How to curtail the speculative global currency transactions?

Question

Speculative funds sloshing around the world markets create an inherent instability while undermining the real economy and progressive policies at a national level. Currency speculators trade over 1800 billion US-$ each day across borders - about 90% of the currency trade is speculative!

In the globalized economy, there is a lack of adequate funding for global problems such as disease, poverty and hunger. Global climate change, deforestation, population growth and unemployment, declining fisheries and pollution threaten local communities worldwide. Projects which could help to address these needs and create jobs will cost more than 400 billion US-$ annually. Private donors don't meet the need, and some nations have cut their aid budgets.



THE PURPOSES OF A TOBIN TAX

The primary purpose of a Tobin Tax is to curtail the huge growth in speculative currency transactions. The fundraising potential for meeting essential needs is a further important purpose of this tax.

Each trade would be taxed 0.10 to 0.25%. This would discourage short-term currency trades but leave long-term productive investments intact.

The currency market would thus shrink in volume, helping to restore national economic autonomy. Nations again could still intervene effectively to protect their own currency from devaluation and financial crisis.

With the Tobin Tax, 100 to 300 billion US-$ per year would be generated. This revenue makes it possible to meet urgent global priorities, such as reducing the effects of global warming, disease, and poverty.

Revenue could go into earmarked trust funds to fund urgent international priorities.

Answer 1

The tax proposal does sound like an interesting idea. In a fair world, I think it would be an excellent way to curtail speculative trading and investing. But, we do need to realize that something like this would never happen. Do we think that investment firms, large banks, and brokers would ever go for a tax increase? Never. They would fight tooth and nail. Plus, often times we need this speculation to keep the economy floating. The flow of money and capital is crucial to sustain the current economic system. It is true, these people are trying to make a quick dollar, but that is the name of the game. Would retirement investments from hard working people like myself have annual returns of 7-11% without these short term risks? No. They really do not harm anyone but themselves and the people who are willing to give their money to them. While it is true that foreign and development projects may suffer if these banks pull out because they are suddenly afraid of getting a lose of profit, the capitalist economic system feeds off of these kinds of transactions. It may seem like robbing the poor to feed the rich, but unfortunately I doubt that much will be changed in the international system to stop this.

Answer 2

Governments must be able to regulate the transactions of currencies so that speculations will be eliminated to the detriment of what the world really needs to finance projects against poverty, environment protection and population explosion.