Germany only guaranteed individuals and not business entity deposits, unlike Ireland and Greece.
Earlier, manfrommiddletown asks Did the Irish Just End Globalization? As he rightly predicted, Europeans flock to secure banks with their deposits.
Other banks in the U.K. and Europe also have seen noticeable outflows since Ireland's ground-breaking deposit guarantee was announced Tuesday, say people familiar with the matte
Even though the UK raised insurance last week, they are now under pressure to guarantee all deposits.
Note the United States only has the amounts to $250k FDIC from $100k after the bail out. Will the U.S. have to go for bail out ver. 1.5 very soon in order to not have their deposits flee?
The time for a Tobin Tax
has come.
The problem at the moment is that there has been a long standing understanding of Article 1 Section 9 of the US Constitution:
That export taxes are illegal. Arguably if this is placed in the broader context of the items surrounding it, this may have been intended to prevent Ohio from imposing a tax on exports of corn to New York, not from the United States to Mexico. Nonetheless, this has not been the way that it was interpreted.
Thus, the potential for a tax on exports of capital from US bank accounts to banks in Europe or elsewhere to be held unconstitutional are high.
So the only real way to go in an try to stem capital flight is a little bass ackwards. You have to place a tax on repatriated capital. About $600 billion is repatriated annually from abroad.
In the absence of a tax on repatriated capital, it's possible to imagine large scale capital flight by individuals holding accounts in excess of $250K, followed by daily or weekly withdraws. Hell, with ATMs, it's possible for a wealthy individual to fly to Dublin or elsewhere, open an account, transfer all their funds from the US, get a debit card, fly home, and use the ATM to withdraw funds from an Irish account from a US ATM. All in a single day.
The Malaysians employed capital controls during the East Asian crisis in the late 90s, and Dani Rodrick has argued that it allowed them to recover quicker with a smaller drop in wages. The current situation is somewhat different, because the danger is bank failure not speculative attack.
Nonetheless a 5-10% tax on repatriated capital would do much to prevent capital flight.
eek
that sounds like a real bad idea unless I"m misunderstanding something. US corporations have offshore outsourced hordes of capital, all to avoid taxes so if they tax repatriated capital that would stop even further from it returning to the US. Or am I misunderstanding something?
Right
but when they make a profit abroad, they have to repatriate it unless they want to spend it overseas. What good is an investment if you don't have access to it because it's locked up overseas? If you are running operating capital across international borders, you have a serious problem if your money to fuel US operations is locked up abroad because it faces a high tax if you want to import capital from Bermuda to run operations. If the transaction cost of crossborder transfers is higher than the value of taxes evaded, then a tax on capital imports penalizes a strategy of placing US operating funds overseas in order to evade taxes.
Get that money back into the US, and you can tax it, because there's greater transparency.
I don't have the numbers, but I think that there's enough money if we actually collected taxes that have been evaded to replace residential property taxes.
One important effect of dropping property taxes would be to raise property values, because the cost of ownership would be greatly reduced.
Let's say that taxes are $3000 annually on a $200K house. The future value of $3000 at 6.8% over 30 years is $21,590. Presumably, reducing the cost of ownership in this way would increase the total value of the asset by a similar amount. It would allow people to better afford the mortgage cost of a fixed rate loan over the long term, and it would slow the decline in housing values.
It's just a thought, no fully developed. I'm supposed to be writing about Japan right now.
on my to do also
They actually leave it abroad...where they moved the jobs, factories and sometimes headquarters and then the move into the US through subsidiaries. I covered this a bit in this post and evaluating the truth of the campaign sound byte "tax incentives to offshore outsource your job" is on the plate to write about.
Back to Japan. We need more people writing on here for there are so many very complex topics and issues, seemingly imploding into one big fat mess before our eyes at one time.
It's a policy
the encourages companies to focus on maximizing share value instead of providing dividends to shareholders. So we get companies searching for short term increases in share value as opposed to creating the type of long term value that allows companies to issue dividends.
Hell, I've got a headache.
I forget the book, but there's an argument that bank based finance leads to both greater long term thinking, and generates greater demand for government action because it smashes the myth of the "ownership society" that you get with finance based capitalism.
yet another topic, here's virtual aspirin
If you see experts, other bloggers who have good insight, writing ability, invite them over to EP to share, blog.
That's yet another topic, this MBA quarterly profits only focus, no long term say 10 years out, 5 years out planning.
the stock market has become like heroin and people want their fix...flat earnings just won't do!