Word: tobins
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There's nothing like financial Armageddon for reviving the work of an old economist. Amid the recessionary doom and gloom, the world has channeled Adam Smith, dusted off John Maynard Keynes and revisited Eugene Fama. In recent days, it's been James Tobin's turn. Close to four decades since the Yale economist proposed a levy on foreign-exchange transactions - or a "Tobin tax," as the suggestion became known - the idea is enjoying a new lease of life. At a meeting of G-20 finance ministers last weekend, British Prime Minister Gordon Brown suggested the group of leading countries consider...
...slapping an additional fee on each transaction, the tax "would naturally drive [investors] toward those that are more sensible, more profitable, more rational," suggests Julian Jessop, chief international economist at the consultancy Capital Economics in London. What's more, even a modest levy on the world's financial markets - Tobin first proposed a 1% charge on currency deals, before advocating even lower rates - would generate hundreds of billions of dollars in revenue. (See pictures of London during the financial crisis...
...poor reception? For a tax that's attracted high-profile backers like Brown and Sarkozy, its track record is thin. When Tobin first proposed the idea in 1972, it was seen as a way to stop currency speculators after the collapse of the Bretton Woods system of fixed exchange rates, but it was never imposed. Sweden enacted a tax on certain financial transactions in the 1980s but ditched it in 1991 after trading volumes sank. (See pictures of President Sarkozy in London...
...With the IMF scheduled to report next April its own findings on possible funding options for future bailouts, banks will, in one way or another, be forced to put aside more to cover the costs. Tobin, were he alive, would surely welcome that...
...language about belonging to something larger, voluntary relinquishment of privilege, and understanding resources and materials in terms of something other than the individual have long been there in the Christian faith,” Tobin said...