Tobin tax

Jordan Hayes jmhayes at
Sun Apr 11 09:21:24 PDT 1999

From hliu at Sun Apr 11 08:39:10 1999

My view is that the new architecture should aim towards

eliminating arbitrage profits from open interest parity between

the currencies of the world's trading system, so that non-trade

and non-development transactions are not profitable. Currency

transactions should be neutral and not be permitted to become

the driving force in transactional decisions.

It's only because of currency fungibility that these arbitrage situations exist in the first place. That is: you can perform arbitrage with goods just as easily as you can with cash. There's a little bit of inefficiency in actually taking delivery from the seller and arranging for the buyer to take delivery; that's why we have futures exchanges for example.

But it can (and would, under your scheme) be done.

Market fundamentalism should not be permitted to be the excuse

for destructive currency manipulations.

I think giving agency to 'currency manipulations' is to miss the point: the value of a currency is merely a reflection of the 'true' market conditions; in that sense, it can seen as the thermometer, not the cold arctic wind. A speculative run on a currency merely underscores the problem and makes it plain for all to see.

I think you've singled out a non-sigle-out-able piece of the puzzle.

I think a Tobin tax (or similar) will only serve as a short-term increase in ineficiency; transaction costs have never much been a problem for large markets.


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