Friday 9 December 2011
Is Cameron saving the City the right thing to do?
On the one hand, the Germans and French simply want to ignore democracy and railroad through their vision for Europe. On the other, as the only Countries who can save the other this realpolitik position is understandable.
Equally for the UK, why should we sign up to a Tobin tax that will only serve to move activities to Frankfurt, Paris and Singapore - but which has little benefit for us. In the long-term a re-structure of the Eurozone is good for the UK, whereas closer integration knackers our export markets like Ireland for years to come.
But, AIG, ths business that blew up the world with Derivatives, was based in the UK. Zero hedge also has an interesting article on MF Global having its key operations based in the UK. Weak UK regulation of derivatives and the financial sector has indeed helped to create the current crisis - there can be no doubting that. However, the extra regulation now being imposed probably does balance this out a bit.
Moreover, a Tobin Tax is a good idea. I hate taxes and never normally recommend them. But in the world where hedge funds use supercomputers to trade over milliseconds, everyone else in the game is getting screwed. A transactions tax would rip up the business model for Algorithmic trading which now accounts for over 60% of NYSE trades and 50% of LSE trades. This computer gaming of the system is causing massive market volatility and wrecking chances of long-term investment.
Of course such a tax is a big hit on London, unless it is a globally enforced tax- the UK should have tried harder on this effort as now it would not be seen as such a blocker. Unregulated finance and extreme money has distoreted the world incredibly, being the only major Country to defend this is an unhappy place to be.
Lots more negotiation fun to be had today - but stay happy its Friday and the world might really end on Monday.....