Vital Signs

A Global IRS?

The global economy is out of control, and the global brains at the Treasury Department, the Federal Reserve, the International Monetary Fund, and the World Bank are not quite sure what to do about it. One prescription being bandied about is a global tax and all the monitoring, rules, and regulations that would go along with it. In short, a global IRS.

Sound fantastic? Endorsements of a global tax on international currency transactions are becoming rather common. On January 30, as the House Banking Committee opened hearings on the Clinton administration's demands for more IMF bailout money for Asia, the Washington Post declared that "One reason for the wild swings in global financial markets—and the need for IMF bailouts —may be that it has become easy and costless to exchange one currency for another. James Tobin, the Nobel Prize-winning economist, suggests throwing some sand in the gears of this process by imposing a universal tax on currency transactions."

At the Banking Committee hearings, however, Federal Reserve chairman Alan Greenspan—while endorsing more billions for the IMF—opposed any "super-regulator" scheme that would interfere with the global market. But depending on the impact of the Asian collapse, Greenspan may be tempted to move in the direction of a global tax. One interim proposal, outlined by Greenspan crony and investment advisor Henry Kaufman in the Washington...

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