Ritchie\’s done it again!

Yes, he\’s written the Robin Hood Tax submission for the budget.

The first is to raise revenues from banks and related organisations to help pay for the economic crisis they have caused.

And yes, as you can see, he\’s not been listening to a single word that people have been telling him for weeks.

It\’s that old tax incidence thing. The banks won\’t be the people paying up. It will be all of the users of financial markets who will. Yup, you and me again.

Oh for crying out loud. He actually tells us this in his own damn report!

This rate would have a minimal effect on spreads. A 0.005 per cent increase in the spread is well within normal market fluctuations ? spreads of all the major currencies commonly fluctuate by 1 basis point, sometimes more. In recent years the overall trend has been for spreads to narrow (between 1986 and 2006 for example the $/£ currency market spread decreased by 4.68 basis points), meaning a tax at this low rate would only increase spreads to levels seen a few years ago.

See! Even he\’s saying that spreads will widen! And thus this incidence of the tax will be on all those people who use financial markets because they\’ll have to pay the wider spreads!

This is what\’s so bloody infuriating about the man. He\’s got the (possibly misplaced) self-confidence to think that he knows how to correct the world\’s entire financial system and yet he\’s entirely incapable of seeing the logical implications of his own statements.

Right from the beginning of this I\’ve been saying that the incidence will fall upon all users of financial markets because spreads (margins, bid/ask differences call it what you will) will widen. All and every user of the markets will therefore have to pay these higher costs.

Richard has been saying that of course Worstall is simply a neo-liberal baby eater protecting his paymasters the bankers.

Richard now, in his own document pushing the case for the RHT says that margins will widen.

Which means that Worstall has been right all along of course.

Lordy, he gets worse:

Secondly, we argue that while banks and others could seek to pass on the cost of this tax to consumers this need not happen. Regulation could support this objective. Bank charges and rates to small businesses, individual customers and personal borrowers must be properly regulated to reflect the cost of providing those services, and not increased to cover costs incurred in other areas of bank operations. We suggest this regulation is streamlined with other bank regulation already under discussion.

We\’ve all kept telling him that incidence isn\’t about attempts to pass along a tax. It\’s that a tax will change behaviour and that such changes in behaviour will impose costs on some people. If margins widen then everyone has to pay those higher margins. There\’s absolutely Sweet FA to do with whether banks are trying to pass on the costs nor whether regulation could prevent it.

The kind of sums that experts estimate might be raised by a system of FTTs can easily be found from the profits of financial institutions and is not unreasonable – particularly given the moral duty on banks to help pay for the damage caused by a recession largely made in the finance sector.

Sweet Jesu, help us! How many bloody times does this have to be pointed out? The incidence comes from changes in the margins in the marketplace, not whether banks agree (or don\’t agree) to pay the tax out of their profits!

Even to the extent they can pass on extra costs it will tend to fall on high net worth individuals who benefit from the financial transactions, not a regular user of high?street bank services.

No, if margins increase then everyone has to pay the higher costs. The burden will be carried by the bloke changing money for booze on holiday just as much as anyone else. Gaaaah!

The argument of many who oppose Robin Hood Taxes is that they would reduce liquidity in financial markets. In this context liquidity is argued to be important because, in theory, if markets are sufficiently liquid no single transaction will be sufficiently significant to alter the price at which trades take place. The theory that significant liquidity of this type is optimal is, of course, based on the logic of the efficient market hypothesis, a theory that has now been questioned by the UK’s Financial Services Authority, amongst others.

What\’s he on about here? Snigger….he\’s not has he? Made a submission to the Treasury using his ghastly misunderstanding of what the EMH actually is?

You know, I think he has.

Richard, please read this. You\’ll become much better informed.

Sigh. The argument about liquidity is that if you reduce itn then margins will widen. If margins widen then the incidence of the tax is on all market users. Please see above…..

The reality is that theory and practice have clearly not coincided. The current exploitation of the euro in the face of problems within the Greek economy is clear indication that trades are being undertaken in large quantity with the explicit aim of moving prices whilst it is very obviously the case that the consequence of that movement in price is damaging to Greece and the whole population of Europe.

Yes, it\’s another Ritchconception. He\’s got confused (again) between the value of the euro and the premium that the Greek Government has to pay on its debt. A fall in the value of the euro of course helps Greece while a rise in the debt premium does not.

Is there no beginning to this man\’s understanding of finance?

Could I offer just a smidgeon of advice to anyone thinking of running a political (or as he would put it, \”civil society\”) campaign?

Do not let Richard Murphy write your reports. Not if you want to be taken seriously that is.

10 thoughts on “Ritchie\’s done it again!”

  1. “This is what’s so bloody infuriating about the man. He’s got the (possibly misplaced) self-confidence to think that he knows how to correct the world’s entire financial system and yet he’s entirely incapable of seeing the logical implications of his own statements.”

    Or, as I’ve said before, not bright enough to comprehend his own limitations.

  2. Regulations to stop companies (in this instance banks) passing on the costs of a tax are regulations designed to bankrupt the company- in this case the banks.
    Remind we, why did we throw all that money at the banks a year or so ago?

  3. He seems to love the IMF at the moment and keeps using their stats to suit his purpose. Have you noticed how he hasn’t drawn attention to the IMF’s managing director pouring scorn on the idea.

  4. This must be terrible for your blood pressure.

    Have you read Turner’s speech? He makes a better case, but clearly for something far far more limited.

  5. I’m beginning to think he’s not thick nor ignorant.

    Not that I agree with any of his waffle but that at the end of the day he is paid to write shyte economics which is what you’re getting.

  6. John W – Richard Murphy is clearly conflicted and cannot claim to be objective or impartial due primarily to him writing articles/ reports etc supporting those that support him financially.

  7. Herr Worstall, you must not excite yourself so much over this Murphy man for he is of Irish blood and not likely to be rational.

    More importantly, against stupidity, the gods themselves contend in vain.

    As I have said before. When I was alive.

    Tim adds: “Of Irish blood”….well, so am I, although a further generation separated.

  8. What Pat says. You can see his plan is flawed because he has to add in distortion after distortion to keep his plates spinning and not crashing to the ground. Each distortion begets others that “only need correcting”.

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