Tuesday, 26 May 2015

Muddled thinking from Richard Murphy on banks.

His first suggestion is a transacton tax on banks, to quote: “This tax is designed and intended to reduce the volume of speculative trading by banks.”

Well I have no big objections to a transaction tax, but the idea that that will greatly reduce socially useless speculation while NOT REDUCING legitimate transactions (which is presumably the object of the exercise) is questionable. If I can make £1,000 a day by speculating and government imposes a 10% tax, that means I make a miserable £900 a day. Am I going to stop speculating? Get at socially worthwhile job like nursing, teaching or sweeping the streets? Unlikely.

And how do you distinguish between perfectly legitimate transactions, like buying stock exchange quoted shares, an activity which is inherently speculative, and on the other hand “anti-social” speculation? It’s near impossible.

His third idea is that “Ring fencing is no longer enough. The banking activity that underpins our economy has to be split from that which is engaged in speculation.” Well that’s pretty much the basic idea behind ring fencing, as is made clear in the Vickers report, the source of the “ring fence” idea!

Plus there’s a big problem with the idea that speculative or “investment” banks should be allowed to fail: it’s widely accepted that letting Lehmans fail did a lot of harm and possibly more harm than good. Vickers didn’t face up to that problem, nor does Richard Murphy.

His fourth idea is to “Bar banks who have undertaken criminal acts from state contracts.” Er… given the widespread criminality amongst bankers, you’d need to bar almost EVERY bank  far as I can see.

I suggest Richard Murphy goes back to the drawing board.

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