Financial Transaction Tax, Anyone?

[Beingist]

Originally Posted by Spinoza

So if something is produced, then that is good to society as a whole?
Why is that?

Well, to use your apples/oranges analogy (which was a good one, btw), if I grew the apples (some of which I traded for oranges, no doubt because my family was tired of eating apples all the time), then society would benefit from the nutrition of my apples. After all, people do need to eat.

But, the actual trade of apples for oranges? Not a benefit to society as a whole, in my view.

What would be a list of things that individuals can do that are a benefit to society as a whole?

Well, I would think that farming, mining, manufacturing and some services (like the guy who cuts my hair) are a benefit.

[Peterw]

Originally Posted by Beingist

I wonder what benefit society gets from any trading?

Thinking about this after a night's sleep the answer is very simple.

Anyone who puts their money anywhere other than a savings account with the intention of watching it grow over time will (should!) benefit from trading.

Without trading and traders then you can just have bank interest from a savings account for your retirement/investment.

I think anyone who thinks traders and trading is a worthless profession should remove any funds they have in any kind of managed fund/401K/retirement fund etc immediately and place it in a bank deposit account!

Enjoy your 0.5% interest and I hope taxes and inflation are good to you in your golden years

[aelle]

Originally Posted by Brutha

The core question is:
What benefit does society get from the guy who's doing the day trading?

If that guy makes money, spending power - money re-injected in his local economy.

Originally Posted by Beingist

No. Actually, I was looking for the benefit to society as a whole. Nothing is being produced, and there is no service to the general public. Even if you want to trade apples for oranges, who else benefits from the trade, except for the farmers who do the trading to begin with?

If someone bought from that trader, it must be that the buyer thought it was worth paying for it - therefore, of value.

The pricing of services is often counter-intuitive because their value can be so different from one person to another. When I moved to Korea I hired an immigration lawyer to deal with my work visa requirements. Objectively they did not perform a very difficult task, just printed out my paperwork, held my hand while I filled it in because red tape makes me anxious, and delivered it at the immigration office. Someone else might consider this mooching off the system. I considered it was a service worth paying $5,000 for.

Originally Posted by Beingist

Well, to use your apples/oranges analogy (which was a good one, btw), if I grew the apples (some of which I traded for oranges, no doubt because my family was tired of eating apples all the time), then society would benefit from the nutrition of my apples. After all, people do need to eat.

But, the actual trade of apples for oranges? Not a benefit to society as a whole, in my view.

You grow apples. But you're in the States. Are you willing to come and deliver your apples to me halfway across the world? Probably not. But a trader is, and I am willing to pay for it - in oranges, if he wants. The value I am receiving is apples I wouldn't have been able to access had there been no trader.

[Mike0149]

Originally Posted by Beingist

... I was looking for the benefit to society as a whole. Nothing is being produced, and there is no service to the general public.

Isn't it good enough that society is unaffected? Just think how many people going about their daily lives absorb from society and deliver detriment into society. I hardly know where to begin: criminals; addicts externalising their healthcare costs into society; ditto those with unhealthy eating and no-exercise lifestyles; corporations running the food-and-pharma complex (the latter-day equivalent of the military-industrial complex), one promoting unhealthy overprocessed food, the latter promoting a pop-a-pill response to the health problems caused by the former, and both promoting 'regulatory capture' of the bodies charged with ensuring products coming to market are fit for purpose. Then there are the latter-day robber barons, the bankers, planning new and better ways to wrap up used toilet paper in gold wrapping paper and pretend it's as good as gold; welfare so-called 'dependant's who are able-bodied but idle... the list goes on... and on ... and on.

Stock traders are just minding their own business. OK so it doesn't impact society - and that's a plus! Their business is none of yours; it doesn't impact you, so no reason to be judgmental about them or even concerned about them and their 'contribution to society' or lack thereof. If you want to see value delivered into 'society', use the resource at your fingertips - your own life - to do it, and let other people live their lives the way they want as long as it doesn't detract from yours. But if you feel it detracts from your own life just to see that there are others who are not delivering into society to your satisfaction, then that's your problem, not theirs, so it's down to you to deal with it, not them.

[Beingist]

Originally Posted by Peterw

Thinking about this after a night's sleep the answer is very simple.

Anyone who puts their money anywhere other than a savings account with the intention of watching it grow over time will (should!) benefit from trading.

Without trading and traders then you can just have bank interest from a savings account for your retirement/investment.

I think anyone who thinks traders and trading is a worthless profession should remove any funds they have in any kind of managed fund/401K/retirement fund etc immediately and place it in a bank deposit account!

Enjoy your 0.5% interest and I hope taxes and inflation are good to you in your golden years

You misunderstood the question. I'll rephrase--

You, obviously, are a trader. What benefit does your trading offer society? If you were in manufacturing, distribution, agriculture, or in a service-oriented field, there is a benefit. But, I see no benefit to society as a whole. It's all for yourself, and yourself alone.

[Beingist]

Originally Posted by Mike0149

Isn't it good enough that society is unaffected?

I never suggested that society was unaffected, only that it didn't benefit from trading.

Just think how many people going about their daily lives absorb from society and deliver detriment into society.

Well, I suppose it could be argued that traders themselves can be a detriment, as it may affect the value of currency, but I'd have to study that more before making such a claim.

I hardly know where to begin: criminals; addicts externalising their healthcare costs into society; ditto those with unhealthy eating and no-exercise lifestyles; corporations running the food-and-pharma complex (the latter-day equivalent of the military-industrial complex), one promoting unhealthy overprocessed food, the latter promoting a pop-a-pill response to the health problems caused by the former, and both promoting 'regulatory capture' of the bodies charged with ensuring products coming to market are fit for purpose. Then there are the latter-day robber barons, the bankers, planning new and better ways to wrap up used toilet paper in gold wrapping paper and pretend it's as good as gold; welfare so-called 'dependant's who are able-bodied but idle... the list goes on... and on ... and on.

So, I guess your point is, "no harm, no foul." Fair enough, but that still doesn't help me see the benefit to society as a whole that traders have to offer.

Stock traders are just minding their own business. OK so it doesn't impact society - and that's a plus! Their business is none of yours; it doesn't impact you, so no reason to be judgmental about them or even concerned about them and their 'contribution to society' or lack thereof. If you want to see value delivered into 'society', use the resource at your fingertips - your own life - to do it, and let other people live their lives the way they want as long as it doesn't detract from yours. But if you feel it detracts from your own life just to see that there are others who are not delivering into society to your satisfaction, then that's your problem, not theirs, so it's down to you to deal with it, not them.

Well, as I say, I haven't done much study into the business, but again, trading itself has an impact, just no apparent benefit. As for being judgmental, if that impact is negative, then wouldn't I have a right as a citizen to issue judgment? I agree, it's "my problem to deal with," but so are child molesters. I'm asking for the benefit to society, not my own.

But, as you have admitted, there is no benefit. Thanks, at least, for that much clarification.

[Beingist]

Originally Posted by aelle

If that guy makes money, spending power - money re-injected in his local economy.

Okay, this is the only thing that I've seen that comes close to what a trader might offer in the way of a benefit to society.

However, traders make money on others' losses. Hence, while spending power might increase for that guy making money, it decreases for the one losing it. That trade off would then negate the benefit.

If someone bought from that trader, it must be that the buyer thought it was worth paying for it - therefore, of value.

The pricing of services is often counter-intuitive because their value can be so different from one person to another. When I moved to Korea I hired an immigration lawyer to deal with my work visa requirements. Objectively they did not perform a very difficult task, just printed out my paperwork, held my hand while I filled it in because red tape makes me anxious, and delivered it at the immigration office. Someone else might consider this mooching off the system. I considered it was a service worth paying $5,000 for.


You grow apples. But you're in the States. Are you willing to come and deliver your apples to me halfway across the world? Probably not. But a trader is, and I am willing to pay for it - in oranges, if he wants. The value I am receiving is apples I wouldn't have been able to access had there been no trader.

Maybe I need to be more specific. I'm talking specifically about securities trading.

However, to respond to your response, as an apple farmer, I already provide a benefit to society by producing food that it eats. Now, when you say that a trader is going to deliver my apples to China, he's not functioning as a trader, then, but as a delivery service. That service is the benefit, not the trade itself.

Ultimately, what I'm trying to understand why the world even needs securities trading, so as to gather what the problem would really be if a tax were instituted on every trade. It would obviously lower trade volume, but so what? It might put day traders out of business, but if they are of no benefit to society as a whole, then so what?

[Peterw]

Originally Posted by Beingist

You misunderstood the question. I'll rephrase--

You, obviously, are a trader. What benefit does your trading offer society? If you were in manufacturing, distribution, agriculture, or in a service-oriented field, there is a benefit. But, I see no benefit to society as a whole. It's all for yourself, and yourself alone.

It generates tax revenue and I put money back into the economy by spending it.

What about real estate investing or just plain old buy and hold investing - what benefit does that have to society?

The money I trade provides liquidity into the financial system and helps move price in the direction it goes in, this will benefit some and not benefit others.

If like Buffet, Soros and countless other financial entrepreneurs and institutions I decide to donate money to charity then there will be many beneficiaries.

But yes, I don't manufacture anything or provide a service through my trading, and I'm OK with that. Maybe when I branch out into venture capital and real estate I will 'provide a service' but until then I'm trading what I can with the capital I have available.

Not that I have any justification or need to propve anything to anyone. I'll let the 'judging' people get all upset about their own personal beliefs of what they think is right and wrong while I get on and make money and one day make a real difference.

[Peterw]

Originally Posted by Beingist

Okay, this is the only thing that I've seen that comes close to what a trader might offer in the way of a benefit to society.

However, traders make money on others' losses. Hence, while spending power might increase for that guy making money, it decreases for the one losing it. That trade off would then negate the benefit.
Maybe I need to be more specific. I'm talking specifically about securities trading.

However, to respond to your response, as an apple farmer, I already provide a benefit to society by producing food that it eats. Now, when you say that a trader is going to deliver my apples to China, he's not functioning as a trader, then, but as a delivery service. That service is the benefit, not the trade itself.

Ultimately, what I'm trying to understand why the world even needs securities trading, so as to gather what the problem would really be if a tax were instituted on every trade. It would obviously lower trade volume, but so what? It might put day traders out of business, but if they are of no benefit to society as a whole, then so what?

OK I've been thinking about this for a few days because I don't want any subconcious negative beliefs about my chosen business model derailing my plans. I've also consulted with some other full time one man band traders who have helped put it into some perspective. Here are the benefits of a full time spculatiuve trader to society - please debunk/argue against them as much as you can:

1. Private investors, businesses and a whole range of people and organisations rely on liquidity in the financial markets and many people would lose a hell of a lot of money if liquidity was to dramatically reduce as this would mean higher spreads (cost of doing business) and less efficient pricing. This goes for currency values, commodity prices and of course shares in companies that people invest in either actively or passively. I provide some of that liquidity

2. Tax revenue - if I make a lot of money I will obviously pay a lot of tax on it.

3. Should you end up making trading your sole income, you are effectively freeing up a "real world job" for someone else to make a living from, thus reducing unemployment.

4. You are, if you are trading via ECN into the true Interbank market, literally taking back the money from the 1% they are protesting(banks, corps etc) and giving it back to the 99%(yourself). I'm still in the '99%'

However, traders make money on others' losses. Hence, while spending power might increase for that guy making money, it decreases for the one losing it. That trade off would then negate the benefit.

The one losing it is the '1% evil bank'

So I take money from the '1%', I don't take a job which means someone else can have it, I don't claim any welfare, I pay tax and I provide liquidity into a system that many people rely on for personal, business and retirement reasons.

I was OK with the ethics of becoming a full time trader before but now I'm absolutely 150% OK with it so this has been quite helpful for my business. Thank you

[Beingist]

Okay, Pete, I don't wan't to rain on your parade, and dispute what you say here. But, I do have some questions.

Originally Posted by Peterw

1. Private investors, businesses and a whole range of people and organisations rely on liquidity in the financial markets and many people would lose a hell of a lot of money if liquidity was to dramatically reduce as this would mean higher spreads (cost of doing business) and less efficient pricing. This goes for currency values, commodity prices and of course shares in companies that people invest in either actively or passively. I provide some of that liquidity

Okay, these are all nice in how it effects financial markets, but I still don't understand how that effects society as a whole. How does liquidity (I'm still not sure what that even means, tbh) affect me, John Q. Citizen?

2. Tax revenue - if I make a lot of money I will obviously pay a lot of tax on it.

But, again, if you make money at someone else's loss, doesn't the loss of tax revenue on the other end offset the loss?

3. Should you end up making trading your sole income, you are effectively freeing up a "real world job" for someone else to make a living from, thus reducing unemployment.

Okay, I'll give you this one.

4. You are, if you are trading via ECN into the true Interbank market, literally taking back the money from the 1% they are protesting(banks, corps etc) and giving it back to the 99%(yourself). I'm still in the '99%'

Oddly enough, I do see regular day-traders as the '99%', because they're just like anyone else trying to make a living. They're not incorporated, they don't buy politicians, and they don't live for extracting as much money as possible from consumers. My only issue with what you say above is that they seem to earn their money straight from the banks, but I can't knock them for having the ingenuity to do that. I'd be a hipocrite if I said I wouldn't do the same, if that were possible.

So I take money from the '1%', I don't take a job which means someone else can have it, I don't claim any welfare, I pay tax and I provide liquidity into a system that many people rely on for personal, business and retirement reasons.

I was OK with the ethics of becoming a full time trader before but now I'm absolutely 150% OK with it so this has been quite helpful for my business. Thank you

Nice summary, Pete. I won't argue with it.

[Peterw]

Okay, these are all nice in how it effects financial markets, but I still don't understand how that effects society as a whole. How does liquidity (I'm still not sure what that even means, tbh) affect me, John Q. Citizen?

Liquidity in the markets will affect you if you have a managed investement fund of any kind for retirement. Also If you have a business or work for a company that does any kind of overseas trade then currency rates and import/export prices will be affected by liquidity in the markets. Also banks need to be liquid in order to lend out money and offer mortgages, business loans etc.

I'm not best placed to explain all this though.

My only issue with what you say above is that they seem to earn their money straight from the banks, but I can't knock them for having the ingenuity to do that. I'd be a hipocrite if I said I wouldn't do the same, if that were possible.

Oh but it is - I think you've already had a go, very few people find success first time round and the market is an incredibly merciless and harsh teacher. The ones that make it are the ones that come back after getting their behinds handed to them.

Nice summary, Pete. I won't argue with it.

Thanks - I don't have any inner conflicts over it any more either

[aelle]

Originally Posted by Beingist

But, I do have some questions.
Okay, these are all nice in how it effects financial markets, but I still don't understand how that effects society as a whole. How does liquidity (I'm still not sure what that even means, tbh) affect me, John Q. Citizen?

Hang on. You do know that in the real economy as a whole (I mean companies that provide a concrete product or service), transactions between businesses are much more important in volume than transactions with the general public, right? It's not because an activity does not directly involve a member of the general public that it doesn't eventually serve the public. A business-to-business (B2B) company can help a business-to-customer (B2C) company serve you better (1 step removed) or help another B2B company that serves a B2C company (2 steps removed) etc. It must all benefit the customer eventually, or the activity would stop being profitable and die.
Things that go against the public's interest seem to go against the laws of the market, as far as I can tell (some lobbies, some government protected companies).

[MariconesUnited]

I see Snerp poisoned that well very effectively! I should try that sometime hehe.

[Beingist]

Originally Posted by Peterw

Liquidity in the markets will affect you if you have a managed investement fund of any kind for retirement. Also If you have a business or work for a company that does any kind of overseas trade then currency rates and import/export prices will be affected by liquidity in the markets. Also banks need to be liquid in order to lend out money and offer mortgages, business loans etc.

All you have listed above, though, Pete, affect only those in the financial world. I still don't see how it affects John Q. Citizen.

I'm not best placed to explain all this though.

Fair enough. Good shot, though.

Originally Posted by aelle

Hang on. You do know that in the real economy as a whole (I mean companies that provide a concrete product or service), transactions between businesses are much more important in volume than transactions with the general public, right?

No, actually, I don't know this, which is why I'm asking the question.

It's not because an activity does not directly involve a member of the general public that it doesn't eventually serve the public. A business-to-business (B2B) company can help a business-to-customer (B2C) company serve you better (1 step removed) or help another B2B company that serves a B2C company (2 steps removed) etc. It must all benefit the customer eventually, or the activity would stop being profitable and die.
Things that go against the public's interest seem to go against the laws of the market, as far as I can tell (some lobbies, some government protected companies).

But how does it "serve" the public? By "not dying?" How does profitability "serve" the general public?

[aelle]

Originally Posted by Beingist

No, actually, I don't know this, which is why I'm asking the question.
But how does it "serve" the public? By "not dying?" How does profitability "serve" the general public?

Imagine a company A that wants to serve the public directly (provides you with apples, puts a roof over your head, keeps you safe at night, entertains you, whatever you want). How can you tell how well it does the job of giving individuals what they want? By the revenue they generate. If consumers are making the choice of buying what the company has to offer, it is because each consumer sees value in it. If no one buys it, it is because they don't see the value, and then the company dies. Agree so far?

Now this company A must outsource some part of their process because it's not their core skill. If their core skill is growing apples, surely when it comes to manufacturing the farming tools, fertilizer and bug repellent necessary to grow apples, or shipping apples to Seoul, or defending the interests of apple farmers in Washington, there is someone out there whose core skill better matches this task than the guy who mostly knows really well how to grow apples.

So company A buys company B's products or services. But the goal of company A still hasn't changed - it is to provide customers with value in the form of apples. The only way A can afford to spend more (purchasing what B has to offer is an extra spending) is if eventually the value of A's product increases as well and the customer buys more. If what A spends on B doesn't increase revenues, A will eventually go out of business. And since A is keeping B alive, B will go out of business too.

So B's goal is to allow A to provide better value to its customers, even though B is not in direct contact with the general market. Because what is good for the public is good for A is good for B.

And if B purchases yet another services from company C, then C's goal is to help B help A serve the public. Etc. It's not that a company provides value by the virtue of being alive - it's that the fact that it is alive proves that it is serving the public, somehow, eventually. It's Darwinian - if it weren't generating value it would go out of business.

[Beingist]

Originally Posted by aelle

Imagine a company A that wants to serve the public directly (provides you with apples, puts a roof over your head, keeps you safe at night, entertains you, whatever you want). How can you tell how well it does the job of giving individuals what they want? By the revenue they generate. If consumers are making the choice of buying what the company has to offer, it is because each consumer sees value in it. If no one buys it, it is because they don't see the value, and then the company dies. Agree so far?

Now this company A must outsource some part of their process because it's not their core skill. If their core skill is growing apples, surely when it comes to manufacturing the farming tools, fertilizer and bug repellent necessary to grow apples, or shipping apples to Seoul, or defending the interests of apple farmers in Washington, there is someone out there whose core skill better matches this task than the guy who mostly knows really well how to grow apples.

So company A buys company B's products or services. But the goal of company A still hasn't changed - it is to provide customers with value in the form of apples. The only way A can afford to spend more (purchasing what B has to offer is an extra spending) is if eventually the value of A's product increases as well and the customer buys more. If what A spends on B doesn't increase revenues, A will eventually go out of business. And since A is keeping B alive, B will go out of business too.

So B's goal is to allow A to provide better value to its customers, even though B is not in direct contact with the general market. Because what is good for the public is good for A is good for B.

And if B purchases yet another services from company C, then C's goal is to help B help A serve the public. Etc. It's not that a company provides value by the virtue of being alive - it's that the fact that it is alive proves that it is serving the public, somehow, eventually. It's Darwinian - if it weren't generating value it would go out of business.

I'll admit, aelle, this is a nice illustration of how and ostensibly why companies buy other companies, but in my experience in businesses, I have found it more likely that the real motive of any of these companies is not serve anyone, but to make a profit from selling, in this case, apples.

In any event, I wasn't really asking about buying companies, but rather trading stock in companies. Even if we compare buying stock in companies to buying companies outright, I still don't see the need, as long as company A can continue to produce apples. If there is no company B to make the tools, there's always another company that does, else A wouldn't have been able to produce the apples in the first place (unless, of course, B is a monopoly, which would hardly signify its impending death).

[aelle]

Originally Posted by Beingist

I'll admit, aelle, this is a nice illustration of how and ostensibly why companies buy other companies, but in my experience in businesses, I have found it more likely that the real motive of any of these companies is not serve anyone, but to make a profit from selling, in this case, apples.

How else do you make a profit than by providing something that customers want to buy, for the price at which they want to buy it? And isn't offering what people want the definition of "providing value"?

Originally Posted by Beingist

In any event, I wasn't really asking about buying companies, but rather trading stock in companies. Even if we compare buying stock in companies to buying companies outright, I still don't see the need, as long as company A can continue to produce apples. If there is no company B to make the tools, there's always another company that does, else A wouldn't have been able to produce the apples in the first place (unless, of course, B is a monopoly, which would hardly signify its impending death).

Sorry if I was unclear, I wasn't talking about buying companies either. I was talking about the B2B market: companies providing services or products to other companies - selling fertilizer to a farm, selling shipping services or retail services, selling law services, bookkeeping services, etc. They're all different companies, with corporate clients instead of individual clients.

As for the specific industry of trading, Peterw gave an example of a service it provides to other industries: liquidity. Liquidity means how easily you can sell an asset, or in other words, how quickly you can sell it without radically changing the market price. A house is very illiquid: if you want to sell it really fast, you have to really underprice it. Currencies are very liquid: you can go to the bank any day of the week to exchange your euros for dollars without even being noticed by the market. As a result, the euro/dollar rate is very easy to know with a very high certainty, while it's hard to know for sure when and how much your house will sell for.

Now, it's hard to illustrate how liquidity benefits the apple industry, to stick to my previous example, but it certainly is a benefit to commodity industries. A corporation that manufactures steel will greatly benefit from a liquid steel market (more certainty, more fluidity, less costs), which will benefit the companies they sell steel to, which will eventually benefit the consumer with bridges, buildings and railways built when needed for the most reasonable price.

Actually, many large corporations who extract/refine/manufacture commodities will also have commodity trading desks. (Hm. Is that everywhere or just in Asia?)

[Beingist]

Originally Posted by aelle

How else do you make a profit than by providing something that customers want to buy, for the price at which they want to buy it? And isn't offering what people want the definition of "providing value"?

Well, "providing value" is a term that you and others use. To me, the phrase "offering what people want" is better defined by the term, "sales" or "selling." But, that's me.

Anyway, how else one can make a profit, without offering anything to the general public, is by buying (at a low price) and selling stocks (at a high price). This is the very nature of the question originally posed--how stock trading benefits society.

But, as you suggest in the rest of your post, Pete's done about the best at answering the question as anyone can. I still think stock trading is driven by profit motive, moreso, even, than business transactions, as it must look deeply in order to understand how it benefits society, and therefore, in essence, I still see such transactions of no inherent value, in and of themselves. It's still just another way to make money.

That said, I can see how traders would instantly jump on the seemingly inherent unfairness to taxing financial transactions. I think a straight comparison would be a national sales tax, which would tax product transactions, and since there is yet such a national tax, it makes the Tobin tax even more unfair. Not that I'm against a national sales tax, but there's no way I could support that, as long as there's already an income tax (and a progressive one, at that).

Now, it's hard to illustrate how liquidity benefits the apple industry, to stick to my previous example, but it certainly is a benefit to commodity industries. A corporation that manufactures steel will greatly benefit from a liquid steel market (more certainty, more fluidity, less costs), which will benefit the companies they sell steel to, which will eventually benefit the consumer with bridges, buildings and railways built when needed for the most reasonable price.

Actually, many large corporations who extract/refine/manufacture commodities will also have commodity trading desks. (Hm. Is that everywhere or just in Asia?)

I'm still working on understanding what liquidity is (part of the reason for this, is the accounting definition I have stuck in my head). Once I understand that, I might be better able to understand how that benefits anyone.

That said, what is the opposite of market liquidity, then--volitility?

[MariconesUnited]

Originally Posted by Beingist

Well, "providing value" is a term that you and others use. To me, the phrase "offering what people want" is better defined by the term, "sales" or "selling." But, that's me.

Anyway, how else one can make a profit, without offering anything to the general public, is by buying (at a low price) and selling stocks (at a high price). This is the very nature of the question originally posed--how stock trading benefits society.

But, as you suggest in the rest of your post, Pete's done about the best at answering the question as anyone can. I still think stock trading is driven by profit motive, moreso, even, than business transactions, as it must look deeply in order to understand how it benefits society, and therefore, in essence, I still see such transactions of no inherent value, in and of themselves. It's still just another way to make money.

Been following your back and forth with Aelle. It seems to me that you have a problem with the profit motive itself. I've struggled with the concept myself. I think we need to remember that the profit motive isn't inherently exclusive to providing value to society. In fact they often go hand-in-hand. Just because the intention is to maximize profit does not mean that one is not providing value to society.

Originally Posted by Beingist

That said, I can see how traders would instantly jump on the seemingly inherent unfairness to taxing financial transactions. I think a straight comparison would be a national sales tax, which would tax product transactions, and since there is yet such a national tax, it makes the Tobin tax even more unfair. Not that I'm against a national sales tax, but there's no way I could support that, as long as there's already an income tax (and a progressive one, at that).

At first I didn't get what you were saying here. But then I realized over here (Canada) we have a national sales tax. You guys don't. And yet, I still don't understand how taxing financial transactions would be unfair. There's some sort of tax on products everywhere in the US no? They go to each individual State I presume? This would mean that everyone pays taxes on transactions. Except traders. Which would mean the current situation is unfair.

[Beingist]

Originally Posted by MariconesUnited

Been following your back and forth with Aelle. It seems to me that you have a problem with the profit motive itself. I've struggled with the concept myself. I think we need to remember that the profit motive isn't inherently exclusive to providing value to society. In fact they often go hand-in-hand. Just because the intention is to maximize profit does not mean that one is not providing value to society.

I'll admit, that I've harbored resentment in the past towards those whose motive is profit (which indicates selfishness to me), but I'm working on that, and easing up, as such a motive is often accompanied by a motive to simply survive and function in the world. However, I still have to get over the hipocrisy of those (and I've known a few) who, on the one hand, claim they're "providing value", while in truth, they're just in it for the buck, as witnessed by their actions. Honestly, I have more respect for one who admits unabashedly that they're just in it for the buck. At least they're not hipocrits.

At first I didn't get what you were saying here. But then I realized over here (Canada) we have a national sales tax. You guys don't. And yet, I still don't understand how taxing financial transactions would be unfair. There's some sort of tax on products everywhere in the US no? They go to each individual State I presume? This would mean that everyone pays taxes on transactions. Except traders. Which would mean the current situation is unfair.

Granted, 45 of the 50 states (plus D.C.) have a sales tax. Some states tax everything--property, income, and sales. Add to that all the federal taxation, and it's no surprise that a lot of Americans feel they're already taxed to death.

That said, I think it's ironic that the U.S. has the taxation it does, though it was founded by men who asserted that "the power to tax is the power to destroy", and clamored "no taxation without representation".

In any event, rather than add another tax, I, personally, am more the advocate for simplification. The tax code is already so complex as to be nearly unintelligible, and so I think the last thing we need is another tax (or, for that matter, another "deduction" or "incentive"). Throw the whole thing out, I say, and let's start from scratch.

Not that I expect that to happen anytime soon.

[aelle]

Originally Posted by Beingist

I'll admit, that I've harbored resentment in the past towards those whose motive is profit (which indicates selfishness to me), but I'm working on that, and easing up, as such a motive is often accompanied by a motive to simply survive and function in the world. However, I still have to get over the hipocrisy of those (and I've known a few) who, on the one hand, claim they're "providing value", while in truth, they're just in it for the buck, as witnessed by their actions. Honestly, I have more respect for one who admits unabashedly that they're just in it for the buck. At least they're not hipocrits.

As an aside, I don't think anyone can be in a career strictly for the value, nor can anyone be in it strictly for the money. But both must usually be present to some extent. One cannot be in a line of work that doesn't allow them to support themselves for obvious reasons, but I don't think many people can stay in a career that they feel is immoral or doesn't contribute anything, either.

Anyway, the main motivation for a career usually has nothing to do with either of these things - it's more about what you enjoy doing day after day. You're probably going to have a longer career as an apple farmer if you enjoy spending your days outdoors and learn about plants than if you just believe deep down that the world would be a better place with more apples. Similarly, I suppose traders are in it primarily for the pleasure of solving mathematical problems, or for the thrill of handling large sums of money, or for the people they get to meet in the industry, or for the unusual work hours. Mundane stuff, like the rest of us.

[Peterw]

I still think stock trading is driven by profit motive, moreso, even, than business transactions, as it must look deeply in order to understand how it benefits society, and therefore, in essence, I still see such transactions of no inherent value, in and of themselves. It's still just another way to make money.

I don't actually trade stocks (yet) I trade forex and commodities, however stock investing has the added benefit of providing capital to the companies which if they are good and profitable provide a benefit to society.

I like Aelle's explanations a lot. The companies that directly interface with the end consumers all rely on wholesale products and services from B2B companies and things like commodity prices and currency exchange rates.

Ask yourself this - how many of the companies that you use for your day to day existence are tradeable on the stock exchange? Would they be in a position to provide the value they do to you had they not floated and allowed investors and traders to inject capital into them to finance their operations? How about the B2B companies they rely on to provide you with value (take your internet connection for example) - do they have tradable shares that are providing them with the capital needed to function efficiently and stay in business?

Anyway, the main motivation for a career usually has nothing to do with either of these things - it's more about what you enjoy doing day after day. You're probably going to have a longer career as an apple farmer if you enjoy spending your days outdoors and learn about plants than if you just believe deep down that the world would be a better place with more apples. Similarly, I suppose traders are in it primarily for the pleasure of solving mathematical problems, or for the thrill of handling large sums of money, or for the people they get to meet in the industry, or for the unusual work hours. Mundane stuff, like the rest of us.

I love trading, I'm learning more about myself than in any other field. I'm absolutely fascinated by what moves the markets and seeing it mapped out on the charts and moving in real time. I'd probably do it for fun even if it didn't pay anything at all.

[MariconesUnited]

I agree with the idea of simplifying the tax code Beingist. A flat tax on everyone's yearly incomes I think would be more fair in the grand scheme of things. It wouldn't be a demotivational thing like the tax brackets we have now. But there should be some compensating for the poorer individuals when the flat tax is implemented. Because obviously they'd be getting the short end of the stick in the transition if there's no balancing out the fact that these people woule now be paying more in taxes.

But we're talking about something different now. We were talking about sales taxes, not income taxes. Sales taxes are pretty straightforward and simple. You buy a product you pay x% in taxes on it. Simple

[Peterw]

Originally Posted by MariconesUnited

I agree with the idea of simplifying the tax code Beingist. A flat tax on everyone's yearly incomes I think would be more fair in the grand scheme of things. It wouldn't be a demotivational thing like the tax brackets we have now. But there should be some compensating for the poorer individuals when the flat tax is implemented. Because obviously they'd be getting the short end of the stick in the transition if there's no balancing out the fact that these people woule now be paying more in taxes.

But we're talking about something different now. We were talking about sales taxes, not income taxes. Sales taxes are pretty straightforward and simple. You buy a product you pay x% in taxes on it. Simple

It gets complicated when you look at the different types of income and how they are taxed. This is what enables people to move their money around and draw income in different ways to control how much tax they do and don't pay.

For example I run my primary business (IT consultancy) through a UK LTD company. The money that comes into my company I can draw in 2 ways. I can pay myself in salary which is fully taxed, or as a company director I can take out dividends which attract much less tax. I have a choice over which method I use and how much tax I pay.

Same with trading, I can trade spot and CFDs which are liable to simple income tax and/or capital gains depending on whether I reinvest all my profits or take them as income. Or I can use spread betting which is 100% tax free providing it isn't my sole source of income.

It all boils down to how well I think the money will be spent by the government how I decide to draw money out of my contracting and my trading.

Simplifying the tax brackets at the end user income would probably be a good thing like a flat rate for all income for everyone whether it's salary, dividends, capital gains. It would have to still incentivise businesses and entrepreneurs to take on risk and the extra work involved in creating wealth and jobs for those who just want an easy life without having to worry about all that.

I'm in a situation where I can earn more and pay less tax because I chose to get myself into it. There's nothing stopping anyone from doing the same and the tax breaks are there to encourage just that. It's risk vs reward, take away the reward element and what's the point in taking the risk?

[MariconesUnited]

I would think the possibility of maximizing your revenues to levels most full-time employees can only dream of would be enough of a reward. But what do I know? You're the guy who's surrounded by these guys all the time, you probably have a better idea than I do what makes them tick.

By the way, I'm really glad you're doing something you would do for free. That's how you know you're on the right path! Just...don't tell too many people, they'll try and take advantage of you. Trust me on this one

[Peterw]

Originally Posted by MariconesUnited

I would think the possibility of maximizing your revenues to levels most full-time employees can only dream of would be enough of a reward. But what do I know? You're the guy who's surrounded by these guys all the time, you probably have a better idea than I do what makes them tick.

By the way, I'm really glad you're doing something you would do for free. That's how you know you're on the right path! Just...don't tell too many people, they'll try and take advantage of you. Trust me on this one

Especially with only having to work a few hours a week

My approach to paying tax is that I'd like to see complete transparancy as to where and how the money is spent. If they publish annual accounts like companies do and we could all see what goes where and it looks good - then they've got my support.

Otherwise I'll just keep donating to people in the 3rd world who don't have basic living conditions through no fault of their own.

I've only got 3 1/2 weeks to go at this contract then I'm on courses/exams all December. Who knows what next year will bring for MyITConsultancy LTD.. Could find myself in any kind of company, or on the sidelines for a few months with no income at all

[Beingist]

Originally Posted by Peterw

My approach to paying tax is that I'd like to see complete transparancy as to where and how the money is spent. If they publish annual accounts like companies do and we could all see what goes where and it looks good - then they've got my support.

I'd like to see transparency across the board. That means everybody.

--not that such will ever happen.

[Acting Like Godot]

Originally Posted by Beingist

Anyway, how else one can make a profit, without offering anything to the general public, is by buying (at a low price) and selling stocks (at a high price). This is the very nature of the question originally posed--how stock trading benefits society.

..... I'm still working on understanding what liquidity is (part of the reason for this, is the accounting definition I have stuck in my head). Once I understand that, I might be better able to understand how that benefits anyone.

That said, what is the opposite of market liquidity, then--volitility?

The opposite of market liquidity is illiquidity.

For example, let us say that you have a house worth about $1,000,000. I have listed shares worth about $1,000,000.

Although our assets are similar in value, mine are more liquid. Generally, it takes a few clicks on my computer to sell my shares. The money comes in two or three days later.

As for your house, although it definitely has value, you may take months to find a willing buyer. This is because your market is less liquid than mine.

You will have even less liquidity, if you owned a precious painting valued at $1,000,000. Because it is even harder to find a willing buyer.

-------------------

The value of stock trading to society is that trading creates liquidity in markets. Without liquidity in stock markets, people would be much less willing to invest in shares (because they do not know who they can sell their shares to, if they later wish to sell).

If people are not willing to invest in shares, then companies will find it very difficult to raise money from the public. If they cannot raise such money, then they lose one important avenue of raising money. If they lose that avenue, they will find it much harder to finance their business operations, whether they are in agriculture, or manufacturing, or retail, or pharmaceuticals or whatever else.

[Acting Like Godot]

Originally Posted by Beingist

In any event, rather than add another tax, I, personally, am more the advocate for simplification. The tax code is already so complex as to be nearly unintelligible, and so I think the last thing we need is another tax (or, for that matter, another "deduction" or "incentive"). Throw the whole thing out, I say, and let's start from scratch.

Yes .... In my country, doing your annual tax returns normally takes about 5 minutes.

The tax authority has already gathered all the info about you; computed the figures; and filled in your deductibles. You only need to log on, read the statement, and confirm that it's correct.

Americans who come to my country to work are regularly astounded.

[Acting Like Godot]

Originally Posted by Beingist

I still think stock trading is driven by profit motive, moreso, even, than business transactions

Eh? What kind of business transaction is not driven by a profit motive?