The destructive turbulence of global markets has aroused interest in a measure that would not only calm the financial waters but also perhaps eliminate abject poverty. In 1978, Professor James Tobin proposed a 0.5 percent tax on foreign exchange transactions. The effect of what has since become known as the Tobin Tax would be to reduce exchange-rate volatility caused by short-term, speculative transactions, which enrich the few and impoverish the many.
The value of international exchange transactions is generally estimated at more than $1.5 trillion each day, of which a mere 5 percent is directly related to settlements for traded goods and services. The short-term transactions can mostly be classified as unproductive speculation.