Macri Imposed Capital Controls: When Will Argentina Learn Its Lesson?

To say that the Argentinian economy is not performing well is an understatement. Peso depreciation began in 2018, and ever since, Argentina has been on a downward spiral with no end in sight. Earlier this month, Argentinian President Mauricio Macri reinstated capital controls as a short-term emergency measure in the hopes that it will improve the deteriorating state of the Argentinian economy.

Before continuing, it would be prudent to define what a capital control is. A capital control is a measure taken by a government or central bank to limit the flow of foreign capital in or out of a country. They can take the form of tariffs, transaction taxes, volume restrictions, or outright bans. I had to consult my macroeconomic policy textbook from graduate school (Caves et al., 2007, p. 516), but capital controls have four possible aims:

• To discourage capital outflows in the even of a balance-of-payment crisis
• To discourage capital inflows in the aggregate, before a crisis
• To modify the composition of capital inflows, in particular to discourage short-term banking inflows, relative to other inflows
• To decouple domestic interest rates from foreign rates, with the aim of restoring some monetary independence

Let's jump back to capital controls in an Argentinian context. Prior to Macri getting elected, the capital controls were bad enough where 10 percent of Argentinian adults were buying dollars on the black market. About half of educated, middle-class adults were doing so (Schiumerini and Steinberg, 2019). Macri made a big deal of it during his 2015 presidential campaign. When he removed the capital controls shortly after his election, his decision to do so was very popular (Steinberg and Nelson, 2019). What happened Macri's election and now that he would change his mind?

Macri's initial removal of capital controls showed a break from the previous administration and a push for reform. While it provided a short-term boost of investor confidence, the Argentinian government was still borrowing a lot of money to finance its debts. Budgetary shortfalls combined with inflation and a drought that messed with Argentina's agricultural sector made matters worse, which is why the peso devalued as much as it did. The IMF-backed loan plan was not enough to stabilize the economy. As such, Macri lost the primary election (PASO) on August 11, which triggered another round of peso-selloffs because people weren't exactly confident in a Peronist government led by the leadership that got Argentina into this mess in the first place. Even if the capital controls could stabilize the peso, it does not look good for Macri's reelection chances. Macri's choice is based on his perception of stabilizing the economy along with politics.

Now that we understand the political calculus behind the decision, I have a more policy-focused question: do capital controls work? This is not a debate you see in economically developed countries because they do not need those controls. After, the globalization and integration of financial markets diminishes the need to use them. Conversely, capital controls are more common among developing countries, such as Argentina, precisely because their capital reserves are lower and their economies are more susceptible to volatility.

There are some who think capital controls succeed (Landy and Schiavone, 2018; Levy Yevati, 2011), some who think they fail (e.g., Alfaro et al., 2017; Pasricha et al., 2015; Alfaro, 2015; Carvalho and Garcia, 2006; Forbes, 2005), some who think that it depends on it being implemented short-term (e.g., Davis and Presno, 2014) or the level of short-term capital flows (Magud et al., 2011), and those at the OECD found contradictory results (OECD, 2016). The Federal Reserve Bank of San Francisco found that capital controls work better on capital inflows than outflows (Magud et al., 2007, p. 21). As for foreign exchange liquidity specifically, the Bank for International Settlements conducted some research. While capital controls reduce the cost component of FX market liquidity, they also make the market more vulnerable to order flow imbalances (Cantú García, 2017).

In the vein of the research being more ambiguous, I feel a certain ambivalence about capital controls. On the one hand, I know a country such as Argentina has not reached the level of economic maturity to do away with capital controls. Perhaps removing them suddenly as opposed to gradually was a mistake for Argentina. It is disconcerting because Argentina has cooperated with the IMF and has used other standard policy instruments to try to abate the peso devaluation.

On the other hand, not needing them shows a maturity of a given economy. I worry that capital controls are like putting a Band-Aid on a cold in that it is a short-term fix to a long-term, structural problem. As we saw with Malaysia, capital controls were used to cover up corruption and ineffective monetary policy. By limiting convertibility, the value of assets is diminished. Viewing the economy as a zero-sum game is as erroneous when discussing goods and services as it is when discussing capital.

There is an argument to be made that the success is conditional and situational, especially if implemented as a short-term solution. Even if a theoretically successful capital control could be implemented in practice, I worry that Argentina's monetary history and how Argentinians have turned to the underground market in the past would diminish the argument. At best, Macri's capital controls are going to be a temporary stop-gap that won't do too much if he cannot get a handle of the macroeconomic fundamentals.

Should We Brush Aside Worries About Amazon Rainforest Fires?

In recent weeks, I have noticed a flurry of articles about the Amazon rainforest. The cluster of wildfires were worrisome enough that the G-7 countries offered Brazil $22 million to fight the fires, an offer that Brazilian President Jair Bolsonaro summarily rejected. When environmentalists frame it in terms of the Amazon being the planet's lungs, it is bound to turn some heads. What I am curious about is the context of these fires and the extent to which we should worry.

Is the Amazon Rainforest Earth's Lungs?
In short, not really. Yes, the Amazon produces a significant amount of oxygen. The reality is that a majority of the oxygen that the Amazon produces is also consumed by the Amazon vis-à-vis respiration, whether it is wildlife or microorganisms that decompose dead leaves, twigs, or other materials. When this processing is factored in, net oxygen production is near net zero. When considering breathable oxygen, oceans are responsible for about 50-85 percent of the world's breathable oxygen. In short, the entire Amazon rainforest could be destroyed, G-d forbid, and we could still breathe. National Geographic recently released an article explaining in detail why this "Amazon's are the Earth's lungs" claim is a myth.

Historical Context of Amazon Rainforest Fires
Listening to the media, I would have thought that these fires were at an unprecedented level. Let us take a look at the data from Brazil's Instituto de Pesquisas Espaciais (INPE), which is Brazil's space research agency.

Source: FEE (dated September 5)

I do notice that we are not complete with the 2019 calendar year, and fires are already higher than 2018. However, I notice two other things. One, Amazon rainforest fires are not new. Two, they are still lower than they were in the early- and mid-2000s. While useful, these data have limits because they say nothing about the size of the data (i.e., unlike Brazil, the U.S. tracks the size of the fires).

Shouldn't We Still Worry? 
Even if the fires are not anything new or if the levels are not unprecedented, we should still worry, argue environmentalists. After all, these fires are bound to have detrimental effects on the biodiversity of the region. The New York Times and Smithsonian Magazine confirm most of the fires are being burned on agricultural land where the forest has already been cleared.

This is not to say that there are no issues whatsoever. One has to be concerned with increased carbon monoxide emissions and how that will most immediately affect the indigenous tribes living in the Amazon.

Second, there is concern that we will reach a tipping point (called a dieback scenario) if we reach 20-25 percent deforestation levels (Lovejoy and Nobre, 2018). We are currently at 17 percent, according to the World Wildlife Fund. While deforestation rates have slightly increased under Bolsonaro, those rates are much higher than they were in the early- and mid-2000s. There was actually a 70 percent decline in deforestation between 2004 and 2012 (Nepstad et al., 2014).

Source: Ministério do Meio Ambiente

There is also expressed concern about how deregulation has contributed to the uptick. I would contend that Brazil being a developing country has something to do with it. Research suggests that there is a U-shaped relationship between environmental degradation and economic growth (Chiu, 2012). The process to get a permit for scheduled clears and burns is onerous enough that Brazilians are resorting to illegal burns, which like so much in the underground market, is more problematic. As an economist from University of Colorado hypothesizes, the economic development that results in rule of law and greater voice translates into better forest management (Barbier, 2019). This better forest management, of course, assumes that Brazil can get past crony capitalism and become a developed nation.

When I take a look at this, I do not this that it is the dire situation that many environmentalists are depicting. I also do not this that the situation is free of concern. Ultimately, it is something we should see an eye on while making sure that the Amazon tree canopy cover is growing, much like we see happening on the global level (Song et al., 2019). Fortunately, there are ways to ameliorate the situation (Lapola et al., 2018). Ultimately, this is another example of how we should let facts inform our emotions, and not the other way around.

Red Flag Laws With Constitutional Protections Should Be Given the Green Light

El Paso, Thousand Oaks, Pittsburgh, and the mass shooting in Midland-Odessa last week. These are just some of the places where there have been mass shootings in the past year. It seems like a never-ending nightmare, especially by those who are victims of such tragedies. Mass shootings are sadly not anything new, but the response to mass shootings is getting more intense. Recent rhetoric has surrounded white nationalism and mental health. In addition to such rhetoric, there has been a policy alternative that has emerged: red flag laws.

A red flag law, also known as an extreme risk protection order, is a petition for a temporary order of removal of firearms from an individual who would be proven to be a danger to themselves or others. While this could be in response to gun suicides, red flag laws have primarily been in response to preventing further mass shootings, especially since 51 percent of mass shooters exhibit a warning sign of some sort.

One thing that red flag laws already have going for them is their popularity. A Washington Post poll from last year shows that 85 percent of Americans are in support of red flag laws. The argument for red flag laws is stronger than citizen support. One study shows that red flag laws to prevent suicides reduced suicide rates in Indiana and Connecticut by 7.5% and 13.7%, respectively (Kivisto and Phalen, 2018; also see Swanson et al., 2019). It is trickier to say whether they would help with preventing mass shootings because they are statistically rare occurrences. Even so, a study preliminarily suggests that an intervention as urgent and individualized as the red flag law could help reduce mass shootings (Wintemute et al., 2019).

Proponents of the Second Amendment are concerned that red flag laws would be used as a backdoor to eroding gun ownership. I share those concerns because I could see red flag laws being abused. At the same time, I also see the public safety concerns of those who support red flag laws. Similar to the positions of libertarian think-tank Cato Institute and the National Rifle Association (NRA), I would want red flag carefully written to include protections of Second Amendment and due process rights, as well as have a narrower definition of "dangerousness." The last thing we need is for the slippery slope to become a reality.

I also have reservations about red flag laws working even if they are implemented with such constitutional protections. One is the assumption that most or all dangerous individuals are reported in time to prevent such an act. The second concern is one I brought up after the Las Vegas shooting in 2017, which had been the deadliest mass shooting on U.S. soil. The correlation between mental illness and mass shootings is low enough that it lacks a coherent risk-identification strategy. I would rather see improvement in mental health services than further stigmatization of those who require mental health services.

My bottom line is this: Red flag laws with the proper constitutional protections would be fine. However, don't expect it to perform miracles in preventing mass shootings.

Why Care About Denmark Putting Trump's Offer to Buy Greenland on Ice?

The real estate agent in President Trump came out last week. He made a proposition to buy Greenland from Denmark, much like President Truman attempted in 1946. Denmark's Prime Minister, Mette Fredericksen, said that Greenland is not for sale and the idea of doing so is absurd. Trump subsequently cancelled his plans to visit Denmark next month.

While it would be easy to dismiss this sales proposal as "Trump does that wildest things," there might be some rhyme and reason for Trump's move. Although Greenland is sparsely populated, Greenland is abundant in natural resources, especially in rare earth metals. These are the same rare earth metals that act as inputs for computers, smartphones, electric cars, and other electric goods. China already has such a large market share in rare earth metals, and has been mining for more in Greenland through an Australian company. Trump is assumedly trying to position himself in the rare metals market because he is anticipating a drawn-out trade war with China which he should have never started in the first place. And to think there are also copper, zinc, and iron reserves, as well (see Brookings Institution report here).

But Greenland's advantage isn't just about natural resources. Its geographic position combined with the melting polar ice caps allows for maritime travel to be shorter through its shipping lanes more quickly than the Panama or Suez Canals, but that might not transpire for about another century. China will continue to have geopolitical interests in establishing a presence in Greenland. Russia is also interested in Greenland as the major world powers vie for power in the Arctic region.

There are economic and national security interests for the United States to purchase Greenland from Denmark. Something tells me that Denmark is more aware of Greenland's worth than it is letting on. It does signal how a large island that historically was considered all but worthless is now playing an increasingly important role in international politics. While we will not see a purchase of Greenland anytime soon, this is not the last we will hear about Greenland's role in international affairs.

Is Allowing Transgender Women to Compete in Female Sporting Events Unfair?

Secretary of Education Betsy DeVos has stirred the pot with the transgender community. Last week, the Office for Civil Rights formally launched an investigation in the state of Connecticut's policy to allow transgender high school athletes to compete as the gender with which they identity. This investigation is the consequence of Alliance Defending Freedom, a Christian conservative nonprofit, filing a complaint with the Department of Education on behalf of three female high school track athletes.

The crux of the complaint is that the the three cisgender girls (cisgender being those whose gender identity matches the sex they were assigned at birth) had to compete against two male-to-female (MTF) transgender athletes. Per the complaint, since the two MTF transgender athletes "have male hormone levels and musculature," they have an undue advantage that violates Title IX, which is a federal law that does not allow for discrimination that is based on sex in education programs. Those filing the complaint contend that the alleged violation of Title IX is tantamount to discrimination. Those who are opposed to this complaint contend that siding with the Alliance Defending Freedom would mean further discriminating against transgender athletes.

Before I continue, I want to preface with this. I have more than a feeling that the upcoming nuance in this piece is going to get lost in politics. I have spoken out against the transgender military ban and the transgender bathroom ban. Not only do I believe that transgender individuals should be treated with the same respect and dignity as everyone else because they are human beings, but I also have transgender friends. Anyone who thinks that I am exhibiting transphobia because I am sorting through the details and searching for the truth only lobs that argument because they don't have anything else to stand on. But let's get back to the question of the hour: should MTF transgender athletes be allowed to compete against cisgender female athletes or not?

Gender is more than mere societal construct. Granted, there might not as many differences as certain traditionalists would like to think, but there are still differences between men and women. As Doraine Coleman, a Duke Law Professor that specializes in gender issues and a former 800-meter champion, reminds us:

Compared to females, males have greater lean body mass (more skeletal muscle and less fat), larger hearts (both in absolute terms and scaled to lean body mass), higher cardiac outputs, larger hemoglobin mass, larger VO2 max (i.e., a person's ability to take in oxygen), greater glycogen utilization, and higher anaerobic capacity. 

These differences in physical attributes come from testosterone levels. Women have a range of 0.3-2.4 nanomoles per liter (npl), whereas men have a range of 10-38 npl. If a doctor ignored differences between sexes in their diagnoses, they would have their license revoked. This is not to say that there are not exceptions to norms, but that the general differential between men and women creates a performance gap, typically of 10 to 12 percent. This performance gap is the primary justification for having a woman's category in most competitive sports because without it, there would be very few female victories in athletics.

The next question is whether MTF transgender individuals retain the physical advantages of having been born biologically male. With regards to the Olympics, the International Olympics Committee ruled in 2015 that for a MTF transgender athlete to compete, testosterone has to be below 10 npl vis-à-vis hormonal replacement therapy (HRT) for a year before competing. Disregarding that the Olympics has yet to have an openly transgender athlete compete, it does show an attempt to level the playing field.

Given that women typically range from 0.3 to 2.4 npl, one could argue that 10 npl is enough. As a matter of fact, a recent study from the peer-reviewed Journal of Medical Ethics (JME) came to that very conclusion (Knox et al., 2019). In spite of having testosterone levels below 10 npl, the MTF transgender subjects did not lose significant muscle mass because their muscles are rebuilt. Since MTF transgender athletes retained muscle mass and strength, the study ultimately concluded that it is an intolerable unfairness.

One option, as the JME offers, is to have everyone compete in the same sporting leagues. This would not only allow for transgender individuals to compete without issue, but it would also include those who do not identify as non-binary. While it would be more inclusive and gender-blind, my concern is that biological males still would have the advantage. To reiterate, the 10 to 12 percent performance gap that biological males have over biological females would all but wipe out any incentive for cisgender females to participate in athletics.

Yes, life is unfair, and it is unreasonable to expect that each athlete have the same exact skills and attributes. Some basketball players are taller than others. A swimmer could have a naturally wider wing span. Caster Semenya is an Olympic-winning runner who is an intersex woman with 46, XY DSD (formerly known as "pseudo-hermaphroditism"). These advantages can and do exist, but these advantages are much more subtle than the clear-cut advantage that higher levels of testosterone provide. On the other hand, there is a strong enough case for these advantages not mattering in certain sports. Wrestling divisions are based in weight categories. For a sport like baseball or softball, these biological advantages seem to have less bearing.

In many things in life, it does not matter what biological sex you were born with. But with something as physically rooted as athletics, it is difficult to deny the differences between being born biologically male versus female. The reality is that males have a biological advantage in most sporting events, which justifies the women's category in most sporting events. This is not bigotry; it is biology. If HRT meant that there was more or less parity between MTF transgender women and cisgender women, I would not care because transgender individuals have it hard enough in life. However, MTF transgender women still hold an undue advantage over cisgender women because they are still biologically male. Until science can catch up with the ethical debate, I conclude that it is not fair for MTF transgender women to compete with cisgender women in most sports.

Parsha Devarim: It's Not a Matter of Whether to Rebuke, but How

Moses did much for the Jewish people. Not only did he help free the Israelites from slavery, but he led them through the desert for forty years. By the beginning of Deuteronomy (in this week's Torah portion, Devarim), we have reached the point in the text where Moses is not long for this world. How does Moses decide to spend the end of his life? Dispensing some not-so-old-fashioned Jewish guilt:

דבר משה אל בני ישראל ככל אשר צוה הי אתו אלהם.

-Moses spoke to the children of Israel, according to all that G-d commanded to them. -Deuteronomy 1:3

According to Rashi, Moses' words at the beginning of Deuteronomy are words of rebuke. Moses starts his long speech after having defeated Sichon and Og in battle (Deuteronomy 1:4). Why after this battle? Because had it been before, he would have been accused of ulterior motives. Since it was done after, his rebuke is a sign of rededication (Sifrei, cited by Rashi). The first important lesson is that timing is everything. Had Moses rebuked before defeating Sichon and Og, his words would have not been taken seriously. Rashi's commentary implies that finding the opportune moment has the potential to affect the outcome of whether the rebuke is heeded (ibid.). 

Going back to Deuteronomy 1:1, we see a list of places. According to the Sifre, the landmarks listed are not places where Moses spoke his final words of rebuke. Rather, they are a list of sins in the form of allusion. "In the desert" refers to when the Israelites complained in Exodus 17:3. "In the Aravah (Plain)" refers to worshipping Ba'al (Numbers 25). "Opposite Suf" is in reference to when the Israelites made trouble by the Sea of Reeds (Exodus 14:11), and "Paran" is regarding the sin of the spies (Numbers 13). There are others, but you get the idea: Moses did not call out the sins by name. He used euphemisms to soften the blow. Why? Because Moses knew his audience, and the content of the rebuke mattered. If he would have said, "What's wrong with you people for committing all these sins? G-d is going to punish you for your stupidity and insolence," odds are that the Israelites would have ignored Moses. If this were Moses' approach, it would have been better to have not said anything because as the Talmud states (Yevamot 65b), "it is a mitzvah to refrain from saying something which will not be listened." Just as important, the content matters because it is important to preserve the honor of those being rebuked (R. Chaim Shmuelevitz).

In Deuteronomy 1:5, Moses began his words of rebuke in the land of Moab. According to Rashi's commentary (1:5), this is when Moses translated his words of rebuke in 70 languages. This is based on the assumption from the Haggadah that the world is made of 70 languages. What this implies is that Moses translated the Torah so everyone had linguistic access. Rashi's commentary teaches us that Moses went through this translation work to make sure that the rebuke is unambiguously understandable. 

Finally, if you are going to rebuke, do it out of love. It is no accident that the command to rebuke (Leviticus 19:17) is juxtaposed with the commandment to love one's neighbor as oneself in lieu of taking vengeance or holding a grudge (Leviticus 19:18). Since juxtaposition is a standard hermeneutical tool in Judaism, one could infer that either rebuke leads to love and/or that rebuke should be done with love. As the Midrash (Genesis Rabbah 54:3) states, "love unaccompanied by criticism is not love." 

This message about "criticism without love" is very important during the Nine Days. It is commonly taught that the Second Temple fell because of baseless hatred. R. Jonatan Eibeschitz expounded upon the Talmud by saying that the baseless hatred was manifested by a lack of people rebuking. For Eibeschitz, it was not an active hatred that caused the destruction of the Second Temple, but rather the apathy. 

We learn a few things here. Rebuke is not meant to be a sign of hate or disgust, but one of love. The second is that when we rebuke, what we say, how we say it, when and where we say it are all important. If Moses had not been more careful, it could have meant destabilizing the Jewish people to the point of non-existence, which could have had major ramifications for the development of humankind. Fortunately, he was aware of how to rebuke, which also explains why the end of Moses' speech a few Torah portions later ends on a high note, further illustrating the importance of content. Jewish tradition does not teach us to unconditionally accept people for who they are. To err is the human condition, and there are times where we need redirection. What's the moral of the story? When we do point out others' flaws, we do so lovingly and with considerable sensitivity. We might not have the political standing that Moses had, but our words nevertheless have power. By using our words to build up rather than tear down, we can reverse the damage caused centuries ago and bring about an era of peace in our times. 

Financial Transaction Tax: An Oversold Idea That Won't Die

The 2020 Democratic Party presidential primaries are bringing out a litany of horrible public policy ideas: the wealth tax, baby bonds, expanding national service programs, capping credit card interest rates, and forgiving student debt. I have another one to add to the list: the financial transaction tax (FTT). Back in May, Senators Bernie Sanders (I-VT) and Kristine Gillibrand (D-NY) introduced the Inclusive Prosperity Act. This Act sets up a few FTTs: 0.5 percent for stocks, 0.1 percent for bonds, and 0.005 percent for derivatives. The United States is not the only country eyeing the financial transaction tax. Last month, France and Germany set out to persuade other European Union member states to enact a 0.2 percent FTT on equity trades in the EU from 2021.

What exactly is the FTT? It is like it sounds. It is a levy imposed on the buyer or seller of a financial instrument (e.g., stock, bond, FX, derivative, security). There are three common policy justifications: reducing financial market volatility, more tax revenue, and pay for the federal assistance to the institutions that are viewed by some as the source of the financial instability, a.k.a. Wall Street. In the case of Sanders, he would like to take the tax revenue to fund his proposal for free college tuition and erasure of college student debt. Sanders hopes that such a tax would generate up to $2.4 trillion over the next decade. Sanders would like to mitigate income inequality while "sticking it to Wall Street." What could possibly be wrong with a financial transaction tax? Non-rhetorically, I can think of a few reasons.

1. It is not clear as to whether it would mitigate financial volatility. The main argument used is to prevent another financial downturn similar to the Great Recession. However, financial transaction taxes might not work so well. In 2012, the Bank of Canada released a study on FTTs. They concluded there is little evidence that it would mitigate financial volatility. If anything, it would likely "increase volatility and bid-ask spreads and decrease trading volume." Jared Bernstein, the former economic adviser of Vice President Joe Biden, came to a similar conclusion, as did the International Monetary Fund [IMF] (Matheson, 2011; also see Wang and Yau, 2012; Habermeier and Kirilenko, 2001; Hau, 2003).
2. It is a poorly targeted tax. Sanders would like to target the more speculative aspects of Wall Street that supposedly got us into trouble. The problem is that the FTT would indiscriminately target speculative and productive trading, thereby disincentivizing investment. 
3. Revenue Estimates are Too Optimistic. This is not the first time that Sanders proposed a FTT. He previously did so in 2016, and estimated it would bring in $3 trillion over a decade. The left-of-center Tax Policy Center found that Sanders' 2016 version would only bring in $400 billion. This means that Sanders exaggerated by a near ten-fold! The Congressional Budget Office also estimated the tax revenue back in December, and it was only $776 billion over ten years. This phenomenon is not unique to Bernie Sanders. The European Union has come across similar issues with rosy FTT revenue estimates. France and Italy also did not acquire the revenue they anticipated.
4. It would negatively affect retirement savings. As the Tax Policy Center points out, financial transaction costs have lowered since the 1970s. This has made way for such retirement vehicles as the 401(k), mutual funds, and the IRA, which has made retirement more accessible for those who aren't rich. Sanders' FTT would increase transaction costs by ten-fold, which would make retirement more difficult for the working class that Sanders purports to help. This means that the FTT doesn't target Wall Street speculators like Sanders would like because the costs are passed on to the investors. 
5. There would be significant tax avoidance. A paper from an economist at the University of Berkeley outlines how the FTT incentivizes tax avoidance, and uses Italy and France as examples (Coelho, 2016). Some forms of tax avoidance are portfolio substitution, market-making exemptions, platform and derivative shifting, and geographic evasion.
6. This would negatively affect liquidity and price discovery. This might sound like some financial jargon, but ensuring liquidity, or the ability to purchase or sell an asset without causing a drastic change in the asset's price, is important. As the IMF found, a decrease in liquidity increases the price impact of trade, which increases price volatility (Matheson, 2011). This same paper also found that the reduction in liquidity makes it more difficult to "incorporate the effect of new information into asset prices," which only makes it more difficult to prevent asset bubbles. 
7. European Case Studies. While the United States has yet to implement the FTT on the level that Bernie Sanders would like, there have been some European countries that have implemented the FTT. How did it fare?
• Sweden: Sweden introduced a FTT in the 1980s, and it ended up reducing 60 percent of the trading volume (Umlauf, 1993). 
• France: France's attempt at the FTT in 2012 resulted in lower trading volumes and reduced market liquidity (Colliard and Hoffman, 2017). 
• Italy: The Italian government imposed a FTT in 2013. A 2016 report from the European Central Bank found a "reduction in liquidity for the stocks hit by the reform (Cappeletti et al., 2016)." Credit Suisse also estimated that Italy's stock trading fell 34.2 percent two years later as a result of the FTT.
• United Kingdom: To be fair, the United Kingdom has had a stamp tax since 1694 [on stock transactions], and it doesn't seem worse for wear (Burman et al., 2016). On the other hand, a paper from the IMF shows that the market for "contracts for difference" in the U.K. grew rapidly when they were exempted from the stamp tax (Matheson, 2011). The U.K. stamp duty has also been found to depress share prices and distort how investors interpret share prices (Bond et al., 2004; also see 2008 European Commission paper).

Conclusion
In theory, a FTT could be broad-based and low enough where it could minimize damage to investing. What is observable in practice is that the FTT does not create nearly as much tax revenue as estimated. As Professor Moorad Choudhry from the Bank of Scotland points out, "An FTT would actually produce lower government revenue due to falling profits in the financial industry. And that benefits precisely no one." On top of that, the FTT depresses trade volumes, damages savings, incentivizes trading in other countries, and increases transaction costs. The irony is that those who advocate for the FTT do not realize that the FTT increases market volatility, which is the very thing they are trying to avoid. It would behoove the Democrats, and indeed anyone advocating for the FTT, to think twice before trying to enact this atrocity.