30 Dec 2012

US Financial Transactions in 2011 : $5.5 Quadrillion

A quick message for Barack Obama with just hours to go before the US goes over the fiscal cliff.  Don't forget that a Financial Transaction Tax like the one being introduced in 11 countries in the European Union could fix the problem for good.

I'd already totted up the numbers from the DTCC and BIS to come up with a total of $4.44 quadrillion for financial transactions in the US for 2011. And I was happy to see that that figure got a mention in Ellen Brown's recent article on the Fiscal Cliff.

But as I mentioned in my recent commentary, even that number clearly ignores some very major players such as the CME Group (Chicago Mercantile Exchange). I've just discovered that you can download their Financial Report for 2011 here. On page 34, they conveniently provide the following table which summarizes the key figures for the period 2007-2011.

As you can see, the total notional value of transactions in 2011 was an eye watering $1,068 trillion. That's up 7.4% on 2010, but still substantially lower than the record turnover of $1,227 trillion in 2008. I note that the report mentions that these figures "exclude our TRAKRS, HuRLO, Swapstream, credit default swaps, interest rate swaps and CME Clearing Europe contracts". Any guesses how much more those would add?

By adding those numbers in the DTCC and BIS figures, I get the following revised numbers for US financial transactions in 2011.

That's a total of over $5.5 quadrillion dollars - $5,511,178,000,000,000 for those of you who have trouble trying to imagine what a quadrillion looks like. And of course, I have no way of knowing that there are not other untapped sources of revenue that I haven't managed to include. Please let me know if you can think of any other suitable places to look.

A 0.1% flat rate financial transaction tax on that lot would raise far more than all the other US government taxes combined. It would allow income taxes, taxes on company profits and sales taxes to be abolished completely.

I can honestly think of no good reason for keeping the current tax arrangements which, apart from anything else, are extremely complex to implement - especially in the USA, where even ordinary citizens have to use tax advisors to fill in their tax returns.  The flat rate FTT could be implemented for the cost of adding one line of code to the software used to handle all these transactions.

So, here's wishing a happy and tax-free 2013 for everyone except the computers that handle the $5.5 quadrillion in transactions. Will the computers mind having to pay? I don't think so.

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