fpmi hails ban on naked short selling
21. May 2010 by Finanzplatz München Initiative
Taxes on financial transactions require international-level consultations
Munich Financial Center Initiative (fpmi) has come against the introduction in Germany of a tax on financial transactions that has not undergone a process of international consultation. The failure to undertake this would lead to the G-20 countries’ taking a variety of approaches. This, in turn, would cause Germany’s business community and private investors and other citizens to experience disadvantages. It would not, however, achieve the objective envisioned by Germany’s government of putting an end to the machinations of “international-level speculators and other parties responsible for the crisis being experienced by financial markets.” FPMI has, however, come out in favor of the German government’s ban on naked short selling, with the initiative calling it a “comprehensible step.” A much more productive approach would be, however, to institute such measures on the Europe-wide level, at the very least.
The fact that it is apparently not possible to get such a tax on financial transactions approved on the international level makes the German government’s new measure quite surprising. The only way, after all, of precluding evasions and distortions of competition is by promulgating this tax on a global level. This would ensure its having identical effects in each financial market. The failure over the last 30 years to achieve this global-level consensus has kept this tax from being instituted.
This failure will cause financial players to undertake their transactions in centers not subject to this tax, with all of the resultant relocations of operations and thus of staff members—as pointed out in the in-depth position paper (in german) released by fpmi in February 2010.
Compiled by fpmi’s experts, this position paper contains a number of other important points. These continue to apply. Rather than affecting the banks, the tax encumbers the state and the business community as a whole by increasing the former’s costs of capital procurement. This, in turn, increases the state’s expenditures, curtailing its room to maneuver and economic growth in the process. The tax will also have a detrimental affect on Germans’ private provisions for old age, as the tax will reduce the proceeds capable of being produced by such plans.
A further key point is that the tax will not change the methods of speculation used by a number of market players. The tax will, rather, cause the speculators to undertake such practices in other areas, facilitating and expediting them in the process.
Getting other EU member countries involved in banning short selling
FPMI views, on the other hand, the banning of naked short selling as being a measure that will stabilize markets. Another positive effect: it is an unmistakable sign of the German government’s strong resolve in this area. The initiative does, however, regard the obvious lack of international coordination as being worrisome. This lack mandates the German government’s pushing for the other EU member countries’ following suit. This would then form the basis of an EU-wide ban on naked selling.
Munich Financial Center Initiative (fpmi) has come against the introduction in Germany of a tax on financial transactions that has not undergone a process of international consultation. The failure to undertake this would lead to the G-20 countries’ taking a variety of approaches. This, in turn, would cause Germany’s business community and private investors and other citizens to experience disadvantages. It would not, however, achieve the objective envisioned by Germany’s government of putting an end to the machinations of “international-level speculators and other parties responsible for the crisis being experienced by financial markets.” FPMI has, however, come out in favor of the German government’s ban on naked short selling, with the initiative calling it a “comprehensible step.” A much more productive approach would be, however, to institute such measures on the Europe-wide level, at the very least.
The fact that it is apparently not possible to get such a tax on financial transactions approved on the international level makes the German government’s new measure quite surprising. The only way, after all, of precluding evasions and distortions of competition is by promulgating this tax on a global level. This would ensure its having identical effects in each financial market. The failure over the last 30 years to achieve this global-level consensus has kept this tax from being instituted.
This failure will cause financial players to undertake their transactions in centers not subject to this tax, with all of the resultant relocations of operations and thus of staff members—as pointed out in the in-depth position paper (in german) released by fpmi in February 2010.
Compiled by fpmi’s experts, this position paper contains a number of other important points. These continue to apply. Rather than affecting the banks, the tax encumbers the state and the business community as a whole by increasing the former’s costs of capital procurement. This, in turn, increases the state’s expenditures, curtailing its room to maneuver and economic growth in the process. The tax will also have a detrimental affect on Germans’ private provisions for old age, as the tax will reduce the proceeds capable of being produced by such plans.
A further key point is that the tax will not change the methods of speculation used by a number of market players. The tax will, rather, cause the speculators to undertake such practices in other areas, facilitating and expediting them in the process.
Getting other EU member countries involved in banning short selling
FPMI views, on the other hand, the banning of naked short selling as being a measure that will stabilize markets. Another positive effect: it is an unmistakable sign of the German government’s strong resolve in this area. The initiative does, however, regard the obvious lack of international coordination as being worrisome. This lack mandates the German government’s pushing for the other EU member countries’ following suit. This would then form the basis of an EU-wide ban on naked selling.