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So, about that Robin Hood Tax then

The financial transactions tax. Just a leeelte bit won’t change anything but raise tonnes, right?

Hmm. iEnergizer dropped 80% this morning on the announcement that it would close down its AIM quote and move to matched bargains only.

So, really, the only change here is in the liquidity of iEnergizer stock. Less liquidity means a lower value, clearly.

So, we deliberately reduce the liquidity of all financial markets – including all stocks and bonds. Therefore all stocks and bonds fall in value, right?

A fall in the value of investments does what to the incentive to invest? That’s right, reduces it. So, an FTT, that Robin Hood Tax, a Tobin Tax, reduces the size of the future economy by lowering investment now in that grand but not quite so glorious future.

As, err, my one and only peer reviewed publication pointed out.

Good stuff this logic and science, isn’t it? Hypothesis and sometimes there just are those natural experiments to test it. It very gradually moves along the spectrum from hypothesis to theory as more such tests fail to disprove it.

4 thoughts on “So, about that Robin Hood Tax then”

  1. “[W]e deliberately reduce the liquidity of all financial markets”

    Ok – but how are you going to do this? If you abolish the LSE, punters will trade elsewhere unless you make that illegal too. In order to enforce the ban you’d need to constrain the convertibility of GBP (which would lose you some FTT) and reintroduce exchange controls to police GBP accounts held by foreigners.

    I suppose it’s all do-able but it seems like a lot of trouble for not much gain and ETFs and so on would probably remain tradeable through their issuers – always allowing for a bit of a time-lag before settlement.

  2. The Conservative Party

    As the holy month of Ramadan comes to an end, let’s celebrate the joyous occasion of Eid al-Fitr with gratitude and love. Eid Mubarak!

  3. Weeeelll, lower liquidity means fewer transactions, so a less efficient, more time-consuming, price discovery process. Less confidence in any price available/published.

    In other words, yes.

  4. An 80% fall in share value is quite surprising and I wonder…

    What does this say about the true worth of that company and it’s added value as a ‘gambling chip’ on the stock market that appears to be the lion share of the price?

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