Friday, November 27, 2009

Krugman and the Tobin Tax

In a 11/20/2009 post below entitled, Jobless Prosperity", I included a communication I had sent Paul Krugman and another I had sent Mark Thoma about unemployment, deficits, and the Nobel economist James Tobin.   On the 26th, Krugman published "Taxing the Speculators" in the New York Times and Thoma republished it on his blog Economist's View.  I had also mentioned the more aggressive UK program to regulate financial institutions and their executives.  Please read the article in either one of the links.

I also had in my communication a questions relating to deficits and how the are exited after sustained recovery.  In blog post today, "Deficits: The Causes Matter", Krugman discussed how the causes of a deficit are important and how the causes, to an extent, define, how the deficit must be dealt with and when.

I do not know how coincidental the article and the blog post were, but they are both greatly appreciated.  Tobin's Tax was a concept developed to decrease economically undesirable and dangerous trading by taxing the specific type of financial transactions.  And just today we are seeing that financial institutions are already trying to test how credit default swaps are settled in this article on Bloomberg,com.  The current process was designed to abnegate the need for regulation.  If they do not get it, and have all kinds of reasons why a clearinghouse is liquidity "inconvenient", then maybe a Tobin Tax is just what they should get.

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