Democratic Primaries
In reply to the discussion: Sanders to propose canceling $1.6 trillion in US student debt [View all]FBaggins
(26,731 posts)I don't have to prove that changing the price of a thing changes the behavior of people who consume that thing. That's a basic axiom of economics. The burden of proof would be on anyone who thought that their proposal was an exception.
Take arbitrage for example. Stock XYZ is traded on both the London exchange and NYSE. It trades at $100/share and heavy trading in NY drives the stock up by $.25/share (or perhaps there's a currency value shift with the same effect). The stock in London should go from 79.53 pounds (at current exchange) to 78.72.
The thing that makes that happen is called arbitrage. The moment the disparity occurs, someone with large sums will simultaneously buy and sell that stock in the two markets until the price levels out to be the same in both places (as it should be because it's the same company). That might take trading 100,000 shares (requiring $10million in capital). Little investors rarely have access to multiple markets and such rapid trading... but without arbitrage (and other market-making forces), consumers can't know that they're getting the right price.
The arbitrage-er makes a really quick $10-15k on the transaction. But add a $50k tax on both the purchase and sale? Obviously that trade isn't going to happen. That 0.5% tax is actually substantially larger than LOTS of market-making transactions. That MUST have a substantial impact on the markets themselves (not just to the rich market-makers)
primary today, I would vote for: Undecided