Thursday, August 27, 2009

Tobin redux, and what the L?

Interesting to see Adair Turner apparently considering a Tobin tax to curb destablising speculative currency trades, in an interview with Prospect Magazine. As reported in the Guardian:
He told Prospect: "If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit. Higher capital requirements against trading activities will be our most powerful tool to eliminate excessive activity and profits.
"And if increased capital requirements are insufficient I am happy to consider taxes on financial transactions – Tobin taxes."

The paper's Larry Elliot embraces the comment:
Lord Turner's championing today of a levy on financial dealings to curb the power of the City marks a breakthrough in the long struggle to have the neglected brainchild of American economist James Tobin become a practical policy proposition.

But it does seem like fairly weak support, really. It's not a great advance on his views in his Just Capital (Macmillan 2001), in which he notes that there are 'at least theoretical attractions' in the tax - 'The key arguments against it are therefore not theoretical but simply the impracticality of enforcing it and deciding on division of revenues in a world of multiple nations and government.'
Those arguments remain.

And here's a puzzling little recession-related thing. The Guardian again relays the wise words of an advertising chap on the likely shape of recovery:
Martin Sorrell, WPP chief executive, gave the City little to cheer about as he used his trademark skill with metaphors to suggest the recession would be "L-shaped" – an italic capital L, to be exact. He said that while chief executives and marketing managers may have recently begun to feel slightly more positive about the global economy, that was not yet translating into actual spending.
Now, here's an italic capital L:
How the hell does that fit onto a graph of any economic indicator against time?



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