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Europe’s Tax on Financial Trades Is a Risky Bet

By Mark Buchanan

Millions of Europeans are about to become the subjects of a vast social experiment. What’s troubling is how little anyone understands about where it might lead.

A total of 11 European Union member states — including France, Germany, Italy and Spain, but not the U.K. — plan to introduce a small tax on financial transactions by the beginning of 2014. Financial institutions will pay 0.1 percent on all stock and bond trades, and 0.01 percent on derivatives. Although taxes that are at least crudely similar exist in about 40 nations around the world, the European measure will be the first introduced on such a large scale.

The idea of a financial transactions tax goes back to the economist John Maynard Keynes. In the 1930s, he argued that speculation on assets drives market instability and suggested that an appropriate levy could deter it. If small enough, the tax would have a negligible effect on long-term stock investors, who trade infrequently and focus on real economic factors in making their decisions. It would primarily deter short-term speculators who buy and sell frequently in response to temporary market movements.

The idea makes intuitive sense and could, in principle, help channel investment to productive economic activity. There’s much debate, though, over whether it can work in reality. Well- known economists such as Joseph Stiglitz and Larry Summers have supported a transactions tax. Others of equal prominence have countered that it would be likely to lower equity prices, drive trading across borders and possibly increase market volatility.

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How Pakistan Lost Its Top U.S. Friend

Outgoing U.S. Joint Chiefs Chairman Explains Shift From Confidence in Islamabad to Tougher Tone

BY JULIAN E. BARNES AND ADAM ENTOUS

WASHINGTON—U.S. Joint Chiefs of Staff Chairman Adm. Mike Mullen has long been seen as Pakistan’s closest friend in Washington.

He visited Islamabad 27 times since 2008 in his role as America’s top uniformed officer, cultivated a bond with the Pakistani army chief of staff and early in his tenure said he believed Pakistan was serious about plans to take on militant groups that the U.S. wanted shut down.

But in recent months, Adm. Mullen said in an interview with The Wall Street Journal, he concluded that the partnership approach he long had championed had fallen short and would be difficult …

Read more → THE WALL STREET JOURNAL

Unnecessarily provocative statements, violence & attempts by anyone to divide people shoud be condemned. Find ways to bond together irrespective of the languages

Courtesy: Geo Tv (Capital talk  with Hamid Mir, Haroon-ul-Rasheen and Nazir Laghari – 14th july 2011 part – 4)

via → ZemTVYouTube

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