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Taxing Global Capital Flows

By Matthew Yglesias  

"Taxing Global Capital Flows"

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At the beginning of the month, I wondered if one of the lessons of the current crisis isn’t that we need to reconsider if opposition to international capital controls has really been such a hot idea. If even a real right-winger like Megan McArdle is contemplating this position, I think I’m going to take up the banner. Kevin Drum suggests that this might be accomplished by means of a modest tax.

I find this idea appealing, much as I think idea of a small financial transactions tax is a good idea. In both cases, the thinking is that a modest tax should leave “real” long-term investments more-or-less unmolested. Thus savers in Germany and Japan can still have their money directed into profitable investment opportunities in Arizona and Shenzhen. But it would put a real crimp in short-term speculation and more generally slow things down.

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