I commented yesterday on Richard Murphy\’s plan for a financial transactions tax on money that moved through CHAPS. One point was that the effect would be to entirely close down the short term money markets.
I could add much the same of a great deal of what is done by corporate treasury functions – many of which will have had the primary purpose of distracting attention from the real goal of the entity – which is to ensure profit is earned in real markets – not financial ones.
They are not the same thing
And I’d wholeheartedly agree that the net sum of much money market and inter bank activity – however originally contracted is not a zero sum game but a net loss, possibly of serious amount to the economy.
Far from him seeing this as a problem, he actually thinks that this would be a benefit.
And yes, this is indeed someone who advises the TUC on tax matters.
Just think through what he\’s saying here. If British Aerospace has money lying around (a not unlikely occurence, they get their revenue in huge chunks from the leasing companies as planes roll out, they pay out money over time for wages and materials. Heck, people pay up front fees to book a place in the order book, years before they actually get the plane.) then he thinks it better that that money simply sit in an account somewhere rather than be lent out to someone else to make use of.
That\’s the implication of closing down corporate treasury functions. In fact, looked at this way (for of course the money sitting in a bank account will be lent out, the margin going to the bank, not to BAe) he\’s trying to ensure that the banks become even more important as intermediators of cash flow, rather than the disintermediated money markets.
It\’s very difficult indeed to work out which economic planet he\’s living on for it certainly ain\’t this one.