President John F. Kennedy helped to revive the City of London in 1963 by imposing a tax on US investment in foreign securities. That made the international bond market move to London, allowing the City to regain its 19th century status as Wall Street’s rival in capital markets.
I did not know this bit of history. It seems like a perfect illustration of some obvious but often ignored truth, perhaps simply that policies have consequences. Consideration of more than policy advocates’ lies may be in order. Betting market prices may be one valuable source of more information.
A small irony then, that U.S. regulation is ensuring that the leading betting markets are located outside the U.S., largely in London. Eventually this may be a big deal:
It does not sound like a very worrying loss for Wall Street given its strong position in equities, bonds and derivatives. But Mr Bloomberg should watch out: in an arena of financial innovation that is rapidly converging with other forms of trading and investment, New York is drifting behind London.
As an anti-nationalist, I don’t care much where the leading markets locate; I just hate to see stupid policy implemented anywhere, including the U.S. If I were betting on the consequences of this policy I’d short New York.
Financial markets too gauche? Think through the likely consequences of heavy handed cloning regulation.