Financial Transaction Tax

In 1970 more than 95 percent of currency trades were for activitieslinked to what many call the "real economy" -- investment, tourism,foreign aid, trade. Today only two percent are. The volume of currencytrading is now some 50 times greater than the volume of trade in goodsand services. We trade more than $100 worth of stock and bonds forevery dollar raised for investment in new plant and equipent, a ratioalmost four times greater than 30 years ago.

Thisdelinking of money from place and productive investment is not theinevitable result of technological advances or economic evolution.Money is a human invention and rules that control its dynamic are alsoa human invention. To slow down the speculative and destablizing flowof money, John Maynard Keynes proposed a small financial transaactionstax in 1930. In the 1970s, Nobel Prize winning economist James Tobinproposed a tax on international financial transactions. The modest taxcould dampen volatility and encourage longer term investment. Todaytraders hold assets for a few hours, or even a few minutes. They arehappy with a very small return on each trade

Financialtransactions taxes are in place in more than 15 countries. The U.S. hada financial transactions tax from 1914 to 1966 but then reduced it to atrivial .004 percnet tax only on stock transfers to generate revenue tosupport the operations of the Securities and Excahnge Commission.Recently there has been renewed interest in such a tax on internationalfinancial transactions.