A Handful of Sand in the Wheels of Financial Speculation. Alex C. Michalos University of Northern British Columbia

(1) Introduction

(2) The Risks of Financial Crises

(3) Financial Transactions

(4) Taxing Financial Transactions and Tobin's Tax

(5) Arguments For Tobin Taxes

(6) Arguments Against Tobin Taxes, With Refutations

(7) Conclusion

References

Revised, March 2000

Abstract

The aim of this essay is to briefly review some of the broadly financial and narrowly currency crises of the 1990s, consider their causal antecedents and consequences, and finally examine in some detail one plausible remedial policy initiative that might be undertaken by key players in the international game of financial trading.

* This paper was written for the Conference on New Rules for the New Millennium, sponsored by Mani Tese, in Florence, Italy, March 18-19, 2000. An earlier version, without the section on causes and consequences of financial and currency crises as well as some material from the CIDSE meeting in Antwerp in October 1999, appeared in B.K. MacLean (ed.) Out of Control: Canada in an Unstable Financial World (Canadian Centre for Policy Alternatives and James Lorimer and Co., Ottawa and Toronto) 1999, pp.145-159. 

(1) Introduction

The aim of this essay is to briefly review some of the broadly financial and narrowly currency crises of the 1990s, consider their causal antecedents and consequences, and finally examine in some detail one plausible remedial policy initiative that might be undertaken by key players in the international game of financial trading. (An interesting review of similarities between banking and currency crises may be found in Marion (1999).) The next section (2) is a review of the crises drawn from several contemporary researchers and deliberately expressed largely in their own words. This is followed by a section (3) giving an overview of the foreign currency market, and then a section (4) describing some of the current tax regimes applying to securities trading within countries and a proposed international tax regime, the Tobin tax. Arguments in support of the latter sort of taxes are listed in the section following that (5) and arguments against such taxes are presented in section (6). The sixth section is the longest part of the paper because an attempt is made to demonstrate that the arguments against Tobin taxes are refutable. Most of the material for sections (3) to (6) of this paper was drawn from Michalos (1997) and readers who are interested in more detailed and documented arguments on both sides of the issue should consult that monograph.