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View Diary: Transaction tax would raise $350 billion over next decade (136 comments)

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  •  But it will put the brakes on the micro trades (3+ / 0-)
    Recommended by:
    Nimbus, David54, Boris49

    that drive up consumer prices.

    Education is a progressive discovery of our own ignorance.

    by Horace Boothroyd III on Mon Nov 07, 2011 at 05:13:52 PM PST

    [ Parent ]

    •  sorry for my cynicism, but they'll get around it (1+ / 0-)
      Recommended by:
      Horace Boothroyd III

      Show me a politician that doesn't want to gain, and/or hold onto power, and I'll show you one who can't get elected.

      by HarryParatestis on Mon Nov 07, 2011 at 05:21:11 PM PST

      [ Parent ]

      •  So we should quit our whining and bend over. (0+ / 0-)

        I get it.

        •  no, but do you think that our Congress could find (0+ / 0-)

          bigger fish to fry?  Even this super committee that's supposed to cut 1.2 trillion....peanuts in the long term...the feared future is here, and the financial problems that are being forced on us is growing exponentially...  we clearly need a balanced approach, but the extremists won't let it happen

          Show me a politician that doesn't want to gain, and/or hold onto power, and I'll show you one who can't get elected.

          by HarryParatestis on Mon Nov 07, 2011 at 06:06:33 PM PST

          [ Parent ]

          •  It's not the extremists that won't let it happen. (0+ / 0-)

            It's the GOP.
            Clearly.

            Of course, this is just one small effort, however, it's aimed at the high frequency trading that, is, frankly, dangerous and not necessary to "free enterprise".

            Yes, they need to do more.

    •  This does not make any sense to me, could you (2+ / 0-)

      explain further, how this would be the case.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Mon Nov 07, 2011 at 05:22:11 PM PST

      [ Parent ]

      •  right now they have computers (6+ / 0-)

        making trades in millisecond intervals exploiting the changes in stock price.

         They add no value to those stocks as they only purchase them to make profits when they sell them again milliseconds later.

        What happens is that increases the cost of things we need such as fuel and food because they are driving the stock price up doing these trades.

        By adding a transaction tax we can slow them down because they will be less likely to do these trades in milliseconds because the value of the trade will no longer be profitable.

        Education is a progressive discovery of our own ignorance.

        by Horace Boothroyd III on Mon Nov 07, 2011 at 05:32:06 PM PST

        [ Parent ]

        •  This is how they directly take money (2+ / 0-)
          Recommended by:
          Horace Boothroyd III, Mr Robert

          out of my pocket without me getting anything.

          I would love to do the same to them.

        •  Changes is stock prices from computer trades (2+ / 0-)
          Recommended by:
          cityofgates, VClib

          have zero impact on the price of goods and services people buy.

          Your reasoning appears to be "if they made money, it came at my expense."

          What is actuall happening is that they are market makers, and narrow the spread between bid and ask prices, which means the markets are more liquid for investors.

          The most important way to protect the environment is not to have more than one child.

          by nextstep on Mon Nov 07, 2011 at 06:54:41 PM PST

          [ Parent ]

          •  By "have zero impact" what do you mean? (0+ / 0-)

            Why would they do it if they don't make money from the transaction? Where did the money they made come from, and who did it go to?

            So tell me: How does this work? And if there is no money to be made, why do it? And if there is no money to be made, how can there be any loss? And if there is no loss, why are they complaining?

            Go slow, because, I'll admit, I'm a total idiot about this sort of thing.

            •  When stocks trade there is not a single price (0+ / 0-)

              as stocks trade in something like an auction.

              The highest price anyone is offering to buy the stock is called the "bid" price.  The lowest price anyone is offering to sell the stock is called the "ask" price.  If a person wanted to immediately buy the stock, he would pay the ask price, and if a person wanted to immediately sell the stock he would get the bid price.

              For stocks that trade in very high volume, the difference between bid and ask prices may be only a few pennies.  For stocks that trade less frequently, the spread could be $0.40 or greater.  So in addition to the commission paid to make a stock transaction, this spread in prices is also a cost in the transaction.  If you were to buy a stock and then immediately sell it you would have a loss per share equal to the difference between the prices.  At one time there were people who were designated as market makers on exchanges who were responsible for making a market for specific stocks.  These market makers would have a bid and ask price that they would use to buy and sell over the day, and they would adjust these prices based upon people wanting to buy or sell.  For the most part, high frequency trading has replace these human market makers.

              This is similar to a currency exchange at the airport.  They have a price at which they will buy a currency and a higher price that they would offer to sell the currency.  The currency broker makes money by selling currency at a higher price than it is sold.

              In simplified form, high frequency trading uses computers to forecast which way the prices appear to be moving for the next few seconds and then buy stock from those selling and selling to those buying acting as a broker of sorts between buyers and sellers.  This has the effect of reducing the spread and therefore make the market more efficient while they also make the market more liquid.  More liquid means that if say a penson fund wanted to invest $1 million in a stock the price changes less than in a less liquid market.  So the penson fund gets a better price than they would otherwise.

              So high frequency trading makes money at the rate of pennies at a time or less on average, but they do this in very high volume.  Some transactions make money others will lose money, but firms that do this over time make money more often than they lose.

              So in terms of some of your questions.  Those that do this tend to make money on average.  Economically what they are doing in effect is collecting a tiny transaction fee in return for reducing the net transaction cost to longer term investors making the market more liquid and efficient and better for longer term investors.

              The transaction taxes would push many of these high frequency traders out of the US market, which would make the markets less liquid, increase the transaction cost to actual investors far more than the transaction tax and make the markets more volatile not less.

              The most important way to protect the environment is not to have more than one child.

              by nextstep on Mon Nov 07, 2011 at 11:24:29 PM PST

              [ Parent ]

        •  I'm baffled. (1+ / 0-)
          Recommended by:
          nextstep

          Please explain the link between stock prices and the cost of, "things we need such as fuel and food".

          •  Here is video to explain it for you. (1+ / 0-)
            Recommended by:
            ManhattanMan

            And here are a bunch of graphs at this link if that helps you understand.


            U.S. and EU commodity markets continue to be under “light touch” regulation

            Agricultural futures price levels and volatility continue to suffer excessive speculation

            Better knowledge of physical stocks (G-20 ag ministers): insufficient to make markets transparent for food security purposes

            Need for commodity mkt regulation

            Education is a progressive discovery of our own ignorance.

            by Horace Boothroyd III on Mon Nov 07, 2011 at 07:09:30 PM PST

            [ Parent ]

            •  Oh, you mean... (1+ / 0-)
              Recommended by:
              nextstep

              ...commodity prices. I thought you meant "stocks" (aka "equities").

              Yes, I agree, the commodity market is broken. More regulation and transparency is needed.

              But this transaction tax hits stocks, bonds, commercial paper, notes, and (non-commodity) derivatives. I don't see how wrecking those markets solves our commodity problem.

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