don't know if the tax would work.

So the problem is someone else makes money?  Oh noes, how horrible.  I pay what I am willing to pay, how horrible.

Problem is that someone else is making money off of you without you getting anything out of it.  You literally gain nothing in the transaction while they gain everything. 

The funny thing is you're already paying these inflated prices to private hedge funds and other HFT operations.  You get to pay more for hyper-traded funds while getting nothing (except for the privilege of paying a little more, I guess).  All the details of the existing system look like a tax (since you can't elect not to pay it) except you get nothing out of it.  Like I said before in an exchange where 1 party seeks to gain all the utility of the transaction without providing any benefit/utility to the other party seems like a parasitical operation that should be discouraged. 

 

[niemivh]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

Most free-marketeers don't see are unable to see the incredible bias of all economists.  They believe that free markets are the solution to all our woes and that all economists (at least on their side) have no stake in the fight.  

Can I see some of those studies?  It's likely that I've seen them before and that they are totally wrong, well not 'wrong' just biased in favor of those who produce nothing and suck of the real economy (not referring to speculation in general, just HFT).  The resistance to a Tobin tax is not some benign triviality, it is through a lack of this tax that the system is largely gamed at present and there are people making an incredible pile of money in the process.

Let the people make a pile of money. Wealth is not limited unless you set it up that way from the start.  

So it's ok for people to make money off of other people without their knowledge or benefit at all?  And that somehow trading money back and forth with algorithms to exploit technicalities in an exchange system is creating "wealth"? 

People make money "off" people without their knowledge all the time.  Why is that wrong?  For example, my mortgage was sold to another company.  Someone else is making money off of me! Oh noes!  The benefit is liquidity.  No one is forcing people to sell at these prices, no one is given special access to make bids or asks.

Do you favor banning poker since some people might be better than others and "take money" from them?

*Sigh*

I said "without their knowledge or benefit".  That is knowledge OR benefit.  Either one.  You use your mortgage as an example, did both you and the bank not benefit from the mortgage arrangement?  Wasn't it an agreement on both parties to engage in said arrangement?  In fact I would wager that this agreement was done with your knowledge and benefit.  So... why did you bring this up to compare to what I said?

With poker they are entering in this arrangement with their own knowledge and the benefit is a chance to win more money than they put in.  So once again... what does this have to do with what I'm talking about?

[labestiol]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

Most free-marketeers don't see are unable to see the incredible bias of all economists.  They believe that free markets are the solution to all our woes and that all economists (at least on their side) have no stake in the fight.  

Can I see some of those studies?  It's likely that I've seen them before and that they are totally wrong, well not 'wrong' just biased in favor of those who produce nothing and suck of the real economy (not referring to speculation in general, just HFT).  The resistance to a Tobin tax is not some benign triviality, it is through a lack of this tax that the system is largely gamed at present and there are people making an incredible pile of money in the process.

Let the people make a pile of money. Wealth is not limited unless you set it up that way from the start.  

So it's ok for people to make money off of other people without their knowledge or benefit at all?  And that somehow trading money back and forth with algorithms to exploit technicalities in an exchange system is creating "wealth"? 

People make money "off" people without their knowledge all the time.  Why is that wrong?  For example, my mortgage was sold to another company.  Someone else is making money off of me! Oh noes!  The benefit is liquidity.  No one is forcing people to sell at these prices, no one is given special access to make bids or asks.

Do you favor banning poker since some people might be better than others and "take money" from them?

In poker, people agree to play, and understand the risk. With HFT, everyone is paying the price, even if they don't want to play the game.

About speculation and price discovery, of course we need speculators, question is how much (how much accurate we want the price to be). And tobin tax is a very efficient way to set the limit.

And sorry about OP hopes, but Sarkozy don't really care about this. I guess he just said that during the election campain, or at some point when he needed a nice popularity poll.

[naturallaw]

If you want an exchange with a Tobin Tax, then create one. Everyone who thinks it's a good idea will trade on it. Others won't unless you force them to. We'll then let people figure out how valuable HFT is.

[niemivh]

Treating people that trade in other people's money and 30 to 1 leverage in hyper trading doesn't seem like 'labor' to me.  These are not Howard Roark's of your imagination but brutal exploitationists.

It's up to investors to do their due diligence and not let people who leverage the money under their management 30 to 1 control their money.

When you reduce investment risk by prohibiting or penalizing potentially risky trading practices, you are also eliminating the benefits that those trading practices provide.

A market where profit/loss is not socialized, and participants have complete contractual freedom, leads to the most efficient allocation of resources.

A lot to comment on here.  But just one question for now: what does HFT do to provide a 'benefit'?  I assume you mean a 'benefit' as in more than a benefit to one party...?  Lest we call stealing a 'benefit' since it provides advantage to one person involved in the 'transaction'.

[niemivh]

a 1% Tobin tax is extremely high.  Most Tobin tax proposals have been a fraction of that amount and would still have significant distortionary effects according to any of the positive studies done.  

I also do not see a problem with HFT or speculation on its own.

And why is this posted in Bitcoin Economics?

Most free-marketeers don't see are unable to see the incredible bias of all economists.  They believe that free markets are the solution to all our woes and that all economists (at least on their side) have no stake in the fight.  

Can I see some of those studies?  It's likely that I've seen them before and that they are totally wrong, well not 'wrong' just biased in favor of those who produce nothing and suck of the real economy (not referring to speculation in general, just HFT).  The resistance to a Tobin tax is not some benign triviality, it is through a lack of this tax that the system is largely gamed at present and there are people making an incredible pile of money in the process.

Let the people make a pile of money. Wealth is not limited unless you set it up that way from the start.  

So it's ok for people to make money off of other people without their knowledge or benefit at all?  And that somehow trading money back and forth with algorithms to exploit technicalities in an exchange system is creating "wealth"? 

People make money "off" people without their knowledge all the time.  Why is that wrong?  For example, my mortgage was sold to another company.  Someone else is making money off of me! Oh noes!  The benefit is liquidity.  No one is forcing people to sell at these prices, no one is given special access to make bids or asks.

Do you favor banning poker since some people might be better than others and "take money" from them?

In poker, people agree to play, and understand the risk. With HFT, everyone is paying the price, even if they don't want to play the game.

About speculation and price discovery, of course we need speculators, question is how much (how much accurate we want the price to be). And tobin tax is a very efficient way to set the limit.

And sorry about OP hopes, but Sarkozy don't really care about this. I guess he just said that during the election campain, or at some point when he needed a nice popularity poll.

Glad to see another person who gets it.

 

The Tobin Tax has a lot more support and traction in the EU than it does in the states.  Sarkozy is a scumbag, the Tobin Tax idea has been around for decades and he's obviously trying to improve his approval rating from the 20% range.

[labestiol]

If you want an exchange with a Tobin Tax, then create one. Everyone who thinks it's a good idea will trade on it. Others won't unless you force them to. We'll then let people figure out how valuable HFT is.

Thanks for your answer, it's a good one, and it makes me think

Maybe that's the way to go, but for that we would need producers/retailers to agree with that, which need pressure from people, which need people to understand economy.
That's why niemivh idea of creating a website is a good one.

Call me an utopist, but I still hope that one day people will get it. We just need good (and not corrupted) teachers, and a motivation for people to understand economy. Perhaps the present economical situation could help with that

[tomcollins]

I'd love for someone to tell my why speculation is bad.

I sense a thread derail coming, but yeah I don't see why speculation is so bad.

Apparently that's because both of you aren't aware of how much of it is going on, at least I hope that is the answer.  Before I write a 10 page history on this I'll test the waters: do you think that there is any amount of speculation that would be 'too much' or is it fine to have 50 times GDP of a country flowing in and out of that countries capital markets annually?

No, I don't think there is the concept of "too much".  Maybe you can explain why.  Even just a short summary.

I don't know if the Tobin tax is a good idea but the problem it addresses is huge.

When you try to buy or sell securities, hypertrading is a way that allows the big players to find the maximum price you are willing to pay.  They do it by placing and cancelling sales 1000s of times per second when a new buy order appears.  The effect is that us peons always pay close to the max we are willing to pay while the Goldman Sachs type institutions pocket the difference between that max and the price the security could be acquired at.

Its thought that transaction tax to eliminate those trades would be helpful.  If it provided a buffer for the "too big to fail" banks, so much the better.

Personally I'd worry that the exchange would simply take place somewhere else.  I don't know if the tax would work.

So the problem is someone else makes money?  Oh noes, how horrible.  I pay what I am willing to pay, how horrible.

Problem is that someone else is making money off of you without you getting anything out of it.  You literally gain nothing in the transaction while they gain everything. 

The funny thing is you're already paying these inflated prices to private hedge funds and other HFT operations.  You get to pay more for hyper-traded funds while getting nothing (except for the privilege of paying a little more, I guess).  All the details of the existing system look like a tax (since you can't elect not to pay it) except you get nothing out of it.  Like I said before in an exchange where 1 party seeks to gain all the utility of the transaction without providing any benefit/utility to the other party seems like a parasitical operation that should be discouraged. 

 

I lose .00005%.  Oh no, how horrible.  I'll much rather pay a 1% tax instead to keep these bastards from taking my .000005%.

Sounds to me that someone is getting utility, otherwise they wouldn't be engaging in trade.