Barack Obama is now proposing a tax on “risky” financial transactions.

The problem here is two fold:

• Many of the risky financial transactions were there to skirt regulations, and this just creates another incentive for people to do this again.
• Many of the problems with our markets come from people who attempt to generate minuscule profits across thousands, or millions, of trades, Goldman Sachs front-running the entire US stock market comes to mind.

The solution to fixing this is to make rapid-fire low margin speculation unprofitable, and the way to do this is to to tax all financial transactions at something like ¼-½%.

For the investor, this is an infinitesimal cost of doing business, but it puts the rampant speculator out of business.

It eliminates regulatory arbitrage, and could go a long way toward paying for health care reform.