A recent statement in the Washington Post represents one of the few attempts at coherency and is worth reiterating and analyzing:
And we will see clearly articulated demands emerging, among them a “Robin Hood tax” on all financial transactions and currency trades; a ban on high-frequency “flash” trading; the reinstatement of the Glass-Steagall Act to again separate investment banking from commercial banking; a constitutional amendment to revoke corporate personhood and overrule Citizens United ; a move toward a “true cost” market regime in which the price of every product reflects the ecological cost of its production, distribution and use; and with a bit of luck, perhaps even the birth of a new, left-right hybrid political party that moves America ...
Permit me to analyze the above:
1. Transaction Tax: Taxes are generally created to collect revenue, possibly to motivate behavior. In this case it is to penalize people who create markets. The function of many of the financial markets is to create liquidity. Money moves to where it is best put to use. Thus if I want to raise capital by debt or equity I need an efficient and reliable market. If the cost of doing this is too high in the US then it moves to Singapore, Luxembourg or Shanghai. Along with the move is the opportunity as well. Thus taxing transactions assumes inherently an immovable market, yet that is not the case. Dry up capital and you dry up the entrepreneur. Kill that and you kill this country. Thus the idea of an arbitrary tax is insane.
2. High Frequency Trading: Well there I would agree. As I have been saying for now forty years watch out for the instabilities. Look at LTCM back fifteen years ago, great minds but they got caught up in their own simplified assumptions. The market changes in ways to reverse attempts to maximize returns. It is inherently an unstable system, at best one can ride trends, at worst one can increase the unstable oscillations. Good idea but based upon total ignorance of cause and effect.
3. Glass Steagall: Good idea but remember it was Clinton and Summers and Rubin that gave you that one.
4. Corporate Personhood: Well why not unions as well. Frankly the more voices the better. Look at lobbyists, they write most of our legislation. Just look at SOPA, the Internet regulatory bill, and the mess it will create. It will cause a collapse of the Internet and will make China look like the free speech state par excellence!
5. "True Cost": Now here is a real dumb idea. Think Coase my friends. Who will determine the true cost. Anyone who has ever dabbled in calculating such ephemeral costs knows that it cannot be done. All that can be done is a Coasean cost balance, show me the harm and pay the remedy.
The problem is that some of these are fine and others make no sense. They are all half baked as is the movement.
Now the NY Times comments on this as well. They state:
Occupy Wall Street is animated by a central, galvanizing idea — that the
distribution of wealth is unfair. That struck a very live nerve,
grabbing something that was in the air and turning it into simple math: 1
percent should not live at the expense of the other 99 percent.
However this leaves a significant question. If the 1% benefited at a cost to the 99% then one may have a basis for a claim. If, however, the 1% benefited and so did the 99%, albeit less so, then there is not only no basis for a claim but the claim is denied on face value. Now clearly banks and bankers benefited from public money and also the public has been devalued as a result. Thus the Government officials who created such deals did so in such a way to penalize the public. The benefit went solely to the 1% elements in banks. They in turn should have paid, but the horse has left the barn.
However, for the 1% who did not so benefit, say Steve Jobs and other entrepreneurs, who took risks, create wealth and jobs, then they should be rewarded not penalized.
What is the dividing line; wealth creation versus wealth transfer. Bankers just transfer wealth taking a piece for themselves. Wealth creation is what we should reward, the creation of new businesses, new technologies, new jobs.
Posts
