So, on this Debating Europe on the FTT thing.

I\’m told that a very important person has responded to my post:

\”I would like to draw your attention to a comment we received on Debating Europe from Corrado Pirzio-Biroli, Chairman of the Consultative Committee of the European Landowners’ Organization (ELO). In his contribution, Mr Pirzio-Biroli responds to your statements on Financial Transactions Tax, an criticizes your opinion\”

 

My response is there:

“Tim Worstall’s statements (not the FTT) are arrogant and unbalanced…actually clear lunacy (his own words).”

Ah, the insult direct. Good, this is getting interesting.

“He uses techno-speak to frighten-off the non competent reader. ”

Try again. I go to great lengths to explain technical matters in language accessible to the general, non-specialist, reader.

“So far we have had bad economics as well as bad politics. ”

Detailing the incidence of a tax is not bad economics. It is simply economics. My apologies if this point hasn’t quite reached Continental Europe yet but economics is a science. We can use it to predict certain things. One of those being who will actually carry the economic burden of a tax. That you do not like the answer is of no more import than your not liking Newton’s Equations would be important. Apples will still fall out of trees whatever your personal prejudices on the matter.

“Bankers have their share of responsibility and sought risky private profits counting on governments and taxpayers to socialize their subsequent losses.”

The connection between this and an FTT is not apparent. In fact there is no connection: the answer to the socialisation of losses is of course not to socialise them. Let failing banks go bust. Still nothing to do with an FTT of course.

“Banks used to be intermediaries between savers and investors. They have become speculators with their clients and also with their own money, have betrayed the trust society had put in them, and weakened the capitalist system. They are sawing the very capitalist branch we are all sitting on.”

This all might be entirely true but so what? It’s irrelevant.

“Bankers are perhaps the biggest obstacle for measures improving the efficiency and transparency of financial markets, alleging Armageddon for additional financial market regulation as well as the introduction of a FTT (e.g. that high frequency trading would emigrate destroying the financial service industry where the FTT is applied).”

Gosh, that’s an interesting one. An FTT will remove liquidity from the markets, widen spreads, increase price volatility and cost consumers vastly more than it will raise in revenues. Yet you say that an FTT will increase efficiency? More volatile more expensive capital markets will be more efficient? Clearly the last couple of centuries’ worth of work on markets and the joys of them haven’t quite reached parts of the European Mainland as yet.

“Admittedly, FTT alone, without regulatory reform, would not control speculation, but would be at least a signal that excessive short-term speculation is unhealthy;”

This is something that you must prove, not assert. And as yet, no one has shown that it is even possibly true, let alone certainly so, to the satisfaction of economists. You know, economists, the people who are the experts in the science of economics? Just like you go to the physics wallahs if you want to know why apples fall down out of trees?

Speculation increases liquidity and reduces price volatility. Both highly desirable things.

“it would recognize that Keynes’ warnings against liberalizing world financial markets were justified,”

That’s the Keynes who spent decades speculating in the commodities markets, is it? That one?

“that the related uncertainties for the budgets and finance of whole countries can have catastrophic consequences and disrupt national and regional economies, if not the world economy;”

Eh? That governments are spending money like drunken sailors on shore leave is a result of those dastardly speculators? Not the result of politicians be constitutionally fiscally incontinent? We have a useful word in English to describe such a position: “nonsense”.

“and that the FTT-related revenues would be the smoothest way to deal with widespread budgetary problems worldwide.”

What? Haven’t you seen the revenue projections from the EU document about the FTT? There will be no additional revenue! A bit comes in from the tax, yes, but it shrinks EU GDP by 1.7%. Meaning that all other tax revenues *fall*. By more than the new revenue. The FTT simply does not provide any extra revenues at all: it shrinks revenues. And no, not even in European economics is a fall in tax revenues a method of dealing with budgetary problems.

“If those actually paying the FTT would be the consumers, let them decide (the majority don’t have the means to be consumers of the financial products banks offer to financial investors).”

Make the tax voluntary? Now there’s an idea. That would be letting the consumers decide, yes. Pity no one thought of that before imposing income tax on us all, eh?

“It could notably help governments affected by insufficient economic growth to grow out of the mess,”

No, you haven’t read the EU report, have you? It says that an FTT will shrink the European economy.

“and the EU to find an own resource”

That’s not something that is convincingly in favour of any tax you know. “Let’s send money to an unelected supra-national bureaucracy” is not known as being a wise move. Quite apart from it being undemocratic of course.

“which would have wide popular support, preventing governments from continuing to act as shop-keepers with a calculating machine to check the net- contributing or net-receiving effect of every EU decision.”

Well, quite, an “own resource” would mean that no one at all was looking over the shoulder of that bureaucracy. This might be how it’s done in Padua, or Potsdam, Senor, but it’s not the way that we are used to dealing with our affairs.

English political history has been described as a 1,000 years of our gaining the power to insist that the State ask us nicely for our tax money, ask for it every year, tell us where it goes and give us an opportunity to say “No”. Quite why we should have to give that up just so that Germany doesn’t invade France again I’m not sure. Perhaps you could explain why keeping a bureaucracy accountable would increase the risk of war?

“If bankers then succeeded to pass on the tax to the consumers, governments should intervene on the latter’s behalf, starting with decent limits on bonuses of bank leaders unrelated to performance.”

You’ve entirely missed the point of tax incidence. Please go and read Seligman (1899) so that you can see what is being said. There is no conscious attempt to “pass on” a tax. Rather, people’s behaviour changes as a result of the existence of the tax. This change in behaviour leads to certain people having less money in their pockets than they would in the absence of the tax. Thus these people with less money are those who bear the incidence of the tax.

My apologies, but really, what are you doing commenting upon the incidence of taxation when you don’t have the very first inkling of a suspicion of an idea of what is being talked about? Is this how things are done in your corner of the Continent? That the ignorant are asked to make public policy?

“Come on, Tim Worstall, how can a 0.005% FTT have the mammoth impact on the economy that you predict?”

Sigh. The FTT is variously predicted to raise €50 billion (some EU estimates, before the tax losses from a shrinking economy) to $400 billion (Robin Hood Tax people). Anyone who thinks that you can raise $400 billion in tax revenues without changing the way the world works just isn’t thinking, are they? You know, even in government circles $400 billion a year is though of as pretty fat money. If we stuck $400 billion on cigarettes we’d all assume there’d be some change in behaviour, wouldn’t we?

“Whose interests are you defending with your spurious arguments?”

Actually, mine. No, not as a producer of anything, but as a consumer. As one of the people that is going to have to pay this tax. I’ll end up paying £10 so that £1 can be raised in tax for Mr. Rumpypumpy to spend as he pleases. This does not please me, I do not think that this is good public policy. In fact, as I say at the top, I think that this is insane.

“As Jean Letitia Saldanka commented, I hope that the finance industry reflects on its role in society before it is to late for all of us, including that industry itself.”

Myself I hope that the political classes and their shills and lickspittles stop trying to impose entirely insane, expensive and counter-productive taxes on us.

30 thoughts on “So, on this Debating Europe on the FTT thing.”

  1. n.b. I know you have argued that many of the arguments put forward by its proponents are hogwash, but I’m less sure you’ve managed to demonstrate FTT is such a bad idea … what did you make of that mildly positive assessment from the IDS?

    http://www.ids.ac.uk/index.cfm?objectid=89EA5114-F8AE-4D47-74EAB87AB851BBB4

    mind you, I think things like ICAP threatening the leave London are going to be very hard to call bluff on

    http://www.ft.com/cms/s/0/86770a00-eab2-11e0-aeca-00144feab49a.html#axzz1ZjXIg96s

    Tim adds: Well, the IDS report says it will likely increase volatility, would be passed onto consumers. Not good then eh?

    Joyously, they run it on FX thoughm, which here in hte EU would be illegal, so not all that good a report at all.

  2. also, I think you have left yourself open trying to claim Economics is a hard science that can predict tax incidence as accurately as Newtonian physics predicts the movements of objects.

    We can take an informed guess about incidence, a guess which we will never be able to verify. That’s as good as it gets.

  3. “increased volatility … not good”

    well, no. But how quantitatively important is it, and does it outweigh the benefits (more tax revenue in the context of state of current public finances).

    You can’t argue against something just by listing its bad points.

    Tim ads: Come along Luis, one of the major arguments used in favour of the tax is that it will reduce volatility. So, if it actually increases volatility then that’s that argument in favour of the tax defeated.

    Then there’s the “but we’ve got to raise money somehow” one, defeated by the EU’s admission that it will shrink the economy so much that it will reduce revenues (as sith Stamp Duty, revenue would rise if it were abolished, so says the IFS).

    Finally, there’s the “but the bankers must pay” and tax incidence shows us that they won’t we will.

    There’s no good argument in favour of the tax left, is there?

  4. It’s simple – just like the 50% debate, socialists don’t let the truth or facts get in the way of bashing the rich – even when it actually reduces the take take – the basing is the important bit..

  5. Why do they not realize that any tax put on a supplier of goods or services will always be paid by the consumer ? Are they dumb stupid or devious?

  6. Can I just say well done, Tim. The ordinary people are powerless in the face of the enemy, but at least you managed to really rile one of the ignorant socialist bastards who illegitimately and undemocratically hold the power to lower our standards of living as part of a scheme to destroy the nations of Europe.

  7. “(n.b. Tim I’d dial down the liquidity argument because I think it is rebutted by the idea that short-term speculators only provide liquidity when you don’t need it – i.e. not when shit hits fan”

    I don’t understand this point. In this context, I thought one of the the main point about liquidity is that it lowers spreads and therefore transaction costs. Desirable at all time.

    Secondly, the presmise makes no sense.

    “short-term speculators only provide liquidity when you don’t need it – i.e. not when shit hits fan”

    Are you saying that there is not an increase in short terms speculation when the shit hits the fan? If so, I think you are about to be surprised.

  8. Tim said: “Yet you say that an FTT will increase efficiency?”

    What is the efficiency of a trading market that has had all the trading regulated and taxed out of it – nil or infinite?

    Or perhaps he measures efficiency as how much money speculators are throwing at politically acceptable pockets.

  9. Innumerate fucking Wop gets hoity-toity when reality impinges. Tim counter-argues bluntly, but soundly. World turns on its axis. So fucking what.

  10. I just meant the point about volatility didn’t knock down IDS conclusions. But, as you point out, if the FTT were to actually decrease tax revenues, that does rather pull the rug out.

  11. I OBJECT TO YOUR STATMENT THAT GOVERMENTS ARE SPENDING MONEY LIKE A DRUNKEN SAILOR
    WHEN I WAS A DRUNKEN SAILOR WHEN I RAN OUT OF MONEY I STOPPED

  12. Well! How unlike an apparatchik to stick his head above the parapet!
    I think that one has to forget the pro’s(none) and cons (many) of an FTT and remember that ‘The Project’ comes first, however it has no income of its own and an FTT would be the thin end of the wedge leading to tax-raising on a wider stage. The facts must not be allowed to get in the way of this. An added bonus is that it looks to the bovine crowd as though the unpopular banking (tiny) minority is being smacked in the goolies. Another, huge, advantage is that it reads so well in F****e, as their market is insignificant when compared to that of Perfidious Albion and Brit bashing is a national sport.
    Incidentally, I’m sure I’m not alone in seeing a strong likeness between the rhetoric used to support the Euro and that deployed for another belief system: AGW .

  13. Listening to the case for the financial transaction tax reminds me of the case for the euro:

    “Even better from a campaigning angle, the most vocal opponents of an FTT look the most partisan, self-interested and out of touch with ordinary life”~

    The people who warned of the damage that would be inflicted upon Europe by the flawed single currency were cast aside as loons, talking gibberish, extremists and everything else under the sun.

    After everything that has happened have they been accepted as being correct? No..there just accused of wanting the euro to collapse for there own interests.

    How did this weak minded mentality which is nothing more than ignoring the facts and playing the game of “there’s more on our side than yours”… how did this escape the playground and move on to govern the world?

  14. @john malpas: The Chinese are watching the results of our continuing and upcoming changes in regulation and tax (both in the US and the EU) and… not doing anything. They’re waiting for our ‘experiment’ to provide results before they jump in.

  15. Is it true that the EU will collect the revenue from this tax? If so, why should they give two shits that it reduces national tax revenues? They gain money and power.

  16. Yes. Arnald, because your lefty bunch haven’t never generalised about baby eating Tories / Bankers…

    Arnaold, you’re a full time Professionally offended Twat…

    How do you earn a living in the real world..?

  17. “Innumerate EU apparatchik whose closest attempt at a real job was teaching in a uni in the 1960s when being moronically communist was a genuine job requirement.”

    Maybe a bit more fair. Although why we should be required to be “fair” to somebody who spent 34 years in the EC scheming for the destruction of the UK is a mystery.

  18. @Johnnydub,
    Some commenter was on here a few months back and knows Arnald in the real world. He does some pointless public funded job in the channel islands I seem to recall. Apparently in the real world he is every bit the prick he is online.

  19. Chrissums
    No that bloke doesn’t ‘know’ me. He used Guernsey’s jungle drums to find a name, and then googled it, or asked someone to find out. That’s what happens in places like this when you are proactively telling the truth about the finance industry. But hey ho. Don’t let your ‘prick’ get in the way of mindless nonsense.

    So johnny, the finance industry didn’t get felched and then expect the taxpayer to clean up the mess.

    Let them fail, you all bleat, let the finance industry fail because of its incompetence, you slaver.

    Then what?

    Cocks.

  20. @Johnnydub, I stand corrected on the single issue of whether the person in question knows Arnald in real life. He does apparently suckle at the tax payers teat however, and is undeniably a prick of the very first order.

    “That’s what happens in places like this when you are proactively telling the truth about the finance industry.”

    The “speaking truth to power” nonsense – the claim of many a jumped up pompous knob. I am sure the finance industry is shitting itself about arnald “proactively telling the truth” and investing much time and money on a smear campaign on the comment pages of Tim’s blog. You deluded cock.

  21. Chrissums.
    Don’t bother yourself. It was a while back. That guy has got a bee in his bonnet.

    So really, unless you know what happened, shut the fuck up. There’s a good boy.

    Also, you seem to know nothing about secrecy jurisdictions and the way they operate.

    No delusions here. But vent away, go ahead.

    It shows how stupid you are, along with most on here, that regard working on improving social infrastructure as ‘suckling at the taxpayers teat’.

    McWhore.

  22. But it isn’t just one guy is it. Everyone thinks you are a cunt. So either everyone has a bee in their bonnet, or you are indeed a cunt. I am going with the second theory.

  23. Chris M, Arnald routinely makes up some rubbish about uncovering some illegal behaviour at his previous job. But he can’t back it up due to some agreement he signed. Or something like that. It sounds like something Murphy or Shaxon would make up. If you are really bored one day trawl through thisisguernsey.com for full details.

    Now he seems to work for the state, and got in trouble once for posting his rubbish when meant to be working.

  24. Peter Whale:

    I think the answer is, simply, that the chosen route is easiest, procedurally and least opposition-generating, politically.

    It’s easier (and cheaper) to put the onus of collection and payment on fewer, more easily-identified entities. Add to that that the included (more or less “hidden”) charge for tax is liable to ruffle fewer feathers among the large number of consumers (and, thus, to be less a political liability). Straightforwardly devious is how I’d characterize it. By and large, deviousness is
    most of what politics is about: there’s underhanded deviousness, straightforward deviousness (and, sometimes, deviousness so stupid it’s hard to classify).

  25. Nearly all banks did not play a part in the financial crisis. And the solution is to tax all financial instruments and savings accounts totally unrelated to the crisis.

    The FTTers deny reality. They have to for they are greedy and require deception to remove money from individuals and businesses. Any economic damage caused is of no concern to them for they are employed by government or charities. They can legally steal without fear of imprisonment.

    FTT cannot be made to work. It’s inherent nature is failure. Many countries such as Sweden abolished their FTT. Even the two great promoters of the tax abolished their FTT, Germany in 1991 and France in 2008 by darling Sarkozy himself. At the current proposed tax rate, five hundred thousand people will lose their jobs, most in the UK.

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