Commentators and policy makers are casting far and wide to try to find policies that may offer solutions to the banking crisis and the financial situation it has caused. One proposal (considered in two articles below) is the introduction of a Tobin tax. A Tobin tax is a levy on currency transactions and the argument is that this will act as a disincentive for short-term speculation and therefore force traders in financial and currency markets to look more at medium- to long-term rather than short-term gain.
Tobin’s nice little earner Guardian (15/10/08)
Make state capitalism pay its way Guardian (26/9/08)
Questions
| 1. |
Explain what is meant by a Tobin tax. |
| 2. |
Assess the arguments for and against the imposition of a Tobin tax on currency transactions. |
| 3. |
Discuss whether changes to the regulatory structure of currency markets may be more effective than the introduction of a Tobin tax. |
The Office of Fair Trading (OFT) is to set up an investigation into the reality of ‘free banking’ to establish whether greater transparency in charging would benefit consumers. The articles linked to below consider the scope of this investigation and look at what some consider the ‘myth’ of free banking.
OFT probe into bank charges could mean end of ‘free banking’ The Scotsman (27/4/07)
‘Free’ banking could end as overdraft charges challenged Guardian (27/4/07)
Watchdog probes cost of banking BBC News Online (27/4/07)
Charges inquiry may spell end of free banking Telegraph (28/4/07)
OFT considers ending ‘free’ banking Times Online (27/4/07)
Q&A: Banking investigation and you BBC News Online (26/4/07)
Calling banks’ bluff BBC News Online – Robert Peston blog (26/4/07)
Free banking ‘myth’ to be probed Guardian (26/4/07)
Questions
| 1. |
Explain the reason why some people consider free banking to be a ‘myth’. |
| 2. |
Examine the likely impact of the market structure in the market for banking on the level of competition. |
| 3. |
Assess two policies that the government could implement to ensure that consumers get a fairer deal from their banks. |