Reform of IMF (was the global melodrama)

[Brad De Long]

>Brad De Long wrote:
>
>>Treasuries and Central Banks fear that even talking about a Tobin tax is
>>instant death for their international finance industries--that all
>>transactions will move to Bermuda or the Caymans if they even start
>>discussions...
>>
>>Yet another example of the race to the bottom produced by divided
>>sovereignty and jurisdiction...
>
>They say that, but is it really true? If the G-10 central banks wanted to
>enforce a Tobin tax, couldn't they? An IMF report on the 1992 ERM melodrama
>said that the Swiss national bank refuses to let its banks lend francs for
>shorting - that shows a pretty strong level of control for something
>putatively out of the authorities' hands. My guess is that the central
>banks don't want a Tobin tax, because they're totally in the grip of their
>financiers, not because it's beyond their technical capacity.
>
>Doug

Why is the Eurodollar market headquartered in London rather than in New
York? Because the Federal Reserve and Treasury took one regulatory step too
many in an attempt to diminish the U.S. balance of payments deficit in the
1960s.

If the boards of the G-10 central banks all woke up tomorrow and decided
that this was the day they were going to impose a Tobin tax, they probably
could do it. But it's my judgment that the process of trying to assemble
the coalition would generate a few holdouts who would think that pulling a
lot of business away from New York would be very much worthwhile...

Brad Delong

Professor J. Bradford De Long
Department of Economics, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027; (925) 283-2709 voice
(510) 642-6615; (925) 283-3897 fax