Windfall taxes are a ghastly idea. They are a sop to prejudice, a burden on risk-taking and a form of arbitrary confiscation. No sensible person should support them. So why do I now find the idea of a windfall tax on banks so appealing? Well, this time, it really does look different.First, all the institutions making exceptional profits do so because they are beneficiaries of unlimited state insurance for themselves and their counterparties. As Andrew Haldane of the Bank of England argues, the state has "become the last resort financier of the banks".* In the UK, total support amounted to a staggering 74 per cent of gross domestic product. These must be the largest business subsidies ever.Second, the profits being made today are in large part the fruit of the free money provided by the central bank, an arm of the state. The state is giving the surviving banks a licence to print money.
First, all the institutions making exceptional profits do so because they are beneficiaries of unlimited state insurance for themselves and their counterparties. As Andrew Haldane of the Bank of England argues, the state has "become the last resort financier of the banks".* In the UK, total support amounted to a staggering 74 per cent of gross domestic product. These must be the largest business subsidies ever.
Second, the profits being made today are in large part the fruit of the free money provided by the central bank, an arm of the state. The state is giving the surviving banks a licence to print money.
The Banks have always had a licence to "print money".
the state has "become the last resort financier of the banks"
This has been going on since the Great Depression. Since the 1960's there has been a financial crisis every few years (usually no more than five) and in each case the Central Bank cleans up the balance sheet of banks by acting as lender of last resort, and the government subsidizes business to make up for reduced private investment so as to put a floor on employment and output.
But, yeah, it is unseemly that the banks should be returning to the big bonuses. However, the better way to address this is adding more tax brackets and higher, punitive marginal rates. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
