The liberal editors at the Guardian

The other day, the Guardian ran a piece by Ha-Joon Chang and Duncan Green, arguing for the extremely bad idea of a financial transaction tax, and claiming that it is 'obviously' the right thing to do (link). The first comment below the line came from a commenter called SoundMoney, who raised some very powerful points. I shall replicate them in a moment, but for the moment, consider this. One of the commenters responded, saying

@SoundMoney

Thanks for that. It's good to see the counter-argument developed.

Hopefully an advocate of a FTT will respond to you at some point.

The response from the Guardian has been to make SoundMoney's comment to read, 'This comment was removed by a moderator because it didn't abide by our community standards. Replies may also be deleted. For more detail see our FAQs.' Comment is free?

For the record, here is a duplicate of the original comment, reposted later (src). It is rather baffling to me as to which community standards it breached. I assume, for the sake of charity, that the Guardian does not think disagreeing forcefully, with argument and reason, are breaches of community standards. It's worth reading and bearing in mind, since this idea still maintains some sort of zombified existence in the weirder fringes of leftonomics.

This argument is flawed beyond all reason. The two "main" objections you cite are minor ones. Complexity is indeed a non-issue.

Mobility of capital is a serious matter - not least because Obama has said America will have nothing to do with it. One major centre opting out will attract funds from all around the world. [The Glass Steagall Act post the Great Depression severely damaged New York as a financial centre and handed global dominance to London, where it remains. Food for thought for anyone crying "break up the banks"].

The remaining objections to a Tobin tax are:

1. It will raise nothing. Those millions of transactions per minute are generally computer generated - moving £1m from A to B overnight in search of 12p interest, then back again. A Tobin tax would take £500 on the move to B and £500 on the move back to A. So the transactions will never happen. And some retail depositors somewhere will lose 12p.

2. Whatever it does raise will be easily avoidable and/or will impact adversely on less sophisticated bank customers. A tax is a tax: it's not free money. Depositors will pay. The rich won't pay it; the small savers unable to arrange their affairs to avoid it will. It will increase inequity. It is, in fact, a Sheriff of Nottingham tax.

3. That bank paying an extra 12p overnight - it's offering it because it needs to borrow inter-bank funds. All banks do this to maintain liquidity: they can never guess with 100% accuracy how much cash to hold to meet expected withdrawals. Taxing the mechanism whereby banks maintain liquidity is dangerous and possibly suicidal. Lack of liquidity, more than lack of assets, is pretty much what nearly drove the entire banking system over a cliff in 2008. It is insane to increase the probability of a recurrence.

4. If a Tobin tax is introduced, arguably the Chancellor should in fairness repeal his new "windfall tax" bank levy (taxing bank profits being a far more sensible way of proceeding - and we have done so). You are not going to convince any sane Chancellor apprised of the facts that a Tobin tax will raise more money. Why throw away something workable, predictable, and only just introduced in favour of a chimera which will probably raise next to nothing?

5. There is no international body capable of requiring 200 nation states to introduce it. Those that opt out will perceive (probably rightly) some competitive advantage to be gained from not joining in. If you doubt that, consider the fact that there are more hedge funds in the Channel Islands than London. Regardless of any change of heart by America (none is now an offer), enough places will opt out to make avoidance easy and legal. My own self-administered pension fund can be offshored in a day.

6. The loss of business from Tobin-taxed Britain to opt-out jurisdictions will threaten Britain's pre-eminence in financial services, our largest source of taxes after retail, and threaten the 2,000,000 people whose jobs the sector maintains.

7. The "goodies for the developing world" argument is bullshit. The tax will go to national government who choose to impose it. Those governments may or may not modify their aid spending, but any decision to do so will have nothing to do with a Tobin tax. Very few transactions now take place in the developing world, so their own governments will gain little or nothing from the tax should they introduce it. Many developing countries do business in the major western financial markets however. They too will be victims of the tax. They will be funding, say, the UK's health service. Again, for them, it's a Sheriff of Nottingham tax; a (typical) smash-and-grab raid by the rapacious west on their fragile economies.

Now can we please lay this nonsense to rest?