One Toke Over The Line....

    Well, The Three Stooges (Obama, Pelosi and Reid) are smoking crack, again. They are recommending the government install a 1% transaction tax. Doesn't sound too bad, does it? Well here's how it will work: Every time you make a deposit or withdrawal with your bank, you are taxed 1% for each action. So let's say you deposit $1000.00 into your account: you are taxed !% which equals $10.00. Now you want to take out $500.00: you are taxed again. This time $5.00.
    "Okay" you say: "I can live with that". Well, this is were it gets scary. It's not just the banks. It's 1% of the amount of every check you write to pay a bill. Now bare in mind that the company that receives your check will be subject to that tax, too. What do you want to bet that, let's say, the utility company will raise your bill by an extra 1% to cover their cost? Of course they will, and so will any business or bank that has to pay this tax. Don't get me started on the Stock Market.
    What no one seems to understand is that this tax would destroy the US financial system. Think about the implications of a "small" .25% tax. Let's say you are talking about a trade that lasts for one week. You will be taxed once when you enter the trade and once when you exit. Therefore, you will pay a .5% tax on this trade. There are 52 weeks in the year, and therefore your annualized tax is actually 52 * .5% = 26%. In other words, this tax will eliminate any trading activity with a holding time of a week or less that fails to generate returns of at least 26% per year. Guess what. That is about 98-99% of all trading activity. People don't understand how financial markets work. This will almost completely eliminate the trading activity of all financial intermediaries. Financial intermediaries facilitate retail trading, institutional trading, stock and debt issuance, corporate financial transactions, etc. When trading volume grinds to a halt, liquidity and efficiency in the market place will disappear. This will destroy the US financial system. I don't understand how people fail to see this.
    Now, if you think like me and say: "I'll just pull all my money out of the bank and pay in cash". Two things will happen: The banks will crash and burn a thousand times worse then we've seen in the past few years and you will have spent more in gas than what you would have saved had you done nothing at all.
    The only way out of this is to run these people out of office and hope that the next group of officials have their shit together and realize they work for us, not the other way around.
     HOPE AND CHANGE.....yeah, right!!!