Comments for CBO Letter on FTT: When There's No Smoke, There's No Fire at http://www.cepr.net , comment 1 to 1 out of 1 comments http://www.cepr.net Wed, 22 May 2013 17:47:20 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/cepr-blog/cbo-letter-on-ftt-when-theres-no-smoke-theres-no-fire#comment-14305 How about instead of a financial tax, a prohibition on all short-term trading of financial products? By this I mean we mandate that any purchaser of a financial product (stock, bond, treasury, derivative, etc.) would be required to hold that product for a certain number of years, say 2.5 years, before he or she could resell it. This would be better than a tax, and definitely better than the status quo, for at least four reasons: 1) it would reduce overall liquidity but would increase what I might term "useful liquidity," thereby preventing sudden busts (illustration: in Longterm Capital Management's downfall, everyone was a seller and no one was a buyer and so the market spiraled endlessly downwards; but under my plan, prices would always drop at a controlled and moderate rate - since there would be fewer eligible sellers - thereby reducing the likelihood of these types of irrational sell-offs) 2) It would change the mindset of Wall Street to one of investment as opposed to speculation, which a tax would not do as effectively 3) it would make systemic risk management easier (since bank books would be more fixed) and 4) just like a tax, it would reduce total financial transactions, which would reduce the opportunity for Wall Street to profit, which would eventually shrink the size of Wall Street and deliver top students back to the real economy. - Andrew Clearfield Mon, 23 Jan 2012 11:45:58 +0100