[DynamicSyngery]

(Original post by JPKC)
To circumvent the definition you would have to lie about the services you were offering as a company which would be incredibly difficult. The FSA aren't stupid.

The definition as it stands is contradictory, so it's unenforceable just by default.

Second order problems are things like: who owns the shares in retail banks? Typically shares in big companies are owned by investment institutions like pension funds, investment banks, insurance companies, and so forth. Who do retail banks get loans from? Would you make it illegal for retail banks to be owned by investment institutions or obtain loans from them? If so, where does anyone get capital to support a retail bank? If not, the two systems are not separate.

No it's not. And £60 would still be a fraction of the money made from the original £100 if you were trading it on the market, so your argument doesn't work. You start with £100, if you trade it wisely over a year then you can expect to increase that amount. What makes you think you have to trade once every hour without any profit? Bizarre.

It's an illustration that your "small" tax is not necessarily small. It depends how often money is traded. If once a year, then yes it is small. If more quickly than that, maybe not. If over the course of a day, it's very large, and may de-facto outlaw day trading. Is that good? Not really, because it means information cannot be used to price companies on a short time scale, which makes the markets less efficient.

High frequency trading is the worst kind.

Stating a position is a good start, but why is it bad?

[Maddog Jones]

(Original post by JPKC)
And you're so keen to keep them why? It's not like we get any more money from them now. An undertaxed booming City of London is as useful to the Exchequer as an adequately taxed neutral City. Most economists see the decline as inevitable, an FTT won't alter this trend either way, but it would provide a damn tonne of good for the country. The option is an FTT or cuts, cuts, cuts. I expected Labour to side with the left on this issue, as your leader intelligently has.

Fire this guy then. I don't care whether you look united, I care that you don't cynically cosey up to the Socialists in spite appointing twits like this to "positions of authority".

No, it is absolutely not as useful to the UK as a small, more taxed City. 'Most economists' do not see this decline as inevitable. I'd like to see your evidence for that assertion though.

As for you calling for me to be sacked due to not agreeing with the socialists - I don't mind if he does. But I was appointed to this position to gain Labour economic competence, and to argue and to do what is best for the British economy. Siding with the socialists is not best for the British economy. Many of their social policies are to be praised - their economic policy is laughable. I'll stand by what is right, not what is politically best for me - unlike you, who quits parties when he can't get a promotion.

[Classical Liberal]

(Original post by JPKC)
Why? Are you saying that doing business in the UK will, because of a 0.01% transaction tax (VAT is 4%!), become so unprofitable as to shunt them all overseas? Can you give me some reasons here. You've previous described yourself as a fiscally responsible centre-lefter. I did not take you for a stooge of big business, I took you at your word.

A lot of financial activity is trading currencies, also known as Forex. The margins made in Forex are tiny. This is because a small amount of money can be used to purchase a huge amount of currency, and a tiny change in the value of said currency can lead to huge gains, as the amount being traded is so vast.

A financial transactions tax would literally destroy the profits made in Forex trading, as the changes in the value of currency can be absolutely tiny, thus the tax will destroy any profit. We are talking about 0.0001% changes in the value of a currency being used to make money.

We can debate the merit of speculation such as Forex, but saying a tiny financial transactions tax would not destroy the industry is a foolish position to take. Thus the financial transactions tax would not raise much revenue, because it would destroy the revenue base.

[barnetlad]

A FAT tax? Surely that's not very PC.

[JPKC]

(Original post by Classical Liberal)
A lot of financial activity is trading currencies, also known as Forex. The margins made in Forex are tiny. This is because a small amount of money can be used to purchase a huge amount of currency, and a tiny change in the value of said currency can lead to huge gains, as the amount being traded is so vast.

A financial transactions tax would literally destroy the profits made in Forex trading, as the changes in the value of currency can be absolutely tiny, thus the tax will destroy any profit. We are talking about 0.0001% changes in the value of a currency being used to make money.

We can debate the merit of speculation such as Forex, but saying a tiny financial transactions tax would not destroy the industry is a foolish position to take. Thus the financial transactions tax would not raise much revenue, because it would destroy the revenue base.

Good point. That may be changed for the Second Reading; I was never certain that currencies should be included.

[Classical Liberal]

(Original post by JPKC)
Good point. That may be changed for the Second Reading; I was never certain that currencies should be included.

May I advise that you get rid of the financial transaction tax entirely and substitute it with an asset transfer tax, or more specifically a tax on buying and selling property.

The Tobin tax was proposed not to create revenue for government by the economist who thought it up to stop currency speculation, and other such similar speculation. It was argued by Tobin that such speculation is harmful to the economy and a small tax would stop the speculation dead, which it would. It is a tax that is intended to not really raise any revenue but to stop people from doing a specific thing.

I would propose an asset tax to do the same thing. To stop speculation on property. Speculation on property was the underyling root cause of the 2008 and crisis and the resultant depression. When banks lend for mortgages, they create the money to buy homes. This newly created purchasing power is used to buy homes. This new money increases the price of homes. Which leads to people wanting to get on the property ladder, hoping their property will increase in value. This causes more people to take out mortgages, which creates new money, which is used to buy property, which causes the price of property to rise. As you can see this system is self fulfilling. It is a credit expansion driven asset inflation phenomena. Only once the debt becomes too large and the interest unpayable do people start to default, the homes are then sold onto the market, this increases the supply of property, which lowers the price of property, which means banks become wary of mortgage lending (because they are worried that price of property will fall, because their collateral would be devalued) and they do not lend, which causes the price of property to fall. The defaults and the falling collateral values shows up as a loss on the banks balance sheet, and they end up needing to be bailed out. This is called debt deflation, and was proposed as the explanation of the Great Depression by one of Keynes contempories, Irving Fisher.

If a hefty tax was introduced on buying and selling property it would reduce the extent to which speculation on property would be worthwhile, because a large part of the profits from buying and then selling higher priced property would be taxed. This would stop or atleast slow down the credit driven frenzy in the property market and instead banks would create money for productive things, like investment into manufacturing, rather than jacking up the price of homes.

We need to lower taxes on production, which means lowering things like income tax, and raising taxes on assets, which means raising taxes on things like property. Once we start doing this, banks will start to lend in a way that increases the productive capacity of the economy and thus make us all wealthier in a real sense.

[DynamicSyngery]

It's more like that instead of "stopping speculation on property", it just gums the system a bit so that it takes a day and a half to collapse rather than a day, with slightly larger overall loss, and slightly lower returns to investments the rest of the time.

[JPKC]

(Original post by DynamicSyngery)
The definition as it stands is contradictory, so it's unenforceable just by default.

The definition really isn't important when debating the issue, but I take your point and so it shall be tightened up for the Second Reading. I'll try and find the descriptions used in the original Glass-Steagall Act.

Second order problems are things like: who owns the shares in retail banks? Typically shares in big companies are owned by investment institutions like pension funds, investment banks, insurance companies, and so forth. Who do retail banks get loans from? Would you make it illegal for retail banks to be owned by investment institutions or obtain loans from them? If so, where does anyone get capital to support a retail bank? If not, the two systems are not separate.

Another problem with the implementation that I'll get back to you on.

It's an illustration that your "small" tax is not necessarily small. It depends how often money is traded. If once a year, then yes it is small. If more quickly than that, maybe not. If over the course of a day, it's very large, and may de-facto outlaw day trading. Is that good? Not really, because it means information cannot be used to price companies on a short time scale, which makes the markets less efficient.

Your point here only works if the trades never added value. If the amount of worth in a traded thing remained static each time it was traded then yes the tax would add up, though the trades would be pretty pointless since there'd be no profit made even without an FTT! What this tax does is make sure that those looking to make transactions rationally consider the worth of making a certain trade, which would then obviously decrease the volume of frivolous unnecessary/irrational transactions that don't produce any value for the trader.

Stating a position is a good start, but why is it bad?

Currently there is little intelligence in the way transactions are made, so vast amounts of trades are made moving vast quantities of wealth about without proper consideration. A factor jolts the markets, trading firms then react by randomly moving their money about in spells of excessive speculation without any justification for where their wealth ends up. An FTT curbs this type of irrational speculation. To use the vernacular, trades that have a low margin of safety for a return on the principal sum are impacted more by the tax than proper investments. This is good for the capital market, good for wealth creation.

(Original post by Maddog Jones)
No, it is absolutely not as useful to the UK as a small, more taxed City. 'Most economists' do not see this decline as inevitable. I'd like to see your evidence for that assertion though.

Markets in Asia are expanding rapidly, financial centres in the East are much better placed to provide services to those markets. It's just common sense.

As for you calling for me to be sacked due to not agreeing with the socialists - I don't mind if he does. But I was appointed to this position to gain Labour economic competence, and to argue and to do what is best for the British economy. Siding with the socialists is not best for the British economy. Many of their social policies are to be praised - their economic policy is laughable. I'll stand by what is right, not what is politically best for me - unlike you, who quits parties when he can't get a promotion.

You're a liability. Each time you comment it's like "look how important I am as the Shadow Chancellor on an internet forum", you then insult a few parties and make your leader look a fool. And we both know that you were appointed because no-one else asked for the "job"! FYI, I quit Labour because idiots like you completely bastardise it with the reactionary nonsense you spout - I care about debating policy on this forum, you've never written a bill, so I have zero respect for your pronouncements. Only respond if you want to talk about the merits/demerits of an FTT.

[Maddog Jones]

(Original post by JPKC)
Markets in Asia are expanding rapidly, financial centres in the East are much better placed to provide services to those markets. It's just common sense.

Markets in the East are expanding rapidly in terms of manufacturing and industry. I think you'll find if you look at the Global Financial Centres Index, it's still the old stalwarts at the top - London, New York, Hong Kong, Tokyo, Singapore. Lots of centres in the East, yes, but the old ones - the new ones, like in India, and 'old China' (ie, not Hong Kong, most of its growth coming due to British colonialism rather than current Chinese growth) like Shanghai, are still languishing mid-table. They may be beating us in industry, but not in financial services.

You'll also note that financial services are in far, far greater demand in the West than they are in the East. The East is well served by its large population in terms of selling/making large quantities of things, but it requires a wealthy population for demand in financial services to rise. A vast majority of the Chinese and Indian populations will never go anywhere near a financial service in their lifetimes. Europe and North America will make up the majority of demand for financial services for a long time.

(Original post by JPKC)
You're a liability. Each time you comment it's like "look how important I am as the Shadow Chancellor on an internet forum", you then insult a few parties and make your leader look a fool. And we both know that you were appointed because no-one else asked for the "job"! FYI, I quit Labour because idiots like you completely bastardise it with the reactionary nonsense you spout - I care about debating policy on this forum, you've never written a bill, so I have zero respect for your pronouncements. Only respond if you want to talk about the merits/demerits of an FTT.

I don't believe I am a liability - I very much doubt a single person on TSR will go into the next election knowing who I am, never mind choosing to vote based on my personality. I do believe that Labour highlighted you as a liability though, and chose never to reaccept you into the party or go into coalition with you because of your abrasive attitude and offensive style, which brings me nicely onto your next point - I don't believe I've ever made a post boasting about being SCotE on TSR. Mainly because I don't really care - as you pointed out, I only got the job because I was the only one who applied for it (as is the case with most ministerial posts, and if its true in Labour, the largest party, I'd imagine its true in others also).

As for your final point, that you 'only care about debating policy' and that I should 'only respond if I want to debate', it's nice to see you can dish out the insults, but aren't prepared to receive any criticism. Come back when you can maintain a level of civility and diplomacy that you can actually function with other human beings and remain in a party without falling out with all of them, like you did in Labour. (You aren't missed).

[D.R.E]

Nay. This isn't doing anything to fix the monetary and financial systems. Complete waste of time.

[DynamicSyngery]

(Original post by JPKC)
The definition really isn't important when debating the issue, but I take your point and so it shall be tightened up for the Second Reading. I'll try and find the descriptions used in the original Glass-Steagall Act.

Before we conclude the definitions don't matter, can you answer the two questions I posed? Because if the answers are obvious from the definition to you, they're not to me.

Your point here only works if the trades never added value. If the amount of worth in a traded thing remained static each time it was traded then yes the tax would add up, though the trades would be pretty pointless since there'd be no profit made even without an FTT! What this tax does is make sure that those looking to make transactions rationally consider the worth of making a certain trade, which would then obviously decrease the volume of frivolous unnecessary/irrational transactions that don't produce any value for the trader.

If I trade every hour then the profit on any given trade to yield a market rate yearly return will be comparable to the amount taken by the tax. The effect is to de-facto outlaw most trading on shorter than around a weekly basis. This makes markets considerably less liquid and less efficient on shorter time-scales than this.

Currently there is little intelligence in the way transactions are made, so vast amounts of trades are made moving vast quantities of wealth about without proper consideration. A factor jolts the markets, trading firms then react by randomly moving their money about in spells of excessive speculation without any justification for where their wealth ends up. An FTT curbs this type of irrational speculation. To use the vernacular, trades that have a low margin of safety for a return on the principal sum are impacted more by the tax than proper investments. This is good for the capital market, good for wealth creation.

The consideration is whether it makes money, and is considerable. That's why the considerers are maths and physics PhDs, rather than people on internet forums.

[JPKC]

(Original post by DynamicSyngery)
Before we conclude the definitions don't matter, can you answer the two questions I posed? Because if the answers are obvious from the definition to you, they're not to me.

In the MHoC, when a problem is found with a Bill, the Second Reading usually includes an attempt to fix it, which it will for this Bill since you've raised a valid point in criticising the implementation proposed in this Reading.

If I trade every hour then the profit on any given trade to yield a market rate yearly return will be comparable to the amount taken by the tax. The effect is to de-facto outlaw most trading on shorter than around a weekly basis. This makes markets considerably less liquid and less efficient on shorter time-scales than this.

How will it be comparable to the amount taken by the tax? The research I've cited in this bill says completely the opposite for rates going right up to even 0.5%(!), so can I see the evidence you're basing your contradictory view on?

The consideration is whether it makes money, and is considerable. That's why the considerers are maths and physics PhDs, rather than people on internet forums.

Sorry, you've lost me there.

[cl_steele]

no, plain and simple.

[DynamicSyngery]

(Original post by JPKC)
In the MHoC, when a problem is found with a Bill, the Second Reading usually includes an attempt to fix it, which it will for this Bill since you've raised a valid point in criticising the implementation proposed in this Reading.

It's not just the implementation, it's a fundamental question of what you're trying to do. If to nominally separate arbitrarily defined types of investments into different [holding] companies, then the effect is minimal. Barclays will just set up a Barclays Retail Ltd. subsidiary, &c. Otherwise, you're imposing very serious restrictions on obtaining capital for retail banking.

How will it be comparable to the amount taken by the tax? The research I've cited in this bill says completely the opposite for rates going right up to even 0.5%(!), so can I see the evidence you're basing your contradictory view on?

If I make a trade every hour with an average 0.01% profit, without the tax I am making a 140% annual profit. With the tax I break even. 140% is way higher than anyone actually makes, so hour-to-hour trading is taxed out of existence.

idk what your research says - it may not exist, or you may be misrepresenting it, or you may have misunderstood it - but the whole FTT is just a scam based on the public's poor understanding of maths. The usual 'maths for fun' explanation is that you put a penny on the first square of a chessboard, 2 pennies on the next, 4 pennies on the next, and so forth, and the reader expects the total to be quite small, and it ends up more than all the money that exists in the world. Growing exponential functions after lots of iterations only look small to people who haven't got a clue what they are.

The net effect vs a higher corporation tax is just to outlaw rapid trading (I say rapid rather than high frequency because while HFT is done on intrasecond basis, this is more like outlawing buying and selling shares on anything more than a weekly basis).

Sorry, you've lost me there.

High frequency trading is not done without consideration. It is done by programmes written by maths, physics and electronic engineering PhDs.

[Metrobeans]

This is in cessation.