News & Analysis
Thump ... Thump ... Disastrous Financial Tax One Step Closer
German parties strike deal on financial market tax ... The German government and the main opposition parties have agreed on the principles of a tax on financial market transactions. The deal is essential for German parliamentary approval of the EU fiscal compact. The accord has been thrashed out in a joint working group made up of the conservative-led centre-right government and the opposition Social Democratic Party (SPD) as well as the Green Party. According to SPD chairman Sigmar Gabriel, the compromise was based on an EU Commission proposal for a financial transaction tax, and marked a complete "180 degrees" U-turn in the position of the government. – DW
Dominant Social Theme: This is necessary for Europe to survive.
Free-Market Analysis: The big news in Europe is not the implosion of the euro but the steadily advancing financial market tax. This is a tax on financial transactions and it will constitute the biggest single intrusion into private affairs since, well ... the income tax.
We learn from DW Akademie that German parties have come together on the principles of a financial tax and that this is a "180 degrees U-turn" – which it no doubt is. But the powers-that-be have been trying to implement some sort of financial transactions tax for years ... even decades.
It has little to do with the money and everything to do with control. We've focused on this in the past in several articles. You can see one article here: "The Financial Transactions Tax Rolls On."
An FTA [Financial Transaction Tax] will surely retard economic recovery, not that there's much of it around anyway. It will surely add considerable additional recordkeeping throughout the business community. Everyone from the largest to the smallest would likely be under an affirmative obligation to keep some sort of log of trades and transactions.
And, as we've pointed out previously, once such recordkeeping is put in place, there will be a spate of new laws, new crimes and eventually, new criminals. The "criminals" will be those who do not wish to keep detailed records of their financial transactions or who attempt to obfuscate them.
This will open up a bonanza of new crimes and criminals, in our view. First of all, as times goes on, trade data could be matched by powerful computers to detect patterns of "insider trading." But sooner or later other crimes would be discovered as well.
One could come up with a whole category of market manipulation crimes once trade data is extensively tabulated. There could be volume crimes in which trades overwhelm the market, moving certain investment instruments up or down.
Or how about exotic frontrunning crimes in which markets are primed for frontrunning by manipulative trades. The trades push securities up into unstable valuations. Then someone triggers a selling program and the instruments begin to fall.
To counteract these newly discovered crimes, an international agency to fight market manipulation and insider trading might have to be set up. It would be a huge, global agency that would be funded by an ever-steepening transaction tax.
The current agreement in Germany, astonishingly, is being characterized as "the first big step towards overcoming the eurozone debt crisis," according to SPD chairman Sigmar Gabriel.
This doesn't make much sense to us. Even if one agrees with the increasingly strange (and strained) narrative that sovereign nations found it necessary to borrow billions from accommodating European banks, the idea that a huge and invasive tax is going to provide "solution" to the current crisis is strange indeed.
In fact, it's a kind of elite dominant social theme, that every government crisis can be addressed by yet more revenue. The upshot eventually is a political system that garnishes never-ending amounts of tribute for an insatiable socialist state.
The issue, really, is not one of money but of the basics of the one-size-fits-all euro that benefits Northern Europe at the expense of Southern Europe. One can continue to throw tax dollars at the problem, but this won't solve the fundamental issue.
The ruin of Europe is simply being used as a justification to advance this terrible tax. And because the problems are profound, the supporters of this garnishment have become even shriller.
Although the details of the accord were yet to be "finalized," a key principle provided for the tax to be imposed on the "broadest possible spectrum" of financial products. Highlighting the need for consensus across the European Union, Gabriel said that he was "confident of finding nine partners," which he believed were necessary for the financial transaction tax to go through in the EU.
According to Gabriel, the tax could be introduced through "bilateral accords" between EU member states – a model already being used with regard to the EU fiscal pact.
Conclusion: The intrusiveness this tax justifies is almost never ending. Here's hoping that some point it loses momentum. Right now, it seems to be gaining.