Mr. Speaker, to explain the government's position on this, the Minister of Finance has been very busy lately. He has had a lot of things on his plate. He has this leadership thing coming up and everything. He was walking along one day and one of his staff asked what he was going to do about this Tobin tax. I think the minister thought it was a Tobin attack. He was thinking of the premier in Newfoundland and he said, “I support any attack on that guy because he is going after the same job I want” and ultimately this changed things very quickly.
On the issue of speculation, the southeast Asia meltdown occurred partially because governments were operating monetary policies that were inconsistent with their fiscal policies. They had pegged currencies, and that could exist only for so long. The speculators saw a huge opportunity. The only time there is a huge opportunity for speculators to make a lot of money is when governments operate fiscal policies inconsistent with monetary policies, and that is not sustainable anyway.
Effectively, if the speculators had not done what they did in southeast Asia, it is kind of like someone who is injured and is lying on the sidewalk bleeding to death. The difference would be getting hit by a bus and being taken to the hospital as opposed to lying on the sidewalk and slowly bleeding to death. Those economies ultimately were not sustainable with that.
The way that kind of speculation occurred, sometimes can be considered to be very negative. The other kind of speculation that occurs every day and is an operating mechanism for floating exchange rates is not a negative speculation. Even the Prime Minister who calls the speculators the guys in red suspenders would probably agree that it is not so bad.
The bad thing about a Tobin tax is that it would punish the good speculation, but would not inhibit the bad speculation because the margins on the good kind of speculation that we need if we are going to have floating currencies, or floating exchange rates, are minute. The margins are very small. The Tobin tax would discourage that, but it would not stop the Soros type of speculation because the margins are so big.
The only way a Tobin tax would ever be able to work is if every jurisdiction in the world signed on. Even if we had every OECD country sign on, and for instance a Singapore or a Cayman Islands opted out, we would be creating havens there or increasing the level of tax havens those countries would have. With the death of distance as a determinant in the cost of telecommunications, we cannot afford to do that to our Canadian financial services sector because there would be an exodus.
The other issue is these new financial instruments. For instance, derivatives have become so complex that they cannot be traced. It is almost impossible. One of the issues we have in terms of safety and soundness issues in Canada is how the heck can OSFI which is already overburdened deal with all these financial complexities in the global environment, plus the complexities in the instruments?
Look at what happened in Orange county, California. I think the treasurer of the county was actually a hero for years because he had been investing in derivatives and making copious quantities of quid on behalf of the people of Orange county. Ultimately, when the derivatives he was participating in went down, Orange county faced bankruptcy.
It is very difficult and we have to be very careful to watch those kinds of things. When there are failures, those are not failures of speculators; those are failures of regulatory authorities within our countries.