Transforming Finance

A financial transactions tax is a sensible idea whose time has come.

As part of the Green Economy series

By Hazel Henderson

In 2010, we at Ethical Markets Media (USA and Brazil) released a statement from the meeting of financial experts we convened on Transforming Finance. We worried the Dodd-Frank Bill – now made law – would do little to prevent another financial collapse. We were concerned about too-big-to-fail banks (now 30% bigger); the May 6, 2010, flash crash and Wall Street’s computerized high-frequency trading; regulating derivatives (the CTFC still has not moved); raising banks’ capital reserves to curb risk-taking; separating retail banking from risky proprietary trading; reforming credit ratings, as well as discussing a below 1% financial transaction tax (FTT) to curb “flash trading” and speculation without harming genuine investors. 

I support this “sensible FTT" since such a tax would help all strapped governments raise significant revenue to fill their budget gaps.  FTT is now supported by many European countries on the agenda at the G-20 and is the easiest tax to track (FXTRS) and collect from online trading platforms. Lobbyists in Washington, Brussels and London still are fighting all these reforms in the Dodd-Frank law (which kicks the can over to weak, understaffed regulators).

The good news: over 80 experts worldwide have signed our Transforming Finance statement, and we welcome additional signers. Britain’s Independent Commission on Banking (ICB) has called for higher capital reserves, higher than those in the new Basel III rules. 

Global finance is shifting to Asia (see Eichengreen’s Exorbitant Privilege). The recent BRICS conference in China (Brazil, Russia, India, China and South Africa) agreed to trade in their own currencies instead of the dollar.

Meanwhile, the US is floundering with political theatrics over the debt ceiling that, unless raised, would technically put US sovereign debt in default. Standard and Poors’ outlook for US treasuries is “negative.” Republicans, many of whom still want to repeal the New Deal, pushed Democrats to cede ground to the deficit hawks. Both parties follow the defunct paradigm of “efficient markets” and the GDP scorecard that blinded Wall Street from seeing the broader picture we laid out in Transforming Finance. 

Ethical Markets’ Beyond GDP survey with Globescan in 12 countries found ordinary citizens understand the need to include indicators of health, education, poverty-gaps and the environment in GDP. In my “GDP: Grossly Distorted Picture,” I showed how bond markets’ focus on GDP causes mis-pricing of sovereign bonds. All other forms of wealth: well-educated workforces, efficient infrastructure and productive environments, count for zero in GDP. Public anger still simmers that perpetrators of the 2007-8 Wall Street financial debacle and its horrendous costs to Main Street have not been prosecuted. Cities and states are trying to balance their budget crises – caused by fallen tax revenues, unemployment and foreclosures – by targeting public employees. 

Meanwhile, the Fed’s efforts in QE2 to pump up stock markets has led to additional bubbles in oil, food, farmland and other commodities (Bloomberg Business Week). Savers are still punished. Ben Bernanke still believes in “trickle down” economics (Levy Institute). Only the Supreme Court case brought by Bloomberg and Fox News forced disclosure of the Fed’s trillion dollar bailouts (beyond TARP) to big, global banks and corporations. The Public Banking Institute reports that in 11 states, there are efforts to re-instate public banks like the Bank of North Dakota, similar to public utility banking proposed by Lawrence Kotlikoff in his Jimmy Stewart is Dead. Finance must be downsized and its excesses curbed if we are to restore its traditional role of serving real economies. Our statement on Transforming Finance is based in recognition that finance is part of the global commons. More on all this in my next post on Talkback!

About Hazel Henderson

Hazel Henderson, president and founder of Ethical Markets Media (USA and Brazil), is a futurist, evolutionary economist, author of Ethical Markets: Growing The Green Economy and eight other books. Her editorials are syndicated by InterPress Service, and articles appear in journals worldwide. She leads the Transforming Finance initiative, created the Green Transition Scoreboard®, tracking global private sector investment in green tech, and developed with Calvert Group the widely used alternative to GNP, the Calvert-Henderson Quality of Life Indicators. In 2010, she was honored as one of the “Top 100 Thought Leaders in Trustworthy Business Behavior 2010” by Trust Across America.

Talkback Readers: Is a financial transactions tax a sensible idea? Give us your comments on Talkback!

10:25 pm by csrwiretalkback[19 notes]

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