Cameron Criticises European Financial Tax

kristy Reforming Global Finance, The Blog

Some news for you on the subject of developments in Europe concerning the financial transaction tax.

… is an article in the Financial Times of 120126 — by Chris Giles in Davos, George Parker in London and Gerrit Wiesmann in Berlin – under the headline “Cameron criticises European financial tax”.

It has given me an opportunity to get the following comment posted:

A comment from a coach to a currency and derivative trader in Canada:

FTT — a madness, eh? Well, yes and no. Extensive empirical analysis by Stephan Schulmeister, a visiting professor from WIFO to the IMF, shows that a small rate of FTT does reduce volatility, so anyone who claims the FTT is ‘simply madness’ has obviously lost a bit of his equanimity. In this case we might surmise that Britain’s normally amiable PM is worried that, if he doesn’t talk tough on the FTT, he might lose a critical number of his City supporting caucus.

Introduction of a smart FTT is bound to occur sooner or later — both because reducing government as a pat prescription for economic health is obviously madness to anyone concerned in the least about such things as social justice and the coaxing of industrial gladiators to be sufficiently responsible about social and environmental sustainability, and because a small FTT does reduce financial volatility. So the EU majority will, sooner or later, compel the increasingly bankrupt Anglo-Saxon nations to rein in their desktop trading banksters. The issues are what is ‘smart’ for a smart FTT?, and when will people help Mr. Cameron knock more wholesome sense into his more rabid City kowtowing caucus?

Well, IMO as a coach to a trader in staid old Toronto, a smart FTT will be one that distinguishes between speculative, i.e. short-term, capital flows and genuine investment. Of course, if you talk to most people in the financial world they will pretend that “you can’t distinguish a speculation from an investment”, but notice how that’s a challenge, not a truth. So when I got that pretence thrown in my face by a sequence of a thousand and one Dalmatian financial people, I confess I got much madder than David Cameron and decided I would write a paper to describe what a practical transaction tax on obviously speculative capital flows would look like. Since my paper has now had over 400 hits from people I know, it might be robust enough now for readers of the FT to justify taking the 15-20 minutes needed to grasp its essentials. If that makes sense for you, you can find it at: .

You may have read that Sarkozy has decided to push ahead unilaterally with a small FTT on derivatives and a somewhat larger FTT on trades of stocks and bonds. Well, we all need more time and more patience!