Europe Goes All In

all in Today French President Sarkozy and German Chancellor Merkel made a huge call to action for the Economic Unification of Europe. They're all in.

If you've been watching the economic indicators coming out of Europe lately, you should conclude their economies are stalling. Germany's GDP was D.O.A. with 0.1% Q2 GDP growth and Q1 revised downward to 1.3%. France's GDP growth was literally zero with 0.9% Q1 2011 GDP growth (sound familiar?). Finally, France and Germany decided to try something different. Instead of gutting the middle classes and social safety nets, they proposed a tax on financial transactions. That's right, a tax on Wall Street.

 

 

A Tobin tax proposal, is actually round two in a bare knuckle fight against Banks and Big Business. Nation-states lost with a 1-2 knockout by Wall Street during the financial crisis and watered down to Swiss cheese corresponding financial reforms. A Tobin tax is a tax on stock transactions, financial transactions. It's kind of like throwing a nickle in the toll booth while speeding down that great nanosecond router hopless highway, all the while making hundreds of thousands of trades per second.

Imagine that, making flash traders and hedge funds pay up for large budget deficits. Discouraging and disincentivizing speculative shorts, or at least charging a small piece of silver to cross the financial Styx. During the financial crisis, many a lone voice in Congress also proposed various transaction taxes, to fall on deaf ears. After all, Wall Street wouldn't hear of it.

Germany and France also proposed to harmonize corporate tax rates across EU member states. This also will be assuredly fought tooth and nail. A key strategy here is to disallow large multinationals playing nation-states off of each other. United We Stand is the suggestion, or at least to cushion themselves on the long, race to the bottom, drop down for labor arbitrage, repressed wages and income inequality. For example, Ireland is a notorious super cheap corporate tax rate, so much so the luck of the Irish attracted austerity and a bail out. Lest we not forget, Europe is also loaded with those stupid global corporate tax tricks, like the double dutch.

More frightening, Sarkozy & Merkel recommend all EU member nations enact a balanced budget amendment within their constitutions. It appears Tea party mania has hit the globe and this assuredly will create riots in Greece and Spain.

What is fascinating are we have three major policy initiatives that truly offer more power and control over Wall Street and Multinational corporations, who routinely play nation-states off of each other, forcing nations to drop to the lowest common denominator in order to obtain jobs and industry.

Sarkozy and Merkel also rejected the idea of European bonds, pointing out first they needed to have an economic authority and plan before issuing bonds.

Estimates on revenues raised from a Tobin tax vary greatly depending upon details, some figures suggest $850 billion a year.

The below PBS News Hour report gives a more in detph overview of today's historic events:

 

 

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Comments

Wall Street, Markets Tank, no surprise

the idea of paying a tax on stock, options, futures, trades of any sort hits Wall Street where it hurts.

Frankly from credit default swaps to HFTs to speculative futures on commodities I am thrilled to see a major push back.

This is a major problem, wealth is being created by the great gambling casino, acquisitions, LBOs and all of these exotic financial instruments instead of economic activity that creates jobs, middle classes, i.e. a production economy.

Something's gotta give and this is one very bold move in the right direction.

Not so much on balanced budget amendments at the current moment, although the reality is as an exercise, I balanced the U.S. budget in 5 minutes by rolling back all of the Bush tax cuts, enacting a VAT, and then a Tobin or transaction tax. Didn't do one single budget cut.

Bottom line, expect the markets to not exactly tank, but assuredly not be happy about this proposal.

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BB Amendment+Tobin - 2 Opposite Directions

Society loses no economic value by taxing speculation.Tobin taxes can only help budgets. The only possible counter argument is that all the computer trades create a more 'rational' pricing of markets. Pure BS. If wrong, more Flash-Crashes are the wave of the future, and create value.

If Europe ties its hands with balanced budget amendments, ask WTF are they trying to go? Do they want expansion or the Tea Party race to the River Styx, Nepenthe, Oblivion and Despair (all Hades Rivers).

Sorry, but I do not get what a VAT does for me? Why tax production? Tobin Tax is the opposite of VAT. Do you think we overproduce and need a speed governor or domestic production and value added?

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Burton Leed

VAT is pernicious

Once it's in it's forever. It is hidden, buried unaccountable. It's a gift to politicians because it becomes a fact, like the weather. I want my taxes out where I can see them and vote on them. How about a tax on bank reserves? Lend them or lose them. Also a usury tax on excess bank profits.

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Frank T.

The only reason I'm for a VAT

is due to trade. It can act like a tariff and can be dynamic, adjusted daily even. They are already legal w/n the WTO.

It is regressive and it is on the consumer, end good. You're right, in Europe you cannot afford certain things due to a VAT and politics with their whatever agendas can make it very irritating, say "we've decided no one should be able to buy an imported luxury car" and out comes a VAT.

On the other hand almost every other nation has a VAT and this is another reason we have such a large trade deficit, are getting tanked by globalization.

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